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Kinross Gold: aggiornamento 4Q’20

Kinross Gold: A Solid 2020

Feb. 11, 2021 da Seeking Alpha con aggiunta tabella COT (fonte CME) dei posizionamenti long/short/spread 


  • Ottima trimestrale Q4/2020
  • Per il 2021 atteso un aumento dell’estrazione ma le previsioni sull’andamento dei prezzi dell’oro (tendenza lateral ribassista) comportano stime degli utili leggermente inferiori a quelle del 2020
  • Analisi tecnica: negli ultimi sei mesi si è formato un triangolo discendente, resistenza a $7.55-$7.70 e primo supporto importante fra $6.90 e $6.75
  • COT: negli ultimi tre mesi posizionamenti poco variati con una lieve riduzione dei long dei ptf gestiti (managed money)


Source: Kinross

Investment Thesis

The Toronto-based Kinross Gold Corp. (KGC) released its fourth quarter and full-year 2020 results on Feb. 10, 2021.

The average realized gold price was $1,875 per ounce this quarter, and it had a significant impact on the bottom line. Profits were a new record of $783.3 million with record-high revenues. Gold equivalent production was met after the company maintained operations throughout 2020 despite the impact of COVID-19 across the global portfolio.

Source: KGC Press release

Kinross is still vastly outperforming the VanEck Vectors Gold Miners ETF (GDX).

ChartData by YCharts

The investment thesis is to slowly accumulate KGC on any weakness and build up a medium position. It would be best to use any rally until Q1 2021 to take some profits and wait for some retracement to accumulate again. I will develop this idea in my last part here, called technical analysis.

I believe a potential uptrend could eventually materialize. Still, it seems that the excitement surrounding the gold price has vanished a little, and most of the gold miners have firmly corrected from their highs in 2020. I see 2021 as a transition year for gold.

The immediate issue is that the gold price needs a retracement, and this downtrend process is slow to ramp up, leaving gold investors unsure of what to do.

Kinross Gold – Financials history 4Q’20 – The Raw Numbers

Kinross Gold 4Q’19 1Q’20 2Q’20 3Q’20 4Q’20
Total Revenues in $ Million 996.2 879.8 1,007.2 1,131.3 1,195.1
Net Income in $ Million 521.5 122.7 195.7 240.7 783.3
EBITDA $ Million 840.3 381.3 536.0 589.9 n/c
EPS diluted in $/share 0.41 0.10 0.15 0.19 0.62
Operating cash flow in $ Million 408.6 299.6 432.8 544.1 681.1
Capital Expenditure in $ Million 298.2 213.7 218.1 229.0 298.3
Free Cash Flow in $ Million 110.4 85.9 214.7 315.1 382.8
Total cash $ Million 575.1 1138.6 1,527.1 933.5 1210.9
Long-term debt in $ Million 1,837 2,488 2,672 1,923 1,924
Shares outstanding (diluted) in Million 1,264.1 1,265.3 1,268.5 1,269.0 1,268

Data Source: Company release and Fun Trading. Note: I could not calculate EBITDA for 4Q’20 and wait for more information from the company.

Note: Historical data from 2015 are available for subscribers only.

Gold Production Details For The Quarter

1 – Total attributable gold production

Kinross gold produced 624,032 attributable Au eq. Oz. in Q4 2020, compared with 645,344 Au eq. Oz. in Q4 2019. The decrease was largely due to lower production at Bald Mountain, Round Mountain, and Chirano, mostly offset by increases at Tasiast and Paracatu.

Note: The three mines Paracatu, Kupol, and Tasiast, account for 64.6% of the total gold equivalent production in 4Q’20.The chart below shows the quarterly production per mine for the last three quarters from Q1’20 to Q4’20.

Tasiast mine delivered record production and costs in 2020 for the second consecutive year and is expected to increase throughput to 21,000 tonnes per day by year-end with the Tasiast 24k project.

Fort Knox Gilmore project was completed on time and under budget, with the newly-acquired “bolt-on” Peak project advancing well.

The chart below is impressive. It shows that the AISC (co-product) is now $1,013 per GEO, about average compared to its peers.

AISC Comparison table:

AISC $/oz 4Q’19 1Q’20 2Q’20 3Q’20 4Q’20
GOLD 923 954 1,031 966 n/a
AEM 1039 1099 1,142 1,016 n/a
NEM 946 1030 1,097 1,020 n/a
KL 512 776 751 886 n/a
KGC 1050 993 984 958 1013
Average 894 970 994 969 1013

Source: Fun Trading files – More historical data available for subscribers only. KGC is the first to report for 4Q’20 so far.

Kinross Gold: Financial Analysis

1 – Revenues were $1,195.1 million in 4Q’20

KGC posted a $783.3 million profit or $0.62 per share in the fourth quarter of 2020 compared to a $521.5 million profit or $0.41 per share in the same quarter a year ago. The adjusted net earnings were $335.1 million, or $0.27 per share, for Q4 2020. The adjusted net earnings more than doubled quarter-over-quarter and year-over-year.

Revenues climbed 20% year-over-year to $1,195.1 million on higher average realized gold prices, which were $1,875 per ounce.

J. Paul Rollinson, President and CEO, said in the press release:

During the year, we continued to strengthen our investment grade balance sheet, more than doubled our adjusted net earnings to approximately $970 million, and increased our margins by 53% to $1,051 per ounce, which outpaced the increase in the average realized gold price. We also instituted a sustainable quarterly dividend to return capital to shareholders, which underscores the strength of our financial position.

Note in the press release about reversal impairment:

Included in reported net earnings in 2020 is a non-cash, after-tax impairment reversal of $612.8 million at Tasiast, Lobo-Marte and Chirano of $299.5 million, $180.4 million, and $132.9 million, respectively. The impairment reversals were related to property, plant and equipment mainly due to higher long-term gold price assumptions.

2 – Free Cash Flow is a gain of $382.8 million in 4Q’20

Note: Generic free cash flow is the cash from operations minus CapEx.

2020 free cash flow is $998.5 million. The company had a record gain of $382.8 million in 4Q’20. The company is paying a quarterly dividend of $0.03 per share or a yield of 1.64%.

3 – Net debt and liquidity – Excellent profile

The net debt is now down to $713 million. Cash and cash equivalents of $1,210.9 million, and total liquidity of $2.8 billion at December 31, 2020, with no debt maturities until 9/2021.

In the press release:

The Company had additional available credit of $1,563.6 million as of December 31, 2020, and total liquidity of approximately $2.8 billion. Kinross had total debt of approximately $1.9 billion at year-end 2020, of which $500 million in senior notes are due in September 2021, which the Company intends to repay. Kinross has further improved its debt metrics, including its net debt to EBITDA ratio, and continues to prioritize maintaining and strengthening its investment grade balance sheet.

4 – Outlook 2021

Kinross announced a growing three-year production profile, with production expected to increase by approximately half a million ounces, or 20%, to 2.9 million Au eq. Oz. in 2023.

The Company expects production (+/- 5%) of 2.4 million Au eq. Oz. in 2021, 2.7 million Au eq. Oz. in 2022, and 2.9 million Au eq. Oz. in 2023.

Source: press release

The 2021 forecast for exploration is up this year to approximately $120 million, all of which is expected to be expensed. It will be spent on exploration projects acquired in 2020, such as the Kayenmyvaam and Kavralyanskaya projects near Kupol, Chulbatkan, and the Peak development project in Alaska.

Conclusion And Technical Analysis

Kinross Gold reported a solid fourth quarter and full-year 2020. The gold price jumped from under $1,500 per ounce in 2019 to around $1,900 per ounce in 2020, and it made a huge financial difference for the company.

On February 10, 2021, the company provided updates on its development projects, exploration program, and estimated mineral reserves and resources.

Proven and Probable reserves increased 23% from 24.327 M Oz to 29.988 M Oz in 2020, another outstanding achievement.

Technical Analysis

KGC forms a descending triangle pattern with resistance at $7.55-$7.70 and support between $6.90 and $6.75.

As I have shown in my graph above from StockCharts annotated, this pattern is considered bearish because it is entered from the resistance (see green arrows). Thus, it is important to accumulate between $6.90 and $6.20, in my opinion. Conversely, I recommend taking profits (partial) between $7.45 and $7.80 (200MA).

KGC is considered a long-term investment. Hence you should never sell out your position but sell partially and buy by accumulation. Above all, look at the price of gold for general direction.


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