TORONTO — Kinross Gold Corp. has announced an enhanced share buyback program following what the company calls "constructive discussions" with activist investor Elliott Investment Management LP.
The Toronto-based miner said in a news release Monday that it will buy back $300 million in shares over the remainder of the year, and will allocate 75 per cent of excess cash to repurchase its own stock in 2023 and 2024.
By buying back its shares, a company spreads its profits over fewer shares, increasing its earnings per share, a key ratio used to evaluate a company.
Kinross, which is up more than seven per cent in late-morning trading but down more than 35 per cent this year, said the ramped up share buyback program will protect the company's balance sheet and capacity to continue investing in its business.
"Our board of directors and management team believe that this enhanced buyback program is affordable, enables us to sustain our dividend and is a responsible allocation of capital that does not compromise our balance sheet or our ability to fund our business and advance our impressive pipeline of growth projects," Kinross CEO J. Paul Rollinson said in the news release.
He also said that Elliott's support for the plan further validates the company's view that its shares offer the market "a compelling investment opportunity."
Elliott did not disclose the size of its stake in Kinross.
Elliott portfolio manager Mark Cicirelli said in the news release that Kinross has been trading at a significant discount compared with its peers and the value of its assets, and that the plan is a "major step toward closing that gap and realizing the upside potential in its stock."
Cicirelli added that Elliott sees "strong potential for future growth" for the miner through its Great Bear project in Ontario.
In June, Kinross said it was making progress at its Great Bear project and expects to declare an initial mineral resource as part of its 2022 year-end results. Kinross also said it had drilled approximately 83,000 metres and was on track to complete about 200,000 metres of exploration and infill drilling in 2022 on the LP Fault zone.
Canaccord Genuity analyst Carey MacRury wrote in a note to clients that his firm, which has a "buy" rating on the stock, sees the enhanced share buyback program as a positive.
"In our view, Kinross retains a strong balance sheet, trades at an attractive valuation of 0.48x (net asset value) vs. its senior peers at 0.78x, and has a number of potential catalysts on the horizon, including significantly higher expected production in (the second half of the year), the completion of the Tasiast project, ramp up of La Coipa, and the initial Great Bear resource expected with the (company's year-end) results in February 2023," he said.
In the first half of 2022, Kinross did not repurchase any shares but committed to doing so in the second half of the year. The company repurchased 17.6 million shares for $100 million last year.
This report by The Canadian Press was first published Sept. 19, 2022.
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