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Kinross Gold Is on Track to Meet Lower End of Production Guidance

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Production growth

Kinross Gold (KGC) produced 684,129 GEOs (gold equivalent ounces) in 3Q16, which represents a 1.0% YoY (year-over-year) rise and a sequential rise of 2.0%.

Increased production was due to the acquisition of Bald Mountain and Round Mountain during the period. This was offset by the suspension of operations at Tasiast during the summer, suspension of mining at Maricunga, and lower production at Paracatu.

Kinross’s revenues rose 12.5% YoY due to higher realized prices. Let’s look now at the company’s production performance in detail.

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Americas

Kinross Gold achieved strong production at Fort Knox and Round Mountain. Kettle River-Buckhorn also outperformed the company’s expectations. This mine was expected to reach the end of its mine life in 2015, but now the company expects it to operate into the first quarter of 2017.

In South America, the company announced the suspension of operations at Maricunga in August. It has started the process of putting the mine under care and maintenance.

Russia

The Kupol and Dvoinoye mines continue to outperform the company’s expectations. Kinross remains focused on extending the mine life of these assets. It’s also making good progress on bringing Moroshka and September Northeast into production.

West Africa

As the company had anticipated in 2Q16, its Chirano mine came back on track. It produced 42.0% more volume in 3Q16 than in 2Q16. Costs fell from the first half of the year as production at Paboase ramped up. Its Tasiast mine is also back in production with an average throughput of 8,000 tons per day.

The company said it’s on track to reach the lower end of its production guidance of 2.7 million–2.9 million ounces. It expects to convert a substantial part of Bald Mountain’s 4.0 million ounces of resources to reserves as it continues with infill drilling. This should support high production and enhance the life of the operation.

Kinross Gold’s acquisition of the Nevada assets has helped reduce its geographical risk. Peers Goldcorp (GG), Yamana Gold (AUY), and Agnico-Eagle Mines (AEM) have lower geopolitical risks than Kinross.

Notably, Yamana Gold and Agnico-Eagle Mines make up 8.4% of the VanEck Vectors Gold Miners ETF (GDX). Investors who prefer a low-risk environment might want to invest in physical gold or ETFs that track gold prices such as the SPDR Gold Shares (GLD) and the iShares Gold Trust (IAU).

In the next part, we’ll take a look at Kinross Gold’s costs in 3Q16.

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