Gold equities are starting to shine despite many companies missing analyst earnings estimates for the quarter ending June 30 despite markedly higher gold prices. A 20% increase in the average quarterly gold price to US$2338/oz in the June quarter was expected to result in surging profits and growing cash balances. With few exceptions, bonanza earnings failed to materialise among goldcos as all-in sustaining costs (AISC) continued their upward creep. Only three companies—Lundin Gold, AngloGold Ashanti and Aura Minerals—increased their dividends.

"Crazy.  This was supposed to be the quarter where they finally show leverage and [that they are] worth owning versus bullion, given the big move higher in the gold price was fully captured," wrote @jdvizzle on X.

The comment may have been premature, as the gold price has maintained record levels of over $2500/oz. With the US Federal Reserve expected to start cutting interest rates in the foreseeable future, further strengthening of the yellow metal is expected, leading to the takeoff of gold equities.

The gold price has increased over 24% year-to-date, but the gains in many equities have outstripped that. Only five companies of the 25 North American listed companies covered in this analysis have not beaten the gold price so far this year, and 11 have seen the value of their shares increase by more than 50%. IAMGOLD has posted the largest gain (105.9%), followed by Coeur Mining (95.1%), Torex Gold Mines (81.7% and New Gold (81.5%). Only three companies have failed to see a share price increase so far this year: SSR Mining (-48%), B2Gold (-9.2%) and Endeavour Mining (-1.6%).

The World Gold Council said gold exchange-traded funds had seen three consecutive months of inflows, with $3.7 billion in July, with European and the US investors starting to rotate towards precious metals.

Dividend yields and total returns

Goldcos have paid out $2.2 billion to shareholders so far in 2024, of which $2 billion is in dividends and $165 million in share buybacks. Newmont leads the dollar value returned to shareholders with $865 million, followed by Barrick Gold ($399 million) and Agnico Eagle Mines ($391.4 million). Royalty and streaming companies have paid out $360 million. The highest dividend yield is Mineros (9%), followed by Aura Minerals (7.2%) and B2Gold (6.5%).

"Gold producers complain they're not getting love from the market, and yet they're not handing out dividends. They're saying ‘we're going to reinvest those profits'. My thesis is that it's up to investors to reinvest. It's not up to the companies to say, Oh, we've had a fantastic year when they make really big profits, and we're going to keep it all for ourselves and nothing for you. … We still have this culture of companies that think they know better than investors how to invest the investor's money," Christopher Ecclestone, principal and mining strategist at Hallgarten + Company, told Mining Journal.

Tim Wood, executive director of Denver Gold Group, who organises the Gold Forum Americas in Colorado Springs every September, said it may be too early for companies to increase their returns. "We should expect some lagging effect as it would be irresponsible to increase dividends without rebuilding a capital stock to create some cushion against relentless inflation," he told Mining Journal.

June quarter performance

The nine majors covered produced an aggregate 6.4Moz in the June quarter, slightly up on the March quarter and 3% up on the prior year. AngloGold Ashanti and Endeavour had the biggest quarterly increases of 15.2% and 14.6%, respectively, while B2Gold was down 9.5%. Compared with the prior year, Newmont saw the biggest production increase, up 39.4%, while B2Gold (-22.2%), Gold Fields (-21.3%), Barrick (-14.3%) and Panamerican Silver (-13.85%) experienced the largest declines. The other companies in this group are Agnico Eagle Mines and Kinross Gold.

The intermediates produced an aggregate 1.6Moz in the June quarter, 1.5% up on the March quarter but 2% down on the prior year. Lundin Gold was the biggest gainer in the quarter, up 19.3%, while SSR Mining was the biggest faller, at 25.3%. Compared with a year ago, IAMGOLD was up 55.1%, and Fortuna Mining was up 24.7%, with double-digit gains for Eldorado Gold, Coeur Mining and Aura Minerals, too. The other companies in this group are Alamos Gold, Aris Mining, Calibre Mining, Dundee Precious Metals, Equinox Gold, Mineros, New Gold, Oceana Gold and Torex Gold.

Inflation is still a thing, although less galloping than in the past. The caveat is that the higher gold price has added to the AISC of many companies.  "The increase in the gold price increased costs because royalties and payments to third parties also went up," said Mazumdar.

Mazumdar also identified other factors increasing costs. "Most of the cost issues, 6-8% depending on the company, were from treating more low-grade material, underground development to try and access high grade, stripping in anticipation of accessing high grade in an open pit, and a lot of power issues in West Africa in terms of availability put some plants at lower capacity and increased costs," he said.

The majors had an average AISC of $1454/oz, an increase of 1.8% over March and 11.9% compared with a year ago. Agnico Eagle led the pack of majors with an all-in-sustaining cost of $1169/oz, with B2Gold and Endeavour the only other majors at sub-$1300/oz.  AngloGold had the highest at $1589/oz. Only Agnico and B2Gold saw a reduction in their AISC compared with March, while both Endeavour and Newmont saw theirs increase by 8.5%. Compared with a year ago, AngloGold had the lowest gain at 0.1%, while Gold Fields (36.4%), Endeavour (28.7%) and Pan American (18%) saw the largest increases.

The mid-tiers had an average AISC of $1476/oz for the quarter, 5.9% higher than in March and 10.3% higher than a year ago. Dundee had the lowest AISC in the quarter at $710/oz followed by Lundin at $875/oz. No other company is sub-$1000/oz. At the high end, three companies were over $2000/oz: Oceangold ($2131/oz), SSR Mining ($2116/oz) and Equinox ($2041/oz).

The positive was that the gold price increase outpaced continued cost inflation, allowing many companies to expand their margins. The majors achieved an average AISC margin of 38% in the June quarter compared with 31% in March and 34% a year ago.

Leading the pack was Agnico with a 50% margin, followed by B2Gold (45.8%) and Endeavour (45%). Bringing up the rear was Gold Fields at 25.4%. The intermediates achieved an average margin of 37%, compared with 33% in March and 33% a year ago. Dundee (69.6%), Lundin (62.6%) and Alamos (53.1%) led the way. At the rear were Oceana (8.9%), SSR (9.5%) and Equinox (12.7%).

At the end of the June quarter, the majors held aggregate cash of $10.8 billion compared with $12 billion in the March quarter. Their aggregate debt was $18.3 billion compared with $22.2 billion in the March quarter. Aggregate working capital was down slightly at $15.6 billion. The intermediates saw their aggregate cash increase to $3.9 billion in the June quarter, while aggregate debt also increased to $5.4 billion. Aggregate working capital increased to $4.1 billion.

Mazumdar said that the group's average net debt was about $275 million, ranging from Newmont at about $2.3 billion to companies like B2Gold with negative net debt. "About half of the companies have negative net debt, or very low net debt, which is very encouraging," he said.

An analysis by Mazumdar showed that with debt loads being static, several companies are spending more on financing expenditures as a proportion of total revenue during the first semester than exploration. "The companies with the most significant financing burdens (Equinox, Hecla, Coeur and Endeavour) understandably have the highest financing costs as a portion of revenue," he said.