A strengthening dollar continues to push gold prices lower in the market, much to the disadvantage of the likes of Kinross Gold Corporation (USA) (NYSE:KGC). Spiking US bond yields has also piled more pressure on the precious metal, as investors react negatively to potentially higher financing costs for holding the precious metal.
Tanking Gold Prices
Kinross may tank even further heading into the New Year as the U.S Federal Reserve is more than likely to raise interest rates, which could lead to further strengthening of the dollar. Gold prices have already touched lows of $1,188 an ounce and should the selloff continue, mining companies could struggle to generate substantial returns from their investments.
Higher gold prices in the third quarter allowed Kinross to generate operating cash flow of $320 million, a 50% rise. Repeating such feat in the fourth is unlikely as Gold prices are edging lower in the market. Meryl Lynch downgrading the stock from a ‘buy’ to a ‘neutral’ all but provides a clear picture of how wary investors are about prospects in the industry. About 63% of Wall Street analysts covering the stock have so far issued a hold rating as ‘29%’ call it a ‘buy’ and 8% a ‘sell’.
Kinross Growth Prospects
Amidst the uncertainty in the industry, Kinross boasts of a strong balance sheet that should give it the flexibility to recoup all the losses once stability rocks the industry. Chief executive officer, Paul Rollinson has already said that the current level of liquidity allows the company to pursue exciting organic growth opportunities.
Over the last four years, Kinross Gold Corporation (USA) (NYSE:KGC) has repaid debt worth $1 billion. In the third quarter, it repaid $250 million of senior notes meaning it does not have any debt maturing before 2020. As of the end of the third quarter, the company had $756 million in cash and cash equivalents. What this means is that the company can now focus on investing in growth projects such as the Tasiast and Bald Mountain project.