Gold shares rallied Wednesday as the yellow metal climbed to another new all-time high. The AMEX Gold Bugs Index (HUI), a composite of the world’s largest gold companies, advanced 1.2% to 564.87 in morning trading. The S&P/TSX Global Gold Index, Canada’s leading basket of gold equities, jumped 1.5% alongside the HUI.
COMEX gold futures, per the December contract, reached a new record high of $1,675.90 per ounce in overnight trading, and remained higher by $26.70, or 1.6%, at $1,671.20 this morning.
With today’s strength in gold equities, the HUI extended its weekly gain to 3.9%. However, on a year-to-date basis the HUI remains lower by 1.5%– well below the 17.6% rise in the price of gold over the same time frame.
Gold companies in the news Wednesday included Barrick Gold (ABX.TSX, NYSE: ABX) and Goldcorp (G.TSX, NYSE:GG), the sector’s two largest names by market capitalization.
Dundee Securities lowered its price target this morning on Barrick Gold to C$57.00 from C$58.00 per share, but reiterated its Buy rating. In its report, analyst Paul Burchell wrote that despite Barrick’s encouraging earnings report last week, “the announcement of higher-than-anticipated capital expenditures over the next couple of years is of concern, and has led to a slight decrease in our valuation.”
In contrast to Barrick, Dundee Securities upgraded Goldcorp to Buy from Neutral and reiterated its C$58.00 price target. Commenting on Goldcorp’s recent earnings release, the firm wrote in a note to clients that “While the company’s gold production was somewhat lower than we were looking for, operating costs (that take advantage of by-product credits) remained well below the industry average and corresponding operating margins remained high. The lower-than-anticipated production was largely due to teething problems during the ramp up at the important Penasquito Mine; however, we expect the issues to be resolved by year-end with production hitting forecasts by 2012.”
Dundee went on to say that “We downgraded our rating on Goldcorp to Neutral in late April of this year. Since that time, the stock has lost 11% of its value compared to a loss of 3% in the S&P/TSX Global Gold Index over the same time period. Like most gold producers, Goldcorp is normally leveraged to the price of gold, and we remain bullish on the yellow metal, suggesting a higher share price going forward. We now view the stock as undervalued, trading as it is at a Price/Net Asset Value of 1.2 times compared to its two-year average of 1.6 times.”
In morning trading, shares of ABX added $1.09, or 2.2%, to $49.68, while GG advanced $0.72, or 1.5%, to $49.09 per share.
Other notable gold shares moving higher included Agnico-Eagle Mines (AEM), Kinross Gold (KGC), and Newmont Mining (NEM). AEM, KGC, and NEM rose 1.3%, 0.4%, and 2.3%, respectively.
Premier Gold Mines Provides Mid-Year Update
- Premier Gold Mines recently announced its intention to acquire Goldstone Resources.
- New discoveries have been made at Hardrock including the recently identified Tenacity South horizon where drilling has confirmed high-grade mineralization up to 10.89 grams per tonne (g/t) gold across 10.0 meters including 45.40 g/t across 2.0m and 37.49 g/t across 2.1m.
- Drilling at the Rahill-Bonanza joint venture project in Red Lake continues to define high-grade gold mineralization within the "2E Horizon" with visible gold seen in recent down-plunge drilling.
- Drilling at the PQ North Project has intersected numerous gold-bearing shear zones in addition to mineralized iron formation units with alteration and mineralization similar to the nearby Musselwhite Gold Mine.
- The company has three drill rigs active at the Saddle Project in the Carlin Trend. Several holes have intersected significant mineralization and a results update will be provided in the coming weeks.
