Kinross Gold Corp - Long

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Kinross has worked hard to restore its balance sheet after the disastrous 2010 purchase of Red Back Mining.

What happened?

Kinross paid US$7 billion for Red Back shortly before gold topped out above US$1,900 per ounce. The subsequent crash in gold prices and disappointing production from core assets meant Kinross had to write down most of the value of the Red Back deal.

Management has done a good job of reducing the debt load in recent years, and Kinross is now on solid footing. The company finished Q2 2016 with just US$1.7 billion in long-term debt and had US$968 million in cash and cash equivalents.

The rebound in gold this year has helped boost margins, and Kinross even generated US$202 million in free cash flow in the second quarter.

With the balance sheet under control, Kinross is now focusing on growth. The company purchased assets in Nevada earlier this year and recently unveiled plans to invest US$300 million in its Tasiast project in Mauritania.

Tasiast was supposed to be the crown jewel of the Red Back deal, but the site has never lived up to expectations. That might finally change.

The new investment in the mine is expected to boost production by 90% and help drive down all-in sustaining costs (AISC) to the point where the facility can deliver significant margins at current prices.

Kinross produced 671,000 gold equivalent ounces in Q2 at AISC of US$988 per ounce. Guidance for 2016 remains 2.7-2.9 million ounces at AISC of US$890-990 per ounce.
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