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Miners Are Making Deals as Precious Metals Plunge

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Cost cutting

The slipping commodity prices and the July rout have taken a toll on bullion prices. Though the last week has seen rising prices for most precious metals, miners are still feeling the effects of falling prices year-to-date. Companies are turning to collaboration with other miners to help recoup previous losses.

In August, gold mining giant Barrick Gold (ABX) reached a deal to supply Royal Gold (RGLD) with gold and silver from its Dominican Republic mine. Mining companies are also resorting to layoffs for reducing the production cost and the AISC (sustainable all-in cost). Below is a price chart that shows a comparative price analysis of the mining giant Barrick Gold’s (ABX) prices and gold futures.

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Deals closed

Mining companies like Franco-Nevada (FNV), Silver Wheaton (SLW), Barrick Gold (ABX), and Royal Gold (RGLD) have seen their prices dip substantially on a YTD (year-to-date) basis. The current prices of these equities are now trading close to their 100-day moving averages. In July, the trading prices were far below their 100-day moving averages. These four companies contribute ~21% to the price changes of the VanEck Vectors Gold Miners ETF (GDX). GDX itself has seen a surge 23% on a 30-day trailing basis.

Toronto-based Franco-Nevada and Vancouver-based Teck announced on Wednesday that Franco will pay Teck $610 million for a silver stream on the Antamina mine in Peru. The deal allows Franco to buy Teck’s share of the silver output from Antamina at just 5% of the spot price. V Royal Gold (RGLD) also entered into a $525 million gold offtake agreement with Teck Mining.

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