Gold Mid-Tiers’ Q4’20 Fundamentals

Ex-removed-majors, these elite mid-tier gold miners’ total sales soared 37.6% YoY in Q4’20! That is right in line with 8.0%-higher adjusted production and 26.5%-higher average gold prices. Had those majors not been included in earlier quarters’ results, Q4’20’s revenues would’ve easily been the best ever reported by the rest of these mid-tiers. These sweet-spot gold miners are sure thriving in this higher-gold environment.

Their bottom-line earnings under Generally Accepted Accounting Principles in the US or their equivalents in other countries also proved outstanding. The GDXJ top 25 collectively earned $1,569m in profits in Q4’20, which skyrocketed 127.2% YoY! Those were also the highest earnings by far from the GDXJ top 25 in the 19 quarters I’ve been doing this research, and almost certainly ever. And they aren’t even adjusted.

Remove those kicked majors from the prior-year quarter, and that profits jump soars to 2,078% YoY! And unlike the GDX top 25’s Q4’19 earnings which were riddled with non-cash impairment-reversal gains and impairment charges, Q4’20’s looked fairly-clean. The mid-tier and junior gold miners are making money hand over fist in this environment, forcing their valuations lower leaving them ever-more-attractive to traders.

Their strong operational results also fueled excellent operating-cash-flow generation, with the GDXJ top 25 reporting $3.1b in OCFs last quarter. That surged 10.4% YoY unadjusted, and 57.6% if those four removed majors are excluded. The more cash flows gold miners generate, the more capital they have to grow their production levels by expanding existing mines along with constructing or purchasing new ones.

That will fuel higher stock prices, which ultimately mimic companies’ growth trajectories. All those OCFs pouring in filled up the GDXJ top 25’s coffers to their highest levels yet, totaling $10.1b in cash treasuries. That shot up 43.9% YoY unadjusted, and more than doubled at +105.1% YoY if those booted major miners are taken out. The mid-tier gold miners’ fundamentals have never looked stronger, which is super-bullish!

And the big numbers these elite gold miners are putting up aren’t ending because of this gold correction extending into Q1’21. With this current quarter almost over, gold has averaged $1,801 so far. That is down 4.0% quarter-on-quarter, which will indeed be a drag on gold miners’ earnings. But these Q1 gold levels will still prove the third-highest ever seen, only trailing Q3’20 and Q4’20. $1,800 is still great for miners.

If the GDXJ top 25’s AISCs this quarter come in near their last four quarters’ $1,020 average which was skewed high by all the pandemic disruptions, these mid-tiers would still earn $781 per ounce in Q1’21! That would prove their third-most-profitable quarter on record, behind the preceding couple. That would leave unit earnings up 38.2% YoY, and only down a trivial 1.9% QoQ from Q4’20’s impressively-massive levels.

With incredibly-strong fundamentals like these, investors and speculators should be stampeding back into undervalued gold miners. But they really aren’t yet, because most are momentum traders lacking the fortitude to fight the herd and buy low while sectors are out of favor. Yet as gold’s coming bull-market upleg powers higher and gold stocks amplify its gains like usual, this sector will increasingly attract new buying.

Gold stocks’ track record for multiplying wealth is unparalleled! Today’s middle-aged gold-stock bull has already seen four uplegs, which averaged huge 99.2% absolute GDX gains over 7.6 months! And the secular gold-stock bull before that had literally a dozen uplegs averaging 87.5% absolute gains over 7.8 months. So playing the contrarian to buy lower early in these before selling higher later on is fantastically lucrative.

And those massive upleg gains are in major-gold-miner terms. The fundamentally-superior smaller mid-tier and junior gold miners able to consistently grow their production will achieve gains way surpassing GDX and even GDXJ! Uncovering these best gold stocks to own is the goal of our painstaking multi-decade research campaigns, so we can deploy capital in these outperformers during gold-stock uplegs.

The bottom line is the mid-tier gold miners in the sweet spot for stock-price upside potential just reported one of their best quarters ever. Adjusted for majors removed from GDXJ, the rest of its top components achieved production growth way better than their larger peers. That along with continuing high prevailing gold prices drove record revenues, earnings, operating cash flows, and cash hoards among these elite miners.

Despite these incredibly-strong fundamentals, traders have largely abandoned this high-potential sector due to its recent extended correction. That’s a huge mistake. Today’s anomalously-low gold-stock prices driven by popular bearish sentiment will mean revert dramatically higher during gold’s coming next upleg. Contrarian investors and speculators who can fight the herd to buy low now stand to earn massive gains.

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