Canadian mining company, Kinross Gold Corporation (KGC) announced recently that its Kupol mine in the Far East Region of the Russian Federation has been fully certified under the International Cyanide Management Code. Kupol is the first mine in Russia to obtain this certification.
In November 2009, Kupol’s transportation group was also certified by the International Cyanide Management Code, making it the first certified mine-operated transportation group in the world. The certification covers the storage and transportation of cyanide from Port of Pevek facilities to Kupol.
The Cyanide Management Code is a voluntary code that focuses on the safe manufacturing, transportation, storage, use and decommissioning of cyanide and associated facilities used for the production of gold. Certification for Kinross’ La Coipa mine in Chile will commence in 2010. All other Kinross operations – including Maricunga in Chile; Paracatu and Crixas in Brazil; and Round Mountain, Fort Knox and Kettle River-Buckhorn in the US – are now certified under the Cyanide Management Code.
Like other producers, including Barrick Gold Corporation (ABX) and Newmont Mining Corporation (NEM), Kinross is benefiting from rising gold prices. The Bema Gold Corp. acquisition has been a major contributor to Kinross’ profits in the last few quarters. We expect Kinross’ exploration projects and acquisitions to also boost its top line going forward. Kinross has cleared its hedge book and stands fully levered to the spot metal prices. However, the emerging market growth is declining and production level is shrinking at some of its existing operations. We are also concerned about Kinross’ earnings volatility and lower gold reserve base. Earnings in the last quarter were lower than the Zacks Consensus Estimate. We expect higher mining and administrative costs to further constrain margins. We reiterate our Neutral recommendation on Kinross.
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