China's Move Shifts Risk-Reward in Precious Metals, Says Deutsche Bank; Analyst Upgrades Hecla (HL), Barrick (ABX), Newmont (NEM) & Pan American (PAAS) to Buy

Deutsche Bank upgraded Hecla Mining (NYSE: HL), Barrick Gold (NYSE: ABX), Newmont Mining (NYSE: NEM), and Pan American Silver (NASDAQ: PAAS) to Buy. Analyst Jorge Beristain said China's move to devalue its currency shifted risk-reward in precious equities to favorable.

"While higher real interest rates and/or a strengthening USD remain short-term headwinds, China’s decision to devalue could offer support for gold and more specifically Precious equities, which have appeared to discount an $1,100/oz gold case (or lower) in recent weeks. With the yellow metal already trading at DBe ~$1,100/oz for 2016/17E further mark-to-market downside appears limited. While gold price is theoretically above ‘fair value’ range of $750-850/oz as highlighted in recent DB commodity team piece “Estimating Fair Value for gold”, RMB’s drop is a poignant reminder of gold’s “store of value” aspect," said Beristain.

"Equities most exposed to gold include: Barrick (82% of 2016e revenues from gold), Newmont (82%), Goldcorp (73%) and Kinross (97%). As such, we upgrade Gold producers Barrick and Newmont to Buy on: 1) upside to PT’s; 2) share price moves appear overdone relative to gold’s move; 3) Balance Sheets are improving; and 4) continuing capex and cost-outs are both company and macro driven (FX, oil). In Silvers, we upgrade Pan American and Hecla to Buy given gold exposure (26%, 38%, respectively), significant non-US cost-exposures and favorable risk/reward," added the analyst.

Price targets are $12 for ABX, $3.50 for HL, $27 from NEM, and $12 for PAAS.

For an analyst ratings summary and ratings history on Hecla Mining click here. For more ratings news on Hecla Mining click here.

Shares of Hecla Mining closed at $2.15 yesterday.

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