Rising Costs Negatively Affect Kinross' NAV and Price Targets

Greater cash costs at Kinross’ (KGC) Kupol mine in Russia negatively impacts the company’s net asset value, according to Blackmont analyst Richard Gray.

On Jan. 7, Mr. Gray increased his cash cost estimate for Kupol to C$230 concurrent to his rising gold price forecast. Since then, the company has stated that expected cash costs at Kupol, which is set to begin production in June 2008 - have now increased from its previous estimate of $225 per ounce to $270 per ounce. The company blamed increased taxes and royalties due to the higher gold price for the increase.

As a result of Kinross' higher cash costs, Mr. Gray lowered his NAV from C$11.75 to C$11.25, and his earning per share and cash flow per share estimates by 4 to 5%.

The analyst also lowered his price target to C$25.50 but maintained his “buy” rating.