How High Will Gold Have to Go For Investors to Rush Into Miners?

We check in with the spot prices of silver and gold...and we find nothing's happened since Monday morning. Does that mean they have already stalled out? And how high will prices need to trade for investors to get excited about miners?


We’re back with our mid-week update checking on our three Alpha candidates in the metals & mining industry. As we mentioned on Monday, gold and silver prices have been climbing. And it’s only a matter of time before miners start seeing that money.

But how long before investors start to get excited about that? Will they start jumping into miners now? Or will they wait to see that money be announced in earnings releases which won’t happen until the third quarter releases.

Before we get into the number for our candidate, let’s take a quick look at what the spot prices of gold and silver have done in the first two trading days for the week.

The spot price of gold started the trading week at $1,501. Yesterday it reached up to $1,531 and then settled around $1,502 at the time of market close. So despite all of its Tuesday movement, it’s flat for the week.

The same thing happened with silver. The spot price of silver opened the trading week around $16.91. Then yesterday it reached $17.45 and then settled around $16.91 as the time of market close.

Not much to report so far this week on the pricing of metals…let’s check in with the most recent earnings of our three Candidates for the week…

First up, we’ve got Hecla Mining Company (HL). Hecla is the largest primary silver producer in the U.S. with mines in Alaska, Idaho and Mexico. But the company also is a growing gold producer with mines in Quebec and Nevada.

The company reported its second quarter earnings last week.

For the second quarter of 2019, Hecla saw sales of $134 million. This was 8.8% less than the second quarter for 2018. Overall the company saw a net loss of $46.5 million compared to net income for the same quarter of the previous year of $12 million.

So, what happened?

Hecla experience a gross loss in Nevada. This was due to a number of factors. One mine had a problem with pricing, and one had a problem with fewer gold ounces sold. This decrease in ounces sold was a result of mill maintenance activities. The company also saw a loss of $4.6 million on the sale of Hecla’s interest in the Fayolle property in Quebec. Plus, there was a foreign exchange loss of around $4 million.

All that being said, the company is increasing its estimates for silver production for the year. And the changes that were made as a result of the mill maintenance activities should improve the cost for the third quarter. Lower costs in addition to higher metals pricing…sounds like a good situation to be in.

The management adds in that during the second quarter Hecla locked in minimum average prices of $1,400 per gold ounce and $15.13 per silver ounce by acquiring put options. This arrangement still allows for participation in higher prices like the ones we are seeing now.

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That’s the strategy to have. Being able to lock in a minimum price just in case the market slides, but at the same time being able to take advantage of these higher metal prices.

Shares opened on Monday at $1.62 and closed yesterday at $1.54. That a decrease of 4.8% over the first two trading days of the week.

Next up, we’ve got Osisko Gold Royalties Ltd (OR). Osisko is a metal royalty company that holds a portfolio of over 130 royalties, streams and offtakes. It is the fourth largest precious metals royalty company in the world. It announced its second quarter results on July 31.

For the second quarter of 2019 Osisko saw revenues from royalties and stream interests increase 2.7% when compared to the same quarter of the previous year. Once we add in the offtake interest total revenues for the second quarter were $131.6 million. That’s a decrease of 4.4% for total revenues when compared to the same quarter of the previous year.

The company also pointed out that the construction of the Eagle gold mine of Victoria Gold Corp has reached 95% completion rate. And that at the end of the quarter, the company had $83.6 million in cash and up to $450 million available on its credit facility.

We mentioned on Monday that was something we wanted to look at when discussing a royalty company. Does the company have money available to get into new agreements when the right ones become available? And the answer is clearly yes.

Management confirmed the full year outlook for GEOs (gold equivalent ounces) for the year. If that number remains unchanged and prices of gold are higher…that will mean more money for collection into the third and fourth quarters.

Shares of Osisko Gold Royalties opened on Monday at $12.76 and closed yesterday at $12.33. That’s a loss of 3.3% over the first 48 hours of the trading week.

Finally, we’ve got Avino Silver & Gold Mines Ltd. (ASM). Avino has been in the metals supplt industry for over 50 years and has mines in Mexico and British Columbia. The company announced its second quarter results last week.

For the second quarter Avino saw an increase in tonnes milled by 9%. The company saw revenues for the quarter of $7.8 million. That was 15% lower than the same quarter of the previous year. The company saw a net loss for the quarter of $166,000 which was 120% lower than it’s modest income of the same quarter of the previous year.

Again, we have to ask ourselves…what happened?

The cause was lower production partially caused by unplanned downtime. During the quarter there was unplanned downtime of 5 days due to labor negotiations at on of the mines. This particular mine has also seen a decline in the grade being produced. The mine causing all the problems is approaching the expected end of its life. So that means hopefully it won’t continue to be a problem into the future.

The company has already completed the phase one drilling at the Bralorne Mine that should begin producing in the first quarter of next year.

Shares opened on Monday at 70.9 cents and closed yesterday at 65.8 cents. That a loss of 7.1% over the first two trading days of the week.

It seems like investors aren’t ready to rush into miners yet. We’ll keep an eye out and give you a final update on these three candidates in our Saturday Week In Review.

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