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Why Calumet Specialty Holdings, Primero Mining, and K12 Slumped Today

By Dan Caplinger - Apr 18, 2016 at 4:30PM

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Even in a strong market, these stocks fell. Find out why.

Image: Primero Mining.

Monday was a strong day for the stock market, and bullish market participants celebrated the Dow's moving above 18,000 almost as much as when it first surpassed that milestone. Stocks overcame initial negative sentiment from the weekend's failure among oil-producing nations to come up with a definitive agreement controlling the price of crude, and it now appears that investors might be looking to see if the Dow and other major market benchmarks can climb back into record-high territory in the near future. Even with good cheer on Wall Street, some stocks didn't join in the rally, and Calumet Specialty Products (CLMT 4.68%), Primero Mining (PPP), and K12 (LRN 1.74%) were among the worst performers in the market Monday.

Calumet plunged 48% after the producer of specialty hydrocarbon products and fuels said late Friday that it would suspend its quarterly cash distribution and take other measures to add liquidity for its business operations. Calumet completed a private placement of five-year senior secured notes, paying an interest rate of 11.5% and offering a first-priority security interest on all fixed assets under the agreements governing the company's overall credit. Calumet will use the proceeds to refinance borrowing under its revolving credit facility, but investors worry that the decision from credit rating agency Moody's to cut Calumet's overall rating to Caa1 shows that the company's actions come too late and fall short of providing enough relief from high leverage to reduce risks substantially.

Primero Mining dropped 16% in the wake of its release of preliminary first-quarter operating results. The gold miner highlighted safety as its top priority following a fatal accident at its San Dimas facility last year, but it said that it only managed to produce about 36,000 gold-equivalent ounces during the quarter at an all-in sustaining cost of $1,556 per ounce. That production was down 40% from year-earlier levels, and the costs involved soared by half due largely to changes in standards for ground support at the San Dimas mine. Even worse, Primero cut its full-year production estimates by 30,000 ounces to a range of 230,000 to 250,000 ounces, and it boosted its cost estimates by $125 per ounce to a new range of $975 to $1,025 per ounce. Despite gold's solid performance, costs above $1,500 for a quarter are unsustainable unless the market starts behaving much better.

Finally, K12 fell 7%. The online educational services provider was the subject of a critical news article in the San Jose Mercury News over the weekend, which reported that online academies that K12 operates are "failing key tests used to measure educational success." The piece cited statistics that more than half of those who enroll in online high schools fail to earn a diploma, and few qualify for the standards that California's state-run public universities set for college students. For its part, K12 said that its students don't have the same results as schools in higher-income areas with more access to funding, and it defends its model as educationally appropriate. Nevertheless, allegations of inflated attendance and enrollment records cast K12 in a negative light, threatening to add the pre-college-oriented company to the long list of for-profit college educational institutions that have been controversial for years.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Primero Mining Corp. Stock Quote
Primero Mining Corp.
K12 Inc. Stock Quote
K12 Inc.
$35.76 (1.74%) $0.61
Calumet Specialty Products Partners, L.P. Stock Quote
Calumet Specialty Products Partners, L.P.
$17.46 (4.68%) $0.78

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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