UBS says gold sector’s easy gains are over, names Newmont top pick

UBS has delivered a mixed verdict on the market's major gold miners, upgrading Newmont while downgrading Northern Star Resources and Evolution Mining. The downgrades come as the sector continues to face production delays and rising capital costs despite soaring gold prices.

The investment bank raised its Newmont price target by 17% to $105 while maintaining its Buy rating, positioning the mining giant as its preferred large-cap Australian gold stock.

Gold Price Surge Creates High Expectations

Gold has continued to perform exceptionally well in 2025 and even pushed through the A$5,000 level for the first time in early April. UBS has maintained its bullish long-term forecast of US$3,600 per ounce. This forecast once sat around 30% above market consensus, but the gap has since narrowed to 10% as other analysts have upgraded their own forecasts.

However, this gold price strength has lifted mining stock valuations to levels that leave little room for disappointment, making upcoming FY26 guidance updates particularly important for investors.

Newmont Emerges as Top Pick

UBS analysts highlighted Newmont's improved positioning following years of deal-related challenges and production shortfalls. The company delivered a strong first quarter and remains on track to produce 5.6 million ounces in 2025.

"Following the extended period of deal indigestion and production underperformance, Newmont now appears relatively better positioned," UBS noted, pointing to an expected 8% free cash flow yield in 2026 and ongoing share buybacks funded by asset sales.

Having fully committed US$1.3 billion in development capital to current projects while maintaining net debt below US$5 billion, Newmont is positioned to return excess cash to shareholders while preserving financial flexibility.

Northern Star Faces Delays

Northern Star's downgrade reflects mounting concerns over production timelines, with UBS no longer expecting the company to achieve its long-held target of 2 million ounces annually by fiscal 2026. Instead, analysts now forecast 1.8 million ounces, representing a 12-month delay.

The company's Kalgoorlie operations have struggled with productivity issues in the Super Pit, while permitting delays have pushed back first production at the Hemi project to March 2028. These setbacks have prompted UBS to reduce its earnings forecasts by 6% for each of 2026 and 2027.

"While the balance sheet remains a point of strength, it is confidence in the growth profile and delivery that needs to be rebuilt," UBS analysts wrote.

Evolution Mining Hits Valuation Ceiling

Despite Evolution Mining's strong operational performance and 81% year-to-date share price gain, UBS downgraded the company to "Sell", citing stretched valuations and rising capital expenditure requirements.

The analysts raised their five-year average capital expenditure forecast to $916 million per annum, approaching the upper end of Evolution's guidance range of $750-950 million and signaling potential cost pressures. Production forecasts were also trimmed by 5% following a reserve and resource update that showed grade downgrades at key assets including Red Lake.

"Evolution is now trading expensive," UBS concluded, noting the stock no longer offers valuation support at current levels.

Sector Outlook

The downgrades reflect broader challenges facing Australian gold miners as they navigate higher costs, regulatory delays, and the pressure to deliver on ambitious growth targets. While gold prices remain supportive, operational execution has become increasingly important for maintaining investor confidence.

UBS's reshuffling of ratings suggests the easy gains from rising gold prices may be behind the sector, with individual company performance now taking precedence over commodity momentum in driving share price returns.

The upcoming guidance updates, particularly Northern Star's expected announcement following a site visit in early August, will provide key tests of whether companies can deliver on their promises or face further downgrades from analysts who have grown increasingly selective about the sector's prospects.