In the past year, gold prices have risen from about $950 per ounce to around $1,200 per ounce, a boost of 26%. That increase has kept gold miners’ stocks moving too. But not all the moves have been positive.
Iamgold Corp. (NYSE: IAG) has performed very well, jumping about 50% in the past year. Barrick Gold Corp. (NYSE: ABX) has risen by about 30%. Goldcorp Inc. (NYSE: GG) is up about 14% and Yamana Gold, Inc. (NYSE: AUY) is up about 10%. The SPDR Gold Shares ETF (NYSE: GLD) is up about the same amount as the commodity itself, while the Market Vectors Gold Miners ETF (NYSE: GDX) has risen more than 30%. Kinross Gold Corp. (NYSE: KGC) has not kept up, down about 18% for the past year.
Iamgold reported earnings this morning, and the stock will probably take a few lumps as a result. Adjusted EPS came in at $0.11, below expectations of $0.15, and revenue totaled $214 million, substantially below estimates of $226.08 million. The company suffered from a weather-related production slow-down and rising cash costs. The rise in cash costs is the most troublesome. In the second quarter of 2010, Iamgold’s costs reached $623 per ounce, almost a third higher than costs of $437 per ounce in the same period a year ago. The company attributed the rise to increased royalty payments (the result of higher gold prices) and a boost in royalty rates from 3% to 5% in Ghana. Other factors include lower production due to lower ore grades, higher expenses for waste stripping, and higher energy costs.
Iamgold revised its production outlook and cash cost estimates upward for the rest of 2010. Production guidance rose from 940,000-1 million ounces to 980,000-1.01 million ounces. Cost estimates jumped from $490-$510 per ounce to $530-$550 per ounce. In order to make that cost estimate a reality, the company expects to “deliver robust production at lower cash costs.” That could happen, if ore grades improve.
Iamgold revised its economic assumptions for the rest of 2010, raising its gold price from $1,000 per ounce to $1,100 per ounce. The company now expects to pay $80/b for oil, up from $75/b, and also expects the U.S. dollar to strengthen compared with the Canadian dollar.
The story for gold in the second quarter was higher prices, increased production, and higher costs. That’s the same story we’ve seen for many quarters now, and Iamgold followed that script right down the line.
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