(By Mani) The risk-reward profile for gold equities looks attractive as both company valuations, and investor sentiment towards the sector are approaching historical lows. Operational delivery should remain a key determinant of relative performance.
Since the fourth-quarter earnings season underway, let's see who's best positioned to hit Q4 numbers?
Meanwhile, the fourth quarter is typically the strongest operational quarter for most gold producers and several companies are well positioned to deliver on market expectations for production and cash costs.
"Operational delivery should remain a focus for investors in the quarter, but 2013 guidance and reserve/resource updates should offer distractions from the Q4 figures," CIBC Alec Kodatsky wrote in a note to clients.
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Once again, Agnico-Eagle Mines Ltd. (NYSE: AEM) (TSE:AEM) appears best positioned to deliver a beat, needing production to fall 23 percent and costs to rise 46 percent in the quarter to deliver on its full-year numbers. Agnico-Eagle sees full year 2012 production guidance of approximately 1,025,000 ounces of gold. It expects to produce approximately 990,000 ounces of gold in 2013, unchanged from prior forecasts.
Kinross Gold Corp. (NYSE: KGC), New Gold, Inc. (NGD) and Yamana Gold, Inc. (NYSE: AUY) (TSE: YRI) also appear reasonably well positioned to meet their fourth-quarter numbers, needing to produce at similar levels and costs to the third quarter to hit guidance.
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Kinross Gold expects to be toward the higher end of both its 2012 production forecast of approximately 2.5-2.6 million gold equivalent ounces from its continuing operations, and its 2012 cost of sales forecast of $690-$725 per gold equivalent ounce.
However, Barrick Gold Corp. (NYSE: ABX) (TSE:ABX) and IAMGOLD Corp. (NYSE: IAG) (TSE:IMG) face a much stiffer test than the rest of the group, roughly needing to post a 10 percent gain in production quarter on quarter to hit guidance. Barrick has an even higher hurdle, given cash costs must also decline.
Barrick Gold sees 2012 gold production of 7.3 million to 7.5 million ounces and expects copper production for the year to be about 450 million pounds as a result of the delay in the first production at Jabal Sayid in Saudi Arabia.
Iamgold expects 2012 gold production to be at the lower end of the earlier guidance range of 840 thousand to 910 thousand ounces, with cash costs projected to be within plus or minus 3 percent of the upper end of the prior guidance range of $670 to $695 per ounce.
"The asset bases for each of these three companies are capable of delivering the required ounces, but there is little breathing room for operational issues to emerge," Kodatsky said.