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Why Kinross Gold Is Underperforming Peers after a Strong 2017

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Analysts’ recommendations

Of the analysts covering Kinross Gold (KGC), 47% have recommended “buy” and 53% have recommended “hold.” Ratings for the stock haven’t changed much in recent months. Its target price of $5.38 suggests a potential upside of 47% based on its current market price.

In 2017, Kinross significantly outperformed peers (GDX) (JNUG), returning 39%. Newmont Mining (NEM), Agnico Eagle Mines (AEM), and Barrick Gold (ABX) returned 10.1%, 10.0%, and -9.4%, respectively. Kinross stock performed strongly thanks to its solid operating performance in 2017. In 2018, however, the situation reversed. As of March 19, 2018, the stock had fallen 15.3% this year. Its 4Q17 results were below expectations and the company expects production to be lower in 2018 than in 2017.

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Recent rating changes

On March 12, 2018, Royal Bank of Canada (or RBC) lowered Kinross’s target price from $5.50 to $5, and assigned the stock an “outperform” rating. BMO Capital Markets set a target price of $5 for Kinross stock on December 19, 2017, and has recommended “buy” for the stock.

On November 10, 2017, Macquarie upgraded Kinross stock from “neutral” to “outperform.” Macquarie analyst Michael Siperco upgraded the stock to reflect the company’s improving operations, organic growth pipeline, and increased mergers and acquisitions.

On September 1, 2017, Citigroup (C) upgraded KGC from “sell” to “hold,” and lifted its target price from $3.25 to $4.75. Citigroup’s view is that amid geopolitical tensions, gold prices could be supported at $1,260–$1,360 per ounce, with an upward bias for the remainder of 3Q17.

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