2 Gold Mining Stocks You Should Avoid


Gold prices have ticked up over the past few months as investors are buying bullion to mitigate their portfolios against a weak macroeconomic scenario. This is good news for investors who have a stake in gold mining companies, though they need to remember that not all gold miners will be able to take advantage of the recent uptick in prices.

Let’s take a closer look at two gold equities that might fail to capitalize on the opportunity presented by the recent rise in the price of the yellow metal.

Kinross Gold

Kinross Gold [stock_market_widget type="inline" template="generic" color="default" assets="K" markup="(TSE: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] is a senior gold producer that did well last quarter. The company’s top and bottom lines were ahead of what analysts were expecting, thanks to an increase in gold ounces sold and a dip in all-in sustaining costs.

However, Kinross’ production had dipped last quarter and the situation isn’t expected to improve much in 2019. Kinross’ 2019 production guidance suggests that the company’s output will remain flat this year and its costs will rise. The company expects to produce 2.5 million ounces of gold in 2019 at all-in sustaining costs of $995 an ounce.

For comparison, the company had produced 2.45 million ounces of gold last year at an AISC of $995 an ounce. So any gains that Kinross might have recognized from an increase in gold prices will be erased by higher costs as the company reels under the impact of lower grades.

Now, Kinross’ average realized price of gold in 2018 stood at $1,268 an ounce in 2018. So even if the precious metal averages $1,300 an ounce this year, its realized prices might not rise more than 3%. This is why investors looking to take advantage of rising gold prices should look elsewhere and avoid Kinross Gold.


IAMGOLD (TSE: IMG) is yet another company that’s facing production and cost headwinds. Last year, the company’s gold production remained flat at 882,000 ounces but all-in sustaining costs increased 5.3% to $1,057 per ounce. What’s more, the company’s all-in sustaining costs during the fourth quarter of the year came in at $1,123 an ounce.

Because of the rising costs, IAMGOLD was unable to take advantage of a slight bump in the average realized price of gold, which came in at $1,270 an ounce last year. Its gold margin per ounce shrunk about 6% year over year in 2018.

Now, IAMGOLD plans to keep its AISC at $1,055 an ounce this year, which is the mid-point of its guidance range. This seems impressive at first, but investors should note that the company’s output is expected to go down to a range of 810,000 ounces-870,000 ounces in 2019. The mid-point of that range points toward a 4.7% drop in production.

So, IAMGOLD investors shouldn’t expect any top- and bottom-line gains from the company as the lower production output means that it is not in a position to capitalize on rising gold prices. Analysts are expecting a slight revenue and earnings growth at IAMGOLD this year, but achieving the same doesn’t look like a given right now and that could dent the company’s stock price.

The Takeaway

There are quite a few gold miners out there who are well-placed to take advantage of an increase in the price of the yellow metal. As such, it would make sense for investors to focus elsewhere instead of Kinross and IAMGOLD as these two companies will be handicapped by operational challenges this year and might not be able to benefit from higher prices.

Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.


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