Yamana Gold Inc. and New Gold Inc. reported substantial increases in quarterly profits on Wednesday, as earnings at the Canadian gold miners were boosted by the surge in bullion prices.
The euro zone debt crisis, along with concerns of possible downgrades to U.S. ratings down the road, have pushed the price of gold to record highs. Spot gold broke through the $1,600 (U.S.) an ounce level in July and rose to a record high of $1,672.65 earlier on Wednesday.
Toronto-based Yamana said its gold equivalent production rose 10 per cent to more than 278,000 ounces in the quarter, while its average realized gold price gained 25 per cent to over $1,500 an ounce.
The company said its adjusted earnings in the quarter ended June 30 rose to $186.2-million, or 25 cents a share, from a year ago profit of $84-million, or 12 cents a share.
Yamana, which is focused on projects in Latin America, said it continues to expect 2011 output of between 1.04 million and 1.14 million gold equivalent ounces. But the miner warned of some capital expenditure increases over the next three years.
The miner’s results mirror those of larger rivals Barrick Gold Corp. and Goldcorp Inc., which also outlined solid profit gains last week, but warned of capital expenditure increases.
Yamana chief executive officer Peter Marrone noted that while the company has raised its capital expenditure outlay, the projected $206-million increase in costs over the next three years is “bite-sized” compared to the cost increases faced by many of its peers.
The company said work on its Mercedes project in Mexico is ahead of schedule with the start of production now expected by the end of 2011 and commercial production expected by mid-2012.
New Gold said second-quarter earnings, excluding one-time items, rose to $49.8-million, or 12 cents a share, from a year-earlier profit of $14.1-million, or 4 cents a share.
Quarterly gold sales volumes rose 15 per cent to 95,039 ounces, while revenues rose 52 per cent to $171.6-million.
New Gold also reiterated that it expects to produce between 380,000 to 400,000 ounces of gold this year, at cash costs of $390 to $410 per ounce.
New Gold, which owns mines in Mexico, the United States and Australia, is also developing projects in Canada and Chile.