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Why Has Kinross Underperformed the Gold Sector in 2015?

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Kinross’s performance in the gold sector

As of November 13, 2015, Kinross Gold’s (KGC) stock price showed declines of 37% YTD (year-to-date) on an absolute basis. Even on a relative basis, the company has underperformed most of its peers in the senior gold space.

The VanEck Vectors Gold Miners ETF (GDX) fell by 28% during the same period while the SPDR Gold Shares (GLD), which tracks the spot price of gold, fell by 9.2%.

By comparison, Barrick Gold Corporation (ABX), Agnico-Eagle Mines (AEM), Newmont Mining (NEM), and AngloGold Ashanti (AU) fell by 31%, 3%, 9%, and 21%, respectively, during the same period.

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Operational performance

Kinross has been less successful in containing costs compared to its senior gold peers. Its long-term production profile is also a cause of concern in addition to its geographic exposure to Russia. These are the main reasons for Kinross’s underperformance.

Kinross announced its 3Q15 results after the market closed on November 10 and held the conference call the same day. The company reported adjusted EPS (earnings per share) of $0.02, above the consensus estimate of -$0.03. The beat was mainly due to higher revenues and lower costs.

Series preview

In this series, we’ll discuss how Kinross Gold’s future prospects are looking based on its recent 3Q15 earnings and on its management’s comments. We’ll also look at the firm’s production and cost performances.

We’ll also discuss Kinross’s recent developments with regard to its asset purchases and progress toward debt reduction in this series. We will aim to interpret how the company’s management is trying to position itself within the context of this volatile gold price environment.

Investors can access the gold industry through gold-backed ETFs such as the SPDR Gold Trust ETF (GLD) and the VanEck Vectors Gold Miners ETF (GDX). Newmont (NEM), Barrick Gold (ABX), and Goldcorp (GG) together make up 20.2% of GDX’s holdings.

Continue to the next part of this series for a discussion of Kinross’s growth in production in 2015, as seen through its 3Q15 results.

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