Analysts praise Kinross Gold's spot-on 3Q08 guidance

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The global financial crisis has yet to hit Kinross Gold, which “had an outstanding quarter in which we began to see clearly the positive impact of Kinross’ growth program on our profitability.”

Author: Dorothy Kosich
Posted: Thursday , 06 Nov 2008

RENO, NV -

Kinross Gold won the praise of analysts Wednesday who noted that the Toronto-based company may be the only gold miner to actually meet its guidance for the third quarter.

In fact, Kinross's 2009 guidance also remains unchanged, thanks to new mines that are either producing or in ramp-up stage, including Kupol, Paracatu, Buckhorn and the expansion of the Fort Knox mine in Alaska. The result means that Kinross had completed the majority of its capex spending before global financial markets collapses.

Nevertheless, Kinross President and CEO Tye Burt declared, "I believe that the fundamentals for higher gold prices are firmly in place."

In the company's financial statement, Burt said, Kinross has maintained its financial strength during the current global financial crisis. "The majority of the capital expenditure program for our growth projects is behind us. We have a strong balance sheet and robust cash flow with a cash position of over $700 million, Low oil prices and more favorable currency exchange rates will also have a positive impact on our costs."

First gold from the Paracatu mine expansion in Brazil was poured in October which is expected to be at full capacity during the first-quarter 2009. The Buckhorn Mine in Washington State is now fully operational with first gold produced at the refurbished Kettle River mill also in October. Meanwhile Burt said a decision as to whether to develop the Cerro Casale gold-copper project joint venture in Chile is expected in mid-2009.

Kinross closed its acquisition of Aurelian Resources including its coveted Fruta del Norte gold-silver deposit and is now awaiting the first draft of a proposed new mining law to be issued shortly from the office of Ecuador's President Rafael Correa. Burt told analysts Wednesday that the Legislative and Auditing Commission, or Congresillo, has been appointed to enact laws in Ecuador pending the election of a new Congress in early 2009.

The company expects to produce 1.8 million to 1.9 million gold equivalent ounces (GEO) this year and approximately 2.4 million ounces to 2.5 million ounces GEO in 2009. Cost of sales per GEO is expected to be $424 to $445 for the full year of 2008, which is consistent with previously stated guidance.

FINANCIALS

Net earnings for the third quarter were $64.7 million, or 10-cents per share, compared to a net profit of $39.4 million (7-cents/sh) for the third-quarter 2007. Net earnings for the third quarter of 2008 were reduced by a $19.7 million or 3-cents per share, by impairment charges, a litigation settlement, forex gains, and gains on derivatives and on the sale of assets.

For the first nine months of this year, Kinross reported net income of $161.6 million or 26-cents per share, compared to $160.9 million (30-cents/sh) for the first nine months of 2007.