Note the section on teir III companies!

RBC Cuts Gold Estimates – Shares Dive, Again

The spot price of gold is currently up on the day, however, many of the mining stocks are not. A report released by RBC this morning probably has something to do with this.

RBC now expects gold to trade between $1,300/oz and $1,500/oz for the balance of 2013 and is sticking with its $1,400/oz long-term assumption.

Although this range represents their best guess for the remainder of the year, they see risks skewed towards the downside. This qualifier came with four reasons:

1. Continued liquidation of gold ETF holdings.
2. Liquidation of COMEX speculative long positions.
3. The potential for Eurozone central bank gold liquidation.
4. Seasonally weak demand in June/July.

Target prices reduced but potential gains significant

This reduced commodity price deck had a dramatic impact on the target prices affixed to the gold producers that RBC covers. On average, Tier I producer targets were cut by 26%, Tier II by 35%, and Tier III by 27%.

Talk about advice investors could have used last week!

Kinross (TSX:K,NYSE:KGC) was the Tier I that experienced the greatest reduction. Its target now sits at $7, a 36% decline from the previous $11.

According to RBC, Barrick Gold (TSX:ABX,NYSE:ABX) offers the most upside in the group with a target of $25 which represents a potential gain of 35%. The average gain RBC expects out of the Tier I’s is 32%.

Allied Nevada (NYSEMKT:ANV) took the biggest cut of the Tier II’s that RBC covers. Its target moved from $34 to $19, which still leaves the stock with a potential gain of 74% from its current price. Detour Gold (TSX:DGC), with its $19 target, offers a similar potential return. Tier II’s are expected to provide an average return of 46%.

Tier III is where the magic is really expected to happen as an average return of 52% over the next year is targeted. The stock with the most upside of all is Argonaut Gold (TSX:AR) with an $11 target and upside of 81% from its current price.