Barron's: Gold Miners: It’s Not Gold Prices You Should Be Worried About
By Ben Levisohn
JPMorgan’s John Bridges and Anant Inani warn that lower copper prices could mean big trouble for gold miners like Barrick Gold (ABX), Newmont Mining (NEM), New Gold (NGD), and Compania de Minas Buenaventura (BVN). They explain why:
Bloomberg News
Gold is the Cinderella commodity and is showing relative strength…While gold has been under pressure, the metal does have jewelry and investment demand while the base metals are suffering from weaker estimates for global and especially Chinese demand. Perversely, copper had its own semi-investment demand when it was used for collateral lending but if this category of demand falls away, prices could be weaker…
We continue to like Goldcorp (GG) and Agnico Eagle Mines (AEM) for their production pipeline and the forecast 60% and 40% upside to our new target prices of $22 and $34 respectively. However, the lower precious and by-product credit prices have lowered target prices. Target prices were lower for Barrick, Newmont and Buenaventura; down 14%, 15% and 20% respectively
due in part to these companies’ exposure to copper by-product credits.
Shares of Barrick Gold have dropped 1.8% to $6.63 at 1:12 p.m. today, while Newmont Mining has fallen 3.1% to $16.20, New Gold has tumbled 4.6% to $2.18, Compania de Minas Buenaventura has declined 1.3% to $5.93, Goldcorp has dipped 0.4% to $13.72, and Agnico Eagle Mines is off 2.2% at $23.61.