Kinross Gold Corp.'s chief executive said on Wednesday that his company was well positioned to weather the prolonged slump in gold prices.
With bullion now trading around the critical break-even price, companies are being forced to find further cost savings.
Toronto-based Kinross has already suspended the expansion of a key mine in Africa, in addition to cutting jobs and other expenses.
"I believe that we can create a viable business here at Kinross at $1,000 gold," Kinross chief executive Paul Rollinson said in an interview.
The gold industry has suffered with the precious metal down 40 per cent over four years. Anticipation of a U.S. interest rate hike has driven bullion below $1,100, the same amount it cost many companies to produce an ounce of gold.
Analysts have warned that some mines would have to close if gold remains at $1,100 an ounce. Mr. Rollinson said that Kinross would look at reducing capital spending, exploration and overhead costs before it would consider a mine closure.
"Closing a mine is a big deal for us. We want to make sure we have turned over every stone and looked at every possibility before we get to that decision.," Mr. Rollinson said. "If at the end of the day we can't manage our way down, we have also demonstrated we will make the tough decision. We will put something on care and maintenance."
For the three months ended in June, Kinross spent $1,011 to produce an ounce of gold, compared with $976 last year. The company lost $83.2-million or 7 cents a share in the quarter, due to lower gold sales and the weaker gold price. That compared with a profit of $46–million or 4 cents a year earlier.
Excluding one-time items, Kinross lost 1 cent a share, in line with analysts' expectations.
Mr. Rollinson said Kinross is focused on generating free cash flow, the cash left over after all expenses are paid and widely regarded as the purest measure of a company's profitability. Although the company has free cash flow, its stock is trading at multiyear lows of $2.34 per share partly due to political risk concerns over Russia, the country where Kinross' best mines are located.
During the quarter, Kinross cut its debt to below $1-billion and increased its cash by $21-million to more than $1-billion.
That cash has allowed Kinross to look for an acquisition. But the company has not found anything to buy. Kinross has been under pressure to improve its portfolio as it faces declining production from its Russian mines.
Earlier this year, the miner made an offer for a large gold mine in Colorado but lost out to a higher bid from rival Newmont Mining Corp.
When asked if he would like to completely own Round Mountain – a mine that Kinross shares with Barrick Gold Corp., he suggested that he would at the right price. Kinross operates the mine.
"As operator, that's an easy one for us if there was something at the right price," he said.
Mr. Rollinson would not say where he was looking, but said Kinross was in the position to make an acquisition unlike other companies that have been forced to sell assets to survive. "We have the balance sheet. We have the strength, which allows us to do the looking," he said. "That's a good place to be. Having said that it has to be a deal that makes sense for our shareholders."