BofA: North American Senior Gold Producer Primer

United Arab Emirates -  March 11, 2021:  

4th edition of North American senior gold producer primer

This is the fourth edition of our primer profiling the North American senior gold producer sector. We define a senior gold producer as one with annual production in excess of 1.75 million ounces. Amongst the North American domiciled gold producers, Agnico Eagle Mines (AEM), Barrick Gold (GOLD), Newmont Corporation (NEM) and Kinross Gold (KGC) qualify as seniors. In Sections 4-7 we have included three-page overviews for each North American senior gold producer.

The North American senior gold producers in context

The North American senior gold producers as a group are dominant globally in terms of market capitalization, gold production, gold reserves and free cash flow (FCF) (see Section 1). Versus the global gold producers, the North American senior gold producers accounted for 44% of total global gold producer market capitalization (as of March 5th 2021), 39% of 2020 industry gold output, 31% of aggregate year end 2020 gold reserves and 41.5% of aggregate industry 2020 FCF.

The evolution of the global gold sector: 2000-21

In Section 2 we examine the evolution of the global gold producer sector for the 2000-21 period, broken down into four major eras of merger and acquisition (M&A) activity (pages 8-9). Having covered the gold sector for 33 years, we have had a 'front row' seat to how the global gold producer sector has evolved. Over 60% of the global gold producers in 2000 (Exhibit 1 on page 8) no longer exist due to M&A. Exhibit 15 on page 9 sets out the global gold producer sector as of March 5th 2021, broken down into three sub-sectors: senior, 'senior' mid-tier, and mid-tier producers. 

New to this primer: ESG

New to this primer is an ESG section with several charts comparing the efforts of these producers in this important topic. Page 10 sets out the environmental performance of the senior golds with regards to carbon emissions, water usage & recycling. Page 11 sets out workplace safety (social) and governance charts. We see improvement in reducing workplace injuries and gender equality at the board level. Speaking at the PDAC on March 8th 2021, Blackrock stated that they see ESG flows creating discounts on non-compliant firms and opportunities for those which are compliant. 

Historical valuation charts

In Section 8, we set out historical valuation charts on pages 24-25. Over the past ten years, the North American senior gold producers have traded in the 1-2x NAV range. Year to date 2021, P/NAV multiples for all four senior gold producers have shrunk to multiple year lows. Since 2010, the average P/CF multiple for the senior gold producers has ranged from 5.0-15.0x.