Kinross is flush but not feeling forced into M&A

Kinross Gold (TSX: K; NYSE: KGC) CEO J. Paul Rollinson says the company is in no rush to pursue mergers and acquisitions despite a surge in dealmaking across the sector, arguing its deep internal project pipeline and strong balance sheet give it flexibility as gold prices swell cash flows. 

Precious metals deals reached about $15.8 billion (C$21.8 billion) to mid-May, more than double a year earlier, according to Bloomberg, while Kinross ended the first quarter with $3.9 billion in liquidity, including $2.2 billion in cash. Even so, the company has completed just three deals in the past decade, led by its $1.4-billion purchase of Great Bear in Ontario in 2022. 

“We do look at M&A but we don’t feel under pressure,” Rollinson said in an interview at the company’s Toronto office in late May. “We’ve got a lot of depth in our portfolio.” 

That depth comes from 21 million “well-defined” proven and probable oz., 28 million measured and indicated oz. and 17 million inferred oz., the CEO said. It’s increasingly being translated into development, with Kinross advancing a slate of organic projects in North and South America that the company says can sustain production of about 2 million gold-equivalent oz. a year while improving margins. 

Great Bear 

At the centre is the Great Bear project in northwestern Ontario, which Rollinson has described as a “generational asset” that could produce about 500,000 oz. annually at an all-in sustaining cost of roughly $865 per oz., based on a 2024 preliminary economic assessment.  

Kinross has broken Great Bear into two permitting tracks, with a ramp called the advanced exploration decline now permitted and surface construction about 90% complete. The decline will allow drilling below the planned open pit to test depth extensions of what Rollinson says could be a continuous, large-scale orebody, contrasting with the narrow high-grade vein systems typical of the Red Lake camp.  

“I use lumber as an analogy – think of two by fours in the ground, that’s what you’re looking for when you’re looking for a vein,” the CEO said. “The reason we got excited, really excited, about Great Bear is because it’s a sheet of plywood.”  

The company is targeting first production in the second half of 2029, with permitting timelines remaining a hurdle. The project has been designated under Ontario’s One Project One Process framework, aimed at accelerating approvals through coordinated federal and provincial reviews. 

Rollinson said Kinross has tried to streamline the process by working with the regulator to submit environmental data in stages last September, in December and then in March, rather than waiting to assemble a full baseline package. 

“What that’s allowed is conversations, Q and A back and forth,” he said. “We’re in the system and we’re talking.”  

Complexity  

Still, he described permitting in Ontario as among the most complex jurisdictions he has encountered in more than two decades working globally, citing the need to balance scientific review with extensive Indigenous consultation. 

Beyond Canada, Kinross is advancing three organic growth projects in the United States — Round Mountain Phase X and Bald Mountain Redbird 2 in Nevada, and the Kettle River-Curlew project in Washington — that are expected to extend mine lives and improve cost profiles. 

The projects are forecast to deliver about 400,000 gold-equivalent oz. annually between 2029 and 2031, with combined life-of-mine production of roughly 3 million oz. between 2028 and 2038. They carry a combined post-tax net present value of $4.1 billion and an internal rate of return of 55% at a gold price of $4,300 per oz., according to company figures.  

“We call it a grade enhancement strategy,” Rollinson said. “We’re constantly looking to put into our pipeline of development higher grades as we move forward. That has the effect, obviously, of increasing our margin and increasing our per share metrics.”  

Gold price 

That approach has also shaped Kinross’s capital allocation strategy. Rather than pursuing large acquisitions, the company has returned cash to shareholders through dividends and buybacks, targeting about 40% of free cash flow this year or about $1.2 billion.  

Rollinson said buybacks are particularly attractive given Kinross’s shareholder base, with more than half of investors in the United States where dividends can be tax-inefficient. 

The company remains strongly leveraged to gold prices, which Rollinson expects to rise over the longer term despite recent volatility tied to interest rate expectations and oil-driven inflation concerns. 

“Inflation means we need rate hikes, which is causing bonds to sell off, and rate hikes can’t be good for gold, but I think that’s flawed fundamentally, because what’s the one thing you want to own in an inflationary environment, gold,” he said. “I hope this [Midde East conflict] all comes to an end soon, and when it does, and it will at some point, gold’s ready to step up.” 

Technical army 

The focus on organic growth reflects a broader philosophy at Kinross that prioritizes technical validation over deal volume. The company employs about 80 specialists in a Toronto-based technical services group that reviews plans. 

“It’s an entire technical army, and the purpose of that is to provide a collaborative tension with operations, so we don’t just get a mine plan and say, ‘Thank you very much, guys. Geez, can we sharpen the pencil on inflation?’” Rollinson said. “We duke it out on our mine plans, and what that has led to is pretty much an unparalleled track record of delivery on guidance.” 

It all ties back to the company’s approach to M&A since it’s the same tech crew on due diligence excursions. It was how Kinross bought Great Bear when it didn’t even have a resource yet, a crazy idea in mining.  

“When we get under the hood, a lot of the times when we turn the army loose, we may not agree with all the assumptions, so we do look at M&A,” Rollinson said. “We’re fortunate that we have a very strong inventory, but we’re really, really careful what passes muster.”