Kinross Gold Corporation
) reported adjusted earnings of 14 cents per share in the second
quarter of 2012, below last year's earnings of 20 cents per share.
The results missed the Zacks Consensus Estimate of 16 cents.
Net earnings, as reported, went down almost 53% to $115.8
million (or 10 cents per share), from $244.3 million or 22 cents a
share in the year-ago quarter.
Revenues increased 4.5% year over year to $1,006.7 million,
slightly ahead of the Zacks Consensus Estimate of $1,005 million.
The growth was due to a higher average realized gold price, which
increased almost 8.3% to $1,568 per ounce in the quarter from the
Gold production decreased during the quarter by 4% to 632,772
gold equivalent ounces. The decrease in production was led by an
expected decline in grade at Kupol and Kettle River-Buckhorn along
with an increased output of lower-grade stockpile ore at La
Production cost per gold equivalent ounce was $725 in the
quarter versus $569 in the prior-year quarter. Margin per gold
equivalent ounce sold was $843 in the quarter, down 4% from the
prior-year quarter, mainly due to higher production cost of sales
Adjusted operating cash flow was $270.5 million in the second
quarter compared with $404.8 million a year ago. Cash and cash
equivalents were $1.34 billion as of June 30, 2012, compared with
$1.08 billion as of June 30, 2011.
Capital expenditures were $431.2 million in the quarter compared
with $408.8 million reported in the same period last year. The
higher capital expenses were driven by project-related expenses
incurred at Tasiast, Fort Knox and Round Mountain.
Kinross is currently engaged in the development of a number of
mines, the most important ones being Tasiast and Dvoinoye. At
Tasiast, Kinross is currently reviewing a number of alternatives to
develop the project in the most feasible manner.
Moreover, the company has also received permission from the
Mauritanian government for carrying out the Environmental Impact
Assessment (EIA) for the Phase 2 project. This phase will include
all intended mining and processing activities which might take
place within the boundary of the mine under various
At Dvoinoye, construction is progressing well and the mine is on
track to deliver the first ore to the upgraded Kupol mill in the
second half of next year.
Apart from these projects, Kinross also has a few others in its
portfolio. The company is currently continuing negotiations with
the Ecuadorean government on an enhanced economic package at Fruta
del Norte. In addition, construction work on the fourth Paracatu
ball mill is progressing as per schedule and the project is
expected to be operational in the ongoing quarter.
Kinross has cut its yearly production forecast to approximately
2.5-2.6 million gold equivalent ounces from the erstwhile target of
2.6-2.8 million after divesting 50% of its interest in the Crixas
mine. Excluding Crixas, the guidance has remained
Also, Kinross expects cost of sales to be in the range of
$690-725 per gold equivalent ounce, up from the earlier range of
$670-$715. The forecasted increase is driven by higher expected
production cost of sales per ounce in West Africa and South
Kinross, like other gold producers,
Barrick Gold Corporation
Newmont Gold Mining
), benefits from rising gold prices. However, its results are
constrained by rising costs and lower grades like the other players
in the industry.
Currently, we have a long-term (more than 6 months) Neutral
recommendation on Kinross. The company currently holds a Zacks #3
Rank, reflecting a short-term (1 to 3 months) Hold rating.
BARRICK GOLD CP (ABX): Free Stock Analysis
KINROSS GOLD (KGC): Free Stock Analysis Report
NEWMONT MINING (NEM): Free Stock Analysis
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