Gold mining companies are seeing stronger earnings and cash flow, but their stock valuations have not kept pace with these improvements, according to Kenny Zhu, Director of Research and Investment Strategy at Sprott Asset Management. Speaking with Kitco Mining's Paul Harris, Zhu noted that investors may still be evaluating the sector based on the debt-heavy expansion and expensive acquisitions from the previous cycle. Despite healthier balance sheets and greater capital discipline, EV/EBITDA multiples stood at 5.7 times as of September 2026, down from 9.9 times in June 2014.
Zhu warned that the industry's focus on controlling spending could lead to longer-term supply challenges. Declining ore grades, fewer major discoveries, and mine development timelines stretching up to 18 years raise concerns about replacing future production. He also addressed criticism of share buybacks, defending the practice as a way to return capital to shareholders amid economic uncertainty, even as miners face pressure to invest in new projects.
Key factors influencing the sector include central bank gold demand, real interest rates, and concerns about U.S. economic growth. Zhu emphasized that these elements remain critical for investors to monitor as they assess the gold mining industry's outlook.