GOLD PRICE NEWS – The gold price hovered near $1,690 per ounce for a third consecutive day on Wednesday morning as financial markets awaited an upcoming U.S. debt ceiling vote. The spot price of gold in a narrow range between $1,685 and $1,694, while the U.S. dollar also stabilized near unchanged against a basket of foreign currencies.
Silver hugged the flatline near $32.21 per ounce, in conjunction with the gold price. Gold and silver stocks, however, lagged both precious metals and the broader equity markets. The Philadelphia Gold & Silver Index (XAU) slid by 1.5% to 161.64 while the S&P 500 Index dipped by just 0.1% to 1,491.29.
The largest decliner in the XAU this morning was IAMGOLD (IMG.TSX, NYSE: IAG), which plunged by $1.11, or 10.2%, to $9.76 per share. The sell-off was fueled by disappointing financial results, which included full-year 2012 production of 830,000 ounces – below the Company’s guidance of 840,000-910,000. Looking ahead, IAMGOLD’s 2013 cash cost guidance of $850-$925 per ounce came in well above both the company’s 2012 figures and most Wall Street analysts’ estimates for 2013.
Following IAMGOLD’s announcement, several analysts downgraded and/or cut their price target on the Company. Clarus Securities analyst Nana Sangmuah downgraded IMG.TSX to Hold from Buy and lowered her target to C$19.50 from C$23.00 per share. Dundee Securities analyst Josh Wolfson reduced his target to C$11.50 from C$13.00 but maintained a Neutral rating.
Other XAU components in the red included Agnico-Eagle Mines (AEM) and Gold Fields (GFI) – which fell by 1.7% to $49.80 and by 2.1% to $12.11 per share, respectively.
As for the price of gold, it remained in consolidation mode ahead of tomorrow’s scheduled vote by the U.S. House of Representatives to extend the debt ceiling by four months. Although the measure would be just another can-kicking exercise by politicians who refuse to address the structural challenges in the economy, financial markets have largely cheered the news, at least in the short term.
While the gold price has advanced for the past two weeks, Commerzbank analyst Axel Rudolph wrote in a note to clients that “This is a corrective move up from the low we saw at the beginning of January, so gold is still in this short-term downtrend that we’ve seen since October (when the market touched a low of $1,698.50).”
Rudolph went on to say that “We think it will go back up at some stage, but it might well stall here, come off again and, once we retest $1,600 and it holds, go back up again,” but he did not provide a specific target to which he sees the gold price reaching.
Analysts at ScotiaMocatta offered a more constructive take on the outlook for the price of gold. In the firm’s latest Metal Matters Monthly report, ScotiaMocatta wrote that “The financial system is drowning in debt and there seems no end in sight to ongoing massive budget deficits. Confidence in the financial system and in the fiat government paper that facilitates it will remain low.”
Aurizon Mines’ Board Unanimously Recommends Rejecting Alamos Offer
Aurizon noted that the Alamos offer, based on the closing price of Alamos on January 22, 2013, represented a value of C$4.55 per Share assuming full pro-ration of the Alamos Offer consideration; this is a 4.1% discount to the closing price of Aurizon's shares on the same day and a 21% discount to the 52-week high share price of Aurizon. The Company also pointed out that the C$4.65 price has never been available to Aurizon shareholders, based on the implied offer value, since the Alamos offer announcement was made. Based on the current Alamos offer value of C$4.55 per share, the effective premium to Aurizon shareholders has eroded 4% relative to the closing price of the Aurizon Shares on January 11, 2013 – the last trading day prior to the Alamos offer announcement. Full Aurizon Mines Press Release.
- The Board's recommendation is based in part on the recommendation of the Special Committee and the advice from financial advisors to Aurizon and the Special Committee and follows a thorough review process, undertaken in consultation with its financial and legal advisors
- The Board noted that it has serious concerns about unequal treatment of Aurizon shareholders as a result of Alamos having entered into private share purchase agreements with certain shareholders of Aurizon immediately prior to the commencement of the Alamos Offer
- The Board intends to seek shareholder ratification of a shareholder rights plan at a special meeting of shareholders on March 7, 2013 in order to provide the Board with adequate time and measures to respond to unsolicited takeover bids
