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What Would It Take for Analysts to Be More Positive about KGC?

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Analysts’ recommendations for Kinross Gold

Of the 20 analysts covering Kinross Gold (KGC) as per the consensus compiled by Thomson Reuters, 40% have given it “buy” ratings, and 55% have given it “holds.”

Ratings for the stock haven’t changed much in recent months. Its target price of $4.1 suggests a potential upside of 22.2% based on its current market price.

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YTD underperformance

Kinross Gold has underperformed its peers YTD (year-to-date), returning 3.1% as of March 11. The VanEck Vectors Gold Miners ETF (GDX) has returned 5.7%, and the SPDR Gold Trust (GLD), which tracks gold’s physical price, has returned 0.8%. Geopolitical concerns kept the pressure on KGC in 2018 and are probably continuing to do so in 2019.

Analysts’ pessimism on Kinross

Among major gold miners (NUGT) (JNUG), Kinross Gold’s “buy” ratings are on the low side. Compared to KGC, analysts have 83% “buy” ratings for Agnico Eagle Mines (AEM) and 69%, 67%, and 47% “buy” ratings for Yamana Gold (AUY), Newmont Mining (NEM), and Goldcorp (GG), respectively. Only Barrick Gold (GOLD) has lower “buy” ratings at 10%.

There are several issues with Kinross Gold, due to which most analysts are sitting on the sidelines. There’s a real challenge for the company to increase its production, especially given its many maturing operations. The company also has higher costs than most of its peers, making it very sensitive to changes in precious metals prices. Moreover, the political risks the company faces are also significantly higher than those of its peers.

In April 2018, the US imposed fresh sanctions on Russia, and Kinross stock plunged due to its exposure to Russia. In May 2018, its application for the conversion of its Tasiast Sud exploration permit into an exploration permit was rejected by the government of Mauritania, which stated its desire to enter into mutually beneficial discussions. This development negatively affected its stock.

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