AEM’s EBITDA margin
Of all the miners (GDX) we’ve discussed in this series, Agnico Eagle Mines (AEM) has the highest EV-to-forward-EBITDA[1. earnings before interest, tax, depreciation, and amortization] multiple of 12.0x.
As can be seen in the graph below, AEM’s EBITDA margin is quite high. The company’s strong operational consistency and robust project pipeline support a higher multiple. AEM’s exploration program also offers an upside to the stock.
Goldcorp (GG) has the second-highest forward multiple of 9.9x, representing a discount of 5.3% compared to its historical average multiple. It also reflects a 33.8% premium to the senior gold peers’ multiple.
Analysts are optimistic regarding Goldcorp’s long-term vision, which is expected to drive production and reserves up 20% in the next five years while driving unit costs 20% lower.
Barrick Gold and Newmont Mining
Newmont Mining (NEM) has a forward multiple of 8.8x, which is 11.8% higher than its five-year average multiple and 18.8% higher than the senior peers’ multiples. Analysts have also upgraded their estimates for NEM, which resulted in a higher multiple.
NEM’s upgrades are mostly on the back of higher production expectations. Moreover, its debt reduction is going as planned, giving analysts further encouragement.
Despite having the highest EBITDA margins, Barrick Gold’s (ABX) multiple is lower than that of Goldcorp, Agnico Eagle Mines, and Newmont Mining at 6.0x each. The multiple also represents a discount of 11.6% compared to its historical multiple and an 18.7% discount to its peers.
Barrick Gold faced issues with its mines in Argentina and Tanzania, which could impact its production growth. These factors are affecting analysts’ short-term forecasts.
Yamana Gold and Kinross Gold
Yamana Gold’s (AUY) inconsistent operational performance has been the major reason for investors’ concerns. It is trading at a multiple of ~7.3x, which is an 18.4% discount to its peers.
Kinross Gold (KGC) is trading at the lowest forward multiple of 5.0x. Although the stock saw a rerating of 16% in 2017, there could still be some upside left. The speedy execution of its growth projects, Tasiast Phase II and Round Mountain Phase W, could be the next positive catalyst.