The chart below compares gold miners’ forward EV[1.enterprise value-to-EBITDA multiples and forward EBITDA margins. Agnico Eagle Mines’ (AEM) forward multiple of 10.3x, the highest among senior and intermediate gold miners, is 12% higher than its trailing-five-year average and 75% higher than its peers’ (GDX) (GDXJ). AEM enjoys this premium due to its strong production growth, which is supported by its impressive project pipeline.
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Barrick and Newmont
Barrick Gold (GOLD) has the second-highest multiple of 8.3x. This multiple is 20% higher than its historical multiple, and 41% above the peer average. GOLD’s multiple has been expanding since its merger announcement last September due to expected synergies, cost savings, and increased returns.
Newmont Mining’s (NEM) valuation multiple of 6.5x, the third-highest among the miners, is 5% below its historical multiple and 18% above the peer average. Newmont-Goldcorp’s significant synergies could command a premium multiple, though much depends on post-merger project execution. Newmont will also need to assure markets that it can turn around Goldcorp’s weaker assets or sell them for a reasonable price.
Yamana Gold and Kinross Gold
Yamana Gold’s (AUY) multiple of 5.3x implies a discount of 11% to its senior and intermediate peers (NUGT). However, it has narrowed this discount recently. With the start-up of its Cerro Moro mine, Yamana Gold’s production and costs are expected to improve significantly.
Kinross Gold (KGC) is trading at a forward multiple of 4.7x, 24.0% below the peer average. While the stock has strengthened as the company addresses production growth concerns, geopolitical concerns and challenges at its Tasiast expansion have been weighing it down.