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Kinross Beats Squarely in 4Q

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Gold miner Kinross Gold Corporation (KGC - Free Report) reported adjusted earnings of 24 cents per share in the fourth quarter of 2012, beating the Zacks Consensus Estimate of 22 cents and exceeding the year-ago earnings of 16 cents a share.

On a reported basis, the company posted a net loss of $2,989.1 million (or $2.62 per share) in the reported quarter compared with a net loss of $2,791 million (or $2.45 a share) in the year-ago quarter.

For the full year, adjusted earnings came in at 77 cents per share, ahead of the year-ago earnings by 2 cents. It beat the Zacks Consensus Estimate of 74 cents. Net loss, as reported, was $2,548.8 million, (or $2.24 per share) compared with a net loss of $2,093.4 million, (or $1.84 per share) for full-year 2011.  

Revenues increased 29% year over year to $1,186.9 million, aided by higher production and higher realized gold price. Sales came ahead of the Zacks Consensus Estimate of $1,167 million.

For the full year, revenues increased 12.2% year over year to $4,311.4 million on the back of higher realized gold prices. However, sales missed the Zacks Consensus Estimate of $4,383 million.

Operational Performance

Gold production was 724,510 equivalent ounces for the quarter, a 16% year-over-year increase, mainly due to production increases at Fort Knox and La Coipa. The average realized gold price was $1,707 per ounce, up 6.8% from the year-ago quarter. The average realized gold price per ounce was $1,643 for the full year, up 9.5% year over year.

Production cost per gold equivalent ounce was $686 in the quarter versus $635 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 costs for energy, labor, and consumables.

Financial Review

Adjusted operating cash flow was $501.4 million in the quarter compared with $353.4 million a year ago. Cash and cash equivalents were $1.63 billion as of Dec 31, 2012, compared with $1.77 billion as of Dec 31, 2011.

Capital expenditures were $512.1 million in the reported quarter versus $577.9 million reported in the same period last year. The decrease in capital expenses was due to the timing of expenditures 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 of the year.

Apart from these projects, Kinross also has a few others in its portfolio. The company is currently seeking negotiations with the Ecuadorean government on an enhanced economic package at Fruta del Norte.


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. Production in the first half of 2013 is expected to be lower than production level in the second half of 2012.

The company forecasts roughly $750 million in capital expenditures related to growth projects. Kinross expects exploration and business development expenses to be around $210 million, of which $160 million is expected for exploration.

Kinross currently carries a Zacks Rank #3 (Hold).

Other companies in the mining industry having a favorable Zacks Rank are AngloGold Ashanti Ltd. (AU - Free Report) , Banro Corporation and Primero Mining Corp. . All these companies carry a Zacks Rank #2 (Buy).

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