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Barclays Takes Action on Gold Mining Stocks

- By Alberto Abaterusso

The analysts at Barclays took action on gold mining stocks on Wednesday.

Barclays PLC (BCS) initiated coverage on Goldcorp Inc. (GG), Kinross Gold Corp. (KGC) and Newmont Mining Corp. (NEM) with an overweight rating and an underweight rating for Yamana Gold Inc. (AUY).

The British bank expects Goldcorp, Kinross and Newmont to outperform the mining industry over the next 52 weeks. Yamana Gold is expected to underperform many of its peers over the same period.


Investors may want to adjust their portfolios accordingly.

The British investment bank has also issued a price target for each gold stock. For Goldcorp, the price target is $14 per share, reflecting 38.5% upside from the market price of $10.11 at close on Oct. 10.

The average target price is now $16.47 per share, which is a mean of 20 estimates ranging between a low of $11.5 and a high of $25.5.

As of October, 12 analysts suggest buying Goldcorp, nine recommend holding the stock and one analyst is predicting the stock will underperform. The recommendation rating is 2.2 out of 5.

For the 52 weeks through Oct. 10, Goldcorp has fallen 24% and underperformed the Van Eck Vectors Gold Miners exchange-traded fund (GDX) by 2.6%. Goldcorp has a market capitalization of about $8.64 billion. The 52-week range is $9.75 to $15.55. The share price at close on Wednesday was below the 200-, 100- and 50-day simple moving average lines.

The price-book ratio is 0.62 versus an industry median of 1.74 and the enterprise value-to-earnings before interest, taxes, depreciation and amortization ratio is 9.84 compared to an industry median of 9.30.

For full fiscal 2018, Goldcorp is forecasting gold production between 2.375 million and 2.625 million ounces. The all-in sustaining cost is expected range from $760 to $840 per ounce of metal sold.

GuruFocus has assigned a financial strength rating of 5 out of 10 and a profitability and growth rating of 6 out of 10.

Barclays has issued a price target of $4 per share for Kinross Gold, a 41.3% premium to the closing share price of $2.83 on Wednesday. The average target price is $4.56 per share, resulting from 19 estimates ranging from $3 to $6 per share. For the 52 weeks through Oct. 10, the share price has declined 36% and is below the 200-, 100- and 50-day simple moving average lines. The Van Eck Vectors Gold Miners ETF has beaten Kinross Gold by nearly 14% over the same period. Kinross has a market capitalization of approximately $3.54 billion. The 52-week range is $2.67 to $4.78.

The recommendation rating is 2.5 out of 5, which is the average of 11 hold recommendations, five buy recommendations and three strong buy recommendations.

The price-book ratio is 0.76 compared to an industry median of 1.74 and the EV-to-EBITDA ratio is 3.58 versus an industry median of 9.3.

For full fiscal 2018, analysts are expecting Kinross to increase its production from 2.375 million ounces of equivalent gold to 2.625 million ounces. The production is forecasted to come in at an all-in sustaining cost of $926.25 per ounce to $1,023.75 per ounce of equivalent gold sold.

GuruFocus has assigned a financial strength rating of 5 out of 10 and a profitability and growth rating of 3 out of 10.

Newmont Mining received a price target of $34 per share, which is an 11.1% upside from the share price at market close on Wednesday. The new rating has increased the average target price to $41.58 per share, which is the result of 18 estimates between a low of $33 and a high of $50 per share. For the 52 weeks through Oct. 10, Newmont Mining has fallen 20%, outperforming the Van Eck Vectors Gold Miners ETF by nearly 1.8%. The 52-week range is $29.16 to $42.04.

The price-book ratio is 1.51 versus an industry median of 1.75 and the EV-to-EBITDA ratio is 7.05 compared to an industry median of 9.3.

The recommendation rating is 2.4 out of 5, which is the average of 18 analysts surveyed. Two gave it a strong buy, nine rated it a buy and seven gave a hold recommendation.

Investors are expecting production of 4.9 million to 5.4 million ounces of attributable gold and 40,000 to 60,000 tons of attributable copper for full fiscal 2018. The company is producing gold at an all-in sustaining cost of $995 per ounce sold and copper at an all-in sustaining cost of $2.1 per pound sold.

GuruFocus has assigned a financial strength rating of 6 out of 10 and a profitability and growth rating of 6 out of 10.

The analyst has produced a price target of $2.5 for Yamana Gold, which is almost on par with the share price of $2.52 at market close on Wednesday. The average target price is now $3.92 per share, resulting from 12 estimates that range between a low of $2.8 and a high of $4.92. The stock lost 5% during the 52 weeks through Oct. 10, outperforming the Van Eck Vectors Gold Miners ETF by nearly 17%, and is now trading below the 200-, 100- and 50-day simple moving average lines. The closing share price on Wednesday was 9.6% above the 52-week low of $2.3 and 51% below the 52-week high of $3.8. Yamana Gold has a market capitalization of approximately $2.38 billion.

The price-book ratio is 0.56 versus an industry median of 1.75 and the EV-to-EBITDA ratio is 4.92 compared to an industry median of 9.3.

Looking ahead, the Canadian miner is expecting to produce 900,000 ounces of gold, about 8.15 million ounces of silver and approximately 120 million pounds of copper in full fiscal 2018. The co-product all-in sustaining cost is projected to be $850 to $870 per ounce of gold produced, $12.25 to $12.50 per ounce of silver produced and $1.8 to $1.85 per pound of copper produced.

GuruFocus has assigned a financial strength rating of 5 out of 10 and a profitability and growth rating of 6 out of 10.

Disclosure: I have no positions in any securities mentioned in this article.

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This article first appeared on GuruFocus.