Several gold producers have registered strong share price gains during the first half of 2015, despite price pressure on the yellow metal. The spot gold price dipped 0.7% from last year’s close to end June 30 at US$1,174 per oz. It has since fallen another US$68.20 per oz. to finish July 21 at US$1,105.80. However, there have been many gold stocks on the rise over the first half of the year, including the following:
Kirkland Lake Gold (TSX: KGI; US-OTC: KGILF) ended the half year at $5.63 per share, up 68% since the end of 2014, and up 119% since 2013. In November 2013 the company focused on better grades instead of higher tonnage at its Macassa gold mine in Ontario, leading to its recent success.
Since that change, CEO George Ogilvie explains the mine’s head grades are up 36% to 15 grams gold per tonne. Production in fiscal 2015, ended April, jumped 26% to 154,000 oz. gold over the earlier fiscal year, driving down costs. The firm also reduced its 1,250-person workforce to 1,000 employees. These factors have helped Kirkland “return to profitability and free cash flow for the last four financial quarters,” Ogilvie says.
The miner intends to bump up grades again this year, and Ogilvie says that “a regional exploration program, coupled with continued success at the operation, will act as catalysts to further drive the share price.”
Kirkland Lake will adopt a December year-end, starting in 2016. The stock closed July 21 at $4.56. CIBC analyst Cosmos Chiu rates Kirkland as a “sector performer,” with a $6 per share target.
Lake Shore Gold (TSX: LSG; NYSE-MKT: LSG) rose 64% to finish June at $1.28 per share. The stock had been up 164% since the end of 2013, coinciding with the miner expanding its Bell Creek mill to 3,000 tonnes per day. This bolstered output and trimmed costs last year at its Timmins West and Bell Creek gold mines in Ontario.
Gold production in the first half of 2015 totalled 95,600 oz., relatively flat compared to the same period last year. But preliminary cash costs and all-in sustaining costs during the first half are both down 6% to US$551 and US$810 per oz., leading to a revised 2015 cost guidance.
Lake Shore now expects costs to come in below its previous forecasts of US$650 to US$750 per oz. for cash costs, and US$950 to US$1,000 per oz. for all-in sustaining costs. Full-year production is set at 170,000 to 180,000 oz. gold.
On the exploration front, the miner is focused on the 144 Gap area, near the Timmins West mine, for which it intends to publish a maiden resource next year.
“Lake Shore has their operations running well now,” Haywood Securities analyst Kerry Smith writes. He has a “buy” rating and a $1.30 target on the stock. The miner recently made an all-share offer for Temex Resources (TSXV: TME; US-OTC: TMXRF), which holds a property jointly with Lake Shore near the Bell Creek mine and mill.
OceanaGold (TSX: OGC; ASX: OGC) exited the half year at $3.09 per share, up 53% from its 2014 close of $2.02. The stock has been up 88% since year-end 2013.
“Despite a falling commodity price over the past couple of years, we have posted record financial results and initiated our inaugural dividend policy,” the company’s investor relations manager Sam Pazuki notes.
During the first half of 2015, the miner used the healthy cash flow generated from its Didipio gold-copper mine in the Philippines and the Macraes and Reefton gold mines on New Zealand’s South Island to help pay down its debt. It also struck a US$101-million agreement to buy Newmont Mining’s (NYSE: NEM) Waihi gold mine on New Zealand’s South Island, and picked up a 14.9% stake in Nevada explorer Gold Standard Ventures (TSXV: GSV; NYSE-MKT: GSV) for $16.2 million.
OceanaGold will fund the Waihi transaction, expected to close shortly, with existing cash and an expanded revolving credit facility. An optimization study on Waihi will then hopefully lead to boosted productivity and lower costs, as reserves expand, Pazuki notes.
This year the company plans to reduce costs by connecting the Didipio operation — which runs on diesel — to the country’s power grid by the fourth quarter. It will also develop a decline to access deeper reserves for underground mining.
OceanaGold is guiding consolidated full-year production of 295,000 to 335,000 oz. gold and 21,000 to 23,000 tonnes copper, at cash costs of US$450 to US$530 per oz., and all-in sustaining costs US$770 to US$840 per oz. (Both costs are net of by-products.)
BMO analyst Brian Quast has a $2.75 target and an “underperform” rating on the stock, while CIBC analyst Jeff Killeen rates OceanaGold as a “sector performer,” with a $3.25 target.
Detour Gold (TSX: DGC; US-OTC: DRGDF) exited the half year at $14.37 per share, climbing 51% from its 2014 close. The stock is up 250% over its 2013 close of $4.10. The miner had been struggling to ramp up its Detour Lake gold mine in Ontario since production started in 2013, but is now seeing better days.
In early June, it reported over the previous three months that mill throughput averaged 59,370 tonnes per day — above the 55,000-tonne-per-day design capacity — while mining rates came in at 271,000 tonnes per day, above the planned 238,000 daily tonnes. This marked the best period of mine and milling performance since the operation came online.
Also during the half year, Detour repaid US$124.2 million in debt, amended a US$135-million credit facility and reported strong drill results from the nearby Lower Detour Lake area in zone 58N. The miner started a US$5-million drill program at zone 58N on June 30.
The company’s share price has risen on the improvements at Detour Lake, combined with the “benefits of our safe jurisdiction and the weakening Canadian dollar,” CEO Paul Martin said in an email to The Northern Miner. “These factors should lead to the commencement of positive cash flow in the second half of 2015.”
Detour expects gold production of 110,000 to 120,000 oz. in the second quarter and 475,000 to 525,000 oz. gold for this year. It is guiding 2015 all-in sustaining costs of US$1,050 to US$1,150 per oz.
The stock closed July 21 at $11.59. Earlier in July Haywood Securities’ Smith bumped up his $14 target to $18.50 per share. He recommended a “buy” on the stock.
Endeavour Mining (TSX: EDV; US-OTC: EDVMF) ended June at 62¢ per share, jumping 46% over its 2014 close of 42.5¢. It exited 2013 at 48¢ per share.
Endeavour operates four gold mines in West Africa: Youga in Burkina Faso, Agbaou in Côte d’Ivoire, Nzema in Ghana and Tabakoto in Mali.
Doug Reddy, Endeavour’s senior vice-president of business development, attributes the strong half-year share price performance to the producer beating its 2014 production guidance, and delivering half-year 2015 output of 255,000 oz. at all-in sustaining costs in the lower half of the US$930 to US$980 guidance. Reddy notes costs have improved since 2013. Full-year production remains at 475,000 to 500,000 oz.
The miner ended June with US$52 million in cash. In early July, it further reduced the amount outstanding on its revolving credit facility by US$20 million to US$260 million. Reddy says the debt was necessary when the company was dev
eloping the Agbaou mine, expanding throughput at the Tabakoto mill and developing the Segala underground mine at Tabakoto.
Before the end of 2015, Endeavour anticipates making a production decision on its advanced Houndé gold project in Burkina Faso.
Other rising stars
More than a handful of gold developers have seen their share prices increase in the first half of the year, as they advance their projects towards production. These companies include the following:
Dalradian Resources (TSX: DNA; US-OTC: DRLDF) — which is pushing its high-grade Curraghinalt gold project in Northern Ireland towards a prefeasibility study — finished June at 98¢, up 44% from its 2014 close of 68¢.
Guyana Goldfields (TSX: GUY) climbed 40% to exit the second quarter at $3.96. The junior anticipates first production at its new Aurora gold mine in Guyana in the coming weeks.
Roxgold (TSXV: ROG; US-OTC: ROGFF) added 40% to finish June at 77¢. The firm is developing the 55 Zone on its Yaramoko gold project in the Houndé greenstone region of Burkina Faso. Production from that zone should kick off in the second quarter of 2016.
Asanko Gold (TSX: AKG; NYSE-MKT: AKG) gained 22% to end June at 2.20 per share. After peaking at $2.41 on July 14 after a construction update, shares eased down to $1.98 on July 21. The firm has built 60% of the first phase of its Asanko gold mine in Ghana, with production slated to begin in early 2016.