Kinross Gold Corporation (USA)(NYSE:KGC) posted robust 3Q2016 financial report as production surpassed market projections, irrespective of the pre-reported operational concerns at Maricunga and Tasiast. The firm closed the quarter with $756 mm in cash balance compared to $968 mm at the close of 2Q2016. Analysts have upgraded the stock to ‘Buy’ on the projected return of over 40%.
The highlights
Kinross Gold is among the leading North American gold producers with an extensive portfolio of 8 operating mines. In addition, the company has three mines in development. The company is mainly focused on assets in the U.S., Brazil, Chile, Russia and West Africa. It has advanced its new corporate plan to fit within its projected cash flows. The firm decided not to move with the initial $1.5 billion Tasiast expansion program.
It will progress with Tasiast expansion plan in two phases and recently confirmed to advance with the Phase I expansion. It bought Nevada properties from Barrickheld resource potential, and even started with exploration work on the asset.
Kinross provides consistent near-term production, a comparatively safe liquidity status, above-average gold price influence and a geopolitical risk summary that offsets Mauritania and Russia with notable output in the U.S.
It is guiding to close off FY2016 with the production of 2.7-2.9 MMoz that is the lower end of range. The cash costs are projected at $675-735/oz, which remains the higher end of given projection, while AISC is expected to come around $890- 990/oz. The company posted strong free cash flow in 3Q2016, further supporting the firm’s balance sheet to convert the Tasiast expansion and cash on other external opportunities.
The reduced cash balance in 3Q2016 can be attributed to the debt repayment of $250 MM partially counterbalance by positive FCF of $112 MM. Accessible credit is presently $1.43 BB for liquidity of almost $2.2 BB. Kinross Gold is followed by financial experts, as over the last quarter an average of 15 market analysts released earnings projections up until the fiscal year 2018.
