Cost control has emerged as the key differentiator for Canada’s mining sector this earnings season, according to Jefferies.
The firm noted that miners delivering on cost guidance — and thus stronger free cash flow (FCF) — are outperforming, while those missing the mark are lagging behind.
“Free cash flow is back in focus, and investors are rewarding those that deliver,” Jefferies analysts wrote in a weekly note. “Show us cost control — and we’ll show you a re-rate.”
Several companies reported first-quarter results last week, including gold producers Endeavour Mining PLC (LSE:EDV, TSX:EDV, OTCQX:EDVMF) and Alamos Gold Inc (TSX:AGI, NYSE:AGI), as well as copper players Capstone Mining Corp (TSX:CS) and Ivanhoe Mines Ltd. (TSX:IVN, OTCQX:IVPAF). Results reinforced the market’s focus on costs over volume.
Endeavour Mining, a Jefferies top gold pick, beat consensus on all fronts, with 8% higher production and 11% lower costs. “We expect ongoing capital returns supported by a 17% 2025 FCF yield at spot prices to drive share price upside,” analysts wrote.
In contrast, Alamos Gold shares fell after reporting elevated costs. Jefferies flagged the potential for a guidance revision but called the pullback “excessive,” adding that it expects better performance from Q2 onward.
In copper, both Ivanhoe and Capstone delivered Q1 cost beats at their flagship mines — Kamoa-Kakula in the DRC and Mantoverde in Chile, respectively. Capstone also said it does not anticipate a final investment decision on its Santo Domingo project before mid-2026.
Elsewhere, G Mining Ventures Corp (TSX:GMIN, OTCQX:GMINF) released a feasibility study for its Oko West gold project in Guyana (56% of NAV), showing some cost escalation but no change to the timeline, with a final investment decision still expected in H2 2025.
Despite recent share price gains for select names, Jefferies noted that mining equities remain inexpensive. Stocks in its coverage are pricing in $2,498/oz gold and $3.89/lb copper — well below current spot prices of roughly $3,260/oz and $4.20/lb. At spot, gold miners trade at an average P/NAV of just 0.65x, or about 35% below historical norms.
“Valuations remain compelling, especially for names delivering consistent cost and capital execution,” Jefferies said.
Macro tailwinds could provide further support. US nonfarm payrolls rose by 177,000 in April, beating expectations, while signs of a possible thaw in U.S.-China trade tensions lifted investor sentiment. However, Jefferies believes China will not lower tariffs unless the US acts first.
In Canada, the Liberal Party led by Mark Carney is set to form a minority government following federal elections. Jefferies expects the new administration to prioritize critical minerals and streamline mine permitting. “We anticipate a more efficient approval process under Carney’s leadership,” the analysts wrote.
Meanwhile, gold demand rose 1% year-over-year in Q1 to 1,206 tonnes, the strongest first quarter since 2016, driven by Chinese retail buying and the largest gold ETF inflows since early 2022.
More first-quarter results from Canadian miners are due this week — and, as Jefferies noted, cost control will remain under the microscope.