Mining earnings: the good, the bad and the ugly

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With so many miners reporting their quarterly earnings this week, it can be hard to keep track of the trends. So we went back and did just that.

Summing up the earnings, it's fair to say that they were a mixed bag, but on the whole, quite promising.

There were some bad numbers, yes – notably from Sherritt International and Goldcorp. But there were also some very strong plays, such as Agnico-Eagle Mines and Teck Resources. (Full disclosure, I own Teck.) And the miners that did so-so stressed that they see good growth in the near future.

That probably isn't the impression you get if you base your opinion on general market sentiment. There's a feeling out there that miners are still getting eaten alive. But keep in mind that copper's looking quite handsome at $3.81 (U.S) per pound, and though gold has come off a bit, it hasn't gone into freefall. (The same can't be said for silver.)

Because there was so much activity this week, it's worthwhile to look back at what the miners actually reported, instead of just relying on their stock movements. Though the market is obviously a good measure of performance, it gets distorted in the short-term by analyst expectations. If a company had strong earnings but analysts expected too much, the stock could drop even though the fundamentals were strong.

The power players:

Inmet Mining First-quarter earnings from operations were $151-million, up from $117-million during same time last year. Inmet also posted higher copper sales volumes and had higher production at Las Cruces and Çayeli. Management admitted that earnings were "somewhat offset" by lower realized copper and zinc prices, reducing operating earnings by $26-million.

Teck Resources First-quarter adjusted profit of $504-million, up 12 per cent from same period last year. Teck also posted record first-quarter revenues of $2.5-billion. Chief executive officer Don Lindsay has repeatedly said that the China slowdown everyone keeps talking has been vastly over-exaggerated, and the earnings, so far, prove that.

Agnico-Eagle Mines Quarterly net income of $78.5-million, up from $45.3-million during the same period last year, mostly due to a 20 per cent higher realized gold price. But even Agnico pulled out the 'partially offset' clause, stating that earnings were "partly offset" by lower byproduct metal prices. The miner also produced more gold last quarter than the same time last year.

The mixed results:

Potash Corp. of Saskatchewan First-quarter earnings of $491-million were down big from the $732-million during the same period last year, which was a record first quarter. However, chief executive officer Bill Doyle keeps telling investors that demand for potash is going to ramp up -- it's just that the surge hasn't materialized as soon as he hoped. "Although we anticipated that an increase in global fertilizer purchasing would not take hold until the latter half of the first quarter, it took longer than we expected for demand to emerge."

Lundin Mining At first glance, not so great. The miner's net income of $58.3-million was lower than the $71.2-million during the first quarter of 2011. But the earnings were higher than the $36-million posted in the fourth quarter of 2011 and copper production was strong at both Neves Corvo and Tenke on the back of high throughput rates and solid grades. On top of that, the firm raised its 2012 production guidance.

The laggards:

Sherritt International First-quarter profit was $32.3-million, about half of the $63.6-million from a year ago. Sherritt was hurt by lower nickel prices – $8.66 per pound, down from $11.73 a year ago – and its costs went up. Revenues were also down to $462.2-million, from $474.5-million a year ago.

Goldcorp The big miner was hurt by rough conditions at its Red Lake mine, where it ran into lower grade ore. Production there also fell to 114,200 ounces, down from 186,100 ounces a year ago. Core earnings from operations were actually up a bit from a year earlier, but adjusted earnings fell to $479-million compared to $651-million in the first quarter of 2011.

To wrap up, that's five big miners with great or promising results, and only two with weak numbers. Not too shabby.