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Kinross Gold: Another Buying Opportunity

Jun. 04, 2020 12:02 AM ETKinross Gold Corporation (KGC), K:CA6 Comments
Vladimir Zernov profile picture
Vladimir Zernov


  • Kinross Gold pulls back from highs as global market optimism puts pressure on gold mining shares.
  • Meanwhile, the price of gold has hardly changed since the beginning of April, which will translate into solid cash flow generation in the second quarter.
  • The company has suffered no coronavirus-related disruptions and is positioned for a very strong year.

I’ve last written about Kinross Gold (NYSE:KGC) back in March when the sudden drop in the price of gold during the acute phase of the coronavirus crisis created a buying opportunity in the gold mining space. The stock has had significant upside since then but has recently pulled back from its highs, and it’s high time to revisit the thesis.

In my opinion, the recent downside move is due to the outflow of short-term speculative money, as the huge market upside forced traders and investors to chase stocks in the “riskier” groups and get out of “safe haven” gold-related equities.

However, the situation has not changed fundamentally for Kinross Gold. As I write these words, gold is trading at $1700 per ounce. Gold has been priced at or above $1700 per ounce since early April, creating a great environment for gold mining companies.

During the first-quarter earnings call, Kinross Gold stated that an average gold price of $1700 for the rest of the year will lead to free cash flow of more than $700 million. Sure, a high gold price is not a given, and additional optimism in the global markets could ultimately lead to a sell-off in gold. However, I think that many optimistic projections are already baked in global stock prices, while the money printing from the world central banks has no signs of weakening. These conditions create a favorable environment for gold.

In my above-mentioned article, I noted that the location of Kinross Gold mines decreased risk of coronavirus-related disruptions. So far, this projection turned out to be true. The suspected cases at the remote Russian mine were not confirmed to be COVID-19 (and now, the positive effects of the Russian lockdown together with the geographical position of the mine almost guarantee there’ll be no cases going forward), while other mines did not suffer

This article was written by

Vladimir Zernov profile picture
I'm a trader who trades both short-term and long-term. I started my career as a day-trader for a trading firm, but then turned to longer time frames and went on my own to manage my portfolio. I use technical analysis as well as fundamental analysis in my research.

Analyst’s Disclosure: I am/we are long AUY. 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.

I may trade any of the above-mentioned stocks.

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Comments (6)

G.K.Ommander profile picture
KInross is one of the best gold miners around - IMHO. Thanks for the article!
inv28758231 profile picture
@Vladimir Zernov thanks for the interesting analysis. I have been following your updates on the other gold miners as well.

It would be also exciting to hear your thoughts about Kirkland Lake (KL). It seems to me that
1. KL's AISC is lower than most;
2. KL has 0 debt;
3. KL's mines are in Australia and Canada, which presumably means lower political risk as compared to miners working in developing countries.
Am I missing some important factors that put KL at a disadvantage in comparison to the companies you look at (AGI, GAU, AUY, KGC)?
Vladimir Zernov profile picture
KL looks absolutely normal to me.
Kirkland Lake recently purchased Detour who has a fairly high all in cost per ounce compared to KL. Costs have already came down first quarter. The purchase of Detour was not cheap but should begin to see the payoff by H2 next year. I am long both KL and KGC as core holdings in my metals portfolio.
Thank you.

Are their Brazil ops not affected by covid19?
Vladimir Zernov profile picture
They have not stated anything about this.
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