Gold miner Kinross Gold Corporation KGC reported a net loss of $52.7 million (or 5 cents per share) for the third quarter of 2015, much wider than net loss of $4.3 million (or breakeven per share) in the year-ago quarter. The loss in the reported quarter resulted from lower margins owing to lower average gold prices.

Adjusted (excluding one-time items) loss was 2 cents per share in the third quarter as against adjusted earnings of 6 cents recorded in the year-ago quarter. The results compared favorably with the Zacks Consensus Estimate of a loss of 3 cents.

Revenues decreased roughly 14.4% year over year to $809.4 million in the reported quarter due to lower average realized gold prices and a decline in gold equivalent ounces sold. Revenues, however, beat the Zacks Consensus Estimate of $728 million.

The company’s shares rose 1.7% to close at $1.80 on Nov 11.

Operational Performance

Attributable gold production was 680,679 equivalent ounces for the quarter, down around 1.9% year over year, primarily due to lower production at the Maricunga mine owing to heavy rains in March; and at Chirano and Kettle River-Buckhorn mines, due to anticipated decline in grades. This was partly offset by higher production at Fort Knox and the combined Kupol-Dvoinoye operation because of higher mill grades, and at Round Mountain due to better heap leach performance and increased mill recoveries. Average realized gold price was $1,122 per ounce, down 11.5% from the year-ago quarter.

Production cost per gold equivalent ounce fell to $668 in the quarter from $698 in the prior-year quarter, mainly due to lower energy costs, favorable currency rates and strong operational performance from a number of mine sites. Margin per gold equivalent ounce sold was $454 in the third quarter, down 20.4% from the year-ago quarter.

Financial Review

Adjusted operating cash flow was $206.6 million, down 36.3% from $324.1 million in the prior-year quarter. Cash and cash equivalents were $1,024.8 million as of Sep 30, 2015, up from $835.9 million as of Sep 30, 2014.

Long-term debt declined roughly 13.3% year over year to $1,731.3 million.
Capital expenditures rose to $171.3 million from $153.5 million last year due to the planned increased stripping at Fort Knox.

Growth Projects

Kinross stated that the pre-feasibility study at La Coipa was completed during third-quarter 2015.

Since the deferral of a previously studied 38,000 ton per day mill expansion in first quarter 2015, Kinross continued to explore financially prudent alternatives in order to realize Tasiast's significant growth potential in the prevailing gold price environment. The company is completing early-stage engineering on an alternative two-phased expansion concept. Phase One would provide additional grinding capacity to the operation's existing comminution circuit.

The initial Phase One expansion would increase mill throughput capacity from 8,000 ton per day to 12,000 ton per day. A feasibility study of the expansion is expected to complete in first-quarter 2016. Phase Two could further increase capacity to as much as 38,000 ton per day.

Outlook

On Sep 17, 2015, Kinross updated its outlook for 2015. The company has trimmed its forecasts for all-in sustaining cost (AISC), cost of sales per gold equivalent ounce and capital expenditure for the year. Kinross does not expect the temporary production cuts at Paracatu to affect its updated guidance forecast for the year.

The guidance for AISC per gold equivalent ounce was lowered to the range of $975-$1,025 from the previous range of $1,000-$1,100. The outlook for cost of sales per gold equivalent ounce was cut to $690-$730 from $720-$780. The company expects to be within these updated guidance ranges. Capital expenditure is expected to be lower than the revised guidance of $650 million, which was lowered from $725 million.

Kinross increased the lower end of its production guidance for 2015 in September. The new guidance is in the range of 2.5-2.6 million gold equivalent ounces while the previous range was 2.4-2.6 million gold equivalent ounces. Production for the year is expected to be within this revised guidance. The company expects overhead expenses including general and administrative and business development expenses to be below the guidance of $205 million. The company is looking for more opportunities to further lower such costs.

Kinross expects to be within its original income tax guidance of $55 million based on its assumed gold price plus about 24% of additional profits as it relates to its income taxes on adjusted basis.

As part of its cost reduction efforts, Kinross cut corporate headcount costs by 23% during the third quarter. The company also said that it will close it Denver office. It laid off 222 employees at Tasiast in Sep 2015. Kinross expects combined annual savings of roughly $30 million from these actions.

Kinross currently carries a Zacks Rank #3 (Hold).

Some better-ranked mining companies are NovaGold Resources Inc. NG, Asanko Gold Inc. AKG and Richmont Mines Inc. RIC. All of these stocks hold a Zacks Rank #2 (Buy).

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