As its name implies, Sun Valley Gold—at least on the equity side—is concentrated on the precious metals market, in companies related to mining, producing and refining. Unfortunately for the fund, a 13F portfolio with nearly all its positions tied to metals most likely hasn’t done too well of late, as metals prices have dropped to 2+ year lows. Of course, 13F filings from the SEC only indicate the long side of the equation, so it’s important not to jump to conclusions.
Still, all of the top five positions in Sun Valley Gold’s equity portfolio are from the gold space, which has been hit particularly hard. In one month alone, the price of gold has fallen by 17%. Another strategy, on the other hand, has beaten the market quite handily.
Let’s see Sun Valley Gold’s five largest equity holdings.
First of the top five with 5.5 million shares is Kinross Gold Corporation (USA) (NYSE:KGC). Kinross operates gold mines in North and South American, Russia and Africa. Kinross Gold Corporation (USA) (NYSE:KGC) recently reported strong Q4 earnings – EPS rose to $0.24 from $0.22 in Q3 – but this was before things got ugly in the gold market. Since the beginning of the year, the price of gold has fallen 21%, hitting its lowest level in two years, taking Kinross Gold Corporation (USA) (NYSE:KGC) down 50%. The bloodbath in the gold market is disastrous for miners already dealing with cost overruns and project cancellations. Since production costs are rising faster than the price of gold, miners are going to see profits for the Q1 and Q2 of this year evaporate like water on hot tar.
At number two is Stillwater Mining Company (NYSE:SWC), which develops, extracts, processes, refines and markets palladium and platinum from a mine in central Montana as well as recycled catalytic converters. Like Kinross Gold Corporation (USA) (NYSE:KGC), Stillwater Mining Company (NYSE:SWC) is also facing challenges due to the fall in both palladium and platinum, which are down 18% and 21%, respectively from their 2013 highs. Stillwater Mining Company (NYSE:SWC) has lost 32% in its stock price during the same time period. Stillwater’s Q1 production report stated that cash cost per mined ounce rose to $523 from $514 for the same period last year. But as a buffer to the rising cost of mining relative to price of the metal, Stillwater Mining produced 154,200 ounces of recycled palladium, platinum and rhodium compared to 127,000 ounces of mined palladium and platinum.
The big kahuna
Third is Barrick Gold Corporation (USA) (NYSE:ABX), and if there was a ground-zero for the free-fall in the gold market, Barrick Gold Corporation (USA) (NYSE:ABX) would be sitting in the middle of it with a bulls-eye.