Market Overview

Citi Might Upgrade Kinross From Neutral If Mine-Life Were To Improve


Alexander Hacking of Citi Research initiated coverage of the North American gold sector with an overall Neutral view. The analyst argued that gold appears to be "well supported" at its current level, but investors shouldn't "aggressively chase" the recent run up in gold prices, especially since "technical positions are very long."

Looking forward to next year, the analyst is pricing a base case for gold to be $1,250 an ounce, roughly 6 percent below the current spot price. However, under a bull-case scenario, the price of gold could shoot higher to $1,440 an ounce.

Among the several individual companies that Hacking initiated coverage on, he assigned a Neutral rating and $5.50 price target to Kinross Gold Corporation (USA) (NYSE: KGC).

According to the analyst, Kinross has a relatively shorter mine-life compared to its peers. The company also suffers from a "riskier" geographic mix as up to 40 percent of its profit comes from the Kupol mine in Russia.

Hacking noted that Kinross' produced 2.59 million of attributable gold equivalent ounces in 2015 which marked a 4.3 percent year-over-year decline. However, the company's recent purchase of the Bald Mountain and Round Mountain mines should yield a year-over-year increase in production in the 2.7 to 2.9 million ounce range.

In addition to a growth in production, the mines will also help "de-risk" the company as it shifts the business mix to the US, which will account for approximately 60 percent of total production.

Bottom line, the analyst stated that Kinross' stock should trade at a low earnings multiple given its lower mine-life. However, the stock could see a "significant upward re-rating" if its life-of-mine is extended.

Latest Ratings for KGC

Jan 2021BarclaysUpgradesEqual-WeightOverweight
Nov 2020TD SecuritiesMaintainsBuy
Oct 2020BMO CapitalMaintainsOutperform

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Posted-In: Alexander Hacking Citi Research Gold gold prices gold stocksAnalyst Color Initiation Analyst Ratings

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