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Scott Bishop, chief engineer at Cameco Corp.'s Cigar Lake uranium mine, gives a tour of a mine shaft that is 1,575 feet (480 meters) deep and just below the ore body in northern Saskatchewan, Canada (Geoff Howe/© 2010 Bloomberg Finance LP)
Scott Bishop, chief engineer at Cameco Corp.'s Cigar Lake uranium mine, gives a tour of a mine shaft that is 1,575 feet (480 meters) deep and just below the ore body in northern Saskatchewan, Canada (Geoff Howe/© 2010 Bloomberg Finance LP)

Eye on Equities

TD downgrades Cameco Add to ...

Cameco Corp. stock is far from the heights it reached prior to the Fukushima nuclear disaster in Japan - but it’s been making a lot of headway of late. So far this year, shares are up 43 per cent.

That rally, as well as a slower-than-expected ramp up of its Cigar Lake project in Saskatchewan, has prompted TD Securities Inc. analyst Greg Barnes to downgrade the uranium miner to “hold” from “buy.”

Cameco late last week filed a technical report for the Cigar Lake project with regulators, which Mr. Barnes summed up as slightly negative.

While Cigar Lake is on track to seee first ore production in mid-2013, the company now expects its share of output next year to be about 300,000 pounds, compared with its previous estimate of 1 million pounds. “This and other revisions to Cameco’s production schedule represent an 8.7 per cent decrease in Cameco’s production forecast through 2016 and are a result of the extended period required for remediation, a better understanding of the geology and lower grades in initial production panels,” he noted.

Meanwhile, the company is forecasting higher operating costs in the first several years of production than Mr. Barnes had been expecting.

Upside: Mr. Barnes also cut his price target by $1 to $28.


BMO Nesbitt Burns Inc. analyst Andrew Kaip downgraded Guyana Goldfields Inc. to “market perform” from “outperform” after the company released results of a feasibility study for its Aurora gold project. Capital expenditures over the life of the mine were “materially higher” and the underground gold grade lower than BMO’s assumptions, leading to increased operating costs.

Downside: BMO cut its price target by $3 to $7.


The completed acquisition of European Goldfields Ltd. ushers in a new, ambitious chapter for Eldorado Gold Corp. , notes CIBC World Markets analyst Cosmos Chiu.

Eldorado will release details in April for the planned development of the new assets it has acquired. Mr. Chiu has big expectations for Eldorado in 2012, including 16 per cent year-over-year growth in production compared to a peer average of 5 per cent.

Upside: He reiterated his “sector performer” rating and $19 (U.S.) price target.


A fresh 15-year paper contract and continued efforts at improving Domtar Corp.’s balance sheet should result in the Street revising its estimates higher for the stock, says RBC Dominion Securities Inc. analyst Paul Quinn.

Domtar - rated as a “top pick” by RBC - recently signed a paper supply agreement worth more than $3-billion with Appleton Papers Inc., which will shut its own high-cost production mill in Ohio and rely instead on Domtar for most of its uncoated freesheet requirements (UFS) for thermal, carbonless, and other specialty paper production.

“We view the Appleton supply agreement positively as it reduces some of the uncertainty with respect to Domtar's future UFS shipments by re-purposing higher-risk communication paper volumes into Appleton's specialty paper grades,” says Mr. Quinn. “Looked at from another angle, the agreement effectively tightens North American UFS commodity markets by 2 per cent of current annual consumption without the cost of a machine shut.”

Mr. Quinn says the company’s progress in re-positioning its business mix is at a point where markets are inclined to fundamentally shift its current valuation multiple. “We believe that a clear turnaround in global pulp markets, with supporting evidence given in this week's world-20 pulp stats, would also be a significant catalyst,” he says.

Upside: He reiterated a price target of $125 (Canadian).


Clarus Securities Inc. analyst Kelvin Cheung is initiating coverage of AutoCanada Inc. with a “buy” rating, commenting that there is plenty to like about the owner of 22 franchised dealerships in the country.

AutoCanada has 70 cent of its dealerships in the Western Canadian market, which grew by 4 per cent in 2011 compared to 2 per cent nationally. Within this market, the company strongly outperforms its peers in terms of growth. Mr. Cheung expects it to post 20 per cent growth in new-vehicle sales in 2011 over 2010, compared to Western Canadian vehicles sales growth of only 4 per cent. Furthermore, the U.S. economic recovery should help to lift the Canadian auto industry, he says.

“Attractive valuation, cyclical expansion of margin, exposure to growth in Western Canada, potential dividend increases, and incremental acquisition growth make ACQ an attractive investment,” says Mr. Cheung.

Upside: Mr. Cheung set a price target of $11.50.

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