Gold miners' first quarter fundamentals
The gold miners’ stocks have been slammed by a sharp gold pullback in recent weeks, spawning today’s bearish sentiment. Traders often get caught up in the emotional swings generated by this volatile sector. But once a quarter earnings season arrives, revealing gold mining’s hard fundamental realities which dispel the obscuring sentiment fogs. The major gold miners’ profitability actually just exploded higher in Q1!
Four times a year publicly traded companies release treasure troves of valuable information in the form of quarterly reports. Companies trading in the States are required to file 10-Qs with the US Securities and Exchange Commission by 45 calendar days after quarter-ends. Canadian companies have similar requirements. Some companies in other countries with half-year reporting instead of quarterly even follow suit.
So the world’s major gold miners are just wrapping up their first-quarter earnings season. After spending decades intensely studying and actively trading this contrarian sector, there’s no gold-stock data I look forward to more than the miners’ quarterly financial and operational reports. They offer a true and clear snapshot of what’s really going on, shattering the misconceptions bred by the ever-shifting winds of sentiment.
The definitive list of major gold-mining stocks to analyse comes from the world’s most-popular gold-stock investment vehicle, the GDX VanEck Vectors Gold Miners ETF. Its composition and performance are similar to the benchmark HUI gold-stock index. GDX utterly dominates this sector, with no meaningful competition. This week GDX’s net assets are 36.2x larger than the next-biggest 1x-long major-gold-miners ETF!
Being included in GDX is the gold standard for gold miners, requiring deep analysis and vetting by elite analysts. And due to ETF investing eclipsing individual stock investing, major-ETF inclusion is one of the most important considerations for picking great gold stocks. As the vast pools of fund capital flow into leading ETFs, these ETFs, in turn, buy shares in their underlying companies bidding their stock prices higher.
This week, GDX included a whopping 51 component “Gold Miners.” That term is used somewhat loosely, as this ETF also contains major silver miners, silver streamers, and gold royalty companies. Still, all the world’s great gold miners are GDX components. Due to time constraints, I limited my deep individual company research to this ETF’s top 34 components, an arbitrary number that fits neatly into the tables below.
Collectively, GDX’s 34 largest components now account for 91.1 per cent of its total weighting, a commanding sample. While the vast majority of gold miners’ Q1’17 results have been released, a few are still coming due to later reporting. GDX includes major foreign gold miners trading in Australia, the UK, and South Africa. These companies report in half-year increments instead of quarterly, so their Q1 data is limited.
The importance of these top-GDX-component gold miners can’t be overstated. In Q1 they collectively produced nearly 9.7m ounces of gold or 300.3 metric tons. According to the World Gold Council’s just-released Q1 Gold Demand Trends report, the definitive source on gold’s worldwide supply-and-demand fundamentals, total global mine production was 764.0t. GDX’s top miners alone accounted for nearly 4/10ths! —mining.com/GB