Gold miner Kinross Gold Corporation (NYSE:KGC) reported net profit of $33.1 million or 3 cents per share in second-quarter 2017 against a net loss of $25 million or 2 cents in the year-ago quarter.
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Adjusted earnings (excluding one-time items) was $54.9 million or 4 cents per share, compared with the year-ago loss of $9.8 million or a penny per share. Adjusted earnings per share beat the Zacks Consensus Estimate of 2 cents per share.
Revenues of $868.6 million in the quarter fell around 0.9% from $876.4 million in the year-ago quarter owing to the slightly lower average realized gold price. However, revenues topped the Zacks Consensus Estimate of $826 million.
Kinross Gold Corporation Price, Consensus and EPS Surprise
Operational Performance
Attributable gold production was 694,874 ounces for the quarter, up 3.5% year over year. Production cost of sales per gold equivalent ounce declined to $660 from $731 recorded in the prior-year quarter, primarily due to lower cost of sales per ounce at Round Mountain, Fort Knox, Bald Mountain and Tasiast. All-in sustaining cost per gold equivalent ounce sold fell to $910 from $988 a year ago.
Margin per gold equivalent ounce sold was $600 in the quarter, up 12.1% year over year.
Average realized gold prices fell to $1,260 per ounce in the quarter from year-ago recorded figure of $1,266.
Financial Review
Adjusted operating cash flow was $230.8 million, up 23% from $187.2 million in the prior-year quarter. Cash and cash equivalents were $1,061.3 million as of Jun 30, 2017, up from $968.2 million as of Jun 30, 2016.
Long-term debt was essentially flat year over year at $1,734.5 million. Capital expenditures rose to $200.7 million in the quarter from $114 million in the prior-year quarter due to Tasiast Phase One expansion project costs and higher spending at Paracatu and Bald Mountain.
Development Updates
Kinross continues to progress as planned with the Phase One expansion of the Tasiast mine and remains on track with its commercial production which is expected to begin in second-quarter 2018. The company expects Phase One to increase plant throughput to 12,000 t/d from 8,000 t/d. The company is also making a steady progress with the Tasiast Phase Two expansion feasibility study which is on schedule and is expected to be completed in September. Tasiast Phase Two expansion project is expected to extend mine life at one of Kinross' most consistent operations.
Kinross also continues to progress with detailed engineering work at the Vantage Complex in the South area at Bald Mountain.
Kinross’ Russian development projects are in their advanced stages. The company has completed construction of surface infrastructure at the Moroshka project with decline development on schedule. Development of September Northeast project has been completed on time and on budget. Processing of ore from September Northeast satellite deposit at the Kupol mill started in Jun 2017.
Outlook
For 2017, Kinross reaffirmed its previous gold production guidance range of 2.5–2.7 million gold equivalent ounces. The overall production cost of sales is expected in the range of $660–$720 per gold equivalent ounce, while all-in sustaining cost is estimated to be $925–$1,025.
Kinross projects its capital expenditure to be roughly $900 million.
Price Performance
Kinross has outperformed the industry over the last three months. The company’s shares have moved up 14.4% over this period compared with roughly 7.4% gain recorded by the industry.
Zacks Rank & Key Picks
Kinross currently carries a Zacks Rank #3 (Hold).
Some better-ranked companies in the basic material space Akzo Nobel N.V. (OTC:AKZOY) , BASF SE (OTC:BASFY) and Hitachi Chemical HCHMY. All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Akzo Nobel has an expected long-term earnings growth of 11.1%.
BASF has an expected long-term earnings growth of 8.6%.
Hitachi Chemical has an expected long-term earnings growth of 5%.
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