More good news for Barrick Gold shareholders

Pascua Lama can’t stay out of Chile courts

HSBC Global Research upgraded a number of gold stocks on Monday after seeing “value opened up again,” providing fresh impetus for a rerating of the sector following last week’s bump.

The investment bank upgraded world number one gold producer Barrick Gold Corp (TSE:ABX) to overweight from neutral forecasting “actually reasonably strong operating results” amid a weaker gold prices.

HSBC cited the positive impact of the sale of the Yilgarn South assets in Australia to South Africa’s Gold Fields, a slower ramp-up at Pueblo Viejo and good news from the $8 billion Pascua Lama project on the border between Chile and Argentina.

Barrick’s permit for the massive project which is years behind schedule and way over budget, has been upheld by Chile’s Supreme Court although a local Antofagasta Court of Appeals last week agreed to hear a new appeal by environmental groups lobbying against the proposed mine high in the Andes.

HSBC predicts the Toronto-based miner will produce 1.82 million ounces at a cash cost of $577 an ounce in its third quarter, in line with the company’s own guidance of 7,000 to 7,400 ounces of output for the year and at the lower end of Barrick’s own cash cost predictions.

In late afternoon trade on Monday Barrick Gold added 1.8% giving up some of its gains enjoyed earlier in the day.

Barrick is now worth $19.4 billion on the TSX, still down 44% so far this year amid an aggressive divestment and cost-cutting drive.

The world’s most valuable gold miner, Vancouver-based Goldcorp (TSE:G) and fellow Canadian counters Iamgold (TSE:IMG), Yamana Gold (TSX:YRI) and Agnico Eagle Mines (TSX:AEM) all received upgrades from HSBC.

Iamgold jumped nearly 4% in value on the Toronto big board, bringing its gains since Thursday’s broad  gold stock rally to 11%. Yamana (up 2.8%), Agnico Eagle (1.4%) and Goldcorp (2.4%) all reacted positively.

South African miner Gold Fields (NYSE:GFI) stood out as the sole downgrade, but HSBC citing the world’s fourth largest gold producer’s contrarian purchase of high-cost mines and an SEC investigation into a 2010 deal under the South African government’s so-called Black Empowerment Policy.