The following came from Canaccord on Nov 12, 2012:


Kinross Gold (KGC : NYSE, K : TSX| BUY, Target US$13.00)

Q3/12 results beat on margins; raising to BUY from Hold; maintain US$13.00 target


We are revising our rating on Kinross shares to BUY from Hold following the release of Q3/12 results. Our BUY rating is based on relative valuation and implied return to target. Shares have declined approximately 15% since the beginning of October (underperforming peers by approximately 8.6%) and trade at only 0.79x 5%/spot P/NAV versus the sr/int average of 0.92x.


Investment highlights

Q3/12 adjusted EPS was $0.22 versus our estimate and consensus of $0.19. Attributable production from continuing operations (excluding Crixas) was 672,173 oz AuEq (sales of 665,251 oz AuEq) at cash costs of $677/oz versus our production estimate of 644,214 oz AuEq at $699/oz.


Sales from Kupol were 24% above our estimates (silver grade and partly throughput). Sales from Paracatu were 104,937 oz at $877/oz versus. our estimate of 136,432 oz at $802/oz, resulting in sales of approximately 23% below our estimate due to lower throughput and lower grades.


Pre-feasibility study for Tasiast is expected to be completed in Q1/13. A regional exploration drill map was released showing 11 additional targets. Development at Dvoinoye is advancing and first ore is expected to be delivered to the Kupol mill in H2/13.


The company expects to achieve the upper end of 2012 guidance, which was revised in Q2/12 and remains unchanged, of 2.5-2.6 Moz AuEq at $690-725/oz.



Our US$13.00 target price is based on 0.75x our 5%/peak NAVPS estimate of US$17.32 (previously US$17.16).


Upcoming potential catalysts

Tasiast pre-feasibility study (Q1/13E)

Lobo-Marte permitting achieved (Q1/13E)

First production of Dvoinoye ore at Kupol mill (H2/13E)

FDN agreement on fiscal terms with Ecuadorian government (2013E)


Investment risks

The typical risks associated with any mining investment include commodity and exchange rate risk, permitting and technical (development/operating) risk. The company's asset diversification lowers its overall risk profile, though investors considering an investment in Kinross should consider the development and country risk associated with Fruta del Norte in Ecuador and Tasiast in Mauritania.


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