Maybe the worst is over for major gold miners and producers. Canaccord Genuity has decided to step out and initiate coverage of some key precious metals producers and miners in new coverage. This is a positive call, because the firm expects a 22% return for the group as a whole. The firm believes that gold equities already are pricing in the more challenging environment. What makes this call interesting is that the supposition is that gold will be in a $1,150 to $1,450 trading range in the near term.

The firm’s preferred gold investments over the next 12 months are Goldcorp Inc. (NYSE: GG) and the much lesser known Tahoe Resources Inc. (NYSE: TAHO). Canaccord Genuity said:

We view Goldcorp as the quality leader in the group with a discount valuation and numerous potential re-rating catalysts. Tahoe is commissioning its best-in-class Escobal silver project and all indications point to a smooth ramp-up and positive risk re-rating.

Note that the research is actually in Canadian dollars rather than U.S. ones, and the basis for the price reference is on the Toronto Stock Exchange on each upside price target, rather than the New York Stock Exchange.

Tahoe Resources Inc. (NYSE: TAHO) was given a Buy rating and an implied upside of more than 41%. This is a $2.7 billion market cap stock, but its New York ADR volume is light.

Goldcorp Inc. (NYSE: GG) is the favorite of the lot in the gold picks. It was given a Buy rating and the implied upside is 33% or so.

IAMGOLD Corp. (NYSE: IAG) was given a Buy rating as well, but its upside to the price target is a mere 21%.

Silver Wheaton Corp. (NYSE: SLW) usually is considered a silver player, but it has been diversifying more and more with a gold focus as well. It was given a Buy rating, and the implied upside was almost 25%.

Yamana Gold Inc. (NYSE: AUY) was the last one given a Buy rating. There was an implied 22% upside to the price target here.

Eldorado Gold Corp. (NYSE: EGO), Agnico Eagle Mines Ltd. (NYSE: AEM), Kinross Gold Corp. (NYSE: KGC) and Barrick Gold Corp. (NYSE: ABX) were all only given Hold ratings by Canaccord Genuity.

The Canaccord Genuity report said, “Overall, we see a positive return for the group. Gold equities appear to be already pricing in the more challenging environment and we see better returns in the larger North American gold equities than in bullion.” In short, it prefers gold stock valuations over actual gold.

Another noteworthy observation is that the recent price correction may ultimately be good for the industry, as the significant price drop in gold forced management teams to live within their means with capital allocation, cost control and production and growth guidance.

For better or worse, this also has moved the gold companies beyond a “growth at all costs” mantra, even if a bull run in gold begins again. Production guidance is conservative and current strong sector dividend yields are considered a bonus.

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