| Pair Trade? RBC Upgrades Randgold Resources, Downgrades Kinross Gold | |
| | |
|
-
Randgold Resources Ltd. (NASDAQ: GOLD) has outperformed Kinross Gold Corporation (USA) (NYSE: KGC) this year by 26 percent.
-
RBC Capital Markets' Stephen Walker and Jonathan Guy have changed ratings on the two companies, suggesting that Randgold's outperformance will continue. Guy upgraded Randgold Resources to Outperform, while Walker downgraded Kinross Gold to Underperform.
-
RBC's thesis is the tale of two companies. At Kinross Gold, the production profile is declining and the company may need to make an acquisition to replace reserves. Meanwhile, Randgold may make an acquisition, but approach it from a point of strength with an "ungeared balance sheet and low costs."
RBC Capital Markets was complementary of Randgold Resources' management, noting that the strong Q2 performance were the result of the "strength" in Randgold's business plan. That business plan has the company producing gold at a cost that is in the lowest quartile for the industry, allowing the company to generate positive free cash flow as long as gold prices are above $800 per ounce.
At Kinross Gold, the production profile is declining, and the company will struggle should gold prices slip under $1,000 per ounce. It is at that level that Kinross will start to burn $100 million in annual cash. However, if prices stay above $1,100, the company will be able to fund $300 to $400 million in capital expenditures.
The other interesting dichotomy between the two companies, according to the two research notes, is their approach to acquisitions. Kinross would need to look for an acquisition to "replace reserves," potentially using that $300 to $400 million to fund that.
Conversely, if Randgold's history is any measure, the company will not overpay should it decide to use some capital expenditures on an acquisition. Guy pointed to Randgold's acquisition of AngloGold Ashanti as evidence of management's structured approach. In 2009, the company paid $610 million for AngloGold's Kibali project, while RBC estimates that the project has a net asset value of $2.65 billion at present.
Based on the price target of GBP 4,500, RBC estimated that Randgold could gain 7 percent. Under the downside scenario, the firm said that prices could decline as much as 29 percent. At Kinross, prices could gain 9 percent in the target scenario, while they could decline as much as 28 percent for a downside scenario.
Latest Ratings for KGC
Date | Firm | Action | From | To |
---|
Aug 2015 | RBC Capital | Downgrades | Sector Perform | Underperform | Jul 2015 | Citigroup | Maintains | | Neutral | Jul 2015 | CIBC | Initiates Coverage on | | Sector Perform |
View More Analyst Ratings for KGC
View the Latest Analyst Ratings
See more from Benzinga © 2015 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
|
|
|
Kinross Gold Corporation
|
|
PRODUCTEUR |
CODE : K.TO |
ISIN : CA4969024047 |
CUSIP : 496902404 |
| |
ProfilIndicateurs de MarchéVALEUR : Projets & res.Communiqués de PresseRapport annuelRISQUE : Profile actifsContactez la cie |
Kinross Gold est une société de production minière d'or basée au Canada. Kinross Gold est productrice d'or, d'argent en USA, au Bresil, au Canada, au Chili, au Ghana, en Mauritanie et in Russia, en développement de projets d'argent, de cuivre et d'or au Chili, et détient divers projets d'exploration au Chili, en Equateur et in Russia. Ses principaux projets en production sont ROUND MOUNTAIN en USA, MORRO DO OURO, CRIXÁS et PARACATU au Bresil, REFUGIO MINE (VERDE AND PANCHO), FORT KNOX, MARICUNGA et LA COIPA au Chili, PORCUPINE et MUSSELWHITE au Canada, CHIRANO au Ghana, TASIAST en Mauritanie et KUPOL in Russia, ses principaux projets en développement sont KETTLE RIVER, GOLD HILL et CERRO CASALE au Chili et ses principaux projets en exploration sont RUSSIAN MOUNTAIN, HORN MOUNTAIN et KUBAKA MINE - BIRKACHAN in Russia, AHAFO NORTH, BIBIANI NORTH, BOLE, BOLE - BOLGATANGA, AKYEM, GIL, ENCHI et GOLDBANKS - KINROSS au Ghana, HAMMOND REEF au Canada, FRUTA DEL NORTE en Equateur et LOBO-MARTE au Chili. Kinross Gold est cotée au Canada, aux Etats-Unis D'Amerique et en Allemagne. Sa capitalisation boursière aujourd'hui est 11,2 milliards CA$ (8,2 milliards US$, 7,7 milliards €). La valeur de son action a atteint son plus bas niveau récent le 27 octobre 2000 à 1,43 CA$, et son plus haut niveau récent le 13 décembre 2002 à 9,99 CA$. Kinross Gold possède 1 246 749 952 actions en circulation. |