Despite the merger of two gold producing giants, gold miner stocks and sector-related exchange traded funds remained relatively muted in Monday action, potentially reflecting investor concerns for the industry.
On Monday, the VanEck Gold Miners ETF (NYSEArca: GDX) was up 0.1%.
Barrick Gold Corp. (NYSE: ABX) has acquired Rangold Resources (NasdaqGS: GOLD) for $6 billion in stock, the Wall Street Journal reports.
ABX shares jumped 6.3% and GOLD surged 7.2% on Monday in response to the merger. GDX includes a 7.0% tilt toward ABX and 4.4% to GOLD.
While Barrick and Rangold rallied on the deal, other gold mining companies did not join in on the celebration. The tepid response may be a reflection of Wall Street’s continued skepticism for a sector that has been weakened by flat gold prices and concerns that some miners overextended themselves during the gold bull market.
Gold Miners Continue to Trade at Cheap Valuations
The gold mining segment has not enjoyed the same level of strength as the broader market. Shares of some of the biggest U.S.- and Canadian-listed gold-miners are now trading at an average of 0.75 times net asset value, or 28% below where they were a year ago, according to Macquarie data for the U.S. and Canada show.
The price-to-asset value is a preferred measure for miners since the ratio takes into account variables like expected lifespan of mines and output. The measure is subjective and vary from analyst to analyst based on their individual assumptions.