Gold Miners ETF (GDX)

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Gold Miners’ Q1’24 Fundamentals
By: Adam Hamilton | May 17, 2024

The major gold miners just wrapped up another quarterly earnings season, reporting great results. Sector unit profits continued blasting higher on stable production, lower mining costs, and record prevailing gold prices. Yet individually plenty of majors still struggled with rising expenses or lower output. So deploying capital in miners to leverage gold’s remarkable breakout requires handpicking fundamentally-superior stocks.

The GDX VanEck Gold Miners ETF remains this sector’s dominant benchmark. Birthed way back in May 2006, GDX has parlayed its first-mover advantage into an insurmountable lead. Its $13.9b of net assets mid-week dwarfed the next-largest 1x-long major-gold-miners ETF by nearly 28x! GDX is undisputedly the trading vehicle of choice in this sector, with the world’s biggest gold miners commanding most of its weighting.

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+. Those two largest categories account for fully half of GDX.

GDX’s Q1 performance was poor, merely edging up 2.0% despite gold powering 7.6% higher. Normally the major gold miners amplify material gold moves by 2x to 3x, so their stocks should’ve surged 15% to 23% last quarter! Traders have been slow to warm to this sector, as it languished out of favor for years. Recent months’ euphoric stock-market bubble also overshadowed gold, stealing most of markets’ limelight.

But GDX’s dismal and super-anomalous 0.3x upside leverage to gold in Q1 has passed. Despite gold’s healthy and necessary high consolidation over this past month, the major gold stocks just hit a new upleg high mid-week. GDX has soared 39.2% since late February, amplifying gold’s parallel 17.4% gain by 2.3x! Already back into normal territory, the majors’ upside leverage to gold is dramatically mean reverting.

Gold’s recent nominal-record-high streaks are winning much-more bullish financial-media coverage, so traders are increasingly noticing and chasing. Q1’s earnings season had a great example, as the world’s largest gold miner Newmont reported its latest results. Despite that being the only gold stock included in the flagship S&P 500 benchmark index, normally institutional investors still don’t follow NEM enough to care.

Yet that day its stock rocketed 12.5% higher on that Q1 report! NEM’s gains dragged the entire GDX up a big 3.7%, despite gold only climbing 0.6% that day. But considered in proper comparable context, those Newmont Q1 results actually proved weak as I’ll explain below. Yet fund managers finally starting to pay attention to gold and gold stocks again flooded in anyway. Sentiment is definitely improving in this sector!

For 32 quarters in a row now, I’ve painstakingly analyzed the latest operational and financial results from GDX’s 25-largest component stocks. Mostly super-majors, majors, and larger mid-tiers, they dominate this ETF at 86.0% of its total weighting! While digging through quarterlies is a ton of work, understanding the gold miners’ latest fundamentals really cuts through the obscuring sentiment fogs shrouding this sector.

This table summarizes the operational and financial highlights from the GDX top 25 during Q1’24. These gold miners’ stock symbols aren’t all US listings, and are preceded by their rankings changes within GDX over this past year. The shuffling in their ETF weightings reflects shifting market caps, which reveal both outperformers and underperformers since Q1’23. Those symbols are followed by their current GDX weightings.

Next comes these gold miners’ Q1’24 production in ounces, along with their year-over-year changes from the comparable Q1’23. 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 the middle of this week. 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.

A few weeks ago as this latest earnings season was just getting underway, I wrote an essay previewing likely Q1’24 results. I concluded “...the major gold miners will soon report fantastic Q1 results. Despite higher mining costs likely in the usual Q1 production ebb, record average gold prices will still make for fat unit profits.” That proved true, although digging into the actual quarterlies revealed some surprises like usual.



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 boosts profitability, lowering unit costs by spreading big fixed operational expenses across more ounces. The GDX top 25’s collective Q1 output slipped 0.6% YoY to 7,999k ounces.

That was the fifth quarter in row these major gold miners failed to grow their production. Operating at large scales, they simply can’t find enough new gold to overcome relentless depletion. These bigger gold miners really underperformed their smaller peers last quarter. According to the World Gold Council’s new Q1’24 Gold Demand Trends report, global gold mine production actually grew an impressive 4.4% YoY in Q1!

And the GDX top 25’s production would’ve been even worse if not for Newmont’s soaring 32.3% YoY to a huge 1,680k ounces! That’s the reason institutional investors bid up NEM’s stock 12.5% that day its Q1 results were released. While sounding amazing, that big growth is a short-lived merger boost. Newmont gobbled up Australian super-major Newcrest Mining for $16.8b last year, with that deal closing in early November...

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