Gold Miners Digging a Deeper Hole (ABX, GG, NEM)

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Gold mining stocks have a real challenge in the current environment.  The top companies like Barrick (NYSE:ABX), Goldcorp (NYSE:GG), and Newmont (NYSE:NEM) are doing all they can to reduce costs in the face of falling demand and even faster-falling prices. They’ve got a ways to go yet.

Barrick’s P/E ratio for the past 12 months is around 11; Newmont’s P/Eratio is almost 20, and Goldcorp’s is nearly 22. Which P/E level seemsmore realistic: 10 or 20?

Barrick Gold Corporation (ABX) is down well over 50% at $21.75 today, with a 52-week range of $17.27 to $54.74.

Goldcorp Inc. (GG) is also down over 50% from highs at $20.87, with a 52-week trading range of $13.84 to $52.65.

Newmont Mining Corp. (NEM) is down right at 50% from highs at $23.85, with a 52-week trading range of $21.40 to $57.55.

In the past, gold has been the go-to safe haven for traders looking to escape a broad-based climate of international turbulence.  It seems that if central banks have to only worry about their full faith and credit pertaining to the printing presses and with the Chinese and Indian consumers now in the same soup as the E.U. and U.S. that maybe gold isn’t quite as precious as everyone once thought.

Paul Ausick
November 17, 2008