Zacks Industry Outlook Highlights: Kinross Gold, Agnico-Eagle Mines, Barrick Gold, Goldcorp and Newmont Mining

 Zacks Industry Outlook Highlights: Kinross Gold, Agnico-Eagle Mines, Barrick
                      Gold, Goldcorp and Newmont Mining

PR Newswire

CHICAGO, Oct. 12, 2012

CHICAGO, Oct. 12, 2012 /PRNewswire/ --Today, Zacks Equity Research discusses
the U.S. Metals & Mining, including Kinross Gold Corporation (NYSE:KGC),
Agnico-Eagle Mines Ltd. (NYSE:AEM), Barrick Gold Corporation (NYSE:ABX),
Goldcorp Inc. (NYSE:GG) and Newmont Mining Corp. (NYSE:NEM).


A synopsis of today's Industry Outlook is presented below. The full article
can be read at 


As per the World Gold Council, 2011 was a milestone year for gold as global
demand for the yellow metal grew 0.4% to 4,067.1 tons at an estimated value of
$205.5 billion -- the highest tonnage level with a value exceeding $200
billion since 1997. The increase was mainly propelled by the investment
sector, particularly in India, China and Europe.

In the second quarter of fiscal 2012, gold demand was at 990 tons, down 7%
year over year. Increase in demand from central banks was offset by declines
in demand for jewelry, investment and in the technology sectors, due to higher
prices. Central banks continued to be the primary purchasers of gold,
accounting for around 16% of total gold demand, at 157.5 tons. This was a
record quarter for central bank, buying more than twice the purchases in the
second quarter last year.

In absolute terms, gold demand in the quarter was valued at $51.2 billion, a
1% decline from the second quarter of fiscal 2011. Average gold price in the
first quarter stood at $1,609.49, 7% above the prior fiscal's quarter.

Investment demand declined 23% to 302 tons, due to lower demand for ETFs and
physical bars, particularly in India and China. Gold demand in the technology
sector was 1,112.2 tons, a 5% decline year-over-year due to higher gold
prices, weak consumer demand, uncertainty in Europe and substitution to more
affordable alternatives.

Jewelry demand dipped 15% to 418.3 tons due to higher price levels. Jewelry
demand in India, a major consumer of gold, was down 30%, mainly due to a
deprecation in the Indian rupee against the US dollar, which led to record
high local prices. Furthermore, slowing GDP growth, domestic inflation, high
interest rates and below average monsoon rain also contributed to the decline.
Gold in India is currently at an all-time high in rupee terms.

In China, another major market, demand for gold decreased 9% to 93.8 tons as
consumers were discouraged by the slowing GDP growth and the lack of clear
trend in gold price. However, China is expected to resume its pace as economic
growth is expected to pick up as a result of the monetary easing implemented
in the second quarter.

Mine production inched up 3 tons to 706.4 tons, up 3% year over year. Adverse
weather conditions, interruptions at few operations and slower ramp up of
production at few mines affected the production numbers during the quarter.
Recycling activity decreased 12% to 363.7 tons, bringing the total supply to
1,059.1 tons, down 6% year over year.

Russia is becoming an important player in the global gold market. The Central
Bank of Russia remains a significant purchaser of gold. A healthy domestic
economy is driving the demand for gold jewelry in the region, catapulting it
to the position of the world's fourth largest gold jewelry consumer. The
region accounts for 8% of the total global gold output.

Gold prices in 2011 ranged from a low of $1,310 per ounce to a high of $1,895
per ounce, with an average gold price of $1,572 per ounce in 2011. The record
gold price of $1,895 per ounce was attained in September, 33% higher than the
2010 peak of $1,421 per ounce recorded in November 2010. So far in 2012, gold
has ranged from $1,540 per ounce to $1,791.75 per ounce, with an average of
$1,656.18 per ounce.

Continuing concerns about Europe's financial problems and China's reduced
economic growth forecast led to the climb. Furthermore, the announcement of a
third round of quantitative easing led to a surge in the price of gold. Given
the performance in 2011, and thus far in 2012, we expect this year to be
stellar for gold.

This climb in gold prices has not translated into increased revenues at all of
the gold miners. In the second quarter, while revenues at Kinross Gold
Corporation (NYSE:KGC) and Agnico-Eagle Mines Ltd. (NYSE:AEM) benefited from
higher average realized price of gold, Barrick Gold Corporation (NYSE:ABX),
Goldcorp Inc. (NYSE:GG) and Newmont Mining Corp. (NYSE:NEM) could not
capitalize from them due to increased cash costs. Moreover, Goldcorp was
riddled with production issues at its Red Lake mine.

As prices for gold rise further, gold giants such as Barrick Gold and Goldcorp
being unhedged producers of gold will enjoy significant leverage to gold
prices. The cost increases need to be controlled in order to rake in profits.
On the other hand, gold producers like Newmont and Kinross are slated to
suffer from lower ore grades that subdue production levels, increase mining
costs and negate the benefits of rising gold prices.

Ironically, rallying gold prices have not had the same effect on the share
prices of the gold companies. Investors prefer alternative financial products
that allow them to invest in gold, rather than investment in gold companies
per se. These companies may be entangled in labor issues, escalating cost and
other risks.

Gold remains a coveted asset, given its long-term supply and demand dynamics
and influenced by macro-economic factors. The value and wealth preservation
attributes of gold continue to attract investors and consumers, and is
considered a safe-haven investment. Concerns regarding economic growth in
developed countries have made gold an attractive and safe investment option.
The European sovereign debt crisis promoted gold as a currency hedge for
European investors.

Lingering economic concerns, higher inflation expectations in many countries,
including India and China, and the relentless Euro-zone debt crisis will
continue to drive gold prices this year, as well. India, which alone consumes
nearly 45%−50% of the world's gold, should drive demand for gold along with
China. China will likely emerge as the largest gold market in the world in
2012 and Chinese gold demand is expected to double in 10 years.

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