Kinross Gold Corporation (TSX:K)(NYSE:KGC) is an underrated gold mining company which has been a difficult stock to own for long-term investors. The stock is now down over 76% from its March 2008 peak, and it appears it is finally starting to see some positive momentum.
Kinross has made major changes to its production profile, and it appears that long-term fundamentals have changed for the better. Is Kinross a promising turnaround candidate that should have the attention of contrarian investors? Or is the recent rally unsustainable?
Greg Barnes of TD Securities believes that many investors are overlooking Kinross and have not considered the huge improvements the company has made over the last few years.
Kinross’s Tasiast mine in Mauritania was an underwhelming project for quite some time. Many investors deemed the project a dud, but Kinross has been investing in this mine in the hopes of increasing production with a better operational efficiency.
The Tasiast mine now has a better cost performance and could be a significant source of cash flow in the months ahead. Phase one and two expansions of the project are expected to see production triple to around 770 ounces per year, while the costs are expected to decline to less than $500 per ounce.
The Tasiast project is shaping up to be a promising medium-term catalyst which could propel the stock higher as we head into the latter part of 2017. This leads me to believe that the current rally in Kinross is sustainable and could be heading to new highs over the next 12 months.
Although Kinross is down a gigantic amount from its high, the company’s balance sheet is actually quite solid. The company has $1.1 billion worth of cash with a total liquidity around $2.5 billion.
Kinross has been quite consistent with meeting its targets each quarter, and I think the pessimism surrounding the stock for nearly a decade is completely overblown right now, especially when you consider the major changes that have been made.
The company is firing on all cylinders with its projects. The company has no problems with funding at the moment, and I believe the cost reductions are going to make Kinross a fantastic rebound play for deep-value investors over the next few years.
Stay smart. Stay hungry. Stay Foolish.
