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.

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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.

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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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