Introduction

Kinross Gold (NYSE: KGC) could be considered a long-term gold miner, competing with Newmont Corporation (NEM, Financial), Barrick Gold (GOLD, Financial), and Agnico Eagle Mines (AEM, Financial), which I have discussed on this website.

I owned and traded KGC for a long time and made a good profit. On November 5, 2024, the company released its third-quarter 2024 results. This article is an update to my Gurufocus article from April 3, 2024, in which I analyzed the fourth quarter of 2023.

Over the past year, Kinross Gold has demonstrated a robust performance, particularly in light of the substantial increase in the gold price. The chart below shows that the company has significantly outperformed its peers. KGC has seen a remarkable 69% increase year over year, surpassing even AEM.

Gold Production

The quality of its producing mines determines the company's success. Kinross Gold owns six producing mines and 70% of the Manh Choh mine.Production increased in Alaska's Fort Know this quarter with the addition of Manh Choh (KGC owns only 70%), resulting in a difference between actual and attributable gold production this quarter. Fort Knox produced 149,093 ounces, including Manh Choh, of which 119,500 ounces were attributable.

The Tasiast mine in Mauritania, West Africa, is a minor weakness that could have serious consequences for the stock.

The mine is referred to as "a cornerstone asset with exceptional margins." I see no reason to question the company's assessment. Tasiast is the company's largest mine, producing 162,155 ounces of gold in 3Q24, accounting for 29.5% of total attributed gold production.
However, while Mauritania is a “rare beacon of stability” right now, with a mining sector accounting for 30% of the country's revenue, geopolitical instability is always a risk we must address and never underestimate.

When we invest in the mining sector, evaluating such risks and what could happen if the worst-case scenario happens is essential. Aside from this minor point, the company's mine profile is solid.
Another key advantage of KGC is the potential of the Great Bear Project in Ontario, Canada. The Great Bear Project's Economic Assessment (PEA) was completed on September 10, 2024.

The mine is expected to produce 518K ounces over its first eight years of operation, with an AISC of $812 per year for the mine's lifetime. The project is expected to be completed by 2029, indicating a bright future for the company.

Source: Company presentation 3Q24
Kinross Gold also owns the Curlew Basin and Lobo-Marte projects, which are much less advanced and can only be described as promising in the distant future.

In the third quarter of 2024, gold accounted for roughly 99.5% of Kinross Gold's total revenue. Kinross produced and sold silver as a byproduct, primarily from the La Coipa mine in Chile. The attributed revenue from silver was $21.4 million in 3Q24.The total attributable production was 564,106 gold ounces, and the company sold 550,548 gold ounces in 3Q24. Production this quarter has been higher than the two preceding quarters, as shown in the chart of production history below.

When we compare 3Q23 to 3Q24, we can see that most of KGC's mines produced less gold than a year ago. Even if this quarter's production was higher than the three preceding quarters, we can see that the company is at a historically low level, perhaps due to the forced sale of its Russian assets (Kupol mine and Udinsk project).

The results at Fort Knox include Manh Choh production in 3Q24, which can only be compared to 3Q23 with some adjustments.

The Great Bear project in Ontario, Canada, is a significant asset for Kinross Gold's long-term production. The project was acquired in February 2022 and is scheduled to begin production in 2029.

This timeline may prompt the company to consider a merger or an acquisition of another mine in 2025-2026 to ensure a steady production flow until the project becomes commercially mature.

Kinross Gold has successfully controlled its All-in-Sustaining Costs (AISC) at around $1,350 per attributed ounce. This contrasts Barrick Gold (GOLD, Financial) and Newmont Corporation (NEM, Financial), which reported an AISC of over $1,500 per ounce sold in 3Q24. KGC's record margin of $1,501 per ounce, outpacing the metal increase, is likely to increase even more in 4Q24, indicating the company's effective cost management strategy.

Trading gold stocks

As I said in my preceding article:

The gold industry is currently facing challenges with rising costs, and this trend is likely to persist. If gold prices can maintain their recent levels, gold miners should be able to generate a satisfactory amount of free cash flow, and gold stocks will deliver a decent return. However, this situation partially explains why gold stocks tend to perform poorly when the price of gold is strongly rising, as we have seen in the past few quarters. Worse, they often experience a rapid decline when gold prices undergo any slight consolidation.

Kinross Gold is a solid company, but its risk level is slightly above what I consider safe. There are three main reasons for this classification. The first reason for Kinross Gold's slightly higher risk level is the geopolitical risk associated with the Tasiast mine in West Africa. While Mauritania does not face the same issues as neighboring countries, the situation can quickly deteriorate, and miners are frequently the first to feel the effects.

For example, look at the current situation in Mali or the various crises that have affected other parts of Africa. The Tasiast mine is the company's largest in terms of production, and any trouble or rumors could hurt the stock. Recently, Kinross faced a setback by having to exit Russia, and if another black Swan issue arises again, the stock price could take a significant hit.

The second issue is the company's poor dividend policy. Kinross currently pays a quarterly dividend of $0.03 per share, which translates to an annual yield of just 1.23%. Additionally, being a Canadian company, U.S. investors face a 25% withholding tax on dividends, effectively reducing the yield to less than 1%. Kinross Gold's dividends are relatively unattractive for investors compared to most of its peers.

The final issue revolves around the timeline for completing the Great Bear project and commercially producing gold there. The company may need more production in 2026-2027, which may require acquiring or merging with another company. Such an action is always detrimental to the stock.
My recommended trading strategy for KGC involves using a LIFO (Last In, First Out) approach. This method is intended to effectively manage a large portion of your position, potentially up to 70%. By implementing this strategy, you can handle a short-term position that generates small returns while maintaining a long position until the stock reaches your long-term target—assuming everything goes as planned.
Successful trading using the LIFO method requires a solid understanding of short-term technical analysis and the ability to select the right stocks. KGC, like many other solid gold stocks (GOLD, NEM, AEM, etc.), is an excellent candidate for this strategy.

A quick look at the 3Q24

Kinross Gold reported earnings of $0.29 per share for the third quarter of 2024, a significant increase from $0.09 per share in the same quarter last year. The company's revenues reached $1,432 million, reflecting a 29.9% increase year-over-year. Adjusted earnings were $0.24 per share.

Kinross Gold announced a record net income of $355.3 million for the quarter, up from $109.7 million last year. This significant increase was attributed to the first production from its Manh Choh mine.

The company reported a free cash flow of $454.8 million in the third quarter, a significant increase from the $122.9 million earned in the same quarter last year. Cash flow from operations amounted to $733.5 million, and capital expenditures totaled $278.7 million.

Given the impressive level of free cash flow (see map below), one might expect the company to consider raising its dividends; however, management has chosen not to do so. KGC is not alone in this decision, as other gold companies like Newmont, Barrick Gold, and Agnico Eagle Mines also kept their dividends unchanged. This situation is particularly concerning for KGC, as it distributes roughly half of what its peers offer, providing no incentive for potential new long-term investors.

Kinross Gold ended the third quarter with $472.8 million in cash, cash equivalents, and marketable securities, an increase from $464.9 million in 3Q23. Long-term debt was approximately $1,684.7 million (including current debt), significantly decreasing from $2,283.3 million in 3Q23. The debt is back to the 2021 level, a significant achievement.

What does KGC expect for 2024?

Kinross is on track to meet its production guidance of 2.1 million gold equivalent ounces.
The company also expects to meet its guidance for production costs of sales, estimated at $1,020 million for 2024. It also expects to meet guidance for attributable all-in-sustaining costs forecasted at $1,360 per ounce, along with capital expenditures (including 70% of Manh Choh) for the same year.
Kinross expects annual production to remain stable at approximately 2 million gold equivalent ounces in 2025 and 2026.

Technical Analysis

Note: The chart has been adjusted for dividends.

Kinross Gold follows an ascending triangle pattern, with resistance at $10.70 and support at $9.35. The relative strength index (RSI) is 49, indicating a slightly bearish (descending) trend.

An ascending triangle is commonly regarded as a bullish pattern, frequently leading to a bullish breakout. The stock has identified resistance at around $10.70, which provides an excellent opportunity to consider selling a portion of your position if this resistance is successfully tested, as shown in my chart above.

Taking partial short-term profits using the Last In, First Out (LIFO) method is important. Consider selling around 70% of your position for short-term gains while keeping a core long-term investment. This strategy allows you to capitalize on potential significant gains while still collecting dividends. Most importantly, it can help you avoid unpleasant surprises.
Warning: The technical analysis chart must be updated on a regular basis.