Gold Mining Operations Expected To See High Rates Of Return In 2021
PALM BEACH, FL - Over the last decade, the global demand for gold has increased constantly and the pandemic has only bolstered that historical growth in both 2020 and is projected for 2021 as well. This makes it clear that gold is still one of the world's most coveted commodities and most rewarding investments. The pandemic and its devastating impact on the global economy has impacted investor's risk appetite and boosted safe haven demand for gold. Further, the low interest rates scenario make stocks, government bonds and other investments less appealing, making investors opt for gold. Gold has always been one of the world's most precious and coveted metals. Rarity is the primary reason for its value. A report on metals & mining from McKinsey & Company said that: "The impact of the COVID-19 pandemic and the subsequent reaction by central banks have several implications for the gold-mining industry. Gold prices rose (to historical highs last year). Meanwhile, energy prices and currencies in some gold-mining countries have declined, so the margins of gold miners have increased." Active stocks in the mining markets this week include West Red Lake Gold Mines Inc., Alamos Gold Inc., Barrick Gold Corporation, B2Gold Corp., Kirkland Lake Gold Ltd.
Over the short term, the mining companies that most successfully avoid or contain the spread of the virus throughout their operations while maintaining production levels will emerge with a stronger cash position as they take advantage of high price levels and strong margins. In the longer term, the strong price of gold provides a window for mergers and acquisitions to consolidate the industry, because the acquisition price per ounce of resources and reserves of an operating gold mine is far below the current spot price. That offers high rates of return. In addition, we view the strong price outlook as an opportunity to boost spending on exploration to counteract the industry's gold-reserve crisis... The shortage of reserves can be resolved only if additional sites where metal can be extracted at reasonable cost levels are discovered. This is also a big incentive to accelerate capital projects, especially those expected to come into production in the near future—one to one-and-a-half years—since high prices could significantly improve project economics. The current premium between cash costs and the COMEX price curve is near historically high levels, ensuring strong returns if these prices continue.
West Red Lake Gold Mines Inc. announced that exploration diamond drilling is planned to continue throughout 2021 on the West Red Lake Gold Project located in the prolific Red Lake Gold District of Northwestern Ontario, Canada. During the first quarter of 2021, West Red Lake Gold plans to drill along the northern 1 km of the NT Zone as follow-up to successful drill results generated over the southern 1 km portion of the NT Zone during 2019 and 2020. The northern portion of the NT Zone continues to trend north-east before it folds around to the north-west and to the north side of the Rowan Mine. The folding of the NT Zone occurs where it intersects with the east-west trending Pipestone Bay St Paul Deformation Zone ("PBS Zone") which hosts the Rowan, Mount Jamie and Red Summit Mines which are all located on the West Red Lake Project property. During 2021, after drilling the north-eastern 1 km portion of the NT Zone, West Red Lake Gold plans to carry out deeper drilling below positive results previously reported in the southern 1 km portion of the NT Zone. Mr. John Kontak, President of West Red Lake Gold Mines stated, "We are very pleased to begin to explore the second kilometer of the NT Zone for expansion of gold mineralization further along the geological strike to the north-east. After the expansion drilling along strike takes place, the Company also plans to expand the entire 2 km strike length of the NT Zone to greater depth". West Red Lake Gold also plans to drill approximately 10 shallow holes to target gold mineralization above the first level of the Rowan Mine. Only minimal drilling has been undertaken to date in the area where historic sampling on the first mine level and at surface indicate good potential for a gold-rich surface bulk sample sometime in the future. (NI 43-101 Rowan Mine Mineral Resource: 4,468,900 tonnes grading 7.57 gpt Au for 1,087,700 inferred oz of Au from the Technical Report and Resource Estimate on the West Red Lake Project filed on February 18, 2016.
Barrick Gold Corporation recently announced preliminary full year and fourth quarter 2020 results which indicate that it has met its 2020 guidance targets. Preliminary gold production for the full year of 4.8 million ounces is at the midpoint of the 4.6 to 5.0 million ounce guidance range, while preliminary copper production of 457 million pounds is also within the guidance range of 440 to 500 million pounds. The preliminary Q4 results show sales for the quarter of 1.19 million ounces of gold and 108 million pounds of copper, as well as preliminary Q4 production of 1.21 million ounces of gold and 119 million pounds of copper. The average market price for gold in Q4 was $1,874 per ounce, while the average market price for copper was $3.25 per pound. Preliminary Q4 gold production was higher than Q3 2020, mainly due to a strong performance from Pueblo Viejo, the ramp-up of mining operations at Bulyanhulu and ongoing improvement at Turquoise Ridge. Preliminary Q4 gold sales were lower than Q3 2020 as third quarter sales included the export of the remaining stockpiled concentrate in Tanzania. Q4 gold cost of sales per ounce1 and total cash costs per ounce are expected to be in line with the prior quarter and gold all-in sustaining costs per ounce2 are expected to be 3-5% lower than in Q3 2020.
Alamos Gold Inc. reported new results from surface and underground exploration drilling at the Island Gold Mine, further extending high-grade gold mineralization in Island Main, East and West. "These latest results conclude another successful drilling campaign in 2020. Despite not completing as much drilling as planned due to COVID-19, the 2020 program included some of the best exploration results drilled to date at Island Gold. We expect these results to drive further growth in high-grade Mineral Resources at Island Gold with our 2020 year end update, improving already attractive economics with the Phase III shaft expansion, while also clearly demonstrating the significant ongoing growth potential of the deposit," said John A. McCluskey, President and Chief Executive Officer. Exploration activities at Island Gold were focused on continuing to define new near mine Mineral Resources, building on the success of the 2019 drilling program and the additional high-grade mineralization that was defined throughout 2020.
B2Gold Corp. announced its consolidated gold production and gold revenues for the fourth quarter and full-year 2020, in addition to its production and budget guidance for 2021. B2Gold maintains a strong financial position and liquidity. During the third quarter of 2020, the Company fully repaid the outstanding Revolving Credit Facility ("RCF") balance of $425 million with the full amount of the $600 million RCF now undrawn and available. In addition, at December 31, 2020, the Company had cash and cash equivalents of approximately $480 million. Due to the Company's strong net positive cash position, strong operating results and the current higher gold price environment, B2Gold's quarterly dividend rate was increased in the third quarter of 2020 by 100% to $0.04 per common share (or an annualized rate of $0.16 per common share), one of the highest dividend yields in the gold sector.
Kirkland Lake Gold Ltd. recently announced production results for the fourth quarter ("Q4 2020") and full-year ("FY 2020") of 2020. Q4 2020 production totaled 369,434 ounces, a 32% increase from the fourth quarter of 2019 ("Q4 2019") and 9% higher than the previous quarter. All three of the Company's cornerstone assets achieved their highest quarterly production levels of the year in Q4 2020. For FY 2020, the Company produced 1,369,652 ounces, a 41% increase from 2019 ("FY 2019") and in line with full-year 2020 guidance of 1,350,000 – 1,400,000 ounces. All dollar amounts are expressed in U.S. dollars, unless otherwise noted. Per share amounts are based on a total of 268,097,877 shares outstanding at December 31, 2020. A total of $847.6 million of cash was returned to shareholders through share repurchases and dividend payments in FY 2020 ($280.1 million in Q4 2020), representing $3.16 per share outstanding and $619 per ounce of FY 2020 production. A total of $731.6 million (C$974.6 million) of cash was used to repurchase 18,925,900 shares during the year through the Company's normal course issuer bid ("NCIB"), of which 5,727,500 shares were repurchased during Q4 2020 for $245.9 million (C$319.4 million). With additional repurchases of 1,074,100 shares during the first week of January 2021, for $46.3 million (C$58.8 million), the Company has now achieved its goal of repurchasing 20.0 million shares over a 12 to 24-month period, which was announced in February 2020 following the completion of the Detour Gold Corporation ("Detour Gold") acquisition. Dividend payments in 2020 totaled $116.0 million, including $34.2 million being used in Q4 2020 for a dividend payment of US$0.125 per share on October 14, 2020 to shareholders of record on September 30, 2020. The Company increased the quarterly dividend twice in 2020, doubling it to US$0.125 per share effective the Q1 2020 payment, with an additional 50% increase, to US$0.1875 per share, introduced effective the Q4 2020 payment, to be paid on January 14, 2021 to shareholders of record on December 31, 2020.
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