Kinross Gold Corp.'s third-quarter profit sank 80 per cent as a result of lower bullion prices, but the company further slashed costs and said it would produce more gold than previously expected from its mines in the Americas, West Africa and Russia.
The improved outlook for Kinross is good news for a company that has seen its share price plummet after it spent a year writing down much of its expensive acquisition of Red Back Mining Inc. and its Tasiast gold project in the Mauritanian desert.
The company cut its total capital expenditures for the year to $1.4-billion (U.S.) from $1.45-billion and said it expects its expenses to fall even further in 2014 to between $800-million and $900-million.
"We continue our focus on reducing capital and other costs in a lower gold price environment," Kinross chief executive officer J. Paul Rollinson said in a statement announcing the company's third-quarter results.
Like other mining companies, including the world's largest gold producer Barrick Gold Corp., Kinross has zeroed in on cost-cutting measures in order to mitigate the slump in gold prices.
With gold dipping below $1,270 an ounce, it is crucial for miners to be able to produce the precious metal well below that price.
For the three months ended Sept. 30, Kinross said it cost a total of $1,069 to produce an ounce of gold. That was higher than the $1,021 outlay in the same period last year. For the year, the company said the total cost, also known as the "all-in sustaining costs," would be between $1,100 and $1,200 an ounce.
"We are maintaining our sharp focus on operating costs and expect to be at the low end of our guidance range for all-in sustaining costs and cost of sales," Mr. Rollinson said.
Previously Kinross's executive vice-president of corporate development, Mr. Rollinson took the helm of the company in August 2012 when the miner's CEO Tye Burt was fired.
Under Mr. Rollinson, Kinross has suspended the company's dividend, recorded an impairment charge due to the lower gold prices, took multiple writedowns related to Red Back's Tasiast and suspended plans to expand the West African project until at least 2015.
Tasiast had been expected to quickly vault Kinross into the big leagues. But instead the gold project has contributed to the company's woes.
The company has lost half its market valuation over the year. Kinross stock is down more than 70 per cent from where it was trading in September, 2010, when the company bought Red Back for $7.1-billion (Canadian).
Kinross said it is now on track to produce between 2.6 million and 2.65 million ounces of gold this year, more than its previous forecast of between 2.4 million and 2.6 million.
For the quarter, Kinross said it earned $46.9-million (U.S.) or 4 cents a share, down 80 per cent from the $226.2-million or 20 cents earned in the same quarter last year. Analysts had expected the company to earn 3 cents a share.