Gold Miners ETF (GDX)

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Gold Mid-Tiers’ Q3’23 Fundamentals
By: Adam Hamilton | December 1, 2023

The mid-tier and junior gold miners recently finished reporting their latest quarterly results. These smaller producers are fundamentally-superior, in the sweet spot for upside potential in major gold uplegs. Indeed their Q3’23 operational and financial results proved spectacular, much better than their larger peers. The potent combination of lower mining costs and higher gold prices fueled huge profits growth for these companies.

The leading mid-tier-gold-stock benchmark is the GDXJ VanEck Junior Gold Miners ETF. With $4.4b in net assets mid-week, it remains the second-largest gold-stock ETF after its big brother GDX. That is dominated by far-larger major gold miners, although there is much overlap between these ETFs’ holdings. Still misleadingly named, GDXJ is overwhelmingly a mid-tier gold-stock ETF with little weighting allocated to juniors.

Gold-stock tiers are defined by miners’ annual production rates in ounces of gold. Small juniors have little sub-300k outputs, medium mid-tiers run 300k to 1,000k, large majors yield over 1,000k, and huge super-majors operate at vast scales exceeding 2,000k. Translated into quarterly terms, these thresholds shake out under 75k, 75k to 250k, 250k+, and 500k+. Only four of GDXJ’s 25 biggest holdings are true juniors!

Their Q3 production is highlighted in blue in the table below. Juniors not only mine less than 75k ounces per quarter, but their gold output generates over half their quarterly revenues. That excludes both primary silver miners producing byproduct gold, and royalty and streaming companies that purchase future gold output for big upfront payments used to finance mine builds. But mid-tiers often make better investments.

These gold miners dominating GDXJ offer a unique mix of sizable diversified production, excellent output-growth potential, and smaller market capitalizations ideal for outsized gains. Mid-tiers are less risky than juniors, while amplifying gold uplegs much more than majors. Our newsletter trading books are now filled with fundamentally-superior mid-tiers and juniors, smaller gold miners which we’ve long specialized in at Zeal.

While gains are mounting in these high-potential gold stocks, they remain really out of favor. GDXJ has had a wild ride over the past year or so. From late September 2022 to mid-April, GDXJ powered 66.9% higher in a strong upleg! But then the mid-tiers started grinding lower on balance with their metal, and GDXJ fell 29.3% into early October. That recent selloff rebalanced sentiment, eliminating most bullishness.

Since then GDXJ has started clawing back, up 24.1% at best as of late November. Gold-stock uplegs parallel and amplify gold’s, but often start out slower. Traders remain skeptical after major gold selloffs, not convinced of young uplegs’ staying power. But the longer and higher gold runs, the more speculators and investors grow bullish on its potential. So they increasingly flood into gold stocks as gold uplegs mature.

For 30 quarters in a row now, I’ve painstakingly analyzed the latest operational and financial results from GDXJ’s 25-largest component stocks. Mostly mid-tiers, they now account for 65.9% of this ETF’s total weighting. While digging through quarterlies is a ton of work, understanding smaller gold miners’ latest fundamentals really cuts through the obscuring sentiment fogs shrouding this sector. This research is essential.

This table summarizes the GDXJ top 25’s operational and financial highlights during Q3’23. These gold miners’ stock symbols aren’t all US listings, and are preceded by their rankings changes within GDXJ over this past year. The shuffling in their ETF weightings reflects shifting market caps, which reveal both outperformers and underperformers since Q3’22. Those symbols are followed by their recent GDXJ weightings.

Next comes these gold miners’ Q3’23 production in ounces, along with their year-over-year changes from the comparable Q3’22. Output is the lifeblood of this industry, with investors generally prizing production growth above everything else. After are the costs of wresting that gold from the bowels of the earth in per-ounce terms, both cash costs and all-in sustaining costs. The latter help illuminate miners’ profitability.

That’s followed by a bunch of hard accounting data reported to securities regulators, quarterly revenues, earnings, operating cash flows, and resulting cash treasuries. Blank data fields mean companies hadn’t disclosed that particular data as of mid-November. The annual changes aren’t included if they would be misleading, like comparing negative numbers or data shifting from positive to negative or vice-versa.

The mid-tier gold miners’ overall Q3’23 performance proved spectacular! These sweet-spot-for-upside smaller gold stocks grew their production while slashing mining costs. That along with surging prevailing gold prices fueled massive earnings jumps, both per ounce and absolutely. Last quarter was undoubtedly one of the best the mid-tier and junior gold stocks ever reported, which should really attract back investors.



Production growth trumps everything else as the primary mission for gold miners. Higher outputs boost operating cash flows which help fund mine expansions, builds, and purchases, fueling virtuous circles of growth. Mining more gold also raises profitability, lowering unit costs by spreading big fixed operational expenses across more ounces. The GDXJ-top-25 gold miners delivered again for the sixth quarter in a row!

Their collective production grew 2.5% YoY to 3,378k ounces last quarter. That easily bested the GDX-top-25 majors’ Q3 output, which shrunk slightly as I analyzed in another essay a couple weeks ago. The mid-tiers also outperformed world gold mines as a whole, including all that produce byproduct gold. The World Gold Council’s excellent Q3’23 Gold Demand Trends report pegged overall global output growth at 2.3%.

And interestingly the GDXJ top 25’s production is understated. Note in this table that two new explorers climbed into this ETF’s upper ranks over this past year, Australia’s De Grey Mining and Canada’s Filo Corp. Both are worthy additions, advancing great gold projects. De Grey’s has a massive 10.5m ounces of indicated and inferred resources, while Filo’s huge primary copper deposit contains 6.7m ounces of gold!

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