Intrinsic value of Kinross Gold Corporation - K

Previous Close

$4.90

  Intrinsic Value

$1.08

stock screener

  Rating & Target

str. sell

-78%

Previous close

$4.90

 
Intrinsic value

$1.08

 
Up/down potential

-78%

 
Rating

str. sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of K stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 6.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  13.75
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  4,691
  4,785
  4,895
  5,021
  5,162
  5,318
  5,490
  5,677
  5,879
  6,098
  6,332
  6,582
  6,849
  7,133
  7,436
  7,756
  8,096
  8,456
  8,837
  9,239
  9,663
  10,111
  10,583
  11,081
  11,606
  12,159
  12,740
  13,353
  13,997
  14,675
  15,388
Variable operating expenses, $m
 
  5,961
  6,098
  6,254
  6,430
  6,624
  6,837
  7,069
  7,320
  7,591
  7,881
  8,170
  8,502
  8,855
  9,230
  9,628
  10,050
  10,497
  10,969
  11,468
  11,995
  12,551
  13,137
  13,755
  14,407
  15,093
  15,815
  16,575
  17,375
  18,216
  19,101
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  4,628
  5,961
  6,098
  6,254
  6,430
  6,624
  6,837
  7,069
  7,320
  7,591
  7,881
  8,170
  8,502
  8,855
  9,230
  9,628
  10,050
  10,497
  10,969
  11,468
  11,995
  12,551
  13,137
  13,755
  14,407
  15,093
  15,815
  16,575
  17,375
  18,216
  19,101
Operating income, $m
  63
  -1,177
  -1,203
  -1,234
  -1,268
  -1,305
  -1,347
  -1,392
  -1,441
  -1,493
  -1,550
  -1,588
  -1,653
  -1,721
  -1,794
  -1,872
  -1,954
  -2,041
  -2,132
  -2,229
  -2,332
  -2,440
  -2,554
  -2,674
  -2,801
  -2,934
  -3,074
  -3,222
  -3,378
  -3,541
  -3,713
EBITDA, $m
  1,218
  -24
  -25
  -26
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -36
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -75
  -79
Interest expense (income), $m
  99
  91
  96
  100
  106
  112
  119
  126
  134
  143
  152
  162
  173
  185
  197
  210
  224
  238
  254
  270
  288
  306
  325
  345
  367
  390
  413
  438
  465
  493
  522
Earnings before tax, $m
  -80
  -1,268
  -1,299
  -1,334
  -1,373
  -1,417
  -1,465
  -1,518
  -1,575
  -1,636
  -1,702
  -1,750
  -1,826
  -1,906
  -1,991
  -2,082
  -2,177
  -2,279
  -2,386
  -2,500
  -2,619
  -2,746
  -2,879
  -3,020
  -3,168
  -3,324
  -3,488
  -3,661
  -3,842
  -4,034
  -4,235
Tax expense, $m
  67
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -141
  -1,268
  -1,299
  -1,334
  -1,373
  -1,417
  -1,465
  -1,518
  -1,575
  -1,636
  -1,702
  -1,750
  -1,826
  -1,906
  -1,991
  -2,082
  -2,177
  -2,279
  -2,386
  -2,500
  -2,619
  -2,746
  -2,879
  -3,020
  -3,168
  -3,324
  -3,488
  -3,661
  -3,842
  -4,034
  -4,235

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,117
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  10,781
  9,866
  10,093
  10,352
  10,643
  10,966
  11,320
  11,705
  12,123
  12,572
  13,055
  13,571
  14,122
  14,708
  15,331
  15,993
  16,694
  17,435
  18,220
  19,049
  19,924
  20,848
  21,822
  22,848
  23,930
  25,069
  26,269
  27,531
  28,860
  30,257
  31,727
Adjusted assets (=assets-cash), $m
  9,664
  9,866
  10,093
  10,352
  10,643
  10,966
  11,320
  11,705
  12,123
  12,572
  13,055
  13,571
  14,122
  14,708
  15,331
  15,993
  16,694
  17,435
  18,220
  19,049
  19,924
  20,848
  21,822
  22,848
  23,930
  25,069
  26,269
  27,531
  28,860
  30,257
  31,727
Revenue / Adjusted assets
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
Average production assets, $m
  6,425
  6,555
  6,706
  6,878
  7,072
  7,286
  7,521
  7,778
  8,055
  8,354
  8,674
  9,017
  9,383
  9,773
  10,187
  10,626
  11,092
  11,585
  12,106
  12,657
  13,239
  13,852
  14,499
  15,182
  15,900
  16,657
  17,454
  18,293
  19,176
  20,104
  21,081
Working capital, $m
  1,949
  847
  866
  889
  914
  941
  972
  1,005
  1,041
  1,079
  1,121
  1,165
  1,212
  1,263
  1,316
  1,373
  1,433
  1,497
  1,564
  1,635
  1,710
  1,790
  1,873
  1,961
  2,054
  2,152
  2,255
  2,363
  2,477
  2,597
  2,724
Total debt, $m
  2,342
  2,450
  2,572
  2,711
  2,867
  3,040
  3,229
  3,436
  3,660
  3,901
  4,159
  4,436
  4,731
  5,046
  5,380
  5,734
  6,110
  6,507
  6,928
  7,372
  7,841
  8,336
  8,858
  9,409
  9,988
  10,599
  11,242
  11,919
  12,631
  13,380
  14,168
Total liabilities, $m
  5,180
  5,288
  5,410
  5,549
  5,705
  5,878
  6,067
  6,274
  6,498
  6,739
  6,997
  7,274
  7,569
  7,884
  8,218
  8,572
  8,948
  9,345
  9,766
  10,210
  10,679
  11,174
  11,696
  12,247
  12,826
  13,437
  14,080
  14,757
  15,469
  16,218
  17,006
Total equity, $m
  5,601
  4,578
  4,683
  4,803
  4,938
  5,088
  5,252
  5,431
  5,625
  5,833
  6,057
  6,297
  6,552
  6,825
  7,114
  7,421
  7,746
  8,090
  8,454
  8,839
  9,245
  9,673
  10,125
  10,602
  11,103
  11,632
  12,189
  12,774
  13,391
  14,039
  14,722
Total liabilities and equity, $m
  10,781
  9,866
  10,093
  10,352
  10,643
  10,966
  11,319
  11,705
  12,123
  12,572
  13,054
  13,571
  14,121
  14,709
  15,332
  15,993
  16,694
  17,435
  18,220
  19,049
  19,924
  20,847
  21,821
  22,849
  23,929
  25,069
  26,269
  27,531
  28,860
  30,257
  31,728
Debt-to-equity ratio
  0.418
  0.540
  0.550
  0.560
  0.580
  0.600
  0.610
  0.630
  0.650
  0.670
  0.690
  0.700
  0.720
  0.740
  0.760
  0.770
  0.790
  0.800
  0.820
  0.830
  0.850
  0.860
  0.870
  0.890
  0.900
  0.910
  0.920
  0.930
  0.940
  0.950
  0.960
Adjusted equity ratio
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -141
  -1,268
  -1,299
  -1,334
  -1,373
  -1,417
  -1,465
  -1,518
  -1,575
  -1,636
  -1,702
  -1,750
  -1,826
  -1,906
  -1,991
  -2,082
  -2,177
  -2,279
  -2,386
  -2,500
  -2,619
  -2,746
  -2,879
  -3,020
  -3,168
  -3,324
  -3,488
  -3,661
  -3,842
  -4,034
  -4,235
Depreciation, amort., depletion, $m
  1,155
  1,152
  1,178
  1,208
  1,241
  1,278
  1,319
  1,363
  1,411
  1,462
  1,518
  1,555
  1,618
  1,685
  1,756
  1,832
  1,912
  1,997
  2,087
  2,182
  2,283
  2,388
  2,500
  2,618
  2,741
  2,872
  3,009
  3,154
  3,306
  3,466
  3,635
Funds from operations, $m
  1,718
  -116
  -121
  -126
  -132
  -139
  -147
  -155
  -164
  -174
  -184
  -196
  -208
  -221
  -235
  -249
  -265
  -281
  -299
  -317
  -337
  -357
  -379
  -402
  -426
  -452
  -478
  -507
  -536
  -567
  -600
Change in working capital, $m
  233
  17
  19
  22
  25
  28
  30
  33
  36
  39
  41
  44
  47
  50
  54
  57
  60
  64
  67
  71
  75
  79
  84
  88
  93
  98
  103
  108
  114
  120
  126
Cash from operations, $m
  1,485
  -132
  -140
  -148
  -157
  -167
  -177
  -188
  -200
  -212
  -226
  -240
  -255
  -271
  -288
  -306
  -325
  -345
  -366
  -388
  -412
  -437
  -463
  -490
  -519
  -549
  -581
  -615
  -650
  -687
  -727
Maintenance CAPEX, $m
  0
  -1,108
  -1,130
  -1,156
  -1,186
  -1,219
  -1,256
  -1,297
  -1,341
  -1,389
  -1,440
  -1,496
  -1,555
  -1,618
  -1,685
  -1,756
  -1,832
  -1,912
  -1,997
  -2,087
  -2,182
  -2,283
  -2,388
  -2,500
  -2,618
  -2,741
  -2,872
  -3,009
  -3,154
  -3,306
  -3,466
New CAPEX, $m
  -856
  -130
  -151
  -172
  -193
  -214
  -235
  -256
  -277
  -299
  -321
  -343
  -366
  -390
  -414
  -439
  -466
  -493
  -521
  -551
  -582
  -614
  -647
  -682
  -719
  -757
  -797
  -839
  -883
  -929
  -977
Cash from investing activities, $m
  -1,716
  -1,238
  -1,281
  -1,328
  -1,379
  -1,433
  -1,491
  -1,553
  -1,618
  -1,688
  -1,761
  -1,839
  -1,921
  -2,008
  -2,099
  -2,195
  -2,298
  -2,405
  -2,518
  -2,638
  -2,764
  -2,897
  -3,035
  -3,182
  -3,337
  -3,498
  -3,669
  -3,848
  -4,037
  -4,235
  -4,443
Free cash flow, $m
  -231
  -1,370
  -1,421
  -1,477
  -1,536
  -1,600
  -1,668
  -1,741
  -1,818
  -1,900
  -1,987
  -2,079
  -2,176
  -2,279
  -2,387
  -2,502
  -2,623
  -2,750
  -2,885
  -3,027
  -3,176
  -3,333
  -3,498
  -3,672
  -3,855
  -4,048
  -4,250
  -4,463
  -4,687
  -4,922
  -5,170
Issuance/(repayment) of debt, $m
  -338
  108
  122
  139
  156
  173
  190
  207
  224
  241
  259
  277
  295
  314
  334
  354
  376
  398
  421
  444
  469
  495
  522
  550
  580
  611
  643
  677
  712
  749
  788
Issuance/(repurchase) of shares, $m
  376
  1,362
  1,404
  1,454
  1,508
  1,567
  1,630
  1,697
  1,768
  1,845
  1,926
  1,990
  2,081
  2,178
  2,280
  2,388
  2,503
  2,623
  2,750
  2,884
  3,025
  3,174
  3,331
  3,496
  3,669
  3,852
  4,044
  4,246
  4,459
  4,682
  4,917
Cash from financing (excl. dividends), $m  
  -65
  1,470
  1,526
  1,593
  1,664
  1,740
  1,820
  1,904
  1,992
  2,086
  2,185
  2,267
  2,376
  2,492
  2,614
  2,742
  2,879
  3,021
  3,171
  3,328
  3,494
  3,669
  3,853
  4,046
  4,249
  4,463
  4,687
  4,923
  5,171
  5,431
  5,705
Total cash flow (excl. dividends), $m
  -293
  99
  105
  116
  128
  140
  151
  162
  174
  186
  198
  188
  201
  214
  227
  241
  255
  270
  286
  302
  319
  336
  355
  374
  394
  415
  437
  460
  484
  509
  536
Retained Cash Flow (-), $m
  -346
  -1,362
  -1,404
  -1,454
  -1,508
  -1,567
  -1,630
  -1,697
  -1,768
  -1,845
  -1,926
  -1,990
  -2,081
  -2,178
  -2,280
  -2,388
  -2,503
  -2,623
  -2,750
  -2,884
  -3,025
  -3,174
  -3,331
  -3,496
  -3,669
  -3,852
  -4,044
  -4,246
  -4,459
  -4,682
  -4,917
Prev. year cash balance distribution, $m
 
  1,117
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -145
  -1,299
  -1,338
  -1,380
  -1,427
  -1,479
  -1,534
  -1,594
  -1,659
  -1,728
  -1,802
  -1,881
  -1,964
  -2,053
  -2,147
  -2,247
  -2,353
  -2,464
  -2,582
  -2,707
  -2,838
  -2,976
  -3,122
  -3,275
  -3,437
  -3,607
  -3,786
  -3,975
  -4,173
  -4,382
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  -139
  -1,190
  -1,164
  -1,137
  -1,106
  -1,073
  -1,037
  -997
  -953
  -906
  -856
  -803
  -747
  -689
  -630
  -571
  -512
  -454
  -398
  -344
  -294
  -247
  -205
  -167
  -134
  -105
  -81
  -61
  -46
  -33
Current shareholders' claim on cash, %
  100
  78.2
  61.0
  47.5
  36.9
  28.6
  22.1
  17.0
  13.1
  10.1
  7.7
  6.0
  4.6
  3.5
  2.7
  2.0
  1.6
  1.2
  0.9
  0.7
  0.5
  0.4
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.0
  0.0

Kinross Gold Corporation is a gold mining company. The Company is engaged in gold mining and related activities, including exploration and acquisition of gold-bearing properties, the extraction and processing of gold-containing ore, and reclamation of gold mining properties. The Company's segments include Fort Knox, Round Mountain, Bald Mountain, Kettle River-Buckhorn, Kupol, Paracatu, Maricunga, Tasiast and Chirano. Fort Knox is an open-pit gold mine located in Fairbanks, Alaska. Round Mountain open-pit mine is located in Nye County, Nevada. Bald Mountain open-pit mine is located in Nevada. Kettle River-Buckhorn mine is located in northern Washington State. The Kupol segment includes the Kupol and Dvoinoye mines. Paracatu is a gold mine located in the State of Minas Gerais, Brazil. Maricunga open pit mine is located in Copiapo, Chile. Tasiast mine is located in north-western Mauritania. Chirano is located in southwestern Ghana.

FINANCIAL RATIOS  of  Kinross Gold Corporation (K)

Valuation Ratios
P/E Ratio -43.3
Price to Sales 1.3
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 4.1
Price to Free Cash Flow 9.7
Growth Rates
Sales Growth Rate 13.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 3.9%
Cap. Spend. - 3 Yr. Gr. Rate -12.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 41.8%
Total Debt to Equity 41.8%
Interest Coverage 0
Management Effectiveness
Return On Assets 0.4%
Ret/ On Assets - 3 Yr. Avg. -7.5%
Return On Total Capital -1.8%
Ret/ On T. Cap. - 3 Yr. Avg. -10.9%
Return On Equity -2.6%
Return On Equity - 3 Yr. Avg. -15.5%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 18.2%
Gross Margin - 3 Yr. Avg. 15.5%
EBITDA Margin 25%
EBITDA Margin - 3 Yr. Avg. 5.4%
Operating Margin 1.3%
Oper. Margin - 3 Yr. Avg. -19.2%
Pre-Tax Margin -1.7%
Pre-Tax Margin - 3 Yr. Avg. -22.5%
Net Profit Margin -3%
Net Profit Margin - 3 Yr. Avg. -23%
Effective Tax Rate -83.8%
Eff/ Tax Rate - 3 Yr. Avg. -36.3%
Payout Ratio 0%

K stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the K stock intrinsic value calculation we used $4691 million for the last fiscal year's total revenue generated by Kinross Gold Corporation. The default revenue input number comes from 2016 income statement of Kinross Gold Corporation. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our K stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for K is calculated based on our internal credit rating of Kinross Gold Corporation, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Kinross Gold Corporation.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of K stock the variable cost ratio is equal to 124.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for K stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.9% for Kinross Gold Corporation.

Corporate tax rate of 27% is the nominal tax rate for Kinross Gold Corporation. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the K stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for K are equal to 137%.

Life of production assets of 5.8 years is the average useful life of capital assets used in Kinross Gold Corporation operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for K is equal to 17.7%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $5601 million for Kinross Gold Corporation - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 1246.55 million for Kinross Gold Corporation is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Kinross Gold Corporation at the current share price and the inputted number of shares is $6.1 billion.

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Financial statements of K
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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