Raymond James Getting Bullish On Kinross Gold, Upgrades To Outperform

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For years now, the Tasiast mine has been a black hole for Kinross Gold Corporation (USA) KGC. The company announced results from an economic study, which examined a phased approach to expanding gold output at Tasiast.

Raymond James’ Phil Russo upgraded the rating on Kinross from Market Perform to Outperform, while raising the price target from $4 to $5.

Impact Of Phased Tasiast On Operating Profile

“The studies outlined production and cost outcomes of 409–777 kozpa with AISC ranging from $760/oz Phase 1 to $665/oz in Phase 2. We now estimate a more manageable consolidated production decline for Kinross of ~11% from 2016E to 2020E, a significant improvement from our previous estimate of a 27% decline,” analyst Phil Russo wrote.

The two phases combined demonstrated an NPV of $885 mln and an IRR of 17 percent. Russo mentioned that including both phases take the estimate for combined NPV to $1,030 mln and the IRR estimate to 20 percent.

Ample Liquidity

“At current metal prices Kinross has ample financial flexibility to fund both phases of the Tasiast expansion,” the analyst commented. He added that until gold prices decline to ~$1,025/oz, its covenant would not become an issue over the forthcoming three years.

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Posted In: Analyst ColorLong IdeasUpgradesPrice TargetAnalyst RatingsTrading IdeasPhil RussoRaymond James
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