Worth Their Weight in Gold? Potential Upside for Gold Stocks

(Continued from Prior Part)

AISC (all-in sustaining costs) are quite an encompassing measure that you can compare across miners. This is a very important metric for investors to watch. It shows the company’s margin cushion at prevailing gold prices (GLD) (IAU).

To learn more about AISC, read Everything you need to know about gold and gold companies.

Barrick Gold (ABX) performed strongly on the cost side. Its AISC was down 8% year-over-year to $771 per ounce in 3Q15. This is the lowest metric among the senior gold mining peers. The company has lowered its AISC guidance for 2015 from $840–$880 per ounce to $830–$870 per ounce.

While Barrick delivered the lowest AISC among peers, Agnico Eagle Mines (AEM) was the most successful in year-over-year in reducing its AISC. It came in 29% lower, at $810 per ounce. It also lowered its cash cost guidance for the second time this year to $850 per ounce (mid-point) from $880 per ounce. The upgrades have mainly been due to higher-than-expected grades and currency tailwinds (Canadian dollar and Mexican peso).

Newmont Mining (NEM) also reduced its AISC by 16% to $835 per ounce in 3Q15. It also reduced its guidance by 4% to $910 per ounce.  It expects the AISC to remain below $1,000 per ounce for the next five years .

Yamana Gold’s (AUY) currency hedges had a negative impact to the extent of $35 per ton on the cash costs and AISC in 3Q15. These hedges roll off by year-end, and its costs should benefit significantly from weaker producer currencies going forward in 2016. Yamana has AISC guidance of $820 per ounce for 2H15.

Goldcorp’s (GG) AISC of $848 per ounce improved by 21% year-over-year in 3Q15, driven mainly by higher production and favorable currency. The company reaffirmed its guidance for 2015 at $850–$900 per ounce.

Kinross Gold (KGC) was the only company among the seniors whose AISC increased year-over-year in 3Q15. It reported an increase of 2.7% to $936 per ounce. This growth was due to higher capex and fewer gold ounces sold. The company also maintained its 2015 guidance at $1,000 per ounce.

Among the senior gold miners, AEM has been cutting costs most significantly. Its outlook on costs is also positive. Kinross has been the laggard in this regard. AEM’s drive to reduce its cost base is one of the main reasons for its relative outperformance in the gold sector this year.

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - Why Have Newmont and Agnico Outperformed?
• Part 2 - Gold Miners Are Cutting Down on Risky Geographical Exposure
• Part 3 - Why You Should Look Out for Gold Miners’ Commodity Exposure