Gold miners facing closure or maintenance care threats are set to begin high grading their assets, amid weaknesses in gold prices.
Nomura published its equity research report today on global metals and mining. The report focused on gold, and offers the opinion that with average all-in costs near the current gold price, gold mining companies may face the threat of closures.
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Anticipating a short-term rebound in gold prices, the Japanese broker upgraded its ratings for some gold mining peers.
Upgrades Randgold, Polymetal and African Barrick Gold
Tyler Broda and the team at Nomura, however, feel high grade miners such as Randgold Resources, Russian miner Polymetal and African Barrick Gold’s Bulyanhulu would have a higher flexibility, on balance.
African Barrick Gold has seen the maximum upgrade by the Japanese broker, as the analysts revised its rating from Reduce to Buy, with a new target price of 155p.
Russian miner Polymetal has been upgraded from Neutral to Buy by Nomura analysts with a target price of 590p.
Nomural analysts have upgraded Randgold Resources from Reduce to Neutral with a target price of 4,370p.
ABG’s Buzwagi and POG’s POX Hub Face Closure/Cancellation Threats
The Japanese broker feels there will certainly be some closures and delayed lower grade projects. Towards this, the analysts feel African Barrick Gold’s Buzwagi and Petrapavlosk’s POX Hub will be eventual candidates for closure or cancellation.
The analysts, however, expect more resilience in supply over the next 12 months than perhaps might be expected at a cursory glance.
Expressing concern over the financial constraints faced by Petrapavlosk, the analysts have retained their Reduce tag with a price target of 55c.
Tyler Broda and the team at Nomura retained their Buy tag on Centamin, while revising its target price down to 45p from 70p, echoing concerns over Egypt.
Distressed Gold Miners To High Grade Assets
The analysts termed the closure or the placing of a mine on care and maintenance as a very difficult decision, particularly for single-mine producers.
However, the analysts anticipate the potential for gold mining companies facing the distressed situation to begin to further high grade their assets. This is expected to help buttress their income statements and balance sheets during the ongoing transitory weakness experienced in gold prices.
The following is the summary of ratings and target price of the Japanese broker: