{"id":65752,"date":"2023-09-26T17:38:55","date_gmt":"2023-09-26T21:38:55","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/kinross-gold-a-good-miner-with-quality-assets-at-excellent-price-nysekgc\/"},"modified":"2023-09-26T17:39:02","modified_gmt":"2023-09-26T21:39:02","slug":"kinross-gold-a-good-miner-with-quality-assets-at-excellent-price-nysekgc","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=65752","title":{"rendered":"Kinross Gold: A Good Miner With Quality Assets At Excellent Price (NYSE:KGC)"},"content":{"rendered":"
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Thesis<\/strong><\/h2>\n

Kinross Gold Corporation (NYSE:KGC<\/span>) is a major gold miner with assets in the United States, Canada, Brazil, Chile, and Mauritania. KGC produces 2 million oz of gold annually from its flagship mines, Tasiast, Paracatu, and La Coipa. Kinross’s project pipeline has a Manh Choh project expected to come into production in 1H24 and Great Bear, which is at the PFS stage.<\/span><\/p>\n

The company has a robust balance sheet with sufficient liquidity to cover its debt obligations. In 2025, a large portion of its debt is due, and I do not expect any issues given KGC’s improved profitability and adequate liquidity. I believe Mr. Market misprices KGS, thus providing a margin of safety of 17% even in a conservative scenario with the gold spot price at $1500\/oz. One red flag is the high acquisition price of the Great Bear project<\/span>. Kinross paid $360\/oz for reserves. I hope the Pre-Feasibility Study will validate the project’s potential, thus justifying the high price. Given all the facts, I give Kinross a buy rating.<\/span><\/p>\n

Company Overview<\/strong><\/h2>\n

Kinross owns a portfolio of quality assets in Brazil, Mauritania, Chile, USA, and Canada. The map below from the last company presentation shows the KGS mine locations.<\/p>\n

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\"Assets<\/span>
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Kinross presentation <\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

The Great Bear project in Great Lake, Canada, is anticipated to go into production in 2029. I hope the Great Bear project will justify its high price. The project has an initial indicated resource of 2.7 million ounces and an inferred resource of 2.3 million ounces. Kinross paid an early-stage project price of $1.8 billion or $360\/oz. The plans are to reach an annual production of 5 million ounces and expand its resource base to 10 million ounces. Additionally, it is still being determined how much it will cost to put Great Bear into production. For a mine of this scale, costs might probably reach the $2\u20133 billion level (perhaps higher if inflation remains high).<\/p>\n

The Manh Choh Project in Alaska is 70% owned. Throughout its approximately 5-year mine life, the mine is expected to produce 640,000 attributable gold equivalent ounces. The Fort Knox mill, upgraded to handle the new ore, will process the Manh Choh ore. Kinross is still on target to begin production in the second half of 2024 after obtaining crucial operational licenses in May.<\/p>\n

Kinross’s flagship producing mines are La Coipa in Chile, Tasiast in Mauretania, and Paracatu in Brazil. The company owns three producing mines in the US. Their total output is 15% of KGC’s annual production. Tasiast mine is the leading asset, with an output of 610 thousand ounces annually. Respectively, La Coipa brings 240k ounces, and Paracatu 580k ounces.<\/p>\n

Q2 Review<\/strong><\/h2>\n

Revenues came to $1,092.3 million for the second quarter of 2023, and net income came to $151.0 million. The table below from the 2Q23 financial report shows financial and operational highlights.<\/p>\n

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\"financial<\/span>
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Kinross 2Q23 report<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

Kinross exceeded expectations, helped by a $100 increase in average realized gold prices compared to the previous year. Besides that, a 22% increase in production from the prior year and All-in-sustaining costs of $1,296 per ounce contributed to that result.<\/p>\n

Looking at the results by mine, Tasiast realized sizable growth of operational earnings. The table below shows operating earnings by mining assets.<\/p>\n

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\"ops<\/span>
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Kinross 2Q23 report<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

US mines Bald Mountain and Round Mountain have been a drag, with declining earnings at 63% and realized losses, respectively.<\/p>\n

Company Financials<\/strong><\/h2>\n

KGC has a neat and clean balance sheet. Its growing production figures and higher gold prices notably improved the company’s liquidity and solvency. The table below shows the Kinross balance sheet metrics I use to evaluate its quality. The data is taken from the last financial report.<\/p>\n

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EBITDA\/Interest expenses<\/p>\n<\/td>\n

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22<\/p>\n<\/td>\n<\/tr>\n

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EBITDA – CPX\/Interest expenses<\/p>\n<\/td>\n

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5.4<\/p>\n<\/td>\n<\/tr>\n

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Quick ratio<\/p>\n<\/td>\n

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0.51<\/p>\n<\/td>\n<\/tr>\n

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Current ratio<\/p>\n<\/td>\n

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1.57<\/p>\n<\/td>\n<\/tr>\n

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Net debt\/EBITDA<\/p>\n<\/td>\n

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1.38<\/p>\n<\/td>\n<\/tr>\n

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Net debt\/EBITDA \u2013 CPX<\/p>\n<\/td>\n

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4.65<\/p>\n<\/td>\n<\/tr>\n

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Long-term debt\/Equity<\/p>\n<\/td>\n

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31.0%<\/p>\n<\/td>\n<\/tr>\n

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Total debt\/Equity<\/p>\n<\/td>\n

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41%<\/p>\n<\/td>\n<\/tr>\n

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Total liabilities\/Total assets<\/p>\n<\/td>\n

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73.1%<\/p>\n<\/td>\n<\/tr>\n<\/table>\n

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