Gold miners have recently reported their best quarterly results in history, driven by soaring gold prices. This remarkable performance has led to record revenues, unit profits, bottom-line earnings, and operating cash flows. The last quarter marked the eighth consecutive period of significant profit growth for gold miners, highlighting a robust fundamental backdrop that suggests gold stocks remain undervalued.
The Dominance of GDX
The GDX VanEck Gold Miners ETF stands as the leading benchmark for the gold mining sector. Launched in May 2006, GDX has leveraged its first-mover advantage to amass $17.1 billion in net assets, far surpassing its nearest competitor by over tenfold. This ETF is the preferred trading vehicle for investors, with the largest gold miners making up the majority of its weighting.
Classifying Gold Stocks
Gold stocks are categorized based on their annual production rates measured in ounces of gold. The classifications are as follows:
Small Juniors: Less than 300,000 ounces
Medium Mid-Tiers: 300,000 to 1,000,000 ounces
Large Majors: Over 1,000,000 ounces
Super-Majors: Exceeding 2,000,000 ounces
The largest categories account for nearly 56% of GDX, indicating that the major players significantly influence the ETF’s performance.
A Stellar 2025 for Gold Miners
The year 2025 has been exceptional for gold miners, with GDX soaring 71.2% year-to-date. This surge has amplified gold’s rise by 2.6 times, aligning with historical trends where gold stocks typically outperform gold by a factor of 2 to 3. Since the inception of the current bull market in October 2023, gold has risen by 88.6% without a single correction of 10% or more.
Despite this impressive performance, gold stocks have lagged behind, with GDX only achieving a 1.4x leverage. This discrepancy is likely due to the AI stock bubble capturing investor attention, overshadowing other sectors. However, GDX is on the verge of reaching all-time highs, with just a 14.7% increase needed from midweek levels.
Analyzing Q2’25 Results
For 37 consecutive quarters, I have meticulously analyzed the operational and financial results of GDX’s 25 largest component stocks, which primarily consist of super-majors, majors, and larger mid-tiers. This analysis provides clarity amidst the often murky sentiment surrounding the gold mining sector.
Production and Costs
In Q2’25, the GDX top 25 reported a collective production decline of 9.6% year-over-year, totaling 7,504,000 ounces. This marked the lowest output in 37 quarters, raising concerns about the performance of major gold miners. However, the World Gold Council reported a 3.2% increase in global gold mining output, suggesting that the decline in GDX’s production is largely due to reporting issues from South African miners.
Despite the overall production drop, the average cash costs for the GDX top 25 surged 14.5% year-over-year to $1,186 per ounce, influenced by significant outliers like Buenaventura, which reported cash costs of $2,136. Excluding this outlier, the average cash costs were more manageable at $1,131.
Impressive Earnings Growth
The average all-in sustaining costs (AISC) for the GDX top 25 climbed to $1,424 per ounce, still well below the record average gold price of $3,285. This resulted in impressive implied unit earnings of $1,861 per ounce, a staggering 77.6% increase year-over-year and the highest ever recorded for major gold miners.
Over the past eight quarters, the GDX top 25 has experienced consistent earnings growth, with year-over-year increases of 87%, 47%, 31%, 75%, 74%, 78%, 90%, and 78%. Such sustained growth is rare in any stock market sector, positioning gold miners as a compelling investment opportunity.
Future Outlook
As we progress through Q3’25, gold is averaging another record price of $3,349. If this trend continues, it could lead to a further 35% year-over-year increase in gold prices. The GDX top 25’s average AISC midpoint guidance stands at $1,537, suggesting that implied unit earnings could reach approximately $1,812, marking a 73% increase over Q3’24 levels.
The current environment is ripe for gold miners, especially as American investors begin to take notice of the sector after being distracted by the AI stock bubble. The GDX top 25’s total revenues climbed 21.2% year-over-year to $23.98 billion, with a staggering 144.2% increase in bottom-line profits to $7.58 billion.
Conclusion
The major gold miners have achieved unprecedented success in Q2’25, driven by record gold prices that have resulted in remarkable financial metrics. Despite this success, gold stocks remain undervalued, trading at low price-to-earnings ratios that do not reflect their strong fundamentals. As the market begins to recognize this anomaly, gold stocks are poised for significant upward movement.
Investors should consider the potential for substantial gains in the gold mining sector, especially as GDX approaches new record highs. With a strong financial foundation and growing interest, gold stocks are likely to continue their bullish trajectory in the coming months.
Adam Hamilton, CPA
August 15, 2025
Copyright 2000 – 2025 Zeal LLC www.ZealLLC.com
English 