Kinross Gold Corp. (KGC, Financial) jumped 2% to $3.74 per share on Thursday on the heels of the release of financial results for fiscal 2018.
The early months of 2018 marked a good start. The miner placed a higher volume of gold on the market compared to a year ago. It also reported a lower all-in sustaining cost.
The company invoiced customers for $897.2 million, a 12.7% increase on a year-over-year basis and beat consensus by $64 million. A higher realized gold price per ounce together with a higher volume on the market provided a significant boost. The company sold 674,661 ounces of gold equivalent, which was up 22,145 ounces from 2017. Since costs were spread over a higher sales volume, the all-in sustaining cost at $846 per ounce was 11.2% lower than the prior-year.
With 659,955 ounces, the production of gold equivalent in the quarter declined 2.6% year- over-year. The 2.6% decline was a result of lower grade of ore processed at mines in North America, Russia and West Africa.
The miner issued an adjusted net profit of 10 cents per share or $125 million and beat consensus by 6 cents. The beat has generated a 150% positive surprise, thanks to a higher gold margin, which also led the company to post 435% growth in the bottom line compared to the prior-year quarter.
The cash inflow from first-quarter operations was also strong. That amounted to $363.7 million versus $250.9 million in the comparable of 2017.
The total liquidity of Kinross Gold stands at $2.6 billion. The amount is composed of $1 billion cash-on-hand and securities, and a $1.57 billion line of credit.
The share price is still underneath the 50-SMA line despite the jump. This means the stock is still cheap. Also, when share price is compared to the 52-week range of $3.48 to $4.91 per share, it indicates that the time to buy shares of Kinross Gold is not over.
The recommendation rating is 2.4 out of 5, which is the median value resulting from eight 'buy' and 11 'hold' recommendations.
As of May, 18 analysts were surveyed on Kinross Gold’s target price. The average analyst predicted the stock will hit a price of $5.25 per share in the next 52-weeks of trading. The estimates range between a low of $3.50 per share and a high of $7.80 per share. From the current market valuation, the average target price represents a nearly 40% growth.
The miner hopes to reach a throughput capacity level of 12,000 tons per day at Tasiast in Mauritania before the second half of the current year. Full production of saleable gold is forecasted in the second quarter of 2018.
The market also has expectations on the Phase 2 expansion project at Tasiast. A dialogue with the government of Mauritania is crucial related to the advanced phase of that project. The successful completion of Phase 2 will bring an annual production of 812,000 ounces of gold equivalent over the first five years of operations.
The announcement in June of the feasibility study at Fort Knox Gilmore will also be of importance. The miner aims to prolong the life of mining activities at the site of one of its best-performing assets..
Some improvements in market value are also expected for the second half of 2018 in conjunction with the commencement of high ore grade mining at Moroshka. The satellite deposit is located near Kupol.
CEO J. Paul Rollinson commented: “We continue to maintain our robust liquidity position, and with our strong commitment to deliver consistent results, we are firmly on track to meet our annual production and cost guidance; and are on plan with the development projects that will shape our future.”
For the entire year of 2017, Kinross Gold provided a guidance ranging from 2.375 million to 2.625 million ounces of gold production at an all-in sustaining cost of approximately $975 per ounce of metal sold. The production cost of one ounce of gold equivalent to be sold in 2018 is anticipated at $730. The miner also had planned to use funds of $1 million for capital expenditures.
The chart illustrates the trend in total gold production and gold sold over five years.
(Disclosure: I have no positions in any stock mentioned in this article.)
