Kinross Misses Estimate - Analyst Blog


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Gold miner Kinross Gold Corporation ( KGC ) reported an adjusted net income of $196.6 million or 17 cents per share in the fourth quarter of 2011, above last year's $158.5 million or 14 cents per share, missing the Zacks Consensus Estimate of 22 cents per share.

For the full year, adjusted net earnings were $871.8 million, or 77 cents per share compared with $486.4 million, or 59 cents per share, missing the Zacks Consensus Estimate 81 cents per share.

GAAP net loss was $2.8 billion, or $2.45 per share in the fourth quarter compared with a loss of $72.9 million, or 6 cents per share in the year-ago quarter. For full-year 2011, GAAP net loss was 2.1 billion, or $1.83 per share compared with net earnings of $759.7 million, or 92 cents per share, in 2010.

Quarterly revenues jumped 3% to $949.3 million compared with $920.4 million during the same period in 2010, but missed the Zacks Consensus Estimate of $1.03 billion. The year-over-year increase was due to higher average realized gold price. For full-year 2011, revenues increased 31% to $3.9 billion missing the Zacks Consensus Estimate of $4.03 billion.

Gold production decreased during the quarter by 5% to 643,288 gold equivalent ounces due to reduction in grades at several mines. However, for full year, gold production increased by 12% to 2,610,373 gold equivalent ounces due to a full-year of production from the Tasiast and Chirano mines, and additional production from Kupol, as the company increased its ownership to 100% in the second quarter of 2011.

Production cost per gold equivalent ounce was $636 in the quarter versus $549 in the prior-year quarter. Kinross margin per ounce sold was $965 during the quarter, up 23% from the prior-year quarter, mainly due to higher realized gold price.

Financial Review

In fourth-quarter 2011, adjusted operating cash flow was $418.1 million compared with $294.6 million in the year-ago quarter. Adjusted operating cash flow for full-year 2011 was $1.4 billion compared with $1.0 billion in 2010.

Cash and cash equivalents were $1.8 billion as of December 31, 2011 compared with $1.5 billion as of December 31, 2010.  Capital expenditures were $585.0 million during the quarter compared with $263.0 million for the same period last year.

Growth Projects

Tasiast expansion project - The initial phase of the expansion project at Tasiast is at present complete, following construction of the West Branch dump leach and Adsorption, Desorption and Refining (ADR) facilities. Regarding the next phase of expansion, the company continues to explore processing options at Tasiast with the objective of improving project economics while reducing overall project execution risk.

Dvoinoye - Key project development activities at Dvoinoye continue to proceed on cschedule. The processing of Dvoinoye ore remains on target to commence in the second half of 2013.

Paracatu ball mills - Engineering work on the fourth Paracatu ball mill was 99% complete whereas procurement was at 98% as of the end of the fourth quarter of 2011. The project is expected to be operational in the third quarter of 2012.

Maricunga SART plant - Construction of the Maricunga SART (Sulphidization, Acidification, Recycling and Thickening) plant was re-started in late November. The SART project is targeted for completion in the first half of 2012.

At Fruta del Norte ( FDN ) , negotiations with the Ecuadorean government on an enhanced economic package at FDN continued. Permitting and development work at site will continue in 2012, including construction of the site access road, upgrading of the existing camp, advancing work on the exploration decline, and exploration drilling.

At Lobo-Marte , the timeline for the Lobo-Marte feasibility study is being extended, and is now targeted for completion in 2013.


The company increased its dividend by 33% from the previous dividend paid on September 30, 2011 and declared a dividend of 8 cents per common share. The company took this step as a result of solid operating performance and strong cash flow. The dividend is payable on March 31, 2012 to shareholders of record at the close of business on March 23, 2012.


Kinross remains on track to produce 2.6 - 2.8 million attributable gold equivalent ounces in 2012.  The average cost of sales per gold equivalent ounce is expected to be in the range of $670 - $715. Capital expenditures related to growth projects in 2012 are forecast to be approximately $1.0 billion, compared with the previous forecast of $1.3 billion.

Kinross Gold Corporation, like other gold producers, Barrick Gold Corporation ( ABX ) and Newmont Gold Mining ( NEM ), benefits from rising gold prices. We expect Kinross' exploration projects and acquisitions to boost its top line going forward.

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 Nasdaq, Inc.

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