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Gold stocks slaughtered, Barrick drops 10%

by Frik Els | October 31, 2013 | Reprinted by permission of MINING.com

The gold price slid more than $24 or 2% an ounce on October 31 to a week low of $1,323 after the U.S. Federal Reserve signalled it may cut back its stimulus program sooner than thought and Chinese demand for the metal waned.

After a fightback from near three-year lows below $1,200 struck at the end of June, gold’s momentum now seems to have turned negative again with gold stocks sold off heavily on a relatively modest fall in the price of the metal.

By the October 31 close Barrick Gold TSX:ABX had lost 5.9%, after announcing results that were in line with expectations and the suspension of its troubled Pascua Lama project on the border between Chile and Argentina.

The world’s number one miner of the precious metal followed up after hours with more damaging news. The Toronto-based miner announced it is raising $3 billion by issuing 163.5 million common shares at $18.35 per share.

Barrick is now worth $19.4 billion, down 44% so far this year and nowhere near its $54-billion market value a mere two years ago.

Investors duly marked down the stock again with the counter shedding an additional 5.7% to $18.31 in after-hours trade in New York, wiping more than $2 billion off the value of the company on the day.

Barrick is now worth $19.4 billion, down 44% so far this year and nowhere near its $54-billion market value a mere two years ago.

Newmont Mining NYE:NEM, with a market value of $13.5 billion, escaped the worst of it, down 2.8% in regular trading and trading slightly to the upside after hours, after announcing profits up 11% despite a fall in revenue.

Attributable gold production rose 4% to 1.28 million ounces, while attributable copper output decreased 3% to 34 million pounds during the third quarter at the Denver-based company.

The world’s third-largest gold producer behind Newmont, AngloGold Ashanti NYE:AU was one of the worst performers of October 31. The Johannesburg-based company’s ADRs listed in New York slid 6.7% on October 31 and the value of the company has now halved this year.

Fellow South African miner Gold Fields NYE:GFI, the worst performer among the gold majors this year, gave up 4.4% in New York. The world’s fourth-largest gold producer has had its value slashed 63% in 2013, with investors punishing it for its contrarian purchase of high-cost mines amid the slump.

Goldcorp TSX:G, expected to produce around 2.5 million ounces of gold this year, declined 3.9%. The Vancouver-based company retained the top spot as the most valuable gold stock, with a Toronto big board market capitalization of $21.6 billion.

Toronto’s Kinross Gold TSX:K managed to hold above a $6-billion value despite losing 5.3% on the day. Investors in the company are nursing a $5-billion loss in market cap this year after Kinross, like all the majors, took multi-billion charges against the value of its operations.

Canada’s second-tier gold miners also suffered a loss of confidence from gold investors, giving up much of the gains of recent weeks.

Yamana Gold TSX:YRI skid 3.4%, Agnico Eagle Mines’ TSX:AEM losses were fairly modest at 2.5% while Eldorado Gold TSX:ELD declined 5.1% and IAMGOLD TSX:IMG dropped 5.3%.

Reprinted by permission of MINING.com

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