From gold to gold miners: Extracting higher returns in the current bull run

Gold has continued its strong run since our January 2025 thematic note, pushing above $3,050/oz. We now argue that investors should shift their focus to gold mining equities to maximise returns. With Gold Fields’ recent bid for Gold Road Resources at a 28% premium, we believe a sector consolidation phase is beginning, offering compelling opportunities across the mining spectrum.

Key themes

• The gold price has reached approximately $3,050/oz, confirming our thesis that we are in the early stages of a major rebasing.
• Historical analysis demonstrates distinct waves in which rising gold prices flow through different segments of the market.
• We believe gold mining equities are entering their most rewarding phase, with the foundation of strong gold prices now established.
• M&A activity is accelerating, signalled by Gold Fields’ recent bid for Gold Road Resources at a 28% premium.
• Gold miners offer true diversification, with a very low correlation to the S&P 500 (0.24 over 10 years

Core insights

• Potential upside to $3,300–4,500/oz for gold based on our three-pillar framework.
• Central bank buying has continued to provide structural support, contributing 7–10% to gold’s price performance.
• With gold at $3,050/oz and average all-in sustaining costs for the sector around $1,400/oz, margins for quality producers are exceptionally robust.
• After three years of net outflows, both physical gold and gold equity ETFs are seeing renewed buying interest.
• Attractive dividend yields now exceed the S&P 500 average.

Companies highlighted:

Streaming companies:

• Wheaton Precious Metals: offers a combination of gold exposure, yield and growth potential

Major producers:

• Agnico Eagle Mines: delivered EPS growth approximately 30% greater than gold’s price movement over 2010–24
• Barrick Gold Corporation: trading at attractive valuations
• Newmont Corporation: world’s largest gold producer
• Kinross Gold Corporation: Americas-focused producer

Mid-tier producers:

• Pan African Resources: strong operational performance and disciplined capital allocation
• Alkane Resources: Tomingley operation performing well with Northern Molong Porphyry Project offering significant revaluation catalyst

Junior explorers and developers:

• KEFI Gold and Copper: in the final phase of financing its project in Ethiopia.
• Barton Gold: young, dynamic management with clearly defined business plan and strong focus on minimising equity dilution.

Investment conclusion

We recommend a tiered approach to gold equity investment:

1. Establish a foundation: physical gold and streaming companies provide lower-risk exposure with meaningful upside.
2. Build core positions: focus on quality majors trading at discounts to theoretical valuations.
3. Add growth exposure: select mid-tier producers offer superior growth profiles.
4. Selective exploration upside: concentrated positions in high-potential juniors with near-term catalysts.

With margins at multi-year highs, balance sheets strengthening and M&A activity accelerating, gold equities offer compelling risk-adjusted returns at this point in the precious metals cycle.