Kinross Gold Corporation

KGC Details

Kinross Gold Corporation (NYSE: KGC) is a Canadian gold mining corporation specializing in gold mining and related activities such as gold exploration and acquisition, extraction and processing of gold-bearing ore, and reclamation of gold mining assets. It operates mines in Canada, the United States, Russia, Brazil, Chile, Ghana, and Mauritania.

Latest News:

• Plans to Divest Russian Assets: KGC revealed on March 29, 2022, that it has been working on a transition plan to divest its Russian assets. KGC has received several unsolicited approaches for its Russian operations and is now in exclusive talks with a third-party mining company about the prospective sale of all of its holdings in the country. Any such divestiture or change in control would need to be approved by the Russian government. From an accounting standpoint, KGC aims to consider its Russian business as an asset held for sale until a change of control is accomplished. It will give changes to its guidelines as necessary.

FY21 Results:

• Fall in Topline: The company reported an 11.49% decline 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.
• Increase in CAPEX activity: The company reported an increase in capital expenditures (CAPEX) for FY21 to USD 938.6 million, staying within the company's annual forecast range, from USD 916.1 million in FY20, owing to more significant expenditures for La Coipa development activities, studies at Lobo-Marte and Udinsk, and an increase in capital stripping at Tasiast.
• 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: Gold and copper prices on the global market, which are unpredictable and uncontrollable, significantly impact KGC's business. As a result, any unfavourable shift in their prices could negatively influence their financials.
• Regulatory Risk: KGC is a gold mining company subject to several federal and state restrictions. As a result, the imposition of harsher rules or noncompliance with required legislation may harm the company's profitability.
  

Outlook: 

Future Estimates (Source: Q4FY21 Earnings Release, February 17, 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 8.07% in the past twelve months and is currently leaning towards the lower band 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 7.00.

Considering the slight movement in the stock price in the past twelve months, decent balance sheet, solid margins, underutilized CAPEX activity, current valuation, and associated risks, we recommend a "Buy" rating on the stock at the closing market price of USD 5.92, up 2.78%, as of March 30, 2022.

Three-Year Technical Price Chart (as of March 30, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

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.

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.