If you are looking for a long-term investment opportunity, then gold mining stocks are worth considering. However, it is important to keep in mind that the industry is subject to a wide range of risks. Some of these risks include inflation, which may dampen consumer demand. In addition, gold mining stocks are subject to significant tax implications.
Average cash costs of gold mining companies in 2022
The average cash costs of gold mining companies are expected to increase by 7% per ounce by 2022. That’s according to BMO Capital Markets’ Precious Metals Team. The analysts believe that the trend of cost inflation will continue, and AISC will likely trend toward the top of the range in the second half of 2022. Some major gold miners are already moving their full-year 2022 cost guidance to the high end of the range.
Variable costs for gold mining are mainly driven by energy and consumables. However, the companies cannot sustain the high cost of electricity, diesel, and reagent chemicals forever. Eventually, the supply of these commodities will outstrip the demand for them, driving prices lower.
The companies reported their Q1 2022 cash costs at $1,060 per ounce. The total AISC and cash costs per ounce were higher than the same period last year. The higher cash costs were primarily due to the pre-stripping activities that were necessary to facilitate the multi-year operation of the Limon Central pit. In addition, the company reported corporate G&A of $3.1 million, which includes $0.6 million due to the value of its United States assets.
Growth of gold mining companies in 2022
The growth of gold mining companies is expected to continue to increase during the next couple of years. The commodity has surged over the last few years amid concerns about inflation and geopolitical uncertainty. However, it gave back most of its gains by mid-year, due in part to a slumping economy and the potential for price deflation.
In the first quarter of this year, the share price of Russian gold mining company Polyus soared over 300 percent. In addition, the share prices of all the top five mining companies increased. According to the Statista database, the index values are calculated using the month-on-month change in closing prices. January 1, 2018 serves as the base year, and shares of each company are compared against the closing price for the prior month.
The most important factor for investors to consider is gold miners’ production growth. This is the lifeblood of the gold mining industry. While production growth is important, investors should also take into consideration costs. Costs are typically measured in terms of per-ounce production, and all-in sustaining costs help investors understand how profitable a gold mining company is.
Tax implications of owning gold mining stocks
Investing in gold mining stocks is a great way to gain exposure to gold prices without having to buy physical gold. However, this approach may not always provide a high correlation between the company’s stock price and gold prices. There are a few key factors to consider when buying gold mining stocks. The first is the tax treatment. As with any investment, capital gains on gold mining stocks will be taxed at the appropriate capital gains rate.
Another important factor to consider is whether to invest in junior or senior gold mining companies. Junior gold mining stocks are generally more volatile than their senior counterparts. However, they are less likely to fall in price than major ones. However, if you are looking for a safe investment, you should invest in a more senior company. The reason for this is that senior companies typically have lower share prices and are more likely to rise.
While owning mining stocks is a risky proposition, investors can benefit from it in the long run. This is because gold is a store of value and can be used as an inflation hedge or an appreciation asset.