Kinross Gold continues cost-cutting at mines

Low gold prices are taking their toll on Kinross Gold (K-T) despite ongoing efforts to slash production costs at existing mines in the Americas, Africa and Far Eastern Russia.

The company reported a net loss of US$7.6 million for the first nine months of this year, compared with US$28.9 million a year earlier. The 1997 results include an after-tax writedown of US$24 million resulting from a rockburst at the Macassa gold mine in Ontario. The 1988 results include four months of operating results from mines acquired as a result of merging with Amax Gold, completed in June of this year.

Kinross sold 268,991 oz. gold and 622,000 oz. silver in the latest quarter ended Sept. 30, while slashing cash costs by 30% to US$198 per oz. from $282 per oz. a year earlier. The improved operating performance was attributed to the positive benefits of a low Canadian dollar and Russian rouble, as well as improvements in underground mining at Macassa.

Despite the cash cost reduction, Kinross posted a net loss of US$8.5 million, or 6 cents per share, on revenue of US$86.9 million for the latest quarter ended Sept. 30. This compares with a loss of US$3.2 million on revenue of US$44.1 million in the 1997 third quarter.

The Fort Knox mine in Alaska turned out 86,344 oz. gold (or gold-equivalent) in the latest quarter at a cash cost of US$194 per oz., while Kubaka in Far Eastern Russia turned out 61,362 oz. at a cash cost of US$108 per oz.

In Canada, Hoyle Pond produced 37,915 oz. at US$173 per oz., while Macassa’s production was 19,626 oz. at US$241 per oz. The 50%-owned Refugio mine in Chile produced only 12,981 oz. gold for Kinross’s account at a cash cost of US$425 per oz., largely owing to mechanical problems.

On a brighter note, Kinross has a strong balance sheet, with US$165.2 million in cash and US$214.6 million in working capital. Kinross says cost-cutting will continue in order to preserve this balance sheet for future growth. The company also will suspend operations at the DeLamar gold-silver mine in Idaho early next year. The operation currently employs 162 people. In the latest quarter, the mine produced 16,611 gold-equivalent ounces at a cash cost of US$346 per oz.