Why Kinross Gold’s Stock Price Fell after It Announced Expansion Plans



Kinross Gold’s significant outperformance

Kinross Gold (KGC) stock has outperformed the VanEck Vectors Gold Miners ETF (GDX) and its close peers significantly year-to-date (or YTD). While Kinross Gold has risen 45.7% through September 18, 2017, GDX has gained just 7.7% during the same period.

Among Kinross’s close peers, Barrick Gold (ABX), Newmont Mining (NEM), Goldcorp (GG), and Agnico Eagle Mines (AEM) have given returns of 5.9%, 10.9%, -4.6%, and 12.5%, respectively. Kinross’s strong operating performance along with solid execution on its project pipeline led to its outperformance in 2017.

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Growth projects

On September 18, 2017, Kinross Gold announced that it would proceed with Tasiast Phase Two and Round Mountain Phase W after the feasibility studies were concluded. These projects would entail a combined capital expenditure of more than $1.0 billion.

While Kinross Gold announced a positive development, which would increase its future production and reduce its costs, its stock price fell 6.0% after the announcement. This represented underperformance, as GDX fell just 1.7% on the same day. The most likely reason for the stock decline is that investors were profit-seeking.

The approval of these projects was most likely expected by the market. As we noted, its stock price has significantly outperformed its major peers year-to-date.

Series preview

Kinross Gold (KGC) announced that it would proceed with two important projects that have the potential to increase production significantly and reducing its cost per unit.

In this series, we’ll discuss the economics of both projects in detail. We’ll also see how the company plans to finance these two projects. Kinross Gold hosted a conference call with the analysts on September 18, 2017, to discuss these projects. We’ll also discuss the key highlights from the call.


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