On Wednesday, Jefferies initiated coverage on shares of Kinross Gold (TSX:K) Corporation (NYSE:KGC), assigning a "Hold" rating and setting a price target of $5 for the company's stock. The firm's assessment is based on the gold miner's production outlook and cost pressures, alongside the potential of its mining projects.
Kinross Gold is expected to maintain a steady production level of approximately 2 million ounces per annum through the end of the decade. However, Jefferies anticipates cost pressures to continue rising this year, particularly as the Paracatu mine operates in a lower-grade area according to the mine plan.
Despite these challenges, the analyst acknowledged the promise of Kinross Gold's Great Bear project, which is anticipated to experience significant resource growth. Additionally, the Tasiast and Paracatu mines are noted for their stable contributions to the company's free cash flow.
The $5.00 price target set by Jefferies reflects a valuation approach that includes 0.8 times price to net asset value (P/NAV) and 4.5 times enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), with a 70/30 percent weighting. This valuation implies that while the firm recognizes the company's solid assets and their contributions, it sees limited potential for stock price increase relative to the target price.
The "Hold" rating indicates that Jefferies does not currently see Kinross Gold's stock as outperforming the market, suggesting that investors maintain their positions without increasing their holdings.
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