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WIKI ANALYSIS
Kinross Gold Corporation (KGC) NYSE:KGC TSX:K is a gold (and silver at three locations and copper at one location) mining company that for most of its history (since 1993) has been largely a mine developer and exploration company (minor producer). Since 2008 it is one of the 10 biggest gold companies in terms of both production (about 60% as much as the world's 3rd largest producer Anglogold Ashanti) and size (market value). Its September 2010 purchase of the 91% of Redback Mining shares it didn't own added 9-10 million ounces of 2P (Provan and Probable) gold reserves to the 50.95 million it was estimated to have at the end of 2009.[1] (Red Back Mining also increased total resources by 22.7% up to a total of 92.6 million ounces of gold equivalent). By comparison, Kinross's reserves totalled 45.6 million ounces in 2008 (plus 19.1 measured and indicated) 41% in Brazil, 38% in Chile 14% in the USA and 7% in Russia, Ecuador was home to 64% of its 21.3 million ounces of inferred resource.[2] Its Cerro Casale mine in Chile which is shares joint ownership of with Anglogold Ashanti (isn't producing (November 2010)) has reserves of gold, silver and copper. The company has facilities in United States, Canada, Brazil, Chile, Russia, Ecuador and Africa, and caters to a diverse clientele in Brazil, Chile, Canada and Greece. Kinross runs several mines, including Fort Knox and Round Mountain in the U.S. Porcupine and Musselwhite in Canada La Coipa and Maricunga (formerly Refugio) in Chile Kubaka in Russia and Crixas and Paracatu in Brazil. About 71% of Kinross Gold's proven and probable reserves are in South America (that includes the assets acquired from the Red Back Mining takeover).[1] Though gold mine costs have been variable cash costs are up industrywide 4.1% in the third quarter of 2010.[3]
Other large transactions made by the company include the February 2007 $3.5 billion takeover of Bema Gold Corp. which increased the company's operating mines to nine in five countries. Its array of projects in the pipeline business comprise Paracatu in Brazil, Buckhorn in Washington, Kupol in Russia, and Cerro Casale in Chile. At the time of the Bema Gold acquisition (2007) Kinross/Bema had a combined resource base of more than 56 million ounces of gold, 82 million ounces of silver, and 3.8 billion pounds of copper. [2] In April 2011 Kinross increased its stake in Kupol to 100% from 75% after it bought out the regional government's (Chukotka Autonomous Okrug, Russia) USD 350 million share of the operation. Kupol generated 17% of Kinross' global gold production in 2010.[4]
Franco-nevada Corp (FNV) has a royalty claim on 2% of gold production at Tasiast which takes effect when annual production reaches 600,000 ounces.[5] During fiscal 2009 its share in the Kupol mine in Russia (the largest producing asset in which it had a 75% (upped to 100% in late 2010) interest) added 694,000 ounces of gold to production an increase of about 25%. Kupol's low cash costs ($131 per ounce in the first nine months of 2010 down 48%) also help the company.
Operations
Operations currently (November 2010) take place in 6 countries (Ghana and Mauritania since Sept 2010 when Redback Mining was bought out for $7.2 billion). The company is also in the process of developing a mine in Ecuador.
USA
- Fort Knox, Alaska (100% interest, acquired in 1998) - open pit mine (that also utilizes the process of heap leaching since 2008 to increase efficiency (low grade ore can now be used)) with 2P reserves of 3.7-4 million ounces of gold. Originally the life of the mine was set to expire in 2012 however an expansion project begun in Feb 2008 will lengthen that by 6 years. In 2009 production was 263,260 oz of gold.
- Kettle River-Buckhorn, Washington (100% interest, Kettle River owned since Jan 2003 when Echo Bay was bought, Buckhorn is an underground mine bought Aug 2006 and operated since Oct 2008) - 3075 ha in mining claims. Production in 2008 was 27,036 oz (Buckhorn), 2009 production for the combined area was 173,555 oz of gold (cost of sales are low at $294/oz)
- Round Moutain, Nevada (50% interest, acquired when it merged with Echo Bay, joint partner is Barrick Gold) - open pit mine that has produced gold since 1906 (10 million ounces produced since then). Gold is processed out of the ore using crushed ore leaching, run of mine leaching, milling and gravity concentration circuit. 2P reserves 1.5 million ounces, 2009 production 213,916 oz at an average sales cost of $517 per ounce.
| mil oz | Russia[1] | Brazil | USA | Chile | Mauritania | Ghana | Ecuador | Total |
| 2P reserves | 2.565 | 17.819 | 5.919 | 24.647 | 5.03[5] | 3.19[6] | 0 | 59.17 |
| resources | 2.574 | 20.846 | 8.551 | 29.864 | 9.25[7] | 8.01 | 5.737 | 84.8 |
Brazil
- Paracutu mine (230 km from Brasilia, acquired some interest in Jan 2003 when it merged with TVX then 51% more in Dec 2004 from Rio Tinto, mine life until 2040) - Production goes back to 1722. 2006 Kinross expanded the mill's throughput capacity by 3, that expansion began producing gold in Sept 2008. 2P reserves 17.5 million oz, 2009 production 354,396 ounces at an average sales cost of $693 per ounce.
- Crixa (jointly owned with AngloGold Ashanti, acquired in Jan 2003, Mina III, Mina Nova are the two underground mines) - produced 74,654 ounces of gold in 2009 at an average sales cost of $412 per ounce.
- La Coipa (open pit mine, 100% owned since Dec 2007 when the half it didn't own was bought from Goldcorp, 2P reserves are 1.1 million ounces of gold) - Gold mining is relatively new to the area, the earliest mining in the region involved copper and silver. There are 6 deposits with the largest, Ladera-Farellon consisting of 3 pits. 2009 production was 213,169 ounces at an average cost of $438 per ounce.
Russia
- Kupol, Eastern Russa (100% interest since April 2011, 75% interest before that held since Feb 2007 with the rest residing with the local government (Chukotka Autonomous Okrug), 2P reserves are at 2.6 million oz for gold (13.04 g/t ore grade) and 33 million oz for silver (167.8 g/t ore grade) - in operation since May 2008 (that year production was 469,907 oz gold). Including silver (using the silver to gold equivalent ratio based on market prices) 2009 production was 693,930 oz of gold equivalent at an average cost of $257 per oz of gold.
The Tasiast and Chirano mines in Mauritania and Ghana were acquired when Kinross purchased Red Back Mining in mid 2010. 2P reserves were estimated to be 7.29 million ounces of gold (production 342,082 oz) in 2009. Cash operating costs per ounce averaged $391 in 2009 for the areas combined.[8] Both mines use carbon-in-leach processing.
Business and Financials
| USD million | 2005[9] | 2006[10] | 2007[10][11] | 2008[12] | 2009[13] | 9M09[14] | 9M10[15] | USD million | 2005[10] | 2006[10] | 2007[10][16] | 2008[12] | 2009[13] | 9M09[14] | 9M10[15] | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| revenue metal sales | 725.5 | 905.6 | 1093.0 | 1617.0 | 2412.1 | 1713.1 | 2089.7 | capex | 142.4 | 202.9 | 601.1 | 714.7 | 481.2 | 140.5(qtr only) | 135.3(qtr only) | ||
| cash flow | 133.7 | 292.0 | 341.2 | 634.6 | 937.2 | 479.1 | 700.1 | net income | (216.0) | 165.8 | 334.0 | (807.2) | 309.9 | 74.3 | 561.3 | ||
| earnings per share | (0.63) | 0.47 | 0.60 | (1.28) | 0.45 | 0.11 | 0.78 | cost of sales | 448.1 | 0.47 | 580.3 | 768.8 | 1047.1 | 776.1 | 881.1 | ||
| total assets | 1698.1 | 2053.5 | 6729.3 | 7387.5 | 8013.2 | 7928.0 | 16,147.2 | operating earnings | (211.2) | 164.6 | 226.9 | (611.6) | 645.9 | 419.7 | 627.0 | ||
| shareholders equity | 0.63 | 1468 | 4837.8 | 4776.9 | 5559.9 | 5368.5 | 13,266.8 | depreciation ammortization | 0.63 | 108.3 | 129.3 | 273.8 | 447.3 | 337.9 | 358.3 | ||
| total debt | 149.9 | 89.9 | 564.1 | 550.8 | 692.2 | 612.4(lg trm) | 461.6(lg trm) | ||||||||||
In 2008 property, plant and equipment rose in value by $1.27 billion contributing to an overall increase in asset value by $658.2 million, 9.78%. Assets and shareholders equity underwent the largest increase in company history during the second and third quarters of 2010. In the first nine months of 2010 shareholders equity climbed $7.7 billion or 138.6% while assets doubled in value (an increase of about $8 billion); some of that coming from the newly acquired assets formerly belonging to Red Back Mining (had over $1 billion worth of assets in 2009), though Red Back Mining only contributed about $2 million in additional net earnings for Kinross in the first nine months of 2010 (332 compared to 334).[15]
Revenue grew every year from 2005 to 2010; 47.94% in 2008, 49.17% in 2009 and 21.98% in the first nine months of 2010. Cash flow also recorded steady and consistent growth however net income changes have been more inconsistent due to unstable commodity prices and changes in hedges driving cost of sales, however 2008 was the only year since 2006 that kinross recorded a net loss. Net income for the first nine months of 2010 was near an all time high, at $561.3 million it was 87.17% as much as it earned in 2007 and 2009 combined (the last two years it recorded positive net income).
References
- ↑ 1.0 1.1 1.2 Kinross Gold 2009 reserve and resources statement (2010).
- ↑ 2.0 2.1 Kinross Gold 2008 Annual Report (2009).
- ↑ Gold mine costs up 4.1% in Q3 (2010-11-26).
- ↑ {{cite web|url=http://www.theglobeandmail.com/globe-investor/kinross-signs-to-acquire-100-per-cent-of-kupol/article1970606/|title=Kinross signs to acquire 100 per cent of Kupol|date=2011-04-04||
- ↑ 5.0 5.1 Tasiast-Mauritania Franco Nevada. Retrieved on 2010-11-24.
- ↑ Kinross Provides Conceptural Estimate of Tasiast Resource (2010-09-07).
- ↑ Red Back hikes resources 42% at Tasiast mine (2010-09-07).
- ↑ Red Back Reports Record Net Income of $109 Million in 2009) (2010-02-26).
- ↑ Kinross Gold 2005 Year End Financial Results (2006-03-30).
- ↑ 10.0 10.1 10.2 10.3 10.4 Kinross Gold 2007 Annual Report (Jan 2008).
- ↑ Kinross Gold 2007 Financial Results (2008-02-21).
- ↑ 12.0 12.1 Kinross Gold 2008 Year End Results (2009-02-18).
- ↑ 13.0 13.1 Kinross Gold 2009 Financial Results (2010-02-17).
- ↑ 14.0 14.1 Kinrss Gold 2009 Third Quarter Report (2009-11-02).
- ↑ 15.0 15.1 15.2 Kinross Gold 2010 Third Quarter Results (2010-11-03).
- ↑ Kinross Gold 2007 Financial Results (2008-02-21).
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