Analysts Positive on AEM, EGO, Cautious on NEM

Several of the world’s largest gold mining companies were in the news on Friday as they were the subjects of reports published by Wall Street analysts.  As for the sector as a whole, the Market Vectors Gold Miners ETF (GDX) dropped $0.27, or 0.5%, to $53.63 per share while the Market Vectors Junior Gold Miners ETF (GDXJ) slid $0.16, or 0.6%, to 424.82 per share.

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The sector’s weakness coincided with a modest decline in precious metals and the broader equity markets.  COMEX gold futures dipped 0.3% to $1,774.50 per ounce while the S&P 500 Index retreated by 0.5% to 1,440.70.

Agnico-Eagle Mines (AEM) was reiterated at Sector Perform with a $56.00 price target by RBC Capital Markets as the firm updated its technical outlook on the Canadian-based gold producer.  “AEM has made a series of higher highs and higher lows since the end of March and is trading above both the 50 and 200-day moving averages, both of which are technical positives,” RBC noted. “First resistance is near the July 2011 low at 53.14 followed by the October 18th low at 55.76. Next major resistance is near the September 2011 high at 72.51.”

Shares of AEM inched up by $0.19, or 0.4%, to $51.97 in mid-day trading.

Eldorado Gold (EGO) was reiterated at Outperform with a $20.00 price target by Scotia Capital after Eldorado announced that the Preliminary Environmental License (for the Tocantinzinho (TZ) project has been granted by the Environmental Council of Para State, Brazil (COEMA).

Scotia wrote that “The PEL confirms the environmental feasibility of the project and allows the company to apply for the construction license, the final permit needed for construction of the project to commence…TZ will be an open pit mine with a conventional CIL (carbon-in-leach) milling circuit. ELD expects to produce 159 koz at a cash operating costs of $559/oz (no royalties) over the life of mine (LOM). The mine life is 11 years and it currently holds 1.9 Moz in reserves.”

EGO held near unchanged at $15.14 per share on Friday.

In contrast to the positive commentary on Eldorado and Agnico-Eagle, Newmont Mining (NEM) was the subject of cautious commentary by RBC Capital Markets.  The firm noted that the U.S.-based gold producer “has revised down 2012 gold production on a 100% basis to 71koz from 114koz previously, and copper to 171MMlbs from 192MMlbs previously, as it processes lower grade ore from stockpiles” at the Batu Hijau mine in Indonesia.  Newmont holds a 48.5% interest in Batu Hijau through a joint venture with Sumitomo Corporation and the Bakrie Group.

“We view this news as a modest negative for the shares as the company works through the lower grade portion of the mine,” RBC added.  In mid-day trading, NEM fell $0.56, or 1.0%, to $55.98 per share.