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« Bottleneck or Supply Deficit? | Main | Agnico-Eagle Mines Limited Up 2.82% Today »
Thursday
Feb172011

Kinross Gold Corporation declares a $0.05 dividend

KGC Chart 17 Feb 2011.JPG

We cant say that we are overwhelmed with this dividend payout from Kinross Gold Corporation (KGC) and we are even less impressed with the performance of the stock price over recent years. As the above chart shows the stock price was $25.00 plus in 2008 and since then has steadily plodded south to close yesterday at $16.99. KGC now has a huge market capitalization which is close to $20 billion and a low P/E ratio of 15.73, however the stock price is still in decline.


The President and CEO, Tye Burt, made the following comments in relation to fourth quarter and year-end 2010 results:


"In 2010, Kinross' proven and probable gold reserves increased by 23%. Our production reached a new record with strong performance from our mines, and for the first time, annual revenue exceeded $3 billion while adjusted operating cash flow4 exceeded $1 billion. Margins averaged $683 per ounce in 2010, an increase of 29% year-over-year, compared with a 23% year-over-year increase in the average realized gold price per ounce.

"In 2011, with a full year of output from our West African mines, we forecast production will increase to 2.5-2.6 million gold equivalent ounces, while we also expect higher costs as a result of increased energy and labour costs, and lower average grades.

We also draw your attention to the expectation of higher costs! This gives us cause for concern as there other producers out there who appear to be getting their costs down, granted they are not the giant that Kinross is, but our focus in on return on capital. This may be a case of big not being beautiful.

The highlights of the companies results are as follows:

Production1 in the fourth quarter of 2010 was 676,635 gold equivalent ounces, a 10% increase over Q4 2009. For full-year 2010, gold equivalent production was 2,334,104 ounces, in line with previously announced guidance.

Revenue for the quarter was a record $920.4 million, compared with $699.0 million in the fourth quarter of 2009, an increase of 32%, with an average realized gold price of $1,333 per ounce sold compared with $1,094 per ounce sold in Q4 2009. Revenue for the full-year 2010 was a record $3,010.1 million, a 25% increase over full-year 2009.

Cost of sales2 per gold equivalent ounce was $551 for Q4, which includes a Red Back Mining purchase accounting increase of $13, compared with $437 for Q4 2009. Cost of sales per ounce sold for full-year 2010 was $508, inclusive of a full year Red Back purchase accounting increase of $5, compared with $437 for full-year 2009. Full-year cost of sales per ounce was in line with previously stated guidance. Kinross' attributable margin per ounce sold3 was a record $782 in Q4, a year-over-year increase of 19%. The attributable margin per ounce sold for full-year 2010 was $683, a 29% increase over 2009.

Adjusted operating cash flow4 for Q4 was $332.7 million, a 14% increase over Q4 2009, and $1,091.2 million for the full year, a 16% increase over full-year 2009. Adjusted operating cash flow per share was $0.29 in Q4, versus $0.42 Q4 2009, and $1.32 per share for full-year 2010, compared with $1.36 for full-year 2009.

Adjusted net earnings4 were $144.7 million, or $0.13 per share, in Q4, compared with $148.6 million, or $0.21 per share, for Q4 2009. Adjusted net earnings for full-year 2010 were $478.8 million, or $0.58 per share, compared with $304.9 million, or $0.44 per share, for full-year 2009. Reported net earnings were $210.3 million, or $0.19 per share in Q4, compared with $235.6 million, or $0.34 per share, for Q4 2009. Full year reported net earnings were $771.6 million, or $0.94 per share, compared with $309.9 million, or $0.45 per share for full-year 2009. Earnings were reduced by additional exploration expenditures of approximately $23 million at Tasiast, and by the timing of year-end metal shipments, which deferred sales of approximately 30,000 ounces of Q4 2010 gold production to Q1 2011.

Kinross forecasts 2011 production of 2.5-2.6 million gold equivalent ounces at an average cost of sales per gold equivalent ounce of $565 – 610.

Proven and probable mineral reserves as of December 31, 2010 were 62.4 million gold ounces, an 11.5 million ounce, or 23% increase year-over-year.

Proven and probable mineral reserves at Tasiast increased to 7.6 million gold ounces, measured and indicated mineral resources were 2.1 million gold ounces and inferred mineral resources increased to 8.6 million gold ounces. The Company has completed a scoping study for the Tasiast expansion project based on a 16-year life for the expanded project with average annual production of approximately 1.5 million ounces at an average gold grade of approximately 2 g/t for the first eight full years of the expanded project.

Kinross has declared its first proven and probable gold reserves of 6.8 million ounces at Fruta del Norte (FDN). The Company has prepared a pre-feasibility study and technical report for FDN that estimates average annual production of 410,000 gold ounces over the 16-year life-of-mine. FDN permitting is on schedule to support the project development timeline.

The Company has completed a scoping study for Dvoinoye that contemplates processing higher-grade Dvoinoye ore at the Kupol mill, and an increase in Kupol throughput from 3,000 to 4,000 tonnes per day.

The Board of Directors declared a dividend of $0.05 per share payable on March 31, 2011 to shareholders of record on March 24, 2011.


So there we have it and as you know we sold our share holding on 11th November 2010 for $18.69, when we wrote: Our patience has come to an end so we must bid farewell to the Kinross Gold Corporation, today we sold all of our shares taking the cash back to the side lines where we hope to deploy it in such a manner as to enjoy a good return it.



The question we must ask ourselves is can our capital be better deployed elsewhere?

And the short answer is yes, we'll continue to observe for now and keep our wallet tightly closed.

Kinross Gold trades on the TSX under the symbol of 'K' and on the NYSE under the symbol of KGC and the 52 week trading is range is $14.84 - $19.90, a very modest P/E ratio of 15.73 and an EPS of $1.08.


In yesterdays trading session we closed another trade so we now have 64 winners out of 66 options trades, or a 96.96% success rate If you have any questions regarding these trades please address them through their site where they will be handled quickly and I hope efficiently.


sk chart 10 Dec 2010.JPG

The above progress chart is being updated constantly. However, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today, before we decide to cap membership.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.


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Reader Comments (4)

Agreed, KGC like several other gold stocks are not reflecting the price of Gold. Eldorado is another. Don't understand its lackluster performance either. Any thoughts on EGO. IAG is moving up nicely. THanks

February 17, 2011 | Unregistered CommenterGary

Yes. I think that you can deploy your capital better. I am like you guys and own shares of some large producers, like Newmont and Barrick and see that the stock prices aren't moving as well as some of the juniors that I hold. For example, Copper Fox went up 20 percent in the last session alone. That was a good gain! Wow! Some of the silver producing juniors and non producing silver juniors have done quite well and seem to be headed higher. There seems to be investor support for higher silver prices and recent middle eastern events plus news about oil prices etc will likely continue to drive gold even higher. And this will drag silver up along with it. I think that selling some of my blue chip seniors and converting the capital into more juniors and exploration companies is what I will be doing in the near term. Eric Sprott thinks that silver will break 50 dollars an ounce this year. It is still undervalued and in stage one as we speak. So, silver still has a lot of upside if you ask me. Even Doug Casey seems bullish on silver as per the recent e-mail I got from Casey Research. But, the main concern I have in investing in silver is that the US economy will turn deflationary, in which case silver underperforms gold and junior stocks get hammered. Nobody is really quite sure how the deflation/inflation argument will work out. It is not clear cut and it is not easy to pick which one will occur more than the other. Frankly, we could have both inflation and deflation which is just what Thomas Jefferson warned if we were to ever allow central banks to control our money supply. And we can already see that real-estate prices have ticked down yet some more as per the most recent housing data. So, this will have to be something that is watched very closely. In summary, I think that we may hitch a ride on the Junior miner and exploration railroad and see how far it goes. That is what I'll be doing. Any questions

February 18, 2011 | Unregistered CommenterScott

Scott,

We don't own Newmont or Barrick, we may consider them for an options play from time to time but not as an investment as the large caps are struggling to gain traction when compared with other opportunities.

February 20, 2011 | Unregistered CommenterGold Prices

Im looking at adding to my Gold corp- GG on any pull back. With their large exposure to Silver they are well diversified between Gold and Silver. Also like were there mines are located.

February 20, 2011 | Unregistered CommenterGary

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