UPDATE 2-Kinross Gold cuts reserves after mine plan review

Wed Feb 12, 2014 7:00pm EST

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Feb 12 (Reuters) - Kinross Gold Corp said on Wednesday that a "rigorous" review of its mine plans led to slashing its gold reserves by a third, even as the Canadian miner reported a narrower fourth-quarter net loss compared to the same period last year.

Kinross said its store of unmined gold stood at 39.7 million ounces of gold at the end of 2013, down 33 percent from 59.6 million ounces at the end of 2012. Analysts were not expecting the cut, since Kinross used a conservative price to estimate reserves a year ago.

The reduction reflects depletion through production, the divestiture of the Fruta del Norte project in Ecuador and the adoption of "fully loaded costing" on reserves, the Toronto-based company said.

Kinross' fully loaded costs, which it applied to operating sites, include operating costs, sustaining capital, mine waste management costs, and general and administrative expenses.

"The result is a reduction in proven and probable mineral reserves, primarily at Paracatu, but an increase in the value of our reserves, with higher grades and greater near-term cash flow expected at operations across the company," chief executive J. Paul Rollinson said in a statement.

Paracatu is Kinross' large gold mine in Brazil.

For the first time in years, miners around the world are telling their shareholders that reserves have significantly diminished, partly because of bullion's 28 percent price slide in 2013 and changes to focus on higher grade ore.

Although painful, reserve cuts are seen as helping nurse the gold-mining sector back to longer-term health by discouraging miners from seeking low-margin growth at the expense of profits. Reserves are considered the future source of production, cash flow and growth.

Kinross' reserves lost through the fully loaded costing methodology are in resources and could be tapped if gold prices increase or costs come down.

NET LOSS NARROWS

Kinross said its net loss narrowed from the same period a year earlier when the miner faced a $3.2 billion write-down related to two mines in Africa.

It reported a net loss of $740 million, or 65 cents a share, in the three months to end-December, which included a non-cash impairment charge of $544.8 million, partially related to property, plant and equipment at its Maricunga mine in Chile.

The net loss compared with a loss of $2.98 billion in the same period a year ago, when the miner faced a multibillion dollar write-down related its Tasiast mine in Mauritania and Chirano mine in Ghana.

The Maricunga charge, pegged at $376 million, came from changes to the mine plan and a corresponding reduction in mineral reserves. Kinross also had a $168.8 million goodwill charge related to its Quebrada Seca project in Chile.

Adjusted for various items, Kinross reported a loss of $25.1 million, or two cents a share, mainly due to a weaker gold price, higher production costs and depreciation.

Analysts, on average, expected earnings of three cents a share, according to Thomson Reuters I/B/E/S.

The Toronto-based miner said it expected to produce between 2.5 million and 2.7 million ounces of gold equivalent ounces in 2014. That compares with 2.6 million ounces produced in 2013.

Gold equivalent ounces include silver ounces produced and sold, converted to a gold equivalent based on a ratio of the average spot market price for the commodities for each year.

Kinross' total attributable gold equivalent production in the fourth quarter fell to 646,234 ounces from 724,510 ounces a year ago.

The miner's average realized gold price in the fourth quarter fell to $1,268 per ounce from $1,707 a year earlier, while its all-in sustaining costs rose to $1,169 per ounce sold from $953 an ounce.

Kinross' stock is down 28 percent in the past year, along with other gold mining stocks. It closed at C$5.67 on the Toronto Stock Exchange on Wednesday, down 3.9 percent.

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