Back to top

Analyst Blog

We have reaffirmed our Neutral recommendation on gold miner Kinross Gold Corporation (KGC - Analyst Report). While Kinross is poised to gain from its exploration projects, we prefer to remain on the sidelines considering the current weak gold price and demand environment.
 
Why Maintained?
 
Both revenues and adjusted earnings for first-quarter 2013, reported on May 7, beat Zacks Consensus Estimates. Revenue growth was aided by an increase in gold equivalent ounces sold. Kinross saw higher gold production in the quarter.
 
Kinross is making steady progress in advancing the projects that give it a strong growth profile among leading gold producers. The divestiture of its 50% interest in Brazil's Crixas gold mine to AngloGold Ashanti Ltd. (AU - Snapshot Report) last year has enabled it to turn its attention towards more important assets.
 
Kinross possesses the Tasiast gold deposit which has 20 million ounces of mineral resource base under its jurisdiction. The company recently announced that it is proceeding to a full feasibility study on the Tasiast expansion project based on the encouraging pre-feasibility results. Moreover, construction of the Dvoinoye mine in Russia, Kinross’s second most important project, is progressing well and ore processing is expected to begin in the second half this year.
 
Also, Kinross has streamlined its capital expenditure program, focusing on its priorities and not going overboard in its expansionary moves.
 
However, the gold price environment is not favorable of late. Gold price slumped to a two-year low (below $1,400 per ounce) in April 2013. Import restrictions by India, the world’s largest gold consumer, and slowdown in Chinese economy is weiging on price as well as demand for the yellow metal. 
 
While Kinross's production cost (per gold equivalent ounce) fell year over year in the first quarter, we remain cautious on this front given the industry-wide cost pressure. Production cost of sales per gold equivalent ounce for 2013 is expected to be in the range of $740–790, higher than $706 recorded in 2012. Lower grades across most of the company’s mines may contribute to higher costs. 
 
Other Stocks to Consider
 
Other companies in the mining industry having a favorable Zacks Rank are Lake Shore Gold Corp. (LSG) and Impala Platinum Holdings Ltd. (IMPUY). Both carry a Zacks Rank #2 (Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
UNITED THER… UTHR 117.83 +28.51%
TRIQUINT SE… TQNT 20.67 +6.52%
RF MICRO DE… RFMD 12.47 +6.04%
VASCO DATA… VDSI 14.77 +4.68%
BANCO DO BR… BDORY 15.53 +3.95%