Gold Mid-Tiers’ Q4’24 Fundamentals

Adam Hamilton, CPA

The mid-tier and junior gold miners in this sector’s sweet spot for upside potential are finishing reporting an epic record quarter.  Record-high gold prices combined with excellent cost control catapulted smaller gold miners’ profits to spectacular records!  Well-outperforming majors with their strongest fundamentals ever, mid-tiers’ and juniors’ stocks still need to mean-revert far higher to reflect their huge growing earnings.

The leading mid-tier-gold-stock benchmark is the GDXJ VanEck Junior Gold Miners ETF.  With $5.4b 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, though there is much overlap between these ETFs’ holdings.  Still misleadingly named, GDXJ is overwhelmingly a mid-tier gold-stock ETF with juniors having little 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+.  Today only two of GDXJ’s 25 biggest holdings are true juniors!

Their Q4 outputs are highlighted in blue in the table below.  Juniors not only mine less than 75k ounces per quarter, but gold output generates over half their quarterly revenues.  That excludes streaming and royalty companies that purchase future gold output for big upfront payments used to finance mine-builds, and primary silver miners producing byproduct gold.  But mid-tiers often make better investments than juniors.

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 more than majors.  So we’ve long specialized in the fundamentally-superior mid-tiers and juniors at Zeal, actively trading these smaller gold miners for a quarter-century now.

And what a time to own gold stocks!  Gold forged over $3,000 per ounce for the first time in history this week, blasting this sector’s dominant GDX benchmark up to its long-awaited decisive dozen-year secular breakout!  We aggressively added smaller gold-stock trades in our newsletters in recent months, and their unrealized gains are already running as high as +71%!  Interest in gold stocks is surging as more records shatter.

For 35 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 68.5% 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 Q4’24.  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 Q4’23.  Those symbols are followed by their recent GDXJ weightings.

Next comes these gold miners’ Q4’24 production in ounces, along with their year-over-year changes from the comparable Q4’23.  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.

Unfortunately Q4 results are harder to analyze than other quarters’.  Reporting is way more spread-out, with US and Canadian companies respectively having long 60-day and 90-day deadlines after year-ends to file results with securities regulators!  Further complicating things, some gold miners publish full-year numbers without breaking out Q4.  So quarterly results have to be calculated by comparing prior quarters’.

Back in late January before any Q4 reporting, I analyzed why last quarter would prove gold miners’ best ever.  Dazzling record gold prices along with mining-cost discipline would fuel miners’ richest-and-fattest profits in history.  And boy the mid-tiers didn’t disappoint, achieving phenomenal results handily trouncing the majors’!  The higher gold powers, the more apparent smaller gold miners’ superior fundamentals become.

That’s sure evident comparing the GDXJ top 25’s latest results with the GDX top 25’s, which I analyzed in another essay last week.  One of smaller gold miners’ big advantages over larger ones is their ability to more-consistently achieve better production growth.  Yet the GDXJ top 25’s total output last quarter fell a sharp 9.4% YoY to 3,217k ounces!  Meanwhile GDX-top-25 majors enjoyed excellent 3.1%-YoY growth in Q4.

Fortunately that’s all due to a single big composition change among GDXJ’s upper ranks.  A year ago in Q4’23, GDXJ’s managers inexplicably included Kinross Gold as this ETF’s second-biggest holding.  KGC is actually a super-major that mined a colossal 547k ounces in that comparable quarter, almost a sixth of its GDXJ-top-25 total!  Over the years GDXJ has seen various majors shuffled into and out of its ranks.

If the since-rightfully-booted Kinross Gold’s Q4’23 output is excluded from that quarter and replaced with the then-26th-largest GDXJ component’s, these elite mid-tiers’ total production actually grew an excellent 4.7% YoY in Q4’24!  That’s not only better than the GDX-top-25 majors, but greatly outperformed global gold mining as a whole.  According to the World Gold Council, global production slipped 0.2% YoY last quarter.

GDXJ should’ve never included any major gold miners producing over 250k ounces a quarter, as that’s what GDX is for.  With both leading gold-stock ETFs run by the same company, there’s no need for any significant overlap in their holdings.  Yet 19 of these GDXJ-top-25 stocks are also included in GDX, with fully 13 of them also GDX-top-25 ones!  Nevertheless, way-different weightings ensure GDXJ outperformance.

GDXJ effectively slices away GDX’s ten largest holdings, primarily super-majors and majors.  Most of those are deadweight, operating at huge scales too big to consistently grow production.  That along with their stocks’ high market capitalizations seriously retards their stock performances.  Those 19 GDXJ-top-25 stocks also in GDX have a 57.6% weighting in this mid-tier gold-stock ETF, 2.7x bigger than their 21.4% in GDX.

And mid-tiers’ production growth will accelerate in 2025.  Coeur Mining and Artemis Gold are the fastest-rising GDXJ-top-25 components over this past year.  Mostly thanks to the former’s buyout of SilverCrest Metals, it is forecasting midpoint gold output growth near 20% in 2025.  And the latter is spinning up its maiden mine-build, going commercial in Q2’25.  Its first stage is forecast to average 321k ounces annually.

Even without any adjustments, the GDXJ top 25 have achieved production growth in fully eight of the last dozen quarters!  That’s double the GDX top 25’s mere four over this same span.  Mid-tiers are the kings of consistent production growth, while majors have long struggled to even overcome depletion.  Excluding the mostly-deadweight majors leaving more weighting for better mid-tiers makes GDXJ way superior to GDX.

Unit gold-mining costs are generally inversely proportional to gold-production levels.  That’s because gold mines’ total operating costs are largely fixed during pre-construction planning stages, when designed throughputs are determined for plants processing gold-bearing ores.  Their nameplate capacities don’t change quarter to quarter, requiring similar levels of infrastructure, equipment, and employees to keep running.

So the only real variable driving quarterly gold production is the ore grades fed into these plants.  Those vary widely even within individual gold deposits.  Richer ores yield more ounces to spread mining’s big fixed expenses across, lowering unit costs and boosting profitability.  But while fixed costs are the lion’s share of gold mining, there are also sizable variable costs.  That’s where recent years’ raging inflation hit hard.

Cash costs are the classic measure of gold-mining costs, including all cash expenses necessary to mine each ounce of gold.  But they are misleading as a true cost measure, excluding the big capital needed to explore for gold deposits and build mines.  So cash costs are best viewed as survivability acid-test levels for smaller gold miners.  They illuminate the minimum gold prices necessary to keep the mines running.

In Q4’24 the GDXJ top 25’s average cash costs climbed 9.2% YoY to $1,086 per ounce.  That actually came in some from the prior quarter’s $1,119 record.  And impressively these smaller gold miners held the line on costs much better than larger ones.  The GDX top 25’s average cash costs last quarter surged 17.6% YoY to a considerably-higher $1,157.  Cash production costs are the largest fraction of AISCs by far.

All-in sustaining costs are way superior than cash costs, and were introduced by the World Gold Council in June 2013.  They add on to cash costs everything else that is necessary to maintain and replenish gold-mining operations at current output tempos.  AISCs give a much-better understanding of what it really costs to maintain gold mines as ongoing concerns, and reveal the major gold miners’ true operating profitability.

These elite GDXJ-top-25 mid-tiers reported average AISCs of just $1,347 per ounce last quarter, only edging up 3.3% YoY!  That remained way under their $1,442 record back in Q4’22, and right in line with my pre-results $1,350 prediction for this sector in late January.  For comparison the GDX-top-25 majors’ AISCs shot up a much-worse 12.2% YoY last quarter to a way-higher $1,454 average!  Mid-tiers fared fantastic.

And even that $1,347 average is distorted high by a couple outliers, not representative of smaller miners as a whole.  Q4’24’s highest AISCs of $2,203 and $1,949 were reported by Hecla Mining and IAMGOLD.  Both claimed their higher costs were outliers for different reasons, and guided full-year 2025 to much-better midpoints of $1,850 and $1,713.  Excluding their Q4 AISCs, the rest of the GDXJ top 25 averaged just $1,243!

And paradoxically the mid-tiers’ lowest-cost miner also skewed average AISCs higher.  Buenaventura’s Q4’24 AISCs of $708 were fantastic, yet still way higher than recent quarters’.  This miner also produces lots of silver, zinc, and lead used as byproducts to offset gold-mining costs.  Their outputs are so large relative to gold’s that BVN’s AISCs astoundingly fell negative to -$121 in Q1’24, -$578 in Q2, and -$680 in Q3!

Buenaventura’s Q4 gold production plunged 21.8% YoY, which wasn’t explained in its results.  That will likely recover, probably hammering its AISCs negative again.  That should help the GDXJ top 25’s overall AISCs either remain stable or drift lower in coming quarters.  Between record gold prices and contained costs, the smaller gold miners are printing money.  Both their profits and earnings growth are off-the-charts.

Last quarter gold averaged a fantastic record $2,661 on close, soaring 34.7% YoY!  The best proxy for smaller gold miners’ overall profitability simply subtracts their quarterly-average AISCs from the quarterly-average gold prices.  So Q4’24’s $2,661 less that $1,347 yields jaw-dropping implied sector unit profits running way up at $1,314 per ounce!  That proved way better than the GDX top 25’s $1,207 last quarter.

Amazingly that nearly doubled GDXJ-top-25 unit earnings, which skyrocketed 95.3% YoY to achieve that record $1,314!  That’s no fluke either, the latest in a long line of massive earnings growth achieved by the mid-tier and junior gold miners.  Over these last seven quarters in a row, GDXJ-top-25 implied unit profits have soared 34%, 106%, 133%, 63%, 66%, 71%, and 95% YoY!  Mid-tiers have long been earning hand-over-first.

And this record-shattering run unparalleled in all the stock markets isn’t over.  This juggernaut of a gold bull led by massive central-bank buying is still powering higher.  As of midweek, during this almost-over Q1’25 gold has averaged a much-higher record $2,838.  The GDXJ top 25’s average full-year-2025 AISC guidance is running $1,441, which is likely way too conservative.  I suspect around $1,375 is more likely.

Yet even those higher forecasts now point to Q1’25 implied unit earnings soaring about another 80% YoY to another dazzling record $1,397 per ounce!  So the smaller gold miners’ fundamentals continue to grow even stronger, which should increasingly attract value-oriented professional fund investors.  With their big capital inflows fueling mounting gold-stock gains, retail investors will soon follow really accelerating the upside.

The smaller gold miners’ hard accounting results reported to securities regulators are also important, but more challenging to analyze.  GDXJ’s managers have greatly changed its composition over the years, impairing comparability across longer spans.  That includes periodically adding majors then later kicking them back out, really swinging quarterly totals!  Gold miners’ individual results can also include unusual items.

These are normally big noncash charges flushed through income statements, led by writeoffs of carrying values of mines or deposits as their economics change.  While individual smaller gold miners don’t see these very often, some shifting subset of the GDXJ top 25 typically have some.  I record larger unusual items so I can adjust them out if necessary, but they still leave accounting profits dirtier than implied unit earnings.

Last quarter this current GDXJ top 25’s revenues only grew 22.5% YoY to $11,200m.  But remember super-major Kinross Gold was included a year ago, before since being booted.  Despite that these Q4’24 overall sales were still the highest by far in the 35 quarters I’ve been advancing this research thread, and an all-time record for smaller gold miners!  Of course record sales should translate into record earnings.

The GDXJ top 25’s bottom-line accounting profits indeed quadrupled, skyrocketing a staggering 304.7% YoY to $1,265m last quarter!  Interestingly that was just the second-highest ever, behind $1,547m back in Q4’20 when gold only averaged $1,876.  But back then GDXJ included a super-major and three other larger majors reporting much-bigger profits.  Those were also skewed higher by unusual items adding to earnings.

So it’s certainly safe to say the smaller gold miners’ Q4’24 earnings were their richest and fattest ever!  All that massive earnings growth in recent years has forced valuations much lower.  Plenty of GDXJ-top-25 miners are still trading at dirt-cheap single-digit trailing-twelve-month price-to-earnings ratios, with more in the low-priced teens.  Relative to their underlying corporate profits, smaller gold stocks remain way too low.

The GDXJ top 25’s cash flows generated from operations soared 56.9% YoY last quarter to a record $3,988m.  That helped fill up overall cash treasuries another 42.9% YoY to $9,558m.  That would’ve been a record if not for all those super-major and large-major inclusions back in late 2020.  Cash is essential to fund future production growth for mid-tiers and juniors through expansions, mine-builds, and mine purchases.

GDXJ is the best popular gold-stock ETF now, although its performance is easily beat by handpicking the best mid-tiers and juniors to trade.  Case-in-point was last year, when GDXJ only rallied 12.8% as gold stocks lagged gold’s remarkable monster upleg.  Yet the 84 gold-stock trades closed in our subscription newsletters in 2024 averaged far-better +43.1% annualized realized gains!  Stock picking and timing really matter.

While GDXJ is overwhelmingly a mid-tier ETF despite still claiming to be a junior one, its composition is getting better.  But this ETF’s history has been checkered.  It really was originally a junior-gold-stock ETF.  Then GDXJ’s holdings threatened to run afoul of Canadian securities laws, in that epicenter of the junior universe.  There any investor buying a 20%+ stake in a Canadian stock was legally deemed a takeover offer!

These pre-ETF-era rules made no sense for gold-stock ETFs, but GDXJ was forced to pare its holdings of Canadian juniors.  And it couldn’t weight other positions highly enough to push its stakes over 20%, which is a serious challenge with juniors’ usually-low market capitalizations.  So GDXJ’s managers added larger gold miners with higher weightings to force mid-tiers and juniors to lower ones to comply with that archaic rule.

So for over a decade now, GDXJ’s composition has really evolved.  While there are still some majors in its upper ranks now including Harmony Gold and Endeavour Mining, mid-tiers have slowly regained much of their lost ground.  I was down on GDXJ for years when it was embracing majors, but with each passing quarter in recent years its composition is improving.  GDXJ is the best gold-stock ETF for portfolio allocations.

Mid-tier and junior gold-stock prices are heading far higher.  Because of its big composition changes, GDXJ doesn’t have a well-established historical leverage range to gold.  But smaller gold miners’ profits amplify gold more than larger ones, due to lower AISCs and better growth.  The major-dominated GDX tends to leverage material gold moves by 2x to 3x, which GDXJ has outperformed without larger majors.

As of midweek, gold’s epic upleg has soared 67.4% in 17.5 months without a single 10%+ correction!  The GDX majors should’ve amplified that by 2x to 3x, for 135% to 202% gains.  Yet GDX has only rallied 74.6% so far in that span, lagging way behind gold.  Last year the euphoric AI stock bubble sucked in most of traders’ interest and capital, gold and its miners were ignored.  But all that is really changing in 2025.

With the S&P 500 just entering correction territory last week, this AI stock bubble looks to be bursting.  That’s dispelling AI stocks’ enthrallment over traders.  They are starting to look for alternatives, growing more excited about gold and gold stocks.  Based on their fundamentals, better mid-tier and junior gold stocks could easily see prices triple, quadruple, or more from here before they finish mean reverting with gold!

The bottom line is smaller mid-tier and junior gold miners just reported their best quarter on record.  They largely held the line on mining costs, which proved considerably lower than the majors’.  That combined with record gold prices fueled smaller gold miners’ richest-and-fattest implied unit profits in history.  Those have now skyrocketed with mostly-high-double-digit annual gains for a phenomenal seven quarters in a row!

And this unparalleled hyper-bullish streak will persist in this current almost-over quarter, which is on track to achieve another big record.  The fundamentally-superior smaller gold miners are earning money hand-over-fist, yet their stock prices are still languishing.  That makes a massive mean-reversion higher overdue and inevitable.  Mid-tier and junior gold stocks still have to multiply from here to reflect prevailing gold levels.

Adam Hamilton, CPA

March 21, 2025

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