A record quarterly drop of 23% in gold prices in Q2 to $1,223.80 has exposed miners' massive...

A record quarterly drop of 23% in gold prices in Q2 to $1,223.80 has exposed miners' massive debts, which have increased to a high of $21B at 55 top gold and silver producers from under $2B in the past 10 years. Gold has now become cheaper to buy than to extract for many firms. If prices stay below $1,300 for over two quarters, S&P reckons downgrades could be on the cards. Barrick Gold (ABX) is particularly exposed with debts of $14.8B.

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Comments (21)
  • Doug Eberhardt
    , contributor
    Comments (4890) | Send Message
    NUGT up 21% on Friday. Kind of made up for some of that 23% drop in gold, didn't it? I am long and pretty happy. Took some patience though. Entered the trade Friday and if it falls more, will add to it.
    30 Jun 2013, 02:51 AM Reply Like
  • racchole
    , contributor
    Comments (537) | Send Message
    Great timing. Nobody cares.
    30 Jun 2013, 12:05 PM Reply Like
  • Doug Eberhardt
    , contributor
    Comments (4890) | Send Message
    Silly comment. Nobody cares.
    30 Jun 2013, 02:23 PM Reply Like
  • justaminute
    , contributor
    Comments (1798) | Send Message
    Shortage ahead.
    30 Jun 2013, 03:10 AM Reply Like
  • Daniel Victor
    , contributor
    Comments (30) | Send Message
    Paradoxically,if gold were to settle at these prices,it could actually be bullish for silver.That is because a lot of silver production comes as a bi-product from mining gold.Since a lot of gold mining has become uneconomical following the recent price fall,that should reduce the supply of silver.
    30 Jun 2013, 04:08 AM Reply Like
  • sinedo
    , contributor
    Comments (501) | Send Message
    Unless there's a world recession, silver will be produced as it is today, as a by-product of zinc, lead, and especially copper mines. Relatively speaking, gold mines produce less silver than these.
    Based on Friday's close, I see a nice short covering rally in the precious metals, which tells me the sell-off was organized in conjunction with the Bernanke interest rate scare. The Dow was down 150 points going into a long weekend, but the P.M. miners were up significantly (from 5% to 18%).
    30 Jun 2013, 02:12 PM Reply Like
  • Ponchovilla
    , contributor
    Comments (401) | Send Message
    I check NUGT on yahoo finance. I'll bet there is a text message going out Monday on this good news except everyone who bought at 94.75 down to 5.86 since Sept 19, 2012
    30 Jun 2013, 04:11 AM Reply Like
  • Drumstar
    , contributor
    Comments (27) | Send Message
    Come on with that gold horse!
    30 Jun 2013, 08:05 AM Reply Like
  • The Geoffster
    , contributor
    Comments (4297) | Send Message
    Buy some physical and stash it for your children.
    30 Jun 2013, 09:39 AM Reply Like
  • Kyle Spencer
    , contributor
    Comments (1244) | Send Message
    There's only a "shortage" ahead if demand remains constant, but it won't. Without that increased demand, there's no reason to buy in at the miner's extraction costs as new supply will continue to come to market anyway.
    30 Jun 2013, 11:59 AM Reply Like
  • dragos2901
    , contributor
    Comments (74) | Send Message
    Exposure of weakness could come from anywhere. Our entire financial system is like a house of cards. When one piece falls there is always the danger of domino effect. And who knows this time might be gold who lets the dogs out. Last time around there was the puny subprime mortgage market that brought the system down to its knees. Let's recap: in 2008 we began a spending spree to spruce up the worldwide economy and now, 5 years later governments are scrambling to cut down costs. Only 2 short years ago we faced aggregate government spending cuts AND economic stimulus packages at the same time! I will keep this one to tell to my grandchildren when all is said and done.
    30 Jun 2013, 12:52 PM Reply Like
  • duvas1952
    , contributor
    Comments (14) | Send Message
    A typical bounce! Gold and Silver are heading much, much lower!


    I feel bad for those who bought near the highs but that is typical of the retail investor!


    Just like the wave-frenzy to buy when Gold and Silver were climbing each day, the same holds true the opposite way!
    30 Jun 2013, 02:46 PM Reply Like
  • c21vintage
    , contributor
    Comments (401) | Send Message
    No inflation so metal plummets? 30 years of Reaganomics have beaten down the workers, whose labor produces the goods, but this cycle is ending. Workers just took an American CEO hostage in China, workers are striking in Brazil, at the FCX mine in Indonesia, at the Gibralter mine in Canada, even in Bangladesh. The pendulum is swinging back to the makers and away from the takers, look for metal to bounce in next 2 years.
    30 Jun 2013, 02:47 PM Reply Like
  • JoeBronx
    , contributor
    Comments (6) | Send Message
    "S &P reckons downgrades could be in the cards?" You mean that might cause the price of gold stocks to actually go down? Tell us you're kidding, S & P!
    30 Jun 2013, 02:49 PM Reply Like
  • Halling
    , contributor
    Comment (1) | Send Message
    I find it interesting this report comes out after NUGT gains 22% on Friday. Sounds like market manipulation. Someone wants to see a drop in NUGT so they can buy at a good price.
    30 Jun 2013, 03:00 PM Reply Like
  • Whitehawk
    , contributor
    Comments (3121) | Send Message
    The issue I have with many PM miners is that they enjoyed the ride up a little too much. Now they will be pressed to define what it really costs to mine gold, company by company, and those with too much debt and poor cost structures (and rich management consumption) will find tough roads ahead. Look for consolidation and for some to fail. Buy GDX instead of GDXJ - but expect further weakness and better entry points as the miners report losses and debt loads.
    30 Jun 2013, 03:01 PM Reply Like
  • Mktneutralhedger
    , contributor
    Comments (1400) | Send Message
    Best value is among low-cost australian mid-caps producers like Oceana, St. Barbara and Resolute. Archipelago (listed in London) is another bargain while if you want growth get a piece of Randgold. In case bonds issued by Barrick and Newmont are downgraded I'll buy a large chunk since the weakness of gold is temporary and deflation will stay.
    30 Jun 2013, 03:50 PM Reply Like
  • The king's jester
    , contributor
    Comments (18) | Send Message
    I got burned with rare earth before (not big but enough to cause some pain). Many gold miners has large debts (long and short) and with profitability a big issue now and stock prices taking a beating. How could they fund future projects? While the fact that gold is getting more difficult to mine could benefit the metal in the long term. I don't see how that will help the miners. Newmont for example sold gold at $1631 per oz last quarter but with free cash flow of -71 million. Now with gold average less than $1500 during Q2. Guess where the free cash flow will be? The average all in mining cost for large players between $1200-1400 is correct. If gold stays is this price area, than all the dividends will likely be cut or eliminated. Yes, the best will survive and possibly thrive, but this is an industry that failed to use the high gold prices to create better value for shareholders but rather spending like a sailor on risky & expensive projects to inflate book values (with some assets eventually got written off).
    1 Jul 2013, 03:15 AM Reply Like
  • fghton
    , contributor
    Comments (37) | Send Message
    Nice try shortie and dumb thesis. Everyone knows gold miners have large debt to fund development and ABX is the largest. What you apparently failed to mention is S&P came out with their own report on Friday and they have a BUY rating on ABX. You're a little late aren't you jumping on the old trash gold and gold mining stocks band wagon? Must be amateur week on Seeking Alpha! LOL!
    30 Jun 2013, 07:19 PM Reply Like
  • Villi Grdovich
    , contributor
    Comments (924) | Send Message
    I think the article seeks to point out that it is not $ borrowings, but gold loans that are a concern. Personally, if you want a good gold mine, I suggest you buy a copper producer. The gold is free.
    30 Jun 2013, 07:31 PM Reply Like
  • Investor Talkroom
    , contributor
    Comments (569) | Send Message
    If worried about excessive debt in silver mining sector. Check out the table on my blog.
    CDE, PAAS, AG - all major silver miners have enough cash to last for some time.
    30 Jun 2013, 10:12 PM Reply Like
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