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Kinross 2Q Adjusted Earnings Fall; Tasiast Expansion On Hold

Kitco News

Editor's Note: Updating earlier story with more details about Tasiast expansion.

(Kitco News) - Kinross Gold Corp. (TSX: K, NYSE: KGC) Wednesday reported a decline in its second-quarter adjusted profit as production fell, and the company also announced that it was putting expansion of the Tasiast mine in Mauritania on hold.

Adjusted net earnings in the second quarter fell to $37.8 million, or 3 cents per share, compared with $54.9 million, or 4 cents, in the second quarter of 2017. Net earnings, including special items, were $2.4 million, or zero cents per share, compared to $33.1 million, or 3 cents, in the year-ago quarter.

April-June attributable output totaled 602,049 gold-equivalent ounces, down from 694,874 a year ago. But while production fell, the average realized gold price climbed to $1,306 an ounce from $1,260. Still, against this backdrop, revenue slid to $775 million from $868.6 million in the year-ago quarter, the company said.

Output fell at a number of mines. Among the biggest drops, declines at Fort Knox, Kupol and Paracatu were blamed largely on lower grades, while Round Mountain production was down year-on-year mainly due to lower recoveries from the heap-leach pads related to a decrease in tonnes of ore placed on the pads, the company said.

Still, Kinross said its outlook for the full year was unchanged. The company expects to produce 2.5 million gold-equivalent ounces.

Meanwhile, J. Paul Rollinson, president and chief executive officer, said the first phase of the expansion at Tasiast has been completed but the company will hold off on the second during negotiations with the government.

The Mauritanian government is looking to improve economic benefits to the country, with Kinross reporting back in May the government wanted to enter into “mutually beneficial discussions.” Previously, the government also rejected an exploration permit.

“At Tasiast, construction was completed at the phase-one expansion, with first ore now through the SAG mill,” Rollinson said. “The project has been transferred to operations and is in the final stages of commissioning.

“We have decided to pause activities at phase two and, to maintain optionality, are analyzing alternative throughput approaches to expand Tasiast as we continue to engage with the government of Mauritania regarding our activities in the country. The completion of our evaluation of alternative approaches, and a phase-two re-start decision, are subject to our ongoing engagement with the government….”

The first phase boosted daily processing capacity to 12,000 tons of mill throughput daily from 8,000. The second phase was to bump this all the way up to 30,000 tonnes daily.

Rollinson said progress on U.S. projects is “excellent,” with the Fort Knox Gilmore, Round Mountain Phase W and Bald Mountain Vantage Complex projects all on budget.

“We have also initiated a feasibility study for the La Coipa restart project, and a scoping study for Lobo Marte, to potentially return to production in Chile,” the CEO said. “In Russia, we expect production to commence at the Moroshka satellite deposit near Kupol early in the fourth quarter.”

On Tuesday, a Kinross subsidiary completed the previously announced transaction to acquire two hydro electric power plants in Brazil for $253.7 million. The company said these should provide a long-term supply of power and lower production costs at Paracatu.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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