Lower Costs and Higher Cash Flow Help Gold Stock Outperform Bullion
NEW YORK, 11/02/12 - After a solid start to the year, gold mining stocks have struggled of late. The Market Vectors Gold Miners ETF (GDX) is down more than 4 percent over the last month, while the Market Vectors Junior Gold Miners ETF (GDXJ) has crumbled more than 5 percent over the that period. Five Star Equities examines the outlook for companies in the Gold Industry and provides equity research on AuRico Gold Inc. (NYSE: AUQ) and Yamana Gold Inc. (NYSE: AUY) (TSX: YRI).
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Since the end of June until now gold stocks have begun to outperform bullion. Over that time period the S&P/TSX Global Gold Index has gained 12 percent, while gold futures in New York have gained roughly 6.7 percent. Shares of major gold companies such as Goldcorp Inc. and Agnico-Eagle Mines Ltd. have surged recently as earnings have beat profit estimates as a result of lower costs and higher cash flow.
"The gold shares are starting to outperform the gold price," David Christensen, CEO of ASA Gold and Precious Metals Ltd. "As the companies begin to tighten their operating constraints and generate more cash flow; we're seeing some of that turnaround in the valuations in the industry."
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AuRico Gold's Young-Davidson gold mine in northern Ontario declared commercial production on September 1st, 2012. During September the Young-Davidson mine produced 9,903 gold ounces at cash costs of $639 per gold ounce. The company is scheduled to release its third quarter financial results on November 12, 2012.
Yamana is a Canadian-based gold producer with operations in Brazil, Argentina, Chile, Mexico and Colombia. For the third quarter of 2012 the company reported record gold production of 310,490 gold equivalent ounces, an increase of 11 percent over the year-ago quarter. Shares of the company have surged over 35 percent in the last month.
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