BAY STREET-Quarter's fine print to set fate of gold stocks
* Strong gold prices, muted costs to boost profits
* Equity issues to hold back EPS gains
* Agnico-Eagle first to report next week (In U.S. dollars, unless noted)
TORONTO, Oct 25 (Reuters) - Strong gold prices and tame cost inflation should lead to robust third-quarter results from Canadian gold producers, but investor focus will likely be on updates on new mines and fresh details on the unwinding of Barrick Gold's (ABX.TO) hedge book.
Reports will kick off on Wednesday with a results from Agnico-Eagle (AEM.TO), one of several miners set to show a stronger profit due to a year-over-year rise in gold prices, and a recent rebound in prices for base metals byproducts that many -- including Agnico -- mine along with the gold.
Driven by fears of inflation and a sinking U.S. dollar, gold XAU= averaged $961 an ounce during the three months ended Sept. 30.
That's up about 10 percent from the third quarter of 2008, and comes as prices for key inputs such as oil -- which hit a record high in the third quarter of 2008 -- and chemicals such as acid and cyanide have come down.
"It's the best of all worlds for the gold miners," said John Ing, president of Toronto investment dealer Maison Placements.
"It should be a good quarter for them ... and costs should be flat year-over-year because we didn't have the big energy cost that hurt last year."
Gold ended the quarter at just over $1,000 an ounce and a bit shy of record levels, but it has since smashed through the previous record around $1,030 an ounce, and was above $1,050 an ounce on Friday.
DETAILS KEY FOR STOCKS
Stock prices have largely keyed off the metal's price, and some investors have already started to look ahead to what promises to be even richer fourth-quarter results, analysts say.
"We expect the (third-quarter) earnings season to be a neutral event, with share prices driven by operating performance and underlying commodity price moves," UBS analyst Brian MacArthur said in a research note this week.
That means price moves during third-quarter reporting period will likely come from updates on ramp-ups of new mines that are key to companies' future production, such as Agnico's Kittila mine in Finland, Barrick's Buzwagi mine in Tanzania, and Kinross Gold's (K.TO) Paracatu mine in Brazil.
Even more importantly, Barrick will update investors on progress in buying back 3 million ounces in fixed-price gold hedges, or forward sales, which it entered into years ago as a means to protect itself against a falling gold price. Continued...
