Short sellers pile on Gold Fields and other miners

The number of shares sold short in this South African gold and copper producer surged almost 90%.

By Benzinga Sep 26, 2013 1:56PM

Image: Gold Bars (© Stockbyte/SuperStock)By Nelson Hem

It seems the short sellers still were not through with the leading gold stocks between the Aug. 30 and Sept. 13 settlement dates. 

They dove in to Eldorado Gold (EGO), Gold Fields (GFI) and Harmony Gold Mining (HMY), pushing short interest up by 75% or more.

The short interest in Agnico Eagle Mines (AEM), AngloGold Ashanti (AU), IAMGOLD (IAG), Randgold Resources (GOLD) and Yamana Gold (AUY) also grew by double-digit percentages in the period.

Barrick Gold (ABX) and Kinross Gold (KGC) saw the numbers of their shares sold short increase somewhat, while short interest in Royal Gold (RGLD) was essentially unchanged from the previous period.

However, GoldCorp (GG) and Newmont Mining (NEM) were the standouts, as the numbers of their shares sold short declined modestly to mid-September.

In addition, the number of shares sold short in silver companies Coeur Mining (CDE), First Majestic Silver (AG), Hecla Mining Corp. (HL) and Pan American Silver (PAAS) also grew by double-digits during the period, while short interest in Silver Wheaton (SLW) shrank.

Below is a quick look at how Eldorado Gold, Gold Fields and Harmony Gold Mining have fared and what analysts expect from them.

Eldorado Gold

This Vancouver-based gold miner and producer saw its short interest swell about 75% to around 11.44 million shares. That was the highest number of shares sold short so far this year, though it was still less than 2% of the float. The days to cover remained less than two, as it has since January.

Analysts are looking for lower earnings and revenue from Eldorado Gold for the current quarter. The company's market capitalization is less than $5 billion and the dividend yield is near 1.4%. The long-term earnings per share (EPS) growth forecast is more than 9%.

The consensus recommendation of the analysts who follow the stock and were surveyed by Thomson/First Call is to buy shares. The mean price target, or where analysts expect the share price to go, suggests more than 32% potential upside. Yet, their target is less than the 52-week high.

The share price has retreated about 27% in the past month and is only about a buck north of the 52-week low. The stock has outperformed the likes of Agnico Eagle Mines and Kinross Gold over the past six months. However, it has underperformed the broader markets in that time.

Gold Fields

The number of shares sold short in this South African gold and copper producer surged almost 90%, or about 5.91 million, to around 12.50 million by mid-month. The average daily volume was more than 7.2 million shares, and the days to cover rose to about two.

Gold Fields has a market cap of more than $3 billion, and its dividend yield is near 3.1%. The company announced the end of a strike at its South Deep mine in September. The long-term EPS growth forecast is less than 10%. The operating margin is greater than those of its peers.

All four analysts polled recommend holding shares. That has been the consensus recommendation for at least three months. The analysts' mean price target indicates more than 34% upside potential, relative to the current share price. That consensus target is well less than the 52-week high, though.

The share price fell to a new multiyear low Thursday, and it is down about 56% since the beginning of the year. Over the past six months, the stock has outperformed the likes of AngloGold Ashanti and Harmony Gold, but it has underperformed the broader 


Harmony Gold Mining

Short interest in this South African gold miner jumped more than 82% in the early weeks of September to more than 8.19 million shares. That was by far the highest number of shares sold short in at least a year. The days to cover rose to more than two for the first time this year.

Like other South African gold miners, Harmony Gold faced labor issues during the period. The company has a market cap near $1.5 billion and a dividend yield of about 2.7%. The long-term EPS growth forecast is about 5%, but the return on equity is in negative territory.

Just one of the three surveyed analysts recommends buying shares. They feel the stock has room to run, though, as their mean price target is about 22% higher than the current share price. However, note that the consensus target is less than the 52-week high reached back in January.

Shares have traded mostly between $3.50 and $4.00 since June, not far above the multiyear low. The share price has retreated more than 60% year-to-date. The stock has underperformed competitor Gold Fields, as well as the broader markets, over the past six months.

At the time of this writing, the author had no position in the mentioned equities.

Read more from Benzinga

Sep 26, 2013 3:30PM
It's all about the ASIC to produce an ounce of gold vs the selling price of gold  The current All Sustaining In Cost (ASIC) for all miners is $1086 per ounce and with gold selling at $1300 that only leaves $214 per ounce for gross profits not including interest and tax costs.  Goldfields has the highest ASIC at $1360 with Goldcorp, Newmont and Kinross having ASIC around $1100.  Barrick has the lowest ASIC around $900 for all properties and around $800 for 5 core properties.
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