Gold prices are hovering near record highs, yet the world’s two largest gold producers Barrick Gold (TSX:ABX) and Newmont  (TSX:NGT) have struggled to capitalize on the precious metal’s rally. Over the next ten days, both companies will have an opportunity to regain investor confidence as they report earnings, but they face mounting pressure to deliver results that reflect gold’s historic surge.

An Important Earnings Season for Gold Miners

Barrick is set to kick off the industry’s latest earnings season on Wednesday, February 14, followed by Agnico Eagle Mines Ltd. on February 13 and Newmont on February 20. Investors will be watching closely to see if the companies can move beyond the disappointments of the third quarter, when both Barrick and Newmont fell short of Wall Street expectations due to higher-than-expected costs and production challenges.

Gold prices have been on a steady march toward $3,000 per ounce, driven by increased demand for the metal as a safe-haven asset. As of this week, gold is trading at around $2,900 per ounce, putting added pressure on miners to show they can translate higher bullion prices into improved profitability.

“Gold is at $2,900, so the market is now saying, show me the money,”said Imaru Casanova, a portfolio manager at Van Eck Associates. “As the gold price makes fresh highs, the market will be focused on the companies ability to expand margins.”

Gold Stocks Rebound, But Challenges Remain

Gold producers have started to see their stocks recover this year. A Bloomberg index of 10 senior gold miners has surged 31% in 2024, nearly triple the gains seen from spot gold. That recovery is helping the world’s biggest gold miners catch up after an underwhelming 2023, when gold prices climbed 27%, but the index of senior gold miners gained only 11%.

Despite this rally, Barrick and Newmont continue to underperform some of their smaller peers, including Agnico Eagle Mines, which has consistently exceeded earnings expectations. The Toronto-based company benefits from operating the bulk of its mines in Canada, a politically stable jurisdiction compared to some of the regions where Barrick and Newmont operate.

Barrick’s Challenges: Mali Dispute, Operational Setbacks, and Costs

Barrick, the world’s second-largest gold producer, has faced multiple challenges that have weighed on its stock. A major setback has been a dispute with the military rulers of Mali, where the company operates one of its largest mining complexes, Loulo-Gounkoto. In January, Barrick was forced to suspend operations after the Malian government began removing gold from the mine and blocking shipments out of the country.

The company is also dealing with operational difficulties at key mines in Papua New Guinea and the Dominican Republic, as well as persistently high input costs in the United States. In Nevada, Barrick co-owns a massive mining complex with Newmont, and rising costs in the region have made it more difficult for the company to maintain profitability.

Newmont, the world’s largest gold producer, has also struggled with rising costs. Its third-quarter results revealed higher-than-expected spending at operations in Australia, Canada, Peru, and Papua New Guinea. Since then, the Denver-based company has been working to reduce overhead costs and strengthen its balance sheet.

To improve its financial position, Newmont has been selling off assets. Over the past several months, the company has completed a series of asset sales totaling $4.3 billion. These sales have helped Newmont generate cash, but investors are still waiting to see if the company can rein in operational expenses while taking advantage of high gold prices.

High Expectations for the Final Quarter

Both Barrick and Newmont have guided investors to expect a strong final quarter of 2024. Now, they will need to deliver on those promises.

One of the biggest challenges facing gold miners is rising inflation, which has driven up costs for everything from labor to energy to equipment. While high gold prices should, in theory, benefit miners, the reality is that inflationary pressures can erode profit margins if companies fail to control their expenses.

With gold prices at record highs, Barrick and Newmont face a critical moment. Investors will be scrutinizing their earnings reports, production guidance, and cost-control strategies to determine whether these industry giants can capitalize on gold’s rally.

If both companies fail to meet expectations again, it could further frustrate shareholders who have been waiting for a stronger performance. But if they manage to exceed expectations and demonstrate improved efficiency, it could mark a turning point for two of the world’s largest gold miners.

The post Record Gold Prices Put Pressure on Top Miners to Deliver appeared first on MiningFeeds.