Lower Output from Gold Producers

Kinross Gold Corporation (KGC) is planning to acquire mining assets in North and South America, Russia and Ghana to stay out of countries such as China, which is currently the world's top gold producer. Toronto-based Kinross will continue to build on its operations spread throughout the Americas, and around its Kupol mine in eastern Russia. Kinross sees higher political risk at Venezuela, China, Indonesia and PNG (Papua New Guinea).

Declining global gold production and a weakening U.S. dollar are driving higher gold prices. Gold production peaked in 2001 and has been declining ever since. New acquisitions and higher productions seem difficult for gold producers. Two of the world's largest gold miners, Kinross Gold and Agnico-Eagle Mines Ltd. (AEM), have reported major setbacks as they try to ramp up production and benefit from record-high gold prices.

Kinross has mines and projects in the U.S., Brazil, Chile, Ecuador and Russia. The company has increased its output steadily over the past few years, but was forced earlier this year to reduce its 2009 production forecast -- it now sees output of 2.2 million gold equivalent ounces -- due in part to problems in ramping up its expanded Paracatu mine in Brazil.

Kinross's biggest problem is the Paracatu mine, where it is dealing with harder-than-expected ore that is difficult to grind. That is delaying expansion plans at the mine. Paracatu was expected to have been running full tilt by now, but should produce at a reduced rate of around 420,000 ounces next year.

Additionally, Kinross is facing challenges at its Kupol mine in Russia, as well as other delays at its Fort Knox mine in Alaska. Overall, the company now expects virtually zero production growth in 2010 compared to 2009.

Agnico's biggest problem is a slower-than-expected ramp-up of the mill at its Kittila mine in Finland, but it is also facing issues at its two other new mines, Lapa in Canada and Pinos Altos in New Mexico.

Kinross expects to release its 2010 production forecasts in January.

Read the full analyst report on KGC

Read the full analyst report on AEM