GDX-Fundamentals

But thankfully the American, Canadian, and Australian gold miners that dominate this industry tend to do an excellent job with their quarterly reports.  They transparently provide an abundance of key data going far beyond legal SEC reporting requirements.  That helps investors understand what is actually going on with their companies fundamentally, critical knowledge that is essential for success in this realm.

Every quarter I dig through these reports and fill a spreadsheet with a wide array of data from the results.  This helps me decide which elite gold miners I want to invest in, and equally importantly which I’d rather avoid for a variety of reasons.  These tables summarize some key data from GDX’s top 34 holdings, or 96.7% of this leading gold-stock ETF’s weightings.  That’s how many happen to fit in our standard chart size.

Each company’s symbol and exchange listing purchased by GDX’s managers is followed by its weight in that ETF, and its market capitalization as of the middle of this week.  GDX largely weights components by market cap, which is certainly the most logical way to do it.  Market cap is actually an important thing to consider for investing, as the larger a company is the more capital inflows it will need to propel it higher.

That’s followed by price-to-earnings ratios, the foundation of fundamental analysis.  Throughout all the stock markets, all stocks eventually migrate to some reasonable multiple of their underlying companies’ corporate profits.  As I’ll discuss below, the gold miners’ P/E ratios look absolutely abysmal today.  These companies are either showing GAAP losses or profits so trivial that they lead to ridiculously-high P/Es.

Naturally gold-mining profitability is purely a function of prevailing gold prices relative to the costs of actually producing this metal.  The next few columns show the GDX miners’ cash costs per ounce and all-in sustaining costs per ounce in Q1’16, as well as their AISC outlooks for full-year 2016.  The greater the delta between mining costs and gold prices, the more profitable these elite gold miners will become.

The next few columns look at key measures of financial health including cash on hand at the end of Q1, its percent of companies’ market capitalizations for a relative measure, and the critical cash generated by operations in Q1.  Finally that’s followed by quarterly production, in ounces of gold for GDX’s gold miners.  If silver miners broke out their gold separately, I included that alone.  If not, it’s Q1 silver production.

Any number under 1500k ounces is gold, anything over is silver.  But obviously silver-mining costs are excluded from the gold-mining averages discussed in this essay.  Cells are left blank where data wasn’t available.  The South African miners, for example, report in half-year increments so there is very little if any data available for Q1s and Q3s.  The gold-mining industry actually fared very well fundamentally in Q1’16!