Commodities & Metals

4 Gold Stocks That Can Easily Survive Lower Gold Prices

Investors still see spokespersons on TV saying to buy gold to protect their investments. That must be tough for people who listened to those same pitches three and four years ago. Gold has now pulled back almost 40% from the all-time nominal high of $1,900 per ounce in September 2011, with almost a 40% reduction in margins from the $928 an ounce level achieved in 2012 to $546 an ounce in the second quarter of this year.

What is worse? In a new report from the analysts at RBC, attendees at the company’s recent gold miners conference had little confidence in a rally in the precious metal’s price in the short or medium term. So the RBC team has focused on which companies can cut costs, cut back on exploration and fight their way through the glut of gold mined at higher prices.

Here are the four stocks rated Outperform at RBC.

Agnico Eagle Mines Ltd. (NYSE: AEM) completed the joint acquisition of Canada’s Osisko Mining and its Canadian Malartic mine this past summer, which the company purchased together with Yamana Gold. The Osisko deal guided investors on both companies in recent months, so any positive news on the performance of the Malartic mine could have an immediate effect on valuation. The RBC team feels potential at the new mine joint-venture could be significant. They noted that Agnico said at the conference there could be future opportunities for joint ventures, however, it did not intend to pursue any more at the current time.

Agnico investors are paid a 1.2% dividend. The RBC target price is $34. The Thomson/First Call consensus target is $36.53. The stock closed Thursday at $26.91 a share.

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Eldorado Gold Corp. (NYSE: EGO) is another of the top picks at RBC. The company engages in the exploration, development, mining and production of gold properties in Turkey, China, Greece, Brazil and Romania. The company also explores for iron, silver, lead, zinc and copper ores. RBC points out that the company is a consistent, low-cost operator with solid valuation upside to its net asset value. Furthermore, Eldorado’s strategy remains focused on investing in high-quality projects while maintaining a balance sheet that provides the company flexibility to continue to grow its business through price cycles.

Eldorado investors are paid a miniscule 0.3% dividend. The RBC price target is $8.50, and the consensus target $8.66. Shares closed Thursday at $6.40.

Goldcorp Inc. (NYSE: GG) is another Outperform-rated stock that ranks high at RBC. The analysts feel that the company deserves a premium valuation to its peers due to its excellent balance sheet, growth profile with lower cost new mines coming on line, longer average mine life and superior dividend yield. The company operates as a gold producer involved in the exploration, development and acquisition of metal properties in Canada, the United States, Mexico and Central and South America. Over the past few years, Goldcorp has altered its mine plans, cut spending and disposed of assets in order to reduce costs and focus on the most profitable production.

Goldcorp investors are paid a 2.9% dividend. RBC has a $31 price target, and the consensus target is $28.16. Goldcorp closed Thursday at $20.61 a share.

New Gold Inc. (NYSE: NGD) is rated Overweight and is considered an intermediate gold mining company. The company has a portfolio of four producing assets and three significant development projects. The New Afton Mine in Canada, the Mesquite Mine in the United States, the Peak Mines in Australia and the Cerro San Pedro Mine in Mexico provide the company with its current production base. In addition, New Gold owns 100% of the Blackwater and Rainy River projects, both in Canada, as well as 30% of the El Morro project in Chile.

While the RBC price target is $6.50, the consensus price objective is $5.97. New Gold shares closed Tuesday at $4.27.

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Despite the fact the arguments have raged over inflation both pro and con, the money printing has gone on unabated now for five years. It may have ended here, but it will be running around the rest of the world for some time. One day that catches up. Combined with physical demand and a very unstable world, a small position of gold carved out in a well-rounded portfolio makes good sense now and in the future.

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