Commodities & Metals

Merrill Lynch Raises Price Targets on 5 Top Gold Stocks to Buy

It never fails. Like the call for $20 oil, the “gold is going to $900” story didn’t play out quite like some of the bears wanted it to. High-profile calls like that rarely pan out, and the people who get stuck following the advice are the ones who get shafted. While gold isn’t going back to the lofty highs of five years ago, there is a good chance it can continue the current move higher.

In a new research report, Merrill Lynch raised price targets on many of the gold stocks in the firm’s coverage universe. We zeroed in on the stocks that the firm has rated at Buy, and found five that investors may want to consider now.

Agnico Eagle Mines

This top stock has remained a long-time Wall Street favorite. Agnico Eagle Mines Ltd. (NYSE: AEM) is a senior Canadian gold mining company that has produced precious metals since 1957. Its eight mines are located in Canada, Finland and Mexico, with exploration and development activities in each of these regions, as well as in the United States and Sweden. The company and its shareholders have full exposure to gold prices due to its long-standing policy of no forward gold sales. Agnico Eagle has declared a cash dividend every year since 1983.

The company was the most successful year over year in reducing its all-in sustaining costs in 2015. Agnico Eagle came in 29% lower, at $810 per ounce. It also lowered its cash cost guidance for the second time this year to $850 per ounce (midpoint) from $880 per ounce. The upgrades have mainly been due to higher-than-expected grades and currency tailwinds from the Canadian dollar and the Mexican peso.

This remains one of the top picks on Wall Street as it fits the objectives of having quality mining assets with attractive margins, and it sports a very solid balance sheet.

Agnico Eagle investors are paid a 0.9% dividend. The Merrill Lynch price objective was raised to $43 from $40, and the Thomson/First Call consensus target is $38.97. The shares closed Tuesday at $41.08.


Goldcorp

This is another top company with a solid balance sheet that makes sense for investors to consider. Goldcorp Inc. (NYSE: GG) engages in the acquisition, exploration, development and operation of precious metal properties in Canada, the United States, Mexico and Central and South America. It primarily explores for gold, silver, copper, lead and zinc deposits.

Goldcorp’s principal mining properties include the Red Lake, Éléonore, Porcupine and Musselwhite gold mines in Canada; the Peñasquito and Los Filos mines in Mexico; the Marlin property in Guatemala; the Cerro Negro and Alumbrera mines in Argentina; and the Pueblo Viejo mine in the Dominican Republic.

Wall Street 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, longer average mine life and a solid dividend yield. Over the past few years, Goldcorp has been altering its mine plans, cutting spending and disposing assets in order to reduce costs and focus on the most profitable production.

Goldcorp investors receive a 1.56% dividend. The Merrill Lynch price target rose to $21 from $19, and the consensus target is $17.64. Shares closed Tuesday at $17.73.

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