Credit Suisse Sees 'Renewed Focus' In Gold, Says Positive On Sector

• Shares of Goldcorp Inc. (USA) GG, Barrick Gold Corporation (USA) ABX and Newmont Mining Corp NEM have lost significantly over the past six months.
• Credit Suisse’s Anita Soni has a positive view on the Gold sector.
• With production curtailments to combat price declines, mine supply is likely to have peaked in 2015, Soni stated.

“We are positive on gold as three years of lower prices have resulted in production curtailments and we expect mine supply to peak in 2015,” analyst Anita Soni wrote. She added, however, that the 2015 yearend results of several producers could indicate challenges.

Goldcorp

Soni downgraded the rating for the company from Outperform to Neutral, while reducing the price target from $15.50 to $14.

She said that the downgrade reflected:

1. The CEO transition period likely bringing headwinds, until the new CEO takes over and “alleviates uncertainty around strategy and outlook”
2. Production outlook “flatlines in 2016 with Cochenour delay and Penasquito grade decline which impacts FCF.” The consensus is unlikely reflecting this.
3. Current grade/reserve grade analysis indicating “some risk” to a section of the company’s 2014 yearend reserves.

Barrick Gold

The analyst maintained a Neutral rating for the company, while raising the price target from $9 to $10. She cited a 24 percent higher NAV and 11 percent higher cash flow estimate.

While the investor day scheduled for February 22 is a positive catalyst, several investors already seem to be “ahead of analysts in attributing value to upside potential,” while there are continued overhangs, which keep some investors on the sidelines.

Newmont Mining

Soni maintained an Outperform rating for the company, while raising the price target from $25.50 to $26. She cited a 3 percent higher NAV estimate for the revision. “We remain positive on NEM, and it becomes our preferred senior,” the analyst commented.