Commodities & Metals

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


If there ever was a contrarian buy when 2016 started, it was gold stocks. The spot price had already been hammered when some firms came out and said the precious metal would plummet to $900. But a funny thing happened on the way to the bottom, the spot price started to turn, demand picked up, especially in Asia, and the dollar started to weaken after over a year-long rally.

With most portfolio managers way underweight the miners, some of the top stocks took off and caught many on Wall Street by surprise. In a new series of research notes, the analysts at Merrill Lynch, like many on Wall Street, are almost forced to raise price targets after many of the top stocks closed in on their current price targets. We found five rated Buy where the analysts raised the targets, some substantially.

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 receive a 0.7% dividend. The Merrill Lynch price objective was raised to $52 from $45, and the Thomson/First Call consensus target is $42.58. The shares closed Monday at $46.76.


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 0.4% dividend. The Merrill Lynch price target went to $20 from $19, and the consensus target is $17.64. Shares closed Monday at $19.50.
Kinross Gold

More aggressive investors may want to consider this is a smaller cap company. Kinross Gold Corp. (NYSE: KGC) engages in the acquisition, exploration, development and production of gold properties. The company’s gold production and exploration activities are carried out principally in Canada, the United States, the Russian Federation, Brazil, Chile, Ghana and Mauritania. It also produces and sells silver. As of December 31, 2015, the company’s proven and probable mineral reserves included 34.0 million ounces of gold, 41.0 million ounces of silver and 1.4 billion pounds of copper.

The stock has responded well to the weakening in the U.S. dollar, and also got a boost recently when the analysts at RBC moved the stock to Outperform from Market Perform.

Merrill Lynch boosted its price target to $6 from $5, but the consensus target is much lower at $4.12. The shares closed Monday at $5.64.

Royal Gold

This another solid company for investors looking for a gold presence, and the company got a big price increase at Merrill Lynch. Royal Gold Inc. (NASDAQ: RGLD) is a precious metals royalty and stream company engaged in the acquisition and management of precious metal royalties, streams and similar production-based interests. The company owns interests on 193 properties on six continents, including interests on 38 producing mines and 24 development stage projects.

The royalty type companies like Royal Gold make sense for investors wanting to avoid the actual mining aspect of sector.

The Merrill Lynch price target was boosted to $75 from $67. The consensus target is $60.39. Shares closed Monday at $61.58.

Silver Wheaton

This is another top company that many on Wall Street favor. Silver Wheaton Corp. (NYSE: SLW) is the largest pure precious metals streaming company in the world. Based on its current agreements, forecast 2015 estimated annual attributable production is approximately 44.5 million silver equivalent ounces, including 230,000 ounces of gold. By 2019, estimated annual attributable production is anticipated to increase significantly to approximately 55 million silver equivalent ounces, including 325,000 ounces of gold.

This anticipated growth is expected to be driven by the Silver Wheaton’s portfolio of low-cost and long-life assets, including precious metal and gold streams on Vale’s Salobo mine and Hudbay’s Constancia project.

Silver Wheaton has 18 long-term purchase agreements and one early deposit long-term purchase agreement associated with silver and gold relating to 27 various mining assets. It has silver and gold interests primarily in the San Dimas, Zinkgruvan, Yauliyacu, Stratoni, Los Filos, Peñasquito, Keno Hill, Neves-Corvo, Cozamin, Minto, Barrick, Aljustrel, 777, Salobo and Sudbury mines, as well as the Rosemont, Loma de La Plata, Constancia and Toroparu projects.

Again, the company fits into the Merrill Lynch metrics for quality assets and royalty streams, and the kind of balance sheet that has protected the company from the pitfalls of miners with huge capital expenditures.

Shareholders are paid a 1% dividend. Merrill Lynch raised its price target to $24 from $21, and the consensus target is $21.35. The stock closed Monday at $20.24.

Proper asset allocation should always include a single-digit percentage holding of precious metal like gold and silver. Not only do they hedge over the long term, they can really help if the market does go in to correction or bear market mode, as they tend to trade inversely to the markets.

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