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Strategies & Market Trends : Ride the Tiger with CD

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To: ceejayt who wrote (202458)	8/12/2011 9:13:06 AM
From: Veteran98	Read Replies (3) of 312819

K... Kinross... Canaccord Daily Letter ..... Daily Letter Summary \| 7 11 August 2011 Kinross Gold Corporation \| Steven Butler, 1.416.869.7918 KGC : NYSE : US$16.26 \| US$18,474.0M \| Buy , Target US$26.50 • Q2/11 beats on higher production and sales; Tasiast resource continues to grow; reiterate BUY rating and US$26.50 target Investment recommendation We reiterate our BUY recommendation on Kinross following the release of Q2/11 production and financial results. Our BUY rating is based on relative value, rerating potential associated with the delivery of a feasibility study and resource growth at Tasiast and optionality/derisking value associated with the FDN and Dvoinoye projects. Investment highlights • Q2/11 adjusted EPS was $0.20, ahead of consensus of $0.17 and our estimate of $0.19, with the variance to our estimate explained largely by higher gross margins. • Attributable production was 676,245 oz Au eq (attributable sales were 685,823 oz) at gold equivalent cash costs of $576/oz vs our estimate of 658,103 oz au eq at $575/oz. Higher than expected sales volumes were partly offset by a lower realized gold price ($1,449/oz vs our estimate of $1,508/oz) for net modest positive variance in gross margins. • Production guidance for 2011 remains unchanged at 2.6-2.7 Moz gold eq. Cash costs for 2011 are expected to be closer to the lower end of the previously guided range of $565-$610/oz • Drilling at Tasiast has upgraded 6.4 Moz from inferred to M&I and has added approx 2.9 Moz to the overall global resource inventory. The expansion feasibility study has been delayed (expected to be completed in Q1/12) to incorporate additional drilling and a potentially larger reserve base. Capital expenditures are expected to be $0.5-$1.0 billion higher than the previous estimate of $2.7 billion. We have made no changes to our modeled profile at this stage pending the completion of the full feasibility study. Valuation Our 12-month target price remains unchanged at US$26.50 based on 1.0x our 5%/peak NAVPS estimate of US$26.62 (previously US$26.58).

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