BMO Resumes Coverage On Gold Stocks: Bullish On Barrick, Neutral On Newmont

BMO Capital Markets resumed coverage of several gold stocks Wednesday with a bullish stance on Barrick Gold Corp GOLD and a neutral stance on Newmont Goldcorp Corp NEM.

The Analyst

Andrew Kaip resumed coverage of Barrick Gold and upgraded the stock from Market Perform to Outperform with a price target lifted from $14.50 to $20.

Kaip also resumed coverage of Newmont's stock with a downgrade from Outperform to Market Perform and a price target lowered from $45 to $42.

Barrick: Unlocked Value Through JV

Barrick's Nevada joint venture with Newmont should unlock value for Barrick, Kaip said in the Wednesday upgrade note. (See his track record here.)

As part of the joint venture, Barrick has a 61.5% ownership stake of the Nevada operation that is meant to unlock up to $5 billion in pre-tax net present value over the next 20 years, the analyst said. 

Barrick likely "had to give a little" on the net present value and future reserve front to secure the agreement, although the benefits from the deal likely outweigh the costs, he said. 

Newmont: 

Newmont's 2019 acquisition of Goldcorp and the JV with Barrick are both "accretive events," but investor concern with the Goldcorp deal and recent concerning headlines should "temper investor interest," Kaip said in the downgrade note. 

A downgrade of Newmont is a "tough call" to make, but likely justified until Newmont is "able to demonstrate value," the analyst said.

A rating revision could be made when the Goldcorp acquisition and Nevada JV show benefits, although any material results are unlikely to be seen until late 2019 or early 2020, according to BMO. 

Price Action

Barrick Gold shares were trading higher by 1.35% to $15.80 at the time of publication Wednesday, while Newmont shares were up 0.88% at $38.78. 

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