It's a good thing my No. 1 pick among gold miners for 2012 -- Primero Gold
This week, however, newly appointed President and CEO Scott Perry dispatched the unwelcome news that AuRico will now yield between 248,000 and 278,000 GEOs in 2012, and between 335,000 and 395,000 GEOs during 2013 (or roughly 13% beneath prior 2013 production guidance). With only a slight adjustment to the target for initial production from the company's exciting Young-Davidson mine, the shortfall here is really all about Ocampo. As contractors swoop in to reinvigorate Ocampo's underground development, cash costs are expected to spike sharply in the near term before beginning to trend lower next year.
Unexpected pitfalls and hiccups of the sort are unfortunately par for the course in this challenging and risk-laden industry, but a shortfall of this magnitude and duration from this company's flagship operation is certainly cause for concern. Given AuRico's prior struggle with labor issues at the recently divested El Cubo mine, as a long-standing shareholder I am displeased to see such issues returning to the fore. Moreover, the speed with which Endeavour Silver
On the other hand, the company's new CEO appears to have taken decisive measures to position Ocampo for a more reliable long-term-production outlook by accelerating underground development beyond even the previously conceived pace in order to "increase developed underground inventory for production to ensure flexibility and reliability of future operations." Ironically, increasing the number of available production stopes happens to form part of Endeavour Silver's enhanced mine plan for El Cubo. And as the remarkable trailing trajectory of Primero Mining reminds us, there's no time like the present to take the decisive and predictably unpopular measures that may occasionally be required to maximize the long-term profitability of a mining operation. Although I am naturally disappointed to see the stock languishing here beneath $6 per share, I have every intention of holding my stake to await meaningful long-term profit from AuRico's trio of producing mines. In the meantime, my hopes for nearer-term strength transfer to alternate picks from my top 10 gold stocks for 2012. I consider Eldorado Gold
- Add AuRico Gold to My Watchlist
- Add Endeavour Silver to My Watchlist
- Add Primero Mining to My Watchlist
- Add Eldorado Gold to My Watchlist
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Fool contributor Christopher Barker can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He tweets. He owns shares of AuRico Gold, Eldorado Gold, Endeavour Silver, and Primero Mining. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.