RE:Labour costs sinking Ah if only it was that simple. Unfortunately while the Peso has been falling, so has the price of gold.
November 3rd, TXG reported 30 cents / share, or $23.8 million, in net income for the quarter based on 77,915 ounces of production, or should I say 80,064 ounces of gold sold at an average per ounce price of $1308. That gave them an effective profit of $297/oz. At $1178/oz, Friday's close, they would be looking at a profit per ounce of $167. Or in other words, earnings would fall to roughly (80,000 oz x $167/oz) = $13.36 million. All things being equal of course, which they are not. I don't know how much gold they will produce. I don't know if their expenses will be much lower due to the falling Peso. Etc.
November 3rd, the price of gold was roughly $1290/oz and TXG closed at $24.44 after reporting 30c/sh in earnings for Q3 that morning.
If we assume they've lost roughly 37.5% to 43.77% of their earning power since the close Nov 3rd, since gold has fallen $100/oz after that date, or $130/oz below their average sale price last quarter, (167/267 or 167/297), then I wonder how much the share price really should be falling.
$19.07 (Friday's close), down from $24.44 (Nov 03 close) is only a drop of 21.97%.
Is this a fair drop in comparison? It is just as biased exclusively towards the change in the price of gold as your post is biased about the falling Peso and the labour cost savings TXG will experience going forward from here.
I'm just saying keep everything in perspective. All gold stocks are moving in the same direction as gold these days. FWIW, for the past couple of weeks, TXG has held up a little better than G, AEM, and DGC, just to name a few of it's peers. Hopefully that part of the equation stays the same going forward.
My fingers are crossed that the $14 jump in gold to $1192/oz (as I write this) is just the start of a rebound in the price of gold. Now if we could combine that AND the falling Peso, that would be explosive for Torex.
auburn2 wrote:
"By far, the Mexican Peso has been the weakest currency against gold/silver in recent weeks. The largest expense of most gold/silver miners is the cost of labor – and Mexican gold/silver producers who are paying their employees in weak Mexican Pesos, will see their profit margins explode beginning in their 4Q 2015 earnings results."
Hopefully Torex stops messing with any currency hedges and does like Alacer and lets the currency take care of itself. After all, these currencies tend to weaken against the USD whenever gold does, so it's a nice cushion if they're fully unhedged. The peso has one long term trend and that is DOWN.