Gold Miners: We Initiate Coverage on Newmont, Barrick Gold, Agnico Eagle, and Kinross Gold

We recommence coverage of senior gold miners Newmont, Barrick Gold, Agnico Eagle Mines AEM, and Kinross Gold with fair value estimates of USD 54, USD 21, USD 53, and USD 5.20 per share, respectively. We do not allocate a moat to any of these companies. Newmont, Barrick Gold, and Agnico Eagle have Medium fair value Uncertainty Ratings, while Kinross has a High Uncertainty Rating partly reflecting its greater financial leverage.

We think the shares of Newmont and Barrick Gold are undervalued, trading at discounts of 8% and 6%, respectively, while Agnico Eagle and Kinross shares currently trade at premiums to fair value of 10% and 3%, respectively. Spot gold prices have risen recently to around USD 2,000 per ounce on fears over the stability of the financial system as well as a potential recession. While higher gold prices are a tailwind, concerns remain over rising interest rates, which increase the opportunity cost to hold gold, and cost inflation. Gold investment lacks cash flows for owners, and rising yields make bonds relatively more attractive. Meanwhile, inflation in labor, fuel, and other costs is pushing up the cost curve and impacting gold miner margins.

We now assume gold averages about USD 1,880 per ounce from 2023 to 2025 based on the futures curve, up from around USD 1,810 previously. We also raise our assumed midcycle price for gold to USD 1,700 per ounce from 2026, up from about USD 1,600. This reflects rising unit costs and our updated estimate of the marginal cost of production utilizing the latest cost curve data from the World Gold Council.

Gold prices tend to be relatively uncorrelated to the broader economic cycle and have perceived countercyclical, safe-haven investment attributes while also being seen as an inflation hedge. Investment and jewelry are most of global gold demand, and a demand slowdown is the key risk to cash flows. A reduction in Chinese fixed-asset investment, lowering demand for copper, would also have some impact.