Gold miners better buy than bullion: Sprott

Sprott Asset Management LP, which offers two funds that invest directly in gold bullion, said gold producers’ shares will offer better returns than the metal itself once mining companies start reporting earnings today.

With gold futures trading at US$1,338.60 an ounce Wednesday and mining costs largely fixed, gold producers’ profit margins are likely to increase more than has been factored into their share price, the Toronto-based money manager said in an e-mail newsletter Oct. 26.

“You wouldn’t expect the senior gold producers to be trailing behind gold in this environment,” Sprott said. “After all, at US$1,300 gold, these companies literally have a licence to print money.”

Gold futures have outperformed the S&P/TSX Gold Index, 22% to 17%, this year. Since the first gold exchange- traded fund made it easier for investors to own the commodity directly in March 2003, the price of the metal has increased at a rate of 20% a year, compared with 15% a year for Canadian gold stocks.

Sprott, whose chairman, Eric S. Sprott, has lauded gold and gold stocks since at least 2001, began offering its own products for investors who want to own bullion in March 2009, when it introduced the Sprott Gold Bullion Fund. A second fund, the Sprott Physical Gold Trust, had its initial public offering in February.

In the e-mail, Sprott called for investors to buy gold- mining companies before they release third-quarter financial results. The world’s largest gold producer, Barrick Gold Corp., is scheduled to release earnings on Oct. 28, while the second- biggest producer by market value, Goldcorp Inc., is to announce results at 2:02 p.m. in Vancouver.

Catch-Up

“Despite the buzz you’ve heard about gold and silver over the last two months, the stocks haven’t caught up,” Sprott said. “We expect that to change over the next two quarters as investors realize how much stronger gold producers’ earnings will be at US$1,350 gold.”

Sprott also offers mutual funds and hedge funds that hold shares of mining companies, including gold explorers CGA Mining Ltd. and Colossus Minerals Inc. and reseller Gold Wheaton Gold Corp.

The money manager’s flagship Sprott Hedge Fund has soared 578% since its introduction in November 2000, according to Bloomberg data.

Eric Sprott didn’t immediately return a request for comment.

Sprott Asset Management is a subsidiary of Sprott Inc.

Read more: http://www.financialpost.com/news/Gold+miners+better+than+bullion+Sprott/3739649/story.html#ixzz13ej66Dtm

Goldcorp doubles monthly dividend
Wednesday, October 27, 2010

Vancouver — Goldcorp Inc. doubled its monthly dividend on Wednesday as it reported a sharp increase in quarterly profits, boosted by the rising price of gold .

The Vancouver-based gold miner said earnings attributable to shareholders amounted to $466.5-million (U.S.), or 63 cents per diluted share, for the quarter ended Sept. 30, compared with a profit of $114.2-million, or 16 cents per diluted share, a year ago.

Revenue for what was the company's third quarter totalled $885.8-million, up from $691.9-million.

The company also doubled its monthly dividend to 3 cents per share.

“Goldcorp's current financial strength and growing cash flows enable us to significantly increase our dividend while also executing on our plan to deliver 50 per cent production growth over the next five years,” Goldcorp president and chief executive Chuck Jeannes said in a statement.

Excluding non-cash foreign exchange losses and other one-time items, the company said it earned $231.5-million, or 31 cents per share, in the quarter, compared with $140.6-million, or 19 cents per share, in the third quarter of 2009.

Analysts on average were expecting earnings of 29 cents per share on revenue of $893-million, according to analysts polled by Thomson Reuters.

During the quarter, Goldcorp sold 568,100 ounces of gold, down from 601,500 ounces a year ago, while the average realized gold price increased to $1,239 per ounce, up from $968 per ounce a year ago.

Goldcorp has mines and exploration and development projects in Canada, the United States, Mexico and Guatemala and Argentina. The company employs more than 14,000 people.

Over the past year it has been involved in acquisitions that have irked a number of other players, including Barrick Gold Corp. the world's largest gold producer. Goldcorp stepped in and bought a controlling interest in the El Morro gold-copper project in Chile in a deal with junior miner New Gold Inc. shutting Barrick out of the sales process.

Barrick had already announced an agreement for the property with Anglo-Swiss mining giant Xstrata PLC. Barrick has since launched a lawsuit that alleges the Goldcorp-New Gold deal is illegal.

Last week, Goldcorp closed the sale of its stake in Terrane Metals Corp. to Thompson Creek Metals Inc. for 13.9 million shares of Thompson Creek and $240.5-million in cash.

Goldcorp signed a deal in September to buy U.S. gold miner Andean Resources Ltd. for $3.6-billion (Canadian).

The agreement beat out Eldorado Gold Corp. which had just hours before announced its own $3.4-billion bid for the company which owns a promising mine in Argentina.

Goldcorp's bid has the unanimous support of Andean's board and a lock-up agreement from a shareholder that owns 21 per cent of Andean's shares.

The deal is expected to close later this year or in early 2011.



©2010 CTVglobemedia Publishing Inc. All rights reserved.