IKN

Every why hath a wherefore

Quel surprise! After trying and failing to jawbone gold down, Goldman Sachs (GS) now likes the sector

This morning the Vampire Squid made a new call on gold and the sector. Here’s the front page blurb of the PDF:
Americas: Metals & Mining: Precious
Coverage view up to Neutral; initiate on five names and adding leverage; Buy ABX.TO
Becoming more constructive on gold and silver equities; raising coverage view to Neutral. After underperforming the SPX by 21% since September 2013, gold and silver equities now appear more fairly valued, offering an average 7% total upside. We raise our coverage view to Neutral as we believe (1) more responsible capital allocation, (2) successful cost cutting initiatives, (3) a refocus on maximizing free cash flow, and (4) sound strategic portfolio optimization should improve the positioning of our companies offsetting our below-consensus outlook for commodity prices (we forecast $1,200/oz for gold from 2015 onwards).  
Carving out 3 sub-sectors; prefer exposure to Seniors; expanding our coverage by 5. We are creating three sub-sectors across our Americas – Precious Metals coverage; Seniors, Juniors, and Royalty/Streaming. We see the largest upside risk in the Senior sub-sector as we become more constructive on the sector. We are also initiating coverage on five companies (BTO.TO, AGI.TO, FNV.TO, DGC.TO and BVN) and their ADRs, where relevant. 
Still prefer the harvesters over the investors We continue to focus on low-cost, FCF-generating names with strong balance sheets and fully funded volume growth. We maintain our Buy ratings on G.TO, YRI.TO and SLW.TO. Avoid our Sell-rated names IMG.TO, PAA.TO and ELD.TO.  
Adding leverage to the portfolio; we upgrade 
ABX.TO to Buy ABX.TO has actively shrunk to profitability over the past twelve months, focusing on its key FCF generating operations and divesting non-core strategic assets. Following the equity raise in 2013, we believe the company’s financial flexibility has significantly improved.  
Initiate BTO.TO at Buy; imminent volume growth drives FCF generation. We initiate coverage of BTO.TO with a Buy. BTO.TO has imminent production growth from Otjikoto project which enhances the company’s FCF generation and should fund future development.
Though it beats me how anyone can take this house of forked tongues seriously on any of its gold-related utterings.

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