Gold miner Kinross Gold Corporation (KGC) reported adjusted net income of $144.7 million or $0.13 per share in the fourth quarter of 2010, below last year’s $148.6 million or $0.21 per share, surpassing the Zacks Consensus Estimate of $0.15.
The results were negatively impacted by additional exploration expenditures of approximately $23 million at Tasiast, and by the timing of year-end metal shipments, which deferred sales of approximately 30,000 ounces of gold production from the fourth quarter of 2010 to the first quarter of 2011.
In fiscal 2010, adjusted net earnings were $478.8 million, or $0.58 per share compared with $304.9 million, or $0.44 per share in the prior year.
GAAP net earnings were $210.3 million or $0.19 per share in the fourth quarter of 2010, compared with $235.6 million, or $0.34 per share in the prior-year quarter. In fiscal 2010, GAAP net earnings were $771.6 million, or $0.94 per share compared with $309.9 million, or $0.45 per share in fiscal 2009.
Quarterly revenues leaped 32% to $920.4 million due to an increase of 21.8% in average realized gold price to $1,333 per ounce. About 11,000 ounces of Red Back assets were also sold. In fiscal 2010, total revenue was a record $3,010.1 million, up 25% year over year.
Gold production increased 10% year over year to 676,635 ounces in the fourth quarter of 2010. The increase in production was mainly attributable to improved performance at the Paracatu expansion plant, and the addition of new production from Tasiast and Chirano. In fiscal year 2010, gold production was 2,334,104 ounces, in line with the previously announced guidance.
Kinross margin per ounce sold was a record $782 during the quarter, up 19% year over year. In fiscal 2010, margin per ounce sold was $683, up 29% year over year.
Financial Review
In fourth-quarter 2010, adjusted operating cash flow was $332.7 million, up 14% year over year, while in fiscal 2010 it was $1,091.2 million, up 16% year over year. Adjusted operating cash flow per share was $0.29 during the quarter versus $0.42 in the prior- year quarter, and $1.32 per share for fiscal 2010 compared with $1.36 in the prior year.
Capital expenditures were $236.5 million during the quarter compared with $137.5 million for the same period last year. Capital expenditures totaled $563.7 million for full-year 2010, slightly below the guidance, compared with $481.2 million in the previous year.
The board of directors declared a dividend of $0.05 per share payable on March 31, 2011 to shareholders of record as of March 24, 2011.
Acquisitions and Divestures
On December 13, 2010, the company completed the sale of its 1.8% interest in Osisko Mining Corporation, consisting of approximately 6.8 million Osisko common shares, on an underwritten block trade basis, at a gross price of CDN$14.70 per share, for net proceeds of CDN$97.5 million. The transaction resulted in a gain of CDN$74.1 million.
Outlook
Kinross anticipates 2011 production of 2.5–2.6 million gold ounces at an average cost of sales per gold equivalent ounce of $565 – $610. Kinross also expects higher costs as a result of increased energy and labor costs, and lower average grades.
By 2015, Kinross expects production to grow to 4.5-4.9 million ounces, as new projects start up in 2013 and 2014. With new studies completed at Tasiast, FDN, Lobo-Marte, and Dvoinoye, Kinross is making significant and steady progress in advancing the projects that give the company the best growth profile among senior gold producers.
Zacks Recommendation
Kinross Gold Corporation, like other gold producers, Barrick Gold Corporation (ABX) and Newmont Gold Mining (NEM), benefits from rising gold prices. We expect Kinross’ exploration projects and acquisitions to boost its top line going forward.
Currently, Kinross Gold has a short-term (1 to 3 months) Zacks #3 Rank (Hold) and a long-term Neutral recommendation.
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