Share of relatively small gold and silver miner SSR Mining (TSX:SSRM) fell 11.5% in September according to data provided by S&P Global Market Intelligence. This drop was around three times the decline in the spot price of gold. That said, there are two big takeaways from this September performance comparison, one of which has nothing to do with the price of gold.
SSR Mining is basically a junior gold miner, which means it's relatively small compared to the industry's giant names. It also happens to be a relatively high-cost miner, with all-in sustaining costs (a measure of how much the company has to spend to produce an ounce of gold on a sustainable basis) that were a bit above $1,000 per ounce in the June quarter. That was up nearly 3% year over year. Rising costs is bad, but the real issue is that, with relatively high costs, commodity price changes tend to have a bigger impact on SSR than on miners with lower cost structures. Thus, the stock tends to be more sensitive to the ups and downs of gold and silver prices.
It shouldn't be a surprise, then, that SSR's stock was more volatile than the commodities it produces. However, there was another factor to consider in September: The company completed the purchase of the 25% of its Puna Operation that it didn't own. Although the deal was agreed on in July, it closed in September. It required SSR to pay the seller $2.3 million in cash and issue $20 million worth of SSR stock. Also worth noting was that SSR completed a multimillion-dollar cash infusion into another miner in August. So, there was a lot of cash going out the door recently on top of the new shares it had to issue. It's understandable that investors would push the stock lower in September.
SSR has been making some big changes over the last few years, including shifting away from its historical focus on silver in an effort to produce more gold. Thus, gold prices, which were down in September, are more important today than they were historically. This shift, however, has included a lot of moves within the company's portfolio. And the changes clearly are still being made, as the August and September investments show. While one could persuasively argue that SSR is working toward a better future, it probably isn't appropriate for conservative investors.