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Could Paracatu Lead to a Downside to Kinross’s Americas Production?

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Round Mountain

Kinross Gold’s (KGC) gold production at Round Mountain increased by 30% year-over-year (or YoY) in 3Q15. This increase was due to an increase in mill recoveries, which rose from 61% to 81%, and improved solutions management.

Round Mountain saw its highest production in six years and its lowest cost of sales in three years. A new margin-focused solutions management approach is driving margins at Round Mountain. The company expects to continue this strategy across all of its operations.

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Fort Knox

Fort Knox also depicted very strong performance in 3Q15 with its lowest cost of sales in two years. A 25% YoY decrease was mainly due to lower diesel and power costs. Its production was also strong due to higher mill grades and timing of ounces processed through the mill.

Paracatu

The production at Paracatu increased due to higher mill grades and increased recovery, which improved the cost of sales. Kinross has temporarily suspended Plant 1 and reduced operations at Plant 2 due to a lack of rainfall. As a result, Kinross’s production for the full year should be impacted by at least 22,000 ounces. However, the company maintained that it is not expected to impact its 2015 regional or company-wide guidance.

Newmont Mining (NEM) maintained its production guidance for 2015 but reduced its cost guidance. Goldcorp (GG) maintained its guidance for 2015.

Newmont and Goldcorp form 11% of the VanEck Vectors Gold Miners ETF’s (GDX) holdings. Gold-backed ETFs like the SPDR Gold Trust ETF (GLD) and the iShares Gold Trust ETF (IAU) are another way for investors to get diversified exposure to gold prices.

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