Thursday, April 29, 2010

American Barrick Follows Newmont Mining With Blowout Earnings

Now that earnings season is in full swing, precious metals miners are continuing to report excellent earnings.  Yesterday, giant American Barrick (ABX) reported, followed by Goldcorp. (GG) and Hecla Mining Company (HL).

ABX reported record first quarter net income of $758 million ($0.77 per share), an increase of nearly 150% from the first quarter of 2009.  The increase was attributable to higher production and sales in conjunction with lower total cash costs and higher realized prices for both gold and copper.  Operating cash flow more than tripled to a record $1.05 billion from $349 million in the same prior year period.

Gold production was up 19% to 2.08 million ounces at total cash costs of $442 per ounce, which was $42 per ounce below prior year period total cash costs.  The Company is on track with its guidance to increase production in 2010 to 7.6-8.0 million ounces at lower total cash costs of $425-$455 per ounce.

ABX continues to maintain a strong financial position and the industry's only 'A' credit rating with quarter-end cash of $3.5 billion, an undrawn credit facility of $1.5 billion, robust operating cash flow and excellent access to debt markets.

Goldcorp said on Wednesday its adjusted profit slipped by 3.9%, missing analysts' estimates, as the timing of sales and the stronger Canadian dollar raised costs and offset the impact of higher gold prices.   However, this was in large part the result of a non-cash foreign exchange loss of $211.8 million on a translation of future income tax liabilities.

Stripping out the charge, adjusted profit was $162.7 million, or 22 cents a share, down from $169.3 million, or 23 cents per share in the year-before period.  Nevertheless, GG remains on track.

Revenue rose 20%  to $750.3 million as realized gold prices rose 21.7%  to $1,110 an ounce.  Cash costs per ounce climbed to $325 per ounce from $288, when using by-product metals production as a cost offset.

The strong year-over-year gains by the Canadian dollar and Mexican peso stripped a total of $25.9 million from the bottom line, while results were also hurt by delayed sales at the Red Lake mine in Canada and a port strike that delayed gold and copper sales at the Alumbrera mine in Argentina.

Hecla Mining reported net income applicable to common shareholders of $18.4 million or 8 cents per share during the first quarter of this year, a substantial increase from the $3.9 million or 2 cents per year reported during the first quarter of 2009.

The company is maintaining its previously announced full-year production guidance of 10 million to 11 million ounces of silver with cash costs in the range of $1.90 to $2.25 per ounce.  Hecla is debt-free with $116 million of cash.

As GOLD gets primed to enter its hyperbolic growth phase, excellent revenue growth and profits are being realized.  Unlike the NASDAQ bubble, the mania phase in miners will be supported by bona-fide fundamentals.

Marko's Take

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