Fool's Gold Report: Silver Wheaton, Coeur Fall As Metals Ease Lower; Will Newmont Idle Indonesia?

Friday was an exceptionally quiet day for precious metals, with minimal gains on a lack of any market-moving news. Conditions in Ukraine appear stable, even as Russian President Vladimir Putin visited Crimea for the first time since the peninsula's annexation by Russia. Yet, earnings news continues to pour in, with Silver Wheaton (SLW +5.29%) and Coeur Mining (CDE +4.46%) reporting yesterday, and adding their views to those of the broader market. Meanwhile, Newmont Mining (NEM +2.73%) faces a difficult decision about how long to keep its Indonesian copper-producing assets running in light of continued tension with the Indonesian government about export restrictions.

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

The silver side of earnings
As first-quarter earnings results have come in, investors can take heart in the fact that this marks the last quarter that comparisons with year-ago results will look so terrible. For Silver Wheaton, production figures were actually quite positive at gains of nearly 8% on a silver-equivalent basis, with silver production soaring 10% from the year-ago quarter, even as gold production fell by a similar figure. Growth in sales volumes was even higher at 17%, and that played an important role in supporting overall revenue. Still, the 31% drop in sale prices per silver-equivalent ounce pulled revenue down 20% from year-ago levels, and declining net profit of 40% also showed the difficulties that Silver Wheaton has faced with the plunge in prices.

Coeur Mining's results actually came out before the bell yesterday, but the shares remained under pressure Friday after falling 3% on Thursday. Silver and gold production both rose modestly, and Coeur did a reasonably good job of cutting back on its cost structure. Yet, investors weren't satisfied with Coeur's reiteration of past guidance for the full year, including production volume and costs. Coeur has utilized risk-reduction methods to avoid exposure to further declines in bullion prices, including put-option spreads covering a range of $16 to $18 for silver, and $1,050 to $1,200 for gold. The lack of confidence that Coeur has didn't sit well with bullish metals investors, though, and even though one analyst firm argued that Coeur's slide was too dramatic for its results, Coeur Mining stock didn't respond positively to the assessment and continued its slide Friday.

Beyond immediate earnings news, investors continue to watch Newmont Mining and the need for a decision on what to do with its Batu Hijau mine in Indonesia. The Indonesian government's imposition of levies on exports of copper concentrate have led Newmont Mining to keep produced concentrate at its in-country storage facilities pending a resolution to its disagreement, but with those facilities reaching full capacity late this month, Newmont has said it would likely have to cut production as of the beginning of June if it can't reach agreement. So far, shareholders don't appear to be panicking at the possibility of a production shutdown, but it's unclear how far the Indonesian government will go in its efforts to induce Newmont Mining to refine mined products within the country's borders rather than exporting raw materials for processing elsewhere.

How metals moved today
Friday saw very modest declines in the gold market, with June gold futures falling a $0.10 per ounce, to settle at $1,287.60. July silver futures were down less than $0.02 per ounce, to $19.12, while platinum and palladium fell somewhat more forcefully.

Source: Kitco. As of 4:15 p.m.

Gold has become so dependent on bad news from Ukraine and elsewhere that, without it, gold might not be able to produce strong advances. That's something gold investors will need to think hard about for the foreseeable future even as prices have stabilized from last year's big drops.