Kinross Gold Corp. (KGC, Financial) will release its third quarter results today, Nov. 2, after market close.
For the third quarter, analysts estimate average earnings per share of 5 cents, up 350% from the same quarter a year ago. The highest EPS estimated by analysts is 10 cents.
Source: Yahoo Finance
Concerning revenue, for the third quarter, analysts estimate a 13.10% increase on a year-over-year basis. The average estimate is $915.18 million and ranges between a high of $954.88 million and a low of $868 million.
Source: Yahoo Finance
Kinross is one of the gold mining stocks that benefited the most from rising gold prices that characterized the first part of the year, pushed by the decision of the Federal Reserve Board to keep interest rates low. As a matter of fact Kinross closed the previous quarter showing a substantial improvement of the bottom line and cash flow from operating activities while the price of the precious metal increased 5.6%, from $1,192.303 per troy ounce in second-quarter 2015 to $1,258.482 per troy ounce in second-quarter 2016, on the London bullion market, AM.
In the second quarter, adjusted operating cash flow increased 7.1% on a year-over-year basis, from $161.4 million, or 14 cents per share, in second-quarter 2015 to $187.2 million, or 15 cents per share, in second-quarter 2016.
The increase in the average realized gold price, 6% on a year-over-year basis, and enhanced efficiency at operations, clearly shown by cost reduction, helped the gold producer improve the bottom line as well. The miner reported net loss of $25.0 million, or 2 cents per share, compared to a loss of $83.2 million, or 7 cents per share, in the second quarter of 2015. In the second quarter, adjusted net loss was $9.8 million, or 1 cent per share, compared with adjusted net loss of $13.6 million, or 1 cent per share, in the second quarter of 2015.
During the second quarter, Kinross produced more gold at a lower cost per ounce: the miner produced 671,267 gold equivalent ounces, compared to 660,898 gold equivalent ounces in the second quarter of 2015, at all-in sustaining cost per gold equivalent ounce sold of $988 compared to $1,011 in the second quarter of 2015, and at all-in sustaining cost per gold ounce sold on a byproduct basis of $976, compared to $1,006 in the second quarter of 2015.
The average realized gold price in the second quarter increased to $1,266 per ounce, compared to $1,194 per ounce in the second quarter of 2015.
According to the latest global 2016E guidance Kinross expects to sustain the same level of costs for the rest of the year; thus further improvement in the bottom line and cash flows can be reasonably expected from the third quarter, given the fact that the average quarterly gold price increased nearly 19% on the London bullion market, from $1,124.996 per troy ounce in third-quarter 2015 to $1,334.932 per troy ounce in third-quarter 2016.
Kinross is undertaking several exploration activities and is developing projects to enhance the quality of its assets base through the discovery of more prolific mineralized resources at mines in the U.S., Ghana, Chile and Russia.
In Ghana, at Tasiast mine, Kinross is advancing the Phase One expansion project that is expected to increase mill throughput capacity and gold production to approximately 409,000 ounces at AISC of $760 per ounce by the end of first-quarter 2018.
Significant flexibility for future growth will be provided by Bald Mountain, acquired by Kinross on Jan. 11 through the expansion of existing mine facilities that may potentially increase the current 1.1 million ounces of gold mineral reserve estimate and extend the life of Bald Mountain’s mine.
Maricunga (Chile) will also provide a significant contribution to the growth, but for the time being operations are suspended due to disagreement between Kinross and the country's environmental regulatory authority (SMA) concerning the causes of the drop in groundwater levels across the Atacama region where the mine is located. Kinross said that the earlier originally planned suspension of the mining activities that forced the company to lay off 300 employees is not expected to affect the company's 2016 guidance on production and cost.
The stock closed at $3.96 per share Tuesday, up 0.10 or 2.59% from the previous trading day, with a volume of 12,242,998 shares traded on the New York Stock Exchange. The share price is up 110% year to date:
The majority of the analysts recommend holding Kinross.
Source: Yahoo Finance
The recommendation rating is 2.7, and it ranges between 1.0 (strong buy) and 5.0 (sell).
The average price target estimated by analysts is $5.78 versus a current share price of $3.96. The analysts’ price target ranges between a high target price of $8.00 per share and a low target price of $3.92 per share.
Source: Yahoo Finance
Besides the potential of adding more than 400,000 ounces of gold over the first three years and generating free cash flow to fund expansions from the acquisition of Bald Mountain and 50% of Round Mountain, analysts see in Kinross Gold’s solid financial position another strength. After the repayment of $250 million in senior notes that were due Sept. 1, the miner has no long-term debt to pay until 2020. The company has extended the maturity dates of its $500 million term loan and $1.500 billion revolving credit facility by one year until Aug. 10, 2020 and Aug. 10, 2021.
As of the second quarter, Kinross has a total liquidity of approximately $2.25 billion, which is considered to be sufficient to proceed with the Tasiast Phase One expansion and fund the exploration activities. As mentioned before, the expansion is focused on high-quality brownfield projects and the discovery of new resources within Kinross’ mines.
With the third-quarter report Kinross will also provide an update of the funds that will be spent on explorations and expanding projects. At Tasiast, the miner already expected to spend an additional $160 million, which increased the 2016 capex guidance to $755 million.
Kinross’ price-book (P/B) (mrq) is 1.15 and EV/EBITDA is 7.69. With an average target price of $5.78, analysts forecast a 46% upside in the share price at current levels.
Disclosure: I have no positions in Kinross Gold Corporation.
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