Why Is Eldorado Gold a Favorite among Intermediate Gold Miners?



Performances of intermediate gold miners

Like senior gold miners (GDX), intermediate gold miners (RING) (GDXJ) have had very strong performances YTD (year-to-date). Those performances were followed by a recent weakness after Donald Trump’s presidential win and fears of a Fed rate hike. Intermediate gold miners, on the other hand, saw a rise of 59.0% in 2016.

Among these miners, Iamgold (IAG) outperformed its closest peers, rising 148.0% in 2016. Historically, it has lagged behind its peers due to a high operating leverage.

Eldorado Gold (EGO), on the other hand, has lagged behind its peers by a wide margin, rising just 4.5%. Permit issues and geographical concerns have plagued the stock in 2016.

Agnico Eagle Mines (AEM), Yamana Gold (AUY), and New Gold (NGD) have risen 56.0%, 46.0%, and 50.0%, respectively.

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Eldorado is analysts’ favorite

Among intermediate gold miners, Eldorado Gold (EGO) is analysts’ favorite, with 64.0% “buy” ratings and 36.0% “hold” ratings. There are no “sell” ratings for the stock.

Recently, analysts started turning bullish on Eldorado Gold. At its investor day in September 2016, the company outlined a very attractive project pipeline going forward. Its pipeline and likely catch-up might be why analysts are so optimistic about the stock.

New Gold and Iamgold

New Gold, on the other hand, has the lowest percentage of “buy” ratings at just 23.0%. Its Rainy River project still remains the biggest catalyst for the stock.

Iamgold has “buy” ratings from 55.0% of analysts. The stock’s target price in the last year has seen an upside of 187.0%.

Agnico Eagle Mines has “buy” ratings from 44.0% of analysts covering the stock. Its popularity among analysts, however, has fallen drastically since the start of 2016. It had 78.0% “buy” ratings and only 9.0% “sell” ratings at the beginning of 2016. It’s a rather low-cost producer, and its balance sheet is strong. In this rising gold price environment, this kind of strength leads to lower beta and a limited upside potential. In a flat or declining metal price environment, these types of stocks outperform.

Half of the analysts, or 50.0%, recommend a “hold’ for Yamana Gold. The target price of $4.70 implies an upside potential of 41.0%. Its recent announcement regarding the Brio Gold spin-off is a positive catalyst for the stock.

For an in-depth review of intermediate miners, see Will Gold Miner Stocks Offer Upside Potential in 2017?

In the next part of this series, we’ll look at changes in analysts’ recommendations for intermediate gold miners.


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