- West Africa-based miner shows big jump in sales and profits
- Costs rise much more slowly than revenues
- Shareholders benefit in the form of increased dividends and buybacks as well as capital gains
“The gold price is rising once more, as it makes a bid to reach or even exceed October’s all-time high, and, in this context, it is no surprise to see Endeavour Mining’s shares trading near their highest-ever mark as well, especially after the gold digger’s strong third-quarter results,” says AJ Bell investment director Russ Mould.
“A 36% surge in average selling prices for its gold, combined with a relatively meagre 8% year-on-year increase in its costs, across the first nine months of 2025 mean profits and cash flow are surging, with the result that Endeavour is also able to substantially increase its dividend and share buybacks.
“Endeavour’s shares only listed in London in spring 2021, to add to their presence in Toronto, and after the slow start they have come into their own in the past eighteen months, helped by the surge in gold.
Source: LSEG Refinitiv data
“After a brief pullback from October’s peak, the precious metal seems to be rallying again. The temporary nature of the US government shutdown agreement between the Republicans and Democrats, President Trump’s suggestion of an allegedly tariff-funded $2,000 tax cut for many Americans and retirement of Raphael Bostic from the US Federal Reserve’s Open Market Committee all seem to be giving gold a fresh boost. Bostic’s move is telling, as Trump will get to pick another member of the FOMC, having already selected Stephen Miran, and markets seem to be interpreting this as another opportunity for the president to exert influence over Fed policy.
“The White House continues to call for lower interest rates, as it seeks to boost growth and let the US economy run hot thanks to cheaper money, lower oil, a weaker dollar, cuts in personal taxes and reduced regulation. Yet inflation is still above target, and some investors seem to be concerned that the Trump-Bessent plan is, at least in part, to stoke nominal GDP growth and hold down interest rates, to make the Federal debt more manageable and salt down the debt-to-GDP ratio.
“Yet the risk is that the Federal debt does not fall, even as tariff income does increase, thanks to the giveaways that formed part of the One Big Beautiful Bill, let alone the president’s plan to curry favour through fresh tax reductions with voters who remain concerned about increases in the cost of living.
Source: FRED – St. Louis Federal Reserve database, US Congressional Budget Office
“Growing government debt may therefore be one possible reason why gold continues to perform, especially as currency debasement, in some way, shape or form, is a method of dealing with unaffordable spending commitments and liabilities since time immemorial.
“The US Federal Reserve’s halt to its Quantitative Tightening programme this autumn merely plays to gold bugs’ long-held argument that the ‘temporary’ measures to keep the show on the road in the wake of the Great Financial Crisis of 2008-09 would prove to be anything but temporary, as the economy proves addicted to cheap money and plentiful liquidity. The halt to QE may also only serve to raise fears that more Quantitative Easing (QE) could be deployed once more in the event of any unexpected economic downturn or financial market upset.
Source: FRED – St. Louis Federal Reserve database
“If worries over inflation, debt and currency debasement are potential reasons for gold’s ascent, then any easing of those concerns could end the precious metal’s third major bull run since President Richard M. Nixon took the US dollar off the gold standard in summer 1971. A lasting peace in the Middle East, and also Ukraine, could also provide some further reassurance that portfolios are not in need of perceived haven assets, and further reductions in interest rates may persuade some that governments and central banks are still very much in control of the economic outlook, and not chasing behind after it.
“Investors must decide for themselves which scenario they feel best fits with their world view, and portfolio goals, but those who do feel that may be a useful diversifier then have to decide how best to glean exposure.
“Physical metal is one option, exchange-traded funds which follow the performance of gold and deliver that price change (minus the instruments’ running fees) are as well. Those investors who seek more gearing into the gold price may look to gold miners, as Endeavour’s results show how producers’ profits can rise much more rapidly than the metal when things go well. Funds which own a basket of gold miners, by either passively following an index or with a manager actively choosing which ones to own, are both options here, while the intrepid investor could also take the plunge and pick their own preferred gold producers.
“If the investor is sufficiently risk-tolerant, and also prepared to do their own diligent research, then there are a number of considerations for them to bear in mind when they assess individual gold miners, be they established producers, explorers or early-stage prospectors.
“Not all gold miners are equal, and investors must patiently research them and apply six tests to see whether they may be suitable for portfolio inclusion or not.
- Whether a gold miner is already producing, in the exploration phase or is in the process of obtaining (and making the most of) a license.
- If it is in the production phase, the next task is to assess the size of its resource and the production profile of existing mines. There is little or no point buying a gold miner if it is about to exhaust its reserves and deplete its mine.
Source: Company accounts
- Where the company operates, and the risk (or otherwise) of difficulties with local governments over mining rights and taxes, as well as the susceptibility of individual mines to problems posed by difficult conditions, such as extreme weather. Mali remains a particularly difficult place in which to operate at the moment, as Resolute Mining and Barrick Mining can attest, and their relatively lowly valuations within the peer group may reflect their presence here.
Source: Company accounts
- The company’s all-in sustaining cost (AISC) of producing an ounce of gold, as this will reveal how profitable (or otherwise) the firm will be relative to the prevailing metal price. Some miners publish a cash cost figure, but this may not include third-party smelting, refining, transport costs, local taxes and office running costs so it may not give the full picture. Key cost variables include staff and diesel and fuel, and they can be affected in turn by local currency movements in the countries where their mines are situated.
- The experience and skill set of the management team and executive board.
- The miner’s balance sheet and how much cash or debt it has. The more of the former and the less of the latter the better, especially if gold prices drop
“Finally, having assessed the miner’s operations, investors must study the valuation currently attributed to its stock. This can be done using earnings- or yield-based metrics, but both can be deceptive, especially if the gold price starts to swing around a lot. A further option is to look at net asset, or book, value. This will not move around so much, and should grow over time, at least if the gold price remains firm and profits start to pour out of the ground.
Source: Company accounts, Marketscreener, analysts’ consensus forecasts
“For all of the brickbats that are thrown at London for the discount at which it trades to the US equity market, the gold miners trade on broadly similar multiples of tangible book value.”
Source: Company accounts, Marketscreener, analysts’ consensus forecasts
