Kinross Gold (TSX: [stock_market_widget type=”inline” template=”generic” color=”default” assets=”K.TO” markup=”{symbol} {currency_symbol}{price} ({change_pct})” api=”yf”]) has seen an uptick in its fortunes over the past three months on the back of a gold price recovery. The stock has shot up over 36% since mid-December, while gold prices have increased by nearly 7% over that same period.
[stock_market_widget type=”chart” template=”basic” color=”blue” assets=”K.TO” range=”3mo” interval=”1wk” axes=”true” cursor=”true” api=”yf”]However, Kinross’ momentum will be put to the test when the company releases its fourth quarter and fiscal 2018 results on Feb. 13, along with production guidance for 2019. Let’s take a closer look at what the Canadian gold miner is expected to deliver and what are the factors that could affect its forward-looking guidance.
Kinross Gold’s Production Troubles Mute Earnings Expectations
Analysts expect Kinross’ top line to drop 5.6% year-over-year to $764 million, while earnings per share will decrease from $0.01 in the prior-year period to break-even for the fourth quarter that ended in December 2018. What’s more, the March quarter outlook isn’t going to be great either, with Kinross Gold expected to forecast a steeper annual revenue decline of 17%.
Kinross has been facing hard times thanks to a declining production profile and increasing costs. The company’s gold production dropped nearly 9% during the first nine months of fiscal 2018, while its attributable gold sales fell nearly 5%. Additionally, Kinross’ all-in cost per equivalent ounce of gold sold has increased 13% year over year during the first nine months of 2018 to $1,270 an ounce.
Not surprisingly, the company swung to an adjusted loss of $48.4 million during the last reported third quarter, as compared to a profit of $84.1 million in the prior year. So, it won’t be surprising to see the company’s top and bottom lines taking a dip once again.
Kinross Gold’s Production the Key to Success
Kinross Gold’s outlook is going to play a critical role in determining whether it will be able to sustain its stock price momentum or not. Investors, however, should expect subdued guidance compared to last year as gold prices were trending at higher levels in the first quarter of 2018.
During the first quarter of 2018, Kinross Gold had realized an average gold price of $1,330. However, despite the recent rally, the price is still below the $1,300 an ounce mark. This makes it even more unlikely that Kinross Gold will be able to offer solid forward-looking guidance given the production-related bottlenecks it is already facing.
For instance, at the Tasiast mine, Kinross Gold’s access to a higher grade portion of the mine has been delayed, while the mining rate itself was impacted by the delayed delivery of hauling trucks. Meanwhile, production at the company’s Fort Knox mine in Alaska was throttled by a pit wall slide that happened earlier in the year. The mishap once again kept Kinross Gold from accessing higher grade ore at the mine.
Such operational issues have weakened the company’s cost profile and its output. It remains to be seen if the company has done enough to overcome those same troubles. If it hasn’t, Kinross Gold’s 2019 outlook could call for another yearly decline in production, which would be the third consecutive year of declining production.
Kinross Gold is on shaky ground going into its fourth-quarter report, and any misstep on the company’s part could deal a blow to its recent resurgence.
