The Can of Corn today applies the "keep dancing til the music stops" principle of markets and raises its targets for gold bullion, silver bullion and therefore shouts "gotta buy em" about the miners, too. You can download the 500Kb, 23 page first quarter review of precious metals and their picks right here and below you get the front page synopsis to give you an idea of the contents.
We are raising our peak gold/silver scenario to $1,600/$47.50 (from $1,500/$30) for equity target price setting. For earnings purposes, we are also raising our 2011 price deck to $1,525/$42.00 (from $1,450/$29.75). See Figure 1 for the revised profile.
* We continue to believe that macroeconomic conditions continue to favour higher gold and silver prices, including record global liquidity, inflation prospects and low real interest rates, currency debasement on sovereign debt woes and political unrest in the Middle East & North Africa. The Standard and Poor's cut in the US credit outlook to negative and higher inflation readings have been the catalysts to move gold through our previous peak of $1,500/oz.
* Our average implied return for the group is 36%, based on a target P/NAV multiple of 1.20x (revised down from 1.30x but higher than current 1.05x). Ratings revisions include: Agnico-Eagle, Hecla and Silver Wheaton upgraded to BUY from Hold, and Alamos Gold upgraded to SPECULATIVE BUY from Hold. 2011 Focus list picks include Goldcorp, Allied Nevada and Primero Mining.
* We expect Q1/11 results to highlight year-over-year increases in earnings but some sequential declines due to production levels and cost pressures with only a modestly higher gold price. Our Q1/11 EPS estimates are notably above consensus for ABX, and sequentially higher for GAM, MFL, SLW and PAAS. Our estimates are below consensus for AEM, ANV, YRI and ELD, and we expect sequential declines for CG, ANV, GG and P.
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