Gold Mid-Tiers’ Q4’20 Fundamentals

The mid-tier gold miners’ stocks are in this sector’s sweet spot for upside potential. After a spectacular upleg out of last March’s stock panic, they have mostly been correcting since early August. That is doing its necessary work of rebalancing sentiment, paving the way for mid-tiers’ next bull upleg. These great miners are thriving fundamentally with higher prevailing gold prices, as their latest quarterly results again prove.

Mid-tier gold miners produce between 300k to 1m ounces of gold annually, more than smaller juniors but less than larger majors. Mid-tiers are far less risky than juniors and amplify gold’s uplegs much more than majors. Their unique mix of sizable diversified gold production, material output-growth potential, and smaller market capitalizations is ideal for outsized gains. They are the best gold stocks for traders to own.

Ironically the leading mid-tier gold-stock benchmark and trading vehicle is the misleadingly-named GDXJ VanEck Vectors Junior Gold Miners ETF. It has evolved to be dominated by mid-tiers, miners yielding quarterly gold output of 75k to 250k ounces. The true juniors GDXJ now holds only account for a small fraction of its total weighting. With $5.0b in net assets, GDXJ is the second-most-popular gold-stock ETF.

That’s about 3/8ths the size of its big brother GDX, which is mostly controlled by larger major gold miners. GDXJ’s performance trounced GDX’s during this gold-stock bull’s latest upleg, which blasted higher over 4.8 months last year from mid-March to early August. GDXJ’s massive 188.9% skyrocketing in that short span easily bested GDX’s parallel 134.1% gains! That’s despite these ETFs sharing many component stocks.

That blistering run left gold stocks extremely overbought, necessitating a health correction to rebalance excessively-greedy sentiment. So over the next 7.1 months into early March this year, GDXJ gradually ground a major 30.2% lower. That naturally left this high-potential sector deeply out of favor, with traders convinced mid-tiers are doomed to spiral lower indefinitely. Boy is that universal bearishness misplaced!

For 19 quarters in a row now, I’ve painstakingly analyzed the mid-tier gold miners’ latest quarterly results right after they are reported. While GDXJ contained an absurd 98 component stocks this week, I’m limiting my analysis to its top 25 holdings. These include some of the greatest mid-tiers, which command a major 62.8% of GDXJ’s total weighting. Among these elite ranks are some of the best-performing gold miners.

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.

GDXJ’s top stocks trade in the US, South Africa, Australia, Canada, Peru, Indonesia, and Mexico making amassing this data somewhat challenging. There are different financial-reporting requirements around the world, and even within the same country miners report different data in different ways. Half-year reporting is common globally, so when only six-month data was available it is split in half to approximate Q4.

This table summarizes key operational and financial highlights from the GDXJ top 25 in Q4’20. These 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 GDXJ weightings from Q4’19. With GDXJ largely weighted by market capitalizations, relative ranking changes help illuminate this past year’s outperforming stocks.

Next are the current weightings this week, which are highlighted in blue for the handful of true junior gold miners. That is followed by each miner’s Q4’20 gold production in ounces, and its year-over-year change from Q4’19’s results. Then come cash costs and all-in sustaining costs per ounce mined along with their YoY changes, revealing how much it costs these miners to wrest their gold 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’ parallel selloff, last quarter still enjoyed the second-highest average gold prices ever witnessed at $1,876!So GDXJ’s top mid-tier gold miners should’ve achieved blockbuster results last quarter. That indeed proved true, with plenty of these elite companies reporting record quarterly production, sales, profits, operating cash flows, and cash last quarter.

(Click on image to enlarge)

For decades now I’ve been actively speculating and investing in fundamentally-superior gold stocks, and writing financial newsletters explaining those trades in real-time. Being deeply immersed in this realm, I was really struck by sweeping changes to GDXJ’s top components in this latest quarterly research. This ETF’s managers seem to be working on addressing some of the main criticisms of GDXJ’s component list.

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