Here's Why These Gold Stocks Lost as Much as 18.5% in November

What happened

Gold prices finally began to recover in October after a rough summer. While prices today are trekking back toward levels from the beginning of 2018, the recovery took a brief stumble in the first two weeks of November -- just in time for quarterly earnings reports. That was enough to spook investors away from gold stocks, especially those currently struggling with lower production volumes and higher production costs compared to 2017.

Shares of IAMGOLD (NYSE: IAG) fell 10.8%, shares of Coeur Mining (NYSE: CDE) dropped 17.4%, and shares of Harmony Gold (NYSE: HMY) slipped 18.5% in November, according to data provided by S&P Global Market Intelligence. The first two companies reported third-quarter 2018 operating results, while the latter reported another fatality at one of its mines.

So what

IAMGOLD delivered third-quarter 2018 operating results that demonstrated a step backward since last year. Gold volume produced and sold dropped compared to the year-ago period, while all-in sustaining cost (AISC) rose in the last 12 months. In fact, the AISC of $1,086 per ounce during the quarter is relatively high compared to peers. It contributed to the company's 26% year-over-year drop in gold margin.

To be fair, the company expected a bit of a slide in the most recent quarter due to reduced output from its Rosebel mine. IAMGOLD also maintained its full-year 2018 guidance for gold production of about 875,000 ounces and AISC of around $1,030 per ounce. However, the business will need new reserves to be brought online to both keep production humming along and reduce costs. While the business has a healthy cash position of $744 million, it only delivered net income of $6.6 million in the first nine months of 2018.

Coeur Mining reported third-quarter 2018 operating results on the last day of October. It witnessed a 9% drop in silver production and a 7% drop in gold production compared to the year-ago period, which was exacerbated by 11% and 7% drops in selling prices for the respective precious metal. Protests (now resolved) and weather reduced output, but operations at all major mines are now back to previous levels.

The most important thing for Coeur Mining will be the ramp up of its new Silvertip mine, which only reached commercial operations on the first day of September. The mine will steadily ramp through the first quarter of 2019, after which investors will expect reduced capital expenditures and reduced production costs.

Meanwhile, sliding gold prices combined with multiple factors to drop shares of Harmony Gold. The company reported the eighth fatality of 2018, and second since mid-October, at one of its mines last month. Lax safety rules in the South African mining industry have been put in the spotlight in 2018, with several major global companies stating they'll no longer purchase metals from offenders.

Companies desperate to improve their safety records have turned to more automation, but the resulting job cuts have been met with threats from the national government. That puts companies such as Harmony Gold in a difficult position, especially considering modernizing mines could help to boost operating profits, too. The company reported AISC of $1,281 per ounce in fiscal 2018, easily near the highest in the industry.

Now what

Gold stocks might seem like a great way to invest in gold while also owning a piece of a business, but the reality is that few gold stocks have even come close to beating the return of the S&P 500 over long periods of time. In other words, gold stocks simply aren't good investments. As the recent results from IAMGOLD, Coeur Mining, and Harmony Gold demonstrate, it's difficult to maintain production levels as mining assets age, legal situations change, and precious metal selling prices fluctuate.

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Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.