However, these positives were offset by additional down time expected at Kittila mine in Q2/13, lower commercial production expectations and an increase in cash cost guidance in 2013, associated with the downtime and a revision in commodity and forex assumptions.
Overall, the lower commercial production and higher costs in 2013 negatively impact earnings and cash flow in 2013 and as such some pressure on the stock price is expected in the short term; However, assuming the additional downtime at Kittila is contained to what was guided, any prolonged pressure on the stock price would be seen as an opportunity to enter the stock.
A gold company worth investing
For IAMGOLD Corp (USA) (NYSE:IAG), the Street has recently turned bullish on the company. A strong operating quarter highlighted by cash costs that were well below annual guidance, the potential for a cost guidance reduction in Q2, start-up of commercial production in Quebec and a Quebec tax proposal that ended up being much better than feared, all give us reason to believe positive signs are starting to emerge at this company.
In the near term, the implementation of the company’s $100 million cost savings program along with mine re-sequencing at Rosebel to access higher grade ore could lead to a reduction in annual cost guidance when the company reports its Q2 results.
Another buy
Despite an earnings miss, Goldcorp Inc. (USA) (NYSE:GG)’s investors have recently been excited about the company given its developments in Q1 and the outlook for 2013.
In terms of development, the announcement of a new water source at Penasquito that has the potential to support ramp-up to name plate capacity is seen as a significant positive given that previous guidance at Penasquito inferred that name plate capacity would be more of a blue sky situation.
From an operational outlook perspective, the production and cost metrics are expected to improve throughout the year as gold and byproduct grades improve sequentially at Penasquito and Pueblo Viejo continues to ramp to full capacity. Overall, with improving operations and further clarity on the water solution at Penasquito upcoming, Goldcorp Inc. (USA) (NYSE:GG) is recommended as a buy when moving forward in 2013.
Final word
Through some calculations, we can safely conclude that new mining regulation in Quebec is not as big a threat to Agnico, Goldcorp and IAMGOLD Corp (USA) (NYSE:IAG)’s profitability as perceived by the market. Talking company-specifically, both Goldcorp Inc. (USA) (NYSE:GG) and IAMGOLD Corp (USA) (NYSE:IAG) are recommended as buys given their solid cost-cutting plans. However, uncertainty at its Kittila operations, keeps me on the sidelines for Agnico for the time being.
The article Is the New Mining Tax in Quebec a Headwind for Gold Stocks? originally appeared on Fool.com is written by Zain Abbas.
Zain Abbas has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Zain is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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