Like other gold companies, Kinross Gold Corp. (KGC) is struggling with higher costs and project delays. Both were apparent in the company's second quarter earnings, as cash cost guidance for 2008 was increased to a range of $425-$445/oz (from $385-$395/oz) and the ramp-up at the Paracatu project is taking longer than expected.
However, analysts still liked the numbers, as gold production of 406,032 ounces was in line or better than most of their expectations, and the 51,487 ounces from the new Kupol mine in Russia was a pleasant surprise for many of them. The rise in cash costs was also no different from other big gold miners.
"Kinross has reported a strong quarter unlike most of the senior gold producers, and when combined with a faster-than-planned ramp-up at Kupol it appears that the company is performing very well," TD Newcrest analyst Greg Barnes wrote in a note to clients.
Analyst Catherine Gignac of Wellington West Capital Markets noted that quarterly cash costs rose 43%, but margins were in line with last year because of higher gold prices. She downgraded the stock to "market perform" from "buy" and cut her target to C$20.00 a share (from C$30.00) based on valuation, but still wrote that Kinross has an "excellent" near-term growth profile.
She also wrote that she expects the offer for Aurelian Resources Inc. will be approved by investors. It is due to expire Sept. 3.
(All prices in US$ unless otherwise indicated.)