Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of gold miner AuRico Gold (NYSE: AUQ) surged 10% today following an upgrade from analyst firm Raymond James from a rating of "Market Perform" to "Buy"
So What: It looks as though analysts were a fan of the company's efforts to ramp up production at its Young Davidson mine in Ontario. The company estimates that production at this mine will increase by as much as 15%, and the all-in sustaining costs of $900/oz at that mine will help bring the company's overall all-in sustaining costs to just over $1,000/oz for 2015. Also, the ramp up and completion of the Young Davidson mine expansion will allow the company to significantly reduce its capital expenditures for the year and put it on track to meet management's target to be free cash flow positive on a per-share basis by 2016.
Now What: The company does appear to be doing the right things as a miner -- reducing capital expenditures, increasing production, reducing all-in sustaining costs -- to become profitable again after a couple of years of less than stellar results. That being said, so much of its success is dependent on the price of gold. If prices for gold were to continue to creep lower and below that all-in sustaining cost level, then don't be surprised if that analyst rating heads right back down again.
