Gold and Precious Metals

Cost pressures remain sticky for Canadian precious metals miners in 3Q amid first inklings of relief, say Stifel GMP analysts

Canadian precious metals miners continued to see inflation as the main theme in their third-quarter results, further compounded by softening metals prices compared to the second quarter, according to Stifel GMP analysts.

In a note to clients analyzing Canadian precious metals miners’ 3Q earnings, the analysts noted that, unlike in 2Q, the language surrounding inflation had begun to see the first inklings of relief with some miners beginning to see costs peaking on some consumables.

“That said, language remains cautious, and we would expect conservatism will prevail when setting budgets for the coming year,” they wrote.

READ: Investing in North America’s ‘Canadian Shield’ is strong way to play the lithium, EV trend, says broker Stifel GMP

Looking at production, the analysts noted that 3Q results were putting pressure on miners to deliver a strong final quarter.

“Production guidance was largely maintained with a stronger 4Q anticipated, which for some miners is needed to achieve full-year guidance expectations,” they wrote.

On cost guidance, the analysts wrote that many miners were now expecting to come in at the top end or above their respective ranges set at the beginning of the year or revised in 2Q.

“However, slowing in the rate of inflation compounded by a heavily weighted 4Q for production could drive costs per ounce lower than we have seen year to date,” they wrote.

“All that said, 2023 guidance will provide better clarity on how much inflationary pressures continue to weigh on miners’ margins moving into the new year.”

Regarding their view on near-term and longer-term gold and silver prices, the analysts said they were maintaining their forecast of gold and silver prices of $1,798 per ounce and $21.50 per ounce for 2022, with 4Q prices of $1,700 per ounce and $20 per ounce, respectively.

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