Big gold miners are in big trouble if gold hits $900, Cowen says


Some big gold miners (GDX) might be able to withstand another 30% drop in gold’s price for a year or more, but serious trouble could ensue by 2015, Cowen analysts say.

Barrick Gold (ABX) and Newmont Mining (NEM) have "significant net solvency positions” for the moment, Cowen says, with NEM and Kinross Gold (KGC) coming under more stress the farther out it looks; the firm sees NEM, KGC and Agnico-Eagle (AEM) suffering low or negative profitability even with a $100-$200 gold price drop.

Goldcorp (GG) and Yamana Gold (AUY) "appear to be able to withstand a severe gold price decline and still achieve positive earnings," according to Cowen.

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Comments (10)
  • doc47
    , contributor
    Comments (1514) | Send Message
     
    Gold is just as likely to hit 1900 as 900, i.e., less than 1% chance for at least a few years!
    7 Aug 2013, 03:14 PM Reply Like
  • chuck lewis
    , contributor
    Comments (436) | Send Message
     
    Editor The Lewis Letter
    Cowen is wrong as NEM with over $1B in cash, 99M ounces of gold reserves, 9.5M lbs. of copper, and a "clean" $0.45 EPS versus a consensus $0.41, NEM has staying ability more than most plus a dividend that yields 3.32%
    7 Aug 2013, 04:42 PM Reply Like
  • Steve Nicastro
    , contributor
    Comments (399) | Send Message
     
    "Gold miners in trouble if gold hits $900."

     

    No sh*t.
    7 Aug 2013, 04:52 PM Reply Like
  • Anon5311
    , contributor
    Comments (38) | Send Message
     
    How insightful. What if gold falls to zero???!!!!!
    7 Aug 2013, 05:01 PM Reply Like
  • turville
    , contributor
    Comments (70) | Send Message
     
    Certainly good price looking decidedly "fatigued
    7 Aug 2013, 05:41 PM Reply Like
  • penciltucky1
    , contributor
    Comments (10) | Send Message
     
    Cowan, any chance of the yellow metal moving on the upside??
    7 Aug 2013, 08:14 PM Reply Like
  • New Low Observer
    , contributor
    Comments (2412) | Send Message
     
    Interesting view from Cowen...especially since they upgraded AUY to a buy on March 19, 2013 (found here: http://seekingalpha.co...). Since that upgrade, AUY has declined -40%.

     

    What does Cowen know about the solvency of a gold miner?
    7 Aug 2013, 08:19 PM Reply Like
  • chuck lewis
    , contributor
    Comments (436) | Send Message
     
    Editor The Lewis Letter
    Well said. Short Cowen!
    8 Aug 2013, 10:28 AM Reply Like
  • dalestrnad
    , contributor
    Comments (5) | Send Message
     
    Interest rates are going to go up, so is inflation. GDX and GLD are going to shoot up sharply and burn all the shorts.

     

    If GDX breaks $22 then time to Short again, if GDX holds and keeps this base, then watch GDX shoot to the moon!
    7 Aug 2013, 10:09 PM Reply Like
  • epithermal
    , contributor
    Comments (3) | Send Message
     
    I didn't see the actual report, but the headline seems stretched especially for NEM. In fact, gold was at 800 in 2008 and NEM was still operating then. If you compare the DEC 2008 financials to DEC 2012 you can see most of NEM's growth has been organic:
    Assets 15.83 bio (2008) 29.65 bio (2012) DEBT 8.73 bio (2008) 12.7 bio (2012), Equity 7.1 bio (2008) 16.95 bio (2012). Debt has only grown 1.45x while equity is growing 2.38x. Leverage has also improved substantially since 2008 given their debt to equity ratio is only 0.75X vs 1.22x in 2008.
    7 Aug 2013, 10:11 PM Reply Like
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