Kinross Gold Is Set to Scale New Highs


The gold price rally has turned out to be a boon for Kinross Gold [stock_market_widget type="inline" template="generic" color="default" assets="K.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] stock since the beginning of May, as before that, the gold miner was on shaky ground. Kinross was struggling on account of weak gold grades at its mines, which led to a drop in the company’s top line because of weak production.

As such, it remains to be seen if the recent momentum attained by Kinross can be sustained once the company delivers its second-quarter results on July 31.

What to Expect?

Kinross Gold’s revenue is expected to increase 4.9% year over year during the second quarter to $812.8 million. However, its earnings are expected to dip from $0.03 per share a year ago to $0.02 this time.

But don’t be surprised to see Kinross actually deliver an improvement in its bottom line and surprise Wall Street. That’s because the company has managed to exercise terrific control over costs of late.

In the first quarter, Kinross clocked production cost of sales of $682 per ounce of gold. This was lower than the full-year guidance of $730 an ounce issued by the company. By comparison, Kinross’ production cost of sales in the second quarter of 2018 stood at a sizeable $767 per gold equivalent ounce.

So, a lower cost profile this time will help Kinross deliver an improved bottom-line performance. Moreover, the company estimates hitting 2.5 million ounces of gold production this year, so there might be a slight bump in production on a year over year basis.

I’m saying this because Kinross produced 602,049 gold equivalent ounces in the second quarter of 2018. And, in the first quarter of 2019, it delivered production of just over 606,000 ounces. However, there is one more catalyst for Kinross that investors shouldn’t be missing – improved gold pricing.

Higher Gold Prices Will Be a Catalyst

In the second quarter of 2018, Kinross Gold had witnessed an average realized gold price of $1,306 an ounce. Gold prices averaged more than $1,300 an ounce in the latter half of the second quarter. As such, there’s a good chance that the company will also benefit from higher gold pricing.

So don’t be surprised to see Kinross sustain its impressive stock market momentum thanks to an improving gold pricing scenario and lower costs. More importantly, the company should be able to sustain this momentum in the future because gold is not showing much signs of slowdown despite a small dip of late.

According to a Yahoo! Finance report:

“Goldman Sachs is on board with that analysis, too. Analysts at the investment bank wrote in a new note Wednesday that a combination of a weak dollar and rising global uncertainties could keep gold prices hot. Goldman raised its 12-month gold price forecast to $1,475 an ounce from $1,425 an ounce.”

So now would be a good time to stick to Kinross Gold as geopolitical tensions and other problems can send the yellow metal higher.

Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.


Please enter your comment!
Please enter your name here