After a record-breaking 2024, do Gold and Silver miners still have room to run?

Few asset classes have outperformed precious metals in 2024. Gold has reached record highs, whilst silver is staging a strong comeback. As the global geopolitical situation continues to deteriorate, private investors and central banks alike have flocked to seek safety and stability through precious metals.

The rocketing demand for gold and silver exposure has made some precious metal miners some of the stand-out performers in 2024, particularly in the UK markets.
In my 2023 end-of-year mining sector review, I noted that analysts were expecting that gold prices would reach record highs. They were indeed correct, but it appears that they were very conservative in their estimates, forecasting that gold would reach $2,300 an ounce by 2025, when it’s just breached $2,750.

On the back of the stellar performance of gold this year and silver staging a strong comeback, miners on the UK exchanges have finally found a bit of love again. Junior miners such as Metals Exploration, Serabi Gold and Atlyngold have all seen their share prices more than double. But some of the larger players, like Hoschild Mining and Resolute Mining, have also had their time in the sun. The table below highlights the impressive performance of these often-overlooked mining stocks, all of which have more than doubled in value:

As the data shows, these precious metal miners have outpaced broader market returns, buoyed by economic factors such as inflation concerns, rising debt levels, and geopolitical tensions. Gold, often referred to as the "yellow metal," has been particularly attractive to investors looking to hedge against volatility, as it always has been.

Source: Bloomberg

Citi Research analysts are optimistic that gold will reach $2,800 in the next 3 months and possibly attain the $3,000 level within the next 6-12 months. Goldman Sachs strategists tend to agree with this sentiment, citing persistent central bank purchases, upcoming Fed rate cuts, and potential geopolitical shocks as the driving factors behind this.

Citi also predicts a strong year for silver, projecting a rise to $40 per ounce by mid-2025. The gold-to-silver ratio is currently above historical averages, and silver’s usefulness in industrial applications, such as in electronics and solar technology, can also help fuel its price appreciation. For those of you who are more interested in technical analysis, you can also see a potential long-term “bowl pattern” forming, which could hint at further gains.

Given the robust demand trends underpinning these assets, it’s little wonder that investors have been drawn to the precious metals space once more. In this review, we’ll take a closer look at some of this year’s top-performing gold and silver miners listed in the UK markets. We’ll also look to identify additional opportunities in the mining sector that could capture further upside

Centamin (LON:CEY)

Centamin was one of the companies highlighted in my mining review article at end of 2023. The share price was languishing around £1 at the time, trading at similar levels to its lows in December 2020 despite gold prices being on a strong upward trend.

But in 2024, Centamin’s share price slowly started to move up the gears. By early September, the shares has appreciated in value by over 25%, more or less in line with the rise in gold prices over the same time.

However, it wasn’t until 10th September 2024 that the share price really took off. South African mining giant, AngloGold Ashanti saw untapped value in Centamin's portfolio, particularly in the Sukari gold mine in Egypt, which produces over 450,000 ounces annually.

AngloGold decided to make an offer for the company, valuing it at a 37% premium to its closing price on the day. Centamin shareholders will receive 0.06983 new AngloGold shares plus $0.125 for each Centamin share, giving them a 16.4% stake in the merged company overall.



The Sukari mine is considered a Tier 1 asset in the mining world, with significant long-life reserves (projected to last another 14 years) and relatively low production costs. As the gold price sets record after record, it’s no wonder why AngoGold decided to come in with an offer for an asset that would give it a strategic foothold in Egypt and position it as the fourth-largest producer of the yellow metal in the world.

What is interesting, is that Centamin’s share price surged past the offer price in October, most likely on the expectation that another bidder might enter the fray. The share price reached a high of 173p before falling back to settle around AngloGold’s offer price. It point to a value disparity, with AngloGold’s bid potentially undervaluing Centamin’s high-quality, long-life assets and near-term production growth prospects.

Beyond the Sukari mine, Centamin holds low-cost assets in Côte d'Ivoire, including the Doropo and ABC gold projects. The Doropo project is much further down the line in terms of development. The final investment decision (FID) is expected in the first half of next year. The mine is estimated to contain nearly 2 million ounces of recoverable resources, giving a mine life of around 10 years. Doropo is also expected to generate an internal rate of 34%, which is based on a conservative gold price figure of $1,900 per ounce.



Furthermore, the Eastern Desert Exploration (EDX) blocks represent some of the most exciting exploration prospects in North Africa. EDX is adjacent to Sukari, and early drilling results have been encouraging. Egypt remains an underexplored region for mining, and given Sukari’s success, AngloGold may have access to new discoveries and expansion opportunities with additional resources for exploration.

From a financial standpoint, Centamin presents a compelling profile. The company’s forward P/E ratio is currently just 9 (at the takeover price agreed). It also scores 8 out of 9 on the Piotroski F-Score, which demonstrates Centamin’s strong fundamental moment, with improving profitability, efficiency and liquidity.

Bearing in mind Centamin also holds a net cash position on its balance sheet, you can’t help but think that AngloGold is getting a pretty sweet deal. Given the size and quality of Centamin’s resource base and its strong all-round financials, it may feel bittersweet for Centamin shareholders, who have done very well this year, but could have potentially seen further upside if the company had remained independent over the coming years. Perhaps AngolGold might be worth a closer look though now after the takeover is completed?

Metals Exploration (LON:MTL)

This Philippines based gold producer has been the top performer in the NAPS so far this year. One of the more speculative picks of the portfolio, Metals Exploration has more than doubled in value since the start of 2024. Despite this, the share remain surprisingly cheap, trading at very low multiples on the back of record-breaking earnings and cash flows.

In Q3 2024, Metals Exploration recorded its best quarter yet, seeing its highest-ever revenues and free cash flows, which came in at $27.9 million. Over the course of last year, the company generated $72.3 million in free cash flows. At the current run rate, it could produce a whopping $100 million in free cash flows this year. This is especially impressive when you consider the fact that the current market capitalisation of the company is £110 million, or $142.5 million.

So why are the shares trading so cheaply when free cash flows this year could equate to around 70% of the value of the business? The answer is simple. It’s all got to do with mine life.

Metals Exploration entire production comes from the Runruno mine, which has a very short mine life. Current estimates suggest it has just a few years left of production, so the market is perhaps correctly assigning a cheaper valuation to a company that doesn’t have great earnings visibility beyond the next 3 years.

However, the management team have been proactive in trying to secure the company’s long-term future. This year, it acquired the Yamang Mineral Corporation (YMC) group, which has given it access to promising exploration sites in the Abra region (located around 200km north of Runruno). If the company’s current exploration activities prove successful, Metals Exploration could not only extend Runruno’s productive life by a year or two but also add a notable new asset to its portfolio in a gold-producing region that also contains copper mineralisation.

Given the management team’s success at extracting maximum value from the Runruno mine, the acquisition hints at a bright future if its able to replicate the drilling success from the targets identified in the Abra tenements.

Whilst investors wait on further news from the Abra drilling campaign and an initial resource estimate around Q3 next year, cash flows will continue to contribute to an already impressive balance sheet. In June 2024, Metals Exploration resolved all of its outstanding debt and is now rapidly building up a net cash position on its balance sheet. There were some issues around prior debt settlements, but now that this has been cleared, it removes any overhang of past financial disputes.

Some investors may have concerns investing in a company that has seen its share price quintuple over a 2 year period. Yet Metals Exploration trades on such compelling multiples that it might be hard to resist for the value investors among us. With a forward P/E ratio of just 4 and P/FCF (Price to Free Cash Flow) of 2.3, the stock still appears tremendously undervalued.

The market is inevitably forward-looking. It doesn’t like the uncertainty about where long-term future production will come from, but there are still a lot of ounces of gold to extract at Runruno in a very favourable environment.

I would also highlight that the EV/EBITDA, or Enterprise Value to EBITDA, is among the cheapest on the market. This Enterprise Value takes the overall debt or cash position of the company into account. I prefer to look at the Enterprise Value to Free Cash Flows, though (EV/FCF), as cash flows are hard to manipulate. This figure stands at 2.05 on a trailing twelve-month basis. This again highlights the potential for the company to generate plenty of cash for its shareholders before it runs out of gold.

Thor Explorations (LON:THX)

West African-focused gold miner Thor Explorations is currently one of the highest-ranked mining stocks on Stockopedia. The company, which is dual-listed in Canada and the UK, has made good operational progress this year and published some excellent financial results. Therefore, it is always going to raise some question marks when investors see a paltry 2% return since January, when most peers have raced miles ahead.

Many of these doubts may centre around a similar issue that Metals Exploration faces regarding the life of its flagship Segilola mine in Nigeria. Production from the mine has been falling since 2022. This has mainly been impacted by adverse weather conditions due to a longer rainy season this year, but the greater underlying concern could be that the mine is expected to run out of gold by 2028.

To calm investor nerves, the management team are placing plenty of focus on carrying out drilling activities around Segilola. This includes underground drilling to extend the life of the mine.

Segilola remains a top-tier asset, though, with incredibly low production costs. For full-year 2024, the company expects that its all-in sustaining cost (AISC) will be between $800 and $900 per ounce.

The table below illustrates the sensitivity analysis carried out when estimating the internal rate of return (IRR) from Segolila. At $2,000 an ounce of gold, the IRR is a whopping 130%. At the time of writing, the gold price sits at $2,740 an ounce… There’s clearly still a huge amount of value left to extract from the Segilola mine for Thor’s shareholders.

Souce: Thor Explorations

A secondary issue that has flared up a few times around an ongoing legal dispute with the Osun State government in Nigeria. It is my understanding that the sums involved are not large, but it is important to maintain the relationship with its most important stakeholder for the purpose of operational continuity. I’m sure shareholders will be hoping for a smooth and swift end to this dispute, which may be acting as a drag on the share price.

Nevertheless, these concerns may not fully explain why such a big valuation discount is being applied to the company. The Segolila mine is expected to produce around 85,000 ounces of gold this year, at margins likely over $1,300 an ounce. Once again, this is a company that is generating earnings and free cash flows which make up more than half the value of the company’s entire market capitalisation. You’ll struggle to find cheaper P/E ratios than 1.6 on the market, with earnings also growing at 35%.



The management team’s focus on operational efficiences and cost reductions at the Segolila mine can be seen by the company’s quality metrics. Returns on capital employed, returns on equity and operating margins are all within the top decile of the mining industry.

Whilst investors may be understandably concerned about single-asset risk in a volatile jurisdiction like Nigeria, Thor Explorations has sought to diversify its interests. The Douta project in Senegal is on track for an updated resource estimate and completion of the Pre-Feasability Study (PFS) by the end of this quarter. The resource is estimated to contain 1.78 million ounces of gold before the latest drilling results have been added to the updated resource estimate. This presents an excellent medium-term production route for Thor. 

Equally, the recent acquisition of exploration licences in the underexplored Birimian greenstone belts in Côte d’Ivoire adds some further exciting prospects to the company’s growing asset base. Further exploration stage lithium assets in Nigeria complete the company’s portfolio.

Despite being overlooked by the markets in 2024, Thor Explorations could be set to make up for its lacklustre performance if it continues to build upon its recent financial performances. The company expects to clear all of its debts by the end of 2024 (around $4 million remaining), which will give it the flexibility to either commence dividend payments, initiate share buybacks, or invest more heavily into exploration and resource replenishment.

Conclusion

It’s always challenging to predict when the precious metals cycle might come to an end. Global geopolitical tensions may begin to dissipate, the Federal Reserve may reduce interest rates at a slower pace than anticipated, or new gold and silver supply may start to come online, which would exert sustained downward pressure on prices.

However, considering the number of favourable variables at play, the demand/supply dynamics point to the prices for precious metals remaining elevated for some time. The robust level of merger and acquisition activity in the sector over the past year is also testament to this bullish sentiment.

Plenty of the world’s largest mining companies are actively acquiring assets while gold prices are at or near all-time highs. Last year, Newmont completed the huge $17 billion takeover of Newcrest, the largest in industry history, and M&A activity has reached its highest level in several years.

Source: Mining.com

For private investors, this consolidation trend could be advantageous. Whilst investors may not receive what they deem to be fair value for a company, as may be the case with Centamin and Shanta Gold, takeovers still often come with attractive premiums. The value of the holding may be realised more quickly, which then opens the door to find new opportunities.

It is also worth alluding to the fact that we UK-based investors are becoming more limited in our investing universe, particularly when it comes to the range of mining companies on offer. The war in Ukraine has led to the delisting of plenty mining majors that had assets in Russia. Growing takeover activity has also resulted in plenty of delistings, which haven’t been replaced by IPOs at the same rate, leaving a dearth of UK-listed miners.

It’s therefore worth broadening your horizons to try and find opportunities that may be further afield. Australia and Canada, in particular, have large mining sectors and host some of the world’s largest mining heavyweights on their exchanges. These include the likes of BHP and Fortescue in Aus and Newmont and Barrick Gold in Canada.

Below, you’ll be able to see the industry overview page. It’s worth highlight that the median PE ratio is 15 for the metals & mining sector across Australasia, but that the median EPS Growth forecast is a staggering 58%. This is all whilst the median dividend yield pays out a nice 2.8%.

Similarly, the Canadian metals & mining market is also expected to see EPS growth of 45.68%, but trade on a slightly higher median P/E ratio of 20. The median dividend yield is slightly less at 1.77%, due to the higher proportion of micro-cap miners on Canadian exchanges.

If you were to set up a simple screen to filter the market in Australia for stocks in the Metals & Mining industry with a market capitalisation above £10 million, you would get 292 screen results. In Canada, the screen generates 464 results.

In stark contrast, the same UK screen yields just 63 results. This just goes to show how expanding one's horizons beyond the UK market could uncover some valuable opportunities with greater potential for returns.

It would be great to hear from the community about which mining stocks have caught your eye this year. Feel free to share both your UK and international picks!