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Kinross' Employees Strike at Maricunga Mine

Zacks Equity Research

Gold miner Kinross Gold Corporation (KGC) announced that its unionized employees at the Maricunga mine in Chile's Region III have initiated a strike, an action taken to protest against the failure to reach a new collective agreement at the mine.

The mining operations at the mine have been suspended for the time being. However, the heap leach facility and processing plant continue to be in operation to meet environmental compliance obligations.

At this point, Kinross is unable to predict when the striking employees will return to work. However, Kinross promises to update the market if any change takes place in this context.

Kinross originally acquired 50% interest at the Maricunga open pit mine through the Kinam merger and began operations at the mine in Jun 1998. Later in Feb 2007, Kinross acquired the remaining 50% stake through the acquisition of Bema Gold Corporation.

The Maricunga mine is a three-stage crushing and heap leach operation mine with a capacity to produce 40,000 tons of ore per day, or 11 million tons per year. The mine had produced roughly 188,000 gold equivalent ounces last year.

Kinross posted its fourth-quarter 2013 results on Feb 12. The company logged net loss of $740 million (or 65 cents per share) on a reported basis in the quarter, lower than the net loss of $2,984.9 million (or $2.62 a share) recorded in the year-ago quarter. Losses narrowed in the reported quarter on lower impairment charges.

Adjusted (excluding one-time items) loss was 2 cents per share in the fourth quarter as against adjusted earnings of 25 cents earned in the year-ago quarter. The results missed the Zacks Consensus Estimate of earnings of 3 cents per share. The bottom line was hit by lower gold prices, higher production cost of sales and depreciation.

Revenues decreased roughly 26% year over year to $877.1 million in the quarter due to the lower average realized gold price. However, it came ahead of the Zacks Consensus Estimate of $859 million.

For 2014, Kinross expects to produce roughly 2.5–2.7 million gold equivalent ounces. The company expects production cost of sales of $730–$780 per gold equivalent ounce and also anticipates its all-in sustaining cost to be $950–$1,050 per gold equivalent ounce. Total capital expenditure is expected to be around $675 million, down roughly $585 million from 2013.

Kinross currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the mining industry are AngloGold Ashanti Ltd. (AU), Lake Shore Gold Corp. (LSG) and Pretium Resources Inc. (PVG). While AngloGold carries a Zacks Rank #1 (Strong Buy), both Lake Shore Gold and Pretium Resources hold a Zacks Rank #2 (Buy).

Read the Full Research Report on PVG
Read the Full Research Report on KGC
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Read the Full Research Report on LSG

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