Zacks
Zacks Industry Outlook Highlights Alamos Gold, Orla Mining and Eldorado Gold
Zacks Equity Research
10 min read

In This Article:

For Immediate Release

Chicago, IL – November 15, 2023 – Today, Zacks Equity Research discusses Alamos Gold AGI, Orla Mining ORLA and Eldorado Gold EGO.

Industry: Gold Mining

Link: https://www.zacks.com/commentary/2184066/3-gold-stocks-to-watch-in-a-promising-industry

The prospects for the Zacks Mining - Gold industry look bright at the moment on the back of improving gold prices. The yellow metal is likely to gain, fueled by ongoing geopolitical tensions as well as strong demand.

With gold prices anticipated to gain further on demand-supply imbalance, companies like Alamos Gold, Orla Mining andEldorado Gold are well-poised for growth, backed by their strong balance sheets, efforts to lower costs and growth initiatives.

About the Industry

The Zacks Mining - Gold industry comprises companies engaged in extracting gold from mines. These mines may be either underground or open pits. Mining is a long and complex process and requires significant financial resources. It involves exploration to evaluate the deposit's size, then assessing ways to extract and process the ore efficiently, safely and responsibly and develop the mine before the actual mining process. It normally takes 10-20 years for a gold mine to produce material that can finally be refined.

Nowadays, industry players use a range of sophisticated techniques to extract gold and convert it into dore bars, an alloy of gold and silver, alongside other impurities. These are then sent for purification, after which gold is purchased as bars or coins or used in jewelry or other purposes.

Major Trends Shaping the Future of the Mining-Gold Industry

Upbeat gold prices: Gold prices held their ground at above $1,900 per ounce through a major part of the third quarter of 2023, aided by a weaker dollar and increased buying by central banks. Even though gold prices had dipped near the end of the quarter, falling below $1,850 an ounce, the Federal Reserve indicates that interest rates are likely to remain higher for longer. Nevertheless, the average gold price for the quarter was at around $1,928.50 per ounce, which was 12% higher on a year-over-year basis.

Gold prices have picked up again, notching a 6.8% gain in October, mainly driven by safe-haven buying due to the geopolitical flare-up in Israel. Year to date, gold prices have gained 6.4%. Gold has also recently gained support after Moody's lowered its U.S. credit rating outlook from stable to negative, citing increasing fiscal deficits and political standoffs in Washington.

Efforts to Counter High Costs to Sustain Margins: The industry has been facing a shortage of skilled workforce, causing a spike in wages. Industry players are persistently grappling with escalating production costs, including electricity, water, and material and supply-chain issues. Since the industry cannot control gold prices, it focuses on improving the sales volume and the operating cash flow and lowering unit net cash costs. The industry participants are opting for alternate energy sources, such as solar or wind farms, to minimize fuel-price volatility and secure supply. Miners are committed to cost-reduction strategies and digital innovation to drive operating efficiencies.

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