Chicago, IL – January 7, 2025 – Today, Zacks Equity Research discusses Agnico Eagle Mines AEM, Franco-Nevada Corp. FNV, Kinross Gold KGC, Equinox Gold EQX and Gold Royalty GROY.
Link: https://www.zacks.com/commentary/2392342/5-gold-mining-stocks-to-watch-as-industry-prospects-look-bright
The prospects for the Zacks Mining - Gold industry look bright, backed by the 26% growth seen in gold prices in 2024. The bullion is expected to end the year at around $3,000 an ounce, supported by geopolitical tensions and central bank buying.
With gold prices expected to increase further on demand-supply imbalance, companies like Agnico Eagle Mines, Franco-Nevada Corp., Kinross Gold, Equinox Gold and Gold Royalty are well-poised to capitalize on this, backed by their strong balance sheets, efforts to lower costs and growth initiatives.
The Zacks Mining - Gold industry comprises companies engaged in extracting gold from mines. These mines may either be underground or open pits. Mining is a long and complex process and requires significant financial resources. It involves exploring to evaluate a deposit's size; assessing ways to extract and process ore efficiently, safely and responsibly; and developing the mine before the actual mining process. It usually takes 10-20 years for a gold mine to produce material that can finally be refined.
Nowadays, industry players use a range of sophisticated techniques to extract gold and convert it into dore bars, an alloy of gold and silver, alongside other impurities. These are then sent for purification, after which gold is purchased as bars or coins, or used in jewelry or other purposes.
Solid Trend in Gold Prices to Drive Industry Growth: Gold prices gained 26% in 2024, surpassing the performance of most major asset classes. The rise is the highest gain recorded by the bullion in 14 years. Gold even hit an all-time high of $2,748.23 in October. Several factors have contributed to this solid performance in 2024, including heightened geopolitical tensions, interest rate cuts and central bank purchases.
This momentum is expected to continue in 2025, with gold prices likely to be supported by ongoing geopolitical uncertainty and concerns over President-elect Trump's agenda, specifically regarding tariffs. Analysts expect gold prices to scale to around $3,000 an ounce by the end of this year, backed by solid demand amid limited supply prospects.
Efforts to Counter High Costs to Sustain Margins: The industry has been facing a shortage of skilled workforce, causing a spike in wages. Industry players are grappling with escalating production costs, including electricity, water, and material and supply-chain issues. Since the industry cannot control gold prices, it focuses on improving the sales volume and the operating cash flow, as well as lowering unit net cash costs.
The industry participants are opting for alternative energy sources, such as solar or wind farms, to minimize fuel-price volatility and secure supply. Miners are committed to cost-reduction strategies and digital innovation to drive operating efficiencies.
Demand & Supply Imbalance to Support Prices: Depleting resources, declining supply in old mines and the lack of new mines have been inherent threats to the industry. Due to the scarcity of discoveries and exhaustive existing resources, miners prefer building up reserves through acquisitions rather than digging new ones that are risky and capital-intensive.
On the demand side, the use of gold in energy, healthcare and technology is rising. India and China account for around 50% of consumer gold demand. Gold demand in India will remain strong on improving economic momentum and consumer confidence.
The yellow metal has long been considered a safe-haven investment amid financial or political uncertainty. Central banks have been ramping up reserves held in gold due to currency depreciation and geopolitical and economic risks. Therefore, there will be an eventual demand-supply imbalance, which will likely drive gold prices.
The group's Zacks Industry Rank, the average of the Zacks Rank of all the member stocks, indicates encouraging near-term prospects. The Zacks Mining - Gold Industry, which is a 39-stock group within the broader Zacks Basic Materials sector, currently carries a Zacks Industry Rank #85, which places it in the top 34% of 248 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that you may want to consider for your portfolio, let us take a look at the industry's recent stock-market performance and valuation picture.
The Mining-Gold Industry has outperformed the sector over the past year but lagged the Zacks S&P 500 composite. The stocks in the industry have collectively grown 14.5% compared with the broader sector's decline of 10.4%. The S&P 500 has gained 26% in the same timeframe.
On the basis of the forward 12-month EV/EBITDA, a commonly used multiple for valuing gold-mining companies, we see that the industry is currently trading at 10.03X compared with the S&P 500's 24.69X and the Basic Material sector's forward 12-month EV/EBITDA of 7.63X.
Over the last five years, the industry traded as high as 11.20X and as low as 7.19X, the median being 9.51X.
Gold Royalty: The company demonstrated strong financial performance through the first nine months of 2024, delivering record revenues, stable expenses and positive net income. GROY is expected to deliver on its 2024 guidance of 6,500-7,000 GEOs and revenues of $13-$14 million, driven by contributions from the Vares and Côté Gold mines and higher commodity prices.
The royalty generator model continues to deliver value, with 47 royalties created since the 2021 acquisition of Ely Gold Royalties, including seven new royalties added in 2024. The company is poised for growth backed by its portfolio of premier assets in top jurisdictions, recent acquisitions, ramp-up and development of key projects.
Vancouver, Canada-based Gold Royalty focuses on acquiring royalties, streams and similar interests at varying stages of the mine life cycle. The Zacks Consensus Estimate for GROY's earnings for fiscal 2025 has moved to 1 cent per share compared with breakeven earnings per share expected 90 days ago. The estimate indicates year-over-year growth of 220%. GROY has a trailing four-quarter earnings surprise of 125%, on average. The company currently sports a Zacks Rank #1 (Strong Buy).
You can see the complete list of today's Zacks #1 Rank stocks here.
Equinox Gold: The company's Greenstone Mine in Ontario poured its first gold in May 2024 and started commercial production in November 2024. Reflecting the ramp-up at the Greenstone Mine and strong gold prices, EQX delivered record production, revenues and adjusted EBITDA in the third quarter.
At full production, the Greenstone mine will be one of Canada's largest and highest-grade open-pit gold mines, producing an average 390,000 ounces of gold per year for the first five years and 330,000 ounces of gold annually for an initial 15-year mine life. As Greenstone ramps up to capacity and with the successful completion of expansion projects at its Aurizona, Los Filos and Castle Mountain mines, the company can produce more than 1 million ounces of gold annually from its current portfolio.
Headquartered in Vancouver, Canada, Equinox Gold engages in the exploration, acquisition, development and operation of mineral properties in the Americas. The Zacks Consensus Estimate for EQX's 2025 earnings has moved up 10% over the past 90 days. The consensus estimate indicates a substantial year-over-year improvement of 113%. EQX has a trailing four-quarter earnings surprise of 39.2%, on average. The company currently carries a Zacks Rank #2 (Buy).
Agnico Eagle Mines: The company, in December 2024, announced that it will acquire O3 Mining, which owns the Marban Alliance property. It includes the Marban deposit, which is an advanced exploration project. The integration of the Marban Alliance property with the AEM's Canadian Malartic land package will create significant and unique synergies.
In September, the company had completed an updated mineral reserve estimate and an updated life of mine plan for its Detour Lake mine. With the development of an underground mine to complement the existing open pit mine and the mill optimization, AEM sees the potential to increase the Detour Lake mine's overall production to an average of 1 million ounces of gold per year over 14 years starting in 2030.
The company continues to lower debt, focus on cost control and invest in projects while providing returns to shareholders. Agnico Eagle has made a string of recent equity investments to grow its holdings of junior mining companies, in sync with its recent focus on increasing base metal exposure.
The Zacks Consensus Estimate for the Toronto, Canada-based gold mining company's 2025 earnings has moved up 12% over the past 90 days. The estimate indicates year-over-year growth of 13%. AEM has a trailing four-quarter earnings surprise of 19.2%, on average. The company has a long-term estimated earnings growth of 31.3% and a Zacks Rank #3 (Hold).
Franco-Nevada: FNV appears on a promising long-term trajectory, backed by a healthy portfolio of streaming and royalty agreements on several properties mined by some of the most reputable mining companies in the world. The company is debt-free and uses its free cash flow to expand the portfolio and pay out dividends.
Given its focus on cost management, FNV has been generating high margins. Franco-Nevada has been enhancing its portfolio without adding significant overhead. The company signed a $500-million precious metals stream agreement with Sibanye-Stillwater in December 2024. Over the next 20 years, this deal is expected to provide Franco-Nevada with a stable GEO profile from platinum, palladium, rhodium and gold production.
The Zacks Consensus Estimate for this Toronto, Canada-based gold-focused royalty and stream company's earnings for fiscal 2025 has moved up 8% over the past 90 days. The estimate indicates 21.7% year-over-year growth. FNV has a trailing four-quarter earnings surprise of 4.2%, on average. The company currently carries a Zacks Rank of 3.
Kinross Gold: The company's strong liquidity position and substantial cash flows allow it to finance its development projects while paying down debt and driving shareholder value. Kinross has a strong production profile and boasts a promising pipeline of exploration and development projects.
Its key development projects and exploration programs, including Great Bear in Ontario and Round Mountain Phase X in Nevada, remain on track. These projects are expected to boost production and cash flow and deliver significant value. KGC also completed the commissioning of its Manh Choh project and commenced production during the third quarter of 2024, leading to a substantial increase in cash flow at the Fort Knox operation.
The Zacks Consensus Estimate for this Toronto, Canada-based gold mining company's earnings for fiscal 2025 has moved up 11% over the past 90 days. The estimate indicates 24.6% year-over-year growth. KGC has a trailing four-quarter earnings surprise of 32.5%, on average. The company currently carries a Zacks Rank of 3.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Kinross Gold Corporation (KGC) : Free Stock Analysis Report
Agnico Eagle Mines Limited (AEM) : Free Stock Analysis Report
Franco-Nevada Corporation (FNV) : Free Stock Analysis Report
Equinox Gold Corp. (EQX) : Free Stock Analysis Report
Gold Royalty Corp. (GROY) : Free Stock Analysis Report
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