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  (John Lehmann/The Globe and Mail)


(John Lehmann/The Globe and Mail)

Canaccord downgrades 8 gold, silver stocks as it slashes metals outlook Add to ...

"Under our revised gold price forecasts, we expect that the Bogoso/Pretea operation will likely not be viable. We continue to see value in the Wassa operation at our revised gold price forecasts. However, we believe that sustaining profitability over the next few years will likely require significant near term capital investments. We believe prevailing market conditions may force the company to drastically cut capital spending over the next 12-months, which in our view, could impact future profitability."

Goldrock Mines Corp. downgraded to “hold” from “speculative buy” with a revised target of 35 cents (Canadian) from 90 cents. The average target is 87 cents.

"Downward revisions in our precious metal forecast and its impact on the valuation of the fully permitted, Lindero open pit/heap leach gold project has led us to defer the forecast development of the project by three years to FQ2/16E (November 2016) with initial production postponed to 2018E. The net impact of these changes was a drop in our NPV11 per cent valuation (~US$30-million, ↓75 per cent) of the Lindero project. A testimony to the project’s leverage to gold price."

Midway Gold Corp. downgraded to “sell” from “speculative buy” with the target cut to 70 cents (Canadian) from $1.65. The average target is $1.56.

"Our commodity price revisions had significant negative impacts (35– 50 per cent) on our underlying valuations for the company’s key projects."

New Gold Inc. downgraded to “hold” from “buy” with the target cut to $7.75 (U.S.) from $11. The average target is $9.90.

"Despite one of the lowest cost and more attractive growth profiles in the sector, approximately 42 per cent of our NAV estimate is tied to unpermitted development stage assets. In a risk-averse environment, we are concerned that this may limit re-rating. Blackwater represents a key component of New Gold’s production growth profile. We consider economics reasonable for a large project, and believe that it should offer NGD shareholders with substantial optionality to higher gold prices. That said, under our revised gold price forecasts, we anticipate that construction may have to be delayed by at least two years so as to develop the project using internal cash flow. We see the potential for further delays if the gold price/capital market conditions were to further worsen."

Pan American Silver Corp. downgraded to “hold” from “buy” with the target cut to $13 (U.S.) from $19.50. The average target is $13.22.

"While Pan American Silver has one of the strongest balance sheets in the sector (US$245-million in cash/ US$738-million in working capital as of March 31, 2013), we estimate that free cash flow would be limited (representing an FCF yield of 5 per cent in 2014E and beyond) under our revised gold and silver price forecasts. Organic growth within the portfolio is limited (mill/pulp agglomeration circuit at Dolores and possible expansion at La Colorada – both pending completion of economic studies), and we expect that without a material improvement in the silver price and the situation in Argentina, Navidad will likely not be built."

Endeavour Mining Corp. maintained as “speculative buy” but price target cut to $1.80 from $3. The average target is $1.69.

"We have updated our model for our revised commodity price deck and assumed a push back of the development of the Houndé project for a start of production in 2018. Given the uncertainty of when development could begin and what will happen with the project, we have also increased the discount rate to 15 per cent from 10 per cent previously. The net impact is a drop in our estimate of NAVPS (5-15 per cent, US$1,350/oz Au) to C$1.98, down from C$4.34."


Johnson & Johnson delivered solid second-quarter results, with sales and earnings per share ahead of expectations and strong pharmaceutical sales offsetting weaker device and consumer trends, commented RBC Dominion Securities analyst Glenn Novarro.

But he believes shares already reflect high expectations for the company.

Deutsche Bank analyst Kristen Stewart echoed that view, downgrading the stock to "hold" from "buy," believing the stock's valuation is fair.

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