The gold market may be struggling to attract new investment capital as prices remain caught in a range below $1,750 an ounce. However, one research firm said that if investors are looking for value, they should look at the mining sector.

In a report published Tuesday, Metals Focus said that despite lower production and other issues created by the COVID-19 pandemic, gold miners saw record margins in 2020. The analysts added that even with gold prices down from the August highs, miners are still able to generate significant cash flow in 2021.

Despite the COVID-19 pandemic, the U.K. research firm said that the gold sector saw its most profitable year on record in 2020.

“This was largely a result of the rising gold price, which hit record highs in 2020, alongside a continued focus on operating and capital cost discipline despite upward pressure on costs caused by the pandemic,” the analysts said in the report.

According to the data compiled by Metals Focus, profit margins reached a record high of $828 an ounce last year, compared to margins of $666 seen in the previous bull market in 2011.

The report said that on average, all-in-sustaining-costs increased 1.8% last year; however, the gold price increased a whopping 27%.

Although gold prices have dropped more than 8% so far this year, Metals Focus said they expect profit margins to remain healthy.

“We are expecting AISC to drop marginally this year. This will largely be driven by significantly reduced disruption from the COVID-19 pandemic, with the vast majority of mines expected to operate at full capacity throughout this year,” the analysts said.

Metals Focus added that silver producers also saw significant margins last year, but they were no near their record highs.

By Neils Christensen
For Kitco News