Gold Miners’ Q4’20 Fundamentals

The gold miners’ stocks have suffered an extended correction in recent months, leaving them deeply out of favor. Yet their underlying fundamentals remain incredibly strong, thanks to continuing high prevailing gold prices. These companies’ recently-released Q4’20 results revealed they are thriving, generating massive revenues, earnings, and operating cash flows. Thus their stock prices need to mean revert way higher.

The leading and dominant gold-stock benchmark and trading vehicle today is the GDX VanEck Vectors Gold Miners ETF. Launched way back in May 2006, GDX’s first-mover advantage has grown into an insurmountable lead. With $14.2b of net assets this week, GDX commands a staggering 32.0x more capital than its next-biggest 1x-long major-gold-miners-ETF competitor! GDX is really the only game in town.

Yet this sector’s challenging price action of late has cast GDX and the major gold miners it contains off traders’ radars. This gold-stock bull’s last upleg proved mighty, with GDX skyrocketing 134.1% higher in just 4.8 months! In early August it peaked with gold, the gold stocks’ overwhelmingly-dominant primary driver. Then GDX rolled over into a necessary and healthy correction to rebalance sentiment and technicals.

That looked to bottom in late November at a 24.9% loss over 3.6 months, paving the way for this sector’s next upleg. Indeed GDX surged 15.2% higher during the next 1.3 months, decisively breaking out above multiple major resistance zones in early January. But then the markets threw a low-probability curveball, and gold stocks started slumping again. GDX ground lower until its original correction low failed in late February.

The major gold stocks plunged into early March, their leading ETF extending its correction to 30.5% over 6.8 months. That slaughtered any remaining bullish psychology, unleashing universal bearishness. This small contrarian sector was left forsaken again, an ideal spawning ground for this bull’s next major upleg. It is likely underway, with GDX already rebounding 10.7% higher at best. So fundamentals really matter today.

For 19 quarters in a row now, I’ve painstakingly analyzed the major gold miners’ latest quarterly results right after they are reported. While GDX contained a crazy 51 component stocks this week, I’m limiting my analysis to its top 25 holdings. These are the world’s biggest and best gold miners, which command a dominant 86.3% of GDX’s total weighting. The lion’s share of capital chasing gold stocks ends up in them.

Unfortunately, Q4 results closing out calendar years arrive much later than normal quarterlies. Since the annual reports containing Q4 numbers are bigger, more complex, and must be audited by independent CPAs, securities regulators grant extended filing deadlines. Those are 60 days after year-ends in the US, and a ridiculous 90 days in Canada where most of the world’s gold stocks trade! So Q4 analysis runs later.

Even at this Wednesday’s essay data cutoff 76 days after year-end, one key Canadian GDX component hadn’t yet reported its Q4 results. The major gold miners trade in the US, Australia, South Africa, China, and Canada, making amassing this data somewhat challenging. There are different financial-reporting requirements around the globe, and even within the same country miners report different data in different ways.

Some annual reports are well-laid-out and easy to parse, while others seem intentionally opaque requiring lots of digging and calculations to tease out comparable data. Australia and South Africa require half-year reporting instead of quarterly, although their gold miners usually give supplemental quarterly updates. But in cases where half-year data was all that was available, it is split in half to approximate Q4’20 results.

This table summarizes the operational and financial highlights from the GDX top 25 in Q4’20. These elite gold miners’ symbols are listed, some of which are from their primary foreign stock exchanges. That is preceded by their ranking changes in terms of GDX weightings from Q4’19. Then their current weightings as of this week follow those stock symbols. This ETF essentially weights gold stocks by market capitalizations.

So relative ranking changes help illuminate outperformers and underperformers over this past year. That data is followed by each miner’s Q4’20 gold production in ounces, and its year-over-year change from Q4’19’s results. Then comes cash costs per ounce and all-in sustaining costs per ounce along with their YoY changes, revealing how much it costs these gold miners to wrest their metal from the bowels of the earth.

Next quarterly revenues, GAAP earnings, operating cash flows generated, and cash on hand are listed along with their YoY changes. Blank data fields mean companies hadn’t reported that particular data as of the middle of this week. Blank percentage fields indicate those changes would be either misleading or not meaningful, like comparing two negative numbers or data shifting from positive to negative and vice versa.

Despite gold’s correction running through Q4’20 which drove gold stocks’ selloff, last quarter still enjoyed the second-highest average gold prices ever witnessed at $1,876. So the major gold miners dominating GDX put up blockbuster results then. In many cases, these proved the best on record, with miners’ gold output rebounding in Q4 after governments’ COVID-19-lockdown orders hammered Q2 and early-Q3 production.

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