Editor of Adrian Day’s Global Analyst, Adrian Day takes a look at the first quarter results of three gold companies they think are worth watching.
The sell of Yamana Gold Inc. (YRI:TSX; AUY:NYSE; YAU:LSE) from our last bulletin would have filled at or above our limit of $6.11. We have a loss of nearly 48% on this position, bringing the average return on all closed positions to 92%. We have been trimming our list to make room for recent and future new buys.
In today’s bulletin, we look at several companies that have just released their first-quarter production numbers, which were mixed with a positive bias, and given good full-year outlooks.
Companies Had Mixed 1Q Results With Positive Outlooks
Barrick Gold Corp. (ABX:TSX; GOLD:NYSE) reported first-quarter production, with both gold and copper output coming in below expectations. Gold production was 990,000, down from 1.2 million in the fourth quarter. The major factor for the quarter-on-quarter decline was the depletion of higher-grade stockpiles at Carlin mines.
Costs per-ounce are expected to be commensurately higher. The company reiterated that it expected the first quarter to be the lowest production quarter of the year, with steady increases throughout the year, as it maintained its annual guidance. Barrick also held an in-depth analyst presentation last week on its Reko Diq project in Pakistan. We have already discussed this project.
One point that CEO Mark Bristow emphasized is that a company does not get to choose in which country is its next tier-one asset. Having both the central and state governments as partners reduces the risk, he said, while a commitment to providing education and infrastructure in the local region would also help.
After a run-up, and with some war premium still in gold price, we rate Barrick a hold.
Record Profits at Osisko With More to Come
Osisko Gold Royalties Ltd. (OR:TSX; OR:NYSE) released preliminary first-quarter results, showing a record quarterly profit. However, even with that, cold weather slowed the ramp-up of a couple of new projects.
Looking ahead, as these projects move to full production and the revenue from the Renaud diamond mine is included (starting next month), profits will continue to grow.
As with Barrick, we rate Osisko a hold.
Gold up, but less than expected, for Fortuna; year looks solid Fortuna Silver Mines Inc. (FSM:NYSE; FVI:TSX; FVI:BVL; F4S:FSE) first quarter production figures, just released, were generally positive, though mixed.
Gold output saw a 93% increase over the first quarter a year ago, though this was lower than expected; slower operations resulting from a COVID outbreak at the Lindero mine in Argentina was largely responsible for the shortfall.
Contrarywise, silver production saw a 13% decrease of the same quarter a year ago, but this was better than expected. The company re-iterated full-year guidance, saying all mines were on track to achieve their guidance. As with Barrick and Osisko, Fortuna’s stock has rallied recently, though still lags and remains good value.
Royal Takes a Breather After Record Year
Royal Gold Inc. (RGLD:NASDAQ; RGL:TSX) released annual guidance, lower than 2021 and below market expectations, due mostly to lower expected output at the Cortez mine (Royal holds a royalty over only part of the mine); and delays in ramping up Khoemacau due to a COVID outbreak. Royal expects full production there by year end.
First-quarter actual production was, however, slightly ahead of guidance; 2021 had seen three quarters achieve record volumes. The guidance is based mostly on public disclosures of operating companies of the mines on which Royal holds royalties or streams.
With the stock up 45% this year, we are holding.
BEST BUYS this week include Vista Gold Corp. (VGZ:NYSE.MKT; VGZ:TSX), and Lara Exploration Ltd. (LRA:TSX.V). Many of the juniors on our list that we have been recommending as buys recently — Orogen Royalties, Midland, in addition to Vista and Lara — are inching up and could have breakouts in the not-to-distant future, so don’t wait too long to buy if you do not already own.
University of California, Irvine law professor and former “United Nations Special Rapporteur on the Promotion and Protection of the Right to Freedom of Opinion and Expression”, one David Kaye, must have had a large business card.
Anyway, this “promoter of freedom of opinion” praises Twitter for moving away from free speech and “being a more realistic custodian of speech.”
FOLLOW THE LEADER
Leader of the House, that is. House Speaker Nancy Pelosi has the reputation as the best trader of any member of congress. Now, a publicly traded ETF aims to replicate her performance. The name of the fund? The Insider Portfolio!
HAWKISH? Jerome Powell and his band of merry men and women have been portrayed as hawkish as they set about tackling inflation. What piffle!
Even if we take the most aggressive plans from Fed spokesman at face value, the fed funds rate, with two 50 basis point hikes followed by 0.25 bpt as each meeting for the next year, rates will still be more deeply negative in real terms than they were at the onset of the great inflation of the 1970s; while the balance sheet — at the shocking pace of $95 billion per month — would still, one year from now be more than twice its size in August 2019 as it reversed course and starting increasing the size of its balance sheet. Some hawks!
QUESTIONS? I welcome your investment or economic questions, which I shall attempt to answer here. Please write to [email protected]
Originally published on April 18, 2022.
Adrian Day, London-born and a graduate of the London School of Economics, is editor of Adrian Day’s Global Analyst. His latest book is “Investing in Resources: How to Profit from the Outsized Potential and Avoid the Risks.”
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