Analyst Report - ConcordFlash Update
13 August 2008
Kinross Gold Corporation
KGC : NYSE : US$15.29
K : TSX
BUY
Target: US$30.00
COMPANY STATISTICS:
52-week Range: US$9.87 - 27.40
Avg. Daily Vol. (000s): 7,288
Market Cap (000s): US$9,405.1
Shares Out (M) basic: 615.1
Shares Out (M) fd: 625.2
LT Debt (M): US$778.7
Working Capital (M): US$783.4
EARNINGS SUMMARY:
FYE Dec 2007A 2008E 2009E 2010E 2011E
Production 000oz: 1,576 1,800 2,488 2,514 2,129
Total Cash Costs
(US$/oz): 368 426 351 344 354
P/E (x): 47.4 25.1 18.2 21.5 30.7
CFPS: 0.57 1.11 1.58 1.43 1.04
P/CF (x): 26.9 13.8 9.7 10.7 14.7
EPS: Q1 0.10A 0.10A 0.23 0.18 0.14Q2 0.09A 0.09A 0.22 0.18 0.12
Q3 0.07A 0.18 0.20 0.17 0.12
Q4 0.07A 0.24 0.19 0.17 0.12
Total 0.32 0.61 0.84 0.71 0.50
SHARE PRICE PERFORMANCE:
COMPANY SUMMARY:
Kinross has a reserve base of approximately 46.6 million ounces
of gold. Production is expected to increase from 1.6 million
ounces in 2007 to near 2.5 million ounces in 2009 highlighted by
the expansion of Paracatu and completion of the Kupol mine in
Russia.
All amounts in US$ unless otherwise noted.
Metals and Mining -- Precious Metals and Minerals
IMPRESSIVE INITIAL PRODUCTION
RESULTS AT KUPOL: UPGRADING TO
BUY FROM HOLD
Event
Kinross reported adjusted Q2/08 EPS of $0.09, inline with consensus
and just beneath our $0.10 estimate. There was a large variance
between gold equivalent production and sales in the quarter (406,032
GEO produced vs. 330,633 oz sold) as none of the 51,487 GEO produced
at Kupol was sold, and there was an additional 23,912 GEO sales
shortfall at the company’s other mines. As such, gold equivalent sales of
330,633 oz at total cash costs of $466/GEO came in below our estimate
of 391,628 oz at $458/GEO (production was inline with our estimate
exclusive of Kupol which exceeded expectations). Guidance for 2008 was
lowered by 0.1 mm GEO to 1.8-1.9 mm GEO due to the sale of Julietta (~
0.03 mm GEO) and a slower than expected ramp-up of the Paracatu
expansion (~0.07 mm GEO). Total cash cost guidance for 2008 increased
to $425 - $445/GEO from $385 - $395/GEO due largely to revised input
assumptions.
Impact
Neutral to slightly positive. Impressive production results at Kupol more
than offset the 2008 guidance reduction.
Valuation/Action
Our 5%/$1150 peak gold NAVPS is essentially unchanged at $19.35. We
are upgrading Kinross to BUY from Hold as we believe the shares to be
oversold on the Aurelian M&A announcement and (what is in our view)
a temporary correction in spot gold. Our target price of C$30.00 is
unchanged and represents a 1.55 times multiple of our 5%/$1150 peak
gold NAVPS.