Kinross Gold stock jumps as company promises to boost share buybacks

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Shares of Kinross Gold Corp. rose Monday after the Toronto-based company announced that it would repurchase $300-million worth of shares by the end of this year as it looks to strengthen its stock.

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Kinross added that it would also allocate two-thirds of its excess cash for share buybacks in 2023 and 2024. The buybacks after this year, however, will depend on whether Kinross is able to maintain its net leverage ratio, a measure of financial health that compares debt to earnings. Kinross also said that buybacks could be paused in case of a ratings downgrade, an operational issue, or a fall in gold prices.

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“Our shares offer a highly compelling investment opportunity … a more substantial share buyback program is a highly attractive use of excess cash,” J. Paul Rollinson, Kinross Gold’s chief executive, said in a press release. “This enhanced buyback program is affordable, enables us to sustain our dividend and is a responsible allocation of capital.”

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Kinross has looked to rebalance its portfolio in the last one year by focusing more on the Americas. Last month it completed the sale of its Chirano mine in Ghana for US$225 million. In June, the company sold its Russian assets for US$340 million months after it was forced to suspend operations due to the war.

While the company reported higher production and sales in its second quarter results in July, its adjusted earnings per share dipped to three U.S. cents, compared to five U.S. cents in the same quarter last year, due to higher costs. It added, in its quarterly results, that it had a “strong liquidity” of US$2.1 billion.

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The company is currently focused on developing its Great Bear project in Ontario, which it acquired in February. Kinross believes the project has the potential to become a top-tier deposit that could support a large, long-life mine.

Kinross said it decided to initiate the buyback program after “constructive discussions” with Elliott Investment Management LP and some of its other shareholders.

“Kinross today possesses a high-quality, Americas-focused portfolio with strong potential for future growth through Great Bear, yet it trades at a significant discount to both its peers and to the value of its assets,” Mark Cicirelli, Elliott’s portfolio manager, said. “Kinross is taking a major step toward closing that gap and realizing the upside potential in its stock.”

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In April Elliot, which owns a 3.4 per cent stake in Suncor Energy Inc., criticized the Canadian oil major for its “slow-moving, overly bureaucratic corporate culture.” About three months later, Suncor’s chief executive Mark Little resigned, after which the company entered into an agreement with the activist investor to appoint three new independent board directors.

Kinross currently runs three mines in the United States and one each in Brazil, Chile and Mauritania.

At 11 a.m., shares of Kinross were trading at $4.73, up 39 cents or 8.9 per cent, within a 52-week trading period of $3.90 and $8.90. The company has a market cap of $6.1 billion.

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