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Why have these 3 gold stocks stopped shining?

With the news that Australia’s gold miners increased total gold production by 7% in 2013 compared to 2012, investors could be forgiven for thinking the industry is on track for a healthy recovery with the higher gold prices seen so far in 2014.

However not all gold miners are shining bright and some are outright struggling.

Regis Resources Limited (ASX: RRL) shares for example have lost 24% so far in 2014. On top of the tougher operating conditions Regis suffered major flooding at its Garden Well and Rosemont open pit mines which have suspended mining and forced the company to process ore stockpiles.

Estimates are that it could take up to three months to pump the water out of Garden Well and the company has extended its corporate loan facility from $20 million to $70 million to facilitate working capital.

Shares in West African focused Perseus Mining Limited (ASX: PRU) have fallen back from $0.50 per share to $0.46 since announcing a big net loss for the half year to 31 December 2013. Targeting lower grade gold in ore from existing stockpiles, rather than higher grade ore which would require significant investment to access, has contributed to a loss of $4.02 million for a half also impacted by lower gold prices.

Subsequently, Perseus announced a capital rising of $30 million which will be used to fund capital expenditure at the company’s Ghana gold mine as well as for working capital, and to support the company’s balance sheet, despite not holding any debt.

Meanwhile, Silver Lake Resources Limited (ASX: SLR) has announced that a review of the company’s underground Murchison Gold Operations has resulted in the decision to place the mine on ‘care and maintenance’ which means mining will be suspended and the mine preserved until it becomes more economical to mine.

This will result in lower overall production, but it also required the company to raise $39 million through an institutional placement to cover redundancy payments and increase production at the company’s other Mount Monger mine.

Foolish takeaway

Although the share prices of some companies have started to shine again in 2014, others will continue to battle both costs and the elements.

To ensure you don’t get stuck with a dull performer, be sure to invest the time into understanding the operating positions and balance sheets of any enticing company to identify any risks before parting with your money.

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Motley Fool contributor Regan Pearson does not own shares in any of the companies mentioned in this article.

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