Precious-metals producers Barrick Mining (TSX: ABX; NYSE: B) and Equinox Gold (TSX, NYSE-A: EQX) are among the 24 Canadian stocks that offer the best prospects for outsized returns over the next few quarters, TD Cowen says in a new report.
Existing valuation gaps, improving production and a pipeline of future growth projects represent key drivers for the Canadian miners, TD Cowen’s analysts said in a report called “Canada Best Ideas.” Hudbay Minerals (TSX, NYSE: HBM) and Royal Gold (Nasdaq: RGLD) also rank among the firm’s top picks. TD Cowen is a division of TD Securities, the Canadian bank’s brokerage arm.
Catalysts for Barrick include improving operational execution, strong free cash flow and a planned initial public offering (IPO) of the miner’s North American assets, TD Cowen says. Barrick remains undervalued, trading at a 25% discount relative to large capitalization North American miners, the brokerage says. TD Cowen’s $59 (C$82.60) target implies a 38% return compared with Monday’s closing price of $42.69 in New York trading.
“Barrick offers an attractive combination of improving operational execution, strong free cash flow generation and near-term IPO catalysts,” mining analyst Steven Green said in the report. Barrick’s recently completed Fourmile transaction with Newmont (NYSE, ASX: NEM; TSX: NGT), which clears a key hurdle for the North American IPO, could accelerate development of the Nevada project, he added.
Rising output
Toronto-based Barrick should generate about $8 billion of consolidated free cash flow over the coming year, representing an estimated 11% free cash flow yield, Green says. The IPO, targeted for early 2027, should highlight Barrick’s North American assets and potentially help narrow the valuation discount created by the company’s broader international exposure, he said.
TD Cowen’s forecasts call for Barrick’s gold production to climb about 16% year-over-year to 3.7 million oz. in 2027, while copper output rises about 7% to 225,000 tonnes.
Equinox, meanwhile, has the potential “to serve as a core holding for investors” following its acquisition of smaller Canadian producer Orla Mining, analyst Wayne Lam said in the report.
Lam’s target price for Equinox is C$20 ($14.29), which would represent a 17% return over the stock’s C$17.09 closing price in TSX trading Monday. He estimates Equinox’s net asset value discount at 20% compared with peers.
Orla’s addition provides scale from three Canadian flagship assets and a “robust” North America-focused growth pipeline, Lam said.
Gold production at Equinox should jump 40% to 1.27 million oz. in 2027, driving a 62% surge in earnings before interest, taxes, depreciation and amortization (EBITDA) to $3.48 billion next year, TD Cowen projects.
Catalysts for the stock include completion this year of the US-FAST 41 permitting process for the Castle Mountain gold-silver project in California; a potential fourth-quarter restart of operations at the Los Filos gold project in Mexico; and continued progress in construction at the South Railroad gold project in Nevada and the Valentine gold project in Newfoundland and Labrador.
Arizona growth
Hudbay is another Canadian miner expected to benefit from a recent deal – in this case, the $1.5-billion acquisition this year of Arizona Sonoran, which yielded assets such as the Cactus copper project.
Investors are “underestimating both the improvement potential of Hudbay’s existing operations and the strategic value of its Arizona portfolio,” mining analyst Craig Hutchison said in the report.
Copper production should climb about 27% year-over-year to 151,000 tonnes in 2027 as British Columbia’s Copper Mountain mine ramps up and Peru’s Constancia improves throughput, TD Cowen says.
Longer term, two Arizona mines – Cactus and Copper World – should lift Hudbay’s copper production to about 333,000 tonnes by 2036, TD Cowen says. Hudbay is on a “funded path to transformational copper growth,” Hutchison said.
“Copper Mountain and Constancia provide visible, low-capital production growth, while a longer mine life at Manitoba could add meaningful net asset value,” he said. “Copper World and Cactus also offer district-level construction, procurement and processing synergies that should improve execution and economics.”
TD Cowen’s target for Hudbay is C$43. That implies a 15% return over the stock’s C$37.39 closing price in TSX trading Monday.
Long lives
Royal Gold rounds out TD Cowen’s best materials ideas, with analyst Derick Ma raising his target price for the stock to $315 from $289. Royal Gold closed at $250.11 Monday in Nasdaq trading, implying a 26% return.
The royalty and streaming company is expected to deliver 6.1% production growth in 2027, led by higher deliveries from the Kansanshi, Platreef, Robertson and Pueblo Viejo mines.
Royal Gold’s portfolio benefits from long mine lives and diversification, with its five largest assets operated by miners including Barrick and First Quantum Minerals (TSX: FM), TD Cowen says.
Key catalysts include further deals, improved silver recoveries at Barrick’s Pueblo Viejo and development updates at operations such as Fourmile and Kinross Gold’s (TSX: K; NYSE: KGC) Great Bear.
