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On Thursday, JPMorgan shifted its stance on Gold Road Resources Limited (GOR:AU) (OTC: ELKMF), moving from a Neutral to an Overweight rating, though the firm has lowered its price target to AUD1.85 from AUD1.90.
The adjustment follows a period of underperformance in gold production and All-In Sustaining Costs (AISC) due to persistent rainfall. The recent quarterly results from Gold Road Resources fell short of JPMorgan's expectations by 23% for gold production and 22% for AISC.
Despite the weaker quarterly performance, JPMorgan has revised its operational forecast for 2024 to the lower end of the company's revised guidance range, which predicts gold production between 290,000 to 305,000 ounces at an AISC of $2,050 to $2,200 per ounce.
Additionally, the firm has updated its life-of-mine (LOM) plan for the Gruyere project, aligning it with the guidance provided during a site visit. This update includes slight negative revisions to strip ratios and grades.
The new price target reflects a 3% decrease in the net present value (NPV) to $1.85 per share. However, JPMorgan's upgrade to an Overweight rating indicates confidence in Gold Road Resources as offering the most attractive valuation support compared to its peers within JPMorgan's coverage of producing gold companies, which includes Newmont Corporation (NYSE:NEM), Northern Star Resources (ASX:NST), and Evolution Mining (ASX:EVN).
The Overweight rating suggests that JPMorgan views Gold Road Resources' stock as a better value for investors, particularly in the context of the current market conditions. The firm's analysis indicates that despite the recent operational challenges faced by Gold Road Resources, the company's stock presents a compelling investment opportunity within the gold production sector.
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