Kinross Gold (NYSE:KGC)
This article updates my preceding article on Kinross Gold, published on May 10, 2015, about the 4Q'15 results.
Q1'16 Balance Sheet Information (Six Quarters)
|Q1 2016||Q4 2015||Q3 2015||Q2 2015||Q4 2014|
in Oz E.
in $ Million
Adjusted operating cash flow
Adjusted operating cash flow
Adjusted net earnings
Impairment charge + write down inventory
Average realized gold price
|Capital expenditure $ Million||139.5||160.7||171.3||128.5||149.5||189.4|
Cash and cash equivalent
G & A in
|Shares Outstanding in Million||1,244.14||1,146.54||1,146.3||1,146.3||1,145.1||1.145|
Outlook - 2016 Compared To 2015 Per Region
|Total||Americas||West Africa (Attributable)||Russia|
|2014 Production $ Billion||2.739||1.441||0.547||0.751|
|2015 Production $ Billion||2.595||1.3/1.4||0.39/0.46||0.71/0.76|
|2016 Production $ Billion||2.7-2.9||1.67-1.77||0.36-0.42||0.67-0.71|
|% of total production (2015)||100%||61%||14%||25%|
|Capital expenditures $ Million|| |
|Production cost of sale $||675/735||730/790||850/920||460/490|
|AISC $/Au E. Oz||$890-990 ($975 in 2015 - $973 in 2014)|
Production per mine and per Quarter.
|Kettle River - Buckhorn||28,312||19,301||24,222||29,580||24,265|
|Americas - 58.95%||407,912||326,391||379,290||352,168||328,707|
|Russia - 27.8%||192,450||191,308||190,366||191,160||185,729|
|West Africa - 13.25%||91,548||106,017||111,223||110,570||121,924|
|Grade||0.7 g/t||4.1 g/t||0.22%|
|P1 + P2 reserve||33,955 Koz||40,982 Koz||1,444 Mlb|
Kinross Gold released its 1Q'16 results on May 10, 2016. Revenue was $687.463 million, up 10.2% quarter over quarter, and cash flow was $75 million.
Kupol mine in Russia and Fort Know were performing very well this quarter. Also, Kettle River-Buckhorn mine will not be shut down in 2016 as scheduled.
Tasiast mine is a very exciting development for the company that plans Phase I and Phase II. Phase I will be completed by Q1'2018 and production will be 12,000 TPD. Later in Phase III, the company is targeting 30,000 TPD. At the Bald Mountain, the company completed its first quarter as operator. Maricunga mine will be close in October. Paracatu mine production is still hampered by a significant rainfall.
M. Tony Giardini, CFO, in the conference call said the following:
The balance sheet remains strong with $750 million in cash and cash equivalents and $2.3 billion in total liquidity. During the quarter, the company completed an equity offering issuing 96 million common shares for gross proceeds of $288 million. Of that, $175 million was used to repay what we drilldown from our revolving credit facility following the $610 million all cash acquisition of Bald and Round Mountain was closed January 11.
Capital Requirement for 2016
1 $250 million senior notes due September 2016.
2 $160 million CapEx for the Tasiast Phase I which will increase 2016 CapEx to $755 million.
M. Tony Giardini said:
Based on a $1,200 gold price, we expect to meet these capital requirements and finish 2016 with cash and cash equivalents of approximately $700 million on the balance sheet.
Hedging fuel for the Tasiast Phase I, as a precaution
The company decided to hedge the fuel for the Tasiast project at $46 until April 2019, which is a prudent move.
What a difference since early January! The price per share has been multiplied by nearly 4.
The question is whether or not this trend will continue? Of course, no one really knows and it will depend on the gold prices. In my preceding article, I was rating KGC as a buy on valuation, it was easy to recommend at such a low price. Now, my task is much more complicated because the stock jumped so high and so fast that it is difficult to justify it by the fundamentals which are good but not exceptionally good to justify this trend explosion.
I found an excellent article regarding the gold outlook:
Gold has support in the mid-$1,200's and stronger support at $1,185. We expect a slow trending move higher to be now developing. As long-term investors, this is exactly what we would hope to see at this early juncture. Measured moves higher in markets tend to be sustained, whereas explosive surges tend to fade quickly.
However, I am not on the super bullish side yet, and believe the $1,300/Oz may be a strong resistance. I will need a more convincing trend to alter my mind.
That being said, I recommend to take at least 25% profit off the table and turn it into cash. Then, you can sit patiently with your remaining position and wait for what will happen the following few months.
Note: Do not forget to follow me on KGC and get updated regularly. Thank you.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I trade KGC