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7/31/13

(UPDATED) Is it my imagination, or are the Kinross (K.to) (KGC) quarterly numbers pretty good?

Here's the NR link to start you off, the real info in the quarterlies is already on SEDAR so go pick up your copy. So to business and before I expand on that title line there's some negatives to deal with of course. Top of the shop is the $1.41Bn wrote down at Tasiast, mostly due to the fact that K has decided to defer any construction decision on the expansion (aka "Tye's Folly") until 2015. Then there's the $720m Fruta del Norte write-off, which we knew about already. There are more impairments too, mainly on goodwill due to new lower price assumptions (e.g. U$1,300 for FY14, which is conservative and probably smart at this point) and the whole post-tax total balance hit is $2.29Bn. Then there's the suspension (for me "cancellation" would be a more honest word there) of its 8c-every-half-year dividend. Err, no surprise there, K has more pressing things to do with its cash than give it to shareholders, especially if such a policy eats directly into working cap. GORO, please take note at what serious boards of directors do with suddenly expensive dividend policies.

Anyway, K has put in a kitchen sink quarter and the balance charges have put book value at $5.93/share, which means today's closing share price is at 0.87x BV. And here we get to the point, because it looks reasonably good value all of a sudden (OH MY GOD DID I JUST SAY THAT ABOUT MEGADOG KINROSS?????????)  for a company that's kept operating costs under control, is getting leaner and has a decent gross margin on ounces produced that's going to get better now that the highly profitable Kupol has its expansion coming online. It's taken the balance sheet hit, frozen the divi, deferred Tasiast and is cutting back on some exploration costs too. The result is that it will now be able to collect cash and that, ladies and gentlemen, is the type of gold mining company that shouldn't trade under book in 2013 (and 2014). A lot will depend on what gold does in the near-term, but given a level playing field on the price of the things it sells, K could rally pretty easily from its current low level.


Disclosure: No current position in Kinross, not long or short or anything. Once upon a time I owned a few and did pretty well on the trade, too. I may go back, but no decision yet.

PS: On the other hand, New Gold's (NGD) (NGD.to) quarter absolutely sucked.

UPDATE: After hitting send, your humble scribe went over to Kitco to see how things were and...


...sure enough, the people incapable of looking forwards and obliged to scream as hard as they can are going for it with the Kinross headlines. "Massive", Defers" and "Multi-Billion" dontchaknowz. Hmmm...interesting.