Hedge funds slash bullish wagers on gold over Trump election win
The precious metal has fallen about 8% from a record high on Oct. 31, with losses accelerating after Trump’s election victory last week.
Despite production volumes increases in the last 12 months, mining companies continue to experience a “disconnect,” as revenues remain flat, profits fall and share prices underperform, says the latest PricewaterhouseCoopers report on the sector.
The report, the 10th review of global trends in the mining industry by PwC, shows the industry has entered a period where there is a “crisis in confidence” about miners’ abilities to control costs, deliver on promises and successfully cope with resource nationalization demands.
According to Mine 2013: A Confidence Crisis, the growing disconnect between the performance of the mining industry’s share prices, commodity prices, and the broader equity markets continued last year.
Net profits dropped to $68 billion, a 49% decrease from 2011. In addition, market capitalization fell for 37 of the top 40 global miners, totalling a loss of over $200 billion.
Mining stocks fell slightly in the last year, but stocks have been hit in the first four months of 2013 with nearly a 20% decline. Meanwhile, shareholders are calling for change from the top, resulting in half of the CEOs at the 10 largest global mining companies being replaced since April 2012.
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In a statement yesterday, Steve Ralbovsky, US mining leader at PwC, highlighted that capital expenditures are being tightened because mining companies are trying to regain the market’s trust.
Forecasted capital expenditures for 2013 have already been reduced by 21% compared to 2012, dropping to $110 billion. At the same time, project hurdle rates have increased with some of the top 40 companies, what leads PwC to forecast that only projects with a return above 25% will be pursued.
“Even with cost containment initiatives well-underway, a strategic, thoughtful approach to rebalancing capital spends should not have a negative impact on miners’ ability to meet the continued demand for their products,” added Ralbovsky.
John Gravelle, mining leader for the Americas at PwC Canada, will be hosting a live web Q&A to discuss the confidence crisis miners are currently facing.
You can join the discussion today at 2 p.m. EST here.
