Is KL an undervalued bargain ? All gold miners have taken a big shareprice drop this week much greater than gold even with fridays drop in the POG back to the US $1520 range.
In trying to make sense of the KL shareprice compared to other gold miners I looked at Barrick and Agnico Eagle.
KL showed consolidated earnings in their Feb 20 report of $2.74/share but Yahoo shows $2.65/share. I'm not sure why. These Yahoo earnings do not include the additional earnings that will come in from the Detour mine from 2019 so just very roughly Detour will have mined close to 600k oz at a profit of about $300- $400 over their costs of around $1000/oz so there should be an addition of lets say US $350M divided by the shares now outstanding of 286 million so about $1.22/share to be added to the KL earnings for 2019 (actual shares are less than 286M now due to buybacks). For purposes below I used the Yahoo $2.65/share plus $1.22 from Detour to give an estimate of KL's actual earnings for 2019 of $3.87 to compare with ABX and AEM now that the shares issued to buy DGC are included in KL's share base.
Any input as to why this KL earnings estimate is wrong would be appreciated.
Until we have post merger data on KL's earnings and the value put on Detour assets and its 2019 earnings its hard to compare but using Yahoo Finance and US dollar values below is a brief comparison:
Stock share price earnings Market Cap
ABX/GOLD 15.67 2.26 27.91 B
AEM 37.27 1.99 8.98 B
KL/DGC 23.10 3.87 6.60 B
I know the market is concerned with the life of mine at its rich Fosterville property but this is getting ridiculous. KL's earning per year are by far the best of these 3 in fact they are approaching that of both ABX and AEM combined on a per share basis. Yet it is valued at less than a quarter that of ABX only ¾ that of AEM . AEM had a bad year but their 2019 earnings are only about a half of KL's.
KL mines mostly gold and in safe areas vs ABX which has a lot of copper and some in not as safe mining regions.In addition KL has a lot of cash on the balance sheet so that portion of there assets (over 10% of their market cap) should have held value in this market decline I think if the gold price rises it should benefit KL more than ABX because of KL's greater percentage of gold endowment. The cash provides ready funds for exploration while others need to borrow or issue shares to afford to explore.
The only thing that would seem to be holding back KL's share price is the perception that it has a shorter mine life which the Detour acquisition addressed somewhat. Any exploration success this year at either Detour Lake or at Fosterville will likely make this stock surge ahead meanwhile Macassa is growing and will soon have more production from the new shaft even if Fosterville begins to decline.
Bottom line is long term an undervalued KL looks like a far superior bet than a bloated ABX which mines copper in dangerous jurisdictions or AEM which is having mine problems up north.