2013 guidance - production and costs miss CS estimates: "KGC
guided for gold production of 2.4-2.6M GEO at cash costs of
$740-$790/oz, vs. CS's 2.79M GEO at $676/oz. We are not surprised
by reduced production but had not yet rolled expected negative
revisions into our forecasts (largely because we didn't really know
which assets would be impacted). However the magnitude of the
increase in operating costs was not anticipated. Total capex of
$1.6B is in-line with the CS est. of $1.64B, but within that
non-growth capital was higher than our forecasts."
Tasiast hit with $3.1B impairment charge, and not surprisingly
(aside from early timing) opts for the 30ktpd option: "The $3.1B
write-down for Tasiast was based on the PFS to be released in April
2013 for the 30ktpd CIL mill option. KGC also wrote off $0.1B in
goodwill attributable to Chirano. The impairment test used a
$1,500/oz LT gold price. Our NAV for Tasiast currently stands at
$1.6B. We were already modelling the 30ktpd CIL mill only scenario,
but we have not yet modelled the higher near and mid-term costs as
the asset given the $1,061/oz cash costs at the asset in
Focus on margins apparent, Kinross keeps $1,200/oz gold with
reserve update: "This resulted in a net reduction not surprisingly,
but again, 'where and how much?' was the key question) in ounces at
several assets in all categories. Resources -13% overall (-5% 2P,
-20% M&I and -28% inferred)."
What to do with the stock short term? Wait and let the dust
settle: "While we do believe that the majority of the negative news
has been released we do not yet fully understand the implications.
In our view there are enough negative valuation drivers, (expected:
lower production and reserves/resources and unexpected: higher
sustaining capex and costs) that we continue to believe it is
prudent to wait and evaluate before jumping in."
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