How Might Kinross Gold’s Balance Sheet Support Its Future Growth?

Anuradha Garg - Author

Nov. 26 2018, Updated 9:00 a.m. ET

Liquidity position

Kinross Gold’s (KGC) liquidity position at the end of the third quarter was reflected its strategic investments. Its investments included a $254 million power plant acquisition in Brazil, which was cash funded, and the buying of its joint venture partners.

The company had cash and cash equivalents of $500 million in the third quarter compared to $918.7 million at the end of the second quarter. Its total liquidity at the end of the third quarter was $2.0 billion compared to $2.5 billion at the end of the second quarter.

This liquidity position is significant given that the company doesn’t have any debt maturity until 2021. Its position should help it invest in future development opportunities.

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Financially flexible to advance growth projects

KGC has the financial strength and flexibility to invest in the future as it executes on five projects and advances three additional development opportunities. Its strong cash flow generation should enable it to pursue these growth opportunities. In the third quarter, it generated $143 million in adjusted operating cash flow. KGC has a forward net debt-to-EBITDA ratio of ~1.1x.

Its peers (RING) (GDXJ) Newmont Mining (NEM) and Barrick Gold (ABX) have reduced their debts considerably over the past few years. Goldcorp (GG) and Agnico Eagle Mines (AEM) have lower financial leverages than their senior gold peers (GDX).

FCF generation

Kinross’s FCF (free cash flow) for the last few quarters has been negative, mainly due to its higher capex. However, as most major capex is now done, especially in relation to Tasiast, the company should see accelerated FCF from 2019 onward.

For now, the company needs to resolve its geopolitical issues as well as bring its production growth back on track. This should help it lower its unit costs, restoring investors’ confidence.


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