Kinross forecasts strong start-up for 3 new mines in 2008
mineweb.com
With three new projects and expansions scheduled for start-up this year, Kinross is confident it will achieve its 2009 production goal of 2.5 million to 2.6 million ounces of gold.
Author: Dorothy Kosich
Posted: Thursday , 08 May 2008
RENO, NV -
As Kinross President and CEO Tye Burt announced the successful start up of the Kupol gold and silver mine during the Kinross annual general meeting Wednesday in Toronto, he assured analysts earlier in the day that new Russian legislation relating to foreign investment in the Russian subsoil sector will not impact Kupol.
Kinross also announced an increase in average per ounce gold costs from the original forecast of $365-$375/oz to $385-$395/oz for this year. The company also boosted its original 2008 capex forecast from $685 million to $752 million.
During a conference call to discuss first-quarter 2008 results, Burt said that the newly enacted Russian Federation laws specifying ownership interests for new mining projects will apply to all new strategic minerals deposits going forward, potentially including new Kinross deposits in Russia.
Nevertheless, Burt and other Kinross officers had high praise for the Kupol project start-up, which is now a month ahead of schedule and is expected to achieve full mill capacity in October of this year. The mine is expected to product 365,000 to 390,000 ounces of gold this year at a cost of sales ranging from $235-$245/oz. Kupol has reserves of 3.3 million ounces of gold and 39.6 million ounces of silver.
Burt also enthusiastically praised two other new projects to shareholders and analysts, the Paracatu expansion in Brazil and the Buckhorn mine in Washington State. The Paracatu gold mine expansion is scheduled to be commissioned in July, which is expected to increase gold production from 175,000 ounces per year to 305,000 to 335,000 ounces this year.
The Buckhorn mine is expected to commence gold production in October 2008 and yield 25,000 to 30,000 ounces this year at an expected average cost of sales per ounce of $290-$300. Buckhorn has a reserve of 990,000 ounces of gold.
Burt said he expects Kinross to produce 1.9 million to 2 million ounces of gold this year at a $385 to $395/oz "co-product basis." By 2009, Kinross hopes to produce 2.5 million to 2.6 million ounces of gold.
Meanwhile, Burt told shareholders at the AGM that $49 million has been budgeted for exploration this year.
Kinross did stumble a bit as gold equivalent production dropped from 389,384 ounces during the first-quarter 2007 to 331,7844 ounces for the first-quarter of 2008, although the company says it remains on track to produce its original guidance of 1.9 million to 2 million ounces in 2008. Operational issues at Fort Knox, Round Mountain and La Coipa deferred some production, which negatively impacted cost. Burt said these issues were short-term and were somewhat offset by "solid production from Paracatu and Maricunga."
FINANCIALS
Due to a higher gold price, Kinross's gold margins increased during the first quarter of this year to $457 per ounce. In a presentation at the AGM, Kinross Executive Vice President Thomas M. Boehlert estimated that gold prices have increased 204% since 2002 while Kinross' cost of sales margin was up 335%.
Net earnings for the first quarter were $70.9 million or 12-cents per share, up from net earnings of $68.5 million or 16-cents per share for the same period last year. Earnings for the first quarter included a gain of $11.5 million for the sale of Kubaka.
Capital expenditures totaled $190.5 million in the first quarter. The company expects 2008 capex to increase to $752 million including investment initiatives such as moving $35 million in capital forward from 2009 to accelerate the Fort Knox expansion project, $12 million for Cerro Casale project feasibility work and $20 million to advance the purchase of equipment at Paracatu and to buy a fuel transport fleet at Kupol. |
