All that glitters has not been gold lately for Pioneer Group Inc.

Due to problems at its gold mining operations in Ghana, the Boston investment adviser in mid-August earned the dubious distinction of the "least-favored stock" among the financial services firms tracked in Market Monitor by First Call Corp.

"The first-half result was dreadful, particularly with regard to operation of the gold mine," said Lawrence Glaser, an analyst at Muzinich & Co., New York. "Costs escalated significantly, and revenue and earnings decreased. I attribute it to poor mine-site management and poor systems planning."

Mr. Glaser, a gold mining specialist who picked up coverage of Pioneer after it acquired Teberebie gold mine through a joint venture several years ago, downgraded the firm's stock to "hold" from "buy" last month.

He noted that first-half earnings of 34 cents a share represented a sharp decline from the same period in 1995, when the company earned 52 cents a share. He reduced his 1996 estimate to 80 cents, from $1.25.

According to First Call, the mean rating on Pioneer stock moved from 3 to 3.7 in the four weeks ending Aug. 23. A score of "1" in First Call's system reflects a strong "buy" rating, while a "5" score means analysts are unanimously urging clients to sell a stock.

Analyst Michael S. Beal of Davenport & Co., Richmond, Va., who does not publish his ratings, also expressed concern about the recent performance of the gold mine and Pioneer stock. "At the moment, our enthusiasm is less than it has been," he said. "We would like to see operational improvements at the mine."

Although it has run into trouble lately, the mining operation has been a boon to Pioneer. Mr. Beal was quick to say that there is nothing intrinsically wrong with a financial services firm running a far different type of enterprise.

"It's just in this past year that they had a tough go of it. It's been a series of bad decisions and poor luck in terms of weather and difficulty getting equipment in."

Because it owns the mine, Pioneer's price to earnings multiple of 39.7 is nearly twice that of its nearest competitor in the investment advisory business.

Mr. Glaser said last year that the mine "has been a tremendous success for Pioneer." Although the ore is of a lower grade than some other mines', it is mined relatively cheaply.

But recently, the firm failed in an attempt to partially spin off the mine. Pioneer blamed the failure of the initial public offering on a decline in the price of gold. But Mr. Beal said the deal was poorly structured.

He said Pioneer's core investment advisory business appears to be thriving. "Something would be terribly wrong if it was not doing well," Mr. Beal said. Pioneer has "spent a lot of money on systems and marketing, and it's beginning to pay off."

The company earned a profit of 14 cents per share for the second quarter, despite losing 3 cents a share on mining.

He also said the problems in the mine are likely reversible.

"Part of the operating problem stems from pilot error, and part stems from unfortunate weather," Mr. Beal said. "There's no evidence that there are significant geologic problems."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.