4 Precious Metal Stocks Deutsche Bank Just Got Very Bullish On

In a report published Thursday, Deutsche Bank analyst Jorge Beristain said that China’s move to devalue its currency had shifted risk-reward in Precious Metals equities to favorable.

China has devalued its currency, RMB, which has lost 3.5 percent in 24 hours. Gold had declined 6 percent so far this year, while the Precious Metal equities seemed to have lost 20 percent. Stocks in this segment came under pressure mainly on concerns over gold continuing to retreat, which would put levered Balance Sheets “under further strain,” analyst Jorge Beristain wrote.

Following the recent decline in Precious Metals stocks, Deutsche Bank upgraded companies that have greater exposure to gold. The ratings for Newmont Mining Corp NEM, Barrick Gold Corporation (USA) ABX, Pan American Silver Corp. (USA) PAAS and Hecla Mining Company HL have been upgraded from Hold to Buy.

Beristain said that both Barrick and Newmont had high exposure to gold, with 82 percent of their 2016 revenues estimated from this precious metal. Moreover, their share price moves appeared “overdone relative to gold’s move,” their balance sheets were improving and their continuing capex and cost-outs were “both company and macro driven (FX, oil).”

Pan American and Hecla also had gold exposure of 26 percent and 38 percent, respectively, significant non-US cost-exposures and favorable risk/reward.

Beristain added that, since April 2013, when the gold correction began, companies have had time to reposition to the lower USD gold price, and have incorporated dividend cuts as well as capex and cost reductions that were still underway.

The price targets were reiterated at:

• Barrick: $12
• Newmont: $27
• Pan American: $12
• Hecla: $3.50