BUSINESS

Kinross reports second-quarter profit down from year ago as costs climb

08/08/2012 06:29 EDT | Updated 10/08/2012 05:12 EDT
TORONTO - Kinross Gold Corp. (TSX:K) reported Wednesday a drop in second-quarter earnings compared with a year ago as its production costs increased.

The Toronto-based gold miner, which keeps its books in U.S. dollars, earned US$153.8 million or 13 cents per share for the quarter ended June 30 compared to a profit of $261.2 million or 22 cents per share a year ago.

Revenue totalled $1 billion, up from $963.6 million.

Production costs per gold equivalent ounce were $725 compared with $569 a year ago, due to increased processing of lower grade ore, as well as higher costs for energy, labour and consumables, the company said.

Adjusted earnings for the quarter totalled $156 million or 14 cents per share, compared with $222.6 million, or 20 cents per share, a year ago.

The average analyst estimate had been for a profit of 18 cents per share, according to data compiled by Thomson Reuters.

Recently-appointed chief executive J. Paul Rollinson said Wednesday that Kinross was launching a company-wide cost reduction initiative aimed at improving capital efficiency, reducing costs, and increasing margins.

"I've been given the mandate from the board to ensure that we deliver on the capital and project optimization process we announced earlier this year," he said in a statement.

"This means striking the right balance between the objective of growing the business and generating free cash flow. It also means taking the time to get our growth projects right in terms of scale, sequencing, timing, and capital, in order to deliver the best return from every dollar we invest while maintaining our financial strength and liquidity."

Kinross replaced high-profile president and chief executive Tye Burt earlier this month in a bid to improve the Toronto-based miner's lagging performance.

Rollinson was executive vice-president of corporate development for the Toronto-based gold miner.

In 2010, the company purchased Red Back Mining for US$7.1 billion, acquiring the Chirano Gold Mine in Ghana and the Tasiast Gold Mine in the process.

Shares in Kinross were hit earlier this year after it slowed the development of its three major projects, including its Tasiast mine. The shares have lost nearly 40 per cent of their value since January.

The gold miner has also said feasibility studies at its Fruta del Norte project in Ecuador and Lobo-Marte project in Chile would be delayed in order to optimize capital costs.

In May, Kinross Gold Corp. (TSX:K) agreed to sell its 50 per cent interest in the Crixas gold mine in Brazil to AngloGold Ashanti of South Africa for US$220 million.

AngloGold Ashanti already holds, through its subsidiaries, the other 50 per cent of the project and it's the operator of the mine.

Kinross has mines and projects in Canada, the United States, Brazil, Chile, Ecuador, Russia, Ghana, and Mauritania.