AURICO GOLD (Toronto symbol AUQ; www.auricogold.com) operates the El Chanate gold mine in Mexico, which produced 71,864 ounces in 2013.
The company’s Young-Davidson gold mine in Northern Ontario reached full production in 2013, with total output of 120,738 ounces. The mine’s output should rise to over 152,000 ounces this year.
AuRico hasn’t yet released its financial results for 2013, but in the three months ended September 30, its revenue rose 36.5%, to $54.3 million from $39.8 million a year earlier. Cash flow jumped to $0.09 a share from nil. Higher gold production offset lower prices.
The company has cash of $140.1 million, or $0.57 a share. The stock yields a high 3.3%.
Mining stocks: Lower copper prices and production shortfalls prompt Amerigo to skip dividend payments
AMERIGO RESOURCES (Toronto symbol ARG; www.amerigoresources.com) processes copper and molybdenum from waste rock at Chile’s El Teniente, the world’s largest copper mine. This contract runs at least through 2037. Amerigo also has an agreement to process material from the nearby Cauquenes tailings pond.
Amerigo gets 94% of its revenue by processing copper. The remaining 6% comes from molybdenum.
A landslide in one of Amerigo’s production areas has hurt its copper and molybdenum production. In the quarter ended September 30, 2013, copper production fell 13.1%, to 11.04 million pounds from 12.70 million a year earlier. Molybdenum output declined 40.0%, to 193,138 pounds from 321,788.
However, these operations are now recovering, and production growth is returning to normal.
Electricity is a big expense for Amerigo, but it has a new power contract that started on January 1, 2013, at much lower rates than it was paying before. As a result, the company will save more than $20 million annually over the next five years. That should continue to significantly improve its cash flow.
The company was paying a semi-annual dividend of $0.02 a share. However, it is currently skipping dividend payments because of uncertain copper prices and lower production forecasts for this year.
The shares have moved up along with improving copper prices from a low of $0.31 in early December 2013 to today’s price of $0.45.
In the latest edition of Stock Pickers Digest, we look at whether AuRico can continue to boosts its output and the shares can keep rising. We also look at Amerigo’s prospects and whether the outlook for copper prices is likely to remain positive. We conclude with our clear buy-hold-sell-advice on these two stocks.
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