Kinross GoldKGC

Key highlights

• One-time tax expense hit earnings: A $102.6 million withholding tax charge related to bringing money home from Mauritania pushed the company's total income tax expense to $1.02 billion for the first nine months of the year. This is a one-time cost that makes the bottom line look lower than it would have been from normal mining operations.
• Production decline from weather and operations: Gold production fell 17% this quarter to 432,368 ounces because of heavy winter storms at the La Coipa mine and mining difficulties at Round Mountain. These challenges at specific sites pulled down the total compared to the 520,301 ounces produced in the same period last year.
• High gold prices offset volume drop: The company sold each ounce of gold for an average of $4,249, which is 23% more than the $3,460 price it received a year ago. This record pricing allowed the company to keep its metal sales steady at $1.77 billion even though it had significantly fewer ounces available to sell.
• Mining costs continue to rise: The cost to produce an ounce of gold jumped 31% to $1,502 because of more expensive fuel, higher contractor fees, and larger royalty payments triggered by high gold prices. This is a sharp increase from the $1,150 it cost to produce an ounce during the same quarter last year.
• Cash spent on growth and shareholders: Spending on mine development and equipment rose 41% to $439.6 million as work ramped up on major projects like Great Bear and Round Mountain. At the same time, the company returned $257.4 million to owners through dividends and by buying back its own shares.
• Production and cost outlook maintained: Management expects to produce between 1.84 million and 1.86 million ounces of gold for the full year. The company also confirmed it plans to spend about $1,500 million on total capital projects while keeping all-in sustaining costs between $1,850 and $1,900 per ounce.

Our take: This was a soft quarter where nature and operational hiccups got in the way. While record gold prices are masking the pain, the 17% drop in production and rising costs per ounce are genuine concerns. The long-term case remains intact as the company funds its big growth projects, but these results show that even a high gold price cannot hide every mining headache.