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Gold and Silver Fall, Agnico-Eagle Plunges 19%

October 19, 2011

On Wednesday, gold (NYSE:GLD) futures for December delivery declined $5.80 to settle at $1,647 per ounce, while silver (NYSE:SLV) futures fell 55 cents to settle at $31.27.

Despite the Bank of England ramping up the printing presses, gold and silver could not mount a rally. The Bank of England’s Monetary Policy Committee voted to add another £75 billion of quantitative easing in order to support the weak UK economy. After discussing earlier this month to inject between £50 billion and £100 billion, the Monetary Policy Committee voted 9-0 for more QE. In September, only one MPC member desired more QE, but now, all 9 members are in favor of more QE after citing a dramatic deterioration in the international outlook as a key factor.

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In afternoon trading, gold miners (NYSE:GDX) such as Barrick Gold (NYSE:ABX) and Yamana Gold (NYSE:AUY) fell 3.5% and 4.3%, respectively. Silver miners (NYSE:SIL) First Majestic Silver (NYSE:AG) and Endeavour Silver (NYSE:EXK) both fell nearly 7%. After trading higher on third quarter earnings, Freeport-McMoRan Copper & Gold (NYSE:FCX) reversed course and headed 3% lower as strike and production issues remain.

Shares of Agnico-Eagle Mines (NYSE:AEM) fell the especially hard today after the company said it was suspending operations at its Goldex mine at Val d’Or, Quebec, becasue of water inflow and ground instability. There is no time table when the suspendsion may end. Agnico will write-off its investment in Goldex, resulting in a pretax third quarter charge of $260 million. As the chart above shows, shares plunged 19% on the news.

Endeavour Silver announced on Wednesday that it has acquired an option to purchase the Lomas Bayas silver-gold property in the Copiapo region of northern Chile. The company reported, “Endeavour can acquire a 100% interest in Lomas Bayas for cash payments totaling US$2,500,000 over a eighteen month period followed by a final cash payment ranging from US$10 to $15 per ounce of gold equivalent reserves and resources (with silver as the only equivalent) as estimated in an independent NI 43-101 report on the property within 24 months of signing the agreement.”

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