Goldman Sachs increased its gold price forecast (hmmm, partial admission they are losing control?) by an average of 10-15% over the next three years. The bank's gold price deck moved to $1,202 for 2016 ($1,097 prior), $1,150 for 2017 ($1,000 prior), and $1,150 for 2018 ($1,050 prior).
With higher prices, analysts now believe miners are well positioned to generate superior market returns.
Discussing impact for miners, analyst Andrew Quail said, "We expect gold miners’ EBITDA margins to rise over 4% on average over the next 12 months, driven by rising gold price. Mining consumables deflation is widespread, and FX and energy tailwinds continue to positively impact miners’ bottom lines. Since 2012, gold miners have successfully lowered their cash costs by 30% on average to adapt to the lower gold price environment. For many companies this was a survival tactic, while for others it was necessary to unwind the bloated cost bases built over the last upward gold cycle. Now, it's a different story."
"Ultimately, we still prefer miners with volume growth, low costs, strong balance sheets and low geopolitical risk exposure that generate superior FCF and EBITDA growth. For valuation purposes, we move to EV/EBITDA from adjusted FCF (CFO-sustaining capex), as going forward we believe that it will be more difficult to differentiate between sustaining and expansionary capex, a fundamental driver behind our methodology.
