Kubaka’s performance buoys Kinross

With the Kubaka gold mine in Far Eastern Russia now its star performer, Kinross Gold (K-T) is continuing efforts to improve efficiencies at its other mines around the world.

As part of this effort, Kinross has five of its higher-cost mines in various stages of residual production or closure. The gold-silver producer also wrote down various mining assets and marketable securities late last year, which brought about a net loss of US$245 million, or US$1.08 per share, on revenue of US$286 million for 1998, compared with a net loss of US$83.7 million on revenue of US$183.5 million in 1997. Writedowns totalled US$220 million in 1998 and US$87.8 million in 1997.

On a brighter note, Kinross reported a major improvement in operating results at many of its mines. The company produced 823,721 oz. gold and 2.7 million oz. silver last year — a 75% increase in gold-equivalent production from 1997. However, this increase largely reflects the company’s June 1998 merger with Amax Gold, which added interests in the Fort Knox (Alaska), Refugio (Chile), Kubaka and DeLamar (Idaho) mines.

Cash costs in 1998 fell to US$205 per oz. gold-equivalent from US$265 per oz. a year earlier. Total cash costs (including royalties and production taxes) improved by US$54 per oz. last year.

Kinross owns half of Kubaka and hopes to boost its interest to as much as 75%. Gold-equivalent production there for a 7-month period last year (following the acquisition) was 154,350 oz. at a total cash cost of US$149 per oz., making Kubaka the company’s lowest-cost mine.

Hoyle Pond in Ontario’s Timmins camp turned out 158,953 oz. at a cash cost of US$171 per oz. last year, compared with 174,317 oz. at a cash cost of US$186 per oz. a year earlier. The mine is expected to produce about 165,000 oz. this year. Macassa, in the nearby Kirkland Lake camp, produced 78,034 oz. last year at a total cash cost of US$257 per oz. This represents a significant turnaround from 1997, when production was only 56,709 oz. at a cash cost of US$370 per oz.

Fort Knox produced 203,010 oz. at a total cash cost of US$199 per oz. gold for a 7-month period of 1998. Estimated production this year is expected to total 370,000 oz. Refugio continued to be a disappointment, turning out only 42,446 oz. gold-equivalent during a 7-month period last year, at a cash cost of US$338 per oz. Kinross expects the 50%-owned mine to contribute 110,000 oz. to its account this year.

The company’s total working capital stood at US$184 million at the end of 1998. Long-term debt consisted of US$49 million for financing of Kubaka, plus US$8.9 million on the Kubaka subordinated debt, US$71 million on the Alaskan Industrial Revenue Bonds, and various capital leases totalling US$22 million.