Gold mining stocks take another beating

Historically September is the best month for the gold price and gold stocks, but 2014 has turned the market on its head.

Gold mining stocks take another beating

It's not looking good

On Friday the price of gold fell again, reaching a fresh 2014 low of $1,216 following three weeks of straight selling on the back of a strong dollar and expectations of a rise in US interest rates.

After closing 2013 at $1,205 the price of gold jumped out of the starting gate, rising consistently to reach a high of $1,380 in March.

But the subsequent retreat accelerated during the third quarter with a loss of 5.5% so far in September – against expectations and counter to historical patterns – dragging gold stock down with it.

By the close on Friday, Barrick Gold Corp (NYSE:ABX, TSE:ABX) had lost 2.4% in market value with a massive 7.8 million shares changing hands compared to usual daily average volumes of 1.6 million,
making the world's number one producer of the metal one of the worst performers in the sector on the day.

The market value of loss-making Barrick which will produce roughly 6 – 6.5 million ounces of gold in 2014 fell below $20 billion on the TSX on Friday. The counter has shed 14.5% over the first three weeks of September and is now down 8.6% this year. Barrick shares struck a 21-year low in July last year after peaking at a $54 billion market value in 2011.

Newmont Mining Corp (NYSE:NEM) with a market value of $12.2 billion escaped the worst of the carnage trading down just over 1% in regular hours. Talks earlier this year between Newmont and Barrick about a possible merger ended acrimoniously with both sides going public with unflattering comments about incompatible corporate cultures.

Newmont shares have outperformed Barrick this year trading up 5.1% year to date.

The world's third largest gold producer behind Newmont, AngloGold Ashanti (NYSE:AU) also managed to limit losses on the day to around 1%, but the company's ADRs listed in New York is down 24% just over the last month of trading.

After a steep selloff last week after announcing a restructuring, Anglogold was forced on Monday to scrap plans to split the company and raise more than $2 billion through a stock sale.

Thanks to some aggressive cost-cutting and a strong operational performance the Johannesburg-based firm is still enjoying a positive 2014 gaining 11.8% in value since the start of the year.

Goldcorp (TSE:G) declined 2.7% on the day, but September has been brutal for the Vancouver-based company, the world's most valuable gold stock, with a more than 15% drop in market capitalization to $21 billion since the beginning of the month.

Goldcorp said last week its 2014 output could end up near the bottom end of its forecast range of 2.95 – 3.1 million ounces because of production problems at a Mexico mine.

Goldcorp walked away from a hostile takeover of fellow Canadian gold miner Osisko (TSE:OSK) last year, but CEO Chuck Jeannes last week said the weak gold price will lead to further consolidation in the industry as gold majors opt to buy ounces.

Osisko found white knights in the form of Yamana Gold (TSE:YRI) and Agnico Eagle Mines (TSE:AEM) which now jointly own 100% of the Montreal firm and take over operation of the company's only operating mine, the Canadian Malartic in Quebec.

Yamana which is forecast to produce 1.4 million ounces this year, slid 3.6%, while Agnico Eagle Mines (TSX:AEM) losses were steep at 4.3%. Last week Agnico announced it plans to buy Mexico focused exploration company Cayden Resources (CVE:CYD) in a predominantly shares-based deal worth $205 million.

Agnico is one of the best performers among large gold miners with a 17.8% gain this year. The Toronto-based company operates nine mines located in Canada, Finland and Mexico as well as exploration and development activities in each of those countries as well as in the United States.

Toronto-based Yamana is worth $6.5 billion and Agnico $6.8 billion making the acquirers the globe's fifth and seventh most valuable listed gold miners. Yamana shares are down 19% year to date, with all of those losses happening since the start of the month.

Toronto's Kinross Gold (TSX:K) lost 3.3% on the day and is down 17 in 2014 over worries about the impact on the company's operating mines in Russia amid the tensions over Ukraine.

Canada's Eldorado Gold Corp (TSX:ELD) declined 4.7% trimming the fast-growing miner's gains for the year to 25.5%. Eldorado is close to starting up a mine in Romania and also operates in China, Turkey and Greece with a target of 1.4 million ounces this year.

South African miner Gold Fields (NYSE:GFI) managed to stay out of the red in New York trading on Friday. The Johannesburg-based firm which is expected to mine 2 million ounces this year is up a whopping 33% in 2014 after a dismal performance last year when in a contrarian move its picked up some of Barrick's Australian operations.

Randgold Resources ADR's trading on the Nasdaq (LON:RSS, NASDAQ:GOLD) shed 2.9%, as investors continue to cool on the counter marking the Africa-focused miner down 16% in September alone.

In August Randgold reported a massive output miss at its new Kibali mine in the Democratic Republic of Congo (DRC).

Randgold is still up 12% year to date with the company valued at some $6.7 billion in London, as it rapidly ramps up production in 2014 to around 1.2 million ounces and boosts it projects in the pipeline.

Citigroup in May warned punters not to buy gold stocks no matter how tempting valuations had become. Based on today's performance that was sound advice.