Gold miners hit 52-week lows
During the trading week starting September 27, twelve ASX gold miners hit 52 week lows. Of the top ten mining companies, five felt the pain, including the three biggest miners in ASX. Here are the eleven, ranked by market capitalization:
- Newcrest Mining (NCM) $ 18.5 billion
- North Star Resources (NST) $ 10.1 billion
- Evolution mining (EVN) $ 6.5 billion
- Regis Resources (RRL) $ 1.5 billion
- Silver Lake Resources (SLR) $ 1.2 billion
- St Barbara Limited (SBM) $ 960 million
- Westgold Resources (WGX) $ 693 million
- Resolved Mines (RSG) $ 453 million
- Dacian Gold (DCN) $ 193 million
- Mine Medusa (MML) $ 149 million
- Auteco Minerals (AUT) $ 125 million
- Beacon Minerals (BCN) $ 111 million
Conventional wisdom suggests that the price of gold rises in times of uncertainty or economic decline and retreats in the face of global economic growth. The following 20-year price table of prixor.org generally supports this view.
The onset of the Great Financial Crisis (GFC) in mid-2007 and the slow global economic recovery that followed pushed the price of gold to a new all-time high in 2011. The early impact of the global pandemic COVID 19 did the same, hitting a new all-time high in mid-2020. With the availability of vaccines and the prospect of an economic recovery improving in early 2021, the price of gold fell again, followed by a brief rise as the Delta variant emerged around the world.
Despite the variant, the economic forecast remains moderately positive, although estimates have declined both here in Australia and in the United States. Few experts predict a return to recessionary conditions.
Newcomers to invest in the stock market could take on the fate of the miners who mine the precious metal from the earth and follow the fortunes of the gold price. This is not always the case, as a recent comparison of au.finance.yahoo.com one of the largest gold ETFs – the GLD – against one of the largest Gold Miner ETFs – the GDX.
A moderately optimistic outlook for a global economic recovery could hamper a further breakout in the price of gold, but the specter of the Chinese economy collapsing in the Evergrande crisis persists. In addition, the US Federal Reserve is hinting at an earlier-than-expected interest rate hike, pushing up yields on US Treasuries. Low interest, low yield environments are bullish for gold.
Analysts’ estimates are subject to change, but of the dozen miners who have bottomed out this week, seven have double-digit two-year profit growth forecasts.
Investors should take note of the decline in the price of gold from 2012. Despite this number 2 – North Star – and the number 3 – Evolution – ASX’s biggest gold miners have been successful in sustaining dividend payments and stock price appreciation over the past decade.
Cost control is a partial explanation. Miners of all commodities pay little attention to the cost of doing business when the price of their commodity is booming. Gold miners have adopted a new cost reporting system called All in Sustaining Cost (AISC) which includes not only mine operating costs, but all operating costs for the entire company. . Gold and iron ore miners looked for and found ways to dramatically reduce operating costs.
A low AISC allows gold miners to maintain profitability in the face of falling gold prices.
The following graph of VanEck shows how the global gold mining community reacted to the fall in gold prices in 2012. With the current gold price of $ 1,759.04 as of October 1, low AISCs can maintain a healthy profitability. The higher Australian gold price – $ 2,541 – reflects the dollar’s exchange rate. ASX miner costs are paid in lower Australian dollars, with miners benefiting from raw material sales in US dollars.
North Star rose to second place among ASX gold miners thanks to an aggressive acquisition strategy, with Saracen Minerals being the last. The company has two mining centers here in Western Australia and one in Canada.
The company has increased revenue and profits in each of the past three fiscal years, with massive increases in fiscal 2021 spurred by the pandemic. Revenue increased by 40% and profits by 300% with an AISC of AUD $ 1,438 for the full year.
For fiscal year 2022 North Star expects production of 1.55 to 1.65 Moz (million ounces) at All in Sustaining Costs between AUD $ 1,475 and $ 1,575. For fiscal 2021, the annualized average price of gold received was AUD $ 2,277 per ounce.
Evolution has four operating gold mines and one gold / copper / silver mine here in Australia as well as one operating gold mine in Canada. The company’s financial results for fiscal 2021 were modest at best, with a 4% drop in revenue and a 14% increase in net income after tax (NPAT).
On the last day of the trading week ending October 1, Evolution The share price was boosted by the announcement of regulatory approval for the development of a new underground mine at the company’s Cowal gold operation in New South Wales. In addition, all ASX gold miners have been hit by the nervousness of the market which has driven the price of gold higher.
Evolution qualifies as a low cost producer, with an AISC of AUD $ 1,042 per ounce. In a bold change of pace, the company opened its annual financial results presentation with a three-year outlook, unlike the usual practice of putting the outlook statement away at the end.
The company sees production grow from a range of 700,000 ounces to 760,000 in fiscal 2022 to 940,000 to 1,010,000 by 2024, with impressive AISC forecasts every year. For fiscal year 2022 Evolution expects AISC to be between AUD $ 1,220 and $ 1,230 for fiscal year 2022: $ 1,125 to $ 1,185 for fiscal year 2023 and $ 1,170 to $ 1,230 for fiscal year 2024
Régis resources is a leading mid-level gold producer and explorer, with multiple assets in the gold fields of Western Australia and New South Wales. The Duketon project in Western Australia has three operating gold mines with a joint venture with Anglo Ashanti Gold at Tropicana. The Tropicana project is owned 30% by Regis and 70% by Anglo Ashanti. Regis is also developing the McPhillamys gold project in New South Wales. The approval and other ongoing delays on McPhillamys appear to be helping Regisdrop in the share price, adding to concerns about the price of gold.
For fiscal 2021, the company announced an 8.3% increase in revenue and a 5.9% increase in production. The NPAT fell 35%, but as is customary when a company shows a loss, a positive increase in EBITDA (earnings before interest, taxes, depreciation and amortization) is cited as a valid surrogate. Regis increased its EBITDA by 2.3%. AISC for fiscal 2021 was $ 1,372, compared to $ 1,246 for fiscal 2020.
For fiscal year 2022, the company expects an increase in production and a decrease in AISC.
Silver Lake is another mid-level gold miner with two operating gold mines in Western Australia. The financial results for fiscal year 2021 were uneven, with a 9% drop in gold production; a 6% increase in turnover; a 12% increase in EBITDA; a 15% increase in AISC; and a 62% drop in NPAT, due to a one-time expense. Normalized profit increased 6%.
For fiscal year 2022 Silver lakes forecasts modest growth in group gold sales and an increase in AISC between $ 1,550 and $ 1,650, from $ 1,484.
Westgold Resources increased both revenue and profit in each of the past three fiscal years, with earnings more than doubling between fiscal 2020 and fiscal 2021, from $ 34.6 billion to $ 76.8 million dollars.
The company uses a “hub and spoke” operating model, with six underground and surface mining “spokes” supplying three processing “centers” in the Murchison region of Western Australia.
For fiscal year 2022 Westgold predicts an increase in production from 245,111 ounces per year to 270,000 ounces. AISCs are pretty high, between $ 1,500 and $ 1,700 an ounce. In fiscal 2021, the AISC for all transactions was $ 1,518.
Resolute mining and Dacian gold both beat 2-year earnings growth forecasts as both started from a weak base – a loss of 1.2 cents and 2.3 cents per share respectively.
Resolved has three operating gold mines in Africa. The company sold its only Australian stake, the Ravenswood mine in Queensland, to focus on expanding its operations in Africa. The company follows the calendar year. Fiscal 2020 results were released in early 2021, with the company overcoming a massive loss of $ 98 million in fiscal 2019 to post a profit of $ 20.7 million in fiscal year 2020. Half-year 2021 results have been disastrous, with gold production and sales, revenue, EBITDA, all with a loss of $ 219.8 million to top it off.
The company owns another African asset – the Tabakoroni gold project – showing “exceptional drilling results”.
Dacian Gold’s The gold producing asset is the Mt Morgans project in the gold fields of Western Australia. The project has six exploration targets. Dacian also has several highly promising assets in another exploration target – the Redcliffe gold project.
Dacian embarked on a five-year mining plan to increase annual gold production in its licensed areas to 115,000 to 125,000 ounces per year at an AISC of $ 1,550 per ounce between 2024 and 2026. The portfolio of The company’s assets already have surface and underground mines operational. The five-year plan is the culmination of the company’s exploration efforts to define resources and reserves to date.