Kinross Q1 2012 Earnings: Trying to Forget Red Back | Mining University

Kinross Q1 2012 Earnings: Trying to Forget Red Back

Kinross Gold Corporation released its results for first quarter 2012 yesterday.  The company did its best to spin the results in a good light.  To be fair, there were several positive indicators to flaunt to shareholders:
  • Revenue is up 11% over Q1 2011 to $1,036,600,000
  • Attributable margin of $902 per ounce sold is up 15% from Q1 2011
  • Adjusted net earnings were up 16% over Q1 2011 to $203,100,000
Unfortunately, there were several items that weren’t as positive:
  • Production is down 6% from Q1 2011
  • Production cost of sales is up to $742 per gold equivalent ounce from $545 in Q1 2011
  • Reported net earnings are down $0.13 per share compared to Q1 2011

The Kinross press release also stated that the outlook for 2012 is good and the company expects to be within guidance for production of 2.6-2.8 million attributable gold equivalent ounces.  I don’t share this sunny outlook.

Kinross first quarter production was 604,247 gold equivalent ounces.  This is on target for 2.4 million ounces for the entire year (that’s less than the reported production of 2.6 million ounces for 2011).  This is also a company reeling from the  $2.9 billion write off for the Tassiast and Chirano assets they picked up in the Red Back acquisition.  Kinross attributes this write off in part to “increases in capital and operating costs, a decline in industry-wide valuations as at year-end, and the Company’s growing understanding of the Tasiast project parameters, including its analysis of a draft mine plan.” 

I didn't see any of the other mining companies write off three billion dollars.  Industry wide changes can't be the whole issue.  Was this really a three billion dollar analysis of a draft mine plan?

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