Mining Stocks Slide This Week With Gold; Greek Standoff Hurts Eldorado

By Paul Ploumis (ScrapMonster Author)

January 18, 2016 02:57:07 AM

(Kitco News) - Mining stocks for producers of precious metals took a hit during the first four days of the week as the prices of gold and silver fell, with shares of Eldorado Gold Corp. also hurt by the continuing showdown with the Greek government.

As of Thursday’s close, Comex February gold futures were at $1,078.30 an ounce, a loss of $25.80, or 2.3%, for the week through Thursday. Comex March silver was down 10 cents, or 0.1%, for the first four days of the week at $13.825.

During that same time span, the NYSE Arca Gold Bugs index (HUI) was down 11.3015 points, or 9.5%, to 107.2392. The Market Vectors Gold Miners exchange-traded fund (GDX), which consists of stocks of gold-mining companies, fell $1.39, or 9.6%, to $13.13%.

Gold and mining stocks bounced Friday but were still lower on the week.

Eldorado (NYSE: EGO) was among the biggest decliners as the companies’ troubles with the Greek government continued.  Its shares fell 84 cents, or 26%.

The company said this week that a suspension of much of its mine construction in Greece – due to a standoff with the government over permit issues – will mean the loss of 600 jobs. The government responded by saying that Eldorado must resume operations for talks to even continue.

Freeport-McMoRan Inc. (NYSE: FCX) slid $1.21, or 22%. The company produces a number of commodities, including copper, gold and energy, all of which have been under pressure lately, thereby denting revenues. In addition, its debt was downgraded by Fitch Ratings at the end of last week. Meanwhile, the company has submitted a $1.7 million divestment plan to the Indonesian government, which is requiring Freeport to sell a 10.64% stake in the huge Grasberg mine during talks to extend the company’s right to operate beyond 2021.

Royal Gold Inc. (Nasdaq: RGLD) lost $8.29, or 22%, on apparent investor concerns beyond the price of gold. BMO Capital Markets downgraded the company to “market perform” from “outperform,” citing counterparty risk in the streaming company’s portfolio. In particular, BMO suggested that counterparty risk may continue to weigh on this company’s shares until refinancing or restructuring of a streaming deal with Thompson Creek Metals Co. is done.

As has occurred other times in recent months, shares of South African gold producers that trade in North America bucked the weaker trend and managed gains even though most of the sector was down. These companies have benefited from a weak South African rand, which improves their profitability since they get more money in their local currency when they sell their gold.

Harmony Gold Mining Ltd. (NYSE: HMY) added 20 cents, or 16%. Sibanye Gold Ltd. (NYSE: SBGL), rose 73 cents, or 11%.

Courtesy: Kitco News