Gold miners may see margins shine as energy, labor costs edge lower

“Costs on the gold side are down a little bit, so we should see better margins in Q4,” said Carey MacRury, analyst at Canaccord Genuity.

“So, it’s really just higher production, slightly lower cost and the flat gold price,” he said, adding he expects margins to have improved in the October-December period compared to the previous quarter.

Miners also grappled with wet weather, Covid disruptions, labor shortages that were sometimes linked to the pandemic, and supply chain constraints, Bernstein analysts said, adding firms should have good visibility on labor shortages in 2023.

Context

Gold, considered a safe-haven asset in times of uncertainty and inflation, touched the $2,000 mark after Russia invaded Ukraine in February 2022, but fell 21% in the following eight-months as the Federal Reserve hiked interest rates.

“Most of the damage (from interest rate hikes) was done in 2022,” said MacRury, adding that he expects margin expansion in 2023 on higher gold prices.

Barrick’s gold output has been on a steady decline, falling for at least three consecutive years.

However, Barrick expects higher grades to flow through 2023 from its Nevada Gold Mines, a joint venture between the company and Newmont.

“Supply chain issues are fixable to a certain extent, but if social unrest persists or the Ukraine war escalates further, then the miners may struggle to meet guidance,” said Bernstien.

Barrick is scheduled to report quarterly results on Feb. 15, while Newmont is expected to post on Feb. 23.

Fundamentals

(By Arshreet Singh; Editing by Sriraj Kalluvila)