Kinross Gold Corp. (KGC, Financial) released its operating and financial results for the second quarter of fiscal 2017, reporting another strong quarter in terms of production and operating cash flow generation.
For the quarter, Kinross Gold reported  EPS of four cents, or $54.9 million, an increase from the $9.8 million loss, or one cent per share, it reported in the year-ago quarter.Â
As shown in the chart below, the miner beat analysts’ expectations by two cents, generating a surprise of 100%.
Source: Yahoo Finance
Revenue for the quarter came in at $868.6 million. While this was down 0.9% year over year, it was enough to beat expectation by $40.55 million. Analysts expected revenue of $828.05 million.
During the quarter, the company sold 683,584 ounces of gold equivalent, which was lower from 686,752 ounces sold in the comparable quarter of 2016, at an average price of $1,260 per ounce.
Sales volumes were backed by a quarterly production of 694,874 ounces of gold equivalent, up 3.5% year over year.
Despite a flat gold price and a lower sales volumes, the company reported a 23% increase in adjusted operating cash flow to $230.8 million.The miner was able to achieve this growth due to improved efficiency at its operations. Cost of sales and all-in sustaining costs (AISC) decreased by almost 10% and 8% from the comparable of 2016 to $660 per ounce and $910 per ounce of gold sold.
Kinross' organic growth strategy is paying off and, consequently, the company is strengthening its balance sheet. The amount of cash on hand and securities was $1,061.3 million at the end of the quarter – a solid 28.3% improvement in just six months’ time. When a line of available credit of $1,433.1 million is considered, it brings the company’s total liquidity to approximately $2.5 billion. With no scheduled repayments for the next 3.5 years, Kinross has enough financial flexibility to advance its mineral projects.
For full fiscal 2017, Kinross Gold expects production to range between 2.5 million and 2.7 million ounces of gold equivalent. The production cost of sales is forecasted to range between $660 per ounce and $720 per ounce and the AISC to be between $925 per ounce and $1,025 per ounce. Capital expenditures are expected to range between $855 million and $945 million.
Kinross Gold is currently trading around $4.12 per share with a market capitalization of $4.64 billion. The price-book (P/B) ratio is 1.11 and the EV/Ebitda ratio is 5.63.
The analysts' recommendation rating is 2.6 out of 5, and the average target price per share is $4.79.
Disclosure: I have no positions in Kinross Gold Corp.
