i have been trying to research kinross, and this is what i have come up with. like the rest of the industry, kinross is impacted by the higher cost of energy and other inputs. other factors beyond its control are the price of gold, currency fluctuations, and higher taxes and royalties. they have tried to mitigate some of those by taking on substantial hedges against adverse movements in the price of diesel fuel and the value of the local currencies in the countries where they have operations.

as far as company-specific items are concerned, kinross has reduced its risk in some areas. they completed the construction of three mines this year, mostly on schedule and on budget except that paracatu may be 5-10% over budget. total capital expenditures in 2008 were $750, and bringing those three projects into production reduced a lot of uncertainty about the company.

in addition, kinross still has a strong balance sheet because it did a financing earlier in the year before the credit markets collapsed, and now has more than $700 million in cash. most of the capex is behind them for now, so they will be insulated from inflationary cost pressures to some extent. the cost of doing business still increases every year, but that affects the entire industry, and the three new mines are lower cost than the others.

for further growth there is the expansion of fort knox, and beyond that, kinross has only early stage projects such as fruta del norte and cerro casale. we're all familiar with fdn. cerro casale is a joint venture with barrick in chile. it is a huge project, and the kinross share alone is 11 million ounces of gold. a feasibility study is planned for mid-2009, with a production decision to follow. there is also the ixhuatan project in mexico, but that one has a long way to go. kinross also has equity stakes in several junior exploration companies. gold production is expected to reach 2.5 million ounce next year.

things that can go wrong:

i will put kupol at the top of the list. i would like this mine if it were located somewhere normal. it is in a remote part of siberia, 200km from the nearest large town. they describe the environment as "challenging." the average temperature is -13 celsius, the winter lasts 8 months, and it can get as cold as -58. i won't be visiting kupol any time soon to check up on my investment. 25% of kupol belongs to the chukotka government, and my concern is that someday the local government might like to increase that to 50%. the russian government has already demonstrated a lack of respect for property rights or contract law. kupol is probably safe for now, but if russia falls on hard economic times, who knows? when food is scarce, table manners change.

having said all that, tye burt and the kinross/bema team have been operating in russia for twelve (12) years, so they must have learned a great deal about russian politics as well as mining in russia. the fact that they have managed to hang onto 75% of kupol when the maximum for new projects is 50%, and bring it into production, are good signs.

next, ecuador: again, this is the one we know best, and doubtless there will be more twists and turns on the way to bringing fdn into production. mining mandate, stop work order, excessive royalties, windfall profits tax, more soto articles, and on and on.

then, cerro casale: barrick holds a 51% interest, so it should make the production decision, and be the operator. my major concern about this one is financing it. the original capex estimate for just the kinross share was $1 billion, and who knows how much it will be when they finally get around to building it. if kinross tries to finance it internally, they may have to tie up every penny to do so.

but if all goes well, kupol will produce 400,000 ounces annually at close to $200/oz. officially kinross says cerro casale and fdn could each contribute 500,000 ounces per year, but i think this is a case of them under-promising and over-delivering. cerro casale might produce an additonal 50,000 oz and fdn even more, especially if they start by working the high grade rock near the northern end. overall, kinross estimates a cost of production of $365-385, after taking byproducts into account.

where does this leave us? if you want to own a mid-tier producer, i think agnico eagle and yamana are more attractive. both companies have better production growth profiles, lower cost structures, and they operate in safer political jurisdictions. the real wild card is fdn and the rest of the unexplored aurelian concessions. there is the upside potential of being like the first company to build a mine in nevada, although it is subject to the political problems of ecuador. without the aurelian properties, i would not be interested in kinross. now it is high risk/high reward compared to its peers.

that is just my opinion, and by all means do your own research. the warrants are a low-risk way to participate in kinross, and i think this is a terrible time to sell any gold stock, but those are individual decisions.