November 6, 2014 / 12:07 AM / in 3 years

UPDATE 1-Continued weak bullion may derail Kinross Tasiast mine expansion

(Recasts with CEO interview; adds cost, production outlook)

By Nicole Mordant

Nov 5 (Reuters) - Kinross Gold Corp is unlikely to go ahead with the expansion of its Tasiast gold mine in Mauritania if the price of gold does not recover from current weaker levels, Chief Executive Paul Rollinson said on Wednesday.

Kinross, the world’s fifth biggest gold producer by output, is due to make a final decision on the $1.6 billion expansion next year, possibly by the end of the first quarter.

The expansion is the Toronto-based miner’s biggest growth project, and without it analysts are concerned about Kinross’ growth prospects.

“If today’s gold price were to persist I think we would find it challenging to go ahead because our overriding principle is balance sheet strength,” Rollinson said in an interview.

“We have repeatedly said that we would never let a project in any way become too big that it might affect the balance sheet. ... Gold price matters and we are watching it closely,” he said after Kinross released quarterly results that beat market expectations.

The price of gold, which plunged 28 percent last year, has fallen by nearly 10 percent in the past three weeks to four-year lows. It was last at $1,141.70.

If bullion prices remain low, Kinross could either defer a development decision on Tasiast for another year or look to bring in a joint venture partner to help fund the capital investment, Macquarie analyst Ron Stewart said in am Oct. 29 note to clients.

Without Tasiast “in the asset mix, Kinross’ future looks challenged”, he said.

QUARTERLY BEAT, CUTS COST ESTIMATES

Kinross Gold’s third-quarter earnings were boosted by higher production and lower costs. The company also lowered its forecast for full-year production costs and slightly raised its production forecast. Its U.S.-listed shares rose 4 percent in extended trading.

Kinross, which has operations in North and South America, Africa and Russia, trimmed full-year guidance for all-in sustaining costs per equivalent ounce of gold sold to $950-$990 from its previous range of $950-$1,050.

It also lowered its capital expenditures for 2014 to $630 million-$650 million from an earlier forecast of $675 million.

Kinross expects full-year output to be at the high end of a narrowed production forecast range of 2.6 million to 2.7 million gold equivalent ounces. Previously, it forecast output at 2.5 million to 2.7 million ounces.

In the third quarter, the company produced 701,088 gold equivalent ounces, up from 687,581 a year earlier.

On an adjusted basis, Kinross earned 6 cents per share in the third quarter, beating average analysts’ estimates of 4 cents per share, according to Thomson Reuters I/B/E/S.

Kinross reported a net loss of $4.3 million, or zero cents a share, compared with a profit of $46.9 million, or 4 cents per share, a year earlier. (Additional reporting by Susan Taylor in Vancouver and Anet Josline Pinto in Bangalore; Editing by Joyjeet Das and Leslie Adler)

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