Short sellers take aim at gold miners

Two of the most shorted securities by IB customers this morning in the Basic Materials sector according to IB Stock Loan Borrow (SLB) data, are the parties involved in the merger that would have created the world’s largest gold miner: Barrick Gold Corp. (Ticker: ABX) and Newmont Mining Corp.

However, over the weekend talks between Barrick and Newmont Mining resulted in the abandonment of a merger agreement, which investors had been expecting to be announced as soon as Tuesday. Yet the fortunes for both stocks in Monday’s trading pinpoints weakness for Barrick (down 3.45%) but strength for Newmont (up 6.50%).

Discussions between the two were wound up prior to the weekend with no sign that the falling price of gold that created the catalyst for a defensive merger, was showing signs of changing course.

Gold fell to $1285 per ounce on Monday. The combination of the world’s two leading gold producers would have had a joint market capitalization of $60 billion. Both companies may need to further pare production in the face of reductions by the Fed in its monthly purchase of bonds. At the same time gold miners have announced impairment costs related to projects running into difficulties.


Newmont and Barrick compared    

About the Author

Andrew is a seasoned trader and commentator of global financial markets. He worked for several London-based banks trading cash and derivatives before moving to the U.S. to attend graduate school.