How Top Gold Mining Stocks Performed in 2020
Gold mining stocks and the GDX saw strong returns in 2020 as gold was one of the most resilient and best performing assets in a highly volatile year.
But picking gold mining stocks isn’t easy, as each company has a variety of individual projects and risks worth assessing. This is why the GDX (VanEck Vectors Gold Miners ETF), is one of the most popular methods investors choose to get exposure to players in the gold mining industry.
While the GDX and gold miners can generally offer leveraged upside compared to gold during bull markets, in 2020 the GDX returned 23%, just a couple of points shy from spot gold’s 25.1% return.
This graphic compares the returns of gold, the GDX, and the best and worst performing gold mining equities in the index.
Understanding the GDX ETF and its Value
The GDX is one of many index ETFs created by investment management firm VanEck and offers exposure to 52 of the top gold mining stocks.
It provides a straightforward way to invest in the largest names in the gold mining industry, while cutting down on some of the individual risks that many mining companies are exposed to. The GDX is VanEck’s largest and most popular ETF averaging ~$25M in volume every day, with the largest amount of total net assets at $15.3B.
In terms of its holdings, the GDX attempts to replicate the returns of the NYSE Arca Gold Miners Index (GDM), which tracks the overall performance of companies in the gold mining industry.
How the Largest Gold Miners Performed in 2020
As a market-cap weighted ETF, the GDX allocates more assets towards constituents with a higher market cap, resulting in larger gold mining companies making up more of the index’s holdings.
This results in the five largest companies in the GDX making up 39.5% of the index’s holdings, and the top 10 making up 59.3%.
An equally-weighted index of the top five GDX constituents returned 27.3% for the year, outperforming gold and the index by a few points. Meanwhile, an equally-weighted index of the top 10 constituents significantly underperformed, only returning 18.4%.
Newmont was the only company of the top five which outperformed gold and the overall index, returning 37.8% for the year. Wheaton Precious Metals (40.3%) and Kinross Gold (54.9%) were the only other companies in the top 10 that managed to outperform.
Kinross Gold was the best performer among the top constituents largely due to its strong Q3 results, where the company generated significant free cash flow while quadrupling reported net earnings. Along with these positive results, the company also announced its expectation to increase gold production by 20% over the next three years.
The Best and Worst Performers in 2020
Among the best and worst performers of the GDX, it was the smaller-sized companies in the bottom half of the ranking which either significantly over- or underperformed.
K92 Mining’s record gold production from their Kainantu gold mine, along with a significant resource increase at their high-grade Kora deposit nearby saw a return of 164.2%, with the company graduating from the TSX-V to the TSX at the end of 2020.
Four of the five worst performers for 2020 were Australian mining companies as the country entered its first recession in 30 years after severe COVID-19 lockdowns and restrictions. Bushfires early in the year disrupted shipments from Newcrest’s Cadia mine, and rising tensions with China (Australia’s largest trading partner) also contributed to double-digit drawdowns for some Australian gold miners.
The worst performer and last-ranked company in the index, Resolute Mining (-36.9%), had further disruptions in H2’2020 at their Syama gold mine in Mali. The military coup and resignation of Mali’s president Ibrahim Keïta in August was followed by unionized workers threatening strikes in September, slowing operations at Syama gold mine. Outright strikes eventually occurred before year’s end.
How Gold Mining Stocks are Chosen for the GDX
There are some ground rules which dictate how the index is weighted to ensure the GDM and GDX properly reflect the gold mining industry.
Along with the rules on the index’s weighting, there are company-specific requirements for inclusion into the GDM, and as a result the GDX:
- Derive >50% of revenues from gold mining and related activities
- Market capitalization >$750M
- Average daily volume >50,000 shares over the past three months
- Average daily value traded >$1M over the past three months
Gold mining stocks already in the index have some leeway regarding these requirements, and ultimately inclusion or exclusion from the index us up to the Index Administrator.
What 2021 Will Bring for Gold Mining Stocks
The GDX has had a muted start to the new year, with the index at -2.3% as it has mostly followed spot gold’s price.
Gold and gold mining stocks cooled off significantly following their strong rally Q1-Q3’2020, as positive developments regarding the COVID-19 vaccine have resulted in a stronger-than-expected U.S. dollar and a rise in treasury yields.
This being said, the arrival of new monetary stimulus in the U.S. could spur inflation-fearing investors towards gold and gold mining stocks as the year progresses.
Visualizing the Critical Metals in a Smartphone
Smartphones can contain ~80% of the stable elements on the periodic table. This graphic details the critical metals you carry in your pocket.
Visualizing the Critical Metals in a Smartphone
In an increasingly connected world, smartphones have become an inseparable part of our lives.
Over 60% of the world’s population owns a mobile phone and smartphone adoption continues to rise in developing countries around the world.
While each brand has its own mix of components, whether it’s a Samsung or an iPhone, most smartphones can carry roughly 80% of the stable elements on the periodic table.
But some of the vital metals to build these devices are considered at risk due to geological scarcity, geopolitical issues, and other factors.
|Smartphone Part||Critical Metal|
|Display||lanthanum; gadolinium; praseodymium; europium; terbium; dysprosium|
|Electronics||nickel, gallium, tantalum|
|Battery||lithium, nickel, cobalt|
|Microphone, speakers, vibration unit||nickel, praseodymium, neodymium, gadolinium, terbium, dysprosium|
What’s in Your Pocket?
This infographic based on data from the University of Birmingham details all the critical metals that you carry in your pocket with your smartphone.
1. Touch Screen
Screens are made up of multiple layers of glass and plastic, coated with a conductor material called indium which is highly conductive and transparent.
Indium responds when contacted by another electrical conductor, like our fingers.
When we touch the screen, an electric circuit is completed where the finger makes contact with the screen, changing the electrical charge at this location. The device registers this electrical charge as a “touch event”, then prompting a response.
Smartphones screens display images on a liquid crystal display (LCD). Just like in most TVs and computer monitors, a phone LCD uses an electrical current to adjust the color of each pixel.
Several rare earth elements are used to produce the colors on screen.
Smartphones employ multiple antenna systems, such as Bluetooth, GPS, and WiFi.
The distance between these antenna systems is usually small making it extremely difficult to achieve flawless performance. Capacitors made of the rare, hard, blue-gray metal tantalum are used for filtering and frequency tuning.
Nickel is also used in capacitors and in mobile phone electrical connections. Another silvery metal, gallium, is used in semiconductors.
4. Microphone, Speakers, Vibration Unit
Nickel is used in the microphone diaphragm (that vibrates in response to sound waves).
Alloys containing rare earths neodymium, praseodymium and gadolinium are used in the magnets contained in the speaker and microphone. Neodymium, terbium and dysprosium are also used in the vibration unit.
There are many materials used to make phone cases, such as plastic, aluminum, carbon fiber, and even gold. Commonly, the cases have nickel to reduce electromagnetic interference (EMI) and magnesium alloys for EMI shielding.
Unless you bought your smartphone a decade ago, your device most likely carries a lithium-ion battery, which is charged and discharged by lithium ions moving between the negative (anode) and positive (cathode) electrodes.
Smartphones will naturally evolve as consumers look for ever-more useful features. Foldable phones, 5G technology with higher download speeds, and extra cameras are just a few of the changes expected.
As technology continues to improve, so will the demand for the metals necessary for the next generation of smartphones.
This post was originally featured on Elements
Silver Through the Ages: The Uses of Silver Over Time
The uses of silver span various industries, from renewable energy to jewelry. See how the uses of silver have evolved in this infographic.
Silver is one of the most versatile metals on Earth, with a unique combination of uses both as a precious and industrial metal.
Today, silver’s uses span many modern technologies, including solar panels, electric vehicles, and 5G devices. However, the uses of silver in currency, medicine, art, and jewelry have helped advance civilization, trade, and technology for thousands of years.
The Uses of Silver Over Time
The below infographic from Blackrock Silver takes us on a journey of silver’s uses through time, from the past to the future.
3,000 BC – The Middle Ages
The earliest accounts of silver can be traced to 3,000 BC in modern-day Turkey, where its mining spurred trade in the ancient Aegean and Mediterranean seas. Traders and merchants would use hacksilver—rough-cut pieces of silver—as a medium of exchange for goods and services.
Around 1,200 BC, the Ancient Greeks began refining and minting silver coins from the rich deposits found in the mines of Laurion just outside Athens. By 100 BC, modern-day Spain became the center of silver mining for the Roman Empire while silver bullion traveled along the Asian spice trade routes. By the late 1400s, Spain brought its affinity for silver to the New World where it uncovered the largest deposits of silver in history in the dusty hills of Bolivia.
Besides the uses of silver in commerce, people also recognized silver’s ability to fight bacteria. For instance, wine and food containers were often made out of silver to prevent spoilage. In addition, during breakouts of the Bubonic plague in medieval and renaissance Europe, people ate and drank with silver utensils to protect themselves from disease.
The 1800s – 2000s
New medicinal uses of silver came to light in the 19th and 20th centuries. Surgeons stitched post-operative wounds with silver sutures to reduce inflammation. In the early 1900s, doctors prescribed silver nitrate eyedrops to prevent conjunctivitis in newborn babies. Furthermore, in the 1960s, NASA developed a water purifier that dispensed silver ions to kill bacteria and purify water on its spacecraft.
The Industrial Revolution drove the onset of silver’s industrial applications. Thanks to its high light sensitivity and reflectivity, it became a key ingredient in photographic films, windows, and mirrors. Even today, skyscraper windows are often coated with silver to reflect sunlight and keep interior spaces cool.
The 2000s – Present
The uses of silver have come a long way since hacksilver and utensils, evolving with time and technology.
Silver is the most electrically conductive metal, making it a natural choice for electronic devices. Almost every electronic device with a switch or button contains silver, from smartphones to electric vehicles. Solar panels also utilize silver as a conductive layer in photovoltaic cells to transport and store electricity efficiently.
In addition, it has several medicinal applications that range from treating burn wounds and ulcers to eliminating bacteria in air conditioning systems and clothes.
Silver for the Future
Silver has always been useful to industries and technologies due to its unique properties, from its antibacterial nature to high electrical conductivity. Today, silver is critical for the next generation of renewable energy technologies.
For every age, silver proves its value.
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