AuRico Gold Earnings: An Early Look

Earnings season is just about over, with almost all companies already having reported their quarterly results. But there are still a few companies left to report, and AuRico Gold (NYSE: AUQ) is about to release its quarterly earnings report. The key to making smart investment decisions with stocks releasing their quarter reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Gold miners have gone through a tough time lately, as slipping gold prices, higher production costs, and labor strife around the world have weighed on mining stocks. But can AuRico's cost advantage allow it to buck the trend? Let's take an early look at what's been happening with AuRico Gold over the past quarter and what we're likely to see in its quarterly report on Monday.

Stats on AuRico Gold

Source: Yahoo! Finance.

Will AuRico Gold glitter or tarnish this quarter?
Over the past few months, analysts have gotten a lot more pessimistic about AuRico Gold's prospects. Consensus earnings-per-share estimates for the just-ended quarter have come down by $0.02, while full-year 2013 calls have come down by $0.13 per share, or 25% of where they were three months ago. The stock has followed suit, falling 13% since mid-December.

AuRico has had a disappointing track record with its mines lately. Last October, it added its once-flagship Ocampo mine in Mexico to the list of projects on which it has failed to reach its full potential, selling the mine for about $315 per ounce of gold reserves and including a couple of high-potential speculative properties into the mix. Meanwhile, Endeavour Silver (EXK 6.25%) scored a major coup by grabbing up AuRico's El Cubo mine last year, giving Endeavour the inside track at its riches at AuRico's expense.

In preliminary results it released in January, AuRico already gave some details on how tough an environment it has faced. Overall cash costs soared to $630-$650 in the fourth quarter, well above its full-year guidance of $483-$548. For 2013, the company said that it expects production to rise from 127,000 ounces in 2012 to 190,000-220,000 ounces this year. Yet it sees a range of all-in costs, a more accurate measure of production expenses than cash costs, of between $1,100 and $1,200. Rival Yamana Gold (AUY), by contrast, has all-in costs of around $800, showing how much of a competitive disadvantage AuRico has.

Yet some good news for shareholders came in February, when AuRico said it would start paying a dividend. Its anticipated $0.04 quarterly payout only amounts to a yield of 2.3%, but that's fairly high for the industry and reflects optimism that current tough conditions won't last forever. With an expectation of paying 20% of operating cash flow, AuRico should retain enough cash to fund capital expenditures and other strategic moves.

In its quarterly report, watch for AuRico to give investors a better sense of whether its Young-Davidson mine can carry the burden of being the company's high-growth flagship prospect. With the bulk of its capital investment going to Young-Davidson, AuRico needs success there to avoid yet another painful disappointment.

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