How Kinross Gold Plans to Fund Its Expansion Projects
Financing growth projects
Kinross Gold (KGC) plans to fund the Tasiast Phase Two expansion and the Round Mountain Phase W through its strong balance sheet, existing liquidity, and operating cash flows. The company had total liquidity of ~$2.5 billion, consisting of a cash balance of ~$1.1 billion and available credit of $1.4 billion on June 30, 2017.
In July 2017, the company closed an offering of $500 million of notes due in 2027 and used its proceeds plus cash on hand to repay its term loan, which was due in August 2020. This action pushed its nearest debt maturity to 2021.
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Strong financial standing
Kinross Gold’s management made it clear during its 2Q17 earnings conference call that the company would be able to fund its organic growth projects through its balance sheet. KGC’s company’s chief financial officer, Tony Giardini, noted that the company continues to optimize its debt portfolio to strengthen its financial flexibility.
Giardini added that with strong liquidity, cash flow generation from operations, a net debt-to-EBITDA1 ratio of 0.60x, and a manageable debt profile, Kinross is in a strong position to pursue future development opportunities.
Among KGC’s peers (RING) (GDXJ), Barrick Gold (ABX) and Newmont Mining (NEM) have also been successful in reducing their high debt levels over the past few years. Agnico Eagle Mines (AEM) and Goldcorp (GG) have lower financial leverages than their senior gold peers (GDX).
Gold price levels are not a factor
While answering one of the questions during the September 18, 2017, conference call, Kinross’s CEO, Paul Rollison, noted that irrespective of gold prices, the company was able to fund both projects due to its balance sheet strength.
Giardini added that even after stressing the company’s credit metrics under different gold price scenarios, they hold up quite well. This means that the company is going ahead with both projects regardless of gold price movements.
- earnings before interest, tax, depreciation, and amortization ↩