Climbing nearly 6% through January, the price of gold outpaced the meager gain -- approximately 1% -- of the S&P 500. Unsurprisingly, many of the market's largest gold stocks enjoyed double-digit gains, including AngloGold Ashanti (NYSE: AU), Barrick Gold (NYSE: ABX), IAMGOLD (NYSE: IAG), and Royal Gold (NASDAQ: RGLD).
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Out of Africa
AngloGold Ashanti maintains gold-mining operations in South America and Australia, but the company's primary source of gold production is from its mines in Africa. Through the first half of fiscal 2016, South Africa accounted for 28% of gold production, and the remaining countries in Africa accounted for 36%.
Image source: Getty Images.
The company had no major announcements or corporate presentations during January, suggesting that the stock's rise was mostly tied to the rise in the price of gold. Perhaps another factor was management's report last December that the Tropicana mine, located in Western Australia, which had originally been expected to report a decline in production, is now expected to turn things around. Management now expects average annual gold production at Tropicana to increase to an annualized rate between 450,000 and 490,000 gold ounces beginning in the second half of fiscal 2017.
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Looking back at Barrick
Located throughout the Americas, Barrick Gold's core mines are expected to account for 70% of the company's total gold production in fiscal 2016. Illustrating its global presence, Barrick operates one gold mine in New Guinea and three copper mines in Saudi Arabia, Zambia, and Chile.
Like its gold-mining peers, Barrick Gold's 12.5% rise in January was attributable to the rise in the price of gold. But investors were also likely driven to pick up shares based on the company's preliminary fiscal 2016 results. With 1.52 million gold ounces in the fourth quarter, Barrick's gold production for fiscal 2016 totaled 5.52 million ounces -- the high end of its estimate of 5.25 million ounces to 5.25 million ounces. Additionally, management reported that it expects all-in sustaining costs (AISC) to fall at the low end or slightly below its full-year guidance range of $740 to $775 per gold ounce.
Addressing the company's fiscal 2016 success in a January press release, Barrick's president, Kevin Dushnisky, stated, "Our portfolio delivered progressively stronger performance over the course of 2016 as we focused on driving improvements in productivity and efficiency across our operations."
Riding a tailwind into the new year
With four operating mines, IAMGOLD has one project in development five projects in the exploration phase. Shares of IAMGOLD rose 11.6% in January, extending the 148% gain it enjoyed through 2016. Steve Letwin, the company's president and CEO, addressed the company's fiscal 2016 success in a January press release by stating that "The year 2016 was pivotal for IAMGOLD as strong operating performance and the achievement of critical milestones have well positioned us for growth."
Though they're still waiting for the company's fiscal 2016 earnings, investors interpreted management's preliminary operating results as an auspicious sign. Exceeding its fiscal year 2016 guidance of 770,000 ounces to 800,000 ounces, IAMGOLD produced 813,000 gold ounces -- the result of gold production that increased in each consecutive quarter. And following the successful identification of targets at the Westwood mine, management expects gold production to nearly double at the site in 2017. Addressing the year ahead, management reported that it expects production to increase by 4% to 9% from last year with all-in sustaining costs ranging between $1,000 and $1,080 an ounce -- a slight reduction from the $1,050 to $1,100 range it expects for fiscal year 2016.
A gold company fit for a king
Unlike the other companies in this group, Royal Gold generates revenue by collecting royaltiesfrom numerous metals, including silver, copper, lead, and zinc. Gold is its bread and butter, though, accounting for 85% of revenue in fiscal 2016.
Besides the rise in the price of gold, Royal Gold's 11.7% rise in shares in January was likely attributable to a corporate presentation in which management provided guidance on the company's gold equivalent ounces. Based, in part, on production beginning at the Rainy River mine and Crossroads, management expects the company's net gold equivalent ounces to grow at an 8%compound annual growth rate from fiscal 2016 to fiscal 2019. Pleasing investors even further, management reported thatthe company made its second and final advance payment of$75 millionas part of its Rainy River gold and silver stream acquisition.
Many gold-mining stocks enjoyed plentiful gains in 2016 -- gains that have extended into the new year. Though the rise in the price of gold strongly contributed to the stocks' gains, many of the underlying businesses had noteworthy announcements, suggesting that investors were likely motivated by more than just one factor to pick up shares. Of course, no one knows for sure what the future will bring, but having a good understanding of what drove the stocks' gains in January will help provide insight into similar events in the months to come.
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