Kinross (KGC) Maintains Strong Liquidity Amid Coronavirus Crisis

Kinross Gold Corporation KGC provided a global update in response to the coronavirus pandemic. The company stated that all of its mines were operating as of Mar 31, 2020 and have not been materially impacted to this date. However, it has acknowledged that the further effect of the pandemic on global operations cannot be predicted.

Moreover, Kinross has undertaken preventive measures and put contingency plans in all sites. The company formed a cross-functional COVID-19 Task Force in late January 2020 to initiate preparation and planning. It is working closely with local health authorities and governments to ensure that appropriate protocols are being followed during the period of crisis.  

Kinross is maintaining a strong liquidity and financial position in this situation. As a precautionary measure, the company has drawn $750 million from its $1.5-billion revolving credit facility on Mar 20. As of Mar 31, it has cash and cash equivalents of more than $1 billion. The company also submitted notice to draw $200 million on the $300-million Tasiast project financing facility. It has total debt of roughly $2.5 billion.

The company is assessing the potential impact of coronavirus pandemic on its production and cost outlook for 2020. Notably, Kinross has decided to withdraw its 2020 view although the crisis has not made any material impacts on its operations during the quarter ending Mar 31.

Per Kinross, this is a prudent approach considering the pandemic’s considerable impact on the world economy. The company expects favorable foreign exchange rates and fuel prices to offset some of the incremental costs stemming from its contingency measures.

Q1 Update

For the first quarter, Kinross expects gold sales to be modestly lower than production due to the impact of the pandemic on the timing of sales and shipments.

Preliminary production for the first quarter is expected to be around 560,000 gold equivalent ounces and sales of roughly 540,000 gold equivalent ounces. Per the company, production and sales have been partly affected by crisis-related contingency measures. It expects preliminary cost of sales per ounce sold for the first quarter to be at the higher end of its original annual guidance range.  

The company also stated that it is actively managing metal shipments to minimize impacts of the suspension or any risk of suspension of operations at numerous refineries. It has secured alternate transportation channels and is chalking further contingency plans.

Price Performance

Shares of Kinross have rallied 39.5% in the past year compared with the industry’s 17% growth.

Zacks Rank & Other Key Picks

Kinross currently carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the basic materials space are Franco-Nevada Corporation FNV, Novagold Resources Inc. NG and Barrick Gold Corporation GOLD, all currently carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Franco-Nevada has an expected earnings growth rate of 37.6% for 2020. Its shares have returned 42.4% in the past year.    

Novagold has an expected earnings growth rate of 11.1% for fiscal 2020. The company’s shares have surged 89.3% in the past year.

Barrick has an expected earnings growth rate of 43.1% for 2020. The company’s shares have gained 46.4% in the past year.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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