Commodities & Metals

Why Credit Suisse Still Sees Big Upside for 5 Large Cap Gold Producers

The firm’s investment view on Barrick noted that Tanzanian negotiations an area of focus, and it said:

Barrick has delivered underlying net asset value per share growth over the last year and we expect that to continue due to management’s focus on ROIC and Barrick’s high quality asset base.

Goldcorp Inc. (NYSE: GG) has one of the odd scenarios where there is still well above average upside, but it comes with a Neutral rating from Credit Suisse. The latest closing price of $12.74 generates a $10.9 billion market cap. Credit Suisse’s target was lowered to $15.50 from $16.75, which is more or less in line with the $16.87 consensus target price. The firm expects 22% upside here. Goldcorp shares have a range of $11.91 to $17.87 over the past 52-weeks.

The investment view on Goldcorp said:

Goldcorp’s attractive growth profile is tempered by our view that execution risk remains high. In our experience, operational turnaround takes longer to effect than expected, but once started, delivers results more rapidly than expected. We do see GG more likely to rebound given FCF leverage in a gold bull run.

Kinross Gold Corp. (NYSE: KGC) is worth more than $5 billion in market value, based on its $5.29 share price, and Credit Suisse also has an unusual 30% upside to its unchanged target price of $5.50. Kinross has a consensus target price of $5.21, and its 52-week range is $2.88 to $4.91.

Credit Suisse’s neutral investment view note:

We rate Kinross as Neutral due to its 2016 re-rating which has brought valuation closer to peers and our desire to see Kinross’s capital allocation strategy delineated given its shorter than average reserve life. We retain a constructive bias on KGC due to its high leverage to gold and our positive gold price view.

Newmont Mining Corp. (NYSE: NEM) is rated as Outperform at Credit Suisse, and $37.43 share price comes with a market cap of about $20 billion. The firm has maintained its prior target price of $48.50 and that would imply 30% upside. Newmont shares have a 52-week range of $30.19 to $40.05 and a consensus target price of $40.62.

On Newmont, Credit Suisse’s outperform view noted that it should do better based on operational consistency over the years 2014 to 2016 and due to a strong track record of adding to reserves and net asset value versus its peers. It is also said to have the strongest balance sheet among peers Barrick and Goldcorp.

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