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Kinross costs, margins maintain big cash pile

Stronger gold prices and lower operating costs have helped Kinross Gold Corp (TSX: K/NYSE: KGC) generate stronger net cash flow in the first three months of 2018, versus the same period last year, and retain close to a US$1 billion cash war chest during a period of increased capital outflows on growth projects.
Kinross costs, margins maintain big cash pile Kinross costs, margins maintain big cash pile Kinross costs, margins maintain big cash pile Kinross costs, margins maintain big cash pile Kinross costs, margins maintain big cash pile

Tasiast in Mauritania ... expansion on track

Staff reporter

The company reported Tuesday its all-in sustaining cost (AISC) per gold-equivalent ounce sold in the March 2018 quarter hit an all-time low of US$846/oz (compared with $953/oz in Q1 2017), while the average price received of US$1,330/oz received in 2018 Q1 was 9% higher than during 2017 Q1, producing 13% higher revenue of $897.2 million in the latest quarter on increased metal sales (668,217oz Au-eq 2018 Q1 versus 645,946oz Au-eq 2017 Q1).

Kinross reported 2.7% lower gold-equivalent production for the first three months of 2018, compared with the same period last year.

The company's net operating cash flow in Q1 2018 was $293.5 million versus $207.8 million in Q1 2017, but net earnings of $106.1 million for the latest period compared $134.6 million for Q1 2017. Capex in the latest period increased to $246.9 million from $178.9 million a year earlier as Kinross brought its Tasiast expansion project in Mauritania, and Round Mountain upgrade in the US, closer to delivery.

Kinross said the Tasiast Phase One expansion was "near completion, on schedule and on budget, and expected to achieve 12,000 tonnes per day throughput by the end of June 2018".

"The company is assessing the government of Mauritania's request to enter into mutually beneficial discussions respecting all of Kinross' activities in Mauritania with a view to improving economic benefits to the country, including the potential impact on the Phase Two expansion," the company said.

Kinross maintained 2018 full-year production guidance at 2.5 million oz Au-eq, at forecast AISC of $975/oz.

Its total capex spend this year is expected to reach $1,075 million.

Meanwhile, president and CEO J. Paul Rollinson said cash and cash equivalents of $$997.9 million at the end of March meant Kinross had about $2.6 billion of liquidity given available credit of $1,566.5 million and no debt maturities until 2021.

"We are pleased with the strong operational start to 2018, as our portfolio of mines performed well, achieving solid production and significantly lower all-in sustaining costs compared with last quarter and Q1 2017,"Rollinson said.

"We generated strong cash flow and ended the quarter with approximately $1 billion of cash on the balance sheet, relatively unchanged from year-end 2017.

"Our portfolio of development projects is progressing well.

"Our Nevada projects at Round Mountain and Bald Mountain are continuing to proceed on schedule. In June, we expect to announce the feasibility study results for the Fort Knox Gilmore project, an opportunity to potentially extend mine life at one of our best performing operations. In Chile, we expect to commence a feasibility study for the La Coipa Restart project at mid-year. Finally, we also expect to begin mining high grade ore at the Moroshka satellite deposit near Kupol [in Russia] in the second half of 2018.

"We … are firmly on track to meet our annual production and cost guidance and are on plan with the development projects that will shape our future."

Kinross' share price finished Tuesday in Toronto up 2.89%, at C$5.34, capitalising the company at C$6.67 billion.

The shares have traded on the TSX between $4.54 and $5.60 since the start of 2018.