- Goldcorp: 24.2%
- Richmont Mines: 26.9%
- B2 Gold: 28.3%
- IAMGold: 37.0%
- First Majestic: 37.2%
Although the correction is still intact, I think it could be interesting to look at current valuation metrics. Below I present the chart showing a multiple of EV / EBITDA (enterprise value to EBITDA), calculated for a number of mining companies as of August 31, 2016:
source: Simple Digressions
The average multiple stands at 13.7 (horizontal line market in red). As the chart shows, the highest multiples are mainly related to silver miners (Impact, Endeavour Silver, First Majestic, Fresnillo, Fortuna etc.).
The lowest multiples are attributed to big miners (Barrick, Newmont, Yamana), companies in trouble (Orvana, Banro, Kinross) or forgotten miners (Dundee, Oceana Gold).
I guess some investors, in their search for hidden value, may consider buying the stocks showing a low multiple because, generally, low multiple means a cheap stock.
Well, generally, yes. But be careful. Sometimes a high multiple is attributed to a company presenting buying opportunity and, vice versa, low multiple means problems and investors should stay away from such a "cheap" stock (for example, Orvana Minerals, Banro Corp or Hochschild plc).
I think I will discuss some interesting cases of miners with high or low multiples soon.
Now, let me summarize the current situation in the following way:
After an impressive bull run in gold / silver stocks (seen in 1H 2016), the ongoing correction presents a number of buying opportunities. Once again.