Are the golden days over? They may be, as Mackie analyst Barry Allan downgraded two gold stocks; Barrick Gold Corporation (USA) (NYSE:ABX) and IAMGOLD Corp (USA) (NYSE:IAG). The analyst explains that Barrick Gold has been a great investment, but it is time to stop buying in since the market has realized the value of the share price. On the other hand, Allan notes that there is no reason to hold IAMGOLD any longer due to its flat or declining production estimates through 2017.
Barrick Gold Corporation (USA)
Since the market has recognized the value of Barrick Gold, Allan believes the time has come to stop actively buying up shares. In the last six months, shares of the company have increased more than 50% and Allan’s net asset value estimate has increased thanks to lower debt and increased reserves. Although this is good news for investors, Allan is downgrading the stock from Buy to Hold because of the stock’s “good performance.”
The analyst explains, “Without higher gold prices, our target only rises to C$16 from C$14, reflecting the increase in NAV. ABX is once again getting it right, and delivering shareholder returns.” The company’s 2015 production levels of 6.12 Moz beat Allan’s estimates of 6.04 Moz thanks to “excellent operating performance at Goldstrike and Cortez mines.” Furthermore, operating losses were narrower than expected coming in at $596/oz compared to Allan’s estimate of $615/oz.
2015 was a solid year for the company, as Allan explains, “ABX has made good strides in solving an over-leveraged balance sheet and halting the development of questionable projects of low-return. The attention has shifted to getting the best from its core mines, which operating results have shown to be a good strategy.”
Going forward, the company’s Turquoise Ridge will be at the forefront of the company’s attention. Allan expects “to see a pre-feasibility on the construction of an additional shaft at Turquoise Ridge followed by a pre-feasibility” on the Goldrush project. Investors expect to see the company maximizing its operating results.
According to analysts polled by TipRanks, 2 analysts remain bullish while 2 are neutral.
IAMGOLD Corp (USA)
Due to the recent spike in share price, Allan is downgrading the gold company from Hold to Sell and moves his target price from $2 to $2.50 as he “[fails] to see any reason to own the equity.” He elaborates, “With a flat to declining production profile for 2016 and 2017, and a relatively high, all-in cost of ~US$1,200, other than the potential for higher gold prices, there is no fundamental reason to be involved with the stock.”
Allan explains that the company met his revised expectations for 2015, but he does not anticipate any substantial changes for 2016. The company posted production levels of 835 Koz for 2015, higher than the analyst’s estimates of 806 Koz, though operating costs of $835/oz were higher than his estimates of $817. Allan has lowered his production expectations for 2016 due to his expectations for a “lower level of output at a marginally lower cost.”
After accounting for year-end data from 2015, the analyst slightly trimmed his 2016 estimates but notes that “nothing materially changed.” The analyst concludes, “In short, IMG is working hard just to maintain production and an acceptable all-in operating cost.”
According to TipRanks, no analysts are bullish on IAMGOLD. In the past 3 months, 2 analysts have recommended selling the stock while 3 remain neutral.