Gold miner Kinross Gold Corporation KGC reported a net loss of $83.2 million (or 7 cents per share) for the second quarter of 2015, as against net earnings of $46 million (or 4 cents per share) in the year-ago quarter.
The loss in the reported quarter resulted from $24.5 million inventory write-down at the Maricunga mine due to an extreme weather event in Chile, and decline in revenue due to a lower average gold price and timing of gold sales from Russia.
Adjusted (excluding one-time items) loss was a penny per share in the second quarter as against adjusted earnings of 3 cents recorded in the year-ago quarter. The results were on par with the Zacks Consensus Estimate of a loss of 1 cent.
Revenues decreased roughly 17.2% year over year to $755.2 million in the reported quarter due to lower average realized gold prices and a decline in gold equivalent ounces sold as a result of the timing of sales. However, revenues came in ahead of the Zacks Consensus Estimate of $749 million.
Operational Performance
Attributable gold production was 660,898 equivalent ounces for the quarter, down around 3% year over year, primarily due to lower production at Maricunga owing to heavy rains in March, which temporarily suspended operations, and at the Paracatu mine due to reduced mill throughput and recoveries, partly offset by higher production at Fort Knox. Average realized gold price was $1,194 per ounce, down 7.1% from the year-ago quarter.
Production cost per gold equivalent ounce decreased to $724 in the quarter from $742 in the prior-year quarter, mainly due to lower energy costs and favorable currency impact. Margin per gold equivalent ounce sold was $470 in the second quarter, down 13.4% from the year-ago quarter.
Financial Review
Adjusted operating cash flow was $161.4 million, down 32.8% from $240.3 million in the prior-year quarter. Cash and cash equivalents were $1,031.4 million as of Jun 30, 2015, up from $738.7 million as of Jun 30, 2014.
Long-term debt declined roughly 1.9% year over year to $1,987.1 million.
Capital expenditures were $128.5 million for the reported quarter compared with $120 million in the comparable period last year. The decrease was due to the Paracatu Santo Antonio tailings reprocessing initiative.
Growth Projects
Kinross stated that a pre-feasibility study to explore potential re-start options at La Coipa remains on track and is expected to be completed during third-quarter 2015. The new improvement project, taken up to reprocess tailings from the Paracatu Santo Antonio tailings facility, continues on track for an expected launch in the fourth quarter. The company expects the project to produce 34,000 gold ounces per year at a production cost of sales of $400 per ounce.
Development of the decline at the Akoti deposit started in the second quarter, as Kinross continues to proceed with plans to extend Chirano's estimated mine life by one year to 2020. The company expects to mine additional ounces at two known mineral deposits, Paboase and Akoti.
Tasiast Update.
Kinross continues to focus on optimizing the Tasiast operation to enhance performance and cut costs. Tasiast remains an attractive growth opportunity with considerable mineral resource base. To leverage Tasiast's future potential, Kinross will continue to look for ways to trim costs and advance growth opportunities in a financially disciplined manner.
The company also has started discussions with the Government of Mauritania and employee representatives regarding cost saving measures and may consider a potential workforce reduction.
Outlook
For 2015, Kinross expects to produce at the top end of its guidance of roughly 2.4—2.6 million gold equivalent ounces.
The company expects to be at the bottom end of its production cost of sales guidance range of $720–$780 per gold equivalent ounce and all-in sustaining cost guidance range of $1,000–$1,100 per gold equivalent ounces sold, and below its capital expenditure guidance of roughly $725 million.
Kinross raised its expectations for other operating costs to about $120 million, compared with the previously-stated guidance of $50 million, factoring in the impact of the extreme weather event in Chile, and changes to legal and tax-related accounting provisions.
Kinross currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the mining space include Vista Gold Corp. VGZ, Primero Mining Corp. PPP and Avino Silver & Gold Mines Ltd. ASM. All of these stocks carry a Zacks Rank #2 (Buy).
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