Fool's Gold Report: Global Worries Boost Gold As Goldcorp Gets Good News, But What About Earnings?

Gold finished last week at the key level of $1,300, and Monday brought further gains that raised hope that gold might continue its bounce even further. Events in Ukraine continue to raise concerns, and news from China pointing to economic weakness could bring further stimulus measures that could bolster prospects for precious metals. Goldcorp (GG) rose slightly on news that it will be able to resume operations at a key mine, while investors in Agnico Eagle Mines (AEM 1.73%) and Yamana Gold (AUY) considered their earnings results last week in addition to their new venture after beating Goldcorp in a bidding war for Osisko Mining.

Source: Goldcorp.

Good news for Goldcorp
Goldcorp announced Monday morning that it had resumed all of its mining operations at its Los Filos mine in Mexico. Operations at the mine had been suspended for more than a month, as Goldcorp sought to negotiate a new land occupancy agreement with the local Ejido Carrizalillo landowners' group, which had threatened in late March to shut down the Los Filos mine. The Ejido Carrizalillo's actions had drawn support from a number of activist groups, which alleged that Goldcorp had been nonresponsive to the needs of local landowners in other cases as well.

The new Los Filos deal, though, allowed Goldcorp to resume operations and will extend for five years. Because of the month-long suspension, Goldcorp said that the mine's production would likely be toward the low end of its previous guidance of 330,000 to 345,000 ounces. Yet Goldcorp said that the episode wouldn't have an impact on the production range for the entire company. With plenty of challenges already in the industry, Goldcorp's fairly quick resolution of the dispute is good news for shareholders.

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

Earnings recap
Last week, Yamana Gold and Agnico Eagle Mines both announced earnings. Agnico Eagle shares jumped 9% on Friday after the company announced a huge jump in net income, which has been a rarity in the current gold-market environment. Despite seeing about a 19% drop in realized gold prices compared to the year-ago quarter, gold production volume jumped 55%, and lower expenses also helped boost earnings.

Yamana Gold's share-price reaction was much more muted, as production fell 7%, leading to a drop of almost 90% in adjusted earnings. Although all-in sustaining cash costs on a co-product basis of $975 per ounce were down about 4% from year-ago levels, they're nevertheless somewhat higher than some of its peers, and Yamana will have to work hard to cut costs further in order to keep margins high.

Both Agnico Eagle Mines and Yamana Gold have a big opportunity in their coming acquisition of Osisko Mining. The question, though, will be whether having had to pay a higher price in the bidding war against Goldcorp will end up making the deal less lucrative for the acquiring companies, but much of that depends on what the future brings in terms of market conditions.

How metals moved today
Gold rose Monday, with June gold futures climbing $6.40 per ounce Friday to settle at $1,309.30. July silver futures rose just $0.025 per ounce to $19.57, while platinum-group metals were up on the day.

Source: Kitco. As of 4 p.m.

For the rest of the week, watch to see if conditions in Russia and Ukraine worsen. If they do, then gold could see even greater gains. But if the situation starts to calm down, then gold could once again fall back below $1,300.