Barrick Gold in uptrend, Newmont to reverse downtrend - BMO
(Kitco News) Which gold miners are in an uptrend and which are in a downtrend? In the latest research note, BMO looked at large precious metal producers and where they trade relative to each other over time.
“Understanding where a company is trading relative to historical patterns and the reasons for divergence can be important investment tools,” BMO Capital Markets analyst Andrew Kaip and senior associate Rene Cartier wrote in a note published on Monday.
Based on the data, BMO said that the risk for gold equities at current prices is tilted to the upside.
Companies currently in an uptrend are Barrick Gold with the $22.50 target price and Yamana Gold with the $3.75 target price, offering 46% and 14% return respectively, according to the research note.
“Barrick is in the initial stages of multiple expansions, which we view as in response to the merger with Randgold last year and the formation of the Nevada joint venture that closed in July. A recent site visit to Nevada hosted by Barrick (link) highlighted the progress thus far and the potential to grow reserve life on numerous fronts,” Kaip and Cartier wrote.
“Yamana trading at a premium when looking at P/NPV. How did this happen? The company sold the Chapada mine in Q2/19, which was a dilutive sale, in our view,” they added.
Newmont is currently in a downtrend but could turn things around once it delivers on the integration of Goldcorp operations, BMO highlighted.
“Over the last decade, shares of Newmont have been on a long-term uptrend that largely coincided with the stewardship of recently departed CEO Gary Goldberg. This uptrend came to an abrupt end with the announcement of the Goldcorp acquisition at the beginning of 2019. Since then, Newmont has been on a downtrend with the company now trading well below its prior trading range,” Kaip and Cartier said.
Newmont’s target price is $50: “We see this as the opportunity contingent on demonstrating integration and an improved outlook for the former Goldcorp operations,” the two added.
Miners that are currently trading at a discount but could move into an uptrend include AngloGold and Gold Fields, the research added.
Stuck in a downtrend is Fresnillo, which had a poor performance this year.
“The company has been on a two-year downtrend that began last year with a negative outlook on the Mexico elections and on declining grades at the Fresnillo mine. It looks as if shares of Fresnillo are beginning to base, but the company will need to demonstrate progress on turning the Fresnillo and San Julian operations around before the current trend is broken,” Kaip and Cartier wrote.