In Gold Mining, Canadian Content Is King - CIBC

Neils Christensen  

Wednesday June 28, 2017 13:28

(Kitco News) - With Canada preparing to celebrate a key milestone, the 150th anniversary of confederation, one Canadian bank is highlighted potential of the nation’s mining sector.

In a report Wednesday, analysts at CIBC World Markets noted that the Canadian mining companies, with strong domestic production, have outperformed the overall mining index for the last four years. The bank added that it expects the trend to continue.

“In the past ~4 years, the group of Canadian producers (with >50% of NAV in Canada) outperformed the HUI index, on average, by an annual 33%. Even when excluding 2015, when the CAD had the most sizable depreciation against the USD, the Canadian producers still outperformed the broader gold index by 30%,” the analysts said.

One of the biggest advantage for Canadian precious metals producers is the fact that gold is trading above $1,600 an ounce in Canadian dollar terms but that is only one of three factors that is helping the sector.

The analysts said that two other factors that should continue to support the Canadian mining sector are: an industry decline of 5% in all in sustaining costs and an increase in total domestic production of 11%. The Canadian sector is seeing lower production costs as a result of a sharp drop in energy prices.

“Even when we use the larger group of companies to include any company with Canadian content, this larger group still outperformed the broader gold index by 18%. This outperformance supports the strategy that any Canadian content is likely good content,” the analysts said.

According to CIBC the top companies that offer the best investment potential:

• Detour Gold (TSX: DGC) with100% Canadian exposure
• Richmont Mines (NYSE: RIC, TSX: RIC) with 100% Canadian exposure
• Pretium Resources (NYSE: PVG, TSX: PVG) with 100% Canadian exposure
• TMAC Resources (TSX: TMR)with 100% Canadian exposure
• New Gold (AMEX: NGD, TSX: NGD)with 86% Canadian exposure
• Agnico-Eagle (NYSE: AEM, TSX: AEM) with 74% Canadian exposure
• Kirkland Lake (TSX: KL) with 56% Canadian exposure
• Alamos Gold (NYSE: AGI, TSX: AGI) with 53% Canadian exposure
• Centerra Gold (TSX: CG) with 41% Canadian exposure