RBC Names Favorite Stocks As Gold Climbs Higher

With the spot price of gold climbing as high as US$738.30 per ounce on Thursday – its highest level since February 1980 – analysts continue to weigh in on the producers set to benefit most.

Based on both current net asset value and 2008 cash flow estimates, Newmont Mining Corp. (NEM) and Kinross Gold Corp. (KGC) are the most highly levered North American tier-one gold stocks, according to RBC Capital Markets.

IAMGOLD Corp. (IAG) is the top tier-two name, while Jaguar Mining Inc. (JAG) and High River Gold Mines Ltd. (HRG/TSX) lead the way for tier-three companies.

High cost producers typically experience higher cash flow growth (in percentage terms) when gold prices fluctuate, RBC said in a note to clients. Meanwhile, the firm said hedge positions lower leverage, pointing to Barrick Gold Corp.’s (ABX) remaining 9.5 million ounces on its long-term hedge book.

“We view a leverage investment strategy as a short-term opportunity, as we believe better long-term returns are possible by following growth or value investing strategies,” it said.

RBC’s top picks and outperform-rated stocks include Anatolia Minerals Development Ltd., Goldcorp (GG), Newcrest Mining Ltd., Lihir Gold Ltd. (LIHR), Jaguar and Greystar Resources Ltd. IAMGOLD is its only outperform-rated gold stock as a leverage play.