Gold Miners Saw Profits Rise in 2Q as Operations Ramped Up, Gold Prices Rose -- Talking Markets
July 22 2021 - 11:29AM
Dow Jones News
By Adriano Marchese
As pandemic-related measures have begun to ease in much of the
world, gold miners have seen profits rise amid ramping-up
production and increased precious-metals prices, but analysts are
torn on the longevity and forces behind the trends.
Gold mining giant Newmont Corp. said attributable gold
production rose 15% in the second quarter to 1.45 million ounces,
contributing to a nearly doubled profit in the period.
The increase was primarily due to higher production from sites
that were previously placed into care-and-maintenance mode or had
experienced reduced operations in response to Covid-19 during
2020.
Similarly, Freeport-McMoRan Inc. reported greater profit and
earnings in the second quarter as production and realized prices
rose for the metals the company produces. The Phoenix-based mining
company said gold sales climbed to $305 million, from $184 million
in 2020's second quarter.
Much of the success of the miners can be credited to higher gold
prices.
"Gold had a volatile second quarter, with a ride up from the
mid-$1,700 an ounce-level peaking at the $1,900 an ounce level in
early June and then retracing back to the $1,770 an ounce level by
the end of the quarter," according to a report by Canadian bank
CIBC.
Newmont said its average realized price for gold in the period
was $1,823 an ounce, an increase of $99 per ounce over the prior
year quarter, which helped drive up profit in the quarter.
Freeport-McMoRan saw similar increases, with average realized
prices at $1,794 an ounce, up from $1,749 in the second quarter of
2020.
For the full-year 2021, Newmont forecasts attributable gold
production to reach 6.5 million ounces. This is expected to grow
further in 2022, between 6.2 million and 6.7 million ounces, and in
the same range in 2023.
Further down the line, production is expected to increase to
somewhere between 6.5 million and 7 million ounces in both 2024 and
2025.
Freeport-McMoRan also reaffirmed its guidance at 1.3 million
ounces of gold in 2021, which is expected to rise to 1.6 million in
2022 and again to 1.8 million a year later.
The forecasted increased production could be met with higher
demand for gold as more and more investors translate their
inflation worries into gold purchase.
CIBC said its outlook for gold remains bullish into the second
half and over the next two years as the pandemic continues to
intensify in many countries, vaccination rollouts miss
expectations, and governments struggle to keep up with demand for
more fiscal stimulus.
However, Canadian bank Scotiabank believes the inflation fears
are only temporary.
"We believe that fears related to higher interest rates, a
stronger U.S. dollar, and a slowdown in China are transitory,"
Scotiabank said in a research note, suggesting that base and
precious metals are in for a supercycle--a sustained period of
expansion.
CIBC remains skeptical, suggesting that inflation concerns have
risen to the forefront with the market apparently not believing the
'transitory' argument.
"The Fed is reiterating that it is not expecting to have to hike
rates well into 2022. In any event, history has shown that the Fed
is aware that it cannot significantly outpace its counterparts and
still remain competitive on the trade front," CIBC said.
Write to Adriano Marchese at adriano.marchese@wsj.com
(END) Dow Jones Newswires
July 22, 2021 12:23 ET (16:23 GMT)
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