Kinross weighs its growth options
Canadian Press
Friday, November 03, 2006
TORONTO — Kinross Gold Corp., the world's eighth-largest gold producer, is weighing its growth options after reversing last year's third-quarter loss with a 63 per cent increase in cash flow.
The Toronto-based miner, which in recent months has worked to overcome more than a year of accounting problems related to its January, 2003, purchases of TVX Gold and Echo Bay Resources, reported a third-quarter profit of $50.3-million (U.S.) on Friday, versus a year-earlier loss of $44.4-million.
“We're thrilled with the growth we've got on our plates right now — we're growing from now through to 2009 strongly in production at costs that are coming down,” CEO Tye Burt said in an interview.
“That's going to power up our cash flow even further.”
To grow beyond 2009, Kinross will look at more exploration activity and “maybe some selective M&A (merger-and-acquisition) stuff,” Mr. Burt said, but it will “all depend on the opportunities.”
“We've got a portfolio of nine significant assets right now, so we look at new things. We'll be willing to consider upgrading the portfolio in whatever way makes sense.”
But he said in an earlier call with analysts: “We're not going to take any moves just because people say we should participate in the consolidation of our industry. It will be about adding quality new mines or new projects.”
Kinross would ideally like find more ounces in Nevada and Alaska, where it currently has projects, Burt said, and it remains active in all four of its operating countries — Canada, the United States, Brazil and Chile.
The company's profits amounted to 14 cents a share for the quarter ended Sept. 30, contrasting with a loss of 13 cents per share a year ago.
On average, analysts were forecasting earnings of 11 cents a share, according to Thomson Financial. Revenue rose 23 per cent to $223.6-million as higher realized gold prices offset a 12-per-cent reduction in ounces sold because of planned lower from three of its mines and the winding down of operations at Kubaka in Russia.
Cash flow from operating activities increased to $85.8-million from $52.5-million.
But while high gold prices contributed to the increases, Burt said, they weren't the only factor.
“The results we delivered today have not been produced by a single factor, but rather by the result of a focused strategy, a strong gold price and delivery on our operational and financial targets,” he said during the call.
Earnings included a gain on the disposal of assets and investments of $35.9-million, primarily from the sale of Katanga Mining Ltd. shares, and a $7.6-million non-cash writedown on the value of supplies inventory for supplies no longer needed as the mine has completed processing of stockpiled ore.
Production totalled 365,555 gold equivalent ounces in the third quarter, while production in the first nine months of 1.11 million was above plan.
During the quarter, the company also completed the $219.6-million acquisition of Crown Resources Corp. and Buckhorn Mountain, and began construction at the Buckhorn mine in September, which is on track for targeted initial production in late 2007.
Kinross said it expects to exceed previous annual production estimates of 1.44 million ounces by about 20,000 ounces. but it is revising its capital expenditures for the year.
Capital spending now is expected to be about $230 million for 2006 as a result of delayed progress at Buckhorn Mountain and at the Paracatu expansion project in Brazil.
On the TSX at midday Friday, Kinross shares were trading up six cents to $14.96, with nearly 1.2 million changing hands.
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