InvestSMART
The Intelligent Investor Growth Fund is listing on the ASX. Initial Offer closes Friday.

Equities sent into free fall as gold keeps losing lustre

GOLD equities have plunged in value in response to the dramatic decline in the gold price from its record level of $US1921 an ounce on September 6.

GOLD equities have plunged in value in response to the dramatic decline in the gold price from its record level of $US1921 an ounce on September 6.

Industry leader Newcrest underlined the extent of the stampede away from gold stocks by falling $3.24, or 8.9 per cent, to $32.86.

The selloff was one of the biggest ever seen in the sector and came despite local producers being protected from the worst of gold's dive by the fall in the US exchange rate.

Three weeks ago, when gold hit its all-time high, its status as a haven in troubled economic times was being heralded. And predictions that it would race off to more than $US2000 an ounce were widespread.

But the metal has succumbed to the selling pressure being felt by all other asset classes with the flight to cash. It was trading at a greatly diminished $US1586 an ounce late yesterday - $US335, or 17.4 per cent, short of its peak.

Other falls posted by gold stocks yesterday included those by Saracen (down 13.7 per cent to 60?), Kingsgate (down 10.3 per cent to $6.73) and St Barbara (down 11.7 per cent to $1.85). But it was not all gloom in the gold sector. There were smiles all round in the gold room at Castlemaine Goldfields's (CGT) Ballarat gold project yesterday when CGT poured its first gold bar from the recommissioned project.

The 260-ounce gold bar - worth about $420,000 at present prices - follows CGT's acquisition of the project from Lihir Gold in May last year for the knockdown price of $4.5 million. Lihir - now part of Newcrest Mining - spent $750 million acquiring and developing the Ballarat project but mothballed the operation when it became clear the historic goldfield would not produce at the annual rate of 250,000 ounces Lihir had planned.

CGT has much smaller ambitions for Ballarat as an annual producer of 50,000 ounces of gold.

"It's all about the quality of the ounces, not the quantity," the managing director of CGT, Matt Gill, said at the mine site. Mr Gill said that, despite the sharp retreat in gold prices in recent days, the fall in the US exchange rate had limited the fall in the local gold price.

Mr Gill said forecast cash costs of $710 to $750 an ounce meant that the rejuvenated project was still looking at achieving operating cash margins of more than 100 per cent.

"It's a great time to be going into production," Mr Gill said.

But CGT shares were not immune from yesterday's broad selloff in gold equities, falling 2?, or 4.6 per cent, to 42?.


Join the Conversation...

There are comments posted so far.

If you'd like to join this conversation, please login or sign up here

Related Articles