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February 17, 2009 | By: FP Trading Desk |
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For the last few months, non-gold production streams have been a nightmare for the gold companies, as prices for other metals have fallen off a cliff. The top-performing gold stocks have been the ones with limited exposure to base metals such as Kinross Gold Corp. (KGC) and Eldorado Gold Corp. (EGO).
But that trend will change in the longer term, according to analysts at Dundee Capital Markets.
They wrote in a note to clients:
Although we continue to see purer gold names outperforming in the mid-term, we believe the names with base metal exposure stand to benefit as the global economy is stabilized by accomodative monetary policies that, in turn, could fuel increased base metal prices.
They broke down which large-cap gold companies have the most exposure to base metals (and thus the global economy), and found that Iamgold Corp. (IAG) and Yamana Gold Inc. (AUY) lead the way because of their exposure to the steel and copper industries. Yamana has a great deal of copper byproduct production, while Iamgold produces ferroniobium, a key additive to steel.
Meanwhile, they found that Goldcorp Inc. (GG) offers the most exposure to zinc and silver, while Agnico-Eagle Mines Ltd. (AEM) has little leverage to base metals in the long-term. That would come as a surprise to investors familiar with its base-metal-heavy LaRonde mine, but the analysts wrote that reduced future zinc output from LaRonde, combined with a bevy of new mines, "dispels the myth" of Agnico being a base metal company.
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