Gold producers including Barrick Gold Corp. fell the most in more than four years as the metal slumped below $1,400 an ounce in the biggest decline in 33 years after dropping into a bear market last week.
The 54-company Standard & Poor’s/TSX Global Gold Sector Index plunged 9.2 percent, the biggest decline since Dec. 1, 2008. Barrick, the largest producer by sales, dropped 12 percent to C$20.30 at the close in Toronto, where the company is based, while Goldcorp Inc., the second-biggest Canadian gold miner, dropped 5.6 percent to C$28.38. Newmont Mining Corp., the largest U.S. gold producer, declined 6.7 percent to $33.92 in New York.
Gold futures fell as optimism that a U.S. recovery will curb the need for stimulus cut demand for the metal as a protection of wealth. Gold dropped 9.3 percent to settle at $1,361.10 an ounce in New York, the biggest drop since March 1980.
The price of gold tumbled 4.1 percent on April 12, taking losses to more than 20 percent since the record close in August 2011 and meeting the common definition of a bear market.
Gabriel Resources Ltd., which is seeking to develop a gold mine in Romania, fell 29 percent to C$1.39 after John Hayes, a Toronto-based analyst at BMO Capital Markets, cut his rating on the shares to underperform, the equivalent of sell. Detour Gold Corp., the operator of the Detour Lake mine in Ontario, fell 25 percent to C$11.05.
There’s “a moderate probability that Barrick could trigger a single-notch credit-rating downgrade” if gold prices stayed at $1,400 from the second quarter of this year through 2015, Stephen Walker, Dan Rollins and Sam Crittenden, analysts at RBC Capital Markets, said in a note today.
“We would expect the company to draw down its existing credit facilities, consider cash saving measures and seek new debt financing in order to complete the existing capital spending programs” at $1,400 an ounce of gold, the RBC analysts said.
Standard & Poor’s Ratings Services lowered its credit rating on Barrick in July to BBB+, three levels above non-investment grade, with a negative outlook, from A-.
“The company maintains an investment-grade balance sheet supported by a high-quality, diversified portfolio of assets that will continue to generate substantial operating cash flow at present gold prices,” Andy Lloyd, a Barrick spokesman, said today in an e-mailed statement.
“Our scheduled debt repayments over the next five years are modest and the majority of our debt matures after 2018,” Lloyd said in a phone interview.