Headquartered in Ontario, Canada, Kinross Gold Corporation (KGC) currently ranks among the top 10 gold mining companies in the world, with a targeted production of 2 million ounces of gold annually.
In the third quarter, Kinross announced net earnings per diluted share were $0.10 compared to $0.07 in the same period last year. Revenue was up 83% year-over-year to $503.7 million. Gold production was 551,510 equivalent ounces versus 375,546 equivalent ounces last year. The year-over-year decrease in production was primarily due to the asset swap transaction with Goldcorp as well as the impact of lower grades mined at Fort Knox, Round Mountain, and La Coipa.
The average gold price realized was $857/oz, versus $686/oz in 2007. Cost of sales was $406/oz in the third quarter, compared to $383/oz in the corresponding quarter of 2007. The company expects production to increase during the fourth quarter of 2008. For full year 2008, Kinross expects production to be approximately 1.8-1.9 million gold equivalent ounces, slightly below the previously stated forecast of 1.9 to 2.0 million.
Higher gold prices bode well for Kinross' top-line growth. The acquisition of Bema Gold will bring in various synergies. The company reported a 43% rise in net profits helped by stronger gold price and higher production following the opening of the low-cost Kupol mine in Russia.
However, declining production levels at some of the existing operations and higher mining, energy, and administrative overhead costs are likely to constrain margin expansion. Consequently, we reiterate our Hold recommendation on shares of KGC, with a six-month target price of $13.
Read the full analyst report on KGC
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