Mining stocks decline after gold price correction

In heavy volumes gold suffered its worst trading day of 2017 on Thursday with the metal coming under pressure from a rise in the US dollar to 2-month highs and a looming interest rate hike in the US” – informed on the 2 March this year.

What was the result of that situation?

Gold stocks were sold heavily and their value was falling. The major gold miners’ shares were experiencing decline despite gold being still up in value.

Barrick Gold Corp (NYSE:ABX, TSE:ABX) lost 4.6% – 32 million shares which led the world’s first-position gold producer the sixth most active stock on NYSE. Now, Barrick is worth $21.5 in New York – still up a 14%.

Newmont Mining Corp (NYSE:NEM) went through the stumble quite smoothly – 2.4% loss. However, the decline led the company to close below its this year opening levels. In 2017, the company expects to top 5m ounces production and to range between 4.5 and 5.4 million ounces in the next 5 years.

AngloGold Ashanti (NYSE:AU) fell by 4.9% in Thursday trade which resulted in the company’s ADRs worth decrease to $4.3 billion in New York. Now, it is in the black as for now in 2017.

Goldcorp (NYSE:GG TSE:G) noted 4% decline. The company still remains at the level of the two-digit gains. Goldcorp is undergoing the process of rebuilding its portfolio which is necessary after the 17% decrease in production last year.

Kinross Gold (NYSE:KGC, TSX:K) had 4.8% loss and its worth fell to $4.1 billion on the NYSE.

Newcrest Mining Limited (ASX:NCM,OTCMKTS:NCMGY) turned out to lose as much as 5.7%.

South African miner Gold Fields (NYSE:GFI) was in a better situation with its 3.8% decline. Last year, the company noted the steady production at 2.1 million ounces and is still admitting profits. Its market worth is $2.5 billion.

Polyus Gold (MCX:PLZL, ) – world’s lowest cost gold producer from Russia – was affected only slightly in Moscow (here its worth is about RUB1 trillion/$17 billion).

Agnico-Eagle (NYSE:AEM) lost this year’s gains by dropping 3.8%. Its market worth comes to $9.1 billion on the NYSE.

Sibanye Gold (NYSE:SBGL) fell by 4.6% in New York, but it is still trading 9.2%. Last year, the company produced 1.5m ounces and was in the top 10 of gold producers.

Randgold Resources (LON:RSS,NASDAQ:GOLD) declined below 3% on the day. It is considered the best performing large gold miner (17% gain in value and a market worth of $8.4 billion).

Yamana Gold (TSE:YRI), Iamgold Corp (NYSE:IAG) and Eldorado Gold Corp (TSX:ELD) all lost more than 6% which pushed the stocks into negative territory for the year.

Sustainable Investing is profitable

Sustainable Investing is profitable

Have you ever wondered whether your possible returns in SRI are going to be lower just because they are SRI related? Some of us can have such doubts, but the answer to the question is “no”. And now let us try to explain why.

To begin with, here are some facts: investments in SRI (sustainable, responsible and impact) assets are 33% higher than in 2014 (according to US SIF). In other words, $1 of every $4,6 under professional management is invested in SRI. The companies which are better at implementing ESG (environmental, social and governance) approach benefit from high-quality management and good stock performance. The quality, structure and compensation of management, and relations between employees are the main factors deciding about the company’s success.

A crucial ESG factor – corporate governance, tests them. What is more, an active ESG participation shows management teams’ ability to think forward and this helps companies to make use of some long-term opportunities. Consequently, lower costs of capital, higher operational and stock price performance become the reward for the companies which aim at constantly improving ESG actions.

Academic research reviewed 190 high quality academic studies on sustainability and business performance and proved the truth of the theory. According to a research paper by Oxford University from 2014, 90% of the studies showed that sound sustainability standards helped companies lower the cost of capital, and 80% of the studies proved that good sustainability practices have a positive impact on stock performance. 88% of the studies demonstrated that operational performance of companies was positively influenced by implementing ESG practices.

Pepsi can be a good example which proves the theory. What led Pepsi to the stock prices increase? It was the company’s action aimed at water conservation, which brought positive results for both the firm and society. Thanks to the involvement in one of the social issues, Pepsi saved more than $80 million in years 2001-2015.

How about investable SRI funds?

Morgan Stanley conducted a study in 2015 which showed that most of the kinds of sustainable equity mutual funds are overrepresented in the highest quartiles of returns and in the lowest quartiles of volatility. When it comes to the question about some short-term variance between SRI indices and non SRI indices performance, it finds the explanation in the fact that sector allocation of some SRI indices is different when compared to the parent index. It is mostly seen in the cases of those which exclude whole sectors and industries. As it is with KLD 400 Social Index, it is overweight information technology by 6 percent and by 4,6 percent it is underweight financials.

In consequence, discrepancies come out when the two sectors show some performance differentials. Many ESG portfolios experienced huge outperformance in 2015 and then, in 2016 they were systematically going down. What can be the reason of such a scenario? It can be the fact that plenty of ESG portfolios turn out to be underweight energy. On the other hand, since generally ESG practices have a positive impact on businesses, in the long run, ESG criteria bring higher and higher returns.

Mining Stocks

It is rather obvious to the most of people that mining is a huge business. Why not to invest in it? There are some serious environmental issues causing heated discussions in the topic of mining as our planet’s bug enemy, but still it is the important root of many commercial products which often have elements that used to be hidden deep under the ground. In the article below we provide some basic information for those who think of investing in mining.

Two groups of mining stocks

There are two groups of mining stocks –majors and juniors. The group of majors includes the settled companies, with a long history, slow, steady cash flow and stability on the market. These are like huge oil companies. The reserves in such majors are proven which makes them “safe” and easier in terms of investing.

The juniors are, we may say, the opposite of the majors. Thus, you can expect a short history and experience, fluctuating and not high capital and big profits mostly in the sphere of hopes. What can happen in the case of juniors? Starting from the darkest scenario – failure. The consequence is of course unfortunate, and brings the loss for investors and banks. Another scenario is more optimistic. A junior can be successful enough to provide satisfying returns. And the best option: a junior can find a big seam of mineral which is highly desirable in the market and it makes the junior earn a fortune in a very short amount of time as much as a major would gain in years.

The value of junior and major mining stocks

While both juniors and majors are different, they have similar business models. They are based on how much of this useful and valuable material they have under the ground to make money on. The problem is that nobody knows how much is hidden under the earth before it is taken out. That is why, mining stocks’ value is just the result of the market value of the company’s reserves – those with a longer experience and previous successes are valued better. The reserves are estimated by feasibility studies. This kind of study gathers size and grade of the company’s deposit and calculates it with the costs and troubles of its extraction. When the gain is higher than costs, the deposit is considered feasible.

Risky or not?

The biggest risk concerns mainly the juniors. It is the feasibility study which determines the junior company’s value. Junior miners often sell their deposits (or themselves) to large miners and look for another deposit. Thus, it turns out that the juniors are often the “fuel” for the majors. A major provides a more stable option. These are mostly market changes of certain minerals’ values which have the biggest influence on the majors. As a major’s owns many deposits, a single one is not going to change the stock value drastically.

Which option is better?

The answers is not very obvious because it depends on your individual preferences. If you look for something more risky, but probably with more reward, and you have the risk capital to invest, you can choose the junior option. Yet if your investment capital consists of your security money, you would probably prefer something safer, so you can choose the major option. You can still gain some decent reward, but with a lower risk at the same time.

In general, before you start investing look for more detailed information and do some research so that you could invest your money with more awareness and necessary knowledge, and to avoid failures.