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Kinross Gold Corporation (“Kinross” or the “Company”) (TSX: K, NYSE: KGC) is pleased to announce that it is launching a new, enhanced share buyback program. The Company’s Board of Directors and management believe Kinross’ shares offer the best return available on shareholders’ capital and therefore have decided to allocate a more substantial portion of cash available to share buybacks to enhance per-share metrics and improve shareholder returns.
This announcement follows constructive discussions with Elliott Investment Management LP (“Elliott”) as well as a number of the Company’s other shareholders. Elliott is supportive of the enhanced buyback program, which is designed to achieve a shared objective of unlocking value for shareholders.
The strength of Kinross’ business coupled with its investment grade balance sheet allow it to allocate additional funds to share buybacks while also reinvesting in its business and maintaining a strong credit profile. The Company is maintaining its quarterly dividend.
Key elements of the enhanced buyback program
Under the new program Kinross will:
- Buy back $300 million in shares over the remainder of 2022.
- In 2023 and 2024, allocate 75% of its excess cash (defined as free cash flow after paying interest and dividends) to share buybacks.
Kinross’ approach to the enhanced buyback program will ensure the buyback is affordable and sustainable, protecting Kinross’ strong balance sheet and capacity to continue investing in its business.
- Buybacks in 2023 and 2024 will only take place if net leverage is below the current LTM (last twelve months) net leverage ratio of 1.7:1.
- In addition, the Company would intend to temporarily pause buybacks in case of a ratings downgrade, major operational disruptions or a significant drop in gold price.
CEO Commentary:J. Paul Rollinson, President and CEO, commented, “Management met with Elliott a number of times to discuss its views on capital allocation and value creation. We share a common view that our shares offer a highly compelling investment opportunity and as a result believe that a more substantial share buyback program is a highly attractive use of excess cash. 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. Elliott is an experienced mining sector investor and its support for Kinross and this program further validates our view that Kinross shares offer the market a compelling investment opportunity.”
Elliott Portfolio Manager Mark Cicirelli stated, “We have appreciated our constructive dialogue with the Kinross management team, and we believe the enhanced buyback program announced today demonstrates their commitment to shareholders and to unlocking shareholder value. Kinross today possesses a high-quality, Americas-focused portfolio with strong potential for future growth through Great Bear, yet it trades at a significant discount to both its peers and to the value of its assets. We believe that with this new capital-allocation framework, Kinross is taking a major step toward closing that gap and realizing the upside potential in its stock. We look forward to continuing our engagement with the Company.”