Barrick Gold is the world’s leading gold company, and its Pascua-Lama gold-silver megaproject under construction on the Chilean-Argentine border is its leading development project. And so the gold industry watches in dismay as the major grapples with the project’s ballooning capital costs and construction delays, slumping gold prices, writedowns, job cuts and a pummelled share price.
At the time of writing, Barrick’s shares trade for only $15.29 — or US$14.69 — off 56% this year alone, and 74% since their peak in April 2011. Here again, Barrick is the leader of the gold sector that has seen overall share price declines around 50% this year.
Barrick has also led in terms of corporate-suite excess, with the pink-slipped minions at head office bearing the brunt. Fired CEO Aaron Regent was paid US$12 million last year, mostly as severance, while the whole management team pulled in an astonishing US$57 million, up 148% year-over-year. In April, Barrick shareholders finally had enough, and there was heated opposition to the $17-million pay package offered to incoming co-chairman John Thornton, a former president of Goldman Sachs.
Barrick may yet prove to be a leader in accumulating unwieldy debt and tabling enormous writedowns as Pascua-Lama moves forward. At the end of the first quarter, Barrick had US$2.3 billion in cash and US$15 billion in debt. Deutsche Bank had already predicted that Barrick would need to raise US$10 billion in equity if it continued on the same corporate path in a gold price environment of US$1,300 per oz.
The price of gold has played a large part in Barrick’s woes, of course, with the yellow metal tumbling from a 52-week high of US$1,790 per oz. in September 2012 to US$1,200 in June (a figure last seen in August 2010), and US$1,253 per oz. at the time of writing.
The second quarter’s 23% decline in the gold price was the worst quarterly performance since modern gold trading was set-up in the mid-1970s.
What had been a wide complaint among gold investors since 2006 of miners’ share prices lagging the soaring spot price has morphed into this year’s nightmare scenario: a 25% decline in gold prices translating into a 50% decline in share prices. Gold is easily the worst performing sector in the global economy, at a time when investors in U.S. equities are basking in a broad stock rally, with the S&P 500 Index up 13.7% this year.
The junior gold sector is in critical condition, with literally hundreds of juniors driving on financial fumes with slim prospects for conventional financing to get them through the rest of the year intact.
Our stock tables this week are filled with 750 new 52-week lows among the 2,100 companies we have in our listings. Only a few years ago, new writers starting at the ’Miner were told that the term “penny stocks” was a throwback to a bygone era. Today, hundreds of mining juniors are trading below 10¢ — including many listed on the TSX.
We just saw another junior incinerated this week, with TSX-listed, Arctic-focused polymetallic explorer Starfield Resources declaring bankruptcy, and its directors fleeing the wreckage.
We’ve reached that period in the downturn when stock prices move sideways or even drop when companies report good news, as twitchy, long-suffering investors use the window of liquidity to unload shares.
If there’s any saving grace for the remaining die-hard gold investors out there, it’s that the next two months during Canada’s summer stock market doldrums will be a fantastic time to pick up shares on the cheap, and they’ll even have the luxury of waiting till news comes out before deciding to buy a stock.
I guess you have simply taken leave of your senses and are without access to your facilities.
Barrick, quite simply has been and is still a Vampire within the gold minding industry leaving ruin in its wake as it goes about being the handmaiden of the anti-gold forces, at a minimum from GeoBush I forward.
Barricks stands alone as an absolute pariah amongst gold miners who completely undermined price stability by forward selling material that may yet never be produced, Naked Shorting for lack of a better term. and underproduction are hallmarks of this company, which, IMO, is just the right size to FAIL.
Newmont, no pillar of virtue is probably a better example of the industry’s woes, but not the internal issues of Barricks, might have made a better editorial example.
Cheers.
DG