Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

What Newmont Just Did Could Be A Game Changer For Gold Miners

By John RubinoStock MarketsApr 26, 2015 01:48AM ET
www.investing.com/analysis/if-other-gold-miners-can-do-what-newmont-just-did,-look-out-249598
What Newmont Just Did Could Be A Game Changer For Gold Miners
By John Rubino   |  Apr 26, 2015 01:48AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

The past few years have been brutal for the gold miners, most of which brought it on themselves by starting new, high-cost mines just in time for the metal’s price to crater. The resulting write-downs and operating losses have made this without question the most unloved sector in the whole market.

The consensus among analysts has been that most miners’ costs are so structurally sticky that only slight reductions will be possible, making the industry a financial basket case until gold starts rising again.

Then Newmont Mining Corporation (NYSE:NEM), the second biggest gold miner, reported its first quarter earnings. Among other startling numbers, its all-in sustaining costs to produce one ounce of gold fell nearly 18 percent to $849 and its earnings rose by either 50% or 89% year-over-year, depending on the definition of profit being used (analysts were predicting a slight earnings decline). Free cash flow, meanwhile, soared to $344 million from the year-earlier $52 million.

Over the next week or two, these results will get a thorough exam from analysts, and if they hold up they’ll change the game for miners. Specifically, if it’s possible to take this much out of costs without resorting to scams like high-grading (where the miner uses up the best ore to goose near-term results at the cost of future earnings) or fiddling with the timing of revenues and expenses, then other miners may be able to generate some pleasant surprises in coming quarters as well. And suddenly this is a happy, outperforming industry.

One indicator that this may be the case is insider buying: From Acting Man’s Pater Tenebrarum:

Insider Buying by Gold Mining Executives Increases FurtherIn spite of the gold price weakening once again this week and coming dangerously close to breaking an important support zone, gold investors have actually reason to take heart. Readers may recall what we wrote in our most recent update on gold about gold mining margins:

“The market has not yet really given any credit to the fact that mining margins are improving due to strength in the real price of gold. Management boards of gold companies may be coming around to a different view though – after all, they are acutely aware that the real gold price is the only thing that counts with respect to their margins.”

As data from our friends at INK Research in Canada (a highly recommended service) show, gold mining managers are indeed “acutely aware” of their improving profit margins. Insiders of several major and mid tier gold mining companies have embarked on a buying spree. Here is Barrick Gold (NYSE:ABX) as an example:

Barrick Insider Buying
Barrick Insider Buying

Recent insider activity at Barrick Gold: the green crosses denote purchases.

To put a few concrete numbers to this: On March 27, ABX chairman John L. Thornton bought 360,000 shares in the open market. In early March, four different board members acquired 23,200, 10,200, 3,200 and 30,750 shares respectively (amounts are rounded), also in the open market. It is nothing special when insiders are selling – it does however mean something when they are buying, especially when they are buying in size and seemingly without concern for short term price gyrations. Note here that the gold sector is really standing out in this respect. In most other market sectors, insiders are bailing out as fast as they can.

What Newmont Just Did Could Be A Game Changer For Gold Miners
 

Related Articles

What Newmont Just Did Could Be A Game Changer For Gold Miners

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email