Did Kinross Gold Generate Value for Shareholders?
- By Alberto Abaterusso
When I was reading Kinross Gold Corporation's (KGC) corporate responsibility report, I found the following phrase interesting:
"Through our operations, we strive to generate value for our shareholders, and economic prosperity in our host countries through job creation, procurement and tax payments, creating a benefit footprint which in turn generates opportunities." (Page 38 of Kinross' corporate responsibility report).
Warning! GuruFocus has detected 1 Warning Sign with KGC. Click here to check it out.
The intrinsic value of KGC
The benefit footprint is the miner's metric for tracking the distribution of its direct economic impact.
In 2015 Kinross spent approximately $2.3 billion in host countries representing 73% of the total revenue the company generated from metal sales.
Source: Kinross Releases Corporate Responsibility Report
What about Kinross' shareholders? Did they receive economic value from Kinross?
No, they didn't, since Kinross didn't pay any dividend to its shareholders during the year. I came to this conclusion by reading one of the arguments that support the inclusion of precious metal mining stocks in an investment portfolio:
Unlike gold bullion, mining stocks produce economic value by profiting from the extraction and processing of metals. Shareholders receive this value through the distribution of profits via dividends (hralphwakerly.com).
Kinross shareholders don't receive any economic value from the mining activity like shareholders of any other gold stock that doesn't pay dividend.
And if I had to assess the intrinsic value of gold stocks that will distribute small dividends to their shareholders as gold mining stocks usually do, I would obtain a small value and as a consequence 99% of them would be overvalued by the stock market.
But If I had invested in any gold stock traded on the New York Stock Exchange at the beginning of 2016, when the gold price started its uptrend, I would have made an incredible capital gain.
Look at Kinross. The miner gained almost 175% year to date.
Disclosure: I have no positions Kinross Gold Corporation.
Start a free seven-day trial of Premium Membership to GuruFocus.
This article first appeared on GuruFocus.
Warning! GuruFocus has detected 1 Warning Sign with KGC. Click here to check it out.
The intrinsic value of KGC
