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Geopolitical Uncertainty: Which Gold Stocks Are Analysts Playing?

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Part 11
Geopolitical Uncertainty: Which Gold Stocks Are Analysts Playing? PART 11 OF 11

Ratings Changes for South African Gold Miners: What Do They Mean?

AngloGold Ashanti’s ratings changes

The Bank of America Merrill Lynch upgraded AngloGold Ashanti (AU) from “neutral” to “buy” on April 5, 2017.

Citigroup (C) downgraded AngloGold to “sell” on February 22, 2017, from its previous rating of “neutral.” AU’s CEO (chief executive officer) Srinivasan Venkatakrishnan sold some shares of the company that had been acquired through a profit-sharing program in 1Q17. Although the stated purpose of the sale was to cover a related tax liability, investors didn’t take it lightly. It was one of the major reasons for the stock’s underperformance in 1Q17.

Ratings Changes for South African Gold Miners: What Do They Mean?

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Ratings changes after acquisition for Sibanye

Sibanye Gold (SGBL) hasn’t seen any major ratings changes in 2017. In December 2016, it entered into an agreement with Stillwater Mining (SWC) to acquire all its stock. Commenting on the Sibanye Gold–Stillwater Mining deal, UBS analysts Danielle Chigumira and Kieron Daly said, “By Sibanye’s own admission, the valuation paid for Stillwater’s operating assets looks full.” They added that the market might not be factoring in the upside from the Blitz project.

J.P. Morgan Cazenove described this offer as “a very full price.” It also said that Sibanye would need to repay a debt of $865.0 million to return the company to a comfortable net debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) ratio of 1.5x.

Harmony Gold and Gold Fields

Deutsche Bank (DB) lowered Harmony Gold’s (HMY) rating from “hold” to “sell” on March 17, 2017. DB analyst Patrick Mann believes that the gold and platinum sectors are both fully valued.

On February 3, 2017, HSBC raised Harmony Gold’s (HMY) target price from 34 South African rand to 35 South African rand.

Gold Fields (GFI) stock hasn’t seen major ratings changes year-to-date. However, there have been several target price changes. HSBC lowered GFI’s target price from 61 South African rand to 43 South African rand and downgraded it from “hold” to “reduce” on January 27, 2017.

RBC Capital Markets downgraded GFI from “outperform” to “sector perform” on December 12, 2016.

Gold miners (GDX) will release their earnings in the next few weeks. For an analysis of their latest results, be sure to watch Market Realist’s Precious Metal Mining page.

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