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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Allied Nevada Gold (NYSEMKT: ANVGQ ) popped an incredible 27% today after the company updated third-quarter operations.
So what: Overall, management said it met its metal production and sales expectations, which put the company on a path to reaching 175,000-200,000 ounces of gold sales and 0.9 million-1.1 million ounces of silver sales this year. Hycroft mine produced 52,198 ounces of gold and 184,070 ounces of silver, up respectively from 39,195 and 132,841 ounces in the previous quarter.
Now what: The big takeaway is that production is growing quickly, which will mean a significant increase in cash and net income from last quarter. Gold and silver mining is really a levered way to play metals: There are a lot of fixed costs that go into building a mine and once you break even the additional sales produced flow almost entirely to the bottom line.
Some perspective is needed when it comes to Allied. While this was a good quarter, operations have been all over the map over the past year and expectations were very low, so I wouldn't put too much into one three-month period. The sharp fall in gold prices and operational problems have led to a 91% decline in the stock before today's open and there are now too many unknowns on both fronts for me to buy.
A better way to play gold
There are too many challenges facing gold to just jump in on one positive operation report after a year of problems. A more measured approach is required and that's why The Motley Fool's new free report, "The Best Way to Play Gold Right Now," dissects the recent volatility and provides a guide for gold investing. Click here to read the full report today!