Gold miners might be about to deliver one of the most explosive earnings seasons in decades, and the market doesn't seem to be pricing it in yet. Here's the setup: bullion prices have rocketed higher while mining costs have stayed relatively flat, creating the kind of margin expansion that makes CFOs giddy.
Gold just posted its strongest annual performance since 1979, and now miners are preparing to report results starting in mid-February. But there's a curious disconnect happening on Wall Street.
"Despite the fact that the strategists on Wall Street and Bay Street are characteristically talking about $5,000 and $6,000 an ounce, the analysts are using $3,200 in their earnings forecasts," veteran investor Rick Rule warned in a recent interview with Jay Martin.
That gap matters. If Rule is right, the market is materially underestimating how profitable these companies actually were in the fourth quarter.
Why Timing Could Amplify the Impact
Here's where it gets interesting. American-listed gold miners have 60 days after year-end to report fourth-quarter results, while Canadian-listed companies get 90 days. That means the bulk of earnings releases will land between mid-February and mid-March, cramming what could be a series of upside surprises into a very short window.
The underlying math is pretty straightforward. When gold prices surge faster than costs, margins expand dramatically. All-in sustaining costs for most gold mines are largely fixed once operations are up and running, rising only gradually with inflation. Gold prices, on the other hand, are highly volatile.
In the fourth quarter, gold averaged roughly $4,150 an ounce, up about 56% year-over-year, while industry AISC rose by only a mid-single-digit percentage. The result? A near-vertical increase in profitability per ounce.