Move over Bitcoin. In 2018, so far, it’s gold that’s catching investors’ attention.
Gold hit a four-month high on Friday, trading at US$1,338.39 per ounce on the back of strong production outlooks from companies, higher price predictions from bank analysts and merger activity.
“It’s going to get more competitive,” Clive T. Johnson, chief executive of B2Gold Corp., told the Financial Post about the state of the gold industry. “There’s going to be more competition (to acquire) some of these assets.”
Johnson said his company used the past five years to acquire properties for its pipeline, and is now focused on development and production.
Weather leaves Centerra investors cold even as gold prices sizzlePacton Gold: Exploring Timmins and Red LakeThis week, B2Gold, whose stock is up 12.2 per cent to $3.84 since October, announced it produced 630,000 ounces of gold in 2017, setting a new high for the Vancouver-based company with its flagship Fekola mine in Mali. B2Gold is forecasting that 2018 will be “transformational,” and that its annual gold production could grow 50 per cent to as high as 950,000 ounces.
That would put its gold production in league with Yamana Gold Inc., another company that exceeded its 2017 guidance, producing 977,000 ounces — in addition to 5 million ounces of silver and 127 million ounces of copper.
The Toronto-based company also said in a press release on Thursday that its Cerro Moro gold and silver mine in Argentina will begin producing by mid-2018, although Yamana does not give full guidance for the upcoming year until Feb. 14.
On Thursday, it was one of several gold companies that The Canadian Imperial Bank of Commerce analysts spotlighted in a note to investors. They increased the 12- to 18-month price target for Yamana from US$3.25 to US$3.75 based on the rise in spot gold prices. It is currently trading at US$3.44.
The CIBC analysts also commented on Toronto-based Alamos Gold Inc., which this week posted a 10 per cent increase in gold production in 2017 at 429,000 ounces, its highest ever, and forecast 2018 production at the high end could hit 520,000 ounces.
Although Alamos said capital expenditures in 2018 could exceed US$300 million as it seeks to develop a mine in Turkey — far above CIBC’s estimate of U.S.$205 million — the analysts reiterated their “outperformer” rating.
“We don’t see the higher capex in 2018 as an issue, as it is a result of timing (in Turkey) and higher allocation to the exploration budget, which should both yield future benefits,” CIBC analysts Cosmos Chiu and Kevin Chiew wrote.
Still, many of the industry’s heavy hitters have not yet released their fourth quarter production numbers, and even those that have do not release earnings until later this month or February.
Barrick Gold Corp., for instance, has not yet released its full 2017 production, and in the third quarter, lowered its high end gold production from 5.6 million to 5.5 million ounces. Its annual gold production has declined for consecutive years, and the company previously said it aims to reduce debt in 2018 from $6.4 billion to $5 billion.
Although B2Gold’s Johnson said his company is moving out of an aggressive acquisition mode, there are still mergers in play. On Friday, Vancouver-based First Majestic Silver Corp. announced it will acquire the gold and silver-focused Primero Mining Corp. for $320 million. Primero shares jumped 125 per cent on the news, but First Majestic declined 3.5 per cent.
The deal gives Mexico-focused First Majestic possession of Primero’s San Dimas property in Sinaloa, an over 100-year old mine that through the first three quarters of 2017 produced 99,000 ounces of gold equivalent and 2.64 million ounces of silver.
As part of the agreement, First Majestic also agreed to restructure Primero’s existing silver streaming agreement with Wheaton Precious Metals Corp., so that it will instead receive 25 per cent of gold production plus more than 20 million shares of First Majestic worth $151 million in aggregate.