A quarterly financial review of Canada’s largest gold producers

VANCOUVER — The Northern Miner presents a roundup of second-quarter results from Canada’s three largest gold producers by market capitalization: Barrick Gold (TSX: ABX; NYSE: ABX); Agnico Eagle Mines (TSX: AEM; NYSE: AEM); and Goldcorp (TSX: G; NYSE: GG). The review summarizes financial results, and highlights quotes from management and analysts.

Barrick Gold

Barrick has second-quarter gold production of 1.4 million oz. at all-in sustaining costs (AISCs) of US$710 per ounce. The company is keeping full-year guidance of between 5.3 and 5.6 million oz. at AISCs from US$720 to US$770 per ounce.

Barrick registered adjusted earnings per share (EPS) of 22¢ and generated US$43 million in free cash flow (FCF). The company hopes to lower its debt from US$7.9 billion to US$5 billion by the end of 2018.

Barrick is dealing with production shortfalls from 63.9%-owned Acacia Mining (LON: ACA), which is grappling with a government-imposed concentrate export ban in Tanzania.

Barrick shares have traded in a 52-week range of $18.52 to $29.97 per share, and closed at $20.76 at press time. The company has 1.2 billion shares outstanding for a $24.2-billion market capitalization.

Barrick Gold’s Cortez gold mine in Nevada will be the pilot site for its digital partnership with Cisco. Credit: Barrick Gold.

Kelvin Dushnisky, president, Barrick Gold: “We’re working to maximize free cash flow generation, while maintaining discipline to prudently invest capital into our business. Partnerships and joint ventures are a core element of our portfolio-optimization strategy, and during the year we’ve already finalized a number of agreements. Achieving and sustaining a strong balance sheet also remains a priority.”

Tony Lesiak, analyst, Canaccord Genuity: “Barrick generated only $43 million in FCF in the quarter due to higher capital costs associated with the Veladero leach pad works, waste stripping in Nevada, and due to the Tanzania concentrate export ban and higher cash taxes at [Pueblo Viejo]. Despite the near-term restriction in FCF, Barrick improved its debt position by $309 million from the previously announced asset sales.”

Andrew Kaip, analyst, BMO Capital Markets: “[Barrick] reported a solid second-quarter EPS, production and cost beat on the back of a strong performance at Cortez on better grade, while operating cash flow (OCF) and FCF disappointed, owing to unfavourable working capital adjustments. In Tanzania, the company will begin direct discussions with the government regarding the concentrate export ban affecting Acacia Mining.”

Tanya Jakusconek, analyst, Scotia Capital Markets: “[Barrick] reported an improved operational quarter versus the first quarter, led by [Nevada], where the Cortez Hills open-pit processed more ore at a higher grade than Scotia expected. The EPS beat was due to the better-than-expected operational numbers and from higher [gold] sales.”

Agnico Eagle Mines

Agnico reported 428,000 oz. in payable gold production during the second quarter at US$785 per oz. AISCs. The company has boosted its full-year guidance nearly 100,000 oz. to 1.6 million oz., and dropped its AISC estimates by US$20 to US$850 per ounce.

Agnico registered a 24¢ adjusted EPS and generated US$8 million in negative FCF. The company noted a strong performance at its Meadowbank operation in Nunavut.

Agnico shares have moved in a 52-week range of $46.91 to $78.35 per share, and closed at $59.37 at press time. The company has 232 million shares outstanding for a $13.8-billion market capitalization.

Moving material at the Meadowbank gold mine in Nunavut. Credit: Agnico Eagle Mines.

Sean Boyd, president and CEO, Agnico Eagle Mines: “We had strong operating financial performance, our growth projects continue to advance extremely well, and we reported promising exploration results at our key development projects and producing mines. The strong margins at our operations are driving very good cash performance. We’re on target to hit our production goal of 2 million oz. gold annually by 2020.”

Canaccord’s Lesiak: “[Agnico] again outperformed on production and cost expectations, posting a 24¢ second-quarter adjusted EPS, handily beating [Canaccord’s] 19¢ estimate. As anticipated, this year’s production guidance was revised higher, but it still appears conservative.”

BMO’s Kaip: “[Agnico] posted another strong quarter, building off a beat in first-quarter 2017, as the company delivered higher production, lower costs and EPS above expectations. [The company’s] headline EPS was above our 17¢ estimate.”

Scotia’s Jakusconek: “[Agnico’s] 23¢ adjusted EPS compares to Scotia’s 14¢ estimate and 15¢ consensus. The beat came on the strong operation performance (production and operating costs), and lower depreciation.”

Goldcorp

Goldcorp produced 635,000 oz. gold in the second quarter at US$800 per oz. AISCs. The company kept its 2.5 million oz. full-year guidance and dropped its AISC estimates to US$825 per oz., from US$850 per ounce.

Goldcorp had a 12¢ adjusted EPS and negative US$63 million FCF.

The company realized proceeds of $242 million from selling its Los Filos and Cerro Blanco assets.

Goldcorp’s chief financial officer Russell Ball is resigning.

Goldcorp shares have traded in a 52-week range of $15.95 to $25.24 per share, and closed at $16.07 at press time.

The company has 865 million shares outstanding for a $13.9-billion market capitalization.

David Garofalo, president and CEO, Goldcorp: “Quarterly gold production is expected to remain in a flat range, as a planned decrease in grades at Penasquito over the second half of the year is offset by the ramp up of Cerro Negro and Éléonore, and an improved grade profile at Red Lake. We see solid progress at many of our sites as productivity goals are achieved and rationalization of sustaining capital is implemented.”

Goldcorp’s Éléonore gold mine in the James Bay region of Quebec, 350 km north of the town of Matagami. Credit: Goldcorp.

Canaccord’s Lesiak: “Goldcorp announced second-quarter 2017 production results that were broadly in line with our expectations. [The company’s] 12¢ EPS came above consensus and our 9¢ estimates, with the variance largely due to a favourable tax rate and other non-operating items.”

BMO’s Kaip: “[Goldcorp] reported an EPS beat on an income tax recovery and lower depreciation. OCF and FCF lagged our estimates. Production was in line, while AISC came in lower due to lower sustaining capital spending.”

Scotia’s Jakusconek: “Scotia’s EPS estimate [for Goldcorp] was 7¢ against a 9¢ consensus. The beat owed to better operating costs. Scotia expects improvements at Éléonore and Cerro Negro will offset declining grades at Penasquito.”