Kinross sees cost reductions ahead

With gold prices still mired around US$300 per oz., speculation is growing that some companies will not be able to survive a prolonged period of depressed prices. Kinross Gold (K-T), fully aware that investors and analysts are watching the company closely, has taken steps to dispel concerns about its viability.

The company notes that it had produced about 145,000 oz. gold-equivalent in the fourth quarter of 1997 at an average cash cost of less than US$230 per oz. gold-equivalent.

“This represents a significant improvement over the 120,000 oz.

gold-equivalent produced in the third quarter of 1997 at cash operating costs of US$282 per oz.,” states Kinross Chairman Robert Buchan.

He points out that the most significant contributor to the improved performance in the fourth quarter was the Hoyle Pond mine in Ontario, where production increased to almost 62,000 oz., from 39,000 oz. in the previous quarter. Cash operating costs declined to US$139 from US$219 per oz. as certain technical problems were rectified by the end of the third quarter.

For the full year, production at Hoyle Pond was essentially on plan, with output exceeding 174,000 oz. gold at cash operating costs of about US$184 per oz.

Gold-equivalent production from all operations is expected to fall slightly this year to about 455,000 oz., while cash costs are expected to be reduced to about US$240 per oz. in 1998 from an average of US$265 per oz. last year.

The company already has suspended production at its high-cost QR gold mine in British Columbia.

Buchan says Kinross is financially “well-positioned” to acquire additional core assets in 1998, “thereby resuming a growth profile when the gold market eventually turns upward.”