Renewed fears about Chinese equity markets after the worst points loss in Shanghai for eight years gave the gold price a lift on Monday.
But the metal continues to trade close to five-year lows after settling at $1,093, up only $7.40 from Friday’s close. An earlier move above the psychologically important $1,100 level turned out to be brief.
A return to its recent dip below $1,180 would represent a 50% retracement of the metals 12-year bull run.
The gold market has turned overwhelmingly bearish with so-called managed money investors such as hedge funds going short – placing bets that the gold price will decline – to the tune of 12.1m ounces or 340 tonnes, a new record high.
According to the Commodity Futures Trading Commission’s Commitment of Traders data for the week to July 21, large speculators now hold a net short position for the first time since at least 2006, when the data was first being tracked.
A positive gold price could not stop the bleeding among gold mining stocks with renewed selling pushing the sector to fresh-multiyear and sometimes multi-decade lows.
The sell-off was led by Barrick Gold Corp (NYSE:ABX, TSE:ABX), the world’s top producer of the metal, which tumbled 5.1% to the lowest in USD terms since November 1990. More than 33m shares changed hands, double the usual daily volume for the share.
Barrick’s market value has nearly halved just over the last three months and is now worth $8.5 billion in New York. That compares to a $64 billion capitalization when gold was at $1,900 in 2011. Barrick’s gold production is expected to fall to between 6.2m – 6.5m ounces as it disposes of underperforming assets to tackle its crippling debt-load of more than $13 billion.
Goldcorp is forecasting a whopping 20% production increase this year to between 3.3m – 3.6m ounces despite cutting capex costs nearly in half to $1.3 billion. Goldcorp latest project to come on stream is the Argentina-based Cerro Negro gold and silver mine while its also ramping up at Éléonore in Quebec.
World number two in terms of production Newmont Mining Corp (NYSE:NEM) was spared some of the worst trading, declining 3.3%.
Denver-based Newmont announced on Monday it is selling a refinery in Switzerland for $119 million bringing non-core asset sales to $1.6 billion over two years. The only gold company that forms part of the S&P500 index and which has been publicly traded since 1940, Newmont is having a good 2015 so far, with a relatively modest 9% decline.
While others are disposing of mines, Newmont is building its portfolio and recently acquired the Cripple Creek & Victor gold mine in Colorado for $820 million in cash from AngloGold Ashanti. while selling non-core assets like a refinery in Switzerland. Unlike its peers the company is showing strong cash-flows and in its recent production report upped its output guidance to between 4.7 million ounces and 5.1 million ounces in 2015.
ADRs of AngloGold Ashanti (NYSE:AU), the world’s third largest gold producer expected to produce some 4m ounces in 2015, fell 6.2% for a market value of $2.5 billion on the NYSE. The counter has lost 30% of its value in just one month over fears of labour turmoil at its core operations in South Africa.
Agnico Eagle Mines (TSE:AEM, NYSE:AEM) also sold off, losing 3.9% on the day and cutting its market capitalization down to $6.5 billion in Toronto and $5.2 billion in New York bringing losses. Agnico is down 21% in a month but remains the only major gold producer in positive territory for the year – up 3% year to date in CAD terms although the USD has now also caught up with the Toronto-based company.
Agnico operates nine mines located in Canada, Finland and Mexico and hit record production during its first quarter. Agnico’s Meadowbank mine in Canada and 50%-owned Canadian Malartic mine are ramping up production helping it to raise 2015 output guidance to 1.6 million ounces.
Randgold Resources ADR’s trading on the Nasdaq (LON:RSS, NASDAQ:GOLD) also came under pressure with the fast growing miner losing 4.7%. The Africa-focused miner with a $5.4 billion valuation has declined 34% since hitting four-year highs in July last year.
Randgold has been piling on the ounces at its mines in West and Central Africa, growing output 26% last year with a target of 1.2m ounces this year. Its Kibali mine in the Democratic Republic of Congo which boasts reserves of 12 million ounces should hit 600,000 ounces this year while its Tongon mine in Côte d’Ivoire is also being upgraded.
Randgold, which have been active in West Africa for almost 20 years, is one of the fastest growing gold miners in the world, moving it up the ranks over the past couple of years to become the fifth most valuable gold counter.
Yamana Gold (TSE:YRI) dropped 4.9%, and the once high-flying Toronto-based company is now down a more than 30% in value in just one months after reporting disappointing full year 2014 results.
The company has had operational issues at its Argentina and Brazilian mines but still plans to up output this year to 1.3 million ounces. Yamana is worth $2.4 billion on the TSX, down a whopping 71% from highs hit in August last year.
Damage to Toronto’s Kinross Gold (TSE:K) was limited to less than 1%. The company with a market worth of $2.5 billion produced 2.6 million ounces last year with some 720,000 ounces coming from Russia, making Kinross much cheaper than its peers on an ounce for ounce basis. Kinross recently settled a number of class-action lawsuits tied to its disastrous purchase in 2010 of Red Bank Mining for more than $7 billion.
Canada’s Eldorado Gold Corp (TSE:ELD) fell 3.2% bringing its year to date losses to over 40%. A promising start to 2015 for the stock came to an abrupt end on January 21 when the Vancouver-based gold producer’s outlook for the year came in way below expectations.
The company with mines and projects in crisis-hit Greece, now worth $3 billion on the Toronto big board, announced record production of 782,224 ounces during 2014, but slashed forecast production for this year to between 640,000 and 700,000 ounces and upped costs at the same time.
Image by Javier Cabrio.
6 Comments
Paul Linton
Good grief – get facts right, Anglo American is NOT the parent of AngloGold and hasn’t been for about 7 years now (they hold exactly 0% of the shares, they sold their stake to John Paulsen). So their layoffs have zilch to do with AngloGold……shoddy journalism.
MINING.com Editors
Thanks for pointing that out Paul. Very much an ex-parent. Fixed now – Frik
Richard Gorman
So the manipulation continues ……. look for members of the evil marxist elite billionaires club to take over the gold market soon ! ! ( Soros, Rothschild, Gates, House of Morgan, etc.).
ExPat
I really appreciate this crisp summary of 9 large gold miners. Thank you Mr. Els.
Two other large South African gold miners, Sibanye Gold Limited (SBGL), and Gold Fields Ltd. (GFI) might have been included, as they are also top 10 in terms of 2015 production guidance. Not that they would “buck the trend” because they are both down about 45% since February 2015. And the Australian company Newcrest Mining Limited (NCM.AX) is another top 10 miner that has had the most positive stock performance this year (up over 15%).
Over the past year, I made 2 rounds of culling out gold mining stocks from my portfolio (My former financial advisor had me in way too many different gold miner stocks ever since 2008). It has been a very tough 4 years for gold mining investors (not necessarily bad for gold mining stock traders), and I am glad that I kept most of my eggs in other baskets. So I can still make omelets, but a few major discretionary purchases will need to be put on hold for a while.
For the most part, my decision to keep NEM, AEM and EGO (and shed AUY, ABX and NGD) was correct. I did not anticipate the issues EGO would face in Greece and Turkey (yes, a year ago I thought the Greeks were smart enough not to willfully damage one of their few non-state-owned large employers) and I think EGO will ultimately survive. In my opinion, NEM and AEM are positioned to outperform the GDX index.
rayban
Bear season on hold it seems , this shall change a little later . Looking for buying in November …. A little buying .
2ndOrion
Sure hope those with some money are buying some, and maybe more as this price continues to fall. This low price will not continue as way too much money has been printed and made by computer to the accounting books worldwide to sustain such low prices. At some time the price will rise -and those with some will be very happy, even if they bought at $1500/Oz..