Company Reports

Commodity prices generally fell in the September-ending quarter, except for gold. Concerns about weak China end-user steel demand affected iron ore and other steelmaking commodities, while base metals prices fell on worries over slower economic growth in China and elsewhere.

Elevated gold prices drove a better-than-expected 2024 second-quarter result for no-moat Kinross Gold. Higher prices more than offset sales volumes falling 6%, and unit costs rising 7%. Lower production on lower grades at its Paracatu mine in Brazil was the main reason for the fall in volumes. However, Kinross remains on track to meet our unchanged forecast for sales volumes of around 2.05 million gold equivalent ounces, or GEO, in 2024.

Shares of most of our global mining coverage fell during the quarter, and the average price/fair value estimate has fallen modestly to 1.05 at July 8, 2024 from 1.07 last quarter. While our coverage is close to fairly valued on average, there is a wide dispersion, with no-moat mineral sands miner Iluka the cheapest, trading 30% below fair value at that date. Mineral sands prices are lower, on reduced demand from China’s property sector. Rising interest rates and slowing housing markets in the West are also a near-term headwind. However, longer-term, maturing mines and a lack of large, high-grade, undeveloped resources are likely to support mineral sands prices. Its proposed rare earths refinery in Eneabba is an option, on elevated rare earths prices and potential Western tariffs on Chinese production.

Base metals prices surged earlier in the June quarter of 2024 before partially reversing due to concerns over China’s economy. Iron ore prices are broadly stable despite China's struggling property market and weak infrastructure spending, leading to questions over China's steel demand. After updating our commodity price assumptions, no-moat Iluka is the cheapest miner we cover, trading 31% below its unchanged fair value estimate of AUD 9.50.

Kinross Gold is a senior gold miner with production split roughly 70% in the Americas and 30% in West Africa. Its Paracatu mine in Brazil and Tasiast mine in Mauritania accounted for about 55% of the roughly 2.2 million gold equivalent ounces produced by Kinross in 2023. Both mines are also in the bottom half of the gold cost curve, but we don’t consider them moatworthy due to remaining mine lives of about a decade. They are more than offset by Kinross’ remaining higher-cost mines. The company’s average all-in sustaining cost of roughly USD 1,300 per gold equivalent ounce in 2023 places Kinross at around the middle of the gold cost curve. Kinross had about a decade of gold reserves at the end of 2023.

No-moat Kinross Gold’s solid 2024 first-quarter result broadly met our expectations. It is on track to meet our unchanged forecast for sales of around 2.05 million gold equivalent ounces, or GEO, in 2024. Sales volumes grew 7%, driven by higher production from its Tasiast mine in Mauritania and La Coipa mine in Chile. The increased production broadly offset headwinds from inflation, meaning unit cash costs were similar to last year.

Kinross Gold is a senior gold miner with production split roughly 70% in the Americas and 30% in West Africa. Its Paracatu mine in Brazil and Tasiast mine in Mauritania accounted for about 55% of the roughly 2.2 million gold equivalent ounces produced by Kinross in 2023. Both mines are also in the bottom half of the gold cost curve, but we don’t consider them moatworthy due to remaining mine lives of about a decade. They are more than offset by Kinross’ remaining higher-cost mines. The company’s average all-in sustaining cost of roughly USD 1,300 per gold equivalent ounce in 2023 places Kinross at around the middle of the gold cost curve. Kinross had about a decade of gold reserves at the end of 2023.

Commodity prices diverged in the quarter. Despite solid China steel production, iron ore and metallurgical coal prices are down, while copper rose on supply issues and hopes of faster global growth. However, prices are elevated compared with history and cost-curve support.

Iron ore prices are lower on concerns over China steel demand due to its struggling property market and weak infrastructure spending. However, gold prices are up on optimism over peak interest rates, driving a 2% rise in our estimate for no-moat Newmont, to USD 51. It remains the cheapest miner we cover, trading 27% below fair value.

Kinross Gold is a senior gold miner with production split roughly 70% in the Americas and 30% in West Africa. Its Paracatu mine in Brazil and Tasiast mine in Mauritania accounted for about 55% of the roughly 2.2 million gold equivalent ounces produced by Kinross in 2023. Both mines are also in the bottom half of the gold cost curve, but we don’t consider them moatworthy due to remaining mine lives of about a decade. They are more than offset by Kinross’ remaining higher-cost mines. The company’s average all-in sustaining cost of roughly USD 1,300 per gold equivalent ounce in 2023 places Kinross at around the middle of the gold cost curve. Kinross had about a decade of gold reserves at the end of 2023.

Demand growth from China has been the main driver of rising commodity prices in the past two decades. More recently, though, most commodity prices have fallen from highs set with Russia’s invasion of Ukraine, the subsequent sanctions on Russia, and the rerouting of supply chains. Prices, nevertheless, are generally elevated versus the 20-year average, as well as relative to cost support.

No-moat Kinross Gold’s 2023 result was better than we expected. Adjusted EBITDA of roughly USD 1.8 billion was 46% up on 2022 and 7% higher than our forecast. Both gold equivalent ounces, or GEO, sales volumes and prices contributed. Adjusted net profit after tax of USD 540 million, or USD 0.44 (CAD 0.59) per share, roughly doubled, with free cash flow of USD 560 million more than twice that earned in 2022. Strong earnings allowed Kinross to materially improve its net debt position, with net debt now around 1 time trailing 12 months EBITDA, down from roughly 1.7 times. Consistent with its quarterly dividend policy, Kinross will pay a USD 0.03 (roughly CAD 0.04) dividend, the same as last year, in March.

Kinross Gold is a senior gold miner with production split roughly 70% in the Americas and 30% in West Africa. Its Paracatu mine in Brazil and Tasiast mine in Mauritania accounted for about 55% of the roughly 2.2 million gold equivalent ounces produced by Kinross in 2023. Both mines are also in the bottom half of the gold cost curve, but we don’t consider them moatworthy due to remaining mine lives of about a decade. They are more than offset by Kinross’ remaining higher-cost mines. The company’s average all-in sustaining cost of roughly USD 1,300 per gold equivalent ounce in 2023 places Kinross at around the middle of the gold cost curve. Kinross had about a decade of gold reserves at the end of 2023.

Near-term iron ore prices are higher on strong China steel production. Gold prices are up on optimism over peak interest rates, driving a 2% rise in our estimate for no-moat Newmont, to USD 54. It is the cheapest we cover, trading 30% below fair value.

Kinross Gold is a senior gold miner with production split roughly 70% in the Americas and 30% in West Africa. Its Paracatu mine in Brazil and Tasiast mine in Mauritania accounted for about 55% of the roughly 2 million gold equivalent ounces produced by Kinross in 2022. Both mines are also in the bottom half of the gold cost curve, but we don’t consider them moatworthy due to remaining mine lives of about a decade. They are more than offset by Kinross’ remaining higher-cost mines. The company’s average all-in sustaining cost of roughly USD 1,300 per gold equivalent ounce in 2022 places Kinross at around the 55th percentile of the gold cost curve. Kinross had about a decade of gold reserves at the end of 2022.

Commodity prices diverged in the quarter with strong China steel production driving iron ore and metallurgical coal prices up, while base metals prices dropped on worries of a Western recession. Even so, prices are elevated versus history and cost-curve support.

No-moat Kinross Gold’s 2023 third-quarter result was better than our expectations. Higher gold sales volumes and prices along with lower unit cash costs drove a 66% increase in EBITDA, to USD 490 million, compared with the same quarter of 2022. Adjusted net profit after tax of USD 145 million, or USD 0.12 (CAD 0.167) per share, more than doubled. Kinross will pay a USD 0.03 (roughly CAD 0.042) dividend in December, the same as last year and in line with its quarterly dividend policy. We forecast total 2023 dividends of USD 0.12 (CAD 0.167) per share for a 2.2% forward yield at current share prices.

Kinross Gold is a senior gold miner with production split roughly 70% in the Americas and 30% in West Africa. Its Paracatu mine in Brazil and Tasiast mine in Mauritania accounted for about 55% of the roughly 2 million gold equivalent ounces produced by Kinross in 2022. Both mines are also in the bottom half of the gold cost curve, but we don’t consider them moatworthy due to remaining mine lives of about a decade. They are more than offset by Kinross’ remaining higher-cost mines. The company’s average all-in sustaining cost of roughly USD 1,300 per gold equivalent ounce in 2022 places Kinross at around the 55th percentile of the gold cost curve. Kinross had about a decade of gold reserves at the end of 2022.

Strong China steel production is supporting prices for steel inputs despite recession concerns. Otherwise, changes to our commodity price assumptions are mixed, led by higher near-term iron ore prices and lower near-term thermal coal prices. We think thermal coal miner Whitehaven Coal and minerals sands miner Iluka are the cheapest we cover. Both trade at 29% discounts to our AUD 9.50 and AUD 10.50 per share fair value estimates, respectively, with Whitehaven’s down 3% on lower near-term thermal coal prices, partially offset by a weaker Australian dollar. Peer New Hope is also down 3% to AUD 6.10 per share. Iluka’s estimate is unchanged, with a weaker Australian dollar offsetting lower synthetic rutile prices.

Kinross Gold is a senior gold miner with production split roughly 70% in the Americas and 30% in West Africa. Its Paracatu mine in Brazil and Tasiast mine in Mauritania accounted for about 55% of the roughly 2 million gold equivalent ounces produced by Kinross in 2022. Both mines are also in the bottom half of the gold cost curve, but we don’t consider them moatworthy due to remaining mine lives of about a decade. They are more than offset by Kinross’ remaining higher-cost mines. The company’s average all-in sustaining cost of roughly USD 1,300 per gold equivalent ounce in 2022 places Kinross at around the 55th percentile of the gold cost curve. Kinross had about a decade of gold reserves at the end of 2022.