Why You Can't Miss this Gold Mine!
Piyush is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The world is gearing up for another round of Quantitative Easing, and so should you. Around the globe, investors are investing their money in precious metals like gold and silver, which is moving the prices of these commodities up. Some people prefer to invest in gold futures and ETFs, and some prefer to invest in gold mining and gold streaming companies. I being from the latter category think that Kinross would be a great investment and here are a few reasons why.
Kinross Gold (NYSE: KGC) is a gold mining company which is primarily involved in exploration and operation of gold mines. The Canadian company is ranked amongst the top ten gold producers in the world with production of 2,610,373 ounces of gold in 2011. The company has its operations spread in North and South America along with Russia and Africa.
Company's outlook
One of the most important projects of the company, the Dvoinoye mine in Russia, is expected to be operational by the second half of 2013. Kinross is looking to mine 1000 tons of ore every day, which would yield around 250,000 ounces of gold in a year, when operating at full capacity. It was said that the company is looking to run the mine at full capacity for the first 3 years. The mine has a life of seven years, and the production from the mine alone would add 9.57% to the total production of the company, which may prove to be a positive catalyst for the company’s topline estimates.
Kinross Gold’s most important project turns out to be at Tasiast which is expected to have around 20 million ounces of mineral resource base. The company was forced to take a $1 billion loan to cover the increasing costs of its most important project at Mauritania, West Africa. To beat the increasing expenses the completion date has been pushed back, which analysts believe, would reduce the expected development expenses that company has to bear. This also could be positive for the company, giving the stocks some headroom to grow.
Outperforming its Peers
The company has been the best performer of the industry for the last 3 months. This quarter has been particularly good for Kinross stocks. In the last 3 months the company has not only outperformed its peers in terms of returns, but also the SPDR Gold Index.
Fundamental Comparison
The company faces competition from Barrick Gold (NYSE: ABX), Goldcorp (NYSE: GG) and Newmont Mining (NYSE: NEM).
|
Company |
Market Cap |
Forward P/E |
Quarterly EPS |
EPS next year |
Debt/Equity |
|
KGC |
$11 billion |
9.56 |
16.67% |
36.49% |
13% |
|
ABX |
$40 billion |
8.23 |
3.45% |
16.19% |
56% |
|
GG |
$35 billion |
15.58 |
10.23% |
2.76% |
3% |
|
NEM |
$26 billion |
10.55 |
3.52% |
4.9% |
47% |
In the above metric comparison table, we can very well see that, KGC has given the best EPS this quarter. The company is still priced below its fairly competitors and analysts believe that the company will outperform its peers in the next year with a 36.49% EPS. The Debt/Equity also stands as the second best, which marks healthy business operations. Overall, KGC turns out to be our fundamental pick.
Conclusion
The stock has still not recovered from the fall it incurred from March to May. The slide happened due to a huge write-down of $2.94 billion in Ghana. But the company has outperformed its peers and the gold index in the past 3 months, proving to be a better investment. Analysts believe that the company will continue to outperform its peers in the next year, making the stock lucrative to investors. We believe that the reduced operational costs at Tasiast and the expected launch of the mine in Russia, both give the investors an opportunity to enter a rising stock at a low price. The stock has a Foolish buy rating.
PiyushArora has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
