Mining Shares Rise With Gold; Harmony, New Gold Outperform

By Paul Ploumis (ScrapMonster Author)

December 07, 2015 02:56:09 AM

(Kitco News) - Shares of most gold producers rose along with the price of the metal itself during the first four days of the week, with Harmony Gold Mining Co. Ltd. posting one of the biggest percentage gains after announcing that it has benefited from a higher South African rand price in gold and paid down debt as a result.

New Gold also fared well a week after closing on a deal to sell one of its assets, getting some favorable analyst commentary.

Around Thursday’s close, Comex February gold futures were $1,061.10 an ounce, a gain of $5, or 0.5%, for the week so far. Comex March silver was steady during the first four days of the week at $14.07.

During that same time span, the NYSE Arca Gold Bugs index (HUI) was up 6.8417 points, or 6.4%, to 114.3208. The Market Vectors Gold Miners exchange-traded fund (GDX), which consists of stocks of gold-mining companies, fell 63.3 cents, or 4.7%, to $14.083.

Shares for Harmony surged during a week in which the company said it has repaid 1.1 billion South African rand of its debt as a higher gold price in South African rand terms helped cash flow. Harmony (NYSE: HMY) added 9.56 cents, or 17%.

“Despite the gold price trading around multi-year lows in U.S. dollar terms, Harmony, with over 90% of its operating revenue generated in South Africa, benefits from the weak rand, which more than offsets the impact of the low U.S. dollar gold price,” Harmony said in its announcement.

New Gold Inc. (NYSE MKT: NGD) added 29 cents, or 14%. Just ahead of the U.S. Thanksgiving holiday, the company announced it had completed the sale of its 30% interest in the El Morro project to Goldcorp Inc. New Gold received $60 million in net cash and a loan was canceled. New Gold also will receive a 4% gold stream on production from the property. BMO Capital Markets describes the development as positive.

“The closing of the El Morro deal helps to bolster NGD’s balance sheet by simultaneously increasing the cash position and decreasing debt while still maintaining exposure to the project via the stream,” BMO said in a research note this week. “Although New Gold is likely to retain the stream in the short/medium term, it could be a potential source of funds if a larger streaming/royalty company was interested in it.”

Among the other companies posting big gains were Seabridge Gold (NYSE: SA), up 80 cents, or 11%; and Alamos Gold Inc. (NYSE: AGI), up 35 cents, or 12%.

Yamana Gold Inc. (NYSE: AUY) climbed 22 cents, or 11%, jumping for the second straight week. Yamana and wholly owned subsidiary Brio Gold Inc. announced last week that they have begun the private placement of Brio shares, with Yamana reporting that the move will reduce its stake to 20.9%. Plans call for a primary offering by Brio to fund its near-term business plan, while Yamana will use expected proceeds for “general corporate purposes.”

Among some of the major companies in the news this week, shares of Newmont Mining Corp. (NYSE: NEM) rose $1.34, or 8%, during a week in which the company released an updated long-term outlook. “We expect to keep our all-in sustaining costs below $1,000 per ounce and maintain profitable production of between 4.5 and 5 million ounces of gold per year over the next five years,” said Gary Goldberg, president and chief executive officer.

Iamgold Corp. rose for the week with gold even though the company said workers at the Rosebel Gold Mine in Suriname went on strike over the issue of a 10% workforce reduction. The cuts are in response to a lower-price gold environment, Iamgold said. Iamgold (NYSE: IAG) shares gained 8 cents, or 5%.

Kinross Gold Corp. (NYSE: KGC) reported that production at Paracatu in Brazil has returned to normal following a partial curtailment on Nov. 5 due to lack of rain. While Kinross said some output would be lost this year, the company still expects to be within its production guidance for the year of 2.5 million to 2.6 million gold-equivalent ounces. Kinross (NYSE: KGC) shares climbed 13 cents, or 7%.

Meanwhile, Silvercorp Metals (TSX: SVM) came under pressure, losing 7 cents, or 9%. The company, which operates multiple mines in China, has not reported any fresh news since announcing increased mineralization at its one of its mines ahead of Thanksgiving.

Courtesy: Kitco News