Gold Mining Stocks Record Quarter / Commodities / Gold & Silver 2024

The gold miners willsoon report what will almost certainly prove their best quarter ever.  Mostly due to Q2’s record-shattering goldprices, gold miners’ earnings should soar off the charts.  Those will be further boosted by slightly-lowermining costs many of these companies are predicting.  With such incredibly-strong fundamentals,more professional fund managers should soon start investing in thishigh-potential sector.

Four times a year,publicly-traded companies report quarterly results.  These earnings seasons are very important,illuminating how gold miners are actually faring fundamentally.  That really cuts through the obscuringsentiment fogs often shrouding this sector. I enjoy learning about companies’ fundamentals, so for 32 quarters in arow I’ve analyzed the latest quarterlies from the top 25 gold stocks in boththeir leading ETFs.

Those are of course theGDX VanEck Gold Miners ETF dominated by super-major and major gold miners, andits little-brother GDXJ VanEck Junior Gold Miners ETF which is actuallyoverwhelmingly weighted to mid-tier gold miners despite its name.  Those categories are defined by annualproduction levels, with super-majors exceeding 2,000k ounces, majors above1,000k, mid-tiers over 300k, and juniors under that.

While gold-stockquarterlies are often interesting, my primary motivation in studying them everyquarter is trading.  The more I grow myknowledge on leading gold miners, the better I get at picking fundamentally-superiorones to fill our newsletter trading books. This better subset of gold miners is constantly evolving, withindividual companies gradually migrating in and out depending on their currentproduction and cost profiles.

We gather lots of datafrom those quarterly results, and have grown massive spreadsheets over theyears to track it all.  Most leading goldminers publish full-year production and cost guidances, and explain how theiroutput is trending.  In this industry,unit all-in sustaining costs are highly inversely correlated withproduction levels.  The more ouncesmined, the more ounces to spread gold mining’s big fixed costs across.

In their latest Q1’24results, the majority of GDX-top-25 gold miners forecast improving outputand lower costs as this year marches on. You’d think global gold mine production is linear and steady throughoutcalendar years, but it isn’t.  The WorldGold Council publishes the best-available global gold supply-and-demand data inits excellent quarterly Gold Demand Trends reports, which reveal productionseasonality.

Since 2010, quarter-on-quarter global mined gold has averaged changes of -8.4% in Q1s, +4.8% in Q2s, +6.7% inQ3s, and +0.2% in Q4s.  Q1s are goldminers’ weakest quarter of the year, which is followed by big production surgesin both Q2s and Q3s.  So Q2s averageconsiderably-better output and proportionally-lower costs than Q1s.  Northern-hemisphere winters and calendarfiscal years are the primary reasons.

Over 2/3rds of theworld’s land masses are in the top half of the globe, along with similarproportions of global gold mines.  So theworst of winter weather hits in Q1s, ranging from bitter cold and snow up northto heavy rains down south.  Both reduceoperational efficiencies, slowing excavating and hauling ores and moreimportantly slowing necessary chemical reactions that dissolve gold from oreson heap-leach pads.

Gold-mining managersoften schedule processing-plant maintenance in these winter-impeded months, aswell as expansions to upgrade throughputs. Capital allocated is often budgeted late in preceding years, then madeavailable in Q1s.  Much of that workrequires temporarily shutting down plants, retarding output.  But as that is completed and better springand summer weather improves operations, production surges.

In Q1’24, the GDX-top-25 gold miners averaged $1,277 all-in sustaining costs. But one was an extreme outlier reporting -$121 due to enormous byproductcredits, and didn’t give guidance.  Excludingthat, the rest of those major gold miners averaged $1,370 AISCs.  But their average full-year-2024 guidances werelower at $1,324.  And those numbersincluded Q1’s higher costs before production ramps in subsequent quarters.

Run the math on that,and GDX-top-25 AISCs would have to average $1,310 in Q2 to Q4 this year toachieve that midpoint guidance.  But Q3’smining costs will likely be the lowest due to another big output surge, so$1,325 is a reasonable estimate for Q2. That equates to average AISCs retreating a modest 3.3% QoQ.  This is conservative too, as that gold minerwith negative AISCs should again drag down the average.

If it is lumped back inwith the rest of the GDX top 25, Q2 average AISCs could fall as low as$1,235 or an eight-quarter low!  Thatwould further amplify sector unit profits, but for our purposes today let’s usethat $1,325.  Gold-mining earnings areessentially the difference between average prevailing gold prices and miningcosts.  Before Q2’s remarkable breakout surge,Q1’24 had the highest average gold ever at $2,072.

And that truly was fantastic,as gold had never even closed that high before late December 2023.  But Q2 proved exceptional, utterly trouncingthat earlier record.  With Q2’24 fully 97%completed mid-week, gold has averaged a stupendous $2,338!  That soared a mammoth 12.8% QoQ and 18.2%YoY!  As gold has mostly consolidated highin recent months, such lofty prevailing price levels are gradually beingnormalized.

With $2,338 averagegold prices less $1,325 average all-in sustaining costs, the major gold minersof GDX are tracking to average awesome unit profits of $1,013 per ounce!  And they could soar as high as $1,103 if thatnegative-AISC gold miner comes through again. Either way, $1,000+ per-ounce earnings would be the highest by far thissector has ever reported!  We’ve amassedextensive data on this profits proxy.

During the last 32quarters which include gold miners’ most-profitable ever, the top five unit profitswere $884 in Q3’20, $838 in Q4’20, $795 in Q1’24, $744 in Q2’21, and $730 inQ2’20.  The average across that entirespan was $562.  So soaring over $1,000 inQ2’24 is a big deal, utterly unprecedented. That estimate of $1,013 would make for huge year-over-year growth too, soaring69% from the comparable Q2’23’s $598!

Colossal sector unitearnings growth is nothing new for gold miners either.  In Q3’23, Q4’23, and Q1’24 respectively,GDX-top-25 per-ounce profits blasted up 94%, 42%, and 35% YoY!  No other sector in the stock markets isseeing earnings rocket higher so fast.  Somevalue-oriented fund managers will have to take notice sooner or later here, andstart deploying capital in gold stocks from essentially-zero allocations.

And even before theseblockbuster Q2 results are released, plenty of gold miners already havefantastic fundamentals.  Last week Iwrote an essay on gold stocksreloading, readying for another strong surge higher after working offserious overboughtness and excessive greed in recent months.  I mentioned that sideways-to-lower grindstopped us out of about 1/4th of our newsletter trades at big realized gains.

I wrote “We’re probablygoing to refill our trading books over the next couple weeks, bringing ourweekly back up to twenty positions and our monthly to ten.”  We indeed started doing that this week, andone of our new trades illustrates the incredible gold-stock bargains outthere.  This gold miner is projectingabout 288k ounces of output this year, near $1,325 AISCs.  But it is building a new flagship mine goinglive in Q2’25.

That is forecast to addanother 195k ounces of annual production, around much-more-profitable $1,007AISCs that will drag down overall company-wide ones.  This is huge coming growth, catapulting thisgold miner well into mid-tier-dom producing around 500k ounces annually!  Since late January alone, this stock hasalready rocketed up 91% at best, and is still 48% higher midweek.  We rode a good chunk of that surge.

We were last stoppedout of this stock in early June at nice 55% realized gains, and have beenwaiting to reload it.  With a sterlingprofile like that, you’d think this fundamentally-superior gold miner has to betrading at 30x+ earnings.  Yet the kickeris its trailing-twelve-month price-to-earnings ratio this week is merely9.9x!  That’s an epic bargain, dirt-cheapby any stock-market measure.  Othergold stocks look similar.

With gold miners allbut printing money with gold consolidating high near record territory,speculators and investors alike should be flocking to gold stocks.  Traders don’t need to do any of this analysisto see how massively profitable they’ve been, a simple P/E stock screen will revealthat.  Yet with gold miners’ best quarterever about to be reported, sector apathy remains widespread as this lacklusterGDX chart reveals.

GDX isn’t faringpoorly, it recently surged 44.5% higher from late February to mid-May.  But gold stocks are ultimately leveragedplays on gold, and their metal’s underlying mighty upleg powered up 33.2% atbest since early October.  Major goldstocks only amplified gold by 1.3x, which is really weak compared to historicalprecedent.  GDX tends to leveragematerial gold moves by 2x to 3x, it should’ve rallied 66% to 100%!

This is improving, asduring that latest surge GDX amplified gold’s gains by 2.3x.  Yet this sector remains massively undervalued relative to these high prevailing gold prices fueling huge earningsgrowth.  That’s mostly because tradersaren’t interested yet, they’ve been distracted by the seductive AI stock bubble stealingmarket limelight.  Shockingly Americanstock investors haven’t evenstarted chasing this gold upleg yet!

And if gold isn’t evenon their radars yet, they certainly aren’t aware of gold stocks.  The past few months as gold broke out to manynew records on Chinese investors and central banks buying, market news wasall-NVIDIA-all-the-time.  Gold won somefinancial-media coverage, but nothing compared to the AI stock bubble.  Skyrocketing parabolic in a colossal gammasqueeze, NVDA’s moonshot overshadowed everything.

At last week’s latestrecord high, NVIDIA briefly became the world’s largest company worth$3,340b.  It had skyrocketed 173.8%year-to-date, nearly doubled its 200-day moving average at 1.976x, and tradedat a dangerous 79.3x TTM P/E!  Drenchedin popular greed and absurdly overbought, this epic anomaly can’t andwon’t last.  NVIDIA rolling over is aserious problem for these stock markets heavily reliant on its gains.

As this latest stockbubble inevitably decisively bursts, euphoric scales will fall from traders’eyes.  They will look to prudently diversifytheir mega-cap-tech-dominated portfolios, and some will notice gold and addmodest gold-stock allocations.  Thiscontrarian sector is so small it won’t take much buying to catapult it wayhigher.  With American stock investors actuallyselling gold during it, today’s gold upleg isn’t over.

This is gold’s firstrecord-achieving upleg since a pair both cresting in 2020.  They averaged monster 41.4% gains largelyfueled by American stock investors buying major-gold-ETF shares.  Like usual GDX amplified those, averaging itsown 105.4% gains.  Again Q3’20 was alsothe last time major gold miners’ unit earnings soared to records.  Professional fund investors noticed that, andbid gold stocks way higher.

With Q2’24 tracking tosee the fattest gold-mining profits ever by far, and the first new record sinceQ3’20, gold stocks’ setup here is wildly bullish.  As gold finishes its own high consolidation here in the summer doldrums to rebalance sentiment and technicals, it will resume powering higher.  As traders’ awareness of gold grows, theywill increasingly chase it and leverage its upside by deploying some capital ingold stocks.

Recent months’gold-stock drift lower is a good mid-upleg buying opportunity to addtrades.  The biggest gains will be won bycontrarians buying in early before the herd figures this out.  Even GDX’s upside will be handily bested bythe fundamentally-superior mid-tiersand juniors we specialize in. They’re not just better able to consistently grow their production withlower-cost mines, their smaller stocks are easier to bid higher.

Successful trading demands always staying informed on markets, tounderstand opportunities as they arise. We can help!  For decades we’vepublished popular weekly and monthly newsletters focused on contrarian speculation andinvestment.  They draw on my vastexperience, knowledge, wisdom, and ongoing research to explain what’s going onin the markets, why, and how to trade them with specific stocks.

Our holistic integrated contrarian approach has proven verysuccessful, and you can reap the benefits for only $10 an issue.  We extensively research gold and silverminers to find cheap fundamentally-superior mid-tiers and juniors with outsizedupside potential.  Sign up for free e-mail notifications when we publish newcontent.  Even better, subscribe today to our acclaimednewsletters and start growing smarter and richer!

The bottom line is gold miners will soon report a record quarter.  Mostly thanks to record-shattering goldprices, Q2’24’s sector unit earnings will almost certainly prove the highestever by far.  They will be further boostedby projected lower mining costs as production ramps.  Amazingly major gold miners’ average Q2profits are now tracking over an unprecedented $1,000 per ounce.  Their quarterly results should prove epic.

With gold stocks already deeply undervalued even before thiswindfall, their strong fundamentals should start attracting fundinvestors.  Their capital inflows oughtto drive gold stocks much higher.  And Q2results are coming out as gold readies to rally out of recent months’ highconsolidation rebalancing sentiment and technicals.  As always the biggest gold-stock gains willbe won by traders buying in early before the herd.

Adam Hamilton, CPA

So how can you profit from this information? We publish an acclaimed monthly newsletter, Zeal Intelligence , that details exactly what we are doing in terms of actual stock and options trading based on all the lessons we have learned in our market research. Please consider joining us each month for tactical trading details and more in our premium Zeal Intelligence service at … www.zealllc.com/subscribe.htm

Questions for Adam? I would be more than happy to address them through my private consulting business. Please visit www.zealllc.com/adam.htm for more information.

Thoughts, comments, or flames? Fire away at zelotes@zealllc.com . Due to my staggering and perpetually increasing e-mail load, I regret that I am not able to respond to comments personally. I will read all messages though and really appreciate your feedback!

Copyright 2000 - 2022 Zeal Research ( www.ZealLLC.com )

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.