Kinross Gold Corporation (NYSE: KGC) is a Canadian-based senior gold mining company with mines and projects in the United States, Brazil, Russia, Mauritania, Chile, and Ghana. Kinross maintains listings on the Toronto Stock Exchange (symbol: K) and the New York Stock Exchange (symbol: KGC).
Kinross’ development strategy is focused on high-quality projects in its three operating regions, offering the key benefits of low execution risk, established infrastructure, and familiar permitting and operating jurisdictions and its strong operating results are driven by solid and consistent performance from a diverse portfolio of mines located in three core regions: the Americas, West Africa and Russia.
During the first nine months of 2018, the company’ global portfolio of mines achieved solid production and generated robust cash flow. Kinross’ Nevada, Brazil, Ghana, and Russia operations performed well during the quarter, and the company remains on track to meet its company-wide production and cost guidance for the year.
Commissioning of the new SAG mill for the Tasiast Phase One expansion has been completed. Performance at Tasiast is expected to further improve in the fourth quarter, as the mine delivered record monthly production in October and began mining higher grade ore. The company also continue to advance discussions with the Government of Mauritania regarding the operations in the country and have now signed mandate letters with Export Development Canada (EDC) and the International Finance Corporation (IFC), a division of the World Bank, regarding project financing.
Furthermore, the Construction at its U.S. projects – Round Mountain Phase W and Bald Mountain Vantage Complex in Nevada and Fort Knox Gilmore in Alaska – remain on schedule and on the budget as it continues to solidify its production footprint in the country. In Russia, the Moroskha project was completed, and production commenced at the high-grade satellite deposit near Kupol, while the company’s studies assessing a return to long-term production in Chile are proceeding well.
In terms of liquidity and financial flexibility, the cash position at the end of the quarter reflects the strategic investments Kinross have been making. This has included $495 million of investments in its development projects year-to-date as well as other transactions to add value to the portfolio such as a $254 million power plant acquisition in Brazil.
The company funded this deal with cash and continue to consider debt financing. This year KGC has also bought out JV partners at 2 of its properties consolidating its ownership of projects or land packages where it sees significant potential. This includes the Phase 7 deposit at La Coipa, which it now owns 100% of and which has advanced to a feasibility study and the Bald Mountain JV zone, which was previously a 50-50 joint venture with Baird which was completed in October. With $2 billion of liquidity and no debt maturities until 2021, Kinross continues to be in a strong financial position, and financial strength and discipline continue to be core principles.
Key Operational highlights:
Kinross Value Proposition:
Analysts Review and Target Price
Analyst tracking the stock are bullish about the company, as KGC’ overall portfolio of mines generated solid results in the first nine months of the year despite some operational headwinds in the quarter at 2 of its sites. Moreover, the company is on track to meet its 2018 guidance. Furthermore, KGC is making good progress in advancing its development pipeline, and the balance sheet and liquidity remain very strong.
Thus, value investors should consider exposure in this sector as the backdrop remains favorable. Per www.marketbeat.com, Their average twelve-month price target is $4.25, suggesting that the stock has a possible upside of 55.68%. The high price target for KGC is $5.00, and the low-price target for KGC is $3.25. There is currently one sell rating, seven hold ratings and 4 buy ratings for the stock, resulting in a consensus rating of Hold.
Below are the excerpts of recent ratings by brokerage house:
Industry outlook (Source: GFMS Gold Survey 2018): With early signs of professional interest in the market plus improvement in grassroots retail activity we believe that there is scope for further price appreciation, but it does look as if this will be something of a long haul. The long-drawn-out concerns over trade tensions and the continued bartering in the EU have been supportive, but neither of these has either intensified by much or indeed dissipated, and this steady background rumbling, aided by associated central bank activity has given gold some support above $1,180, and this is leading short-side traders to lock in profits. There is little appetite as yet for fresh longs, however. We are looking for a fourth-quarter average of $1,224, leading to an annual average for next year of $1,285.
Source: GFMS Gold Survey 2018
2018 third-quarter highlights:
- Production: 586,260 gold equivalent ounces (Au eq. oz.), compared with 653,993 Au eq. Oz. in Q3 2017.
- Gold equivalent ounces sold: 618,463 Au eq. Oz. Compared with 638,659 Au eq. Oz. Sold in Q3 2017.
- Revenue: $753.9 million, compared with $828.0 million in Q3 2017.
- The production cost of sales: $777 per Au eq. oz., compared with $662 in Q3 2017.
- All-in sustaining cost: $1,049 per Au eq. Oz. Sold, compared with $937 in Q3 2017. All-in sustaining cost per gold ounce (Au oz.) sold on a by-product basis was $1,046 in Q3 2018, compared with $927 in Q3 2017.
- Operating cash flow: $127.2 million, compared with $197.7 million in Q3 2017.
- Adjusted operating cash flow: $143.2 million, compared with $320.8 million in Q3 2017.
- Reported net earnings/loss: loss of 104.4 million, or $0.08 per share, compared with net earnings of $60.1 million, or $0.05 per share, in Q3 2017.
- Adjusted net earnings/loss: loss of $48.4 million, or $0.04 per share, compared with adjusted net earnings of $84.1 million, or $0.07 per share, in Q3 2017.
Organic projects and development opportunities:
- Tasiast expansion: Phase One SAG mill commissioning has been completed. The Company continues to assess alternative throughput approaches to expand Tasiast and advanced discussions with the Government of Mauritania. Kinross also advanced project financing activities during the quarter.
- Round Mountain Phase project: On schedule and on budget, with initial ore expected in mid-2019.
- Fort Knox Gilmore project: On schedule and on the budget, with initial production expected in early 2020.
- Bald Mountain Vantage Complex project: On schedule and on the budget, as stripping and stacking on the new heap leach pad have now commenced. On October 2, 2018, the Company acquired the remaining 50% interest in the Bald Mountain Exploration Joint Venture that it did not already own from Barrick Gold for consideration including $15.5 million in cash and a 1.25% net smelter royalty, giving Kinross 100% ownership of the entire Bald Mountain land package.
- Russia satellite projects: The Moroshka project was completed as production commenced at the high-grade deposit located near Kupol. Development at Dvoinoye Zone 1 is proceeding as planned.
- Chile projects: The La Coipa Restart project feasibility study remains on schedule to be completed in the second half of 2019, with permitting now complete for the project. The Lobo Marte scoping study also remains on schedule and is expected to be completed in the first half of 2019.
Outlook: Kinross expects to produce 2.5 million Au Eq. Oz. (+/- 5%) At a production cost of sales per Au eq. Oz. of $730 (+/- 5%) and all-in sustaining cost of $975 (+/- 5%) per ounce sold on both a gold equivalent and by-product basis for 2018. Total capital expenditures are forecast to be approximately $1,075 million (+/- 5%).
Revenue: Revenue from metal sales was $753.9 million in the third quarter of 2018, compared with $828.0 million during the same period in 2017, due to a decrease in gold equivalent ounces sold and the average realized gold price.
Earnings/loss: Reported net loss was $104.4 million, or $0.08 per share, for Q3 2018, compared with earnings of $60.1 million, or $0.05 per share, in Q3 2017. The decrease was mainly a result of lower margins and an increase in income tax expense.
Capital expenditures: Capital expenditures increased to $276.4 million for Q3 2018, compared with $204.7 million for the same period last year, mainly due to increased spending at Round Mountain and Bald Mountain.
Key Stock Influences: Some key influences that might govern future stock price performance over the near to medium include:
- The company’s operations are subject to extreme weather events. In fact, KGC had a very wet Q3. The company got like 13 inches of rain, which is half of the annual average in a very short period of time and that complicates things from a geotechnical perspective. It takes time to draw water out of the structures.
- The near-term performance of the company is significantly dependent on the upcoming developments, Sentiment in the investment sector, global Jewellery demand and Fundamental retail investment (coin and bar demand)
- On Friday, November 30th, 2018, Kinross closed at $2.71, on an average volume of 14.2 million shares exchanging hands. Market capitalization is $3.381 billion. Current RSI is 53.02
- In the past 52 weeks, shares of Kinross have traded as low as $2.38 and as high as $4.78
- At $2.71, shares of Kinross are trading near its 50-day moving average (MA) at $2.73 and below its 200 days moving average at $3.35
- The present support and resistance levels for the stock are at $2.59 & $2.85 respectively.