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RBC sees gold going higher next year Posted: Thu, 13 Nov 2008 [miningmx.com] -- RBC Capital Markets predicted gold should rally through $900/ounce in the first half of 2009 at the firm’s annual gold conference being held in London on Thursday. Head of global mining research Stephen Walker said: “While we recently lowered our expectations for gold prices over the next few years, as the global economy slows, we remain very positive on the outlook for gold. “We believe that the gold market should begin to price in a recovery in the global economy and, with that recovery, an increase in inflation expectations, particularly given the enormous amount of monetary and fiscal stimulus being applied by central banks.” RBC equity analyst Leon Esterhuizen said: “The current financial crisis has delivered the perfect conditions for gold to rise over the next year or two.” He also put buy recommendations on the three major South African gold producers - AngloGold Ashanti, Gold Fields and Harmony - as well as on some of the country’s junior producers, in particular DRDGold. That’s despite the underperformance of these shares over the past three years during which, according to Esterhuizen, “massive cost increases and persistent failure to deliver against production targets have seen these gold shares shunned.” Esterhuizen said: “We expect the major SA gold producers to have finished restructuring at the end of 2008 and to be looking forward to a period of decent profit growth, much of which will be delivered from low-cost, offshore assets. “The right and ready state of the companies is compounded by what we see as the most optimistic background for gold price appreciation in a very long time. “The combination of a weaker US dollar, a strong possibility of a higher oil price and the potential for further rand weakness over an asset base that is just getting ready to deliver good results delivers a real potential for explosive increases in profitability and, hence, higher share prices,” he said. Esterhuizen also pointed out that, after years of high capital expenditures, most of the majors were now indicating lower, near-term capital expenditure profiles. Esterhuizen said AngloGold Ashanti should have removed most of its “debilitating hedge book” by the end of 2008, and would expand production from 2009. He added that Gold Fields should have fixed the problems at Kloof and started delivering exceptional cash flow from Cerro Corona, while Harmony would see constant improvement in margin as new, higher-grade projects started to roll out. Esterhuizen said: “Given its marginal asset base but strong balance sheet, DRDGold could be the pick of the bunch.” Click Here to subscribe to our daily newsletter
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