Seven Mining Companies CIBC Likes In A Rising Gold Environment
(Kitco News) - The gold market is starting a new long-term uptrend, according to analysts at CIBC and they see the potential for seven mining companies to benefit from higher prices.
In a report Monday, the Canadian bank said that it sees gold prices pushing to $1,500 an ounce next year and 2021 and see gold prices holding above $1,400 in the long-term.
“We continue to see no signs of rate hikes on the horizon over the next several years, and historically have seen gold continue on an upward trajectory beyond the last rate cut,” the analysts said.
Looking at the mining sector, the analysts have revised their outlook on eight mining companies. The bank analysts said that Agnico Eagle (NYSE: AEM, TSX: AEM), is its top pick among the senior producers with a price target of $70 a share. The bank note that the company has a “highly regarded management team that delivers on promises and focuses on capital allocation.”
“AEM has a lower-cost production base and low geopolitical risk profile (Canada, Mexico, and Finland), combined with appealing organic growth and longer-term valuation. The company is undergoing a growth phase for 1.6Moz to 2.0Moz by 2020,” the analysts said.
“Franco-Nevada is a go-to name for generalist investors, as the company offers exposure to some of the industry’s best assets without the concentrated operational risk that is associated with the miners,” the analysts said. “Near-term growth is derived from Cobre Panama’s ramp-up, and we also expect the company to be active on the acquisition front in 2019.”
Among the mid-tier producers, CIBC likes three companies in the current gold price environment.
The analysts noted that Kirkland Lake (NYSE: KL, TSX KL has been “the darling” of the gold mining company for the last two years and that sentiment is not expected to change any time soon. They have a price target of $64 per share.
“With two of the highest-grade mines in the world, no debt, and strong free cash flow, Kirkland Lake should continue its outperformance through 2019,” the analysts said.
“Production [is] expected to increase to almost 1Moz in 2020E with organic projects,” the analysts said.
Another company CIBC likes is SSR Mining (TSX: SSR), increasing their price target to $18 a share.
“With a conservative management team, a strong balance sheet, and a portfolio of assets in safe jurisdictions, SSRM is one of our preferred intermediate gold producers under coverage,” the analysts said. “We expect production growth to continue as the Chinchillas project (Peru) reaches steady-state production in 2019.”
In the junior producers’ space, the bank said that it likes Equinox Gold (TSX.V: EQX), increasing its price target to $1.85 a share.
“Equinox has transitioned from developer to multi-asset producer, with the acquisition of Mesquite in 2018 followed by commercial production at Aurizona announced on July 1, 2019,” the analysts said. “We continue to expect a re-rate in 2019 as the company improves its production profile, a trend that should continue into 2020. The scarcity of quality, mid-tier, multi-asset producers creates a niche market for Equinox to target.”
Within the silver market, CICB analysts said that they like Pan American Silver (TSX: PAAS), increasing the price target to $22 a share. The bank said that the company has the largest reserve base of any silver company and a diversified production profile across 10 operating mines.