Kinross Updates DD&A Guidance

Gold miner Kinross Gold Corporation (KGC - Analyst Report) updated its guidance for depreciation, depletion and amortization in 2011 to approximately $600 million versus its previous forecast of $651million.

Kinross remains on track to produce about 2.6 – 2.7 million attributable gold equivalent ounces in 2011.  The average cost of sales per gold equivalent ounce is expected within the previous guidance range of $565 – $610.

Recently, Kinross reported an adjusted net income of $273.4 million or 24 cents per share in the third quarter of 2011; above last year’s $116.8 million or 15 cents per share, outpacing the Zacks Consensus Estimate of 21 cents per share.

GAAP net earnings were $212.6 million or 19 cents per share in the third quarter of 2011 compared with $540.9 million, or 71 cents per share in the prior-year quarter.

Quarterly revenues leaped 45% to $1,069.2 million, due to an increase in total ounces produced and a higher average realized gold price.

Gold production increased 13% year over year to 647,983 ounces in the third quarter of 2011 with an average realized gold price of $1,646 per ounce sold compared with $1,190 per ounce sold in the prior-year quarter.

The increase was mainly attributable to increased production from the Kupol and the West African operations. Production cost per gold equivalent ounce was $634 versus $517 in the prior-year quarter. Production costs per ounce escalated mainly due to a rise in labor costs, diesel and power costs, and royalties.

Kinross’ margin per ounce sold was $1,012 during the quarter, up 50% year over year due mainly to higher realized gold price.

In third-quarter 2011, adjusted operating cash flow was $421.6 million, up 82.1% year over year. Adjusted operating cash flow per share was 37 cents during the quarter versus 30 cents in the prior-year quarter.

Cash and cash equivalents were $1,874.6 million as of September 30, 2011 compared with $1,466.6 million as of December 31, 2010.

Capital expenditures were $395.0 million during the quarter compared with $150.7 million for the same period last year.

Kinross Gold Corporation, like other gold producers, Barrick Gold Corporation (ABX - Analyst Report) and Newmont Gold Mining (NEM - Analyst Report), 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.

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