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Gold/Mining/Energy : A to Z Junior Mining Research Site -- Ignore unavailable to you. Want to Upgrade?

To: 4figureau who wrote (892)	8/8/2002 10:23:52 AM
From: 4figureau	Read Replies (1) \| Respond to of 5423

Yorkton Gold Report on 15 producers: (Taken from a PDF file...a few pages out of 74) NORTH AMERICAN GOLD PRODUCERS July 31, 2002 US$ unless noted. How High is Up? How Low is Down? Initiating Coverage of Mid-Tier Gold Producers in a Volatile Market We are initiating coverage of 15 intermediate producers. Companies include nine intermediates and six "emerging" intermediates. Recent volatility in the gold and share prices creates opportunity. NAV premiums are down from recent highs to levels seen in late 2001, prior to gold's run to the $330 range in early June. Eldorado Top Pick; Agnico, Cambior, Glamis, Wheaton rated Buy. Meridian, Goldcorp, Iamgold and the "New Kinross" (Kinross, TVX and Echo Bay) fall just below our cut-off and are rated Accumulate. YSI North-American Gold Coverage Company Ticker Rating Intermediates Agnico-Eagle Mines Ltd. AGE 2 - Buy Cambior Inc. CBJ 2 - Buy Echo Bay Mines Ltd. ECO 3 - Accumulate Glamis Gold Ltd. GLG 2 - Buy Goldcorp Inc. G 3 - Accumulate IamGold Corp. IMG 3 - Accumulate Kinross Gold K 3 - Accumulate Meridian Gold Inc. MNG 3 - Accumulate TVX Gold Inc. TVX 3 - Accumulate MergeCo K NR Emerging Intermediates Apollo Gold Inc. APG 4 - Hold Bema Gold Corp. BGO 5 - Reduce Crystallex Corp. KRY 4 - Hold Eldorado Gold Corp. ELD 1 - Top Pick Northgate Exploration Ltd. NGX 4 - Hold Wheaton River Minerals Ltd. WRM 2 - Buy INVESTMENT HIGHLIGHTS RATINGS & TARGETS Gold prices have risen 14.7% over the past year in response to accommodative monetary policy in the United States, a weaker U.S. dollar and long-term supplydemand issues. Over the same period, gold equities have risen 18.1%, with the best performers mainly intermediate and smaller producers. Over the past two weeks, however, both the price of gold and share prices have dropped precipitously. This begs the question – is this the time to be buying or selling gold equities? The macroeconomic setting is, in our opinion, still favourable for gold, with the Fed likely to err on the side of caution and hold off on tightening for at least the remainder of this year. Real interest rates close to or below zero remain positive for gold, as does the ongoing depreciation of the dollar against the euro and yen. The recent sharp correction in gold shares brings more of our companies into buying territory, with the average decline from the 52-week high of 38%. Valuations, as measured by premium to net asset value (NAV), are back where they started the year, which is close to historic norms. Although our target prices represent an average implied return of about 40%, they are higher than the 52-week highs for only 4 of the 15 companies covered in this report. In our opinion, the intermediate and "emerging" intermediate producer groups still represent the best way to play a rising gold market. We believe several members of these groups have the potential to dramatically increase production, cash flow and earnings through development of new, high-quality projects. A rising gold price can only provide further upside. Many of these projects, like most new projects being considered for development, are low-cost and provide strong cash flow without the necessity of hedging. Companies with strong balance sheets and low-cost production have the potential to develop new projects without the necessity of hedging their gold production, which has been the best recipe for share price performance. Companies with this profile include Glamis, Meridian and Eldorado. Cambior's Gros Rosebel project mainly fits this image (its average cost is higher than some projects), but the company's financial position may make avoiding a hedge difficult. Another group of companies offers superior exposure to gold in terms of how much gold (as measured by reserve or annual production ounces) an investor buys with their investment dollar. Standouts here are Cambior, Apollo Gold and Eldorado (based on future production growth), while Kinross and Agnico form the next group. We also look at mine life (based on our expected recoverable gold divided by forecast annual production) and our estimate of deposit upside to evaluate a company's gold leverage. Another important factor is risk profile, which we evaluate by looking at exposure to commodities other than gold (our estimates build in base metal prices substantially higher than today's spot), the company's balance sheet, the country risk profile based on sources of cash flow, and the amount of gold hedging. Lastly, we evaluate company management on the basis of past performance in delivering on operating and financial forecasts and our view on track record in adding value through corporate development activities. Exhibit 1 presents our ratings and target prices for the 15 companies covered by this report. The ratings were based on a combination of valuation, asset quality, management and risk factors. Target prices are based principally on the market gauge1 combined with NAV. For Kinross, Echo Bay and TVX, all ratings and target prices are based on our view of "MergeCo" – Kinross after finalization of the three-way merger between the companies. The range of NAV premiums at our target price, based on a gold price of $330/oz (the recent high and our forecast for the year-end metal price) is between –25% and +99% for the intermediates (average 49%) and from 0% and 46% (average 23%) for the emerging intermediates. The market gauge at the target prices clusters at $330/oz for most intermediates (lower for those with balance sheet or operating issues), and $300/oz the emerging intermediate group. Ratings are driven principally by implied return but are modified where we see potential financing requirements. Exhibit 1. North American Gold Companies - YSI Ratings YSI Intermediates Ticker Share-Price High Low Rating Target-Price Implied-Return Agnico-Eagle Mines Ltd. AGE $17.82 $27.59 $12.27 2 $26.40 48% Cambior Inc. CBJ 1.20 2.63 0.55 2 3.25 171% Echo Bay Mines Ltd. ECO 1.14 2.18 0.79 3 1.56 37% Glamis Gold Ltd. GLG 11.20 15.95 4.24 2 16.40 46% Goldcorp Inc. G 12.00 18.80 7.05 3 15.50 29% IamGold Corp. IMG 4.31 8.75 2.54 3 5.50 28% Kinross Gold K 2.25 4.44 0.95 3 3.00 33% Meridian Gold Inc. MNG 21.00 31.60 11.50 3 29.00 38% TVX Gold Inc. TVX 14.25 25.60 5.00 3 19.50 37% Emerging Intermediates Ticker Share Price High Low Rating Target Price Implied Return Apollo Gold Inc. APG 1.70 4.00 1.80 4 2.35 38% Bema Gold Corp. BGO 1.47 2.94 0.44 5 0.85 -42% Crystallex Corp. KRY 2.10 3.79 1.65 4 2.10 0% Eldorado Gold Corp. ELD 0.90 1.62 0.22 1 4.00 344% Northgate Exploration Ltd. NGX 1.13 2.25 0.85 4 1.30 15% Wheaton River Minerals Ltd. WRM 1.04 2.10 0.47 2 1.55 49% YorktonI Ratings: 1-Top Pick; 2-Buy; 3-Accumulate; 4-Hold; 5-Reduce; 6-Sell Given the recent sharp declines in share prices for most of these companies and our positive view on gold prices, we have a bias toward buy and accumulate ratings. We highlight Eldorado as a 1-Top Pick, and two of the four "amigos" (Glamis and Agnico- Eagle) as 2-Buys, along with Cambior (on compelling valuation) and Wheaton River (in part for its silver exposure). We rate Kinross and merger candidates TVX and Echo Bay 3-Accumulate along with Meridian, IamGold and Goldcorp. Our hold- and reduce-rated stocks include those with limited cash and free cash flow or with particularly challenging valuations.