Gold price breakout sparks massive move into mining stocks
In a surprise move after months of subdued trade, the gold price jumped more than $48 or nearly 4% an ounce on Thursday, its best trading performance since September last year.
Gold ended the day at its high of $1,320 an ounce on Thursday, fighting back from lows of $1.244 at the beginning of this month. The metal is up 10% in value this year. The silver price jumped nearly 5%, climbing back above $20 an ounce for the first time in two months.
Gold's positive momentum sparked heavy buying of gold counters with the Market Vectors Gold Miners ETF (NYSEARCA:GDX), holding stock in the world's top gold miners, soaring 5.4% bringing its gains so far this year to 23.5%.
The bellwether for the industry for decades The Philadelphia Gold & Silver Index (INDEXNASDAQ:XAU) gained 5% and is back to levels last seen in March when gold hit a 2014 high of $1,379 an ounce.
By the close on Thursday, Barrick Gold Corp (NYSE:ABX, TSE:ABX) was up 3.2% with 4.3 million shares changing hands, more than double usual volumes for the world's number one producer of the metal.
It was revealed earlier this week the company has been in talks about about possible partnerships with China's largest gold producer, China National Gold.
The state-owned giant with nearly 50 operating gold mines in the country said it's actively looking at acquisition in gold, silver and copper companies around the world as it embarks on an expansion drive.
Co-operation with Barrick would not include the the Toronto-based miner's Pascua Lama projecton the border between Chile and Argentina which is the subject of a number of class-action lawsuits.
The class actions allege that Barrick Gold shareholders lost billions of dollars as a result of Barrick’s "misrepresentations and failures" regarding the stalled project.
The < href="http://www.mining.com/barrick-talking-to-new-chile-mines-minister-to-restart-pascua-lama-60443/">technically and politically challenging project high in the Andes launched in 2006 (initial capex costs were pegged at $1.5 billion but has now ballooned to $8.5 billion) suffered a number of defeats in Chilean courts about water use and the impact on glaciers in the area.
Barrick which will produce roughly 7 million ounces of gold in 2014 is now worth $22.7 billion on the TSX, compared to its peers up a relatively modest 4% in 2014. Barrick shares struck 21-year lows in July last year after peaking at a $54 billion market value in 2011.
Newmont Mining Corp (NYSE:NEM) with a market value of $12.3 billion also gained more than 3% with a whopping 12 million shares changing hands.
Talks in April between Newmont and Barrick about a possible merger ended acrimoniously with both sides going public with unflattering comments about incompatible corporate cultures.
The world's third largest gold producer behind Newmont, AngloGold Ashanti (NYSE:AU) jumped 4.8% in Thursday trade. The Johannesburg-based company's ADRs listed in New York is up a whopping 46% this year after first-quarter results showed a turnaround in operations with production of 1 million oz at a total cash cost of industry-beating $770/oz.
Goldcorp (TSE:G) added $1 billion to its market value, surging 4.7% in heavy volumes of 4.4 million shares. The Vancouver-based company is widening the gap to its peers as the world's most valuable gold stock after a 28.7% gain in market capitalization to $24.1 billion this year.
Goldcorp is expected to produce around 3 million ounces of gold this year and was praised by investors for walking away from a hostile takeover of fellow Canadian gold miner Osisko (TSE:OSK).
Osisko found white knights in the form of Yamana Gold (TSE:YRI) and Agnico Eagle Mines (TSE:AEM) which will 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, gained 5.6% on Thursday, while Agnico Eagle Mines (TSX:AEM) traded just under 5% for the better.
The bidding for Osisko boosted the stock 83% this year for a market value of $3.8 billion ahead of its delisting on Monday. Malartic will produce nearly 600,000 ounces this year.
Toronto-based Yamana is worth $7.1 billion and Agnico $7 billion making the acquirers the globe's seventh and eighth most valuable listed gold miners. Yamana shares are up 3% year to date, while Agnico has soared more than 40%.
Toronto's Kinross Gold (TSX:K) increased 5.5% on the day but has only managed 3.2% upside in 2014 over worries about the impact on the company's operating mines in Russia amid the tensions over Ukraine. Kinross is worth a good $1.5 billion less than Yamana, despite being forecast to produce some 1.3 million ounces more than Yamana this year.
Canada's Eldorado Gold Corp (TSX:ELD) was the best performer on the day with a 8.5% bounce. 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) continued its turnaround adding 5.2% in New York. The Johannesburg-based firm which is expected to mine 2 million ounces this year is up 20% 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) jumped 4.2% and is up 31% this year as its massive new Kibali mine in the Democratic Republic of Congo (DRC) exceeds expectations.
Africa-focused Randgold has become something of an investors' favourite with the company valued at some $7.7 billion in London, as it rapidly ramps up production in 2014 to around 1.2 million ounces and boosts it projects in the pipeline.
Based on the sector's performance today many investors are choosing to ignore the advice of investment bank Citigroup which last month warned punter not to buy gold stocks no matter how tempting valuations had become.