Agnico Eagle Mines Ltd T.AEM

TD

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GOLD OUTLOOK REMAINS POSITIVE WITH STRONG PHYSICAL DEMAND AND VOLATILE POLITICS

THE TD COWEN INSIGHT

We expect a number of factors to remain supportive of a strong gold price in 2025 including declining interest rates, ongoing strong central bank buying, and a volatile geopolitical environment.

We remain positive on gold equities with stronger expected AISC margins, industry consolidation continuing to play out, and healthy share buybacks expected. Top picks are AEM, WPM, AGI, GMIN, and MAG.

• 16th Annual TD Cowen Global Mining Conference. We kick off our Mining Conference with an exploration focused agenda today, and a full slate of fireside chats and presentations on Wednesday and Thursday. Please see agenda and registration details (LINK).

• Inaugural Mining Sentiment Survey. We've launched a completely anonymous, 5-minute survey to get a pulse on investor and corporate sentiment heading into 2025. Please participate; the survey link is now open, and we are excited to share the results post conference (LINK).

• Gold bouncing back from the election selloff. Gold pulled back ~8% following the U.S. election, as the U.S. dollar soared and rate cut expectations declined. Gold has started rebounding however, up ~4% from the lows. We believe the incoming Trump administration is potentially positive for gold, given its more unpredictable nature and potentially inflationary foreign policies, highlighting gold's traditional role as a safe haven asset and incentivizing central bank buying.

• Physical demand picks up in Asia and China's Central Bank (PBoC) resumes buying. The PBoC resumed buying in November and December, following a six-month hiatus. In addition, TD Cowen Commodity Strategy group recently pointed out that gold is once again trading at a premium in Asia with Shanghai Futures Exchange buying on the rise.

• Margin expansion trend to continue in 2025 (Figure 1). We forecast industry AISC to be roughly flat in 2025, with modestly higher costs from most producers offset by slight improvements at NEM and select mid-caps. Based on our gold price forecast of $2,725/ oz, AISC margins should climb to 46% or $1,252/oz. The previous 20-year change in AISC margins vs. equity returns suggests a potential gain of 15% for equities in 2025.

• A stable gold price should bode well for miners and drive M&A. The elevated gold price, and resulting strong free cash flows and strong balance sheets, has created a supportive environment for sector M&A, in our view. Newmont has received attractive valuations in its asset sale process, and with this process now mostly concluded, we expect other industry participants to get more active on the M&A front.
   

  Trump tariffs could accelerate the depletion of silver stockpiles. TD Cowen Commodity Strategy believes the setup for silver is the most exciting theme in the commodity sector. Silver stockpiles have experienced four consecutive years of deficits driven by strong investment and industrial demand. This could be accelerated by Trump's potential universal tariff, leading to a silver squeeze and significant rally. The silver stocks with the highest beta are Endeavour and First Majestic (Figure 7). Our top pick among the silvers is MAG for its low-cost structure, strong FCF, and its potential as a takeout target.

  Very robust market for royalty and streaming deals. Our understanding is that 2025 is shaping up to be comparable to 2024 in terms of deal flow. While we believe it is unlikely that as many large deals will be completed in 2025, we understand that there are currently 1 or 2 large potential precious metal deals ($500mm+) being contemplated in the market. We believe the potential for large transactions bodes well for the entire sector and could directly benefit WPM, FNV and RGLD, in our view.

  We remain positive on gold equities. With stronger expected AISC margins, industry consolidation continuing to play out, and healthy share buybacks expected. Top picks are Agnico-Eagle, Alamos, and G Mining. For silvers, our top pick is MAG, and Wheaton and Royal Gold among the royalties. In addition, we have included our beta to gold charts (Figure 4) - among torquey gold stocks we like Kinross, Lundin Gold, Torex, and IAMGOLD.