What happened
Shares in Metal miner Turquoise Hill Resources (NYSE: TRQ) were 19% lower on May 13 at around 2:00 p.m. EDT. The stock fell after the company posted gains after close of trading on May 12. On the surface, it looked like a great report if it weren’t for the company’s warning about the future.
so what
Turquoise Hill copper production in the first quarter of 2021 increased nearly 30% year over year and 9% year over year compared to the fourth quarter of 2020. Gold production grew a massive 460% year over year and 66% sequentially. And silver production grew nearly 20% year over year with a sequential increase of 10%. The ore grades were consistently higher.
This, combined with higher raw material prices, all contributed to the miner’s sales growth of over 300% for the quarter. Earnings for the first quarter of 2021 were $ 1.18 per share compared to $ 0.22 per share for the first quarter of 2020.
Image source: Getty Images.
In any case, it was a very good quarter financially. Ordinarily, you might expect that you would have seen price rise on news like this, but that clearly did not happen. The weak copper and silver prices were somewhat of a headwind today. However, investors were more pessimistic as Turquoise Hill warned that the impact of a coronavirus flare-up on its mining operations in Mongolia combined with a mining accident in late 2020 required a downward revision of its 2021 production forecast.
Gold production is projected to decrease from 500,000 to 550,000 ounces to 400,000 to 480,000 ounces. The copper outlook has clouded over from a production range of 160,000 to 180,000 tons to 150,000 to 180,000 tons. This revision will clearly have a notable impact on the miner’s sales and profit numbers.
What now
Copper, gold and silver prices have rallied over the past year, offering miners like Turquoise Hill an opportunity to generate external profits. The first quarter proved that. However, it appears that it cannot fully benefit from the raw materials boom thanks to the problems in the company’s only mine. It seems perfectly reasonable for investors to view this news in a negative light.
This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.
