Gold Fields upgraded to Buy at Goldman, which says gold rally to continue - Seeking Alpha
8 July 2016
- Gold Fields (GFI +3.2%) is upgraded to Buy from Neutral at Goldman Sachs in anticipation of higher investor interest in the stock given its high free cash flow and dividend yield, which the firm thinks has the potential for further increases.
- Goldman acknowledges that gold names already have rallied since Brexit, and GFI's ADRs are up more than 90% YTD, but expects gold stocks to continue to shine.
- The firm says GFI has been a consistently strong free cash flow generator, with FCF yield averaging 8.9% over the past two years when the average gold price was ~$1,200/oz., and FCF yield could reach double digits with gold prices close to $1,350, which could mean an increased dividend.
- The firm also says GFI's South Deep mine is FCF positive at current gold prices, which should allay market concerns; it expects GFI to detail a plan for South Deep next year, likely to be at a lower production level than the original ~700K oz. but should be FCF accretive.
- Also, Goldman says Rangdold Resources (GOLD +1.6%) is a top pick, as one of just two precious metal stocks in the FTSE 100 that warrants a scarcity premium.
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