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Rising silver and gold prices? Still not good enough, says mining analysts

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(Kitco News) - A strong third-quarter performances within the gold mining sector should help to attract some investment attention, but more work needs to be done, according to one Canadian bank

In a report published late Wednesday, analysts at BMO Capital Markets said mining companies need more than just higher precious metals prices to attract investors; companies need to continue to show their commitment to creating value.

“We expect Q3 piqued some interest from generalist investors, but in our view it will take more than one quarter of positive momentum to make a trend. Returns to investors, whether through dividends or share repurchases, will increasingly come into focus,” the analysts said. “Let’s be clear, the investing landscape has evolved rapidly to the point where gold miners are now being compared with the broader materials sector. Investors need more than a rising gold and silver price to invest in the sector over a sustained period.”

While the third quarter appeared to be a turning point for many mining companies, BMO said that the fourth quarter is shaping up to be another earnings season.

They noted that a number of companies are expecting to see the strongest production in the final quarter of the year.

“Quarter to date, Q4 prices are roughly in line with realized Q3 prices, so higher production should continue to drive strong earnings and cash flow results,” the analysts said.

Some of the companies that BMO expect to continue to outperform include Agnico Eagle Mines, Gold Fields, and Franco-Nevada.

But attracting long-term investors is more than just the bottom line. Analysts at BMO said that companies have to show a commitment to developing and following environmental and social governance policies (ESG). The bank noted that ESG topics are becoming front and center in the mining sector.

“A number of companies have already made their commitment to the standards of the World Gold Council. As metrics, reporting standards and disclosures continue to be refined and evolve with the changing landscape, and companies need to uphold their commitments and lead the change for the better,” the analysts said.

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