Gold producers’ big test: Time to end the restraint? – by Ian McGugan (Globe and Mail – July 25, 2016)

It’s showtime for the hottest sector of the Canadian stock market. After markets close on Wednesday, four major gold producers – Agnico Eagle Mines Ltd., Barrick Gold Corp., Goldcorp Inc. and Kinross Gold Corp. – will roll out their second-quarter results within minutes of one another.

The flurry of reports will indicate how the industry is coping with an unexpected outbreak of prosperity and offer important clues about whether Canada’s biggest gold producers are prepared to open their wallets and start spending again.

Gold and gold stocks had stagnated for years before suddenly reversing course in January and reaching for the stratosphere. Each of the four big Canadian producers has gained at least 50 per cent since then. Barrick and Kinross have more than doubled, thanks to improving operations and a firmer gold price.

Gold is up about 25 per cent on the year, closing just below $1,325 (U.S.) an ounce on Friday. And investors’ outburst of enthusiasm for the sector presents miners with an intriguing dilemma.

Until recently, they swore they had learned important lessons from the previous boom, when gold prices quintupled between 2003 and 2012. Miners failed to turn those enormous gains into lasting value for shareholders, largely because of out-of-control spending and foolish acquisitions.

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