Equity analysts at National Bank Financial believe the expectations for the declining interest rates support a bullish outlook for precious metals, leading the firm to reaffirm its “constructive” stance on the sector. “With real rates declining throughout the year, continued heightened geopolitical risk and central banks remaining net purchasers of gold, we have seen gold/silver prices respond positively, up 26 per cent and 28 per cent year-to-date, respectively, and we remain bullish on the precious metals outlook going into year-end on the same basis,” they said.
In a research report released Thursday, the group updated their estimates based on metals prices and foreign exchange rates to “reflect the current price environment.” They also raised their short-term and long-term price assumptions, including their gold assumptions for 2024 (to US$2,409 per ounce from US$2,280) as well as the long term (to US$2,200 from US$1,700).
“We have modified our calculation methodology for the LT gold price to factor in cost inflation in the mining industry out to our LT forecast year, by inflating the LTM [last 12-month] production-weighted average fully baked All-In Sustaining Cost (AISC) of the Top 10 global gold producers and adding 15 per cent to this future AISC projection to determine where gold needs to be to see investment in the sector,” they explained. Our analysis results in a new LT gold price of US$2,200/oz (prev. US$1,700/oz), while we have increased our LT silver price to US$27.00/oz (prev. US$21.00/oz) to keep our gold/silver ratio unchanged at 81 timed, in line with long-term averages. Our LT prices now begin in 2030 (prev. 2029). We also apply 3 per cent per annum of inflation to our medium-term cost forecasts (2025-2030) for opex and capex which is aligned with the average inflation the sector has realized over the past decade.”
Ahead of quarterly earnings season, the analysts also emphasized a number of companies in their coverage universe “successfully completed growth projects earlier this year and are focused on ramping up to commercial production during 2H24.”
“We would also note that several companies are guiding to a back-half weighted production year (especially Q4), which we expect to drive strong FCF growth quarter-over-quarter and also thanks to the gold price continuing to set new all-time highs,” they said.
With their adjustments, the analysts made rating changes to stocks in their coverage universe... Calibre was included.
Calibre Mining Corp. to “outperform” from “sector perform” with a $4 target, up $2.85 and above the $3.17 average.
Analyst Don DeMarco: “We are upgrading to Outperform (was Sector Perform) after revising our gold price deck with a materially higher long-term gold price ... in a catch-up to the constructive precious metals’ environment. This adjustment lends favourably to our Valentine project NAV estimate (58 per cent of our NAV) given production of 195k oz/year over an extended 12-year mine life (FS 2022).
“Our upgrade also considers that Valentine mine development is in the homestretch, first pour approaching iNQ2/25 and de-risking advanced, with capex normalized, a site visit showing well and led by a strong management team with a track record of success. We highlight visibility for a valuation re-rate to reflect increased production in Tier 1 jurisdiction.