Gold stocks crash – Barrick plummets to 25-year low
On Friday, the price of gold dropped to the lowest level since April 2010 after the Fed said the world's largest economy favours a rate rise this year which boosted the dollar and Chinese disclosure about its gold holdings disappointed the market.
Futures contracts in New York with August delivery dates were trading at $1,131.20 an ounce in afternoon trade, down more than 1% from yesterday's close in a second day of losses.
The gold market has turned overwhelmingly bearish with large gold futures investors such as hedge funds slashing long positions – betting on a rising price – to less than 1m ounces, the lowest in at least nine years. At the same time speculators' short positions – bets that gold could be bought cheaper in the future – jumped to all-time record highs.
Gold's weakness led to a brutal sell-off among the world's top gold miners.
More than 22m Barrick shares changed hands as the share tumbled 5% to the lowest since 1990
The sell-off was led by Barrick Gold Corp (NYSE:ABX, TSE:ABX), the world's top producer of the metal, which tumbled 5% to the lowest in USD terms since 1990. More than 22m shares changed hands, double the usual daily volume for the share.
Barrick's market value is down 32% over the last three months and is now worth $13.8 billion in New York. That compares to a $64 billion capitalization when gold was at $1,900 in 2011. Barrick's gold production is expected to fall to between 6.2m – 6.5m ounces as it disposes of underperforming assets to tackle its crippling debt-load of more than $13 billion.
The world's most valuable gold stock, Goldcorp (TSE:G, NYSE:GG) fell 6% in heavy volumes of more than 10m shares traded and is now worth $13 billion in New York and C$16.4 billion in Toronto – a decade low. Year to date share price decline for the Vancouver-based firm is a relatively modest 10% in Canadian dollar terms thanks to the falling loonie which hit six year lows this week.
Goldcorp is forecasting a whopping 20% production increase this year to between 3.3m – 3.6m ounces despite cutting capex costs nearly in half to $1.3 billion. Goldcorp latest project to come on stream is the Argentina-based Cerro Negro gold and silver mine while its also ramping up at Éléonore in Quebec.
World number two in terms of production Newmont Mining Corp (NYSE:NEM) was spared some of the carnage, declining 2.9%. Denver-based Newmont, the only gold company that forms part of the S&P500 index and which has been publicly traded since 1940, is having a good 2015 so far, with 10% gains this year thanks to institutional interest.
While others are disposing of mines, Newmont is building its portfolio and last month acquired a 100% interest in the Cripple Creek & Victor gold mine in Colorado for $820 million in cash from AngloGold Ashanti. The company estimates 2016 production of between 350,000 and 400,000 ounces at the mine.
ADRs of AngloGold Ashanti (NYSE:AU), the world's third largest gold producer in terms of output fell 5.8% for a market value of $3.1 billion on the NYSE.
AngloGold Ashanti is expected to produce some 4m ounces in 2015, but is in the midst of tough wage negotiations at its core operations in South Africa and the threat of a strike has seen the counter lose 18% of its value in just one month.
The Johannesburg-based company's output in the country was already down 18% in its first quarter even as costs rose 12% despite a fall in the value of the rand against the US dollar.
Agnico Eagle Mines (TSE:AEM, NYSE:AEM) also sold off, losing 5.3% on the day and cutting its market capitalization down to $7.3 billion in Toronto and $5.8 billion in New York.
Agnico Eagle is the only major gold producer in positive territory for 2015
Despite a sharp pullback over the past month the stock is the only major gold producer in positive territory for the year – up 8% year to date in CAD terms while staying just in the black on the NYSE.
The Toronto-based company operates nine mines located in Canada, Finland and Mexico and hit record production during its first quarter. Agnico's Meadowbank mine in Canada and 50%-owned Canadian Malartic mine are ramping up production helping it to raise 2015 output guidance to 1.6 million ounces.
Randgold Resources ADR's trading on the Nasdaq (LON:RSS, NASDAQ:GOLD) also came under pressure with the punters' favourite losing 2.3%. The Africa-focused miner with a $6 billion valuation has declined 30% since hitting four-year highs in July last year.
Randgold has been piling on the ounces at its mines in West and Central Africa, growing output 26% last year with a target of 1.2m ounces this year.
Its Kibali mine in the Democratic Republic of Congo which boasts reserves of 12 million ounces should hit 600,000 ounces this year while its Tongon mine in Côte d'Ivoire is also being upgraded.
The company has also completed a feasibility study for an underground mine at its Loulo-Gounkoto gold mining complex in Mali.
Randgold is one of the fastest growing gold miners in the world becoming the world's fifth most valuable gold counter
Randgold, which have been active in West Africa for almost 20 years, is one of the fastest growing gold miners in the world, moving it up the ranks over the past couple of years to become the fifth most valuable gold counter.
Yamana Gold (TSE:YRI) dropped 2.7%, and the once high-flying Toronto-based company is now down a more than third in value in just three months after reporting disappointing full year 2014 results.
The company has had operational issues at its Argentina and Brazilian mines but still plans to up output this year to 1.3 million ounces. Yamana is worth $3 billion on the TSX, down a whopping 67% from highs hit in August last year.
Toronto's Kinross Gold (TSE:K) was knocked 5.7%, slicing its market worth to $2.8 billion. After starting the year with a bang, the stock is now down nearly 44% from its 2015 highs.
The company produced 2.6 million ounces last year with some 720,000 ounces coming from Russia, making Kinross much cheaper than its peers on an ounce for ounce basis. Kinross recently settled a number of class-action lawsuits tied to its disastrous purchase in 2010 of Red Bank Mining for more than $7 billion.
Canada's Eldorado Gold Corp (TSE:ELD) fell 8.8%. A promising start to 2015 for the stock came to an abrupt end on January 21 when the Vancouver-based gold producer's outlook for the year came in way below expectations.
The company with mines and projects in crisis-hit Greece, now worth $3.1 billion on the Toronto big board, announced record production of 782,224 ounces during 2014, but slashed forecast production for this year to between 640,000 and 700,000 ounces and upped costs at the same time.