Macquarie Remains Bullish but Selective on Gold Sector Stocks

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Macquarie Research metals analysts said recently that "We remain bullish on the gold sector-but due to rising operating and capital costs, we remain selective. We prefer large liquid companies exhibiting low risk, high growth as well as experience and proven management teams."

Macquarie Research metals analysts said recently that "We remain bullish on the gold sector-but due to rising operating and capital costs, we remain selective. We prefer large liquid companies exhibiting low risk, high growth as well as experience and proven management teams."

"Our top picks are Goldcorp, Agnico-Eagle and Yamana; we recommend investors buy these stocks at current levels," analysts George Albino, John Graham, Matthew Sheppard, Pierre Vaillancourt, and Andrew Thompson advised. "We also note, at recent trading levels, we recommend accounts accumulate shares of IAMGold."

During the first quarter, Macquarie noted that senior and intermediate gold producers reported production "ranging from 1%-22% lower than our forecasts-companies with by-product credits benefitted from positive provisional pricing adjustments, while gold-only producers broadly reported financial results below expectation."

"1Q08 marketed a quarter of record high gold prices (average prices of $924/oz, with a high of $1,033/oz), but was marred by ongoing cost pressures resulting from forex changes and soaring input prices," Nevertheless, a number of companies with exposure to copper byproduct credits "outperformed our cost expectations in 1Q08-the most significant being (in our view) Goldcorp, Yamana and Agnico-Eagle." The analysts advised that "we continue to believe that copper exposure is a plus-but we continue to closely monitor copper price fluctuations in order to clearly define the directionality of provisional pricing adjustments."

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