On Nov 19, we maintained our Neutral recommendation on
Kinross Gold Corporation
). While the gold miner should benefit from its exploration
projects, we remain on the sidelines considering the current weak
gold price and demand environment.
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Revenues and profit for third-quarter 2013, reported on Nov 13,
slid year over year on lower gold prices. However, both sales and
adjusted earnings beat Zacks Consensus Estimates. Kinross saw
higher gold production in the quarter and raised its production
guidance for 2013.
Kinross, a Zacks Rank #3 (Hold) stock, is making steady progress
in advancing the projects that give it a strong growth profile
among leading gold producers. Also, the company has streamlined
its capital expenditure program, focusing on its priorities and
not going overboard in its expansionary moves.
Kinross possesses the Tasiast gold deposit which has 20 million
ounces of mineral resource base under its jurisdiction. The
company is conducting a full feasibility study on the Tasiast
expansion project with completion expected in the first quarter
of 2014. Moreover, construction of the Dvoinoye mine in Russia
completed on time and within budget and commercial production
started in Oct 2013.
Kinross is also accelerating its cost reduction efforts and has
further reduced its capital expenditure guidance for 2013 by $50
million to roughly $1.4 billion. This is in addition to $150
million savings announced earlier. The company has also
identified savings opportunities on the general and
administrative costs front.
However, the gold price environment is not favorable of late.
Kinross has suspended its semi-annual dividend considering the
weak gold price environment and its negative impact on its cash
flows. Moreover, import restrictions by India, the world's
largest gold consumer, coupled with weakness in the country's
currency are weighing on demand for the yellow metal.
We also remain cautious about Kinross's production costs given
the industry-wide cost pressures. Production cost (per gold
equivalent ounce) rose 9% year over year in the third quarter,
hurting the company's margins in the process.
Other Stocks to Consider
Other companies in the gold mining industry with favorable Zacks
Lake Shore Gold Corp.
Pretium Resources Inc.
Golden Star Resources, Ltd.
). All of them retain a Zacks Rank #2 (Buy).