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November 6, 2009 Dear Friend,
We upgraded Agnico-Eagle to
Overweight from Neutral with a $75 target based on higher gold
prices, its share price decline and its various expansion
programs to 1.5 mm oz. We estimate it will command a $100 per
oz EV/reserve premium to its peers owing to lower operating
costs, lower capital costs and simplicity.
We raised earnings estimates
for Barrick Gold to reflect $1,050 long-term gold prices,
perhaps optimistically. We found its shares trade at just 13x
such estimates, and perhaps suffer a valuation "discount" owing
to large dollar capital projects as well as the hedge book
being closed out. In general, larger capitalization gold shares
have risen mildly as gold rallied in recent weeks with stronger
smaller caps often enjoying 50% rallies.
Thomas Weisel recommended
purchase of Duluth Metals on November 5th, which rose over 23%,
and has almost tripled since neighbor PolyMet Mining won October
2nd notice that PolyMet's draft EIS will be published. We have
been recommending Duluth Metals since October 2007 at a $15
price target, although its recent ore grade and tonnage resource
expansion to 17.7 mm oz of palladium, platinum and gold and 15.2
bil. lbs of nickel and copper with 114 mmt at 1.8%
copper-equivalent grades justifies an even larger price target.
John C. Tumazos
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Copyright © 2008 John Tumazos Very Independent Research,
LLC
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