What happened
August was a pretty good month for gold stocks. Shares of several leading companies enjoyed double-digit gains last month after each reported solid second-quarter 2017 earnings, including IAMGold (IAG -4.64%), Franco-Nevada (FNV -2.99%), Randgold Resources (NASDAQ: GOLD), and Kinross Gold (KGC -4.43%).
Each company reaffirmed full-year 2017 guidance on production, financials, or both, and each used words such as "strong" or "solid" to describe their performance. Those are certainly accurate adjectives. After last month's impressive gains, all of the gold stocks I mentioned are now up at least 40% in 2017.
Image source: Getty Images.
So what
IAMGold led the pack with monthly gains of 20.3%, which nearly doubled the performance of its three peers in this comparison. The company reported a 47% increase in gross profits, a 25% increase in operating cash flow, a 13% boost to production volumes, and a 12% decrease in all-in cash sustaining costs per ounce. Plus, it announced big developments in mines that were previously written off in the minds of investors, which resulted in big increases in the company's overall reserves.
Natural resource streaming company Franco-Nevada turned in monthly gains of 11.7% after reporting year-over-year revenue gains for its precious metals, minerals, and oil and gas portfolios. In fact, the only asset that failed to eclipse revenue levels from the year-ago period was silver, but the difference was less than $1 million and due solely to lower sales volumes in the most recent period. Management expects to add assets in each category before the end of the year -- diversification that no other gold stock can boast.
Kinross Gold Corporation and Randgold Resources both followed suit by increasing production and lowering production costs during the second quarter of 2017.
Despite posting less revenue in the most recent quarter, Kinross Gold Corporation notched a year-over-year operating income improvement of 52%. Several expansion projects are contributing to the gains this year -- production from Bald Mountain will double from last year -- while another major project will reach full production this time next year.
Randgold Resources performed even better, despite being attached to the stock that gained the least last month. Operating income improved 105% compared with the second quarter of 2016 as the company turned in one of its most profitable quarters and halves in quite some time. Management admitted the company is on track to hit the top end of its guidance and that investors should be confident it can find three new investment-grade greenfield projects within the next five years, a key part of its business strategy.
Now what
Considering that production volumes and production costs are the driving factors for gold stocks, it's not surprising that the solid performance of each gold stock in the second quarter of 2017 resulted in double-digit gains in August. It has certainly been a great year for gold investors, and with no signs of margin deterioration for the second half of the year, things may continue to get better for shareholders.
