Now, on to a metal that relies on investors for its success just as much as, or more than, on its consumer end market demand: gold. Barrick Gold Corporation (USA) (NYSE:ABX) is the leading gold company in the world and one whose investors experienced a pretty bumpy ride over the past 52 weeks, losing 38.75% of their investment as of March 7. While President and CEO Jamie Sokalsky didn’t provide much of an update on the market, he did highlight the direction his company, and the gold industry in general, must take moving forward. His outlook will certainly have an impact on the spending habits of Barrick Gold Corporation (USA) (NYSE:ABX) and its competitors and, in turn, have a positive effect on equity values.
I have repeated it many times over the last three quarters and again many times throughout this presentation: Production will drive returns, not the other way around. Investors have been dissatisfied with capital allocation decisions in our industry. And that is clearly reflected in the gold equity valuations. They will no longer reward production growth just for production’s sake to the same extent as in the past. They are looking for higher rates of return and free cash flow, and not just production growth — and, ultimately, a greater return of capital to them.
For the most in-depth outlook, turn to Alcoa Inc (NYSE:AA) CEO Klaus Kleinfeld. During the company’s conference call, he dove down into specific industries’ growth prospects that he believes will provide increased demand for his company’s aluminum supply. From his perspective, increased demand will stem from the aerospace, U.S. and Chinese automotive, Chinese truck and trailer, and commercial building and construction markets. He’s hoping for 7% growth at Alcoa, which is a little more than the 6% the company experienced in 2012 and closes in on its average of 8% per year.
Based on these five outlooks, the future does appear slightly more luminous for those invested in metal miners. From this macro perspective, it still remains each investor’s duty to determine the best company in each respective sector. While I’m not attempting to break that argument down, I think what these CEOs had to say does shed positive light on the industry. Take these thoughts into consideration when evaluating your portfolio and potential watchlist companies that you might want to add.
And as always, Fool on!
The article 5 Mining Company CEOs’ Thoughts on 2013 originally appeared on Fool.com and is written by Taylor Muckerman.
Taylor Muckerman has no position in any stocks mentioned. The Motley Fool owns shares of Freeport-McMoRan Copper & Gold.
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