Today’s news is for all you gold bugs out there. Maybe you want to invest in a company but you just can’t decide which one. Maybe you just really like debating between two different gold companies. Either way, this article should be pretty informative for you!
Kinross spent a large majority of the last 5 years in survival mode after spending $7.1 billion to buy out Red Back Mining. That decision loaded their balance sheet with debt right before gold hit its peak in 2011. Kinross was forced to write down the majority of the Red Back purchase which included the Tasiast mine in Mauritania. Almost 6 years later, their debt is finally at a manageable level and money is being spent to expand operations at Tasiast.
Barrick has a similar story with bad deals, a huge debt load, and falling gold prices but they implemented a turnaround plan last year and it is starting to pay off. They reduced their $13 billion debt load by $3 billion in 2015 via asset sales, streaming deals, and new partnership agreements. Barrick had a lot of critics over this plan, but they are already well on their way to clipping another $2 billion off in 2016.
So to answer the question in the title, “Kinross or Barrick?”, we pick Barrick! We expect both stocks to move higher as gold prices rise, but Barrick’s cost structure is significantly lower and therefore more favorable in our eyes. Regardless, we are excited to see huge industry giants like these two coming back to life. Who else would we sell our earthmoving equipment to?
*Some of the information for this story was taken from Fool.ca