Kinross improves with a strong first quarter

VANCOUVER — Things are looking up for Kinross Gold (K-T, KGC-N) — financially, at least. The company delivered strong results for its third straight quarter, with profits jumping 50% year-on-year alongside rising production and falling cash costs.

According to CEO Paul Rollinson, the quarter reflects the company’s renewed focus on operations and fiscal discipline.

Kinross produced 649,000 equivalent oz. gold during the first quarter and sold 645,200 oz., with all-in cash costs clocking in at US$1,038 per oz. This compares to 604,000 oz. gold production and 622,000 oz. in sales at a US$1,180 per oz. all-in cost over the same period in 2012.

With an attributable sales margin of US$895 per oz., Kinross saw its net earnings jump to US$160.5 million, or US14¢ per share — compared to net earnings of US$99.6 million, or US9¢ per share, in the first quarter of 2012. The company’s improved operations resulted in rising cash flows, which increased 29% — or US$92.5 million year-on-year — to US$411.8 million, or US36¢ per share.

“Our [first-quarter] operating results illustrate the discipline that we are applying at our existing mines,” Rollinson said during a conference call, noting that on a company-wide basis, production increased 10% compared to a year ago.

“We are applying that same level of discipline to our development projects. In all cases, we are committed to using capital prudently, reducing execution risk where possible and ensuring that we undertake high-quality analysis before making development decisions,” he adds.

Kinross enjoyed better-than-expected production from its Fort Knox gold mine in Alaska despite a harsh winter, with the operation cranking out 94,000 oz. gold at cash costs of US$558 per oz., as well as a standout performance from its Tasiast asset in Mauritania, Africa. Operations at Tasiast achieved the highest quarterly production since Kinross acquired the mine in 2010, with 63,000 oz. gold produced at cash costs of US$880 per oz.

“Our North American operations delivered a strong performance in the first quarter. Round Mountain performed as we anticipated during the quarter, and Kettle River-Buckhorn had an outstanding quarter,” president and chief operating officer Brant Hinze says. “Production from our West Africa region was in-line with the previous quarter, while production from our South American region was [lower] — but overall, I am pleased with their performance.”

Hinze says that the company’s work at its Paracatu gold mine in Brazil — where Kinross increased mill availability — improved throughput and recovery, and reduced the energy per tonne that it processed at both plants.

Kinross’ US$370-million Dvoinoye gold project in Russia, which will ship ore to the nearby Kupol mill, remains on track and on budget, while the company recently released a US$2.7-billion expansion plan at Tasiast in the form of a prefeasibility study. Rollinson pointed out during the conference call, however, that a construction decision has not been made on the Tasiast expansion, although the company will commit US$624 million to the project this year.

Kinross maintains its 2013 guidance, with production expected to be between 2.4 million and 2.6 million attributable equivalent oz. gold at an all-in sustaining cost of between US$1,100 and US$1,200 per oz. gold sold. The company held US$1.4 million in cash at the end of March, and expects capital expenditures to total US$1.6 billion in 2013.

Shares of Kinross jumped 6.3% — or 33¢, after the company’s first-quarter results — with the stock trading at an above-average rate as 8.8 million shares traded hands, en route to a $5.61 close at press time. Kinross has 1.1 billion shares outstanding for a $6.4-billion press-time market capitalization.