Kinross Gold Corporation

KGC Details

Kinross Gold Corporation (NYSE: KGC) is a gold mining company based in Canada that specializes in gold mining and related activities such as exploration and acquisition of gold-bearing properties, extraction and processing of gold-bearing ore, and reclamation of gold mining properties. It has mining operations in Canada, the United States, the Russian Federation, Brazil, Chile, Ghana, and Mauritania.

Latest News:

• Strategic Acquisition: On February 24, 2022, KGC completed the acquisition of Great Bear Resources Ltd. Great Bear shareholders were given the option of receiving CAD 29.00 in cash or 3.8564 KGC common shares per Great Bear Share under the terms of the Arrangement, both subject to pro-ration to a maximum cash consideration of approximately USD1.1 billion (CAD1.4 billion) and a maximum of 80,773,353 Kinross Shares. Great Bear shareholders who elected (or were presumed to elect) to receive cash will receive about CAD 25.80 in cash and approximately 0.4257 Kinross Shares per Great Bear Share, based on valid elections received by the election date. Pro-rationing did not apply to Great Bear shareholders who accept the shares.
• Quarterly Dividend: On February 16, 2022, the company declared a quarterly dividend of USD 0.03 per common share for Q4FY21, payable on March 24, 2022, to shareholders of record on March 09, 2022.

FY21 Results:

• Decline in Topline: The company reported a YoY decline of 11.49% increase in total revenue to USD 3.73 billion during FY21 (ended December 31, 2021) from USD 4.21 billion during FY20, owing to a decrease in sales volume and average realized gold price.
• Reduction in Net Income: Net income for FY21 decreased 83.52% YoY and stood at USD 221.2 million compared to USD 1.34 billion in FY20.
• Cash and Debt Position: As of December 31, 2021, the company had cash & cash equivalents (including short-term investments) of USD 531.50 million and total debt of USD 1.68 billion.

Key Risks:

• Metal Price Risk: Prices of gold and copper on the global market, which are highly volatile and uncontrollable, significantly impact KGC's business. Hence, any unfavorable movement in their prices could negatively impact its financials.
• Regulatory Risk: KGC operates as a gold mining company, which is subject to several federal and state regulations. Therefore, the issuance of stricter regulations or non-compliance with required laws could adversely affect the company's profitability.

 Outlook:

FY 2022 Guidance (Source : Q4FY21, Earnings Release, February 16, 2022)

 Valuation Methodology: Price/Cash Flow-Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 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 8.90% in the past six months and is currently leaning towards the lower end of its 52-week range of USD 4.90 to USD 8.34. We have valued the stock using the Price/Cash Flow-based relative valuation methodology and arrived at a target price of USD 5.82.

Considering the slight movement in the stock price in the past six months, decent balance sheet, solid margins, inorganic growth initiatives, current valuation, and associated risks, we recommend a "Hold" rating on the stock at the closing price of USD 5.32, down 3.27%, as of February 24, 2022.

Three-Year Technical Price Chart (as on February 24, 2022). Source: REFINITIV, Analysis by Kalkine Group

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.