Barrick, Goldcorp cut on lower copper price estimates

Blackmont Capital has reduced its copper forecast, sending price targets lower on Canada's gold giants.

Precious minerals analyst Richard Gray told clients in a note that Blackmont has lowered its copper price forecast to US$3 per pound for the fourth quarter of 2008 from US$3.65. The research firm also now expects US$3 copper until 2012. Blackmont's previous estimates were for US$4 copper in 2010 and US$3.50 copper in 2011.

Mr. Gray said Barrick Gold Corp. will be impacted by the slumping copper prices, due to its copper production at the Zaldivar and Osborne mine.

"We are lowering our NAVPS to US$29.50 (from US$30); our EPS estimates by 3% (2008), 10% (2009), and 16% (2010); and our CFPS estimates by 2% (2008), 7% (2009), and 11% (2010)," he wrote.

As a result, he dropped his price target on the stock from $53 to $49, but with upside of 47% still available, he maintained his "buy" rating.

"Barrick [is] expected to benefit from a flight to quality and liquidity in the gold sector," he said

For similar reasons, Mr. Gray lowered his price target on Goldcorp Inc. from $50 to $45, while maintaining his "buy" rating on the stock. His said Goldcorp, which is impacted due to the copper production from the 37.5% owned Alumbrera mine, will see its NAVPS drop from US$24 to US$23, while his EPS estimate falls 9% and 15% in 2009 and 2010, respectively and his CFPS estimate slumps by 6% and 11% over that same period.

The analyst also cut price targets at Newmont Mining Corp., Yamana Gold Inc. and Northgate Minerals Corp. due to the copper price revision. All three stocks are remain recommended as "buys."