Global analyst Adrian Day takes a closer look at the first quarter results of some resource companies, as well as some positive exploration results that he believes could extend the life of a mine.
Barrick Gold Corp. (ABX:TSX; OR:NYSE) maintained its full-year guidance after lower-than-expected first-quarter gold and copper production. Part of the production decline was due to planned maintenance at the Nevada gold mines, but other causes were unexpected, including lower grades at Lumwana.
The drop in production, particularly that of copper, around 15% below consensus estimates, led to an increase in unit costs. Barrick estimated that its gold costs, at around $1,473 per ounce (for all-in sustaining costs), would be around 8% higher than the previous quarter, while copper would rise around 15%. %. Once again, Barrick will not generate significant free cash flow for the quarter.
As usual, Barrick said it expects production to increase throughout the year, with the first quarter typically being its lowest. He highlighted the acceleration of Pueblo Viejo's expansion in the second quarter and the restart of Porgera.
Potential bad news from Mali
As Barrick announced its first quarter production (with full results due May 1), a report said the Malian military government was considering expropriating its Loulo-Gounkoto gold mine, which represents about 9% of the country's production. net asset value of the company. The Malian junta is targeting the mining sector with a controversial audit of the industry as well as a draft new mining code.
Barrick did not comment on the report. Separately, Saudi Arabia is reportedly close to a deal to acquire a minority stake in Barrick's Reko Diq mine in Pakistan, investing at least $1 billion to buy part of the government's stake .
Saudi Arabia's interest is public. Although a deal would not affect Barrick's interest in the project, it would be positive because it would bring in a well-funded partner. Barrick's stock fell sharply following the doubling due to the production deficit and the Mali report, falling from more than $18 to less than $16.50 before a partial recovery.
In truth, it was an overreaction. The higher costs were largely simply due to lower production, while the shortfall, beyond planned maintenance in Nevada, was fairly minor, and the company reiterated its full-year guidance, supported by solid reasons. In truth, I think investor sentiment was less focused on the details of the quarter and more on a non-illegitimate sense of déjà vu as Barrick missed its often optimistic forecasts multiple times. As for the report on Mali, the expropriation would indeed be serious, but there was little new in this widely publicized report. In short, our position has not changed.
We would stay here but look for purchasing opportunities.
Royal Gold Offers Weak, But Probably Weak Forecast
Royal Gold Inc. (RGLD: NASDAQ; RGL: TSX) announced its 2024 forecast of between 290,000 and 315,000 gold equivalent ounces (GEO), more or less flat compared to actual 2023 GEO of 312,000, and significantly lower than forecast. However, several headwinds are factored into Royal's guidance, which could prove conservative.
It's worth noting that there are several upside opportunities, including upgrades at Goldrush and Robertson in Nevada and the commissioning of some new assets, including IAMGOLD's new Côte gold mine in Ontario.
Royal also continued to repay its credit facility, which it used to make major acquisitions in 2022 and 2023; it repaid $125 million this year, bringing its balance to $125 million.
We are resisting after a jump of more than 20% since the end of February.
Strong quarter of royalties for Altius
Altius Minerals Corp. said its attributable royalty revenue for the first quarter is expected to be $17.4 million, up from less than $16 million in the previous quarter, although down from the first quarter of 2023. Last year's quarter benefited greatly from high potash prices.
The biggest quarter-over-quarter gains came from renewables (nearly double) and base metals, while coal revenues were eliminated when the Genesee mine ceased operations at the end of the year . The company continues to repurchase shares.
Separately, the much-anticipated arbitration hearing on the extent of its royalty on AngloGold's Beaty project in Nevada has taken place, but the company has yet to comment on it. A decision can take months.
Altius is a key holding for us; we maintain our position after a share price appreciation of almost 30% over the last two months.
Positive drilling could extend Mexican Fortuna mine
Fortuna Silver Mines Inc. (FSM: NYSE; FVI: TSX; FVI: BVL; F4S: FSE) announced positive exploration results on its discovery of the Yessi vein at the San Jose mine in Mexico.
Exploration since the initial discovery last August has been aimed at testing the boundaries of the vein as well as carrying out infill drilling to support a resource estimate. Fortuna earlier said it was bringing forward the planned closure of the San Jose mine to the end of this year, but subject to additional resources.
The continued success of the program on the Yessi vein suggests that closure could be postponed.
We hold.
BEST BUYS this week include, in addition to the above, Orogen Royalties Inc. (OGN: TSX.V) And Midland Exploration Inc. (MD: TSX.V).
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Important Disclosures:
- As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their households) own securities of Barrick Gold Corp., Altius Minerals Corp., Fortuna Silver Mines Inc., Orogen Royalties Inc. and Midland. Exploration Inc.
- Adrian Day: I, or members of my immediate household or family, hold titles of: All. My company has a financial relationship with: All. I determined which companies would be included in this article based on my research and understanding of the industry.
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