Canadian gold miners report a mixed bag of Q2 results

Several Canadian-listed gold producers released second-quarter results after market close on Wednesday in what can perhaps best be described as a mixed bag.

Vancouver-based major B2Gold (TSX, NYSE: BTO) posted a better overall cost profile than expected for the three months to June.

Total gold production of 223,623 oz. gold, (including 14,765 oz. of attributable production from its 15.2% holding in Calibre Mining Corp.) came in slightly above guidance by 1%.

The company has maintained its annual production and cost guidance intact. However, the cost guidance for the second half has increased modestly to offset first-half costs coming in lower than guidance.

B2Gold reported headline earnings per share of US4¢; however, this includes US$6 million in non-cash foreign exchange losses and higher-than-expected tax expenses. The quarter’s EBITDA of US$187 million was in line with consensus estimates of US$189 million.

B2Gold said it was tracking towards meeting its full-year production guidance of 950,000 to 1 million oz. gold. The company’s 2022 production profile is expected to entail a story of two halves, similar to 2021. Production is expected to be 40/60 weighed towards the first half, versus the latter half of the year, due to the timing of high-grade ore at Fekola and Otjikoto.

The company expects second-half production of 560,000 to 590,000 oz., up from the first-half production of 405,000 oz.

The company forecasts 2022 cash costs (excluding Calibre) between US$600 to US$640 per oz., and expects full-year costs to fall at the upper end of the range. The company has revised each operation’s cash costs and AISC guidance for the second half to accommodate rising fuel pricing and the expected timing of remaining sustaining capex for 2022.

The company also announced that preliminary results from the Gramalote feasibility study indicate that the project does not meet the partners’ (50% B2Gold/50% AngloGold Ashanti (NYSE: AU) investment thresholds at this time and will review alternatives for the project over the coming months.

Considering the inflationary and uncertain economic macro backdrop, several analysts expect investors are likely to view the decision positively with the option to revisit the project in a more normalized environment.

Meanwhile, Equinox Gold (TSX: EQX) reported a significant second-quarter miss, both financially and operationally, and negative guidance adjustments on production and costs.

Regarding the operational results, the company reported lower production and higher cost.

Gold output totalled 121,000 oz., compared with the consensus forecast for 139,000 oz., while cash costs of US$1,482/oz versus consensus estimates of US$1,275 per oz. were off the mark.

All-in sustaining costs at US$1,657 per oz. were marginally lower than expected.

Revenue came in at US$225 million, with adjusted earnings per share coming in at a loss of 16¢ per share versus consensus estimates for a loss of only 1¢.

In addition, the company reported significant negative 2022 guidance revisions, cutting production guidance by 75,000 to 95,000 oz. to a range of 550,000 to 615,000 oz. gold.

The company increased its cash cost guidance by US$110 to US$120 per oz., to US$1,200 to US$1,250 per oz., with the AISC figure rising from US$115 to US$140 per oz. to US$1,470 to US$1,530 per oz.

Topping off the company’s weak Q2 performance is the announcement that CEO Christian Milau is stepping down to pursue other opportunities in the carbon finance business, to be replaced by president Greg Smith with effect from September 1.

Further, New Gold (TSX: NGD) posted relatively uneventful financial results with a strong balance sheet amid ongoing operational woes at its Rainy River and New Afton operations in British Columbia.

Earlier in July, New Gold announced disappointing production results, prompting it to slash production guidance by 13% or 40,000 oz. gold and 25% or 10 million lb of copper for 2022. This also prompted a revised higher AISC range with a mid-point of US$1,925 per oz.

The production challenges and revised guidance has been attributed to excessive rainfall at Rainy River, which has also necessitated a re-sequencing of the 2022 mine plan, and early closure of the recovery level zone at New Afton.

New Gold reported progress being made in the operational turnaround at both operations.

At Rainy River, the North Lobe of the pit is said to now be wholly de-watered and will be a primary source of feed over the rest of this year.

This material appears to be more complex ore, which will have modest throughput implications. Canaccord Genuity analyst Dalton Baretto said in a research note this lobe did not appear to have grade reconciliation issues.

“The underground Intrepid Zone remains on track for the first production in Q4 and is expected to ramp up to its modest 1,000 tonnes per day run rate fairly quickly,” wrote the analyst.

“Finally, given elevated pricing for fuel and consumables, management is making a major push to reduce consumption through lowering stockpile usage and material re-handling as well as optimizations elsewhere in the mining and milling process.”

At New Afton, management noted during the results conference call that development and draw bell initiation at the B3 zone remains on plan, which is critical given that the stockpile is expected to be consumed before the end of the year. “As such, New Afton should see a step-change in performance in 2023 as B3 will be the primary source of ore feed,” said Baretto.

“The C-Zone, which is expected to enter production in Q4/23 and represents the longer-term future of the mine, also appears to be on track so far, with development reaching the zone in May and the undercut scheduled to commence imminently,” said the analyst.

B2Gold shares in Toronto closed Thursday up marginally at $4.43, taking the 12-month loss to 15%.

Equinox shares were down slightly at market close at $5.53, with the stock tracking 37% lower over the past year.

New Gold shares trading in Toronto were at press time up 8.16% on Thursday afternoon at $1.06, despite the stock dropping 50% over the 12-month frame.