Even as it expanded production and reduced costs,
Following its acquisition last summer of the gold-mining offspring of
In 1998, Kinross lost US$251 million on revenue of US$287 million, amounting to a net loss of US$1.08 per share. The loss was greater than in 1997, when Kinross posted a US$89-million loss on revenue of US$173 million.
In the first quarter of 1999, revenue was US$75.2 million and the company showed a net loss of $10 million or US4 cents a share. The first quarter of 1998 saw Kinross earn US$700,000 on revenue of US$38.8 million; increased depreciation charges were the principal difference in expenses between 1998 and 1999.
Cost-cutting efforts at the mines and mills were successful in 1998, as Kinross’s company-wide total cash cost fell to US$214 from US$268 per oz. The trend continued into the first quarter of this year, with total cash costs down to US$185 per oz. The biggest contributor was the Kubaka mine, north of Magadan in eastern Siberia, where greater mill throughput and higher grades brought costs to an average of US$149 per oz. over the 7-month period following the Amax merger.
At the Fort Knox mine in eastern Alaska, total cash costs rose to US$210 per oz., partly because a lower-grade portion of the deposit was being mined.
Costs fell at the Hoyle Pond mine, east of Timmins, Ont., to US$171 from US$186 per oz., while production decreased during a development phase. In the first quarter of 1999, costs at Hoyle rose to US$243 as productivity fell substantially. Buchan blamed development delays and lower grades, but also said that morale at Hoyle had suffered because of a fatal accident during the quarter and a failed attempt to organize a union.
Hoyle’s production cost is expected to fall again, with the company expecting a US$180-per-oz. average by the end of 1999. “We fully believe the problems at Hoyle are rectified,” said Buchan.
A second fatality at Hoyle, earlier this month, has spurred a safety review at the mine.
Buchan pointed out that good first-quarter results at other operations had balanced the poor quarter at Hoyle and that Kinross was on track to reach its 1999 production and cost goals.
At Kinross’s smaller operations (Macassa in Ontario, Blanket in Zimbabwe, and Refugio in Chile), costs continued to fall in the first quarter of 1999. Exploration and development have blocked out more reserves on the upper levels of Macassa, which are unaffected by rock bursts that caused suspension of work in the lower reaches of the mine over the past two years.
Mill modifications at Refugio, which has suffered from a series of mechanical problems, are expected to bring costs down to around US$240. Larger-capacity crushers for the tertiary crushing circuit in the mill are expected to produce greater volumes of fine material from which recovery will be better.
Kinross posted a loss of US$251 million on revenue of US$269 million in 1998. The company wrote down the carrying value of Fort Knox by US$145 million and of Refugio by US$47 million in 1998, which accounted for most of the loss.
Corporate costs in 1998 were lower, at US$8.3 million, with Buchan claiming bragging rights for the lowest overhead costs per ounce of gold produced by a senior gold company. Since the Amax merger, depreciation charges have taken a bigger bite from earnings, rising to US$81 million from US$32.5 million in 1997.
The year-end results also showed Kinross with US$153 million in cash, plus a further US$111 million in non-cash current assets. The unaudited quarterly results showed US$161 million in cash and US$106 in other current assets.
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