A “material” increase in gold and silver prices is likely to translate to higher free cash flow and “trending balance sheet improvements” for Canadian precious metals companies in the second quarter, according to equity analysts at National Bank Financial.
In a research report released Wednesday previewing the approaching earnings season, the firm emphasized several companies have already upgraded production guidance for the year and it expects to see higher output results from the previous quarter.
“With inflation remaining top of mind, we are looking for commentary on any inflationary pressures that could have a material impact on costs in 2H24 and beyond,” they said.
The analysts also increased their near-term prices for both gold and silver through 2025 as well as their 2026-2028 price estimates to “reflect the elevated trading ranges over the last six months.”
“Consensus estimates remain fluid, thus modest differentials vs. NBF may be explained, while larger gaps are a source for our conviction beats/misses,” they said. “At the time of writing, we have conviction in Agnico Eagle (AEM-T), Dundee Precious (DPM-T), Lundin Gold (LUG-T) and MAG Silver (MAG-T) beating Bloomberg consensus Adj. EPS estimates, while we model Allied Gold (AAUC-T), Centerra (CG-T), Endeavour Mining (EDV-T) and OceanaGold (OGC-T) below consensus. Details behind our conviction calls are presented later in this report. For concentrate producers, provisional pricing adjustments are expected to be a net positive for 2Q24 earnings.”
The analysts made a series of target prices increases to stocks in their coverage universe, adding: “Companies with target price changes of 10 + include: Coeur (+41.7 per cent), ARIS Mining (+21.4 per cent), G Mining Ventures (+16.7 per cent), Kinross (+16.4 per cent), Wesdome Gold (+15.0 per cent ), Pan American Silver (+14.7 per cent), Artemis Gold (+14.3 per cent), Dundee Precious Metals (+14.3 per cent), New Gold (+14.3 per cent), Sandstorm (+11.4 per cent), OceanaGold (+11.1 per cent), K92 Mining (+10.8 per cent), Lundin Gold (+10.8 per cent), and I-80 Gold (-10.3 per cent).