First of all, your skepticism in gold miners is well-placed (from an historical viewpoint if nothing else). One of the oldest axioms in investing decreed that "a gold mine is a hole in the ground with a liar standing next to it". The Bre-X fiasco, of course, was validation of this nugget. That said, the fundamentals for gold (metal) are outstanding if only because the Fed and the Feds seem to be doing everything in their power to ensure a massive bull market (deficit spending, involvement in a foreign war with an ill-defined exit strategy, keeping real interest rates below zero, etc). So I certainly wouldn't throw the baby out with the bongwater on gold shares here.
Kinross is a rather complicated beast. Recall that the current company was formed in a merger of 3 separate entities (TVX, Echo Bay and Kinross), about a year or so ago. They carried a rather staggering debt load coming out of that, which they have been working hard to reduce. Some of the work-off has included dilution. Anytime there's a merger of this magnitude, it's going to cause some inefficiencies and generate expenses as operations and management are integrated. Nonetheless, they have turned the corner and were profitable and cash flow positive in the third quarter. The POG has risen substantially since then, and will clearly be supportive in the quarters to come. Finally, they suspended operations at an underperforming mine (Lupin) which hurt their expense line on a one-time basis. In short, I still like them quite a bit, and think they are among the best values at current prices among the mid-sized non South African companies. |
