Preparing for Gold Players' Earnings Releases

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The earnings season has not yet kicked off for the gold companies. Investors are pretty curious about the 4Q results given the highly volatile gold prices in the last quarter. I have briefly discussed three gold players and what sorts of result are expected from them:

Agnico-Eagle Mines Limited (NYSE: AEM) forecasted 4Q12 gold production of 232.42k oz at a cash cost of $717/oz on a by-product basis.

AEM is well positioned to meet its revised its FY12 production guidance of 1025koz at $660/oz. In Q4, the Street forecasts a pullback in production and costs uptick vs. Q3. However, for FY12, the market does not expect AEM to meet its guidance of $660/oz. The weaker Q4 has been well televised to the market.

Temporary issues at play: Meadowbank will likely be weaker vs. Q2 and Q3 on grades where those two quarters saw positive grade reconciliation in higher grade areas of the pit. Meadowbank now starts a lower grade phase. LaRonde will continue to have heat and vent issues since mining is constricted as it opens up new mining faces in the deeper levels of the mine, but this could be offset by the continued mining of lower grade byproducts, which are not in the mine plan. Kittila will likely experience downtime for maintenance (deferred from earlier in the year). Pinos Altos is remediating the leach pad slippage issue from Q3 in Q4 and Q1/13. 2013 guidance of 990koz was reiterated in Q3 (Meadowbank strength offsetting LaRonde and Creston/Pinos weakness). The Street expects the company to meet this guidance.

However, an up-tick in 2014 (and potentially 2015) is expected from the guidance provided in early 2012 as Goldex and La India were approved subsequent to Feb. 2012 guidance. Additionally, La India and Meadowbank may further surprise analyst expectations to the upside.

AEM will also likely update reserves and resources and has a solid track record of delivery in this area.

The company is expected to post EPS of $0.41 and quarterly revenue of $473 million. However, the company might miss its EPS forecasts given 3 cents/share going to provisional pricing adjustments.  

Alamos Gold (NYSE: AGI)

Alamos previously reported Q4 production of 67.8koz (sales of 62.5koz). Cash operating costs were not reported for the quarter, but are expected to be below $360/oz for the year. Credit Suisse estimates it to be $399/oz in Q4 (implying $360/oz for the year) including $2 million in inventory adjustment for costs associated with Q3 inventory drawn from the leach pad.

Alamos pre-guided results and sales for Q4. The Street is concerned about the grade at Escondida in 2013 (11g/t). It expects that positive grade reconciliation to the 26g/t levels will not be forthcoming and that is not yet fully understood by the market.

The company might not get its production permit from Turkey in Q1. While AGI did submit its EIA and hit its schedule in that regard, we are not as confident in Turkey's ability deliver the permits on schedule. Overall though, we don't see permitting delays as lengthy, or at this stage impacting the construction schedule as there is sufficient buffer.

AGI will also likely update reserves and resources and has a solid track record of delivery in this area

AuRico Gold (NYSE: AUQ)

AuRico previously reported Q4 production of 41.1koz. Total cash costs were guided for Q4 to be $630-650/oz on a by-product basis.

AuRico pre-guided results and sales for Q4 and issued revised 2013 guidance. While guidance was more negative than the Street had expected, largely on the costs side, it is widely believed now that a realistic framework has been put into place. A further re-rating would require consistent execution on this rebased operational guidance and the successful ramp up of the underground mine at Young Davidson. It is important to note that the first year of operations at an underground asset has increased risk.

AuRico will also likely update reserves and resources and has a solid track record of delivery at Young Davidson.

Foolish Bottom-Line

Gold prices fluctuated between $1,650 and $1,800/ounce. The performance settled at +4% on a sequential basis. What impact this volatility had on the gold companies is still to be seen. Let’s see what these companies have for their investors in the ongoing earnings season. 


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