Kinross reports solid Q1 earnings

Company agrees to settle class-action suit

TORON TO • Corp. reported solid earnings on Tuesday, beating analyst estimates in the first quarter even though most of its competitors failed to meet them.

The Toronto-based miner also announced it has agreed to pay $12.5 million to settle a Canadian class-action lawsuit, eliminating a time-consuming headache. The legal action was tied to the company’s statements about the Tasiast expansion project in Mauritania, which did not live up to its original expectations.

In March, Kinross reached a US$33 million settlement of a similar class-action suit out of the United States. Chief executive Paul Rollinson noted that there is no cost to Kinross, as the money is paid out through directors and officers insurance. The company made no admission of guilt in either case.

“When settling these things, it’s really a call on time and cost and energy efficiency,” he said in an interview.

For the quarter, Kinross reported adjusted earnings of US$15.3 million, or a penny a share, beating the average analyst estimate of zero cents. That makes 11 consecutive quarters in which the company has met or exceeded its guidance. Kinross also maintained its full-year production and cost forecasts.

“It was a good solid start to the year,” Rollinson said.

He has put a focus on operational performance since be-

We’re not happy with where the cost structure is right now

coming CEO in mid-2012, and that has paid off in good quarterly results. But the stock has still been a relatively poor performer in a rough gold market.

One concern among some analysts is a shrinking production profile a few years down the road. Kinross has a number of organic growth opportunities, and it is looking at acquisitions as well. Rollinson said the company has passed on some M&A opportunities, and that it brings the same “discipline” to M&A that it brings to its operations.

Kinross was a very aggressive acquirer before he became CEO. That strategy backfired in spectacular fashion in 2010, when the company spent US$7.1 billion for Red Back Mining Inc. It was one of the most overpriced deals in the mining sector’s history.

The Red Back acquisition gave Kinross the Tasiast project in Mauritania, where an expansion is currently on hold because the expected returns are not strong enough. Rollinson noted the company continues to work hard to improve the economics of the project.

“We’re not happy with where the cost structure is right now,” he said. “We’re looking at all ways within our control to try and address that.”