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Randgold, Highland Gold remain top picks for Numis


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Randgold, Highland Gold remain top picks for Numis

Randgold Resources Ltd. remains the favorite large-cap gold producer for Numis Securities in the fourth quarter. Numis updated its fourth-quarter stock recommendations and target prices for gold and silver equities, assessing 10 producers and four developers.

"We retain a positive stance on Randgold despite a challenging third quarter and expect the shares to re-rate as the underground mine at Kibali is commissioned," the team wrote in a Dec. 15 note. "Randgold is currently trading at 1.5x net asset value and retains a very solid balance sheet with no debt and US$572 million of cash at the end of the third quarter."

The analysts continued to rate the stock a buy with a target price of £90 per share. Its Dec. 22 closing price stood at £71.35 per share.

Randgold was one of seven producers Numis continued to rate a buy, though partially with changed target prices.

Acacia Mining plc's target price was cut by 25%, to £3 per share from £4 per share, amid assumptions that a draft deal agreed by Barrick Gold Corp. and the Tanzanian government is implemented with both a 16% free carry given to the government and the payment of US$300 million to resolve historical tax issues. Barrick holds a 63.9% equity stake in Acacia.

Estimates for Pan African Resources Plc, also a buy recommendation, were upped marginally to 30 pence per share, from 28 pence per share, driven by expectations of a stronger exchange ratio between the British pound and the South African rand.

Target prices for Centamin Plc, Highland Gold Mining Ltd., Orosur Mining Inc. and Pretium Resources Inc. — the remaining buy-rated producers — remained unchanged at £1.70 per share, £2.20 per share, 35 pence per share and C$22 per share, respectively.

Highland Gold was flagged as Numis' preferred mid-cap gold player in light of a solid first half, with an EBITDA margin of 50% despite a strengthening Russian ruble.

"The company remains on track to meet the upper end of guidance of 255,000 to 265,000 ounces for 2017 and should be able to at least sustain a flat dividend for the year," the team said. "We expect the shares to re-rate as the company delivers on both the expansion of the Novo mine and the development of the Kekura project."

Numis cut the outlook for three miners amid assumptions that the silver price will drop by 8% to US$16.80/oz in the current quarter.

As a result, the rating for Hochschild Mining Plc was moved to hold from add with a lower £2.30 price target, down from £2.50 per share; the guidance for Russian producer Polymetal International Plc was revised to add from buy, with a target price of £10 per share, from £11 per share previously; and the target price for Fresnillo Plc was reduced to £14 per share from £15 per share, with a retained hold recommendation.

Stocks of four developers were rated buy across the board.

Dalradian Resources Inc. was the only player that saw its target price lifted, to £1.40 per share from £1.30 per share, mainly due to changed foreign exchange assumptions. The same factor led to a reduced target price for Condor Gold Plc, which saw its target price cut to £1.40 per share from £1.50 per share.

Numis left its target prices for Chaarat Gold Holdings Ltd. and Lydian International Ltd. at 35 pence per share and 80 Canadian cents per share, respectively.

As of Dec. 21, US$1 was equivalent to 58.55 Russian rubles.