Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
The gold price jumped more than $20 or 1.8% an ounce on Tuesday to a three-week high above $1,340 after disappointing US economic data.
The much weaker than expected employment numbers in the US convinced gold buyers that any reduction in economic stimulus by the Federal Reserve, which hurts the dollar and boosts gold in return, will come later rather than sooner.
With positive sentiment returning to the gold market, investors took the chance to jump back into mining stocks which have been decimated by the 20% retreat in the price of the metal this year.
On Tuesday Barrick Gold Corp (TSE:ABX) shot up 4.8%, scaling the $20 billion market value for the first time in a month.
The world’s number one miner of the precious metal has added more than $5 billion in market value since hitting 21-year lows early July.
Barrick is now worth $20.5 billion on the TSX, still down 41% so far this year amid an aggressive divestment and cost-cutting drive that is beginning to bearing fruit.
Newmont Mining Corp (NYSE:NEM) with a market value of $14.1 billion added 3.5%. The company recently cut predictions for its copper output, but gold production targets remain unchanged at 4.8 to 5.1 million ounces for the year.
The Denver-based company has not escaped the carnage in the gold sector and is down 38% this year.
The world’s third largest gold producer behind Newmont, AngloGold Ashanti (NYSE:AU) was one of Tuesday’s best performers. The Johannesburg-based company’s ADRs listed in New York gained 9% to a four-month high, but are still trading down 48% this year.
Fellow South African miner Gold Fields (NYSE:GFI) which is the worst performer among the gold majors this year, jumped 5% in New York. The world’s fourth largest gold producer has had its value slashed 62% in 2013 with investors punishing it for its contrarian purchase of high-cost mines amid the slump.
Goldcorp (TSX:G), expected to produce around 2.5 million ounces of gold this year, jumped 4.9%, helping the Vancouver-based company retain the top spot as the most valuable gold stock.
The Vancouver-based company has jumped more than $2 billion in market value over the past week and is now worth $21.3 billion.
Toronto’s Kinross Gold (TSX:K) scaled the $6 billion value gaining 3.3%, but investors in the company are still nursing a $5 billion loss in market cap this year after Kinross, like all the majors, took multi-billion charges against the value of its operations.
Australia’s Newcrest Mining’s (ASX:NCM) declined 0.5% on the Sydney bourse missing out on the gold price rally in New York. The Melbourne-based company earlier this month ousted its CEO and Chairman after its August results showed a A$5.6 billion loss.
Canada’s second tier gold miners also enjoyed a rerating with Yamana Gold (TSX:YRI) adding 4.6%, Agnico Eagle Mines (TSX:AEM) jumping more than 4.7%, Eldorado Gold Corp (TSX:ELD) advancing 3.8% and Iamgold (TSE:IMG) upping its value 4.5%.
Comments
ghartwell
Good, gold is now in.