Kinross Gold Corporation: Time For A Come Back (NYSE:KGC)

Introduction

Our association with Kinross Gold Corporation (KGC) goes back many years to when we were investors in this company and the following brief notes cover how we went for being stockholders to bystanders and where we go from here.

Many moons ago we were big fans of Kinross Gold Corporation (NYSE: KGC) and it formed one of the largest elements of our portfolio of gold producing stocks. However, on January 31, 2008, we reduced our exposure to this stock when we sold about 50% of our holding for an average price of $21.96 locking in a profit of about 93.60%. In our view the profit was worth taking and we were left with a stake in Kinross Gold, which cost us virtually nothing.

The stock price of Kinross failed to improve and on Thursday, November 11, 2010, we sold our remaining stake in Kinross Gold for $18.69, stating that:

“Our patience has come to an end so we must bid farewell to the Kinross Gold Corporation, today we sold all of our shares taking the cash back to the side lines where we hope to deploy it in such a manner as to enjoy a good return on it.”

Since then Kinross Gold Corporation has remained on our Watch List so today we will take a quick look at it in order to ascertain if it is a Buy, a Sell or Hold.

We will start today with a quick look at the chart of the underlying commodity: gold which traded at $1625/Oz in November 2022 before rallying to $2000/Oz plus and then taking a breather to trade around $1977/Oz recently. Gold is holding up pretty well and the technical indicators suggest that it is not as overbought as it was recently.

Also note that the 50dma and the 200dma are heading north in parallel which is a good sign. Gold looks to be forming a base just above the Double Top which it needs to do before resuming its trek north.

Kinross Gold Corporation: Brief Description

Kinross Gold Corp was formed in 1993 and has grown to become one of the major players in the gold mining sector of the market. Kinross is currently actively mining in the United States, Canada, Brazil, Chile, and Mauritania which gives it a certain amount of geographical spread.

Kinross’s guidance for production shows 2.1 Million Oz’s for 2023 and 2024, however it should be noted that production drops to 2.0 million Oz’s in 2025 as their graphic depicts, which is a tad disappointing.

Operations

The Twenty-Year Chart

In 2008, KGC stock traded at $24.00 and is now trading at around $5.00 as depicted on the chart below which is not a pretty picture.

It could be argued that this stock is now cheap and should be bought, but one must remember that cost does not equal value regardless of how cheap it looks.

The One Year Comparison Chart

On a more positive note if we look at the progress made by Kinross over the last 12 months and compare it to a selection of similar mining companies then it has done very well indeed. The stock price is up 13.53% and the Gold Bugs Index (HUI) is down 2.15% so it has performed better than most in this index.

I didn’t include any of the Royalty companies in this comparison as they operate a very different business model to a mining company, but that is an article for another day.

Financials

Q1 2023 highlights from continuing operations:

• The Company is on track to meet its 2023 annual guidance.
• Production of 466,022 gold equivalent ounces (Au eq. oz.), a 23% year-over-year increase, and sales of 490,330 Au eq. oz.
• Production cost of sales ¹ of $987 per Au eq. oz. sold and all-in sustaining cost² of $1,321 per Au eq. oz. sold.
• Margins ³ of $907 per Au eq. oz. sold.
• Operating cash flow ⁴ of $259.0 million and adjusted operating cash flow² of $358.2 million.
• Reported net earnings ⁵ of $90.2 million, or $0.07 per share, with adjusted net earnings^{2, 6} of $87.6 million, or $0.07 per share².
• Cash and cash equivalents of $471.0 million, and totalliquidity⁷ of approximately $1.7 billion at March 31, 2023.
• Kinross’ Board of Directors declared a quarterly dividend of $0.03 per common share payable on June 15, 2023 to shareholders of record at the close of business on June 1, 2023.

It is good to see that the companies involved in the precious metals mining sector are paying a dividend to their investors but a dividend of $0.03 per common share isn’t earth shattering and has little influence on my decision-making process.

Kinross Gold Corporation has a market capitalization of $6.339B, a 52-week trading range of $3.00-$5.57, a P/E Ratio (TTM) of 171 and an EPS (TTM) of 0.03. The liquidity is good with an average Volume 14,867,331shares traded per day enabling speculators to enter and exit this stock with ease.

This company is quoted on both the NYSE under the ticker symbol of KGC and on the Toronto Stock Exchange under the symbol of K.

There is no doubt that Kinross is a heavy weight in this sector and that the results read well, however I am not convinced that it is the best place for my hard-earned cash. So I took a quick look at Seeking Alphas Quant Rating where it is Ranked in Sector 58 out of 277 and is presently ranked as a Hold which really doesn’t inspire me to splash the cash on this one.

Conclusion

Decisions to make a trade are the result of Fundamental, Technical and Comparative analysis and in my case a little thing called Gut Feel.

Kinross was one of my biggest holdings once upon a time but today I just can’t get excited enough about it to make an acquisition, so I’ll have to pass on this occasion.

By comparison Agnico Eagle Mines (AEM) has a PE ratio of 10.54 and an EPS of $5.07. Over the past 20 years Agnico’s stock price has risen from around $10.00 to $53.42, whereas Kinross was trading at $6.00 20 years ago and today it is trading for $5.05. Performance is about comparison and for my peace of mind Kinross doesn’t have the “form” to entice me to invest.

The Q1 report reads well enough, however, it is just one date point and as they say ‘One swallow does not make a summer’ I would like to see their current performance improve over Q2 2023 and Q3 2023 before taking the plunge on Kinross Gold Corp.

For the record, I have been long physical gold and silver for a number of years and also own a portfolio of stocks in the precious metals sector including Sandstorm Gold Ltd (SAND), Wheaton Precious Metals Corp (WPM), Agnico Eagle Mines Limited (AEM) and SSR Mining Inc (SSRM).

Your comments are very much appreciated whether you agree with us or not, so please fire them in, and I will do my best to address each and every one of them.

Go gently.