Metals commentary: UBS slashes near-term commodity price forecasts

Accelerated capital outflow from emerging markets and tighter liquidity as stimulus ends from the U.S. Federal Reserve and the European Central Bank, a “rebalancing” in China where policy-makers are not actively stimulating private construction and infrastructure and the risk of a cyclical slowdown in the U.S. that may bring on renewed credit stress will combine to put pressure on near-term commodity prices, UBS Investment Research concludes in a new report.

Analysts Brian MacArthur, Chris Lichtenheldt and Matt Murphy have slashed their gold price forecast for 2012 to US$1,679 per oz., down 18% from their earlier estimate of US$2,050 per oz. Forecasts for 2013, 2014, 2015 and 2016 all remain unchanged from earlier estimates but are mostly below consensus at US$1,725 per oz. (-5%), US$1,400 per oz. (-10%), US$1,300 per oz. (-6%) and US$1,250 per oz. (+1%) , respectively.

For silver, the UBS analysts are calling for US$33.40 per oz. in 2012 — a decrease of 4% from their earlier estimate of US$35 per oz. In 2013 they forecast silver remains the same as earlier estimates at US$27.50 per oz., and in 2014 the silver price will average US$25 per oz., up 25% from their earlier estimate of US$20 per oz. In 2015 the silver price will rise 16% from their earlier forecast to US$20 per oz. from US$17.30 per oz., and in 2016 it remains unchanged at US$15.50 per oz.

The lower price forecasts for precious metals — except silver, in 2014 and 2015 — have led the UBS analysts to revise near-term earnings per share (EPS) estimates for a number of companies and therein target prices for their stock.

The report offers 12-month target prices on the shares of 16 precious metal companies and their variance from the analysts’ previous estimates. Their 12-month target price for Agnico-Eagle Mines is US$43 per share (-10%); Barrick Gold, US$59 per share (-8%); Centerra Gold, $20 (-13%); Goldcorp, US$60 (16%); Kinross Gold, US$13 (-13%); Newmont Mining, US$77 (-9%); Coeur d’Alene Mines, US$28.25 (-17%); First Majestic Silver, $18.75 (-6%); Fresnillo, £16.50 (-3%); Hecla Mining, US$6.85 (-9%); Pan American Silver, US$25.50 (-15%); Silvercorp Metals, US$8.50 (0%); Silver Standard Resources, US$20.50 (-6%); Silver Wheaton, US$42 (-5%); Franco-Nevada, $46.50 (-2%); and Royal Gold, US$77 (-3%).

In terms of base metals, UBS forecasts lower prices for nickel and uranium. Nickel prices in 2012 could fall 7% from their earlier estimate to US$8.37 per lb. and drop 9% to US$8.55 per lb. in 2013. Uranium oxide prices could slide 5% from earlier estimates to US$52 per lb. in 2012, fall 13% to US$52 per lb. in 2013 and drop 15% to US$55 per lb.

The analysts’ 12-month price targets on the stock of base-metal companies remained largely unchanged, with First Quantum Minerals at $23 (0%); Freeport-McMoRan Copper & Gold, US$50 (-3.8%); Hudbay Minerals, $14.50 (0%); Inmet Mining, $68 (0%); Katanga Mining, $1.10 (0%); Lundin Mining, $5 (0%); Thompson Creek Metals, $8.50 (0%); Royal Nickel, $1.50 (0%); Mirabela Nickel, $2 (0%); Sherritt International, $6.50 (0%); Alcoa, US$11.25 (0%); Eastern Platinum, $1.20 (0%); Noranda Aluminum, $13.50 (0%); Teck Resources, $50 (0%); Uranium One, $4 (-5.9%); and Cameco, $27.50 (-1.8%).

Print

 

Republish this article

Be the first to comment on "Metals commentary: UBS slashes near-term commodity price forecasts"

Leave a comment

Your email address will not be published.


*


By continuing to browse you agree to our use of cookies. To learn more, click more information

Dear user, please be aware that we use cookies to help users navigate our website content and to help us understand how we can improve the user experience. If you have ideas for how we can improve our services, we’d love to hear from you. Click here to email us. By continuing to browse you agree to our use of cookies. Please see our Privacy & Cookie Usage Policy to learn more.

Close