Post by
Krishak5 on Jun 30, 2023 9:20am
GSA adds K as Top 10 stock with target of $USD10/share
MR. MARKET IS MISSING A BARGAIN IN KINROSS: Gold Stock Analyst June 2023 p.21
The May issue of GSA reviewed Kinross and its six operating mines. With its Russian mines taken in 2022 in a forced "low ball" sale, the remaining portfolio has little political risk. We expect Kinross to produce 2.3 million ounces in 2024 at $914 cash per ounce. That would generate $2.5 billion in operating cash flow ("OCF"). KGC trades at an OCF multiple of 3.4X, far below the long-term GSA 6.0X average. Mr. Market has always given KGC a lower-than-average OCF multiple due to a "Russian discount"... which was just proven warranted by the Russian government's compelled sale. We think the market will soon wake up to the fact that the mines in Russia are gone. In 2023, 75% of Kinross' production will come from the Americas, and the balance will come from Mauritania, a fledgling democracy in northwest Africa.
It's too early to value the Great Bear mine in the Kinross portfolio since production won't begin before 2028. But it's good to have built-in future production. We evaluate KGC on its current portfolio and are impressed. With an annual $2.5 billion OCF, the company can internally finance Great Bear's estimated $1 billion in capital expenditures... No dilutive share sale is necessary. We also don't see permits as a problem. There's already power and a road to the property. The nearby Target Price table, based on $2,000-per-ounce gold, shows our forecast of 2.3-million-ounce production in 2024 and the long-term industry average of 6.0X OCF. This gives us a rounded-down Target Price of $10.00. It's unusual for us to project a stock price doubling for a big producer with no change in gold price. It's because Mr. Market hasn't recognized this is a changed Kinross. As a sweetener, KGC pays quarterly dividends totaling $0.12 per year for a safe 2.4% annual yield. Not only is KGC suitable for aggressive investors, but the dividend makes it suitable for widows and orphans! Bu