Kinross Declares 2012 Outlook - Analyst Blog

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Kinross Gold Corporation ( KGC ) declared preliminary operating results for full-year 2011 while providing guidance for 2012.

Kinross expects 2011 production to be approximately 2.6 million gold equivalent ounces and cost of sales to be approximately $600 per gold equivalent ounce, both of these are equivalent to the the company's previous guidance range.

2012 Outlook

In 2012, Kinross expects to produce approximately 2.6-2.8 million gold equivalent ounces from its current operations. Production cost of sales per gold equivalent ounce is expected to be in the range of $670-715 for 2012. On a by-product basis, gold production is expected to be in the range of 2.5-2.6 million ounces and silver production is forecast to be in the range of 7.5-8.0 million ounces. Average production cost of sales per gold ounce on a by product basis is guided in the range of $620-$665.

The company expects production in 2012 to be positively impacted by the ongoing projects at Fort Knox, Paracatu, and at Tasiast. These expected gains are anticipated to be partially offset by a planned decline in grades, particularly at Kupol and Kettle River-Buckhorn.

The 2012 production cost of sales per gold equivalent ounce is expected to increase driven by anticipated higher consumable and labor costs and an expected decline in grades at certain existing mines.

In South America, production is estimated to be in the range of 930,000-1,030,000 gold equivalent ounces at cost of sales per gold equivalent ounce of $780-$850.

In North America, production is estimated to be in the range of 620,000-660,000 gold equivalent ounces at cost of sales per gold equivalent ounce of $620-$660.

In West Africa, production is estimated to be in the range of 500,000-560,000 gold equivalent ounces at cost of sales per gold equivalent ounce of $740-$800.

In Russia, production is estimated to be in the range of 525,000-565,000 gold equivalent ounces at cost of sales per gold equivalent ounce of $470-$495.

The company expects capital expenditures related to growth projects of approximately $1.3 billion in 2012. The company's three major growth projects at Tasiast, Fruta del Norte ( FDN ) and Lobo-Marte will require significant capital expenditures over the next several years.

The 2012 forecast for exploration and business development expenses is approximately $255 million, of which $185 million is forecast for exploration. Capitalized exploration is forecast to be $35 million, for total 2012 exploration expenditures of $220 million.

Other operating costs are forecast to be $70 million, of which $35 million Tasiast expansion costs that cannot be capitalized. General and administrative expense is anticipated to be approximately $180 million. Included in the expenses is approximately $50 million related to equity-based compensation. The company's tax rate in 2012 is forecast to be in the range of 31%-37% and depreciation, depletion and amortization is forecast to be approximately $200 per gold equivalent ounce.

Kinross also announced a project optimization process. The purpose of the project optimization process is to efficiently advance development of its three projects - Tasiast, Fruta del Norte ( FDN ), and Lobo-Marte, generate enhanced returns on capital, and maximize shareholder value, while maintaining a strong balance sheet and investment grade ratings.

As part of the optimization process, Kinross will explore project development alternatives to those included in the original Tasiast scoping study, with the objective of improving project economics while reducing overall project execution risk.

At Fruta del Norte, discussions with the Ecuadorian government are ongoing in order to advance negotiation of the definitive exploitation and investment protection agreements. Kinross continues to explore options to optimize capital allocation and improve overall project economics prior to finalizing the project feasibility study and completing the exploitation and investment protection agreements.

Kinross competes with  Barrick Gold Corporation  ( ABX ) and  Newmont Gold Mining  ( NEM ). Currently, Kinross Gold has a short-term (1 to 3 months) Zacks #3 Rank (Hold) and a long-term Neutral recommendation.


 
BARRICK GOLD CP ( ABX ): Free Stock Analysis Report
 
KINROSS GOLD ( KGC ): Free Stock Analysis Report
 
NEWMONT MINING ( NEM ): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: ABX , FDN , KGC , NEM

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