The prospect of falling potash and fertilizer prices in 2012 isn’t likely to take the sheen off shares of Potash Corp. of Saskatchewan Inc. next year, according to RBC Dominion Securities Inc.
Analyst Adam Schatzker believes that potash producers may cut back on production in order to keep prices up in 2012, and that Potash Corp. is well positioned for a recovery in 2012.
“The company has almost completed the major spending for its massive brownfield expansion program and we believe it will soon become a ‘cash cow’ as it takes advantage of healthy potash prices with growing sales volumes,” writes Schatzker. “In our opinion, Potash Corp. has the best portfolio of producing assets, coupled with four strategic investments.”
Upside: While lowering his 12-month price target to $50 (U.S.) per share (from $58 per share) due to reduced fertilizer price forecasts, Schatzker upgraded Potash Corp. to “outperform” from “sector perform,” based on the 24 per cent implied return to his price target compared to its peers under his coverage.
Banro Corp.’s Twangiza gold mine in the Democratic Republic of Congo (DRC) remains on track to reach full production in the first quarter of 2012 and looks set to meet expectations, according to CIBC World Markets Inc. analyst Cosmos Chiu.
He explains that the operation is currently working through normal teething issues and will receive two Carbon-In-Leach tanks in the second half of 2012, bringing the mill to full capacity and increasing throughput from 1.3 million tons per year to 1.7 million tons per year. Chiu is estimating production of 105,000 ounces of gold for 2012.
A second project in Namoya, DRC, with mine construction scheduled for first quarter 2012 is capable of doubling projected gold output to about 250,000 ounces, says Chiu.
Upside: He reiterated a price target of $7 (Canadian) and rates the stock as sector outperform.
RBC Dominion Securities Inc. analyst Mark Friesen has maintained Athabasca Oil Sands Corp.’s “sector perform” rating as the company enters a “pivotal year” in which it attempts to become a Deep Basin producer.
The company is well funded to finance its $800-million to $1.0-billion (Canadian) 2012 budget, but funding sources for 2013 remain unclear at this time, says Friesen. Despite his projection of a financing gap as early as second quarter 2013, he sees Athabasca setting up to add value with its Deep Basin investment as soon as the third quarter 2012.
Downside: Friesen sees potential negative adjustments to net asset value near term, possibly putting pressure on his $15 (Canadian) target price.
Positive drill results from Queenston Mining Inc.’s Kirkland Lake, Ont., Upper Beaver project has CIBC analyst Jeff Killeen rating the stock as a “sector performer.”
The project’s preliminary economic assessment to build a stand-alone mine and mill complex at Upper Beaver is in progress and will be completed in the first quarter of 2012. A new discovery of more zones of gold and copper has Killeen confident that the expansion of resources will continue.
Upside: Killeen has reaffirmed his price target of $8 (Canadian).
National Bank Financial analyst Tara Hassan has maintained Avion Gold Corp.’s “sector outperform” rating after positive news from the company’s Hounde project in Burkina Faso.
The total resource is up more than 160 per cent to 1.6 million ounces from the October 2010 resource estimate of 610,000 ounces. Hassan says the Hounde is a highly prospective property that stands to be a major valuation driver and become AVR’s next producer with potential to host a 2-to-3 million ounce gold resource in the mid-term.
“We reiterate our ‘outperform’ rating,” says Hassan. “Given numerous upcoming catalysts, AVR has the potential to close the valuation gap with its peers.”
Upside: Hassan raised Avion’s price target by 10 cents to $3.05 (Canadian).