The effect of gold prices on producing companies ...
(and they don't hedge)
Kinross Has Record $65.6 Million Profit on Gold Rally (Update1)
Aug. 4 (Bloomberg) -- Kinross Gold Corp., North America's fourth-biggest gold producer, reported record net income of $65.6 million in the second quarter as gold prices climbed.
Per-share profit was 19 cents, Toronto-based Kinross said in a statement. A year ago, the net loss was $16.4 million, or 5 cents a share. Sales rose 45 percent to $252.3 million.
Kinross, which mines in Canada, Brazil and Chile, sold gold at an average of $625 an ounce, up 48 percent from a year earlier. The board of directors yesterday approved the $470 million expansion of the Paracatu mine in Brazil, the company said.
``Our policy against gold hedging allowed us to enjoy the full benefit of a robust gold price,'' Chief Executive Officer Tye Burt said in the statement.
Shares of Kinross gained 57 cents, or 4.3 percent, to C$13.79 at 10:20 a.m. on the Toronto Stock Exchange. Before today, they had surged 76 percent in the past year.
Gold futures for December delivery gained $3, or 0.5 percent, to $660 an ounce on the Comex division of the New York Mercantile Exchange. Prices on May 12 reached $732, the highest in 26 years. Before today, the metal had climbed 27 percent this year, partly on demand for a hedge against inflation.
Kinross was forecast to earn 12 cents, the average estimate of six analysts surveyed by Thomson Financial. John Bridges of J.P. Morgan Securities Inc. predicted 10 cents.
Production fell 6.8 percent to the equivalent of 385,514 ounces of gold after the Kettle River mine in Washington was closed and output declined at the Kubaka mine in Russia, Kinross said.
Costs Climb
The cost of producing the equivalent of an ounce of gold rose 16 percent to $311 as the Canadian dollar, the Brazilian real and the Chilean peso rose against the dollar. Kinross has costs in local currencies to mine ore and sells metals in dollars. Expenses for fuel, power and labor also increased, the company said.
Output this year will be the equivalent of 1.44 million ounces of gold, Kinross affirmed. The company also producer silver. Cost estimates were increased in May to $305 to $315 an ounce a March forecast of $285 to $295.
Sales in the second quarter of 2005 were $174.6 million.
Barrick Gold Corp. is North America's largest gold producer by first-quarter output, followed by Newmont Mining Corp. and Freeport-McMoRan Copper & Gold Inc.
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