What Awaits Gold Mining ETFs Post Mixed-to-Better Earnings

Many investors are very bearish on the gold mining space right now thanks to the looming Fed tightening, strength in the greenback, uncertain demand from the key consuming nations like China (as its economy is reeling under pressure), as well as investors’ inclination toward cyclical sectors of the equity markets given reasonable improvement in the U.S. economy (read: Gold Mining ETFs Are Crashing).

In fact, the space appears to mirror the crush caused by the taper tantrum in 2013. Market Vectors Gold Miners ETF (GDX) is off 27% this year while gold bullion ETF (GLD)( has lost over 8%. Mining stocks are always more vulnerable as these are often considered leveraged plays of the underlying metal.

In such a scenario, investors’ eyes must be glued to the Q2 earnings releases of the gold mining companies to understand a roadmap for the second half of the year. Investors should note that three gold mining companies Barrick Gold Corporation (ABX), Newmont Mining Corporation (NEM) and Gold Corp. (GG) came up with mixed results this season. NEM reported on July 22 followed by GG on July 30 and ABX on August 5.

Investors must be surprised to know that ABX spread optimism around the space, pushing GDX up by 2.14%. GG also caused a stir in the market for good while NEM is striving hard but yet to reap returns. This suggests that gold mining stocks are no doubt suffering but might turn around by the end of this year.

Barrick Gold’s Q2 Earnings in Focus
 
Barrick Gold’s adjusted earnings plunged over 64% to 5 cents per share but were in line with the Zacks Consensus Estimate. Lower pricing but higher costs can be held responsible for the slack earnings.
 
Revenues fell 9.2% year over year to $2.23 billion in the reported quarter but beat the Zacks Consensus Estimate of $2.21 billion. Average realized price of gold declined 7.7% while gold production dropped 2.7%. All-in costs were up about 1% in the quarter.

The company is leaving no stone unturned to combat the recent upheaval in the gold bullion market. That’s why it slashed its quarterly dividend by 2 cents, planned a capex cut worth $2 billion, guided for reduced costs for the full year and is restructuring operations by ‘asset sales, joint ventures and streaming’. In a nutshell, the company appears to have chalked out its course of action in case gold prices slip further.

Investors valued its efforts and following earnings, the stock gained 5.20% on August 6, 2015. The stock added over 1% after hours.

Goldcorp’s Q2 Earnings in Focus  

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