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Precious Metals:1Q17results wrap,Companies slowly turning on the investing spigot

类型:投资策略  机构:德意志银行   研究员:Jorge Beristain,Chris Terry  日期:2017-05-22
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Results were generally below forecasts but 2Q17 expected better.

    Aggregate EBITDA missed expectations by 4%, with the largest impact fromBarrick (-10%, lower gold sales) and Wheaton Precious Metals (-7%, on lowersales impacted by the San Dimas strike). Franco-Nevada was +9% above DBewith a number of assets outperforming. By 1Q17-end, aggregate Net Debtdecreased to $11.1bn (-3% QoQ, in-line with DBe), as focus remained onimproving Balance Sheets. Managements re-iterated 2017 guidance, withexception of Barrick (changes at Veladero) and Hecla (suspended guidance atLucky Friday until strike concludes). We retain selective Buys includingNewmont, Barrick, Wheaton Precious Metals (previously Silver Wheaton) andPan American and note gold’s “safe haven” status re-emerging on recent USpolitical turmoil impacting timing of Trump Administration’s pro-growth agenda.

    Growth capex is rising whether through exploration or M&A.

    As Balance Sheets are largely restored, managements are increasingly lookingat Greenfield and Brownfield options that can be developed if gold pricingenvironment improves. In 2016, Goldcorp bought the Coffee project ($406m)and early this year, it acquired Exeter Resources as well as a 50% interest inCerro Casale (25% each from Kinross, $260m cash and Barrick, $260mdeferred payment). Barrick is mainly focused on its still-suspended Pascua-Lama for future growth and sold-down part of Veladero ($960m). Newmontannounced a ~20% investment ($109m) in Continental Gold (Columbia) as alonger-term option. Kinross is continuing to look at further investments at itslong delayed Tasiast Phase 2 project. With the industry close to “peak gold”production, we anticipate focus on further exploration, optimization, smallerscaleM&A and investment in future development projects to slowly inch up.

    Environment for Royalty/Streaming deals less robust.

    With Producer Balance Sheets in better shape and managements not yet readyto commit to mega-projects as during the last up-cycle outlook for financingdeals is on stand-by. Meanwhile, Royalty and Streamer Franco-Nevada islooking at O&G bolt-ons to fuel growth and competitor, Wheaton, at coppergoldstreams as pure Silver project options are fewer. While explorationbudgets are rising for most companies, spending remains below peak levels andwe believe the industry will struggle to replace depleting Reserves.

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