National BankYou are welcome dom. GLTA
Analysts at National Bank Financial analyst see an improved outlook for precious metals entering 2024 “in the context of real rates.”
“We begin the 2024 calendar year constructive on the outlook for gold and silver prices, and correspondingly gold equities, given the historical price appreciation in periods of declining or flattening real rates,” they said. “That said, we anticipate continued near-term volatility around key U.S. economic data prints/geopolitical headlines. Generally, we believe under this scenario, the best gold companies to invest in are those with well-funded near-term production growth, a strong balance sheet and upcoming catalysts. Given the anticipated volatility, names that exhibit the most sensitivity to gold prices include: EQX, FR, IMG.”
In a research report released Monday titled Gold is Back (Back Again), the firm noted market conditions are “supportive of consolidation” in the months to come.
“In our view, near-term price volatility and favourable long-term fundamentals create a market environment where gold producers will continue to shop for opportunities to add long-term precious metal growth to their portfolios at attractive valuations,” the analyst said. “Senior producers have maintained an elevated P/NAV multiple relative to more leveraged junior producers and developers. Should this differential persist, we expect it to drive consolidation, with juniors offering investors more torque to rising commodity prices given the potential for valuation re-rating and/or M&A potential.
“We outline near-term FCF generation and production growth across our universe, and when weighed against balance sheet strength/valuations, identify: AEM, BTO, CG, FNV, K, NGD and OGC as likely consolidators and ARIS, ELD, EQX, IMG, KNT and OR as acquisition targets. We also identify junior producers/developers nearing the completion of significant development projects which is often supportive of a re-rating/increased M&A appeal, outlining: ARTG, AYA, GMIN and IMG as having significant FCF inflection points in 2024.”
The firm also thinks the changing rate environment had brought “relative mispricing opportunities” that investors can take advantage of.
“Currently, elevated interest rates apply upward pressure on discount rates employed in DCF valuations,” it said. “When combined with social unrest, political uncertainty and acute labour availability challenges, a premium can be ascribed to consistent producing operations located in politically stable jurisdictions.
“We outline implied discount rates across our coverage universe and identify: DPM, OGC, OR and K as being potentially over-discounted by the market and ABX, ELD and FNV as under-discounted.”
Agnico Eagle Mines Ltd. ( “outperform”) to $85 from $86. Average: $89.42.