For Immediate Release
Chicago, IL - February 09, 2017 - Today, Zacks Equity Research discusses the Industry: Gold, Part 2, including Tahoe Resources Inc. (NYSE: TAHO - Free Report ), Goldcorp Inc. (NYSE: GG - Free Report ), Seabridge Gold, Inc. (NYSE: SA - Free Report ) and Fortuna Silver Mines Inc. (NYSE: FSM - Free Report ).
Industry: Gold, Part 2
After years of languishing prices declining output from existing mines, concerns over Brexit and China worries have turned the tables for the yellow metal. There are plenty of reasons to be optimistic about the gold mining industry for both the short term and the long term. Below, we have discussed what investors in the gold mining sector can look forward to in the coming months and years.
Asia Will Be a Long-Term Growth Drivers
Over the last decade, combined demand for gold from India and China has soared 71%. These two markets roughly account for 54% of consumer gold demand, up from 33% in 2005. This figure is expected to go up to 60% in 2017. Asia is now less economically dependent on the West and has shown relatively strong growth since the global financial crisis, despite persistently weak growth in the US and Europe.
India has a strong tradition of investing in gold, mainly in jewelry. Demand mostly increases around the wedding and festive seasons, which begin from mid-to-late August and continue until January. Expenditure on gold can account for almost 30% of the total wedding cost. This gives a boost to local currency demand and raises gold prices .
In China, people view gold, whether in the form of bars, coins or jewelry, as a natural vehicle for savings and diversification. Gold is embedded in China's culture and the Chinese New Year and weddings are key events for the country's gold consumption. In China, although demand might drop from the highs of 2013, growth remains intact.
A continuous shift toward higher-margin products has lately been observed in the Chinese jewelry market. Gem-set and 18-carat gold items are becoming increasingly popular, with the latter largely gaining popularity among the younger generation. Producers are also playing a key role in promoting these products given their higher margins.
The World Gold Council anticipates demand from China to grow at least another 20% by 2017. While China's middle class is expanding, India has a comparatively low level of per capita gold holdings. The powerful combination of increasing urbanization and strong cultural affinity for gold bodes well for the metal's demand in both these countries.
China's central bank also continues to purchase the precious metal on a monthly basis, as it sees value in diversifying in gold. People's Bank of China (PBOC) now holds a total of 57.18 million ounces of gold. Currently, China's gold reserves are ranked fifth in the world, behind the U.S., Germany, Italy and France.
U.S Markets Hold Promise
Demand for gold jewelry in the first half of 2016 in the U.S at 48.6 tons was the strongest since 2009. Consistent, albeit moderate economic growth, improving employment levels and growth in consumer confidence are supporting demand.
Revived Appetite for Acquisitions
Canada's Kirkland Lake Gold will buy Newmarket Gold Inc. in a bid to create a new company with a market capitalization of C$2.4 billion ($1.83 billion) with the capability to produce over 500,000 ounces of gold annually.
Vancouver-based Tahoe Resources Inc.'s (NYSE: TAHO - Free Report ) acquisition of Lake Shore Gold Corp. will address challenges faced by both companies. The transaction added Timmins West and Bell Creek mines in Timmins, Ontario, to Tahoe's holdings, which include mines in Guatemala and Peru. The combined entity is expected to produce 370,000-430,000 ounces of gold in 2016 at total cash costs of $675-$725 per ounce and all-in costs of $950-$1,000 per ounce. Last year, Tahoe had bought a smaller rival Rio Alto Mining to expand its presence in Latin America.
Goldcorp Inc. (NYSE: GG - Free Report ) has acquired Kaminak Gold Corp. Kaminak's primary asset is the wholly owned Coffee Gold project - a hydrothermal gold deposit located at Yukon. This project has considerable potential for near-mine discoveries, with mineralization remaining open along strike and at depth.
The Coffee gold deposit currently has total indicated gold mineral resources of 3 million ounces and total inferred gold mineral resources of 2.2 million ounces. The acquisition is in sync with Goldcorp's strategy of aligning with smaller exploration companies to identify and develop mining districts with large exploration potential that can grow its net asset value per share.
Seabridge Gold, Inc. (NYSE: SA - Free Report ) acquired SnipGold and its Iskut project which is a gold-silver-copper project with measured and indicated resources of 2.16 million ounces of gold, 13.17 million ounces of silver, and nearly 502.7 million pounds of copper. Fortuna Silver Mines Inc. (NYSE: FSM - Free Report ) acquired Goldrock Mines and its Lindero gold project in Argentina. The project contains 1.15 million ounces of gold.
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