Are Mining Companies Recovering from the Price Rout?



Major miners

According to SNL Metals and Mining reports, the market value of all listed mining companies has seen a fall. The companies’ market capitalization at the end of September 2015 was only $934 billion, compared with $1,030 billion at the end of August. However, the third-quarter returns for some of the companies, such as Barrick Gold Corporation (ABX) and Newmont Mining Corporation (NEM) beat analysts’ expectations as the companies produced more gold than they were expected to.

Article continues below advertisement

Most mining companies are trying to gain back gold bugs’ confidence in the mining industry. The chart above shows performance of major gold mining companies AngloGold Ashanti (AU), Barrick Gold Corporation (ABX), Newmont Mining Corporation (NEM), and Goldcorp (GG), as well as the price of gold futures.

Focus is cost-cutting

As gold is now trading almost 40% below its peak in 2011, miners have come under pressure to cut down their costs. Barrick Gold is mainly focusing on debt reduction by selling a few of its mines, while Newmont Mining is trying to push its production levels higher and cut costs. The value of the 100 largest listed mining companies once stood above the $1,000 billion mark. Recent valuations show that figure at $800 billion. However, exploration and development activity increased in September. Newmont Mining’s all-in sustaining costs were $835 an ounce in the third quarter, compared with $995 a year earlier. Barrick Gold trimmed its cost to produce an ounce of gold to $771 from $866. These figures beat analyst expectations.

For both Barrick Gold and Newmont Mining, one priority continues to be cost cutting. The Direxion Daily Gold Miners Index Bull & Bear 3x Shares ETF (NUGT) and the VanEck Vectors Gold Miners ETF (GDX), both precious metals mining-based ETFs, have fallen a whopping 67.9% and 17.7%, respectively. Newmont Mining, Barrick Gold, Goldcorp, and AngloGold Ashanti make up 24.1% of the VanEck Vectors Gold Miners ETF (GDX).


More From Market Realist