Gold shares headed south alongside the yellow metal on Friday after the January U.S. employment report came in far above expectations. The Market Vectors Gold Miners ETF (GDX) – the leading gold sector ETF – dropped 1.7% to $56.50 per share in afternoon trading while COMEX gold futures slid 1.1% to $1,739.70 per ounce. With the sell-off, the GDX turned negative for the week by 1.3%, but remains higher by 9.9% on a year-to-date basis.
Gold companies in the news on Friday included IAMGOLD (IMG.TSX, NYSE: IAG), after National Bank Financial reiterated its Sector Perform rating and C$20.50 price target. Yesterday the Canadian-based gold miner announced that the rare earth elements zone adjacent to its Niobec mine near Quebec contains an inferred resource of 467 million tonnes at a grade of 1.65% Total Rare Earth Oxides.
National Bank Financial analyst Paolo Lostritto wrote in a note to clients that “By applying an in-situ valuation (determined by 17 market comps), we calculate an initial value of between US$200-US$220 mln” for IAMGOLD’s rare earth assets. “Consequently, we have doubled our modeled in-situ valuation to US$200 mln from US$100 mln, which translates to a 2% increase in our Base Case NAVPS to $17.57. Catalysts include: 1) sale or financing of Niobec, 2) potential acquisition, 3) Sadiola Deeps expansion data, 3) Essakane and Rosebel brownfield expansion studies and 4) Westwood Update.”
Despite the positive commentary, shares of IMG.TSX dipped 0.4% to C$17.37 alongside the gold sector.
New Gold (NGD.TSX, AMEX: NGD) also made headlines after National Bank Financial analyst Steve Parsons downgraded the shares to Sector Perform from Outperform. Parsons did maintain his C$13.25 price target, however. The downgrade followed the release of New Gold’s fourth quarter production results, which included higher cash costs than Parsons was expecting. “The inclusion of higher operating costs in 2012 and beyond and the addition of higher assumed capex have a negative impact on our valuation, more than offsetting the impact of slightly higher production,” Parsons wrote.
Shares of NGD.TSX tumbled 2.8% to C$11.95 in afternoon trading.
Other notable decliners included GDX components Agnico-Eagle Mines (AEM), Eldorado Gold (EGO), and Newmont Mining (NEM). AEM fell by 2.4% $36.58, EGO by 3.9% to $14.89, and NEM by 1.8% to $61.17 per share.