Goldman Sachs Upgrades Kinross Gold To Buy

Kinross Gold Corporation (USA) (NYSE: KGC) is highly leveraged to higher gold prices, Goldman Sachs’ Andrew Quail said in a report. The analyst upgraded the rating for the company from Sell to Neutral, while raising the price target from $2.10 to $5.30. The new price target implies an upside of 2 percent.

“Given the relatively high-cost nature of Kinross’ asset base and our new, higher gold price deck, we believe the company is better positioned to generate FCF,” analyst Andrew Quail wrote. He highlighted the fact that Kinross Gold had recently completed an equity raise of about $280mn, which eases the financial pressure.

The EPS estimates for 2016, 2017 and 2018 have been revised upward from -$0.07 to $0.05, from -$0.19 to -$0.04 and from -$0.10 to -$0.04, respective, to reflect higher gold prices.

Upside To Shares

• Incremental news flow stemming from Tasiast – Any positive update related to the Phase One expansion may lend upside to shares. Throughputs are expected to increase 50 percent at the company’s second largest asset by production.
• Improved financial flexibility – With the overhang of the equity raise disappearing, shares could trend higher, Quail mentioned.
• Nevada assets updates – “We believe the recent acquisition of some of ABX’s Nevadan assets improves the geopolitical risk profile of the company. In our view, any update on the strategy in the region could act as a catalyst for future organic growth,” the analyst wrote.

Quail pointed out, however, that Kinross Gold’s shares had risen 53 percent since January 26, 2015, versus a 0 percent gain in the S&P 500 and a 46 percent gain in the GDX.