Fool's Gold Report: Goldcorp's Optimistic, Stillwater Falls Short, And Investors Ponder Newmont-Barrick

Another drop for gold shows the lack of confidence among investors as earnings season continues.

May 1, 2014 at 5:20PM

The precious-metals markets were mixed Thursday, as gold and silver's recent declines continued on a general lack of market-moving news. Tomorrow's U.S. employment report for April should give some useful information on whether the job market improved once the worst of the past winter's weather was over, but weak figures on U.S. gross domestic product and the Federal Reserve's move yesterday to continue its tapering of quantitative easing failed to inspire confidence among gold investors. Goldcorp (NYSE:GG) and platinum-group metals specialist Stillwater Mining (NYSE:SWC) were among the mining companies to report quarterly earnings today, with their stocks going in different directions even as speculation over a possible combination between Newmont Mining (NYSE:NEM) and Barrick Gold (NYSE:ABX) continued.

Browse Author
Image: Gold Footpath by George Hodan.

Earnings keep coming in
Goldcorp delivered a positive surprise Thursday, as adjusted earnings per share came in at almost double the amount investors had expected. Even more encouraging was Goldcorp's assertion that it will try to increase output by 50% in the next two years, counting on new projects to bolster its overall volume. Goldcorp is also working hard to keep its costs down; it was even more successful on that front that the company initially expected, reporting all-in sustaining costs of $840 per ounce, down almost $300 per ounce from year-ago levels and about 4% to 5% below what Goldcorp had initially projected last month. Goldcorp shares finished flat Thursday, bucking the general downward trend among miners more.

In the platinum-group metals arena, Stillwater Mining fell almost 2% despite posting net income that was 34% higher than in the year-ago quarter. Production volume from Stillwater's mines rose by 2.8%, and all-in sustaining costs fell almost 7% to $788 per ounce. But the company's recycling processing production fell by more than a third, as weather-related issues kept Stillwater Mining from gaining access to raw materials for its recycling operations. Stillwater recycles more platinum than it mines, and its palladium recycling represents more than a quarter of its total palladium production. Even with Stillwater guiding its estimates for 2014 costs and capital expenditures downward, investors punished the stock, especially with somewhat negative comments on Stillwater's having scaled back activity at its Altar copper and gold property in Argentina and its Marathon platinum-group metal and copper project in Canada.

Gold And Silver

Image sources: Wikimedia Commons; Creative Commons/Armin Kubelbeck.

Finally, beyond earnings, the aftermath of failed tie-up efforts between Newmont Mining and Barrick Gold includes plenty of post-mortem analysis on the potential future for the two companies. As Fool contributor Jay Yao noted earlier today, with so many cost advantages to be gained from merging, as well as economies of scale in dealing with workers, customers, and government entities, it seems inconceivable to advocates of efficient economic decision making that Newmont Mining and Barrick Gold couldn't come to an agreement. But corporate identity is important to workers, shareholders, and executives, and it might take a combination of more time and greater necessity for Barrick and Newmont to find enough common ground to move forward with a merger.

How metals moved today
Gold suffered the brunt of the downward pressure on Thursday, as June gold futures fell $12.50 per ounce, settling at $1,283.40. July silver futures dropped $0.13 to settle at $19.04, while platinum-group metals were mixed on the day.


Today's Spot Price and Change From Previous Day


$1,285, down $6


$19.02, down $0.13


$1,418, down $2


$811, up $4

Source: Kitco. As of 4 p.m. EDT.

On Friday, any surprise on the employment report could lead to dramatic moves in gold prices. Otherwise, though, it looks like the general trend will remain down absent other unexpected bullish events.

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