Analyst Actions: Credit Suisse Q1 Preview For Canada Metals & Mining


Credit Suisse says: "1Q13 Earnings Preview: Focus on a lower price environment; Revising Estimates."

While all commodities have traded off in April, none more so than gold (-12%) and silver (-19%): "Our commodities team called an end to the decade-long bull-market in gold on Feb. 1 this year (Gold: The Beginning of the End of an Era). The recent fall has exceeded even our team's bearish expectations."

Profitability and liquidity in a lower commodity price environment under the microscope: "We estimate the all-in cost including growth capital, interest and taxes in the gold sector will average $1,690/oz in 2013. If gold and silver prices remain below the Credit Suisse forecast, deferral of gold company capex is likely, in our view. Currently, our sector average all-in cost forecast declines to $1,482/oz in 2014 and $1,318/oz in 2015, with 59% of the decline attributable to lower growth capex spending. We expect investors will focus on management's response to the lower gold and silver prices, with capital review efforts already announced by the seniors now likely kicked into high gear.

Top picks in Q1 results (which tends to be seasonally weak). For the near term we prefer producers with strong balance sheets and lower costs. Our top picks in the golds are Agnico-Eagle Mines Ltd ( AEM ) (higher grade assets provide flexibility and strong operational execution), Yamana (YRI.TO) (growth and low costs), New Gold ( NGD ) (low costs), Eldorado (ELD.TO) (low costs) and Detour Gold (DGC.TO) (valuation). In the base metals space we prefer Teck (TCK-B.TO), Lundin ( LUN ), and Cameco (CCO.TO). We like North American Palladium (PDL.TO) in PGMs. We do not have any Outperform ratings in iron ore, but Labrador (LIF.TO) offers the most defensive trade in the sector."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright (C) 2014 All rights reserved. Unauthorized reproduction is strictly prohibited.

This article appears in: Investing , Commodities

Referenced Stocks: AEM , LUN , NGD

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