This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

How Middle East Unrest Hurts Gold Miners

Stocks in this article: GOLD THM NG GFI GG AEM ABX

(Article updated with gold prices information and additional commentary.)

HOLLYWOOD, Fla. ( TheStreet ) -- Unrest in the Middle East and North Africa is hurting gold miners as oil prices pop.

On the one hand, recent violence in Libya has helped gold reclaim its identity as a safe-haven asset, pushing the metal up to a record close of $1,431.20 an ounce Tuesday. High gold prices can keep miners rolling in dough as low cash costs mean high profit margins.

But the biggest roadblock gold companies are confronting now is higher oil prices, which can eat into these profits. Oil topped $100 a barrel Tuesday and was trading above that level today, while Brent crude touched $116 on Tuesday.

Gold mining CEOs attending the BMO Capital Markets Global Metals & Mining conference here Monday and Tuesday were unanimous in putting oil at the top of their risk lists.



Jeff Pontius, CEO of International Tower Hill (THM), a Canadian miner with a 10 million ounce gold deposit in Alaska, says "we do see inflation in a number of places, fuel, of course, is always a big deal." International Tower Hill will start producing in 2016. The company will complete its pre-feasibility study in 2011.

To try to combat skyrocketing oil, International Tower Hill is buying its own fuel and then supplying it to the drillers to make sure they aren't overpaying. "Typically if drillers are buying the fuel they're going to try and put into their bid additional money." Pontius is gearing up for the volatility, financially prepared for oil prices between $80 and $100 a barrel.

Helping the company is the strength of the Canadian dollar against the U.S. dollar, a trend that's increased International Tower Hill's purchasing power. The company is also leaning on Alaska to provide it with alternative energy options.

"There's a number of initiatives in Alaska to bring natural gas down to Fairbanks, which potentially would provide us with on-site gas," Pontius said. Alaska is also looking into a hydro project, or water-based energy, to lessen its dependence on oil.

Mark Bristow, CEO of Randgold Resources (GOLD - Get Report), a West African gold miner, says "oil is the big inflator where we are." Randgold is expecting to produce 750,000 to 790,000 ounces of gold in 2011 at cash costs below $600.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,672.60 -141.38 -0.79%
S&P 500 2,051.82 -11.33 -0.55%
NASDAQ 4,757.8790 +7.4820 0.16%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs