Investors in gold mining stocks usually expect them to perform in line with gold prices. That, however, is hardly the case and gold stocks may fail to perform even in a high price environment, simply because there's a lot more to gold mining than just prices of the precious metal. That explains why, despite gold prices heading north this year, gold mining stocks have moved in all directions.

Gold Mining Company Market Capitalization  Year-to-Date Returns
Newmont Mining Corporation (NEM 0.97%) $19.55 billion 9.01%
Barrick Gold Corp (GOLD -1.71%) $16.52 billion (7.99%)
Goldcorp Inc. (GG) $11.26 billion (4.19%)
Agnico Eagle Mines Ltd (AEM 0.71%)  $10.4 billion 7.6%
Randgold Resources Ltd (NASDAQ: GOLD) $9.14 billion 20%
Kinross Gold Corporation (KGC -0.30%) $5.17 billion 38.59%
AngloGold Ashanti Limited (AU -1.13%) $4.21 billion (0.29%)
Yamana Gold Inc. (AUY)  $2.48 billion (2.49%)
IAMGOLD Corp (IAG -1.89%) $2.57 billion 46.49%
Eldorado Gold Corp (EGO -0.66%) $983 million (63%)
McEwen Mining Inc (MUX -1.14%) $663 million (31.62%)

Data source: Google Finance. Data as of Nov. 28, 2017.

The truth is that the business of gold mining is fraught with uncertainties. A gold miner can never really know where gold deposits are, or how much. According to the World Gold Council, 0.1% or less of gold discoveries eventually end up as productive gold mines. Not to forget how complex, capital-intensive, and time-consuming the process from exploration to processing of gold can be.

Simply put, gold mining companies face several challenges at any point in time which may have nothing to do with gold prices, which is why it is important to analyze a miner's cost position and growth prospects carefully before investing in gold mining stocks. From that standpoint, Goldcorp and Yamana look really attractive now if you're eyeing a position in the gold-mining industry. At the same time, you might be better off staying on the sidelines of Eldorado Gold. Here's why.

Goldcorp: Creating value in the tough gold mining business 

Goldcorp stock may not have made investors any money this year, but it's still outperforming closest rival Barrick Gold. The market is noticing Goldcorp's growth moves, and that's a good thing.

Gold nuggets on a paper with stock graphs.

Picking the right gold mining stock at the right time holds the key to your gold investing success. Image source: Getty Images.

During the nine months ended Sept. 30, 2017, Goldcorp lowered its all-in sustaining costs (AISC) by nearly 10% to $808 per ounce of gold, thanks to higher production of by-products (including silver, lead, zinc, and copper) and lower costs. AISC is a comprehensive cost measure that's widely used in the gold-mining industry to reflect a miner's true costs. 

As one of the world's largest gold-mining companies, Goldcorp stands to benefit greatly from rising gold prices, but what matters is how efficiently it can control costs to prevent erosion of profits during tough times. Goldcorp initiated a bunch of cost-reduction moves in the past year or so that includes improving ore grades from key mines such as Penasquito in Mexico. The gold mining giant aims to bring down its AISC to $825 (+/-5%) per ounce this year from last year's $856 an ounce. Comparatively, Newmont Mining, which generated nearly twice of Goldcorp's sales last year, is targeting a high AISC range of $855-$930 per ounce for FY2017.

By 2021, Goldcorp aims to bring down AISC by another 20% while expanding its gold reserves and production by 20% each as part of its ambitious 20-20-20 growth strategy. Some of Goldcorp's major ongoing projects include Coffee Gold in Canada and Cerro Casale and Caspiche in Chile. Cerro Casale is one of the world's largest gold mines that will be jointly developed by Goldcorp and Barrick Gold.

For investors in gold stocks, there's little reason not to like a company like Goldcorp that's so focused on two key areas in the gold mining business -- production and costs. Goldcorp's balance sheet is also among the strongest in the gold industry, making investing in the stock even more worthwhile.

Yamana Gold: Winning gold-mining investors' confidence

Yamana Gold recently delivered strong numbers for its third quarter, turning around year-ago losses into profits and upgrading its full-year production outlook by 4% from its original guidance to 960,000 ounces. However, that's still lower than its 2016 actual production, and it's likely that Yamana will end fiscal 2017 with substantially lower profits. Why, then, should you invest in this gold mining stock now, you may ask? The answer lies in Yamana's prospects for 2018 and beyond.

Last month, Yamana confirmed that its seventh gold mine, Cerro Moro in Argentina, is on track to start production early next year. Cerro Moro could be game-changer for several reasons. First, Yamana is betting big on the mine to help it boost its gold and silver production by 20% and 200%, respectively, by 2019. Second, Cerro Moro should be among Yamana's lowest-cost mines. Third, cash flows from Cerro Moro should help Yamana clean up its balance sheet.

If everything goes as planned, 2018 will be the first year of production for Cerro Moro, which is why Yamana makes such an attractive gold-mining stock right now. Moreover, Yamana's cash flows could expand substantially as its capital expenditures taper. In the longer run, the gold miner has several other projects in the pipeline; but for now, my focus is on Cerro Moro. If Yamana can deliver, it could be an outperformer among gold mining stocks in 2018.

Eldorado Gold: A gold mining stock stuck in the rut

2017 is a year investors in Eldorado Gold would quickly want to forget. The gold mining stock has lost all its shine, crashing more than 60% year to date, as of this writing.

A caution tape.

Stay cautious if you're invested in gold mining stocks like Eldorado Gold. Image source: Getty Images.

Eldorado shares were holding up pretty firm until mid-year when the miner announced plans to acquire Integra Gold for a hefty premium. Soon after, investors were dealt a huge blow when the Greek government announced arbitration proceedings against Eldorado to settle long-pending disputes over some of its key developing projects, including the high-profile Skouries and Olympias mines in northern Greece.

Then in October, Eldorado Gold missed its own estimates and downgraded its full-year gold production guidance substantially. The market was spooked, sending the stock crashing more than 40% in just one month as investors sensed they might be underestimating the extent of troubles at the gold miner.

So this is what the scene at Eldorado looks like now: It is struggling to expand gold production, is incurring losses, is burning significant amounts of cash, and doesn't know the fate of its investments and mines in Greece.

To be fair, the vigor with which Eldorado Gold is fighting back -- it recently filed lawsuits against Greece's Ministry of Energy and Environment -- reflects management's confidence in securing a ruling in its favor. However, the shrouds of uncertainty remain, and I see little reason to stay invested in Eldorado Gold right now when there are safer and better stocks to opt for in the gold mining industry.