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Gold miner Kinross Gold Corporation (KGC - Analyst Report) reported adjusted (excluding one-time items) earnings of 15 cents per share in the first quarter of 2013, beating the Zacks Consensus Estimate of 12 cents but falling behind the year-ago earnings of 17 cents a share.

On a reported basis, the company posted a net profit of $160.5 million (or 14 cents per share) in the reported quarter, up 61% from net earnings of $99.6 million (9 cents a share) recorded in the year-ago quarter.

Revenues increased 5.3% year over year to $1,058.1 million due to higher gold equivalent ounces sold. Sales came ahead of the Zacks Consensus Estimate of $1,033 million.

Operational Performance

Gold production was 648,897 equivalent ounces from continuing operations for the quarter, a 7.4% year-over-year increase, mainly due to a spurt in production at Tasiast and Fort Knox. Average realized gold price was $1,624 per ounce, down 1.2% from the year-ago quarter.

Production cost per gold equivalent ounce was $729 in the quarter versus $738 in the prior-year quarter. The results witnessed a declining trend, driven by continued focus on cost management and increase in gold ounces sold. Margin per gold equivalent ounce sold was $895 in the quarter, down 1% from the prior-year quarter.

Financial Review

Adjusted operating cash flow was $411.8 million in the quarter compared with $319.3 million a year ago. Cash and cash equivalents were $1,420.8 million as of Mar 31, 2013, compared with $1,982.5 million as of Mar 31, 2012.

Capital expenditures were $317.8 million in the reported quarter versus $529.3 million reported in the same period last year. The decrease was due to the timing of expenditures at Tasiast and the completion of the fourth ball mill at Paracatu and SART plant at Maricunga in 2012.

Growth Projects

Kinross is proceeding to a full feasibility study on the Tasiast expansion project based on the recently announced pre-feasibility results. The feasibility study is expected to complete in the first quarter of 2014. After the feasibility study is complete, Kinross will make a decision on whether to complete engineering work and proceed with construction.

At Dvoinoye, construction is progressing ahead of plan with underground development completing 1,567 meters. Kupol mill’s expansion is proceeding well and is expected to be complete by third-quarter 2013. The project is in line with the budget and is expected to start production at its full capacity in the second half of the year.

The negotiation between the Fruta Del Norte (FDN) project and Ecuadorian government regarding exploitation and investment protection agreements is underway, however, due to some key economic and legal matters the parties have not been able to come to an agreement.


Kinross, which is among the prominent players in the gold-mining industry along with Barrick Gold Corporation (ABX - Analyst Report), Goldcorp Inc. (GG - Analyst Report) and Newmont Mining Corporation (NEM - Analyst Report), 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 forecasts roughly $1.6 billion in capital expenditures 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).

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