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BMO Capital Markets Takes Action on 3 Gold Miners

- By Alberto Abaterusso

Analysts at BMO Capital Markets, the investment banking subsidiary of Bank of Montreal (BMO), took action on gold mining stocks on Monday.

BMO downgraded Yamana Gold Inc. (AUY) to market perform from outperform, initiated coverage on AngloGold Ashanti Ltd. (AU) with a market perform rating and on Gold Fields Ltd. (GFI) with an underperform rating.


Investors may want to adjust their portfolios accordingly.

The Canadian investment bank also issued a price target for each stock except for Yamana Gold, whose average target price remains at $3.86 per share, reflecting a nearly 80% growth from the share price of $2.17 at close on Monday. The average target price is a mean of 12 estimates, ranging between a low of $2.5 and a high of $5.28.

As of December, five analysts suggest buying Yamana Gold, seven recommend holding the stock and two analysts are predicting the stock will underperform. The recommendation rating is 2.6 out of 5.

For the 52 weeks through Dec. 10, Yamana Gold has fallen 12% and underperformed the Van Eck Vectors Gold Miners exchange-traded fund (GDX) by 6%. Yamana Gold has a market capitalization of about $2.06 billion. The 52-week range is $2 to $3.8. The closing share price on Monday was below the 200-, 100- and 50-day simple moving average lines.

The price-book ratio is 0.51 versus an industry median of 1.74 and the enterprise value-to-earnings before interest, taxes, depreciation and amortization ratio is 6.08 compared to an industry median of 9.30.

For full fiscal 2018, Yamana Gold is forecasting gold production of 920,000 ounces, silver production of 7.55 million ounces and copper production of 125 million pounds. The co-product all-in sustaining cost is expected to range from $850 to $870 per ounce of gold, from $12.25 to $12.50 per ounce of silver and from $1.8 to $1.85 per pound of copper.

GuruFocus has assigned a financial strength rating of 8 out of 10 and a profitability and growth rating of 6 out of 10.

BMO Capital Markets has issued a price target of $11 per share for AngloGold Ashanti, reflecting a 0.9% decline from the closing share price of $11.1 on Monday. The average target price is $14.02 per share, resulting from four estimates ranging from $12 to $17.02 per share. For the 52 weeks through Dec. 10, the share price has increased 24% and is above the 200-, 100- and 50-day simple moving average lines. The stock has beaten the Van Eck Vectors Gold Miners ETF by 18% over the same period. AngloGold Ashanti has a market capitalization of approximately $4.57 billion. The 52-week range is $7.08 to $12.

The recommendation rating is 2 out of 5, which is the average of one strong buy rating, two buy ratings and one hold rating.

The price-book ratio is 1.8 compared to an industry median of 1.74 and the EV-to-EBITDA ratio is 31.98 versus an industry median of 9.3.

For full fiscal 2018, analysts are expecting AngloGold Ashanti to deliver the upper end of its guidance range of 3.325 million to 3.45 million ounces of gold production.

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

Gold Fields was given a price target of $3 per share, which is a 2.9% downside from the share price at market close on Monday. The new average target price is $3.44 per share, resulting from four estimates ranging between a low of $3.15 and a high of $4 per share. For the 52 weeks through Dec. 10, Gold Fields has fallen 17%, but outperformed the Van Eck Vectors Gold Miners ETF by 11%. The 52-week range is $2.2 to $4.54.

The price-book ratio is 0.9 versus an industry median of 1.74 and the EV-to-EBITDA ratio is 6.55 compared to an industry median of 9.3.

The recommendation rating is 2 out of 5, which is the average of four analysts surveyed. One analyst gave it a strong buy rating, one rated it a hold and two assigned an underperform rating.

Investors are expecting 2 million ounces of gold production at an all-in sustaining cost of $990 to $1,010 per ounce for full fiscal 2018.

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.