Gold Miners’ Q3’17 Fundamentals


The gold miners’ stocks have spent months adrift, cast off in the long shadow of the Trumphoria stock-market rally. This vexing consolidation has left a wasteland of popular bearishness. But once a quarter earnings season arrives, bright fundamental sunlight dispelling the obscuring sentiment fogs. The major gold miners’ just-reported Q3’17 results prove this sector remains strong fundamentally, and super-undervalued.

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. In other countries with half-year reporting, many companies still partially report quarterly.

The world’s major gold miners just wrapped up their third-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 ever-shifting winds of sentiment.

The definitive list of major gold-mining stocks to analyze 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 23.2x 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 major 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 91.9% of its total weighting, a commanding sample. GDX’s components include major foreign gold miners trading in Australia, the UK, and South Africa. These companies report in half-year increments instead of quarterly, so their Q3 data is limited.  They usually publish quarterly production results, but generally, don’t disclose quarterly financial results.

The importance of these top-GDX-component gold miners can’t be overstated. In Q3 they collectively produced over 9.9m ounces of gold, or 309.4 metric tons. The World Gold Council’s recently-released Q3 Gold Demand Trends report, the definitive source on worldwide supply-and-demand fundamentals, pegged total global mine production at 841.0t in Q3. GDX’s top 34 miners alone accounted for nearly 4/10ths!

Every quarter I wade through a ton of data from these elite gold miners’ 10-Qs, and dump it into a big spreadsheet for analysis. The highlights made it into these tables. If a field is left blank, that means a company didn’t report that data for Q3’17 as of this Wednesday. Companies always try to present their quarterly results in the best possible light, which leads to wide variations in reporting styles and data offered.

In these tables, the first couple columns show each GDX component’s symbol and weighting within this ETF as of this week. While most of these gold stocks trade in the States, not all of them do. So if you can’t find one of these symbols, it’s a listing from a company’s primary foreign stock exchange.  That’s followed by each company’s Q3’17 gold production in ounces, which is mostly reported in pure-gold terms.

Most gold miners also produce byproduct metals like silver and copper. These are valuable, as they are sold to offset some of the considerable costs of gold mining. Some companies report their quarterly gold production including silver, a construct called gold-equivalent ounces. I only included GEOs if no pure-gold numbers were reported. That’s followed by production’s absolute year-over-year change from Q3’16.

Next comes the most-important fundamental data for gold miners, cash costs and all-in sustaining costs per ounce mined. The latter determines their profitability and hence ultimately stock prices. Those are also followed by YoY changes. Finally, the YoY changes in cash flows generated from operations, GAAP profits, revenues, and cash on balance sheets are listed. There’s one key exception to these YoY changes.

Percentage changes aren’t relevant or meaningful if data shifted from positive to negative or vice versa. Some major gold miners earning profits in Q3’16 suffered net losses in Q3’17. So in cases where data crossed that zero line, I included the raw numbers instead. This whole dataset offers a fantastic high-level fundamental read on how the major gold miners are faring today. They’re actually doing quite well!

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