People avoid the mining sector because of its volatile nature, although stock prices tend to increase when demand for precious metals increases. Gold, for example, is also the safety net in case of a market crash. As of this writing, materials, the sector where mining stocks belong, is the third-best performing sector with +10.7% year to date versus the TSX’s +4.4%.
One thing going for the mining industry today is that metals are needed to develop the newest technologies. Moreover, the sector is becoming an attractive option for growth investors and suitable for diversification.
The TSX has a wide selection of mining stocks. Barrick Gold is one of the world’s largest gold (and copper) producers. However, consider Kinross Gold (TSX:K) if you’re investing in the sector long term.
Outperforming
Kinross Gold is a 31-year-old company that operates mines in Canada, the U.S., Brazil, Chile, and Mauritania. This $23.78 billion senior gold miner also produces silver. The exploration strategy focuses on high-quality brownfield projects and discovering new resources within the existing footprint of its operating mines.
Partnering with high-quality junior exploration companies helps maximize Kinross’s exposure to promising greenfield opportunities. The established partnerships yielded probable reserves of up to 22.8 million gold ounces at year-end 2023.
Performance-wise, the mining stock is doing exceedingly well. At $11.17 per share, current investors are up 40.59% year to date. Their overall return should be higher if you include the modest 1.30% dividend.
Financial highlights
In the first half of 2024, metal sales and net earnings attributable to common shareholders increased 12.14% and 24.13% to US$2.3 billion and US$317.9 million compared to the same period in 2023. Net cash flow from operating activities rose 19.5% year over year to US$978.4 million. In the second quarter (Q2) of 2024, the average realized gold price was US$2,342 per ounce versus $1,976 in Q2 2023.
Its chief executive officer, J. Paul Rollinson, said, “Kinross had another strong quarter supporting an excellent first half of the year. Our portfolio of mines performed well, delivering high-margin production, and we remain on track to meet our annual production and cost guidance for 2024.” He also noted the positive progress in all growth projects.
Other business highlights in the second quarter were the higher margin and hefty US$345.9 million free cash flow (FCF), which enabled Kinross to repay $200 million in debt and significantly improve its debt metrics.
The ongoing exploration and development projects are the Great Bear Gold (Red Lake, Ontario), Manh Choh (Tetlin, Alaska), and Round Mountain Phase X (Nevada, U.S.A.). Kinross poured the first gold bar from Manh Choh in early July.
According to Andrea Freeborough, Kinross’s chief financial officer, the company is solidly on track to meet its 2024 guidance to produce 2.1 million ounces at the cost of sales of $1,020 per ounce and all-in sustaining costs of $1,360 per ounce.
Competitive advantages
Rollinson said that based on the strong first-half results, the business remains in great shape, and there is much to look forward to for the rest of 2024 and beyond. He believes that Kinross has a strong production profile and an investment-grade balance sheet and can generate significant cash flow.
