The coronavirus outbreak has affected markets significantly, and stock markets experienced massive selloffs this past week. Since last month, gold penny stocks were also being battered thanks to the panic. Even before the COVID-19 breakout really took off, some mining companies were struggling with volatility.
At the beginning of this month, almost all asset classes dropped in value, with stocks, bonds, and even the safe-haven metals declining in value, taking many investors by surprise. Usually, precious metals tend to experience a surge in demand when the economy starts to slow. Interestingly, gold prices plummeted from around $1,700 per gold ounce to below $1,500 per gold ounce in just two weeks. As a result of this, and due to the absence of historical parallels, investors rushed to sell their assets to cushion themselves from the broader market selloff.
Following the Federal Reserve’s announcement this week to slash interest rates to zero, many gold penny stocks started to gain once more, so there may still be hope for the gold industry yet.
However, these four gold penny stocks have been losing momentum. Here’s why.
4 Gold Penny Stocks Losing Momentum: New Gold Inc. (NYSEAMERICAN:NGD)
Since February 27, New Gold stock has shed around 40%, and in the last session, the stock lost 7.02%, closing the day at $0.5735. This is despite the company recently announcing a $300 million strategic partnership with Ontario Teachers’ Pension Plan.
According to the terms of the agreement, Ontario Teachers will acquire a 46% interest in the company’s New Afton mine. The pension plan has the option of converting the 46% interest into a joint venture in four years. Alternatively, they can let the interest remain as free cash flow at a rate of 42.5% for $300 million upfront cash proceeds that will be payable after finalizing the transaction.
NGD stock is now up by 2.60% at $0.59.
4 Gold Penny Stocks Losing Momentum: Gold Resources Corp (NYSEAMERICAN:GORO)
Gold Resources is another gold penny stock that has lost significantly in the last month, shedding up to 60% of its gains. The company recently updated its annual reserve estimates through a 20.1% increase of the consolidated proven and probable gold reserve grade, as well as a 1.1% increase of gold reserve ounces.
The company has given back around $113 million to shareholders in monthly dividends since 2010. It also gives them the option of converting dividends into gold and silver.
>> 4 Momentum Penny Stocks Moving Higher
GORO stock is trading higher by 2% to $2.55 on Thursday.
4 Gold Penny Stocks Losing Momentum: McEwen Mining Inc. (NYSE:MUX)
In the last month, McEwen Mining has lost around 50%. Today, it is down 8.98% and trading at $0.674. At the beginning of this week, the Toronto-based gold mining company reported a loss of $25.1 million or $0.07 per share in the fourth quarter on revenue of $32.4 million.
McEwen indicated that its full-year loss had widened to around $59.7 million or $0.17 per share. Full-year revenue came in at $117 million.
MUX stock is under pressure this morning, with a fall of 3.70% at $0.65.
4 Gold Penny Stocks Losing Momentum: Coeur Mining Inc. (NYSE:CDE)
Since the beginning of the year, Couer Mining has been on a downward path, and its stock has lost over 60%. Things seem to be getting worse for the miner after it temporarily suspended mining operations at its Silvertip silver-zinc-lead mine in British Columbia, citing low prices of zinc and lead.
Following this move, the company was forced to take an impairment charge of around $251 million on this underperforming project. The company acquired the asset from Denham Capital three years ago for around $250 million. Severance costs associated with the halting of operations could be around $5 million and $10 million in the first half of 2020. Also, quarterly maintenance and care could cost $6 million.
CDE stock is trading marginally higher this morning.
Key Takeaway
The global economic situation is currently fluid, and it is likely to take a long time before it plays out, so investors should be realistic. Markets are highly volatile, and no one can claim a monopoly of information at the moment. The upside is that compared to the same period last year, gold prices are currently higher, despite plunging to $1,500 per gold ounce. The good news for gold producers is that their operating result for the first quarter of this year could be cushioned from the economic impact of the COVID-19 outbreak.
Featured image: Pixabay
