Since hitting a multiyear low of around $1,050 late last year, gold prices have added nearly 20% to trade at around $1,230 on Friday. The rise also has been good for gold mining companies that had led the slide.

Earlier this week we looked at five Merrill Lynch picks among the senior gold producers. Friday morning the analysts released a note reinstating Tahoe Resources Inc. (NYSE: TAHO) with a Buy rating and a price objective of $14.50, based on 2.25 times the firm’s estimated net asset value on the miner.

Tahoe completed its acquisition of Lake Shore Gold on April 1 and issued new full-year guidance a week later based on the combined company. The company said it expects to produce 18 million to 21 million ounces of silver and 370,000 to 430,000 ounces of gold this year. The company’s goal is to raise gold production to 550,000 ounces by 2020.

As important as the commodity price of gold is to producers, costs are equally important. Tahoe estimates 2016 cash cost per ounce of gold at $675 to $725, net of byproduct credits. All-in sustaining costs are expected to fall into a range of $950 to $1,000 per ounce. For comparison purposes, senior miner Agnico Eagle estimates its 2016 cash costs at $850 an ounce.

The Merrill Lynch analysts noted:

Free cash flow is forecast to jump sixfold from $36 million in 2016 to $219 million by 2018. Gold and silver are forecast account for 59% and 38% of 2016 total revenue.

In the analysts’ view Tahoe deserves a premium valuation:

Tahoe is trading at 1.77x our estimated NAV, an 18% discount to the market capitalization weighted average of the mid-tier gold producer peers. As Tahoe demonstrates the benefits of the Lake Shore merger and meets its growth objectives, we believe that it should be valued at a target multiple of 2.25x. This is in line with the peer group average and target multiple at which we value the senior gold producers.

Here’s Merrill Lynch’s conclusion:

Tahoe is well positioned to thrive in the current bullish gold and silver price environment given its solid growth profile, along with its low costs and strong balance sheet. That, combined with its strong cash flow outlook and experienced management team inform our Buy rating.

Tahoe stock trade up less than 1% Friday mid-morning, at $11.81 in a 52-week range of $6.48 to $15.14.

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