Record-setting gold prices may have created bullish investment opportunities in gold miners but their appeal will be put to the test this earning season as investors scrutinize their ability to stay disciplined.

Gold producers are set to release second-quarter results, starting with Agnico Eagle Mines Ltd. Wednesday afternoon and Newmont Corp. Thursday morning. Analysts see adjusted earnings per share of 15 cents US at Agnico, according to data compiled by Bloomberg. That would represent about a 50-per-cent increase from a year earlier. At Newmont, analysts see 31 cents US, or a jump of 158 per cent.

In theory, the bullish run in the price of gold should help gold miners. The gold spot price climbed 13 per cent in the second quarter and is heading for its biggest annual gain in a decade.

But gold miners are still “exceptionally undervalued both on an absolute scale and relative to the metal itself,” according to John Hathaway, senior portfolio manager at Sprott Asset Management USA Inc. The current dislocations between the price of gold and mining stocks have created a “fat pitch” opportunity, he said, applying a baseball term — if investors swing at such disparity, they could be rewarded with enormous gains.

Investors, though, haven’t completely stepped up to the plate, waiting for signs that the industry doesn’t repeat past bullish-cycle mistakes of overspending and destroying billions of dollars in shareholders value.

Past Pitfalls

“In the context of this favourable outlook, investors may begin to scrutinize capital allocation and investment decisions such that pro-cyclical pitfalls of the past are avoided,” RBC analysts led by Josh Wolfson wrote in a note.

Wolfson picked Kinross Gold Corp. and B2Gold Corp. as potential winners among peers when they report results. He sees Iamgold Corp., Agnico, Newmont and Pan American Silver Corp. as carrying the risk of falling short of expectations.

Don’t forget Covid-19, which will make the results “messy” because of operational disruptions, according to BMO analyst Jackie Przybylowski. “We are expecting that differences in Covid-19 closures and the reporting of costs associated with these closures will make the results difficult to interpret when compared against previous or future periods or consensus estimates,” she said in a note.

Even so, miners that can show discipline will stand out, RBC’s Wolfson said. Gold companies that are “harvesting cash flow, repaying debt, increasing dividends, and allocating capital at high rates of return should be rewarded,” he said.

This could potentially translate into “one of the fattest investment pitches of our time,” said Sprott’s Hathaway. Such opportunities are rare, he said, and “deserve serious consideration and expeditious response.”

Just the Numbers


  • 2Q adjusted EPS estimate 15 cents US (range 1 cent US to 22 cents US) (Bloomberg Consensus).
  • 2Q gold production 306k, cash cost US$843 per ounce gold
  • April 30, Agnico Eagle Mines forecast gold production for the full year of 1.63 million to 1.73 million ounces and capital expenditure of US$690 million
  • Agnico has 13 buys, 4 holds, 2 sells; avg price target of $96
  • Agnico’s option implied 1-day share move following earnings is 2.8 per cent
  • The company is set to release its earnings release Wednesday postmarket
  • Call at 11am (Toronto time) July 30, 1-888-231-8191


  • 2Q adjusted EPS estimate 31 cents US (range 23 cents US to 37 cents US) (Bloomberg Consensus).
  • 2Q sales estimate US$2.38 billion (range US$2.15 billion to US$2.92 billion)
  • May 19, Newmont forecast gold all-in sustaining cost per ounce for the full year of about US$1,015 and 2020 outlook is about 6 million ounces of attributable gold production, near the lower-end of the company’s previous outlook
    • The company said second quarter is expected to be the lowest production and highest cost quarter of 2020 as the sites ramp up from care and maintenance
  • Newmont has 15 buys, 6 holds, 1 sell; 12-month avg price target US$72
  • Newmont’s implied 1-day share move following earnings is 3.5 per cent
  • The company will release its earnings July 30 before market open
  • Call 9am (New York time), 855.209.8210 password: Newmont