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Here's one of the shorter segments from IKN287, out last Sunday November 9th, that had a look at a trend (re)developing in the Argentina precious metals producer patch.
Argentina precious metals sales lagging again
It’s not something that’s being widely advertised by those companies working there (no surprise) but after seeing the MUX and TRY numbers come in then checking through a couple of other filings, there’s a clear trend re-emerging of a lag in precious metals sales compared to production in mines operating in Argentina. Here are some numbers for your consideration:
From McEwen Mining (MUX) 3q14 filings: Minera Santa Cruz
Gold produced: 48.6k oz
Silver produced: 1,535 k oz
Gold Sales: 37.0k oz
Silver Sales: 1,149k oz
Production/Sales lag gold: 23.9%
Production/Sales lag silver: 25.1%
From Troy Resources (TRY.to) (TRY.ax) 3q14 filings (i.e. to Sep 30): Casposo mine
Gold produced: 15.22k oz
Gold Sales: 11.46k oz
Silver produced: 734.9k oz
Silver Sales: 574.8k oz
Production/Sales lag gold: 24.7%
Production/Sales lag silver: 21.8%
From Yamana Gold (YRI.to) (AUY) 3q14 filings: Gualcamayo mine
Gold produced: 43.1k oz
Gold Sales: 40.1k oz
Production/Sales lag: 7.0%
From Barrick (ABX) 3q14 filings: Veladero mine
Gold produced: 178k oz
Gold Sales: 166k oz
Production/Sales lag: 6.75%
From AngloGold Ashanti (AU) 3q14 filings: Cerro Vanguardia mine
Gold produced: 62k oz
Gold Sales: 54k oz
Production/Sales lag: 12.9%
All figures taken from company filings (SEDAR, LSE, NYSE). Now some of those numbers are more acceptable than others, for example the Gualcamayo production/sales lag of just 3k oz gold would be acceptable under normal circumstances, as long as the lag gets made up next quarter. The 12k lag at ABX Veladero looks a little too large for comfort in absolute terms (after all it’s about $15m worth of metal), but a company the size of ABX can swallow that easily enough without it affecting bottom line results to any significant extent.
But Cerro Vanguardia couldn’t sell 13% of its gold, Minera Santa Cruz (49% MUX, 51% Hochschild (HOC.L) couldn’t sell 24% and 25% of its gold and silver, Troy at Casposo couldn’t sell 25% and 22% of its gold and silver. I do not believe in coincidences.
Back in 2013 mining companies along with other export oriented companies in Argentina complained bitterly about the barriers to exit for the goods and remittances for revenues, with reports of long delays and suchlike. The government promised to improve things and for a while that happened, but it looks as though the lag is back again. Less of a problem for the small player, more of a problem for companies such as TRY and MUX who are dependent on the cash flow from their mines. Even HOC could be feeling the pinch.