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Kinross to Boost Production in 3 Years, Restores '20 Guidance

Zacks Equity Research
·3 min read

Kinross Gold Corporation KGC recently provided an upbeat production guidance for a three-year period. The company expects to increase production by 20% to 2.9 million gold equivalent ounces (GEOs) over the next three years. Meanwhile, the company’s planned lower cost projects will lower the production cost of sales and capital expenditures thereby, boosting its free cash flow over the period.

Kinross’ robust production estimate suggests its ability to generate additional ounces from planned life of mines extensions and project execution resulting from the company’s prior three-year major capital reinvestment phase. Apart from this, the company’s strong productivity and operational efficiencies, aided by its focus on comprehensive improvement programs, as well as exploration strategy, contributed to the encouraging production view.
 
Kinross’ cost of sales per ounce sold will likelybe slightly higher in 2021 compared with the current-year guidance, primarily due to unfavorable impact of the pandemic. However, the company stated it will gradually decrease in 2022 and 2023.

Kinross’ annual capital spending is estimated to decline based on its current production guidance. It projects capital expenditure of $900 million in 2021, declining by $100 million each year until 2023.

Meanwhile, the company has restored the 2020 guidance, which was issued on Feb 12, 2020. In April, Kinross revoked its full-year guidance on account of the global uncertainties created by the coronavirus pandemic.

Kinross continues to expect production of 2.4 million (+/-5%) GEOs for the current year. All-in sustaining costs are forecast to be $970 (+/-5%) per GEOs for 2020. The company also expects current-year production cost of sales of $720 (+/-5%) per GEOs.Capital expenditure for the ongoing year is projected to be roughly $900 million (+/-5%). The company is on track to meet its production, cost of sales per ounce, all-in sustaining cost per ounce and capital expenditure guidance for this year.

On Sep 15, the company stated that it intends to repay remaining $500-million credit facility out of the $750 million previously drawn under its revolving credit facility of $1.5 billion. On Jul 24, the company repaid $250 million of the credit facility and the remaining repayment is scheduled for Sep18. Kinross will continue to strengthen its investment-grade balance sheet and focus on capital-allocation priorities to generate strong free cash flow and shareholder value.

Price Performance

The company’s shares have gained 69.6% over the past year, outperforming the industry’s growth of 39.1%.

 

Zacks Rank & Key Picks

Kinross currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space include Barrick Gold Corporation GOLD, Pretium Resources, Inc. PVG and Maverix Metals Inc. MMX, each carrying a Zacks Rank #2 (Buy) currently. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Barrick has an expected earnings growth rate of 80.4% for the current year. The company’s shares have surged 51.2% over the past year.

Pretium Resources has an anticipated earnings growth rate of 20% for the ongoing year. Its shares have rallied 6.7% in the past year.

Maverix has an estimated earnings growth rate of 33.3% for 2020. The stock has gained 18.7% in the past year.

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Pretium Resources, Inc. (PVG) : Free Stock Analysis Report
 
Kinross Gold Corporation (KGC) : Free Stock Analysis Report
 
Barrick Gold Corporation (GOLD) : Free Stock Analysis Report
 
Maverix Metals Inc. (MMX) : Free Stock Analysis Report
 
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Zacks Investment Research