Why Shares in This Leading Mining Stock Soared 21% in May

This gold stock has risen higher on the back of gold prices, sure, but there’s even more driving shares this month.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published May 23, 2024 3:30 pm EDT

Gold prices continue to climb in this time of uncertainty. And that included the month of May, with many gold stocks seeing a rise in share price. However, not all of them climbed as high as Kinross Gold (TSX: K). Shares of the gold miner soared 21% in the month of May alone. So, let’s look at what happened and whether the stock will keep it up.

Safety helmets and gloves hang from a rack on a mining site. — Source: Getty Images

Earnings are up

Part of the climb came after Kinross stock reported first-quarter earnings that demonstrated more strength for the gold stock. Kinross reported a 19% increase in reported net earnings to US$107.0 million for the first quarter (Q1) of 2024 compared to the same period in 2023. Furthermore, its margins increased by 20% to US$1,088 per gold equivalent in Q1 2024, indicating they’re controlling costs effectively while gold prices remain favourable.

Kinross stock also reported positive cash flow. The company’s adjusted operating cash flow increased to US$424.9 million compared to US$358.2 million in Q1 2023, demonstrating healthy cash generation from their operations.

Add to this that production was well on track. Kinross stock produced 527,399 gold equivalent ounces in Q1 2024, which is in line with their 2024 production guidance of approximately 2.1 million gold equivalent ounces. Overall, it was a strong quarter, but more is underway.

Project developments

There was also strong news in the quarter about the company’s existing mines. This included significant progress at its Great Bear Project, which was acquired back in February of 2022.

Kinross stock conducted extensive drilling in 2022, exceeding 250 kilometres. This data, combined with previous drilling by Great Bear, helped establish an initial mineral resource estimate for the project in February 2023.

Now, Kinross stock sees this project as a central piece of their future, with the potential to be a large, long-life mine due to the promising gold deposit. Back in 2023, Kinross aimed to define deeper mineralization and explore new areas around the property. They’re also working on permits for an advanced exploration program that could involve an underground tunnel to access deeper parts of the deposit for further analysis.

All this to say, Kinross stock is targeting a potential start sometime this year, adding even more gold to the company’s reserves.

Bottom line

So, with all this recent growth, should investors consider buying Kinross stock right now? There are a few items to consider here, as always. Since Kinross mines and sells gold, its stock price tends to move in the same direction as the overall price of gold. If you believe gold prices will continue to rise, Kinross could be a good way to benefit from that trend.

Furthermore, Kinross stock still looks valuable. It trades at 22.88 times earnings, which is in line with fair value, and 1.65 times book value. So, there is certainly room to grow for the company. What’s more, production growth cannot be overlooked. The Great Bear project has the potential to become a major mine for Kinross, significantly increasing their production in the future.

However, the price of gold can be volatile. So, a significant drop could negatively impact the stock. What’s more, there could always be unexpected events at mines, and there is no guarantee as to when Great Bear might be up and running. So, as always, make sure you consider all factors and your risk tolerance before diving into a stock.