Barrick Gold mine in Nevada.
With so much uncertainty around commodity prices, miners must live by one crucial rule: keep new project developments on schedule.
Investors are already feeling the heat as they try to determine whether the mining margins will compress because of falling commodity prices, so the last thing they need is more uncertainty.
Just look at Barrick for proof. Investors punished the firm after it announced on Thursday that its major Pascua Lama project won't be ready until mid-2014, a year later than expected.
And earlier in July, Goldcorp announced that mill throughput at its Peñasquito mine was hit by inadequate water supply in June, and its Red Lake project was hampered by seismic activity, which sent shares tumbling.
No doubt, managing massive projects is a complex task. But miners must play by the rules investors set, or else they get punished – in particular smaller capitalization companies whose stocks trade purely on development prospects.
However, the flip side is also true: investors are now so pessimistic that any good news is handsomely rewarded. Case in point: Agnico-Eagle Mines, which was up almost 8 per cent Thursday after the firm increased its 2012 production guidance.
Tim Kiladze