Earnings Update: Mixed Results for Mining Companies

August 14th, 2015 by


The mining industry has come under fire lately for the lack of growth in the sector. As metal prices have dropped nearly across the board, even the biggest miners have struggled to maintain their previous levels of profitability. Although they are unlikely to enjoy the windfall from another bull market in base and precious metals in the near future, the prospects may be improving across the industry as companies find ways to cut costs and become more efficient amid a low-price environment.

The Bad


The mining news was not all positive this week, with some big players still posting poor second-quarter performances. Pan American Silver (NASDAQ:PAAS; TSX:PAA), the world’s second-largest primary silver miner, had to eat a $7.3-million loss during Q2 this year, and quarterly revenues fell by 13% year-over-year. In addition to silver, the company saw its profit margins on lead, zinc, and gold fall as well.

There were encouraging signs for Pan American, however: the company was able to cut costs and increased its cash flow compared to Q1. Its output also rose, as more silver, gold, and copper were mined in total during Q2 compared to the same period in 2014. Importantly, gold production rose a hefty 18% year-over-year.

The Good

Several miners reported Q2 earnings that paint a much rosier picture. Silvercorp Metals (NYSE, TSX:SVM) increased its sales, extracting a balanced mix of base metals and precious metals, especially lead and zinc. Gold and silver output accounted for over 60% of the company’s quarterly revenues. B2Gold Corp. (NYSE:BTG; TSX:BTO; NSX:B2G) enjoyed a record-high gold output during the second quarter, up 42% year-over-year.

The "Big Pit" at the Kalgoorlie Mine, Western Australia

The “Big Pit” at the Kalgoorlie Mine, Western Australia

Gran Columbia Gold (TSX:GCM) was another miner who posted higher output during Q2. The successful quarterly report came on the back of climbing production numbers and falling costs per ounce. The company’s performance continues to improve incrementally, thanks in part to the relatively cheaper value of the Colombian peso (where much of the Canadian company’s mines are located).

Even somewhat weak headline performances carried silver linings (no pun intended) for some miners. Argonaut Gold (TSX:AR) did see a marginal loss of $100,000—essentially flat—but managed to increase its revenues during the second quarter, even amid falling metal prices. Gold production jumped 21% year-over-year for Argonaut when many of its competitors are cutting output in order to save on expenditures.

Key Takeaways

As surprising as it may be that some miners still managed favorable Q2 results even as the majority of their peers suffered with the tide of the commodities markets, this is precisely why some investors love mining stocks: even in a scenario where metal prices fall, there are some miners that provide good value despite any volatility or downturns in the global markets. Although one should hardly ignore the dynamics in the broader sector, it is worth noting that those who buy-and-hold mining stocks may be providing their portfolios with a buffer against slumping metal prices.