KGC: Yet Another Solid Gold Stock

Gold just hit $1000 today, something I've been on top of for over a year. I wrote an analysis on GLD a couple months ago that shows you the reasons that gold will keep going up this year to around the $1150-1200 area. As one might imagine then, if gold were to keep going up the gold miners would be a "gold mine", lame pun intended. They have the operating leverage on the gold mines they own and thus would be able to produce you much more profits than just buying the metal. Not all miners are created equal though, as we have seen with the South African miners getting hit hard by power outages. I've given you AUY and AEM so far, and another excellent miner to look at is Kinross Gold. Already assuming that gold prices are going higher, lets first look at how much gold KGC could come up with, its proven reserves. Last quarter KGC stated it has 47 million ounces in gold, 77 million ounces in silver, and 2.8 billion pounds of copper in provable reserves. This is the 3rd largest amount of reserves among all the North American miners. 47 MILLION ounces in gold! Mmm multiply that by $1000-1200 an ounce and we're looking VERY pretty. Of course you can't just value a miner by multipling its reserves by the spot price of the commodity because it takes a HELL of a lot of work to extract that from its mines. This is where KGC's booming production rates come into play big time. KGC expects itself to increase production about 20% this year to 1.9-2.0 million ounces of gold and expected them to grow by an even greater rate to 2.5-2.6 million ounces in 2009. Thats a 60% increase over the next two years. Huge. Not only is KGC expected to increase production by a large amount but its COST of production is getting much smaller. In 2007 its cost of production was about $365/ounce of gold and this is expected to decline to $325-335/ounce throughout 2008. And with that the margins just keep on widening. Kinross has five mines right now that are fully operational, three more are set to come online this year, and another 3 set to come online within 2-3 years. This is big, and few miners offer this kind of growth. Kinross also has a very strong balance sheet. They have $551 million in cash at the end of Dec2007 and just recently raised another $449 million from a convertible bond sale. This will be used to continue to fund more growth and improve its current mines. Plain and simple Kinross is a story of rocketing profit margins and production. Gold prices are set to increase 15-20% while their costs are set to DECREASE a good 15-20%, and that just equals great margins. Add to that a 20% production increase for 2008 and you got yourself a sweetheart stock. With gold making all the headlines lately its important to know where you can play it and KGC is a name you'd wanna stick by.