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Kinross Gold: Should We Pay Attention to It in 2017?

PART:
1 2 3 4 5 6 7 8 9
Part 6
Kinross Gold: Should We Pay Attention to It in 2017? PART 6 OF 9

These Could Drive Kinross Gold’s Free Cash Flow in 2017 and Beyond

Free cash flow

Investors usually look at a miner’s ability to generate FCF (free cash flow) in a volatile metal price environment. In this part of our series, we’ll see how Kinross Gold (KGC) is progressing in this metric.

These Could Drive Kinross Gold’s Free Cash Flow in 2017 and Beyond

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FCF generation

Kinross Gold generated $212.0 million in operating cash flow in 4Q16, which is a 4.0% rise YoY (year-over-year). After capital expenditure, FCF for the quarter was $80.0 million. The company has generated $465.0 million in FCF year-to-date.

Along with its available liquidity, its FCF should be enough to fund the company’s operations, near-term capital expenditure, and exploration activities.

FCF drivers

Below are the main drivers for Kinross Gold’s increasingly positive FCF in 2016:

  • higher gold prices
  • strong performance from its US, Russian (RSX), and Brazilian operations
  • low oil prices and favorable exchange rates
  • continued discipline in capital and operating expenditure

Other gold miners, including Eldorado Gold (EGO), AngloGold Ashanti (AU), Goldcorp (GG), Yamana Gold (AUY), and Newmont Mining (NEM), are also taking steps to increase their FCFs in order to weather this volatile gold price environment.

You can get exposure to the gold sector by investing in ETFs such as the VanEck Vectors Gold Miners ETF (GDX), which invests in intermediate and senior gold producers. Goldcorp makes up 7.6% of GDX’s holdings. The SPDR Gold Shares (GLD) tracks spot gold prices.

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