Kinross Gold Corp. reported adjusted net earnings for the second quarter of $156.5 million, or 12 cents per share, down from $194 million, or 15 cents per share, in the second quarter of last year, and the company attributed the downturn partially to lower sales of gold equivalent ounces in the 2021 quarter.
The company also reported that proactive mitigation measures on the wall stability issues at the Round Mountain Mine in Nevada discovered in the first quarter have been successful, and the wall is stabilized.
The measures taken included dewatering and moving waste material at the top of the pit, and Paul Tomory, executive vice president and chief technical officer, said in the July 29 earnings call that the waste “proved to be mineralized and should ultimately cover the cost” of the removal.
Kinross produced 538,901 ounces of gold in the second quarter, compared with 571,978 ounces in the 2020 quarter, and the company attributed the drop to lower production at the Tasiast Mine in West Africa that had a mill fire, and lower production at the Bald Mountain Mine in Nevada and Kupol in Russia.
The reduced production at those mines was partially offset by higher production at the Fort Knox Mine in Alaska and the Paracatu Mine in Brazil, according to the earnings report released after the market closed on July 28.
The company’s president and CEO J. Paul Rollinson said in the call that “we realize the fire at Tasiast created uncertainty and hurt stock prices,” but the “gold is still in the ground, and we have an insurance claim for disruption of our business.”
Free cash flow in the second quarter totaled $182.8 million, compared with $218.5 million in the 2020 quarter, and the company’s reported net earnings totaled $119.3 million, or 9 cents per share, compared with $195.7 million, or 16 cents per share, in the 2020 quarter.
The average realized gold price was up 6% to $1,814 per ounce in the quarter ending June 30.
Kinross share prices were at $6.56, up 29 cents, in late afternoon trading on July 29, and the 12-cent adjusted net earnings per share was in line with the Zacks Consensus Estimate.
Rollinson said that the “excellent free cash flow, as well as the strength of our investment grade balance sheet and growing production profile underpin today’s announcement of a share buyback program and our continuing quarterly dividend, which supports our commitment to enhance shareholder value.”
Toronto-based Kinross received approval from the Toronto Stock Exchange to purchased up to 5% of the company’s issued common shares, and the company’s board authorized a 3-cent quarterly dividend, and Andea Freeborough, executive vice president and chief financial officer, said in the earnings call that Kinross will begin the buy-back “in the near future.”
Rollinson said the company’s “future growth strategy is also advancing well, with Tasiast 24k and La Coipa on schedule to be completed in mid-2023 and mid-2022, respectively,” and Kinross is on track to meet its revised production guidance of roughly 2.1 million ounces of gold equivalent ounces this year.
The company had anticipated 2.4 million ounces of gold production this year before the mill fire.
“Despite the impact of the Tasiast mill fire on our 2021 production and cost guidance, we continue to expect our production to increase to 2.7 million ounces in 2022 and 2.9 million ounces in 2023,” Rollinson said, reporting that the mill is expected to restart in the fourth quarter of this year at a cost of roughly $35 million, lower than originally planned $50 million.
The mill fire at the mine in Mauritania happened June 15, and Kinross has completed an agreement with the Mauritania government that provides enhanced certainty on the mine’s economics and underpins the partnership between the company and government, according to the earnings report.
All-in sustaining costs companywide for the quarter were $1,069 per ounce, compared with $984 per ounce in the 2020 quarter, mainly due to higher cost of sales per ounce and lower production. Production cost of sales was $830 per ounce.
Looking at Nevada, Kinross reported that production at Round Mountain in Nye County was lower mainly due to deferred mining in the north wall of the Phase W area because of the pit wall instability, as well as anticipated lower mill grades.
Round Mountain produced 67,928 gold ounces in the second quarter, compared with 74,351 ounces in the second quarter of last year.
Mining continued in other parts of the Round Mountain pit during the second quarter, and Kinross reported that the mine optimization program that includes evaluating further de-risking initiatives to enhance stability of the wall and the Phase S pushback is advancing and expected to be completed in the second quarter of next year, the company reported.
Kinross also reported that exploration drilling continues at Phase X at Round Mountain. Phase X is the northwest continuation of Phase W mineralization, and the company said drilling results have been encouraging. Phase X includes the possibility of underground mining, Tomory said.
Exploration is ongoing at Gold Hill north of the Round Mountain pit, as well.
At Bald Mountain in White Pine County, Kinross produced 36,887 ounces of gold, down from 48,368 ounces in the 2020 quarter, mainly due to the timing of ounces recovered from the heap leach pads as the operation mined through carbonaceous material in the Vantage open pit at the beginning of the quarter.
Tomory said Bald Mountain’s production is expected to be higher in the second half of this year.
Kinross also reported that it published its 2020 Sustainability Report on July 26, detailing the company’s environmental stewardship, social engagement, and governance performance in 2020.