Kinross Gold - Q1 2016 Earnings Review

| About: Kinross Gold (KGC)

Summary

Kinross Gold released its 1Q'16 results on May 10, 2016. Revenue was $687.463 million, up 10.2% quarter over quarter. Solid quarter overall.

What a difference since early January! The price per share has been multiplied by nearly 4.

I recommend to take at least 25% profit off the table now and turn it into cash. Then, you can sit patiently with the remaining position.

Kinross Gold (NYSE:KGC)

This article updates my preceding article on Kinross Gold, published on May 10, 2015, about the 4Q'15 results.

Q1'16 Balance Sheet Information (Six Quarters)

Q1 2016 Q4 2015 Q3 2015 Q2 2015

Q1 2015

Q4 2014

Production (Attrib.)

in Oz E.

687,463 623,716 680,679 660,897 629,360 672,051

Revenue

in $ Million

782.6 706.2 809.4 755.2 781.4 791.3

AISC in

$/Oz

963 991 941 1,011 964 1,006

Adjusted operating cash flow

$ Million

202.6

203.8

206.6 161.4 214.8 197.6

Adjusted operating cash flow

$/share

0.17 0.18 0.18 0.14 0.19 0.17

Adjusted net earnings

$ Million

1.4 (68.8) (23.9) (13.6) 15.3 (6.0)

Net earnings

$ Million

(13.9) (841.9) (52.7) (83.2) (6.7) -

EPS

$/share

(0.01) (0.73) (0.05) (0.07) (0.01) (0.01)

Impairment charge + write down inventory

$ Million

- 674.5 0 24.5 0 1,251.4

Average realized gold price

$

1,179 1,108 1,122 1,194 1,218 1,201

Total debt

$ Million

1,732.5 1,731.9 1,974.0 1,987.1 1,986.1 1,998.1

Total liabilities

$ Million

3,898.1 3,802.2 3,806.3 3,891.3 3,933.8 4,059.6
Capital expenditure $ Million 139.5 160.7 171.3 128.5 149.5 189.4

Cash and cash equivalent

$ Million

750.4 1,043.9 1,024.8 1,031.4 1,010.5 983.5

G & A in

$ Million

38.3 51.6 44.2 44.6 39.0 51.2

Finance expense

$ Million

33.2 26.4 21.9 23.7 24.0 29.4
Shares Outstanding in Million 1,244.14 1,146.54 1,146.3 1,146.3 1,145.1 1.145
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Outlook - 2016 Compared To 2015 Per Region

Total Americas West Africa (Attributable) Russia
2014 Production $ Billion 2.739 1.441 0.547 0.751
2015 Production $ Billion 2.595 1.3/1.4 0.39/0.46 0.71/0.76
2016 Production $ Billion 2.7-2.9 1.67-1.77 0.36-0.42 0.67-0.71
% of total production (2015) 100% 61% 14% 25%
Capital expenditures $ Million

565-595

760

230 435 95
Production cost of sale $ 675/735 730/790 850/920 460/490
AISC $/Au E. Oz $890-990 ($975 in 2015 - $973 in 2014)
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Production per mine and per Quarter.

1Q'16 4Q'15 3Q'15 2Q'15 1Q'15
Fort Knox 87,800 87,561 115,258 116,061 82,673
Round Mountain 92,926 51,034 58,074 48,448 40,262
Bald Mountain 20,422 0 0 0 0
Kettle River - Buckhorn 28,312 19,301 24,222 29,580 24,265
Paracatu 119,376 113,547 129,064 110,366 124,685
Maricunga 59,076 54,948 52,672 47,713 56,822
Americas - 58.95% 407,912 326,391 379,290 352,168 328,707
Kupol 192,450 191,308 190,366 191,160 185,729
Russia - 27.8% 192,450 191,308 190,366 191,160 185,729
Tasiast 47,078 53,306 53,440 57,890 54,009
Chirano 90% 44,470 52,711 57,783 66,079 60,915
West Africa - 13.25% 91,548 106,017 111,223 110,570 121,924
Total 691,910 623,716 680,679 660,898 629,360
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As 12/31/2015 Gold Silver Copper
Grade 0.7 g/t 4.1 g/t 0.22%
P1 + P2 reserve 33,955 Koz 40,982 Koz 1,444 Mlb
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Commentary

Kinross Gold released its 1Q'16 results on May 10, 2016. Revenue was $687.463 million, up 10.2% quarter over quarter, and cash flow was $75 million.

Operational segment

Kupol mine in Russia and Fort Know were performing very well this quarter. Also, Kettle River-Buckhorn mine will not be shut down in 2016 as scheduled.
Tasiast mine is a very exciting development for the company that plans Phase I and Phase II. Phase I will be completed by Q1'2018 and production will be 12,000 TPD. Later in Phase III, the company is targeting 30,000 TPD. At the Bald Mountain, the company completed its first quarter as operator. Maricunga mine will be close in October. Paracatu mine production is still hampered by a significant rainfall.

Liquidity

M. Tony Giardini, CFO, in the conference call said the following:

The balance sheet remains strong with $750 million in cash and cash equivalents and $2.3 billion in total liquidity. During the quarter, the company completed an equity offering issuing 96 million common shares for gross proceeds of $288 million. Of that, $175 million was used to repay what we drilldown from our revolving credit facility following the $610 million all cash acquisition of Bald and Round Mountain was closed January 11.

Capital Requirement for 2016

1 $250 million senior notes due September 2016.

2 $160 million CapEx for the Tasiast Phase I which will increase 2016 CapEx to $755 million.

M. Tony Giardini said:

Based on a $1,200 gold price, we expect to meet these capital requirements and finish 2016 with cash and cash equivalents of approximately $700 million on the balance sheet.

Hedging fuel for the Tasiast Phase I, as a precaution

The company decided to hedge the fuel for the Tasiast project at $46 until April 2019, which is a prudent move.

Conclusion

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What a difference since early January! The price per share has been multiplied by nearly 4.

The question is whether or not this trend will continue? Of course, no one really knows and it will depend on the gold prices. In my preceding article, I was rating KGC as a buy on valuation, it was easy to recommend at such a low price. Now, my task is much more complicated because the stock jumped so high and so fast that it is difficult to justify it by the fundamentals which are good but not exceptionally good to justify this trend explosion.

I found an excellent article regarding the gold outlook:

Gold has support in the mid-$1,200's and stronger support at $1,185. We expect a slow trending move higher to be now developing. As long-term investors, this is exactly what we would hope to see at this early juncture. Measured moves higher in markets tend to be sustained, whereas explosive surges tend to fade quickly.

However, I am not on the super bullish side yet, and believe the $1,300/Oz may be a strong resistance. I will need a more convincing trend to alter my mind.

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That being said, I recommend to take at least 25% profit off the table and turn it into cash. Then, you can sit patiently with your remaining position and wait for what will happen the following few months.

Note: Do not forget to follow me on KGC and get updated regularly. Thank you.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I trade KGC