How Gold Miners Aim to Get Their Groove Back | ETF Trends

Gold miners still have plenty of tailwinds as 2021 moves along, all music to the ears of investors considering the Sprott Gold Miners ETF (NYSEArca: SGDM).

SGDM tracks the Solactive Gold Miners Custom Factors Index and “emphasizes gold companies with the highest revenue growth and free cash flow yield, and the lowest long-term debt to equity ratio,” according to the issuer.

Some experts see the stars aligning for gold miners.

“In a recent interview with Kitco News, Douglas Groh, co-portfolio manager of the Sprott Gold Equity Fund, said that after all the excitement in 2020, miners saw record margins and unprecedented cash flow. Groh added that he is not expecting to see any significant fireworks for the first quarter of 2021,” reports Neil Christensen for Kitco News.

SGDM remains catalyst-rich, owing to rising inflation and miners’ dwindling costs, among other relevant factors likely to linger through the end of this year, if not beyond.

“2020 proved to be a wild ride for miners that had to navigate mine closures due to the COVID-19 pandemic and then ramp up production to capture all-time high gold prices. Groh said that many companies would take the first quarter to get back into their production rhythm,” according to Kitco.

A major point of emphasis with many SGDM components is the increasing attractiveness of gold miners’ balance sheets, which can support increased dividend growth.

“Although Groh is looking at the first-quarter earnings season to be a quiet affair, he said that companies sitting on piles of cash are expected to increase their activities, leading to more exploration and production in the second half of the year. He added that as the global economy continues to recover from the COVID-19 pandemic, activity in the mining sector should pick up,” continues Kitco. “Although miners are enjoying healthy margins, Groh said that management teams appear to have learned from their mistakes of the last bull market. Instead of piling on debt and chasing projects, companies are more methodical regarding their growth plans.”

SGDM YTD Performance

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.