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Mining Downturn Hits Gold Miners "Especially Hard"

GOLD MINERS are being "hit especially hard" by a downturn in the global mining industry, says a new report from PwC, the finance and management consultancy.

Falling mineral prices, rising costs and "concerns of resource nationalism" – where governments seize mining assets from foreign companies – have "weighed" on the industry, says the report – Mine: A crisis of confidence.

The gold market has seen declining prices in 2013, but 2012 was already a poor year for gold miners, PwC goes on. Of the five global mining companies whose stock-market value shrank the most last year, four of them were gold miners – Barrick Gold, Anglo Gold Ashanti, Goldcorp, and Newmont. And amongst the world's top 40 mining companies, "Gold miners lost $29 billion" of their market capitalisation in 2012, says the report.

In the past, the price of gold showed a strong relationship with the price of gold mining stocks. But, regardless of the steady gold price increase in 2012, gold equities declined. Gold prices ended the year more than 7% higher at $1676 per ounce. The market capitalisation of the world's Top 40 miners' gold producers fell by nearly 15%.

During this spring's Cyprus crisis, many analysts thought that investors would turn to gold and push prices higher. But gold prices saw in April their biggest one-day percent decline since the 1980s.

This turned out to be bad news for gold miners, the PwC project leader Tim Goldsmith writes. In April, the Top 40's gold miners saw their stocks falling 28%, as the gold price fell 12%.

The decline in gold prices "will produce even weaker stocks for 2013," the report says. 

Aurelie Zoetelief Tromp is working as a research assistant at BullionVault, the No.1 gold and silver ownership service for private investors.


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