Gold prices have dropped 4% year to date and nearly twice as much in the past quarter, as of this writing. Most gold stocks are, unsurprisingly, feeling the heat, but the market has frantically dumped and driven some stocks down by high double digits this year.
Here's how much the five worst-performing gold stocks have lost in 2018 so far.
|Gold Stock (Symbol)||Year-to-Date Loss||One-Year Loss|
|Sibanye-Stillwater (SBSW -3.68%)||53.6%||50%|
|AngloGold Ashanti (AU -4.74%)||21.4%||17.3%|
|Eldorado Gold (EGO -1.89%)||21%||54.8%|
|Alamos Gold (AGI -1.66%)||18%||24%|
|Kinross Gold (KGC -4.78%)||15.9%||13.9%|
What's wrong with these gold stocks, and are any worth betting on now?
5. Kinross Gold: This story could end well
Kinross Gold shares dropped the most on two occasions: the fiscal 2017 earnings release in February and the first-quarter earnings release in May. Kinross reported an improvement in all-in-sustaining costs (AISC) both times, with its AISC even hitting a record low of $846 per gold-equivalent ounce in Q1.
Yet investors were miffed with Kinross' outlook for fiscal 2018, which calls for gold production of 2.5 million ounces -- representing roughly 6% decline -- and AISC of $975 per ounce, within a +5/-5% range for each. On top of that, the Mauritanian government rejected a key permit in May that could hurt Kinross Gold's Tasiast second-phase expansion. Meanwhile, Ghana's recently proposed review of mining laws and the U.S. sanctions against Russia have added to Kinross' geopolitical risks.
If not for macro factors, Kinross could be a great turnaround story, given its strong production pipeline -- including the Tasiast first phase that's nearing completion and is expected to boost production substantially -- and a strong balance sheet.
4. Alamos Gold: Is the gold stock on your radar yet?
The sharp drop in Alamos Gold shares in early 2018 was a bit of a surprise, as the gold miner hit record production of 429,400 ounces of gold in fiscal 2017 and lowered its AISC to $940 per ounce.
Alamos kicked off 2018 on an equally strong note, reporting record quarterly production and AISC of $935 per ounce for Q1 in May. More importantly, Kinross upgraded its outlook for fiscal 2018 and guided for a sharp jump in gold production to 490,000-530,000 ounces while reiterating its AISC guidance of $950 an ounce. If you must, check out Alamos Gold's financials as well: No debt and a strong war chest and cash flows aren't things you see everyday in a gold mining company's books.
Alamos Gold appears to be among the stronger gold miners out there, making it one gold stock you should be watching closely.
3. Eldorado Gold: Only one silver lining
After watching Eldorado shares tank on a Greek arbitration and poor operational numbers, investors are banking on key permits for the miner's high-potential Kassandra assets in Greece that comprise Olympias, Skouries, and Stratoni. Greek arbitrators ruled positively in Eldorado's favor in April, rejecting allegations of an environmental breach and hinted at a resolution soon. However, there has been no update since.
Meanwhile, gold production from Eldorado's flagship mine, Kisladag in Turkey, is on the decline. And costs are rising, which doesn't bode well, given that the miner incurred a loss of $9.9 million in fiscal 2017.
|Metric||Fiscal 2017 Actual||Fiscal 2018 Forecast|
|Gold production||292,971 ounces||290,000-330,000 ounces|
|Cash operating cost||$509 per ounce||$580-$630 per ounce|
With 2018 seemingly a challenging year, the only near-term milestone that could improve Eldorado's prospects is the start of its recently bought Lamaque project in Canada next year. Watch out for updates in Eldorado Gold's second-quarter earnings report, coming up this week.
2. AngloGold Ashanti: Can the new CEO turn its fortunes around?
Despite 4% higher gold production, AngloGold Ashanti's profit took a big hit in fiscal 2017, thanks partly to class action suits. That, a projected production decline of 11% at the midpoint this year, and the sudden departure of its CEO in April sent AngloGold shares crashing.
AngloGold's stock, however, appears to have found a bottom for a couple of reasons. Last month, the miner received regulatory approval from Ghana to redevelop its stalled Obuasi mine, which AngloGold says will be its cornerstone asset thanks to high-grade ore and low costs. Meanwhile, AngloGold estimates production from its Sunrise Dam mine in Australia to jump 25% this year to about 300,000 ounces -- a level it expects to maintain in the long run.
In a bigger development, AngloGold has roped in Barrick Gold's ex-president, Kelvin Dushnisky, as its new CEO, who brings with him extensive mining experience, including 16 years with Barrick Gold. If Dushnisky can cut AngloGold's exposure in South Africa and pare its humongous debt of nearly $2 billion, things could get rolling for AngloGold.
1. Sibanye Stillwater: No gold -- it's platinum here
Sibanye-Stillwater has a couple of big problems to deal with, including investigation into the death of several workers this year and high debt after the acquisition of Stillwater Mining, part of which was repaid last year with a $1 billion rights issue at a steep discount. Sibanye recently cut its full-year production guidance for South African gold operations by 6% at the midpoint and expects to incur higher all-in-sustaining costs of around $1,227-$1,263 per ounce.
On the positive side, Sibanye has pared down debt with the $500 million it recently received under a streaming agreement with a subsidiary of the world's largest precious-metals streaming company, Wheaton Precious Metals (NYSE: WPM). In return, Sibanye will deliver Wheaton 100% gold and 4.5% of palladium produced in the U.S. for 18% of spot prices up to certain thresholds and a lower percentage and higher prices thereafter.
Sibanye's safety policies and high costs remain its biggest growth hurdles. Unless the miner takes care of these, it may not be able to exploit its about-to-be-gained competitive advantage to full potential -- that of becoming the world's second largest platinum miner, thanks to Stillwater and its impending acquisition of Lonmin, both of which also expand Sibanye's footprint outside the challenging South African region.