Gold stock prices surged after the U.S. inflation number for October surprised dramatically to the upside last week. However, it hasn’t moved much since then. The European inflation read also signaled hot inflation this week, coming in higher than the Bank of England’s target for the third consecutive month. Eurozone inflation came in at 4.1%, the highest level in 13 years, although the European Central Bank remains unfazed.
So what does all this price movement in gold mean for gold stocks? Some companies released their latest earnings reports recently, and analysts are weighing in.
Argonaut Gold (ARNGF)
Argonaut Gold (OTCMKTS:ARNGF) reported a slight beat in adjusted earnings per share, coming in at 6 cents per share, compared to the consensus of 5 cents per share. Desjardins analyst John Sclodnick said higher gold sales and lower costs drove the earnings beat.
Argonaut produced 58,800 ounces in the third quarter, compared to the consensus of 59,400 ounces. The company sold 60,600 ounces. Its cash costs came in at $992 per ounce and all-in sustaining costs at $1,207 per ounce, versus the consensus of $1,013 per ounce and $1,296 per ounce.
Desjardins expects Argonaut to report full-year production at the top end of its guidance. Consensus stands at 243,900 ounces, in line with management’s guidance of the top half of their guidance of 210,000 to 250,000 ounces.
Sclodnick said Argonaut’s Magino construction is still on schedule as parts for the processing facility arrive at the site. The company will update its capital expenditures estimate next month, although its most recent guidance indicated that it would exceed its previous budget of 480 million CAD to 510 million CAD by 15%. Sclodnick maintained his buy rating and 4.25 CAD price target and continues to see Argonaut as a top producer pick, although he still sees the company as speculative.
Americas Gold and Silver Corporation (USAS)
Americas Gold and Silver Corporation (NYSEAMERICAN:USAS) missed consensus estimates for its third-quarter results. However, Sclodnick doesn’t see the results as meaningful for the company. He believes the market is primarily focused on the ramp-up at its Cosalá property, resource growth at Galena, and metallurgical testing at Relief Canyon.
Americas ended the third-quarter with $2.54 million in cash and a working capital of $9.89 million. The company amended its 2024 convertible debentures earlier this month, boosting the outstanding principal by 6.3 million CAD to 17.9 million CAD. Americas was also able to reduce the conversion price from 3.35 CAD to 1.48 CAD.
The company has already started work at Cosalá and now has over 20,000 tons of ore ready to be processed. Sclodnick noted that mining would start at the Main Zone and move to the higher-grade Upper Zone in the next six months.
Meanwhile, the Phase II drill program at Galena is moving forward as Americas aims to add another 50 million ounces of silver to its resource base. However, mining operations at Relief Canyon are suspended as Americas focuses its capital on the restart of operations at Cosalá.
Sclodick points out that Americas is trading at a 30% discount to its junior gold producer peers and a 64% discount to silver producers. He believes it is an attractive acquisition target at its current valuation. Management also indicated to him that there is interest in its assets, especially Galena.
Aya Gold and Silver
Aya Gold and Silver also released its third-quarter earnings results, reporting adjusted earnings of 1 cent per share, in line with the consensus. Cash flow per share was slightly ahead of the consensus, coming in at 3 cents per share compared to the consensus of 2 cents per share. The company ended the quarter with $88.1 million in cash.
So far this year, Aya has produced 1.17 million ounces of silver, about 75% of the increased guidance of 1.55 million ounces. Sclodick expects the company to come in slightly ahead of its production guidance for the full year at 1.61 million ounces.
During the third quarter, Aya continued to work on its resource update and expansion feasibility study at Zgounder. The property currently has five drills in operation and Aya has drilled 15,834 meters so far, bringing its total drilled to 40,703 of the 42,000 meters planned. At the end of the quarter, the feasibility study was 73% complete.
Sclodick points out that Aya has multiple catalysts coming in the fourth quarter, which he believes should boost the company’s net asset value. He expects the drill results at Zgounder to back a strong resource update, forming the foundation of an impressive feasibility study. He also believes exploration results at the company’s Imiter bis property will display its next development project.
Orla Mining
Orla Mining released its third-quarter earnings results and updated investors on the progress in its Camino Rojo project, which is on budget and on schedule for the first gold pour by the end of the year. Construction there is 96% complete with capital spending at $110.9 million as of the end of October, amounting to 83% of its $134.1 million budget.
Orla Mining completed construction on the crushing, conveying and stacking system at Camino Rojo and started wet commissioning. It is now ramping up mining there, including drilling, blasting and hauling ore and waste.
Meanwhile, the Merrill-Crowe plant and refinery are 98% complete and are being commissioned. Orla has also finalized negotiations of the collective bargaining agreement with the Miners’ Union. The company had $41.6 million in cash as of the end of October, exceeding the remaining budget of $23.2 million. Orla Mining will start to generate revenue after the first gold pour.
Sclodick reports that the company is trading at 0.76 times net asset value, compared to developers at 0.58 times and junior producers at 0.76 times. He believes the premium versus Orla’s developer peers is justified due to its near-term transition to producer status, low cost profile and clear growth pipeline.
The next catalysts include the first gold pour, expected next month, and the ramp-up to steady-state production rates at the end of the first quarter. Sclodick is also anticipating the metallurgical test results on the sulphide material, which will inform the preliminary economic assessment. He also sees a positive permitting status update for Orla’s Cerro Quema project in Panama and a maiden resource estimate for its Caballito copper gold deposit.
On the date of publication, the author did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Michelle Jones is editor-in-chief for ValueWalk.com and has been with the site since 2012. Previously, she was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Email her at Mjones@valuewalk.com.
