Gold prices have been on the rise this year, and investors might be looking at gold stocks that could stand to benefit from that. I am going to compare two growing gold stocks to see which one might be a better buy.
Kinross Gold Corporation (TSX:K)(NYSE:KGC) is a gold mining company with operations in several parts of the world, and it continues to expand its operations. In Mauritius, Kinross is working on a two-phase project in Tasiast, which would become the company’s largest operation at over 400,000 ounces annually. The first phase is 55% complete, and full production is expected in the second quarter of 2018. The second phase is still a question mark, and the company won’t make a decision on whether or not to pursue it until later this month.
Eldorado Gold Corp. (TSX:ELD)(NYSE:EGO) has operations on a much smaller scale, but it has made strides in increasing its production. In July, the company announced the acquisition of Integra Gold Corp., which will add multiple Canadian properties to the company’s portfolio. One of the challenges Eldorado Gold currently faces is in its operations in Greece — specifically, its Skouries project, which has been opposed by authorities over disagreements about the project’s compliance with environmental regulations. Production for the project is not planned until 2020, and arbitration to resolve the issues is expected to start this month.
Both of the companies are showing efforts to grow and expand operations. Let’s look at how each one has been doing where it counts: the financials.
Financial performance
In its second quarter, Kinross reported a 3% increase in production over last year with production in Tasiast almost doubling. However, sales are slightly down and total revenue is flat from the previous year, but the company was still able to turn a profit of $33 million compared to a loss of $25 million in 2016.
In its past fiscal year, the company saw sales grow by over 13% but Kinross has not been able to show any consistent growth with revenues down 8% since 2013. The company has struggled to find profitability as well with losses of over $5.5 billion in the past four years combined.
Eldorado Gold saw its production in Q2 nearly cut in half from the prior year, primarily due to the 2016 results which included the company’s Chinese assets, which have since been sold. Total sales for the quarter of $82 million were down just 23%, despite the significant production drop. The company was able to record a net income of $11 million, and three of its last four quarters have now been in the black.
Which company is the better investment today?
Both companies have taken on significant growth initiatives, and as production rises, both will see top and bottom lines improve. Eldorado Gold has seen its stock price plummet over 40% in the past 12 months, while Kinross has seen little change in it share price over that time. Ultimately, the investment comes down to which company offers the better growth prospects, and that is where I would side with Kinross given the potential that its Tasiast project offers.
