TORONTO – Canada’s senior gold producers are expected to boast about their ability to trim costs some of the biggest names in the sector report their second-quarter results Wednesday.
“Cost containment has been a theme now for a year and that theme isn’t going away at these gold prices,” said Barry Allan, an analyst at Mackie Research Capital.
“Everyone’s going to be talking about the success they’ve had and the strides they’ve made.”
However, Allan says investors will be examining the corporate governance issues and geopolitical tensions affecting Canada’s senior gold miners.
Allan said the impact of the retirement of Barrick Gold (TSX:ABX) chairman Peter Munk and the departure of CEO Jamie Sokalsky will be followed closely by shareholders.
“With Barrick it’s just been drama after drama and I think there’s still more dramas yet to go,” Allan says.
Earlier this month, the company eliminated the CEO role and replaced it with two co-presidents in a move that increased the influence of chairman John Thornton. The move followed a tumultuous year for the company that saw it take billions in writedowns, stop work at its massive Pascua-Lama project in South America and restructure its business with the sale of several non-core operations.
The price of gold plunged last year, taking shares in the gold miners with it as companies scrambled to cut costs.
However, the price of gold has stabilized – holding this year between US$1,200 and US$1,300 an ounce – and the gold sector has been one of the top performing groups on the Toronto Stock Exchange.
Meanwhile, Kinross Gold (TSX:K), which has a third of its production in Russia, has exposed itself to considerable risk, Allan said.
“One of their primary asset base is in Russia and, given world sentiment on Russia, it has hurt their stock price fairly dramatically,” he said.
Russia has faced sanctions by the West over its annexation of Crimea and the revolt in eastern Ukraine.
However, Phil Russo, an analyst for Raymond James, doesn’t think it will hurt Kinross’s operations.
“As of today, Kinross’s Russian operations haven’t been threatened. They continue to operate steadily,” Russo said.
“The geopolitcal influences on Kinross stock price are out of their control. The hope is that the issue diffuses over time,” he said.
According to analysts surveyed by Thomson Reuters, Kinross is expected to post earnings of five cents per share. The average estimate for Barrick is 18 cents per share.
Analysts expect Agnico-Eagle Mines (TSX:AEM) to deliver a profit of 29 cents per share.
Agnico-Eagle have managed shareholder’s expectation very well, said Russo, and have operations in relatively stable jurisdictions in the Americas and Finland.
“Agnico are already telling us that they’re going to come in at the high end of their guidance after Q1,” said Russo.
“What you see is what you get and they generally do better than expectations and all in very politically stable jurisdictions,” he added.
Yamana Gold (TSX:YRI), which jointly acquired Osisko Mining Corp. (TSX:OR) with Agnico-Eagle in April, is expected to deliver earnings per share of four cents.