Kinross Gold (KGC) -2.9% premarket after surprising investors yesterday in slashing its year-end 2013 gold reserves by 33% to 39.7M oz. - a massive decline, particularly since KGC used the same $1,200/oz. gold price in both years to calculate reserves.
KGC wants to stick to high-margin ounces, so it calculated reserves uses a "fully-loaded costing methodology" that factors in costs for sustaining capital, waste management, and other work; the result is that millions of marginal ounces were dropped out of reserves.
The irony is that KGC was the one senior gold company that was not expected to cut its year-end reserves, since it had used the conservative $1,200/oz. price to calculate reserves even before gold prices sank.