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
) (higher grade assets provide flexibility and strong operational
execution), Yamana (YRI.TO) (growth and low costs), New Gold (
) (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 (
), 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
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