Kinross Gold (KGC -0.27%) is in a hole as deep as the gold nuggets it digs up, with its stock setting new 52-week lows almost daily. After peaking in late 2020 at $10.31, shares of the gold miner have lost almost half their value. And each day, Kinross seems to test new lows. 

The rise and subsequent fall of Kinross Gold and most other gold miners (the sector is a sea of red) was the result of the sharp increase in value of an ounce of gold from around $1,500 in January 2020 to almost $2,100 last September, and its subsequent retreat since then. Today, gold trades at around $1,780 per ounce. 

But that's only a 15% decline, and Kinross has lost about three times that amount. So let's look closer to see if there's a reason the miner is on such a losing streak or if the disparity gives investors a golden opportunity to buy Kinross stock.

Miner holding a gold nugget

Image source: Getty Images.

Positioned to improve

The Canadian gold miner operates mines in the U.S., Russia, Brazil, Chile, Ghana, and Mauritania. But its three largest mines -- Paracatu in Brazil, Kupol in Russia, and Tasiast in Mauritania -- are expected to account for 60% of its production this year while also being the lowest-cost mines in the portfolio.

Kinross expects to produce 2.4 million gold equivalent ounces in 2021, with production increasing to 2.7 million in 2022, and to 2.9 million in 2023. Production costs were hurt last year by the pandemic, and the situation lingers today. Those cost increases are expected to reverse in 2022 and continue lower until costs reach 2020 levels again as higher-grade ore at Tasiast is accessed.

The higher production costs, however, have also affected Kinross' all-in sustaining costs (AISC), which are now forecast to be $1,110 per ounce this year, but those should decline over time as well. So it seems Kinross is still generating substantial profits off the gold it produces, and it would take a significant collapse in gold prices to impact that.

Furthermore, even as its three premier mines improve over time, the gold miner also expects a lift from its other mines. For example, Fort Knox in the U.S. (no, not that Fort Knox; we're talking about an open-pit mine in Alaska) is also expected to see substantial operating improvements that will help increase output, along with the nearby bolt-on acquisition project of Mahn Choh.

It's clear that as Kinross' overall operating efficiency improves, it will equate to a margin of better than $800 per gold ounce.

Gold bars and coins

Image source: Getty Images.

Influence of ETFs

Demand for gold, though, has been in flux, and last year it suffered due to the global economic collapse resulting from the pandemic.

Kinross says demand was down 14% in 2020, though that was mostly due to the largest segment -- jewelry -- tumbling 33% and from central banks reducing their purchases by some 59%.

While demand for gold bars and coins remained fairly constant, as did its use in technology, not surprisingly, gold exchange-traded funds (ETFs) that either invest directly in gold bullion or in gold futures contracts saw the greatest increases, with their demand for the metal rising 120% last year, putting it on par with bar and coin demand.

The reason, of course, is that gold is seen as a store of value and safety, and so there was a rush to hoard it as the pandemic spread. And many individual and institutional investors have turned to gold ETFs such as SPDR Gold Shares (GLD 0.27%), the world's largest physically backed gold ETF, to complete their investment objectives.

According to the World Gold Council, ETFs increased their physical gold holdings by 876 metric tons in 2020, equal to some 25% of the annual output of all the gold mines in the world. 

While the ETFs make it easier for individuals to own gold, they make it hard for the gold miners themselves to outperform it. Instead of buying shares of gold miners, investors often just buy the ETFs. Over the last five years, SDPR Gold Shares has beaten Kinross Gold's total return by 2 to 1. Over the past decade, the gulf between them is even wider.

That doesn't mean investors should simply ignore Kinross and buy a gold ETF. Over the past three years, Kinross has flipped the script and handily outperformed the ETF standard.

KGC Chart

KGC data by YCharts

Ready for a rebound

The outlook for gold has also never been better, and after a long stock market bull run, there's a good argument to make that a correction might be on the horizon. China's economy is slowing, retail sales are slumping, the global supply chain is still in disarray, and crucial consumer goods remain in short supply.

No one can predict a market crash, but everyone can prepare for one, and gold stocks could be just as good a hedge as anything else. Kinross Gold's position in the global market, along with its improving production profile, low costs, and access to more and better amounts of quality ore make its currently depressed price a veritable gold mine of opportunity.