Feb 12 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
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.