KGC’s Unit Costs: Why They’ll Get Worse before They Get Better



Fourth-quarter cost performance

Kinross Gold (KGC) reported all-in sustaining costs of $961 per ounce in the fourth quarter, reflecting a decline of 5.7% YoY (year-over-year). Its all-in sustaining costs in 2018 were $965 per ounce, an increase of 1.1%. 

Higher costs per ounce at Fort Knox and Tasiast were mainly responsible for the overall increase in Kinross’s costs.

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All-in sustaining costs

Kinross Gold is a high-cost gold producer compared to its closest peers. These higher costs, in turn, make its cash flows more leveraged to changes in precious metals prices. It’s therefore much more leveraged to gold prices than its peers (GDX) Goldcorp (GG), Barrick Gold (GOLD), and Newmont Mining (NEM).

Cost guidance

Kinross Gold has guided for all-in sustaining costs of $995 per ounce with a variance of 5% on either side for 2019. This guidance is higher than Kinross’s all-in sustaining costs of $965 in 2018. The company is expecting higher costs due to higher sustaining capital, which is expected to result from stripping at Bald Mountain as the company completes its Vantage project and begins production in the south area.

While new projects could help Kinross lower its costs, as they have a better cost structure than Kinross’s current average costs, if the Tasiast expansion remains on hold for too long, investors’ sentiments could sour.


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