Loading ...I’ve been combing the street’s numbers on Q1 and especially Q2…
These numbers are going to have to go way up or the majors and mid-tiers are going to blow the doors off of things. The massive write-downs are OVER (except for maybe Goldcorp and their various disasters) and the street is low on Q1 and from my numbers, they are looking at Q2 as if gold is trading sub 1100 as an average price for the quarter. The average price of gold for Q1 was 1179 USD and the majors and mid-tiers are still lowering costs. What happens if the price of gold averages 1250+ in Q2? These margins are absolutely huge. Gold doesn’t even need to go higher for a name like Newmont to go to 40. We could potentially see a name like Agnico up 5-10 on an earnings report… especially on a production beat. Things could really start to get unhinged as these earnings reports come out and more eyes actually see what is happening in the earnings releases.
Absolutely correct. Almost a perfect storm: trend has turned bullish, miners have squeezed and continue to squeeze costs out of production, and energy costs have plummeted, further reducing costs. Energy #1 cost of mining. Especially gold. Oh, fourth point: the financial house of cards is coming undone…
Actually it is labor, but energy is a big input. 2 things to note… Oceanagold has gone on a diesel hedging spree at what appear to be the lows. Absolutely brilliant. That and Newmont’s guidance has a ton of upside because its official cost guidance is assuming 65$ per barrel in oil.
That’s an interest point about Newmont’s guidance oil price.
How long will energy costs be going down if oil jumps to $50 soon?
50$ still isn’t very high in the grand scheme of things. my bigger concern is for the Canadian miners like Richmont and the Aussie guys if we have hit a commodity bottom. The weak Canadian and Aussie currencies have been their biggest tailwinds and 50$ oil is going to really strengthen the Loonie.
As for perfect storm, I wonder if we are about to see rapid retail price inflation start to creep in if oil bottomed here and has started a good rally and if the rest of the commodities complex starts up this year to add some juice to already existing services inflation. CPI and RPI price indices have ticked up “unexpectedly” in the UK, according to last night’s BBC radio news report in the UK.
Perhaps the perfect storm of commodity inflation and asset deflation is on its way. No interest rate will be suitable to treat this malady. The therapeutic range of interest rates will not exist.
Thanks Cashcosts
You are a valuable resource for the Tentsters
Regards
Fully