Kinross (KGC) Moves Ahead With Fort Knox Gilmore Expansion

Kinross Gold Corporation KGC said that it is proceeding with the initial Gilmore expansion project at its Fort Knox mine, Alaska.

The company expects the project to extend Fort Knox’s mining by six years to 2027 and leaching to 2030 and also increase mine life production by roughly 1.5 million gold equivalent ounces. Notably, the project involves a low initial capital cost of roughly $100 million.

The project is likely to generate net present value (NPV) of $130 million and an internal rate of return (IRR) of 17%, considering gold prices at $1,200 per ounce. Based on a gold price of $1,300 per ounce, the project is expected to generate an NPV of $239 million and IRR of 26%.

Per Kinross, the project is not only a low-cost, low-risk brownfield expansion that can considerably extend mine life to 2030, but it will also strengthen the company’s long-term production profile in the United States.

The Gilmore project adds to Kinross’ quality development projects including Bald Mountain, Round Mountain, Tasiast and Kupol and also enhances its globally diverse portfolio. The project will be funded by Fort Knox’s cash flow, given its low initial capital cost. This will help the company to preserve its strong balance sheet and financial flexibility.

Notably, during first-quarter 2018, Kinross’ adjusted operating cash flow was $363.7 million, up from $250.9 million in the prior-year quarter. Cash and cash equivalents were $997.9 million as of Mar 31, 2018, up from $819 million as of Mar 31, 2017. Long-term debt was essentially flat year over year at $1,733.2 million and there are no scheduled debt repayments due for the company until 2021.

Kinross’ shares have gained 4.7% over the past three months, slightly underperforming the industry’s 5.5% rise.

Zacks Rank & Stocks to Consider

Kinross currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks worth considering in the basic materials space are FMC Corporation FMC, Westlake Chemical Corporation WLK and Celanese Corporation CE, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

FMC Corp has an expected long-term earnings growth rate of 14.3%. Its shares have moved up 18.6% in a year.

Westlake Chemical has an expected long-term earnings growth rate of 12.2%. Its shares have rallied 76.4% in a year.

Celanese has an expected long-term earnings growth rate of 8.9%. Its shares have gained 27.1% in a year.

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