We have been following the predictions of precious metals analysts throughout this year and have been giving monthly summary reports. For these summary reports we have been considering price target information provided by Yahoo.com.
In the present article we would like to give the start-of-September update for selected gold mining companies. We will be noting price targets and comparisons will be made to targets documented in our August edition. Many companies mentioned in this article may have more analysts following their progress than considered in our database. This difference is due to the fact that not all analysts release their predictions to Yahoo.com. Instead, in many cases analyst data are considered as proprietary information only available to subscribers of the analysts' services.
We continue to consider the following stocks (in alphabetical order): Agnico Eagle (NYSE:AEM), Alamos Gold (NYSE:AGI), Allied Nevada (NYSEMKT:ANV), AuRico Gold (NYSE:AUQ), Barrick Gold (NYSE:ABX), Eldorado Gold (NYSE:EGO), Goldcorp (NYSE:GG), IAMGOLD (NYSE:IAG), Kinross Gold (NYSE:KGC), McEwen Mining (NYSE:MUX), Nevsun Resources (NYSEMKT:NSU), New Gold (NYSEMKT:NGD), Newmont Mining (NYSE:NEM), Primero Mining (NYSE:PPP), Randgold (GOLD) and Yamana Gold (NYSE:AUY). We decided to retain Nevsun Resources in our analysis despite a change in focus to copper in its mining operations.
The table below summarizes our data. The first three columns list the company name, ticker symbol and share price at the time of writing. Price targets (low, median and high) are listed in the following three columns. These targets are followed by a column giving the number of analysts providing data to Yahoo.com and the mean recommendation given by these analysts ranging from 1.0 (strong buy) to 5.0 (sell). This concludes the data sourced directly from Yahoo.com.
The following columns are colored in light green and contain data derived from our source data. These data points are given in percentages related to the share price at the time of writing. The column titled "median-price" gives the difference between the share price and the median target price. The column titled "high-low" gives the difference between the high and the low target. The last four columns titled "target change" document the changes in price targets since the August report with the last columns giving the average change over the low, median and high price targets.
The diagram below visualizes the data listed in the "median-price" column in the table above. This column shows the difference between the current share price and the median price target. Under normal circumstances we would view a large value in this column as an indicator for the potential of disproportionate gains over the coming year.
McEwen Mining still leads this category with a median price target more than 60% higher than the current share price. It should be mentioned here that only one analyst provides a target for McEwen Mining on Yahoo.com at present. At the other end of the spectrum we find Sibanye Gold, the only company in our data base trading above the current median target, and in fact Sibanye is even trading above the high target. Barrick Gold is trading only 3% below the median target indicating the least potential for share price movement in either direction.
Column "high-low" measures the divergence in analyst opinions. The results from this column in the table at the top of this article are visualized in the next diagram. Analysts seem to disagree the most on IAMGOLD followed by Barrick Gold and Kinross Gold. The greatest agreement in price target is observed for Sibanye Gold.
Column "target change average" gives a measurement for the change in targets during the past month. With the exception of Nevsun Resources all targets were cut yet again on average despite a notable rise in gold price during this period of time. On average targets were revised down by 42.4% of current share prices. Ignoring the outlier provided by Allied Nevada the average downgrade is still 22.6%.
As discussed in our August edition Allied Nevada had technical and managerial problems at its mine. Analysts have caught up to this development during the past month with price targets being slashed by a whopping 340% of the current share price. Of the other companies Barrick Gold received the harshest treatment.
And to round this article out, we would like to offer a visualization for column "Recommendation." Two companies are given a recommendation of 1.5 indicating high expectations by analysts, namely Randgold and Primero Mining. Not surprisingly after all the problems at the Hycroft mine Allied Nevada has become the stock least loved by analysts.
Our pick of the month
This month we would like to highlight Primero Mining, one of the two companies receiving a buy/sell recommendation rating of 1.5. The low cost structure at the San Dimas mine offers reasonable protection from the volatility observed in the gold space in recent times. The upcoming construction decision for the Cerro Del Gallo project in the fourth quarter of this year might provide another catalyst for a higher share price for this company.
Disclosure: I am long AEM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.