Source: Sharecast
The bank, which is 'overweight' on the EMEA gold mining sector as a whole, said Fresnillo was its preference given it is trading on a 3.5x enterprise value-to-EBITDA ratio at a 12% free cash flow yield.
"We expect management guidance on opex inflation at FY24 results (4 March) to further de-risk 2025/26E earnings forecasts," JPM said.
UK-listed Hochschild was also rated 'overweight' given its potential to re-rate as well.
The bank said it was reiterating its positive view on the sector, with shares having traded sideways since the start of November despite a 4% increase in the gold price.
Inflationary pressures, tariff uncertainty and geopolitical tensions should provide upside to prices over 2025, with gold expected to hit the year-end target of $2,950/oz sooner if tariffs risks are prolonged, up from new record of $2,869.68/oz on Wednesday morning.
"Although recent investor marketing indicates a bullish gold outlook is widely shared, there is less conviction or consensus on how to be positioned in the sub-sector. Thus, we still see a compelling entry point for the EMEA Gold Miners given they screen exceptionally cheap with >10% FCF yields and pose fewer operational risks following recent guidance updates."