What are we looking for?
Canadian precious metals and mining producers that have risen this year but still trade at reasonable valuations.
The screen
Gold prices have climbed rapidly over the past 12 months, rising over 80 per cent, as investors look for protection against inflation, geopolitical risk, and growing government debt. Other precious metals such as silver and platinum have risen even more. Consequently, the stocks of many producers have pushed sharply higher. When prices rise quickly, investors often worry that stocks have become too expensive and future returns may be limited.
However, rising share prices do not always mean rising valuations. In some cases, earnings and cash flow have grown just as fast, leaving certain companies still trading at reasonable prices despite strong returns.
Using FactSet’s screening tool, I looked for stable Canadian metals and mining companies that have already performed well this year, but remain relatively inexpensive by applying the following criteria:
- Market capitalization greater than $1-billion
- Classified within the metals & mining sector, according to FactSet
- Pays a dividend
- Has a positive one-year total return
- Trades on the S&P/TSX Composite
The 23 remaining companies (top 10 shown) were ranked by a multifactor ranking of three valuation metrics widely used in the mining industry: price-to-earnings, price-to-net asset value, and enterprise-value-to-EBITDA.
What we found
Even after a strong year, valuations across the group remain reasonable. On average, the companies in the screen are up 25.3 per cent year to date, yet trade at 10.7 times EV/EBITDA and 1.6 times NAV. This suggests that the rally in gold stocks has been supported by improving fundamentals, not just investor enthusiasm.
B2Gold Corp. BTO-T ranked first on the screen and is the cheapest major gold producer in the group. The stock is up 18.8 per cent year to date, but trades at just 0.8 times NAV, implying that the market is valuing the company below the estimated worth of its mines. B2Gold also offers a 3-per-cent dividend yield, the second highest among those passing our screen. Investor caution has focused on geopolitical risk in Mali, where its flagship Fekola mine is located. Still, the company generates strong cash flow and remains profitable, suggesting much of that risk is already reflected in the share price.
Torex Gold Resources Inc. TXG-T ranked second on the screen and combines strong performance with conservative valuations. It trades at 4.6 times EV/EBITDA and 1.1 times NAV, which are both well below the group average. Torex was the largest gold producer in Mexico in 2024, primarily from its flagship asset, the Morelos Complex. While operating in Mexico adds a layer of regulatory risk, management was confident in its Jan. 14 guidance, with the chief executive officer stating that “we expect annual production to pick up significantly in 2026.”
The information in this article is not investment advice. The author assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained above.
Arjun Deiva, CFA, is an MBA Candidate at the University of California, Berkeley, Haas School of Business.