Kinross Gold CEO predicts strong growth this year

ERIC SHACKLETON

The Canadian Press

February 22, 2008 at 3:04 PM EST

TORONTO — An “exciting” year of growth lies ahead for Kinross Gold Corp. as it gets set to start production at three new mines beginning in July, says Tye Burt, chairman and CEO.

The coming year will see an “exciting period of growth” for the company as it brings on line projects that promise to add significantly to the Toronto-based miner's balance sheet, Mr. Burt told a conference call Friday.

His comments came after the company reported Thursday a fourth-quarter profit of $173.1-million (U.S.), up from $41-million a year ago, helped by higher gold prices.

“We significantly advanced our three development projects (in 2007) which will begin contributing to production this year, driving growth in production while lowering our cost to sales,” which have been growing, said Burt.

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Paracatu in Brazil, Kupol in Russia and Buckhorn in Washington state are expected to boost 2007 gold equivalent production by 60 per cent in 2009, improving the company's cost profile and margins, he said.

By the end of this year, “our average cost of sales is expected to decrease to between $325 and $335 per gold equivalent ounce.”

Cost of sales per ounce for full-year 2007 was in line with previously announced guidance at $368 on sales of 1.57 million gold equivalent ounces, compared to $319 on sales of 1.51 million ounces in 2006.

The profit in the fourth quarter of 2007 amounted to 29 cents per diluted share for the three months ended Dec. 31. That compared with 11 cents per share a year ago, the company said. It reports in U.S. dollars.

Quarterly revenue was $284.1-million, up from $231.4-million in the last three months of 2006.

Kinross produced 384,598 ounces of gold in the quarter, up from 362,028 ounces a year earlier. Sales totalled 356,329 ounces, down from 375,684.

“We started (2007) with reserves of 27.9 million ounces of gold and added ounces both organically and through acquisitions, ending the year with 46.6 million ounces, 67 per cent higher than end of year ‘06,” said Burt.

The company also made additions to its silver and copper reserves.

The average realized price of gold was $796 per ounce, up from $615.

Burt is upbeat about the three development projects set to start coming on line, beginning in the summer.

“The Paracatu expansion in Brazil is on schedule for startup in July with construction now 80 per cent complete and on budget with 85 per cent of the total capital spent or committed,” he said.

“Kupol construction in Russia is 91 per cent complete and will begin commissioning in May. That project is also on budget with 89 per cent of the preproduction capital spent or committed.”

The company also executed a long-term lease agreement at Kupol granting Kinross service rights until the year 2024.

“The Buckhorn mine in Washington state is also 80 per cent complete and is expected to commence gold production in the fourth quarter of this year targeting October,” Mr. Burt said.

Buckhorn is also on budget with 60 per cent of the capital spent or committed, Mr. Burt said.

Kinross also “continued to plant seeds for future growth” (in 2007) by entering into a number of relationships and joint ventures with some of the best young exploration companies in the business, said Mr. Burt.

These include Victoria Resources, a Kinross-sponsored company with excellent prospects and drill results in Nevada, he said.

At the Ixhuatan project with Linear Gold Corp. in Chiapas, in southwest Mexico, drilling is continuing with “some very encouraging results,” said Mr. Burt. The company has budgeted $7.5-million for drilling and exploration in the area.

On Thursday, the company announced plans to begin an expansion of the Fort Knox mine in Alaska. “This will extend mine life by five years to 2018,” said Burt.

On the downside, the feasibility and construction decision on the Cerro Casale project in northern Chile, a joint venture with Barrick Gold Corp., has been delayed.

Kinross and Barrick are negotiating “a more definitive” shareholders' agreement to govern the project, Kinross said in its 2007 results' release. It promised an update on the situation at the end of the first quarter of 2008.

“Core drilling at the property was completed in December 2007 and metallurgical test work is continuing,” Kinross said.

For all of 2007, Kinross said it earned $334-million or 60 cents per diluted share on sales of $1.09-billion. That compared with a profit of $165.8-million or 47 cents per diluted share on sales of $905.6-million in 2006.

On Thursday, the board of directors declared a dividend of 4 cents per share, payable March 31 to shareholders of record on March 24.

Richard Gray, a financial analyst at Blackmont Capital, recommended a “buy” on Kinross stock, although the gold miner had slightly missed on its fourth-quarter earnings due to higher costs. He said it had raised the value of its mining properties.

Shares in Kinross were down 73 cents, or more than 3 per cent, at $23.11 in trading of about 3.3 million shares on the Toronto Stock Exchange on Friday.