Earnings season is in full swing, and analysts at Canaccord Genuity (TSX:CF, LSE:CF) are optimistic about upcoming results from precious metals companies.
“Q4 tends to be a seasonally strong quarter from a production standpoint,” analysts said in a note published Monday. “We expect Q4 to be the strongest quarter for a number of producers with overall forecast production growth of ~10% relative to Q3/22.”
Most companies have already prereleased their fourth-quarter production numbers, the firm noted, and investors are instead more focused on 2023 guidance and signs that cost inflation has peaked. Part of that is because the price of gold is more than $130/oz higher than the fourth quarter average of $1,731/oz.
READ: Kinross Gold maiden resource for Great Bear project ‘a significant de-risking milestone,’ analysts say
The firm also expects all-in-sustaining cost (AISC) margins to improve.
“We forecast that average producer AISCs (on a co-product basis) jumped 16% in 2022 to $1,289/oz and eclipsing the 2012 peak of $1,225/oz,” analysts said. “...Based on our 2023 gold price assumption of $1,862/oz, we forecast AISC margins improving 17% to $598/oz in 2023.”
Looking ahead, Canaccord is bullish on gold.
“We were largely cautious on gold in 2022, with inflation accelerating and fueling an increasingly hawkish Fed and a strong US dollar,” analysts said. “However, these headwinds look to have largely run their course with inflation and the economy slowing and with the Fed funds terminal rate continuing to plateau around 5%.”
Ultimately, the analysts argued that gold is in a strong position regardless of whether a recession occurs.
“We think gold and gold equities have more room to run ahead of a potential Fed pause and with a non-trivial chance of a recession emerging,” analysts said. “We think gold is well positioned in either a soft or hard landing scenario.
For gold producers reporting earning results, keep an eye on all Proactive’s mining coverage here.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
Follow him on Twitter @andrew_kessel