November 3, 2011 / 1:13 AM / 7 years ago

WRAPUP 2-Kinross, Yamana lifted by surge in gold price

* Kinross Q3 adjusted EPS $0.24 vs $0.15 a yr earlier

* Yamana Q3 adjusted EPS $0.26 vs $0.16 a yr earlier

* Yamana boosts qtrly dividend 11 pct to $0.05/shr

(Adds details on Kinross, Yamana results) (In U.S. dollars)

By Euan Rocha

TORONTO, Nov 2 (Reuters) - Canadian gold miners Kinross Gold (K.TO) and Yamana Gold (YRI.TO) reported sharp increases in operating profits on Wednesday, as results were boosted by increased output and a surge in the price of bullion.

The spiraling euro zone debt crisis, a tepid economic recovery in North America and other factors lifted the price of gold — often viewed as a safe-haven — to an all-time high of $1,920.30 an ounce in September. And the price of the precious metal averaged more than $1,700 an ounce in the third quarter, up roughly 35 percent from a year earlier.

This surge in the price of gold has helped drive profits of gold companies this year, despite some significant increases in operating costs within the industry. Last week, Canada’s two largest gold miners Barrick (ABX.TO) and Goldcorp (G.TO), both reported higher profits. [ID:nN1E79P2GN] [ID:nN1E79P23Q]

Toronto-based Kinross, Canada’s No. 3 gold miner, said its adjusted operating cash flow rose 82 percent in the quarter.

Kinross, which has mines in places as far flung as Alaska, Russia, Chile and Mauritania, said excluding one-time items its profit in the period was $273.4 million, or 24 cents a share, up from $116.8 million, or 15 cents a share, a year earlier.

Net income in the period ended Sept. 30 was $212.6 million or 19 cents a share, down from $540.9 million or 69 cents a share a year earlier when results were boosted by the sale of the company’s interest in Harry Winston HW.TO and the Diavik Diamond Mine.

Quarterly revenue rose 45 percent to $1.07 billion, as its gold output climbed 13 percent to 647,983 ounces. The company’s average realized gold price in the quarter rose 38 percent to $1,646 an ounce.

Morningstar analyst Joung Park, however, noted that the rapid rise in operating costs remains a concern for Kinross.

The company reported a 23 percent increase in production costs, in part due to lower grades from certain mines. Costs in the period rose to $634 per ounce from $517 a year earlier.

Although Kinross reiterated its 2011 production forecast of 2.6 million to 2.7 million ounces, it said better-than-expected performances from some mines in Russia and North America were helping it offset some production shortfalls in other regions.

Similarly on the cost front, operations in Russia and North America are helping offset production cost increases at mines in South America and West Africa. Kinross said it continues to see 2011 costs in the $565 to $610 an ounce range.


Smaller rival Yamana, which owns mines and projects in Chile, Argentina, Brazil and Mexico, said its operating profit in the period rose 34 percent.

Toronto-based Yamana said that, excluding unrealized foreign exchange losses, its earnings in the period were $190.3 million or 26 cents a share, up from C$117.3 million or 16 cents a share a year earlier.

Net income in the quarter ended Sept. 30 was $115.8 million, or 16 cents a share, compared with a year-earlier profit of $139.2 million, or 19 cents a share.

Yamana also raised its quarterly dividend by 11 percent.

“We did increase our dividend again today and we are now at 20 cents per share (annually). And that dividend represents a roughly a 67 increase over where it was a year ago,” said Chief Executive Peter Marrone, in an interview.

Marrone said the company continues to generate huge amounts of cash flow, which is helping to fund its next phase of growth projects.

The company said work at its Mercedes project in Mexico is progressing and first production is still expected before the end of this year.

Marrone said Yamana remains comfortable with its production forecast of 1.04 million to 1.14 million gold equivalent ounces in 2011. ($1= $1.02 Canadian) (Reporting by Euan Rocha; editing by Rob Wilson, Phil Berlowitz)

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