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Kinross Gold Corporation’s KGC stock looks attractive from a valuation perspective. KGC is currently trading at a forward price/earnings of 11.13X, a roughly 11.2% discount compared with the Zacks Mining – Gold industry’s average of 12.54X. It also has a Value Score of A.
The stock is currently trading at a roughly 9.7% discount to its 52-week high of $10.82, reached on Oct. 24, 2024, thanks to a surge in gold prices to new highs on U.S. election uncertainties and heightened geopolitical tensions.
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Technical indicators show that KGC has been trading above the 200-day simple moving average (SMA) since March 6, 2024. However, the stock is currently trading below its 50-day SMA. Nevertheless, the 50-day SMA continues to read higher than the 200-day SMA, indicating a bullish trend.
Kinross Trades Below 50-Day SMA
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KGC’s cheap valuation should lure investors seeking value. But is the time right to buy KGC’s shares based on its attractive valuation? Let’s delve deeper.
Key Development Projects to Incite KGC’s Growth
Kinross has a strong production profile and boasts a promising pipeline of exploration and development projects. Its key development projects and exploration programs, including Great Bear in Ontario and Round Mountain Phase X in Nevada, remain on track. These projects are expected to boost production and cash flow and deliver significant value. KGC also completed the commissioning of its Manh Choh project and commenced production during the third quarter of 2024, leading to a substantial increase in cash flow at the Fort Knox operation.
Tasiast and Paracatu, the company’s two biggest assets, remain the key contributors to cash flow generation and production. Tasiast remains the lowest-cost asset within its portfolio, with consistently strong performance while Paracatu continues to deliver steady production. KGC remains on course to meet its 2024 gold production target of 2.1 million gold equivalent ounces.
Kinross’ Solid Financial Health Bodes Well
KGC has a strong liquidity position and generates substantial cash flows, which allows it to finance its development projects, pay down debt and drive shareholder value. The company ended the third quarter with solid liquidity of roughly $2.1 billion. KGC also generated record third-quarter attributable free cash flows of $414.6 million, driven by the strength in gold prices and operating margins. It remains focused on paying down debt, reducing its net debt by approximately $1 billion over the past 18 months. KGC repaid $350 million of debt in the third quarter.
Rallying gold prices should boost KGC’s profitability and drive cash flow generation. Gold has been among the best-performing assets this year, with prices rallying roughly 28% on strong demand from central banks, the Fed’s dovish interest rate outlook, global uncertainties and a surge in safe-haven demand thanks to increased tensions in the Middle East. After the pullback due to a rally in the U.S. dollar following Trump's win in the U.S. Presidential election, gold prices regained strength as the Federal Reserve cut interest rates by a quarter point. While a stronger U.S. dollar is weighing on the yellow metal lately, gold prices are likely to gain support on prospects of another rate cut in December.
Further, KGC offers a dividend yield of 1.2% at the current stock price. It has a payout ratio of 20% (a ratio below 60% is a good indicator that the dividend will be sustainable). Backed by strong cash flows and sound financial health, the company's dividend is perceived to be safe and reliable.