RBC Boosts Majority of Gold Producers' Price Targets

Newmont Mining Corp. (NEM), Barrick Gold Corp. (ABX), Goldcorp Inc. (GG), and NovaGold Resources Inc. (NG) are among the gold companies that have faced capital and operating cost increases in recent months. Higher costs for oil, materials and labor, as well as weakness for the U.S. dollar, are all to blame.

Analysts at RBC Capital Markets expect these trends will continue to put pressure on miners. And while they boosted their price forecasts for both silver and gold, these gains are expected to limit, and in some cases be completely offset by higher costs.

RBC thinks Barrick, Newmont, Yamana Gold Inc. (AUY), and Gabriel Resources Ltd. (GBRFF.PK) are most susceptible to further capital and operating expenditure increases.

The firm now expects silver prices will average $14 per ounce in 2008, up from an earlier estimate of $13.50. Its forecasts for 2009 and 2010 also rise $0.50 to $14.50 and $15, respectively.

RBC’s forecast for gold jumped $50 per ounce for both 2008 and 2009, to $780 and $810, respectively. Its estimate for 2010 climbs $60 to $850.

As a result of these adjustments, RBC’s average target price for Tier I gold names climbs 1%, and 4% for Tier II stocks.

Kinross (KGC) is the only Tier I name that got a price target revision, up $1 to $22 per share.

Second-tier names IAMGOLD Corp. (IAG), and Eldorado Gold Corp. (EGO) saw the biggest adjustments to their targets at RBC, up $1 to $13 and up $0.75 to $8.25, respectively.

Tier III producer Alamos Gold Inc. got a $1 price target reduction to $6.

NEM vs. ABX vs. GG vs. NG vs. AUY vs. KGC vs. IAG vs. EGO 1-yr chart: