Berenberg Starts Kinross Gold (KGC) at Hold
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Berenberg initiates coverage on Kinross Gold (NYSE: KGC) with a Hold rating and a price target of $4.60.
Analyst Yuriy Vlasov commented, "Kinross produces 2.6moz of gold a year (2015), making it one of the main global gold producers. Managed from its headquarters in Toronto, Canada, Kinross’s global operations are split into three geographical clusters: Americas (US, Brazil and Chile), West Africa (Ghana, Mauritania) and Russia. The company plans to grow its 2016 production to 2.7-2.8moz, which we see as achievable at the lower end of the guidance range. Kinross’s stock trades at an attractive 2016-17 EV/EBITDA of 5.3-6.3x but the lack of dividend payments and the strong stock performance (+133%, ytd) counterbalance its investment appeal. We therefore initiate coverage with a Hold rating."
He added, "Kinross holds 30.8moz of attributable gold reserves, with an average head grade of 0.7g/t. We consider this to be low compared with other gold players under our coverage. In March 2016, the company announced its decision to proceed with the phase-one expansion of its Tasiast mine in Mauritania. It plans to expand the current mill capacity by 50% to 3.9mtpa and lift annual gold production to 409koz (219koz in 2015). Although we understand the rationale behind this project, we question whether it can attain the projected production cost of $535/oz for 2018 – the mine posted Q2 2016 production costs of $1,240/oz. "
Shares of Kinross Gold closed at $4.58 yesterday.
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