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Gold Rally Rescues Mining Stocks

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Gold Rally Rescues Mining Stocks

gold marketIt seemed that the industry-wide woes for mining companies were beginning to abate as the calendar turned from the third quarter to the fourth. This slight uptick, however, may well have been interpreted as a "Dead Cat Bounce"—i.e. a momentary bounce higher before falling again. The consensus was that mining firms had predictably recovered from their multiyear lows, but their prospects remained subdued. A robust recovery for mining stocks seemed doubtful.

A rapidly rising gold price over the last two weeks, especially since this Wednesday, helped send many mining companies' shares rocketing higher to close out the week. In fact, each of the precious metals broke out of its slump in a dramatic turnaround.

Mining Stocks Break Out

Nearly across the board, mining stocks (especially for companies involved in gold) have taken off the past few trading days. Volumes were far above recent averages, driving many miners to double-digit percentage gains during a single session. Moreover, the PHLX Gold/Silver Sector index (shown below), a bundle of securities tracking the mining companies, rallied about 8.4% from its lows to begin the week, and is even up a staggering 29% just since the beginning of October.

How High Did Gold Mining Stocks Go?

Grasberg_mineMany mining companies were well-positioned for the precious metals rally thanks to the preceding downturn: in order to become more profitable, most mining firms were forced to cut costs and capex (capital expenditures) in an attempt to get leaner and more financially sound. Here's an overview of how well some of the industry's biggest miners did.

Goldcorp (NYSE:GG; TSX:G)—The world's biggest miner in terms of market capitalization (just under $13 billion) saw shares rise nearly 10% on Wednesday alone, when volumes were in 8 figures, and has surged more than 18% since October began. The company's outlook is also improving, as it forecasts production to increase 20% year-on-year by the end of 2015.

Barrick Gold (NYSE, TSX:ABX)—The top gold producer in the world saw its shares jump better than 9% on extremely high volumes, 25% above normal averages. Only 3 weeks ago, Barrick saw its shares sink to their lowest price levels in 26 years.

Newmont Mining (NYSE:NEM)—Newmont is the only gold firm listed on the S&P 500 and is second behind Barrick in annual gold output. It's gains topped out at 6% in a single trading day, but unlike most firms in the industry who have had no choice but to cut operations to remain profitable, Newmont has expanded by acquiring some of its competitors' mines.

goldminerSibanye Gold (NYSE:SBGL) and its former parent company, Gold Fields (NYSE:GFI), posted gains of 9.7% and 5.5%, respectively. Both are active in gold-rich South Africa.

AngloGold Ashanti (NYSE:AU)—Third behind Newmont and Barrick in terms of ounces produced, AngloGold surged 7.8% to add to its recent upswing: Shares have spiked an eye-popping 75% above a multiyear low reached in early August. Like Newmont, AngloGold Ashanti was in the advantageous position to expand rather than contract new projects.

BHP Billiton (NYSE, ASX:BHP)—The world's largest overall mining company (across all resource sectors) did not join the bandwagon, watching its shares trade largely flat throughout the week before sliding lower on Friday. Yet, by raising $6.5 billion in new investment, BHP Billiton's so-far-so-good debt restructuring reveals that investors are again warming up to mining and metals.

Agnico Eagle Mines (NYSE, TSX:AEM)—This mining giant was uniquely enjoying significant gains already this year (mainly thanks to currency depreciation in Canada and Mexico), and things only got better this week. Shares of Agnico Eagle posted single-day gains of 6.8%, building upon double-digit moves higher already—21% higher year-to-date on the NYSE and 35% higher YTD on the exchange in Toronto.

goldmineRandgold Resources (NASDAQ:GOLD; LON:RSS)—Randgold saw solid one-day advances of 4.8%. The African mining company recently partnered with AngloGold Ashanti to once again begin developing and exploring the gold-laden Obuasi gold project in Ghana.

Newcrest Mining Ltd (ASX:NCM)—The Australian-based mining company has operations all over the resource-rich South Pacific, and it likewise benefited from the gold rally. Shares of Newcrest advanced 7.3% on Wednesday. The company is 6th in the world in total gold output.

Kinross Gold (TSX:K)—The Canadian miner Kinross Gold also saw its stock rise by 7.3%, capping a month-long rally that saw the company's shares surge by an incredible 48%. Part of the reason for such optimism is Kinross' projection to actually exceed annual production forecasts.

The bulk of the information presented above was taken from Mining.com.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.

About the Author

Everett Millman

Everett Millman

Analyst, Commodities and Finance
Managing Editor

Everett has been the head content writer and market analyst at Gainesville Coins since 2013. He has a background in History and is deeply interested in how gold and silver have historically fit into the financial system.

In addition to blogging, Everett's work has been featured in CoinWeek, Advisor Perspectives, Wealth Management, Activist Post, and has been referenced by the Washington Post.

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