Kinross Forecasts In-Line; Gold Challenges Prevail (KGC)

Kinross Gold Corporation (NYSE: KGC) is not having the greatest debut for 2011.  As gold is not currently shaping up to look like a 2010 year, many gold miners have failed to perform.  Kinross has some production targets for the year and so far investors are not exactly rushing out to buy more shares on the forecasts.

Kinross said that its 2010 full-year production targets and cost structure is mostly in-line with prior forecasts.  For 2010, its annual production was put at 2.3 to 2.35 million gold equivalent ounces.  That figure does include gold production from the Tasiast and Chirano mines that were from the Red Back Mining acquisition.

Another issue to consider is the production costs in gold miners.  Kinross put the 2010 average cost per gold equivalent ounce in a range of $505 to $520 per ounce.  The company had previously given a consolidated report in November with a cost of about $517 per gold equivalent ounce, and it also noted that cost of sales on a by-product basis including West Africa was $477 per ounce.  Kinross closed out 2010 at $18.96 and shares are currently down almost 1.5% at $17.03.  If commodity prices keep rising, our own read today is that Kinross and most other gold producers may face slightly higher production costs ahead.

Kinross has a consensus analyst target from Thomson Reuters of $23.60 and this remains the stock we would focus on in 2011 in the gold sector despite the potential gold flop.  The position is easy enough to hedge with put options in the stock and/or with gold ETF options.

JON C. OGG