Gold prices are surging and miners might still be cheap
Gold approaches US$4,000 while miners rally 100% YTD. But UBS says they're still cheap if prices continue to trend higher.
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Mentioned
KEY POINTS
- Gold has rallied 16% in six weeks to US$3,943/oz, driven by government shutdown concerns, geopolitical uncertainty, and record central bank buying.
- UBS sees up to 150% valuation upside for gold miners under a US$4,500/oz scenario, with Northern Star and Regis Resources offering the most upside.
- Under a US$4,500/oz scenario, gold miners will delivering some 'eye watering' free cash flow (before they get eaten by costs and capex).
Gold prices seem unstoppable right now, with prices rallying 1.48% on Monday to US$3,943 an ounce. The momentum behind safe havens and precious metals has been relentless, driven by trade tensions, geopolitical uncertainty, record US debt levels, and the latest government shutdown concerns. The US$4,000 mark seems almost inevitable.
Investors have piled into gold-backed ETFs this year, with the World Gold Council reporting a third consecutive month of inflows in August. Collective assets under management rose 5% month-on-month to US$407 billion, setting a fresh record high.
As the path of least resistance points higher, the question becomes: what if gold continues breaking new ground for weeks or months to come? And does this mean gold miners are still cheap at current levels?
Gold price chart (Source: TradingView)
What's making headlines
Before we dive in, here's some of the latest news and analyst commentary around the gold price:
The US government shutdown has extended into this week after the Senate failed to advance competing funding plans on Friday. This has delayed key economic releases, including September's non-farm payrolls report, forcing investors to rely on alternative indicators that point to a weakening labour market.
All of gold's key long-term drivers remain firmly in place: a weak US dollar and de-dollarisation trends, strong central bank demand, and still-solid Fed rate cut expectations (two 25 bp cuts by year end).
Central banks bought over 1,000 tons of gold for the third consecutive year in 2024, with buying pace doubling after Russia's Ukraine invasion as countries sought to reduce dollar dependency.
Goldman Sachs raised their gold forecast beyond US$4,000 for mid-2026 and US$4,300 by year-end 2026.
What does gold at US$4,500 look like?
UBS analysts see up to 150% upside to valuations under a hypothetical US$4,500/oz gold price scenario.
The US$4,500 figure might sound stretched, but it only represents a further 14% gain from current levels. Prices have already rallied 16% in the past six weeks alone.
Under the US$4,500 scenario, analysts expect EV/EBITDA multiples to improve by 20-40%, meaning the stocks "all look cheap still." For context, EV/EBITDA (enterprise value/EBITDA) is a ratio that shows how expensive a company is relative to its cash-generating ability.
Ticker | Company | Current target | US$4,500 target | % Chg |
|---|---|---|---|---|
NEM | Newmont | $140.00 | $180.00 | 29% |
NST | Northern Star | $21.10 | $50.70 | 140% |
EVN | Evolution Mining | $7.90 | $15.40 | 95% |
PRU | Perseus Mining | $5.10 | $9.05 | 77% |
GMD | Genesis Minerals | $6.50 | $12.95 | 99% |
RRL | Regis Resources | $5.40 | $13.90 | 157% |
SSR | SSR Mining | $32.80 | $74.85 | 128% |
VAU | Vault Minerals | $0.72 | $1.54 | 114% |
Source: UBS estimates | October 2025
Northern Star tops the list for potential upside, which makes sense given the company has reached critical mass following several major acquisitions in recent years:
Pogo: Acquired the Pogo underground gold mine in Alaska for $356 million in 2018
KCGM: Acquired the remaining 50% interest in KCGM from Newmont for $800 million in 2019
Saracen: Merged with Saracen Minerals in 2020, with Saracen shareholders receiving 36% of the combined entity. This consolidated Kalgoorlie's Superpit after the companies each acquired 50% of the mine in separate transactions.
De Grey: Acquired De Grey Mining in December 2024 in an all-share deal valuing the company at $5 billion
Northern Star has one of the strongest growth profiles among mid-to-large cap gold miners, with Macquarie analysts forecasting 56% production growth from 1.63 million ounces in FY25 to an estimated 2.53 million ounces by FY30. But this growth comes at a cost. Capex is set to soar from US$1.3 billion in FY24 and $2.0 billion in FY25 to an estimated:
FY26: $3.0 billion
FY27: $2.0 billion
FY28: $2.2 billion
The rising capex will see the company deliver negligible free cash flow until FY29.
Valuations and cash flow
Under a US$4,500 gold price environment, here's how multiples compress based on current EV/EBITDA assumptions:
Ticker | Company | EV/EBITDA (current) | EV/EBITDA (US$4,500) | % Chg |
|---|---|---|---|---|
NEM | Newmont | 6.3x | 4.8x | 24% |
NST | Northern Star | 7.4x | 6.1x | 17% |
EVN | Evolution Mining | 6.9x | 5.6x | 18% |
PRU | Perseus Mining | 4.9x | 4.0x | 18% |
GMD | Genesis Minerals | 6.7x | 5.3x | 21% |
RRL | Regis Resources | 4.0x | 3.1x | 23% |
SSR | SSR Mining | 4.7x | 3.8x | 18% |
VAU | Vault Minerals | 6.1x | 4.6x | 25% |
Source: UBS estimates | October 2025
UBS also expects these miners to deliver "eye watering" free cash flow yields (before they get eaten by costs and capex):
Ticker | Company | FCF yield (current) | FCF yield (US$4,500) |
|---|---|---|---|
NEM | Newmont | 7.3% | 10.7% |
NST | Northern Star | 0.4% | 3.0% |
EVN | Evolution Mining | 7.9% | 11.1% |
PRU | Perseus Mining | -1.1% | 1.0% |
GMD | Genesis Minerals | 8.7% | 11.4% |
RRL | Regis Resources | 14.4% | 21.3% |
SSR | SSR Mining | -1.1% | 1.8% |
VAU | Vault Minerals | 3.1% | 5.6% |
Source: UBS estimates | October 2025
Northern Star shows one of the smallest improvements in both multiple compression and free cash flow, reflecting its ongoing ramp up and heavy capex spend. Perseus also sees minimal free cash flow movement, likely due to hedge contracts covering about 16% of anticipated production over the next three years (240,000 ounces at the end of FY25).
The bottom line
Gold miners have delivered an extraordinary run, with the All Ords Gold Index up 22% in the past month and 100.4% year-to-date. Most stocks now trade at historically expensive multiples, suggesting they're either pricing in higher gold prices or vulnerable to a sharp correction if gold retreats. But if prices continue to trend higher, miners could still prove cheap.
