The company realized a price of around $1670 per ounce of gold from North American mines last year, which decrease to $1400 per ounce this year because of recent volatility in the price of gold. Barrick Gold Corporation (USA) (NYSE:ABX)’s total revenue is expected to decrease from $15 billion in the last year to around $14 billion this year, and its earning margin is also expected to decrease, from 64.3% last year to around 60.3% this year.
Headwind in existing mines
In the first quarter of 2013, Goldcorp Inc. (USA) (NYSE:GG) reported an earning decline of 35% year-over-year. The dip in profit was mainly driven by increasing production costs and a lower price for gold. However, the company’s production of gold increased to 614,600 ounces in the first quarter, up by 15% year-over-year.
Goldcorp Inc. (USA) (NYSE:GG) started its operations in Pueblo Viejo last year, and produced 41,200 ounces of gold. Gold production in this region will increase by 828%, to around 382,000 ounces in the current fiscal year. The company produced 64,700 ounces of gold from Pueblo Viejo in the first quarter of 2013.
However, the increase in production from the new mine at Pueblo Viejo will be offset by lower production in Goldcorp Inc. (USA) (NYSE:GG)’s existing mines. Production of gold is estimated to remain low in Red Lake, Canada due to a delay in the project and a decrease in the quality of gold. It is expected that average production in this region will remain at 492,000 ounces this year, down by 4% year-over-year.
Additionally, in Peñasquito, Mexico, production is expected to lower this year by 8%, year-over-year, to around 380,000 ounces, as mining in the lower grade portion of this pit will affect the production. Gold production in the Wharf region was 68,100 ounces last year, which is expected to decline by 16% year-over-year. Lower gold production from existing gold mines will limit Goldcorp Inc. (USA) (NYSE:GG)’s growth in this fiscal year.
Conclusion
Newmont Mining Corp (NYSE:NEM)’s new project will offset the production delay in Conga, and an increase in shipments of gold from North America will help the company boost its growth. This stock is a buy.
Barrick Gold Corporation (USA) (NYSE:ABX)’s project delays will halt growth, and at the same time its project in Chile is getting ever more expensive. And while production increases from Pueblo Viejo are a positive sign for Goldcorp Inc. (USA) (NYSE:GG), its declining production from existing mines will halt the growth of the company. These stocks are a hold.
The article Not All Gold Miners Are Glittering originally appeared on Fool.com and is written by Madhu Dube.
Madhukar Dubey has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Madhu 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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