Gold Mining: Proceed with caution

Research evidence excerpt

Gold Mining: Proceed with caution

risk vs reward is improving.

Joni Teves

Gold miners well positioned for bear market... Strategist

joni.teves@ubs.com

Mining equities nearly always look 'cheap' at top of the cycle prices; after de-rating +65-6495 6851

during the 2024/26 bull market this was the case for gold equities that still looked cheap

Ethan Hong

at spot in Feb-26, but nevertheless GDX has corrected by >35% vs peak. In our view,

Associate Analyst

spot valuations are generally attractive (Figure 17); but near-term gold miners face ethan.hong@ubs.com

headwinds from material consensus earnings downgrades (~20% spot downside to +1-212-649 8258

2027E EBITDA), confirmation of energy price headwinds in 2Q & potential upside to

2026 cost guidance risks, albeit energy costs should be transitory and part offset by

lower gold prices (most used >$4,000/oz budgets to set guidance) and FX (stronger

USD).

If the gold price continues to decline gold equities should go down further, but in our

view gold miners are generally better positioned for a bear market: (1) looking through

near-term energy cost impacts, cost discipline has been much better vs previous cycles

with record margins better positioned to absorb lower gold prices; (2) balance sheets are

strong with most net cash; (3) spot FCF (~7% 2027E yield UBS coverage) remains robust

providing scope for supportive/accretive buybacks; (4) capital allocation has largely been

disciplined and lower valuations & strong balance sheets may provide attractive M&A

opportunities in a downcycle.

Trim earnings & price targets: NEM, B, EDV, SSR, SKE, & FNV top picks

We trim near-term gold and silver prices (LINK), resulting in earnings downgrades - see

Figure 15 for summary of changes of estimates and rating. We reduce target EV/EBITDA