RBC Precious metals analysts at RBC Dominion Securities are forecasting “exceptionally strong” results for gold equities in the second half of 2024.
“In 2Q, gold producers reported seasonally weak operating results but a sharp improvement in financial results due to higher gold prices. In 2H, we forecast a sharp improvement in operating results which, alongside elevated gold prices, could match record FCF for the sector realized in 2H20,” they said. “Commentary by operators continues to emphasize a measured approach to discretionary spending and a focus on cost containment, in our view critical for gold equities to continue to participate in price upside. At RBC revised pricing, we forecast large-cap gold producers trade at 2024/25 FCF/EV yield of 4.7 per cent/7.6 per cent and EV/EBITDA of 6.4 times/5.2 times.”
In a research report released Tuesday, RBC “modestly” raised its gold price forecast for the remainder of the day while hiking its long-term project by 10 per cent to US$2,200 per ound (from US$2,000), “influenced by rising breakeven costs of mine production as well as gold price model updates.”
“We increase our gold forecast in 2024 to $2,343/oz (up 2 per cent) and 2025 to $2,655/oz (up 1 per cent) in conjunction with RBC Elements,” the analys said. “RBC Mining Equities’ gold price forecasts are slightly below spot near-term, where we view current rate cut expectations and US election uncertainty as risks. Potential weakness in gold equities is viewed as a buying opportunity ahead of a major 2H24 improvement in financial results. Our preferred gold equities include Adriatic Metals, Agnico Eagle, De Grey, G Mining, Hochschild Mining, New Gold, Osisko Gold Royalties, Royal Gold, Torex Gold.”
They added: “Investment demand is growing, but some price risks are present near-term. Gold prices have continued to reach new record high prices more than $2,500 per ounce, supported by strengthening investment demand on shifts in monetary policy expectations, a key component of our bullish view. Since our prior May outlook, consensus rate cut expectations have sharply increased, now slightly exceeding our gold price model inputs. Our gold price forecasts are slightly lower in 3Q vs. spot, and we view some downside risk near-term in light of consensus rate forecasts, plus US election uncertainty in November. We would view upcoming potential gold price downside risk as a buying opportunity.”
The analysts made a series of target price adjustments to stocks in their coverage universe to align with the price deck changes. Their moves included:
- Agnico Eagle Mines Ltd. ( “outperform”) to US$87 from US$80. The average on the Street is US$83.97.