Miners set to reap rewards of high gold prices but remain cautious on spending

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This article was published 25/04/2025 (231 days ago), so information in it may no longer be current.

TORONTO – Record gold prices are translating into higher profits for Canadian producers and excitement about the potential for more growth, though miners remain cautious on spending.

Agnico Eagle Mines Ltd. was among the first big producers to report results after a quarter that saw gold top US$3,000 an ounce, while this week it pushed to over US$3,500 an ounce for the first time on U.S. instability fears.

The higher prices led Agnico Eagle, one of the world’s biggest gold producers, to report record adjusted net income of US$770 million for the quarter ending March 31, up from US$377 million last year.

“The gold price performance over the past year has been remarkable,” said chief executive Ammar Al-Joundi on an earnings call Friday.

The price surge has been a boon to an industry that has seen production rise by about a third over the last decade to make Canada the fourth-largest gold producer in the world, and led exports to top $30 billion in 2023, according to Natural Resources Canada.

The price was up more than US$1,000 an ounce in the quarter compared with a year earlier, while the miner’s costs were largely flat to create all sorts of records on its financial front.

“At these prices, Agnico Eagle, and frankly, a lot of our peers, should be making a lot of money,” Al-Joundi said. 

But while the price of gold is creating big profits, he emphasized the company will be keeping tight control of spending. 

“The most important thing in my opinion, is don’t waste that cash,” he said.

“Don’t go out and do stupid things with our owner’s money.”

The approach is in contrast to the commodity boom over a decade ago that saw miners splash out on huge debt-fuelled takeovers, which led to major writedowns when prices dropped. 

The industry is still somewhat working to shake off that shadow and attract investors who can now more easily buy into gold directly, through exchange-traded funds for example, leading executives like Al-Joundi to emphasize they’re working to pass on price gains directly to shareholders.

“Our owners invested in us because they had the correct view that Agnico Eagle is well positioned to deliver the full benefit of gold price increases to them.”

Gold miners in general have been conveying a similar message on spending discipline, but the high price also allows companies the flexibility to also look to ramp up production, said Dean Braunsteiner, EY Canada’s assurance mining leader.

“It’s good for Canadian producers, and we’re going to see a lot more of the projects that may have been on hold come to fruition.”

The higher prices give mid-tier producers an opportunity to look at mines that may have been put on care and maintenance and look to reopen them, while producers are also focusing on expansions at existing mines, he said.

Reopening and expanding mines are top priorities because most of the permits are already in place, so they doesn’t carry the same delay risks. 

In contrast, smaller, exploration-focused companies and early stage projects could still struggle given that in Canada it takes about 27 years to go from initial discovery to production, said Braunsteiner.

“I’m not sure that those are going to get a lot of attention, just because of the timeline.”

Adding to the pressure, junior miners also have to compete with other higher-risk investing options like crypto.

And while gold did push to a record high this week, it remains volatile. On Friday morning, gold was trading around US$3,280, down over US$200 an ounce from its Tuesday peak after U.S. President Donald Trump said he didn’t plan to try and fire Federal Reserve chair Jerome Powell.

The potential interference in the financial system, along with the recession fears and budgetary strains that Trump’s tariffs have created have been the main driver of the recent rise in gold. 

Analysts have been boosting their outlooks for the gold price given the instability, though longer-term it is expected to pull back somewhat.

Stifel Financial Corp. increased its forecasts this week to US$3,100 an ounce for next year, up from its previous outlook of US$2,550 an ounce. 

Longer term, it sees the price at US$2,400 an ounce, up from its previous forecast of US$2,100. 

While the higher prices are putting off some consumer buyers of jewelry, big central bank buying as a geopolitical risk hedge is maintaining upward pressure on prices, said Braunsteiner.

“Certainly, gold is serving its purpose. It’s a flight to safety,” he said.

“I’m quite bullish on where gold is going to go, and I think it’s creating a lot of opportunities here in Canada and then hopefully, we can see some of the mid-tiers grow into the top-tier gold mining companies.”

This report by The Canadian Press was first published April 25, 2025.

Companies in this story: (TSX:AEM)