JP Morgan has thrown its weight behind the world's gold miners, declaring the sub-sector offers a compelling entry point as it kicks off a new research tool for investors.
The bank used the launch of its inaugural Global Gold Miners Dashboard to argue that valuations across the industry look attractive, spanning more than 20 stocks in five regions and a combined market value of around US$700 billion.
The dashboard, put together by a team including Greg Shearer, Jonathon Sharp, Avery Chan and Yangyang Hou, is pitched as a one-stop shop for the macro and equity numbers that move the sector. It stretches across EMEA, Australia, China, North America and Latin America, covering miners that dig up roughly 35 million ounces of gold between them each year.
On the bigger picture, JPM's mining analysts have joined forces with the bank's commodities desk to weigh up what is driving the gold price, from central bank buying to the ebb and flow of money through exchange-traded funds and retail demand.
A separate tie-up with the derivatives strategy team aims to shed light on how investors are positioned and how much leverage is sloshing around.
For the miners themselves, the bank crunched valuations at both current spot prices and its own house forecasts, running the ruler over measures such as EV/EBITDA, free cash flow yield, dividend yield and balance sheet gearing.
It also mapped out operational yardsticks including all-in sustaining costs, gold-equivalent output and the production growth each company can offer over the coming years.
The upshot is a fresh set of price scenarios and regional favourites designed to help investors pick their way through a sector that has enjoyed a strong run alongside a buoyant gold price.
The message from JPM is clear enough. After the rally, there is still value to be had in the companies pulling the metal out of the ground, and now is a good moment to go looking for it.
