North American gold miners set for profit bonanza

By Euan Rocha

TORONTO (Reuters) - North American gold miners are expected to report bumper second-quarter profits in coming weeks, on the back of record-high bullion prices, but weakening prices for base metals that are produced as byproducts could temper the gains.

Gold, which rose to a record high of more than $1,260 an ounce in June, averaged nearly $1,200 an ounce in the quarter -- up about 8 percent from the previous quarter and nearly 30 percent above year-earlier levels.

With many gold producers in the process of starting production at new mines, or ramping-up output at existing projects, analysts see the strong bullion price as a big driver in the current quarter, and beyond.

That said, declines in the prices of byproduct metals like copper and zinc, along with the impact of slightly higher mining costs, could chip away at some of the gains.

"Shareholders are going to be looking for gold companies to achieve the higher profits that they have promised, because they no longer have the excuse of the gold price not outpacing cost inflation," said Dahlman Rose analyst Adam Graf.

However, it is a common mistake to assume that the higher gold price will automatically translate into higher profits, as taxes and royalties would also rise along with higher revenue, Graf said.

Newmont Mining (NEM.N: Quote), Goldcorp (G.TO: Quote) and Agnico Eagle AEM.TO will kick off the flurry of reports on Wednesday, with the world's largest producer, Barrick Gold (ABX.TO: Quote), and mid-tier miner Eldorado Gold ELD.TO posting results on Thursday.

While all major North American gold producers are expected to outpace results from a year earlier, top-rated analysts expect Goldcorp and its smaller rival Kinross K.TO to handily beat current consensus expectations of 28 cents a share and 16 cents a share, respectively.