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After seeing its share price fall in mid-July, Richmont Mines has defied the gold price rout to bounce back over 20 percent on both the NYSE MKT and TSX.
As the top-gaining mining stock on the TSX last year, Richmont Mines (TSX:RIC,NYSEMKT:RIC) is certainly a company that gold bugs are likely keeping an eye on.
Many might be wondering, then, what’s driven the recent rise in share price for the company. Richmont Mines’ share price touched $2.29 on the NYSE MKT on August 3, the lowest share price for the company so far in 2015. However, it has since bounced back 28 percent to close at $3.05 on Tuesday.
Similarly, the company has risen 23 percent on the TSX since hitting $3.14 on August 4. Richmont Mines’ share price is now up nearly 8 percent on the exchange, having recovered strongly from a 16-percent drop in mid-July.
What caused that earlier fall? Not surprisingly, analysts believe gold price activity played a big part in the drop for Richmont Mines. The spot gold price dropped off precipitously between July 10 and 24, losing nearly $70. That’s around the same time that Richmont Mines’ share price fell, and the company wasn’t alone. Other mid-tier gold producers, such as Timmins Gold (TSX:TMM) and B2Gold (TSX:BTO), saw their share prices fall in July.
“It’s just the gold price,” stated Michael Gray of Macquarie Capital Markets when asked about the price fall. He noted that Richmont had “hung in there quite well compared to a lot of other companies,” but that a 4-percent drop in the gold price and a rise in negative sentiment eventually took a toll.
The release of strong Q2 results from the company seems to have been behind the rise. Richmont Mines reported record quarterly revenues of $40.6 million for the quarter and gold production of 26,314 ounces on August 6.
More specifically, Gray attributed much of the share price rise to to the fact that Richmont Mines is “one of the few companies out there” to increase its production guidance. Richmont has upped its production guidance from 78,000 to 88,000 ounces to 87,000 to 95,000 ounces, a change of about 8 percent.
“The market’s not seeing a lot of that,” he said. “That, coupled with their Canadian exposure [and] weakening currency, that asymmetric leverage is very positive.”
For Rod Husband of Cipher Research, Richmont’s share price rise was more about a reaction to broader overselling in July than to the company’s quarterly results. “Mid-tiers got hammered in mid July when gold fell, and the recent rise is a correction to that overselling,” he said.
There are other gold stocks that have managed to bounce back as well. Lake Shore Gold (TSX:LSG) is up 39 percent so far this year, while Asanko Gold (TSX:AKG) is up about 18 percent.
The gold price has been more calm recently, but has yet to continue to rise again. In any case, it’s certainly heartening for gold investors to see a some gold mining stocks record gains in the current low price environment.
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Richmont Mines is a client of the Investing News Network. This article is not paid-for content.
