Tuesday, November 3, 2009
Barrick Reports Loss, Cortez Hills on Track
*** BREAKING NEWS *** Gold broke $1080 midday on the COMEX futures exchange (most active, December contract). The Dollar Index (.DXY) is also strong breaking its 50-day average which is now positive trending.
It is 5:24 AM, the coffee is on and we'd better catch up on some mining business. Both Barrick and Newmont reported their third quarter (Q3) results last week. Here are the links to their press releases and presentations:
Barrick Press Release
Newmont Press Release
Barrick Gold reported a net loss of $5.4 billion compared to net income of $254 million in Q3 2008. That sounds bad but the loss primarily reflects a $5.7 billion charge to earnings for a change in accounting treatment to allow them to eliminate their gold hedges. The Report covered Barrick's announced intention to do so this September (Barrick Makes Bold Move, Moly Drops, 9/9/09). Eventually removing hedges should be a positive for shareholders since it provides investors leverage to gold price for all future production. This makes sense if you think gold prices will continue to rise and Barrick certainly does; checkout their presentation slide 15, Outlook - Bullish on Gold.
By the by, if you need reminding that gold mining is a profitable business for big miners, checkout slide 7. Barrick's total cash cost in Q3 was $456/oz for an averaged realized gold price of $971/oz. Oooh-Weee, buckaroos. By comparison, their new "advanced low cost mines" are expected to do even better. Cortez Hills is agood example. Presently 85% complete, the Cortez Hills project is on track to commence production sometime early next year. They are expected to produce one million ounces per year at an estimated total cash cost of $350-$400/ounce (slide 4).
Newmont mining reported a net income of $388 million from a quarterly revenue of $2.0 billion. They are doing a good job of reducing costs too. Their average realized gold price was $964 per ounce at a cost of $404/ounce. This is down 13% from $467 per ounce in the year ago quarter. In Nevada they sold 505,000 equity ounces of gold at costs of $541/ounce (see note 1). They estimate to lighten the weight of Northern Nevada by about 1.9 and 2.0 million ounces of gold by the end of 2009. Not too bad, pardner.
The markets are a little rocky this morning with a nice pop in the old U.S. greenback. This reinforces the trend we discussed last week; strong dollar, weak markets (The Colonel's Outlook for Year's End). The curious thing today is a rising gold price which is contrary to its typical inverse relation to the dollar. Stay tuned, this could be interesting.
Enough talk, let's walk the walk:
4-WD is ON - the VIX or "fear index" is way above 25, off-road market conditions are expected to continue (what's this?)
Yellow light is ON for possible adverse regulation/legislation (mercury emissions)
Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)
Oil is down $0.89 in early trading to $77.24 (December contract); Gold is up $7.7 to $1061.7 (December contract, most active); Silver is down $0.015 to $16.425 (December contract); Copper is down $.0235 to $2.9240(December contract); Molybdenum is steady at $11.75.
The DOW is down 56.91 points to 9732.53; the S&P 500 is down 4.78 points to 1038.10. The miners are mixed:
Barrick (ABX) $37.49 up 2.68%
Newmont (NEM) $44.85 up 2.94%
General Moly (Eureka Moly, LLC) (GMO) $2.31 up 2.21%
Freeport McMoran (FCX) $74.11 down 0.67% (a bellwether mining stock spanning gold, copper & molybdenum)
Steel stocks are down, (a "tell" for General Moly):
Nucor (NUE) $38.69 down 0.85% - domestic steel manufacturing
ArcelorMittal (MT) $33.10 down 2.30% - global steel producer
POSCO (PKX) $103.86 down 1,18% - South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is is up 0.52% to $1,164,404.41 (what is this?).
Headline Photograph by Mariana Titus, "Pete's Horses, Ackerman Ranch"
Note 1 - The reader is cautioned not to compare Barrick's and Newmont's cost figures too literally without first reading a zillion accounting footnotes; for ballpark comparisons I think you can skip this step!