A move by the world’s largest gold mining firm to lay off a third of its corporate staff in Toronto has advisors across Canada concerned about what the Barrick decision means for a beleaguered TSX.
“It does concern me because, although I can’t even pretend to know where gold is going I’m not optimistic,” said Susan LeRoy, and advisor with Assante Capital Management in Toronto. “Margins are getting very tight for gold companies, and to see one acting on it makes me wonder if they’re losing faith too.”
"As part of ongoing efforts to streamline the organization and manage costs in a challenging business environment, Barrick is eliminating approximately 100 corporate office positions," company spokesman Andy Lloyd said in an e-mail. "The company is also making reductions at a number of its regional locations as part of a company-wide effort."
Lloyd said the 100 positions represents up to 30% of the corporate office. The majority of the impacted positions are in Toronto. Impacted employees will receive severance packages and access to career placement services.
The layoffs, reportedly the first ever cuts to head-office staffing in the company’s history, illustrates how sharply sentiment for gold has deteriorated. As the Toronto exchange is heavily weighted with metals and mining stocks, Barrick's troubles could be a bad omen.
There was a flight to gold during the financial crisis and the commodity peaked at US$1,900 an ounce in late 2011. However gold has shed about one-third of its value since then and last week hit a three-year low.
Barrick shares were down 43 cents at $17.28 late Monday in Toronto, sharply below their 52-week high of $42.08.
Chris Fry, an investment advisor with BMO-Nesbitt Burns in North York, doesn’t think Barrick’s travails will have a larger impact on the TSX. “The TSX does this every year, it’s the typical summer doldrums. It goes down over the summer and then picks up in August or September.”