Kinross Gold Corporation

KGC Details

Kinross Gold Corporation (NYSE: KGC) is a Canadian gold mining firm company that specializes in gold exploration and acquisition, gold extraction and processing, and gold mining property reclamation. Among the nations with mines are Canada, the United States, Russia, Brazil, Chile, Ghana, and Mauritania.

Latest News:

• Sustainability Report: KGC announced the release of its 2021 Sustainability Report on May 10, 2022. Since launching an updated supply chain due diligence process, Kinross has assessed approximately 98% of Tier 1 suppliers at operating sites, generating USD 3.5 billion in economic benefits to host countries through taxes, wages, procurement, and community support.
• Sale of Ghana Mine: On April 25, 2022, KGC announced that it had reached a deal with Asante Gold Corporation to sell its 90% interest in the Chirano mine in Ghana for USD 225 million in cash and shares. Chirano is owned by the Ghanaian government, which holds a 10% carried interest.
• Announcement of Dividend: KGC stated on May 10, 2022, that the Board of Directors of the company had declared a dividend of USD 0.03 per common share for Q1 FY22, payable on June 16, 2022, to shareholders of record as of June 2, 2022.

Q1 FY22 Results:

• Revenue: KGC’s revenue from ongoing operations was USD 768.0 million in Q1 FY22 broadly in line with USD 768.7 million during Q1 2021.
• Attributable Production Figures: A total of 409,857 Au eq. oz. of gold equivalent was produced. Attributable production costs of USD 1,000 per Au eq Oz sold consolidated production costs of USD 1,003 per Au eq. Oz sold, and attributable all-in sustaining costs of USD 1,245 per Au eq. Oz sold.
• Increase in Bottom Line: In Q1 FY22, KGC reported net results from continuing operations of USD 82.3 million, or USD 0.07 per share, compared to USD 76.2 million, or USD 0.06 per share in Q1 FY21. A drop in income tax expense was primarily responsible for the rise in reported net earnings, which was somewhat offset by an increase in manufacturing cost of sales.
• Decent liquidity Position: On March 31, 2022, the company had USD 454.2 million in cash and cash equivalents and USD 1.7 billion in total liquidity.

Key Risks:

• Metal Price Risk: The volatility and unpredictability of gold and copper prices on the global market significantly impact KGC's operations. As a result, any price adjustment that isn't favourable to them might hurt their bottom line.
• Regulatory Risk: KGC is a gold mining company subject to several federal and state restrictions. As a result, tighter requirements or violations of necessary legislation may impair the company's revenue.

Outlook:

• FY22 Production: Kinross intends to produce 2.15 million Au equivalent ounces (+/- 5%) in 2022 and 2023, resulting in substantial free cash flow.
• Estimated Capex: In FY22, capital expenditures will drop to USD 850 million (+/- 5%). In 2023 and 2024, capital expenditures are estimated to be over USD 750 million per year.

Valuation Methodology: EV/Sales Multiple based Relative Valuation

(Source: Analysis by Kalkine Group)

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

KGC's stock price has fallen 29.29% in the past month and is leaning towards the lower of its 52-week range of USD 8.34 to USD 3.92. We have valued the stock using the EV/Sales multiple based relative valuation methodology and arrived at a target price of USD 5.11.

KGC is likely to do well in the next quarters due to strong underlying commodity prices. Considering the guidance for 2022, consistent revenue, adequate liquidity, risks associated, and valuation done, we recommend a "Buy" rating on the stock at the closing market price of USD 4.25, up 2.2% as of May 16, 2022, at 10:14 AM PDT.

KGC’s 1 Year Technical Price Chart (as of May 16, 2022, at 10:14 AM PDT). Source: REFINITIV, Analysis by Kalkine Group

Technical Summary Analysis

*Current market price as of May 16, 2022, at 10:14 AM PDT

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.