Kinross Gold Corporation
) reported adjusted (excluding one-time items) earnings of 10
cents per share in the second quarter of 2013, beating the Zacks
Consensus Estimate of 6 cents but falling about 29% from 14
cents earned in the year-ago quarter.
On a reported basis, the company slumped to a net loss of
$2,481.9 million (or $2.17 per share), compared with net earnings
of $113.9 million (10 cents a share) recorded in the year-ago
The loss resulted from a $2,289.3 million after-tax non-cash
impairment charge related to lower short-term and long-term gold
price assumptions. In addition, Kinross took a charge of $720
million related to its earlier announced decision to stop
development of its Fruta del Norte (FDN) project in Ecuador that
has been classified as a discontinued operation.
Revenues decreased roughly 4% year over year to $968 million
due to lower average realized gold price in the quarter. However,
it came ahead of the Zacks Consensus Estimate of $929
Gold production was 655,381 equivalent ounces from continuing
operations for the quarter, around 4% year-over-year increase
driven by a spurt in production at Tasiast and Fort Knox. Average
realized gold price was $1,394 per ounce, down 11% from the
Production cost per gold equivalent ounce was $737 in the
quarter versus $724 in the prior-year quarter. Margin per gold
equivalent ounce sold was $657, down 22% from the prior-year
Adjusted operating cash flow was $256.7 million, down 4% from
$268 million in the past year. Cash and cash equivalents were
$1,163.1 million as of Jun 30, 2013, down 13% from $1,337.7
million as of Jun 30, 2012.
Capital expenditures were $321 million versus $414.7 million
in the comparable period last year. The decrease was due to lower
spending at Paracatu, Maricunga, Kupol and La Coipa. Exploration
expenditures were $32.9 million in the quarter, compared with
$66.2 million in the last year quarter.
Kinross' board of directors suspended the upcoming semi-annual
dividend in order to maintain its strong balance sheet and
liquidity position in the current lower gold price environment.
The measure was undertaken by Kinross to reduce its operating and
capital costs. In the future, decisions regarding the dividend
will depend upon factors such as market conditions, balance sheet
strength and liquidity, operational performance, and the impact
of cost reduction measures.
Cost Reduction Measures
Kinross has undertaken various additional initiatives to
reduce operating costs and capital expenditures, and maximize
cash flow in light of the recent drop in the gold price.
For the remainder of 2013, Kinross has identified additional
expected savings of roughly $180 million. It also expects more
savings in 2014, depending on the ongoing cost reviews and its
annual planning and budgeting process.
Kinross does not expect to make a decision now on whether to
proceed with a potential Tasiast mill expansion until 2015 at the
earliest, regardless of the project feasibility study outcome.
The study is expected to complete in the first quarter of 2014.
The decision taken was a part of the company's focus on capital
reduction in the current lower gold price environment.
At Dvoinoye, first ore from development activities was delivered
to Kupol in the second quarter. The Kupol plant upgrade was
successfully completed. Infrastructure construction for the
project has progressed 73%. The project is progressing according
to schedule, and is in line with the budget. The project is
expected to reach targeted production in the fourth quarter of
Kinross ceased further development at its Fruta del Norte
project, Ecuador on Jun 10, 2013, as it failed to reach an
agreement with the Ecuadorian government regarding exploitation
and investment protection agreements for the project.
Kinross expects to produce about 2.4-2.6 million gold
equivalent ounces from its current operations in 2013 and
forecasts cost of sales of $740-$790 per gold equivalent ounce
for the year.
Kinross narrowed its capital expenditures forecast to $1.45
billion from $1.6 billion in 2013. Kinross expects its all-in
sustaining costs to be in the range of $1,100-$1,200 per gold
ounce sold on a by-product basis in 2013.
Kinross currently carries a Zacks Rank #4 (Sell).
Another prominent player in the gold-mining industry,
), posted its second-quarter 2013 results on Jul 25. The
company's adjusted earnings (excluding one-time items) of 14
cents a share missed the Zacks Consensus Estimate of 28 cents and
was well below 41 cents earned in the year-ago quarter. On a
reported basis, the company posted a net loss of $1.93 billion,
compared to net earnings of $268 million in the prior-year
Other companies in the mining industry with a favorable Zacks
Pretium Resources Inc.
NovaGold Resources Inc.
). Both these stocks carry a Zacks Rank #2 (Buy).
GOLDCORP INC (GG): Free Stock Analysis Report
KINROSS GOLD (KGC): Free Stock Analysis
NOVAGOLD RSRCS (NG): Free Stock Analysis
PRETIUM RES INC (PVG): Free Stock Analysis
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