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Gold/Mining/Energy : Gold and Silver Juniors, Mid-tiers and Producers

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From: LoneClone	3/15/2007 9:38:06 AM
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Merrill: Bullish on precious metal and Agnico-Eagle as a result Source: SeekingAlpha metalsplace.com FP Trading Desk submits: Gold prices will continue to rise and Agnico-Eagle Mines Ltd. (NYSE: AEM) should be all the richer for it. According to Merrill Lynch's Michael Jalonen: "Given our expectations for bullion supply-demand fundamentals to remain positive over the medium and long term, we are raising our 2008-2010 gold forecasts from US$650 to US$675/oz, US$625 to US$650/oz, and US$600 to US$625/oz respectively," the analyst said in a research report. He also raised his long-term gold price from US$500 per ounce to US$550. Heightened geopolitical risk and a weaker U.S. dolalr are two of several "positive drivers" noted by Mr. Jalonen for gold's future price. In the past six months, gold has risen from US$567 in early October to US$686 at the end of February. It's currently hovering around US$641. As a result of his new forecasts, Mr. Jalonen upgraded his rating of Agnico-Eagle Mines from "neutral" to "buy." Higher expected gold prices led to an increase of 3.7% in the estimated net asset value (NAV) for the company, he said. The new NAV is $16.85 per share and is based on the company trading at 3 times NAV – the ratio that Merrill ascribes to growth oriented unhedged gold producers. Mr. Jalonen has set a price target of US$47 for Agnico shares, representing an upside of roughly 21%. Agnico-Eagle Mines had record annual earnings in 2006 of $161.3 million and saw its gold reserves increase 19% to an all-time high of 12.5 million. The company share price has increased as much as 36% in the last six months. It is now developing five new gold projects, with a sixth to come after the announcement in February of its merger with Cumberland Resources. Mr. Jalonen expects the company's gold production to increase from 240,000 oz in 2007 to 1.28 million oz in 2010. According to the Goldsheet Mining Directory, gold production was near 80 million ounces worldwide. Mr. Jalonen also increased his silver forecasts for 2007, 2008, 2009 and 2010 from US$13.00/oz to US$13.75/oz. US$12.00/oz to US$13.00/oz, US$11.00/oz to US$12.00/oz and US$10.00/oz to US$11.00/oz. He maintained his long-term silver price of US$10.00/oz.

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