Kinross's Margins Look Great -- But Can Prices Do All the Heavy Lifting?

1: Kinross Gold's 2Q25 Results: Robust Gold Revenues, Solid Margins, and Strategic Capital Returns.

Kinross Gold Corporation, headquartered in Toronto, Canada, is a leading gold producer with operations primarily in the Americas and West Africa. The company's major mining sites are located in the United States, Brazil, Chile, Mauritania, and Ghana. This article is an update of one I wrote on December 9, 2024.

In my article about Barrick Gold, I highlighted that Kinross's main competitors include several key players in the gold mining industry. Newmont Corporation NEM is the world's largest gold producer, with operations spanning the Americas, Africa, and West Africa. Other significant competitors are Gold Fields Limited (GFI), a South African company with international operations; Polyus Gold (PLZL), the largest gold producer in Russia; and AngloGold Ashanti (AU), which has mining assets in Africa, Australia, and the Americas. Additionally, Zijin Mining Group (601899.SS) is a Chinese multinational company primarily focused on gold and copper. At the same time, Pan American Silver Corp. PAAS is known mainly for its silver production, but it also has a substantial amount of gold output. Below is a chart representing the proven and probable reserves (gold, silver, copper) for all the companies mentioned above.

2: A quick look at the gold equivalent production in 2Q25.

In Kinross Gold's second quarter of 2025, the company is navigating a challenging balance between operational setbacks and financial strength. The data shows a mixed picture.

Production reached 512,574 attributable gold-equivalent ounces (GEOs), down from 535,338 GEOs in the same quarter of 2024. Note: Silver production was 650,026 ounces this quarter.

This downward trend has been significant since 2017, highlighting the urgent need for new production mine(s) to reverse this concerning trend trajectory.

The average realized gold price increased to $3,284 per ounce, a substantial rise from the previous year's price of $2,342, despite this decline being disheartening in its own right, profit margins increased by almost 70%. Unfortunately, the profit margin leap was almost entirely due to higher realized gold prices, and not efficiency improvements.

It serves as a reminder that the results of mining are influenced by market conditions in addition to the amount of minerals extracted. The gold price and AISC that KGC has historically realized are shown below, showing a significant increase in profit margin this quarter. The average price for gold in Q3 will probably be above $3,500 or another 6% or 7% increase quarter over quarter.

Kinross Gold faces flat production but is taking focused steps to reverse it. The company is optimizing mine plans, expanding projects like Redbird and Great Bear, and improving efficiency to stabilize output. Investing in exploration and converting new resources to reserves helps offset depletion at older sites. Cost control, sustainability, and diversification strengthen stability. While growth remains modest, these strategies aim to sustain about two million gold-equivalent ounces yearly.

Kinross Gold's all-in-sustaining costs (AISC) remain slightly lower than those of its major competitors, such as Barrick and Newmont. However, Barrick achieved an overall lower AISC by utilizing copper as a by-product. Despite rising costs across the industry due to inflation and operational challenges, Kinross continues to maintain a competitive position, with its 2025 guidance closely aligning with that of its peers.

2.1: The primary cause of Kinross's annual production decline was the decline in grades at the Tasiast mine.

The quarter presented operational challenges. Although lower grades at the Tasiast and Round Mountain mines were anticipated, their impact on production was more significant than expected. The chart below compares production in 2Q24 to 2Q25. Please note that production at Fort Knox is now combined with Manh Choh.

Rising costs have added to these challenges, with the average production cost now reaching $1,080 per ounce and all-in sustaining costs increasing to $1,493 per equivalent ounce. (See chart above).

Factors such as inflation, lower throughput, and accounting adjustments, like the reclassification of certain stripping costs, contributed to these higher expenses. This demonstrates that in mining, efficiency and costs are always changing, influenced by geology, planning, and financial reporting practices.

2.2: Kinross is keeping the quarterly dividend at $0.03 per share. A bit disappointing.

What caught my attention was how Kinross balanced these pressures with its approach to shareholders. The company again declared a quarterly dividend of $0.03 per share, a level unchanged for several years. On one hand, this consistency signals stability, which is valuable in a cyclical industry. On the other hand, it feels somewhat disappointing. With gold trading at historic highs, the flat dividend seems too cautious rather than a bold reflection of the company's stronger position.

The share buyback program eased that impression by returning capital to investors and signaling management's confidence in its stock. Reactivated in the first quarter of 2025, the program has gained momentum. In the second quarter alone, Kinross repurchased approximately $170 million worth of shares, bringing the year-to-date total to roughly $225 million. Including dividends, nearly $300 million has been returned to shareholders this year. The framework is clear, with commitments of at least $500 million in buybacks and a total of $650 million in capital returned in 2025.

This dual strategy of maintaining the dividend while expanding buybacks shows how Kinross balances caution and confidence. The dividend signals resilience, while the buybacks, supported by strong free cash flow, highlight management's belief in the company's long-term value.

Note: Among the five mining companies, dividend yields are generally modest. Kinross Gold offers the lowest yield at approximately 0.8%, while Barrick, Agnico Eagle, and Newmont each provide yields in the range of 1.31.4%. Pan American Silver follows with a yield of around 1.1%. Notably, except for Newmont, which is a U.S.-based company, the other four are headquartered in Canada. Consequently, U.S. investors receiving dividends from these Canadian companies will experience a reduction of roughly 25% due to the applicable foreign withholding tax.

2.3: Kinross' Great Bear project in Ontario, Canada, is progressing.

Strategically, Kinross continues to pursue its development initiatives, including projects at Great Bear, Bald Mountain, Redbird Phase 1, and La Coipa Phase 7. These efforts are expected to increase production capacity and strengthen the company's long-term outlook.

What excites me most is that the Great Bear development in Ontario is progressing, with site infrastructure being developed and structures already in place. Additionally, the Round Mountain Phase X expansion is progressing with promising drilling results, while exploration in the Curlew Basin has uncovered high-grade potential, indicating future growth opportunities. At the same time, studies at Lobo-Marte show that the company is carefully considering its long-term growth strategy.

For me, 2Q25 was not just another financial quarter; it demonstrated resilience. Despite declines in production and rising costs, Kinross transformed its challenges into strengths, utilized its best assets, and continued to plan for the future. This balance between current results and future ambitions truly distinguishes this quarter.

3: Critical analysis of the second quarter results.

This quarter, Kinross Gold Corporation demonstrated remarkable financial strength, reinforcing its position as a leading global gold producer. The company reported revenue of $1,728 million, marking a 41.7% increase compared to the same period last year. This growth was driven primarily by higher gold prices and strong operational efficiency, reflecting the company's ability to navigate market fluctuations while maintaining steady production levels.

Net earnings reached $531 million, or $0.43 per share, more than double the previous year's figure. Adjusted net earnings stood at $541 million, showcasing Kinross Gold's consistent profitability even when accounting for non-recurring items. These results highlight the company's capacity to convert market opportunities into tangible financial performance, an accomplishment underpinned by careful planning and operational discipline.

The company demonstrated strong cash flow results. Operating cash flow rose to $992.4 million, while adjusted operating cash flow reached $844 million, indicating both operational efficiency and effective cost management. Additionally, attributable free cash flow increased significantly to $686.3 million, providing Kinross with the financial flexibility to invest in growth projects and return value to shareholders.

Kinross Gold's balance sheet remains solid, with total liquidity, including cash, cash equivalents, and marketable securities, of approximately $ 1,186 million, and long-term debt of $ 1,236.4 million. This near-balanced net debt position reflects prudent financial management, allowing the company to meet obligations while retaining the capacity to fund development projects and strategic initiatives. Maintaining a conservative approach to leverage ensures financial stability while supporting long-term growth.

4: Conclusion

This quarter, I was impressed by Kinross's resilience and consistent performance. The company has demonstrated a strong ability to adapt to changing market conditions while maintaining operational efficiency. What stands out most is how Kinross turns opportunities into meaningful results, reflecting careful planning and disciplined execution across its operations.

Additionally, I am impressed by the strength of their strategic approach, particularly in striking a balance between growth and financial responsibility. The company's careful resource management and focus on long-term initiatives, like the projects at Great Bear, Bald Mountain Redbird Phase One, and La Coipa Phase Seven, demonstrate a commitment to both immediate results and sustainable development, ultimately benefiting shareholders.

For me, this quarter highlights more than just numbers; it shows a company that is thoughtful, forward-looking, and resilient. Watching their disciplined approach to operations and finance reassures me that the company is well-positioned to seize opportunities and continue creating value in the global gold industry.

Overall, the results make me optimistic about the future. Kinross Gold exemplifies that with careful planning, strategic foresight, and operational discipline, you can achieve both stability and growth.

4.1: Gold's Surprising Surge: A Shift in Market Outlook

This year has been extraordinary for gold, and as an investor, I feel both reassured and challenged by its relentless rise. When Jerome Powell hinted at a more accommodative path during the Jackson Hole symposium, the market's response was immediate. A 25-basis-point cut may not sound dramatic, but the tone of his comments pushed gold to the $3,700$3,800 range, its ninth straight month of testing or breaking record highs. To me, that was a reminder that sentiment often outweighs specifics in markets.

I've always viewed gold as a portfolio stabilizer rather than a growth engine, but 2025 has changed my perspective. The surge in futures volumes and open interest showed that I wasn't alone. Investors large and small are treating gold not just as a hedge but as a core allocation. In an environment where rate cuts erode bond yields and the dollar weakens, gold's lack of yield becomes less of a disadvantage and more of a virtue.

Still, I try to balance excitement with caution. Analyst forecasts highlight just how divided the outlook is. HSBC stays conservative, with an average projection near $3,215, while UBS sees $3,700 by the end of 2026. JPMorgan and Deutsche Bank go further, calling for $4,000 within the next two years. These numbers aren't guarantees, but they frame the risk-reward debate I wrestle with daily: Do I add more gold here, or wait for a pullback that may never come?

For me, the personal lesson has been about discipline. Gold's rally is easy to romanticize as a safe haven, but it's still a volatile asset. Allocating with intention, enough to protect, not so much to distort my overall portfolio, has been my guiding principle.

In the end, I see gold less as a speculative play and more as insurance against the unknown. Whether it tops $4,000 or consolidates lower, owning it gives me confidence in a world where central bank policy, geopolitical shocks, and market psychology can shift overnight. That peace of mind is worth as much as the rally itself.

4.2: However, significant risks to the rally persist.

A faster-than-expected decline in inflation or stronger U.S. economic growth could prompt the Federal Reserve to delay or even reverse its easing plans. Additionally, a stronger dollar would likely decrease demand for gold by making it more expensive globally. If geopolitical tensions ease, the safe-haven premium that supports gold's price could disappear. On a technical level, profit-taking could occur after months of record highs. Changes in ETF flows could also introduce volatility, especially if investors shift their focus to other commodities or equities.

In summary, Powell's remarks at Jackson Hole have revitalized interest in gold markets, but the rally is not guaranteed. Investors should view this surge as an opportunity to sell, while closely monitoring inflation data, Fed signals, and currency movements. The next few months will clarify whether gold can continue its record-breaking ascent or enter a more turbulent consolidation phase.

5: Technical Analysis: Bullish Ascending Channel Patter. KGC is now significantly overbought.

Note: The chart has been adjusted to account for the dividend.

KGC is currently forming an ascending channel pattern, with resistance at approximately $25.3 and support around $23.5. The Relative Strength Index (RSI) is at 68 and descending, indicating a strong overbought condition. This suggests that it might be a good time to consider selling and taking profits.

I recommend selling about 50% of your position between $24.5 and $26 using a Last-In-First-Out (LIFO) strategy, with a secondary target at the upper resistance level of $27 (eventually closing temporarily your long position). For additional context, please refer to the chart above.

While a rising channel pattern is a bullish continuation pattern, we should remain cautious at this level. We may see a potential breakdown in late September even after the Fed decided to cut by 25 points. Many gold stocks are now significantly overbought and a retracement is highly possible. Gold closed today over $3750 per ounce!

I suggest selling part of your long position now and waiting to accumulate again between $23.5 and $20. If a wide sell-off occurs, then the second lower support is at $19 (not likely right now).

Note: It is essential to monitor and regularly update your technical analysis (TA) charts, given the rapidly changing market landscape.