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 fell by as much as $73 in morning trade on Friday crashing through the $1,500 an ounce level and causing mayhem among gold mining stocks.
The gold price is down 10% this year and Friday’s sharp decline dragged it into official bear territory, defined as a 20% decline from a high ($1,909 intra-day in August 2011).
After the initial drop June gold futures regained some of its footing settling at $1,501.40 an ounce in New York, a 21-month low.
After hours renewed selling set in with gold giving up $88.80 an ounce to trade at $1,476.10 late Friday.
The retreat in the price of the yellow metal led to a bloodbath for mining stocks with gold counters dropping across the board.
Barrick Gold Corp (TSX:ABX) lost 8.2% bringing the week’s decline for the Toronto-based global number one gold miner to over 15% following a steep sell-off on Wednesday when a court in Chile ordered a halt to work at its massive Pascua-Lama project. Barrick is worth just under $23 billion on the TSX, less than half it was worth in 2011.
Denver-based Newmont Mining Corp (NYSE:NEM) with a market value of $18 billion down from $30 billion last year shed 5.9%, while the world’s third largest gold producer behind Newmont, AngloGold Ashanti (NYSE:AU) gave up 5.6%. The Johannesburg-based company’s ADRs listed in New York is down a staggering 34% year to date.
Fellow South African miner Gold Fields (NYSE:GFI) traded down 5.9%. Canadian gold counters Goldcorp (TSX:G) and Kinross Gold (TSX:K) – which this year overtook Goldcorp as the world fifth largest gold miner in terms of output – lost 4.5% and 6.5% respectively. Goldcorp’s market value peaked in 2011 when it was worth $30 billion, $6 billion more than today.
Australia’s Newcrest Mining (ASX:NCM) was spared the carnage and ended unchanged on the Sydney bourse ahead of the metal sell-off in New York, while London-listed Polyus Gold also emerged relatively unscathed down 1%.
Rounding out the world’s top 10 listed gold producers Johannesburg-based Harmony Gold Mining was also hard hit, down 8.3% in New York, while Peru’s Compania de Minas Buenaventura (NYSE:BVN), which just edges out Canada’s Yamana Gold (TSX:YRI) in terms of annual gold production, but is not so reliant on the precious metal for earnings shed 1.7%.
Yamana, which produces just over 1 million ounces per year was hammered down 6.7% on the Toronto big board.
