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Kinross Gold Slips on 3rd-Quarter Results

- By Alberto Abaterusso

Kinross Gold Corp. (KGC) fell 3.57% to $2.56 per share on the New York Stock Exchange on Friday after releasing third-quarter results on Thursday.

The Canadian gold mining company missed expectations on non-GAAP earnings by 4 cents, posting a loss of 4 cents per share. The miss produced a 100% negative surprise. In the prior-year quarter, the miner reported a non-GAAP net profit of 7 cents per share.

Revenue came in at $753.9 million, declining nearly 9% year over year. Sales were impacted by placing 20,196 fewer ounces of gold equivalent on the market and a 5.8% decline in the price per ounce sold.

Kinross Gold sold 618,463 ounces of gold equivalent for an average realized gold price of $1,209 per ounce. The company missed consensus on third-quarter revenue by $33.5 million.

The Canadian miner sold less metal because it produced a lower volume of gold equivalent. Production declined 10.4% to 586,260 ounces as a result of issues at its Round Mountain, Bald Mountain and Fort Knox mines in the U.S., Maricunga in Chile, lower grade ore at operations in Russia and lower mill grades at the Tasasiast mine in West Africa.

The only asset that performed better than last year was the Paracatu mine in Brazil, covering about 21.6% of the total production of gold equivalent attributable to Kinross. However, investors must note that in the third quarter of 2017, Brazilian operations were affected by abnormally low levels of rainfall in the region. Adequate water reserves ensure mining and processing activities proceed smoothly.

As a result of the production obstacles, the company reported a 17.4% year-over-year increase in production cost of sales to $777 per ounce of gold equivalent and a nearly 12% increase in the all-in sustaining cost to $1,049 per ounce of gold equivalent.

Lower production and metal prices impinged on the generation of cash flow from operations, cutting it in half from the prior-year quarter. Operating cash flow for the quarter was $143.2 million.

Looking ahead, Kinross Gold is forecasting production of 2.375 million to 2.625 million ounces of equivalent gold. The miner guided production cost of sales of $693.5 to $766.5 per ounce of gold equivalent sold and an all-in sustaining cost of $926.25 to $1,023.75 per ounce.

The company is also projecting to spend $1.02 billion to $1.13 billion for mine site maintenance, organic projects in Chile, Nevada and Alaska and for development opportunities.

Kinross Gold has fallen 38% over the 52 weeks through Nov. 8. The stock has a market capitalization of $3.35 billion as of Thursday. The share price at market close was below the 200-, 100- and 50-day simple moving average lines.

The 14-day relative strength index is 42.34, suggesting it is neither overbought nor oversold.

The price book ratio is 0.74 versus an industry median of 1.74.

The recommendation rating is 2.5 out of 5 and the average target price is $4.21 per share.

Disclosure: I have no positions in any securities mentioned in this article.

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This article first appeared on GuruFocus.