Kinross Beats Estimates in 3Q - Analyst Blog
November 08 2012 - 4:00AM
Zacks
Gold miner Kinross Gold Corporation (KGC)
reported adjusted earnings of 22 cents per share in the third
quarter of 2012, beating the Zacks Consensus Estimate of 19 cents
but trailing the year-ago earnings of 24 cents a share.
Net earnings, as reported, went up roughly 8.6% to $224.9
million (or 20 cents per share), from $207.1 million (or 18 cents a
share) in the year-ago quarter.
Operational Performance
Revenues increased 6.6% year over year to $1,109.7 million,
aided by an increase in production. Sales came ahead of the Zacks
Consensus Estimate of $1,087 million. Gold production was 672,173
equivalent ounces, a 6.3% year-over-year increase, mainly due to
production increases at Fort Knox and Kupol. The average realized
gold price was $1,649 per ounce, up slightly from the year-ago
quarter.
Production cost per gold equivalent ounce was $677 in the
quarter versus $626 in the prior-year quarter. Margin per gold
equivalent ounce sold was $972 in the quarter, down 5% from the
prior-year quarter, mainly due to higher production cost of sales
per ounce.
Financial Review
Adjusted operating cash flow was $434.4 million in the third
quarter compared with $412.9 million a year ago. Cash and cash
equivalents were $1.34 billion as of September 30, 2012, compared
with $1.77 billion as of December 31, 2011.
Capital expenditures were $451.2 million in the quarter versus
$389.6 million reported in the same period last year. The higher
capital expenses were driven by project-related expenses at
Tasiast.
Growth Projects
Kinross is currently engaged in the development of a number of
mines, the most important ones being Tasiast and Dvoinoye. At
Tasiast, the company is currently reviewing a number of
alternatives to develop the project in the most feasible
manner.
Moreover, the company is on track to complete the
pre-feasibility study at the Tasiast mill by the first quarter of
2013. At Dvoinoye, construction is progressing well and the mine is
slated to deliver the first ore to the Kupol mill in the second
half 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.
Outlook
Kinross expects to achieve the higher end of both the production
guidance of 2.5–2.6 million gold equivalent ounces from its
continuing operations and its cost of sales forecast of $690-$725
per gold equivalent ounce in 2012.
The company has reduced its 2012 capital expenditures
expectation to approximately $2 billion, from the previous forecast
of $2.2 billion. The company's depreciation, depletion and
amortization will likely be around $255 per gold equivalent ounce,
compared with the previously-stated guidance of $235 per gold
equivalent ounce.
Our Take
Kinross, like other gold producers, Barrick Gold
Corporation (ABX) and Newmont Gold Mining
(NEM), 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 carries a Zacks #3
Rank, reflecting a short-term (1 to 3 months) Hold rating.
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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