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TD Cowen: Gold’s surge to $2,000 a boon to miners’ cash flow, despite op costs




By Barani Krishnan

Investing.com — Gold’s sudden breakout to $2,000 an ounce will help boost free cash flow for miners, alleviating higher operating costs, TD Cowen said in a research note Tuesday.

“Although operating cost inflation remains an issue for gold producers in 2023 (most companies are expecting costs to increase 3-5% y/y), higher-than-
anticipated gold prices will improve FCF generation,” the unit of TD Securities said in a note, referring to free cash flow.

“We have run a sensitivity on FCF yields (after all capex) across our producer coverage list, assuming 2024 average gold prices of $1,750/oz, $1,850/oz, $2,000/oz, and $2,250/oz,” TD Cowen said.

Not unexpectedly, higher cost producers provide the best leverage to higher gold prices, the note added.

”Within our coverage universe, at $2,250/oz gold, among the larger producers, Kinross generates a 14.5% FCF yield vs. 4.2% at $1,750/oz, a 3.5x increase.”

Gold prices experienced one of their biggest surges for a year after the U.S. banking crisis erupted nearly two weeks ago with the takeover of two mid-sized lenders — Silicon Valley Bank and Signature Bank — by the Federal Deposit Insurance Corp as depositors yanked billions of dollars from them after fearing about their solvency. Silicon Valley later filed for bankruptcy protection. A third bank, First Republic Bank (NYSE:), also waded into trouble despite receiving a $30 billion cash infusion from a consortium of U.S. banks.

The banking crisis spread to Europe, with Credit Suisse (NYSE:), one of the preeminent names in global investment banking, having to seek help from Switzerland’s central bank and put itself up for sale.

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Even so, the investor stampede towards safe havens cooled over the past 24 hours with Swiss investment bank UBS (NYSE:) agreeing to buy beleaguered peer Credit Suisse. Top U.S. banking group JPMorgan (NYSE:) also appeared to make progress in the rescue plan for First Republic.

That calm saw the front-month contract on New York’s Comex hit an intraday low of $1,943.30 on Tuesday. That was nearly $60 below the previous session’s one-year high of $2,014.90.

The , more closely followed than futures by some traders, sank to a session bottom of $1,936.91 Tuesday, versus the previous day’s peak of $2,009.84.



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