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Leveraged gold and silver producers rebound off their lows

The outlook for gold and base metals remains uncertain, but low-cost gold producers have been performing well amid the market decline. Christos Doulis, analyst with PI Financial, says high cost producers will have more leverage to a recovery in precious metals.

“If we do see a real turn in the market and the sentiment for gold, I expect the marginal and higher-cost producers to outperform the lower-cost producers,” Doulis tells BNN.

LOW COST: RIO ALTO MINING (RIO.TO)

Doulis says Rio Alto Mining is a low cost producer that can produce an ounce of bullion for about $850. He has a ‘buy’ rating on the stock, which operates a single mine in Peru, with a price target of $3.25.

HIGH COST: ENDEAVOR SILVER (EDR.TO)

Doulis has a ‘hold’ rating and a $3.40 price target on Endeavor, which has struggled to make a profit at its two silver mines as the price falls. “At [current] silver prices Endeavor will struggle to generate any free cash flow,” he said.

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