Gold has been on fire so far in 2016. This move was not expected at the start of the year, not by any serious measures, but that was then and this is now. Following the first-quarter earnings reporting season, Credit Suisse has decided to join the ranks of other investment banking firms in raising their gold-mining and producer price targets. While many firms are raising target prices, this hike from Credit Suisse was said to be about 29% on average and to reflect the higher net asset values (NAV) and cash flow estimates.
Credit Suisse’s Anita Soni has adjusted the firm’s target multiples to reflect the view that the gold equity rerating will be sustaining over the next 12 months. The firm thinks that gold prices can continue to move higher, toward the Credit Suisse target of $1,350 per ounce for the first quarter of 2017.
Note that gold tanked Monday on a market alert of a large gold seller, but that has nothing to do with analyst ratings on any given day.
Credit Suisse’s preferred stock for high gold leverage is Barrick Gold Corp. (NYSE: ABX). It is rated at Outperform, and the $18.12 share price actually was above the $17 price target. The stock has a 52-week trading range of $5.94 to $19.37.
Price target changes were made for the companies below, with most of them being based elsewhere and the targets being converted for U.S. price targets on the New York-listed American depositary share (ADS) trading.
Alamos Gold Inc. (NYSE: AGI) saw its U.S. price target raised to $7.25 from $6.00, but the firm maintained a Neutral rating. The NAV was raised by 25% to $5.66 per share, driven by the Mulatos project and the project portfolio in Turkey and Lynn Lake. Credit Suisse also talked up a strong growth outlook relative to peers and a good balance sheet.
Eldorado Gold Corp. (NYSE: EGO) saw its U.S. target price raised to $6.00 from $4.50, with the official rating maintained as Outperform. Credit Suisse increased the NAV by 8% to $4.17 per share, driven by Kisladag and White Mountain with lower unit costs. Eldorado’s $6 price target compares to a latest price of $4.73 and a 52-week range of $2.10 to $5.17.
Franco-Nevada Corp. (NYSE: FNV) was maintained only with a Neutral rating, but the target price was raised to $72 from $63. Credit Suisse increased its NAV by 2% to $30.07 per share, based on its Antamina and Karma projects. The firm sees Franco-Nevada on track for a targeted 3.5% free cash flow yield over 2016 and 2017. The 52-week range is $38.20 to $71.48.
IAMGold Corp. (NYSE: IAG) was maintained as Underperform, but the target price was raised to $3 from $2. The NAV was largely left unchanged, and the higher target price was driven by a higher cash flow expectation for 2016 and 2017 after its own forecast was given. The stock’s 52-week range is $1.15 to $3.84.
New Gold Inc. (NYSE: NGD) was maintained as Neutral, but it saw its U.S. price target raised to $5 from $4. The NAV was raised by 26% to $2.34 per share, based on a reduction to the company’s Blackwater discount. Also noted were the Rainy River valuation and Peak lower unit costs, which were partly offset by higher net debt. New Gold has a trading range of 1.80 to $4.72 in the past 52 weeks.
Yamana Gold Inc. (NYSE: AUY) was maintained as Neutral and the price target was raised to $4.50 from $3.50. The NAV was raised by 9% to $2.40 per share, based on a higher valuation for Yamana’s dormant assets (Canada JV and Suyai) and Brio. The 52-week range is $1.41 to $4.95.
Credit Suisse’s top names are still viewed as offering good relative value and potential to grow their NAV through exploration or by lower risk catalysts. Credit Suisse’s report showed that two of its top picks were as follows:
- Agnico Eagle Mines Ltd. (NYSE: AEM) has an Outperform rating with a $50 target, versus a latest close of $45.75 and 52-week range of $21.00 to $48.26.
- Newmont Mining Co. (NYSE: NEM) has an Outperform rating and the target of $37, versus a $33.21 close. Its 52-week trading range is $15.55 to $34.97.