Not all gold for gold equities

Macquarie sees further short- to medium-term problems for gold miners despite the recent gold price rally.

Gold stocks have been on a tear recently as the price of the precious metal rebounded from its near three-year low, but not everyone believes gold stocks are going to make a comeback over the short to medium term.

If anything, Macquarie has thrown cold water on the gold equities party as it lowered its valuation on gold miners by 20% on average after it adjusted its long term forecast on the yellow metal.

While the broker believes that the gold price has found a floor after it jumped around 13% to $US1333 an ounce in 3½ weeks, the balance sheets of many gold miners are a cause for concern as management teams come to terms with the new operating environment.

Several gold miners are likely to require additional debt over the coming 12-months and Macquarie highlights Alacer Gold (AQG), Silver Lake Resources (SLR) and Chesser Resources (CHZ) as candidates.

Small gold miners that are expected to be consuming a large amount of their spare cash are also not well placed to outperform, according to the broker. These include the likes of Papillon Resources (PIR), Gryphon Minerals (GRY) and Ampella Mining (AMX).

On the flipside, gold stocks most favoured by the broker include Uncapped 100 stocks Beadell Resources (BDR) and Regis Resources (RRL).

Macquarie has left its price target on Beadell unchanged at 80 cents a share, but has pared its target on Regis by 40 cents to $3.60 a share.

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