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Kinross Gold Corporation Message Board

  • investora2z investora2z Mar 26, 2013 4:32 AM Flag

    KGC may remain under pressure

    KGC revenues have been growing over the years, with the revenue for 2012 being $4.3 billion compared with $3.8 billion in 2011. However, the company has been reporting losses in the last two years. The loss last year was mainly due to an after-tax non-cash impairment charge of $3.2 billion on account of goodwill and property, plant & equipment related to Tasiast and Chirano projects. Recently KGC failed to win dismissal of a U.S. lawsuit in this connection with these mines. The case relates to KGC's $7.1 billion acquisition of Red Back Mining Inc in 2010, which gave it control of the Tasiast gold mine in Mauritania and the Chirano gold mine in Ghana. The court held that “shareholders may sue over losses between Aug. 10, 2011, when Kinross delayed a feasibility study for the Tasiast mine, and Jan. 17, 2012, a day after it took a $2.94 billion non-cash, goodwill write down related to the Red Back mines”. The company is contesting the allegations. The stock has been on the down trend since many years with the recent high being made in October 2009 (~$23). The fundamental undercurrent, especially in light of the lawsuit, is not very supportive of an upside for the stock immediately. Based on the guidance given by KGC, for 2013, the company expects to produce approximately 2.4-2.6 million gold equivalent ounces which is lower than the figure of 2.61 million for the full year 2012. The expected production cost of sales per gold equivalent ounce is $740-790 ($706 for 2012) with all-in sustaining cost of $1,100-$1,200 per gold ounce sold on a by-product basis for full-year 2013 ($1100 for 2012). The company may, therefore, have lower margins. With other smaller companies like Pershing Gold (PGLC) expected to start production in 2014, and other companies like Bullfrog Corporation (BFGC) owning promising gold & silver resources, the future strategy for KGC may involve inorganic growth through acquisitions of smaller players in areas around its mines.

4.89-0.14(-2.78%)Jun 30 4:01 PMEDT