Monster rally for gold stocks
Gold on Thursday shot higher after Switzerland's central bank scrapped efforts to keep the franc from appreciating sending shockwaves through financial markets already in turmoil as a result of a stock market plunge, the oil price slide and the collapse in copper this week.
In later morning trade on the Comex division of the New York Mercantile Exchange gold for February delivery soared to a high of $1,267.20 an ounce, up $32.70 or 2.5% from Wednesday's close. Volumes were nearly double recent trading session with 23.7 million ounces changing hands by lunchtime.
Gold is now trading at its highest since September 5 and has jumped more than 7% jump so far this year. Gold has gained more than $120 from its near four-year low hit early November and the rally appears to have convinced even skeptics to jump back into the market.
The rally was led by the world's most valuable gold stock, Goldcorp (TSE:G, NYSE:GG). The counter rocketed 11% on volume of 24.5 million shares, twice the usual, as it continues to recover from multi-year lows struck at the end of October. Goldcorp is now worth $17.2 billion in New York and more than C$22 billion in Toronto.
The Vancouver-based company gains came despite disappointing production numbers released on Tuesday which showed an 11% rise in output to 2.87 million ounces compared to a full year 2014 forecast of 2.95 – 3.1 million ounces. Goldcorp did manage to cut all in costs by nearly 8% to $950 an ounce compared to the year before.
Goldcorp is forecasting a whopping 20% production increase this year to 3.45 million 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. The high-grade operation boasts reserves of 5.7m ounces.
Top gold producer Barrick Gold Corp (NYSE:ABX, TSE:ABX) surged 9.9% in market value in eye-popping volumes of 47.9 million shares by the close, rising throughout the day to end at $11.37 a share and adding another 0.6% after hours.
The stock is fighting back after negative views on the company's prospects made by Macquarie Capital Markets in a research note issued last week. Analyst Ron Stewart warned of another $2.5 billion in writedowns, a declining production profile and problems at board level.
The world's number one producer of the metal, expected to have produced roughly 6 – 6.5 million ounces in 2014, is still down 38% over the last six months with a market value of $12.8 billion in New York. That compares to $64 billion capitalization when gold was at $1,900 in 2011.
World number two Newmont Mining Corp (NYSE:NEM) also had a great day, climbing 9%, which lifted the Denver-based company's valuation back above $10 billion. 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 15% gains this year.
Yamana Gold (TSE:YRI) added 8.1%, but despite today's strong gains the Toronto-based company is still down more than 10% this week. The counter was hammered on Tuesday after announcing it is raising at least $260 million by issuing 49.2 million shares. Yamana said the money will be used to pay down debts of roughly $2 billion.
Apart from some operational issues at its Argentina and Brazilian mines, the company has also come under fire for its generous executive pay with CEO Peter Marrone taking home more than $30 million over the past three years even as the share has tanked 67%. Yamana is worth $4.5 billion on the TSX.
Agnico Eagle Mines (TSE:AEM, NYSE:AEM) jumped 7.7% affording it a market capitalization of $6.3 billion in New York and making it the world's 7th most valuable listed gold miner. Agnico started 2015 with a bang – the stock is up 26% year to date.
The Toronto-based company operates nine mines located in Canada, Finland and Mexico and has also found investor favour thanks to an improving production profile. Agnico's Meadowbank mine in Canada and Kittila operation in Finland is humming along helping it to raise 2015 output guidance to 1.6 million ounces.
Yamana and Agnico were responsible for the biggest gold sector acquisition in some time when it bought Osisko's Malartic mine in Quebec a year ago for over $4 billion after Goldcorp baulked.
Randgold Resources ADR's trading on the Nasdaq (LON:RSS, NASDAQ:GOLD) advanced at a more modest pace. The punters' favourite increased 5.2% during normal trading and added to the gains after hours. The Africa-focused miner with a $6.9 billion valuation has gained 17% this year although it remains well below a more than four-year high reached in July.
Big things are expected of Randgold's Kibali mine in the Democratic Republic of Congo which boasts reserves of 12 million ounces and a rapid ramp-up in production. Kibali and a number of projects in West-Africa turned Randgold into one of the fastest growing gold miners in the world, moving it up the ranks over the past couple of years to become the sixth most valuable gold counter.
Toronto's Kinross Gold (TSE:K) also enjoyed a thorough rerating on Thursday rocketing 10.8%, upping its market worth to $4.8 billion. The stock is up nearly 30% in 2015 as worries about the impact on the company's operating mines in Russia recede and last year's sell-off start to look overdone.
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.
Canada's Eldorado Gold Corp (TSE:ELD) ran up 6.8. The fast-growing miner worth $6.1 billion in Toronto is up 20% since the start of the year as takeover rumours continue to swirl and the counter is rerated.
With assets in in Turkey, China, Greece, Brazil and Romania, the company is also benefitting from the strong dollar to drive down costs. Eldorado is targeting 1.4 million ounces this year.
AngloGold Ashanti (NYSE:AU), the world's third largest gold producer worth $8.8 billion on the NYSE, added just under 6% continuing gains since releasing strong third quarter results which boosted its production outlook to the top end of previous guidance.
AngloGold Ashanti is expected to have produced 4.35m – to 4.45m ounces in 2014 despite the sale of the Navachab mine in Namibia in May, losses caused by the earthquake in South Africa, and the transition of the Obuasi Mine to limited operating state by year-end.
South African miner Gold Fields (NYSE:GFI) had an uncharacteristically quiet day advancing 3.6%. The Johannesburg-based company, targeting 2 million ounces a year, is up 25% in 2015.
Fellow South African miner Harmony Gold (NYSE:HMY) turned in an 8.9% upward performance on Thursday, just the latest of many banner trading days.
The company's ADRs have skyrocketed 55.5% in just two weeks thanks to a positive pre-feasibility study of its 20 million ounce Wafi-Golpu project in Papua New Guinea and renewed institutional interest in the counter.
Wafi-Golpu is a joint venture with Australia's Newcrest Mining (OTCMKTS:NCMGY, ASX:NCM). Newcrest's ADR trading in New York advanced nearly 3% in anticipation of a strong opening for the company when trading starts in Sydney.
The Melbourne-based company is up 45% over the past year thanks to a management overhaul and with most of the pain associated with its giant Lihir mine in PNG behind it. Newcrest is targeting total gold production of 2.2 – 2.4 million ounces in 2015.