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Investors usually care about basic things such as how much revenue and income companies earned when they report quarterly results. After all, these are essential building blocks to valuing a stock.
But in the case of Canada’s gold industry, they have become largely irrelevant.
The second-quarter earnings season for the gold miners begins Wednesday afternoon, and experts said there will be little-to-no interest in the actual profits. Instead, all the focus will be on liquidity and the overall health of balance sheets.
“It’s going to be about who is most aggressive in trying to defend their balance sheets,” said Greg Taylor, portfolio manager at Aurion Capital. This is a direct result of the recent chaos in the gold market.
Gold averaged just under US$1,200 an ounce in the second quarter, which ended June 30. But it subsequently crashed to below US$1,100 in July due to a strong U.S. dollar, which is rising on expectations that the U.S. Federal Reserve will raise interest rates this year.
The drop has squeezed liquidity across the gold sector and sparked a panic in head offices. Share prices have been destroyed.
Gold miners have stayed quiet throughout the recent market volatility — although they’re in quiet periods ahead of earnings releases, they’re probably shell-shocked as well — so investors will be reading their earnings statements very carefully to see how they plan to manage the downturn and maintain their margins.
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