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.
On Wednesday, the return of the safe haven buyer and a weaker US dollar combined to lift the gold price to its highest level in eight weeks.
Gold futures in New York for delivery in December, the most active contract, touched a high of $1,284.70, up 1.8% from Tuesday’s settlement price in heavy volume of just under 28m ounces traded, before pairing some gains in afternoon trade. Gold is up 11.5% so far in 2017.
Gold’s rally came after US President Trump said in response to intelligence reports that North Korea has developed miniaturized warheads, that further threats from the country would be met with “fire and fury like the world has never seen.” The totalitarian state then released a statement saying it’s examining an operational plan to fire ballistic missiles toward a US military base on the island of Guam west of the Philippines.
I’m always suspicious of moves like this because the issues that cause them are rarely sustained
Ross Norman, CEO of London-based bullion trader Sharps Pixley told MarketWatch gold is “behaving in its traditional manner as a safe-haven asset” but only a rally above $1,295 would convince him the metal has entered a significant bullish phase:
“I’m always suspicious of moves like this because the issues that cause them are rarely sustained,” he said, referring to the political tensions between North Korea and the U.S.
Gold’s leg up on Wednesday saw major gold mining stocks enjoying one of the best trading days in weeks with gains across the board.
Top producer Barrick Gold added 1.4% affording the Toronto-based company a $19.4 billion market valuation in New York. Gains for world number two producer Newmont with output of 5m ounces expected this year, lifted the Denver-based company’s year to date performance to 5.8%. Vancouver-based Goldcorp added 1.2% for a market cap of $12.7 billion, but the stock is still down 6.7% so far in 2017.
The Canadian miner with four mines in the US, a couple in Russia and operations in Brazil and West Africa is now up more than 34% in 2017
ADRs of the third largest gold miner in terms of output, AngloGold Ashanti trading in New York showed only modest gains. The Johannesburg-based company is facing protests in South Africa as it plans to lay off 8,500 workers at its lossmaking operations in the country. Anglogold’s has lost nearly 30% of its value over the past six months.
Fellow South Africa-based producer Sibanye Gold jumped 2.5% on the day, but is down more than 20% in value this year despite the stronger gold price. Like AngloGold, Sibanye is downsizing operations in South Africa amid rising costs and unprofitability. Central and West Africa focused Randgold Resources jumped 2.3% and the company is now worth 25% more than at the end of 2016.
Shares in Toronto’s Kinross Gold added 1.4% in New York. The Canadian miner with four mines in the US, a couple in Russia and operations in Brazil and West Africa is now up more than 34% in 2017 affording it a market cap of $5.2 billion.
Other Canadian gold companies also performed well with Agnico Eagle building on 6.5% gains year to date, Yamana Gold adding 3.2% and Eldorado Gold gaining just over 1%. Eldorado stock is down nearly 20% over two weeks as the company struggles to advance its projects in Greece.
World number six producer behind Kinross, Australia’s Newcrest Mining, added nearly 4% bringing the US$16.5 billion company’s year to date performance to +15% .
