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Kinross Gold swings to profit in Q4, FY'17; lower output expected in FY'18

Despite lower metal sales, Kinross Gold Corp. swung to net earnings attributable to shareholders of US$217.6 million, or 17 cents per share, in the fourth quarter of 2017, from a year-ago net loss of US$116.5 million, or a loss of 9 cents per share.

Revenue from metal sales in the period declined to US$810.3 million, from US$902.8 million in the fourth quarter of 2016, due to lower gold equivalent sales volumes, partially offset by an increase in average realized gold price.

The company said Feb. 14 that it sold 628,565 attributable gold equivalent ounces in the quarter at an average realized gold price of US$1,276 per ounce, compared to year-ago sales of 738,087 ounces at average price of US$1,217 per ounce. On the cost side, production cost of sales dropped to US$414.5 million in the quarter, from US$529.4 million, and the depreciation, depletion and amortization charge declined to US$190.3 million, from US$237.8 million.

The company also realized an US$21.5 million impairment reversal in the quarter, leading to operating earnings of US$102.9 million, swinging from a US$35.6 million operating loss in the year-ago quarter.

CapEx increased to US$313.3 million for the fourth quarter, compared to US$226.5 million a year ago, mainly due to increased spending at the Tasiast, Bald Mountain and Round Mountain operations.

Kinross produced 652,710 attributable gold equivalent ounces in the quarter, compared to 746,291 ounces in the prior-year quarter, as lower production at the Kupol and Paracatu mines was only partially offset by higher production at Bald Mountain. The quarter's all-in sustaining cost per gold equivalent ounce sold increased to US$1,019, compared to US$1,012 a year ago.

For full-year 2017, Kinross swung to net earnings of US$445.4 million, or 35 cents apiece, compared to a net loss of US$104.0 million, or 8 cents per share, in 2016.

Revenue from metal sales declined to US$3.30 billion in the year, from US$3.47 billion a year ago. The company produced 2.7 million attributable gold equivalent ounces in 2017, a decline from 2.8 million ounces produced in the prior year.

In 2018, Kinross expects to produce 2.5 million gold equivalent ounces at a production cost of sales per gold equivalent ounce of US$730, and all-in sustaining costs of US$975 per ounce sold. Total CapEx is forecast at about US$1.08 billion, including US$355 million for sustaining capital and about US$680 million to advance development projects. All forecast figures include a 5% variance.

Kinross separately said that wholly owned subsidiary Kinross Brasil Mineraçao agreed to acquire two hydroelectric power plants in Brazil from a subsidiary of Gerdau SA for US$257 million.

The company expects to fund the acquisition via debt financing of about US$200 million, with the balance from existing liquidity.

The acquisition will allow Kinross to significantly lower operating costs at Paracatu by eliminating about 70% of future power purchases, it noted.

The deal is expected to close in about three to six months.