Noah Zivitz

Managing Editor, BNN Bloomberg

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Kinross Gold Corp. announced plans to ramp up its share repurchases subsequent to talks with a renowned activist investor and other shareholders.
 
The Toronto-based miner said in a news release Monday that it will aim to buy back US$300 million of its shares before the end of this year. It added that it will allocate 75 per cent of excess cash to buybacks in 2023 and 2024.
 
Kinross said the updated strategy stems from talks with Elliott Investment Management and an unspecified number of other investors. It also cautioned that buybacks in 2023 and 2024 are contingent on the company’s net leverage ratio remaining below the current level, and stated the repurchases would be paused in the event of a ratings downgrade, a significant drop in the price of gold, or major operational setbacks.
 
An Elliott portfolio manager saluted the Kinross and said the hedge fund will remain in contact with the company.
 
“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. We believe that with this new capital-allocation framework, Kinross is taking a major step toward closing that gap and realizing the upside potential in its stock,” said Mark Cicirelli, a portfolio manager at Elliott, in the release.
 
The announcement didn’t include any details about Elliott’s investment in Kinross and a spokesperson couldn’t immediately be reached to confirm the investment manager’s stake. Elliott’s most recent 13F quarterly filing with the U.S. Securities and Exchange Commission didn’t list Kinross as one of its holdings as of June 30.
 
Kinross shares shed almost 40.87 per cent of their value this year through the close of trading Friday, substantially underperforming the S&P/TSX Composite Index’s materials subgroup’s 9.94 per cent decline and Barrick Gold Corp.’s 15.47 per cent drop.
 
“Management met with Elliott a number of times to discuss its views on capital allocation and value creation....Elliott is an experienced mining sector investor and its support for Kinross and this program further validates our view that Kinross shares offer the market a compelling investment opportunity,” said Kinross president and Chief Executive Officer J. Paul Rollinson in the release.
 
Eleven of the 15 analysts tracked by Bloomberg have a buy recommendation on Kinross, and the other four say it’s a hold. The consensus 12-month price target is $8.06, implying a potential return of 85.7 per cent over the next 12 months.

Mike Parkin, an analyst at National Bank of Canada Financial Markets who has an outperform (the equivalent of a buy) recommendation on Kinross, stated in a report to clients he thinks the buyback strategy is a good use of capital in light of the discount on Kinross shares against peers.

Parkin ranks Kinross as his top pick among the senior gold producers. He has a price target of $8.25 per share.