Short Interest Rises in Gold Mining Stocks

  on April 25 2013 4:20 PM
Super Pit, gold mine in Australia run by Barrick Gold and Newmont Mining
Super Pit, gold mine in Australia run by Barrick Gold and Newmont Mining David Gray/Reuters

Probably not much of a surprise, but Barrick Gold (NYSE: ABX [FREE Stock Trend Analysis]), GoldCorp (NYSE: GG) and Harmony Gold Mining (NYSE: HMY) saw big upswings in short interest between the March 28 and April 15 settlement dates.

Other gold mining companies that also saw the number of shares sold short rise in the period include Agnico-Eagle Mines (NYSE: AEM), AngloGold Ashanti (NYSE: AU), Eldorado Gold (NYSE: EGO), Gold Fields (NYSE: GFI), Newmont Mining (NYSE: NEM), Randgold Resources (NASDAQ: GOLD), Royal Gold (NASDAQ: RGLD) and Yamana Gold (NYSE: AUY).

But note that short sellers shied away from Kinross Gold (NYSE: KGC) in the first two weeks of April.

In addition, the shares sold short in silver companies Coeur d'Alene Mines (NYSE: CDE) and Pan American Silver (NASDAQ: PAAS) also increased in early April, while those in Silver Wheaton (NYSE: SLW) declined.

Barrick Gold

This Toronto-based gold and copper producer saw short interest swell more than 44 percent in early April to about 9.30 million shares, on the highest daily average volume in the past year. That was the greatest number of shares sold short since last July. However, the short interest was about one percent of the float.

Barrick Gold abode by a court order to halt production in a Chilean mine in early April. The company currently has a market capitalization of about $19.3 billion and a dividend yield near 4.5 percent. Note that the long-term earnings per share (EPS) growth forecast is less than eight percent and the return on equity is in the red.

Half the 26 analysts who follow the stock that were surveyed by Thomson/First Call recommend buying shares, with seven of them rating the stock at Strong Buy. Their mean price target, or where they expect the share price to go, represents lots of potential upside, relative to the current share price, because the stock has plunged in the past month.

The share price is down more than 46 percent year-to-date and reached a multiyear low earlier this week. The stock has underperformed competitors AngloGold Ashanti and Newmont Mining, as well as the broader markets, over the past six months.

GoldCorp

Shares sold short in this precious metals producer surged about 26 percent to around 5.19 million, which was the highest level of short interest since last October. Though the average daily volume was the highest in the past year, the short interest was less than one percent of the total float.

This Vancouver-based company has a market cap of more than $24 billion and a dividend yield near 2.2 percent. It hit a 52-week low when gold prices plunged in the middle of the month. Its long-term EPS growth forecast is more than 14 percent. The price-to-earnings (P/E) ratio is greater than the industry average, but so is its operating margin.

Out of 23 analysts polled, 16 recommend buying shares, which has been the consensus recommendation for the past three months. The analysts' mean price target indicates upside potential of more than 33 percent. But that target is less than the 52-week high from last September.

The share price is down more than 21 percent year-to-date, despite a pop of about six percent in the past week. Over the past six months, the stock has outperformed competitors Kinross Gold and Newmont Mining, but underperformed the broader markets.

Harmony Gold Mining

Short interest in this South African gold miner jumped more about 33 percent in the early weeks of April to more than 3.75 million shares. That was the highest number of shares sold short in at least a year, and the average daily volume was the highest so far this year. But days to cover is still about one.

In mid-April, Harmony Gold was downgraded to Sell by a Citigroup analyst. The company has a market cap near $2.1 billion and a dividend yield of about 2.0 percent. The long-term EPS growth forecast is a little more than six percent, but the P/E ratio is less than the industry average. The return on equity is less than six percent, though.

Half of the four surveyed analysts recommend buying shares. They feel the stock has room to run, as their mean price target is about 53 percent higher than the current share price. However, note that the target is less than the 52-week high reached last summer.

The share price has retreated more than 46 percent since the beginning of the year and recently sank to a multiyear low. The stock has underperformed peer Gold Fields, as well as the broader markets, over the past six months.

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