War between Russia and Ukraine is pushing inflation higher still. Gold, silver, copper, oil, nickel, zinc, and nearly all other resources have all been rallying in response, asserts Peter Krauth, editor of Gold Resource Investor.
The underlying inflationary drivers were already in place for over 18 months. These events have now kicked things into high gear. Commodities and their producers are your best way to hedge higher prices and shelter your portfolio. This secular resource bull market is just getting started.
Agnico Eagle Mines Ltd. (AEM) announced record 2021 gold production: Payable gold production in the full year 2021 was 2,030,176 ounces (excluding 56,229 ounces of payable gold production at Hope Bay, and including 24,057 ounces and 1,956 ounces of pre-commercial gold production at the Tiriganiaq open pit at Meliadine and the Amaruq underground project, respectively) at production costs per ounce of $835, total cash costs per ounce of $761 and all-in sustaining costs ("AISC") per ounce of $1,038.
Production costs per ounce, total cash costs per ounce and AISC per ounce exclude the Hope Bay mine and the pre-commercial production ounces from Amaruq and Tiriganiaq. Also, new three-year operational guidance suggests payable gold production for 2022 is forecast to be approximately 3.2 to 3.4 million ounces with total cash costs per ounce expected to be between $725 and $775 and AISC per ounce expected to be between $1,000 and $1,050.
Gold production for 2023 and 2024 is expected to be in a similar range to 2022 at approximately 3.2 to 3.4 million ounces of gold with relatively stable total cash costs per ounce and AISC per ounce compared to 2022. These are very attractive, low production costs.
Although AEM has bounced somewhat in the last month, its acquisition of Kirkland Lake could weigh on it a bit versus its peers. Still, AEM remains attractive to accumulate on weakness, especially with its high 3.1% dividend.
Pan American Silver (PAAS) reported impressive results at the La Colorada Skarn, in Zacatecas, Mexico. There were 20 new infill and exploration holes. These support mineralization to the east, west and south of the known skarn. 17,050m of drilling were reported.
Highlights include intercepts ranging from 22m to 322m in length, with grades up to 91 g/t Ag, 0.46% Cu, 5.24% Pb and 11.45% Zn. Another 55,000 of drilling for $18M to $20M will happen this year. A dividend of $0.12/share was also declared, for a 20% increase. Q4 cash flow was $118M, and cash was up $116M for 2021.
2021 Silver Segment Cash Costs and All-in Sustaining Costs ("AISC") of $11.51 and $15.62 per silver ounce sold, respectively, were slightly lower than the revised guidance provided on November 9, 2021. 2021 Gold Segment Cash Costs and AISC of $899 and $1,214 per gold ounce sold, respectively, were within the guidance ranges provided throughout 2021.
The market pushed shares down, I believe mostly because the Morococha operation is being placed on care and maintenance, leading to a decrease in base metal production this year over 2021. Management also believes that COVID- 19 will continue to weigh on performance somewhat in H1, with production to recuperate in H2. PAAS looks attractive at current levels.
