Company Reports

Commodity prices diverged in the quarter. Despite solid China steel production, iron ore and metallurgical coal prices are down, while copper rose on supply issues and hopes of faster global growth. However, prices are elevated compared with history and cost-curve support.

Iron ore prices are lower on concerns over China steel demand due to its struggling property market and weak infrastructure spending. However, gold prices are up on optimism over peak interest rates, driving a 2% rise in our estimate for no-moat Newmont, to USD 51. It remains the cheapest miner we cover, trading 27% below fair value.

Kinross Gold is a senior gold miner with production split roughly 70% in the Americas and 30% in West Africa. Its Paracatu mine in Brazil and Tasiast mine in Mauritania accounted for about 55% of the roughly 2.2 million gold equivalent ounces produced by Kinross in 2023. Both mines are also in the bottom half of the gold cost curve, but we don’t consider them moatworthy due to remaining mine lives of about a decade. They are more than offset by Kinross’ remaining higher-cost mines. The company’s average all-in sustaining cost of roughly USD 1,300 per gold equivalent ounce in 2023 places Kinross at around the middle of the gold cost curve. Kinross had about a decade of gold reserves at the end of 2023.

Demand growth from China has been the main driver of rising commodity prices in the past two decades. More recently, though, most commodity prices have fallen from highs set with Russia’s invasion of Ukraine, the subsequent sanctions on Russia, and the rerouting of supply chains. Prices, nevertheless, are generally elevated versus the 20-year average, as well as relative to cost support.

No-moat Kinross Gold’s 2023 result was better than we expected. Adjusted EBITDA of roughly USD 1.8 billion was 46% up on 2022 and 7% higher than our forecast. Both gold equivalent ounces, or GEO, sales volumes and prices contributed. Adjusted net profit after tax of USD 540 million, or USD 0.44 (CAD 0.59) per share, roughly doubled, with free cash flow of USD 560 million more than twice that earned in 2022. Strong earnings allowed Kinross to materially improve its net debt position, with net debt now around 1 time trailing 12 months EBITDA, down from roughly 1.7 times. Consistent with its quarterly dividend policy, Kinross will pay a USD 0.03 (roughly CAD 0.04) dividend, the same as last year, in March.

Kinross Gold is a senior gold miner with production split roughly 70% in the Americas and 30% in West Africa. Its Paracatu mine in Brazil and Tasiast mine in Mauritania accounted for about 55% of the roughly 2.2 million gold equivalent ounces produced by Kinross in 2023. Both mines are also in the bottom half of the gold cost curve, but we don’t consider them moatworthy due to remaining mine lives of about a decade. They are more than offset by Kinross’ remaining higher-cost mines. The company’s average all-in sustaining cost of roughly USD 1,300 per gold equivalent ounce in 2023 places Kinross at around the middle of the gold cost curve. Kinross had about a decade of gold reserves at the end of 2023.

Near-term iron ore prices are higher on strong China steel production. Gold prices are up on optimism over peak interest rates, driving a 2% rise in our estimate for no-moat Newmont, to USD 54. It is the cheapest we cover, trading 30% below fair value.

Kinross Gold is a senior gold miner with production split roughly 70% in the Americas and 30% in West Africa. Its Paracatu mine in Brazil and Tasiast mine in Mauritania accounted for about 55% of the roughly 2 million gold equivalent ounces produced by Kinross in 2022. Both mines are also in the bottom half of the gold cost curve, but we don’t consider them moatworthy due to remaining mine lives of about a decade. They are more than offset by Kinross’ remaining higher-cost mines. The company’s average all-in sustaining cost of roughly USD 1,300 per gold equivalent ounce in 2022 places Kinross at around the 55th percentile of the gold cost curve. Kinross had about a decade of gold reserves at the end of 2022.

Commodity prices diverged in the quarter with strong China steel production driving iron ore and metallurgical coal prices up, while base metals prices dropped on worries of a Western recession. Even so, prices are elevated versus history and cost-curve support.

No-moat Kinross Gold’s 2023 third-quarter result was better than our expectations. Higher gold sales volumes and prices along with lower unit cash costs drove a 66% increase in EBITDA, to USD 490 million, compared with the same quarter of 2022. Adjusted net profit after tax of USD 145 million, or USD 0.12 (CAD 0.167) per share, more than doubled. Kinross will pay a USD 0.03 (roughly CAD 0.042) dividend in December, the same as last year and in line with its quarterly dividend policy. We forecast total 2023 dividends of USD 0.12 (CAD 0.167) per share for a 2.2% forward yield at current share prices.

Kinross Gold is a senior gold miner with production split roughly 70% in the Americas and 30% in West Africa. Its Paracatu mine in Brazil and Tasiast mine in Mauritania accounted for about 55% of the roughly 2 million gold equivalent ounces produced by Kinross in 2022. Both mines are also in the bottom half of the gold cost curve, but we don’t consider them moatworthy due to remaining mine lives of about a decade. They are more than offset by Kinross’ remaining higher-cost mines. The company’s average all-in sustaining cost of roughly USD 1,300 per gold equivalent ounce in 2022 places Kinross at around the 55th percentile of the gold cost curve. Kinross had about a decade of gold reserves at the end of 2022.

Strong China steel production is supporting prices for steel inputs despite recession concerns. Otherwise, changes to our commodity price assumptions are mixed, led by higher near-term iron ore prices and lower near-term thermal coal prices. We think thermal coal miner Whitehaven Coal and minerals sands miner Iluka are the cheapest we cover. Both trade at 29% discounts to our AUD 9.50 and AUD 10.50 per share fair value estimates, respectively, with Whitehaven’s down 3% on lower near-term thermal coal prices, partially offset by a weaker Australian dollar. Peer New Hope is also down 3% to AUD 6.10 per share. Iluka’s estimate is unchanged, with a weaker Australian dollar offsetting lower synthetic rutile prices.

Kinross Gold is a senior gold miner with production split roughly 70% in the Americas and 30% in West Africa. Its Paracatu mine in Brazil and Tasiast mine in Mauritania accounted for about 55% of the roughly 2 million gold equivalent ounces produced by Kinross in 2022. Both mines are also in the bottom half of the gold cost curve, but we don’t consider them moatworthy due to remaining mine lives of about a decade. They are more than offset by Kinross’ remaining higher-cost mines. The company’s average all-in sustaining cost of roughly USD 1,300 per gold equivalent ounce in 2022 places Kinross at around the 55th percentile of the gold cost curve. Kinross had about a decade of gold reserves at the end of 2022.

Commodity prices have generally stabilized after falling on concerns that China’s reopening would underwhelm, along with worries over a recession in the West. Even so, they remain elevated versus history and cost-curve support. The Russian invasion of Ukraine and subsequent sanctions on Russia support energy prices and reinforce the importance of energy security.

Kinross Gold is a senior gold miner with production split roughly 70% in the Americas and 30% in West Africa. Its Paracatu mine in Brazil and Tasiast mine in Mauritania accounted for about 55% of the roughly 2 million gold equivalent ounces produced by Kinross in 2022. Both mines are also in the bottom half of the gold cost curve, but we don’t consider them moatworthy due to remaining mine lives of about a decade. They are more than offset by Kinross’ remaining higher-cost mines. The company’s average all-in sustaining cost of roughly USD 1,300 per gold equivalent ounce in 2022 places Kinross at around the 55th percentile of the gold cost curve. Kinross had about a decade of gold reserves at the end of 2022.

We retain our fair value estimate for no-moat Kinross of USD 5.20 per share after its strong second-quarter 2023 result. Adjusted net profit after tax was about USD 170 million, or USD 0.14 (CAD 0.19) per share. Adjusted EBITDA of about USD 480 million was roughly double last year and 19% above our estimate, driven by higher sales volumes and average gold prices along with lower unit cash costs. We continue to forecast sales of around 2.1 million gold equivalent ounces, or GEO, in 2023, 9% more than 2022, driven by higher production at Kinross’ Tasiast mine in Mauritania and a full year of production from its La Coipa mine in Chile. Increased production likely partially offsets headwinds from inflation and our forecast unit cash costs of about USD 980 per GEO in 2023, up 4%, is also unchanged. Along with 8% higher assumed gold prices compared with 2022, our forecast EBITDA of about USD 1.6 billion in 2023 is roughly 30% higher than last year.

Kinross Gold is a senior gold miner with production split roughly 70% in the Americas and 30% in West Africa. Its Paracatu mine in Brazil and Tasiast mine in Mauritania accounted for about 55% of the roughly 2 million gold equivalent ounces produced by Kinross in 2022. Both mines are also in the bottom half of the gold cost curve, but we don’t consider them moatworthy due to remaining mine lives of about a decade. They are more than offset by Kinross’ remaining higher-cost mines. The company’s average all-in sustaining cost of roughly USD 1,300 per gold equivalent ounce in 2022 places Kinross at around the 55th percentile of the gold cost curve. Kinross had about a decade of gold reserves at the end of 2022.

No-moat Kinross Gold’s 2023 first-quarter earnings were solid and in line with our expectations. Adjusted net profit rose 27% compared with the first quarter of 2022, to about USD 88 million, or USD 0.07—around CAD 0.09—per share. Adjusted EBITDA of around USD 360 million was roughly one-third higher than last year, driven by increased sales. Sales rose 27% to roughly 490,000 gold equivalent ounces, or GEO, compared with the same quarter of 2022, largely reflecting higher production. Kinross’s La Coipa gold and silver mine in Chile only restarted in the first quarter of 2022, but is now close to full capacity while output increased at the Paracatu mine in Brazil. Kinross’s average realized gold price of about USD 1,900 per ounce and unit cash costs of around USD 990 per GEO were both similar to the first quarter of 2022.

We recommence coverage of senior gold miners Newmont, Barrick Gold, Agnico Eagle Mines, and Kinross Gold with fair value estimates of USD 54, USD 21, USD 53, and USD 5.20 per share, respectively. We do not allocate a moat to any of these companies. Newmont, Barrick Gold, and Agnico Eagle have Medium fair value Uncertainty Ratings, while Kinross has a High Uncertainty Rating partly reflecting its greater financial leverage.

Kinross Gold is a senior gold miner with production split roughly 70% in the Americas and 30% in West Africa. Its Paracatu mine in Brazil and Tasiast mine in Mauritania accounted for about 55% of the roughly 2 million gold equivalent ounces produced by Kinross in 2022. Both mines are also in the bottom half of the gold cost curve, but we don’t consider them moatworthy due to remaining mine lives of about a decade. They are more than offset by Kinross’ remaining higher-cost mines. The company’s average all-in sustaining cost of roughly USD 1,300 per gold equivalent ounce in 2022 places Kinross at around the 55th percentile of the gold cost curve. Kinross had about a decade of gold reserves at the end of 2022.