Kinross Meets on Earnings, Beats on Revs - Analyst Blog

Gold miner Kinross Gold Corporation KGC posted adjusted earnings of $34.1 million or 3 cents per share in the first quarter of 2014, down 80% from adjusted earnings of $172.4 million or 15 cents per share recorded in the year-ago quarter. Earnings per share were, however, at par with the Zacks Consensus Estimate.

Reported net earnings were $31.8 million, or 3 cents per share, in the quarter, an 80% fall from earnings of $162.4 million, or 14 cents per share, posted in the prior year quarter.

Revenues decreased roughly 22.7% year over year to $817.4 million in the quarter due to lower average realized gold prices. However, it came ahead of the Zacks Consensus Estimate of $790 million.

Operational Performance

Gold production was 664,690 equivalent ounces for the quarter, up around 2.4% year over year, mainly due to processing of higher grade ore from the Dvoinoye mine that completed its first quarter at full production. Average realized gold price was $1,299 per ounce, down 20% from the year-ago quarter.

Production cost per gold equivalent ounce decreased to $727 in the quarter from $729 in the prior-year quarter. All-in sustaining cost per gold equivalent oz. sold decreased to $1,001 in the quarter, from $1,030 in the year-ago quarter, mainly due to declines in sustaining capital and exploration and business development expenditures.

Margin per gold equivalent ounce sold was $572 in the first quarter, down 36.1% from the year-ago quarter.

Financial Review

Adjusted operating cash flow was $239 million, down 42.2% from $413.7 million in the prior-year quarter. Cash and cash equivalents were $704 million as of Mar 31, 2014, down roughly 50.5% year over year, primarily due to debt repayment and capital spending. Total long-term debt declined roughly 3% year over year to $2,025.4 million.

Capital expenditures were $168.9 million for the reported quarter versus $309.5 million in the comparable period last year. The decrease was due to lower spending at Tasiast.

Growth Projects

Kinross, in Mar 2014, announced Tasiast expansion feasibility study results. The study, which is based on an optimal mill size of 38,000 tons per day (t/d), produced promising results indicating Kinross' potential to generate significant additional cash flow per share and production at overall lower costs.

Though the final construction decision for the Tasiast expansion project is not expected to be made before 2015, a number of activities will be pursued in the meantime so as to maintain project momentum which will further enhance the viability of the expansion plan.

Outlook

For 2014, Kinross expects to produce roughly 2.5-2.7 million gold equivalent ounces. The company expects to meet its production cost of sales guidance of $730-$780 per gold equivalent ounce and its all-in sustaining costs guidance of $950-$1,050 per gold ounce sold for 2014.

The company also expects its capital expenditure to be about $675 million in 2014.

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

Some better-ranked stocks in the gold mining industry include AngloGold Ashanti Ltd. AU, Gold Fields Ltd. GFI and Lake Shore Gold Corp. LSG. While AngloGold and Gold Fields carry a Zacks Rank #1 (Strong Buy), Lake Shore Gold holds a Zacks Rank #2 (Buy).