For more information, please see Kinross’ 2014 third-quarter Financial Statements and MD&A
For more information, please see Kinross’ 2014 third-quarter Financial Statements and MD&A at www.kinross.com NEWS RELEASE
Kinross reports 2014 third-quarter results
Cost guidance lowered on strong performance year-to-date All-in sustaining cost per ounce down 15% year-over-year $100 million of cash added to the balance sheet in first nine months of the year
Toronto, Ontario – November 5, 2014 – Kinross Gold Corporation (TSX: K, NYSE: KGC) today announced its results for the third quarter ended September 30, 2014.
(All dollar amounts are expressed in U.S. dollars, unless otherwise noted.)
Highlights:
- Production1: 693,818 gold equivalent ounces (Au eq. oz.), compared with 680,580 ounces in Q3 2013.
- Revenue: $945.7 million, compared with $876.3 million in Q3 2013.
- Production cost of sales2: $698 per Au eq. oz., compared with $740 in Q3 2013.
All-in sustaining cost2: $919 per Au eq. oz. sold, compared with $1,082 in Q3 2013. All-in sustaining cost per Au oz. sold on a by-product basis was $911 in Q3 2014, compared with $1,069 in Q3 2013.
- Adjusted operating cash flow2: $312.0 million, or $0.27 per share, compared with $256.4 million, or $0.22 per share, in Q3 2013.
- Adjusted net earnings2,3: $70.1 million, or $0.06 per share, compared with $54.4 million, or $0.05 per share, in Q3 2013.
- Reported net loss/earnings3: Loss of $4.3 million, or $0.00 per share, compared with earnings of $46.9 million, or $0.04 per share, in Q3 2013.
- Average realized gold price: $1,268 per Au oz., compared with $1,331 per Au oz. in Q3 2013.
- 2014 Outlook:
- Lowers guidance range for production cost of sales per Au eq. oz. sold to $720-$750, from $730-$780
- Expects to be at the high end of a narrowed production guidance range of 2.6-2.7 million Au eq. oz., from previous guidance range of 2.5-2.7 million Au eq. oz.
- Narrows guidance range downward for all-in sustaining cost per Au eq. oz. sold to $950-$990, from $950-$1,050
- Lowers guidance for capital expenditures from $675 million to a range of $630-$650 million
- Expects to end the year below guidance of $205 million for overhead (G&A and business development)
- Sale of Fruta del Norte: On October 21, 2014, Kinross announced that it entered into an agreement to sell its interest in Aurelian Resources Inc. and the Fruta del Norte project in Ecuador to Fortress Minerals Corp. for $240 million in cash and shares.
CEO Commentary
J. Paul Rollinson, CEO, made the following comments in relation to 2014 third-quarter results:
“In Q3, Kinross made further significant gains in reducing costs. The Company is lowering its 2014 production cost of sales guidance and is revising down other key cost metrics as a result of successful cost reduction initiatives at several mines, continued discipline in capital spending and the addition of low cost ounces from our newest mine, Dvoinoye.
“The combination of declining costs and strong production in Q3 – including record production at Paracatu and Maricunga – resulted in a 22% year-over-year increase in adjusted operating cash flow, despite a lower gold price. In the first nine months of the year, the Company has added $100 million in cash to the balance sheet.
“With Kinross’ recently announced agreement to sell its interests in Ecuador for $240 million in cash and Fortress Minerals shares, we continue to strengthen our balance sheet and focus on strategic priorities and growth opportunities.”
1 Unless otherwise stated, production figures in this news release are based on Kinross’ 90% share of Chirano production.
2 These figures are non-GAAP financial measures and are defined and reconciled on pages 12 to 16 of this news release.
3 Net earnings/loss figures in this release represent “net earnings (loss) from continuing operations attributable to common shareholders”.
p. 1 Kinross reports 2014 third-quarter results www.kinross.com
Financial results Summary of financial and operating results
| Three months ended Nine months ended September 30, September 30, (in millions, except ounces, per share amounts, and per ounce amounts) 2014 2013 2014 2013 Operating Highlights from Continuing Operations Total gold equivalent ounces(a) Produced(c) 701,088 687,581 2,059,398 2,004,827 Sold(c) 746,425 658,055 2,084,668 2,005,793 Attributable gold equivalent ounces(a) Produced(c) 693,818 680,580 2,038,339 1,984,858 Sold(c) 739,095 651,104 2,063,860 1,985,857 Financial Highlights from Continuing Operations Metal sales $ 9 45.7 $ 8 76.3 $ 2 ,675.0 $ 2 ,902.4 Production cost of sales $ 5 20.1 $ 4 86.8 $ 1 ,502.0 $ 1 ,476.0 Depreciation, depletion and amortization $ 2 33.8 $ 1 84.3 $ 6 45.5 $ 6 22.1 Impairment charges $ - $ - $ - $ 2 ,433.1 Operating earnings (loss) $ 1 12.6 $ 1 01.9 $ 2 74.2 $ (1,929.1) Net earnings (loss) attributable to common shareholders $ (4.3) $ 4 6.9 $ 7 3.5 $ (2,272.6) Basic earnings (loss) per share attributable to common shareholders $ - $ 0 .04 $ 0 .06 $ (1.99) Diluted earnings (loss) per share attributable to common shareholders $ - $ 0 .04 $ 0 .06 $ (1.99) Adjusted net earnings attributable to common shareholders(b) $ 7 0.1 $ 5 4.4 $ 1 37.1 $ 3 46.3 Adjusted net earnings per share(b) $ 0 .06 $ 0 .05 $ 0 .12 $ 0 .30 Net cash flow provided from operating activities $ 3 04.5 $ 1 37.7 $ 6 78.9 $ 6 09.4 Adjusted operating cash flow (b) $ 3 12.0 $ 2 56.4 $ 7 79.3 $ 9 26.8 Adjusted operating cash flow per share(b) $ 0 .27 $ 0 .22 $ 0 .68 $ 0 .81 Average realized gold price per ounce $ 1 ,268 $ 1 ,331 $ 1 ,283 $ 1 ,448 Consolidated production cost of sales per equivalent ounce(c) sold(b) $ 6 97 $ 7 40 $ 7 20 $ 7 36 Attributable(a) production cost of sales per equivalent ounce(c) sold(b) $ 6 98 $ 7 40 $ 7 22 $ 7 36 Attributable(a) production cost of sales per ounce sold on a by-product basis(b) $ 6 85 $ 7 09 $ 7 06 $ 6 93 Attributable(a) all-in sustaining cost per ounce sold on a by-product basis(b) $ 9 11 $ 1 ,069 $ 9 54 $ 1 ,027 Attributable(a) all-in sustaining cost per equivalent ounce(c) sold(b) $ 9 19 $ 1 ,082 $ 9 63 $ 1 ,050 Attributable(a) all-in cost per ounce sold on a by-product basis(b) $ 9 82 $ 1 ,333 $ 1 ,043 $ 1 ,333 Attributable(a) all-in cost per equivalent ounce(c) sold(b) $ 9 89 $ 1 ,334 $ 1 ,050 $ 1 ,339 (a)" Total" includes 100% of Chirano production. " Attributable" includes Kinross' share of Chirano (90%) production. (b)The definition and reconciliation of these non-GAAP financial measures is included on pages12 to 16 of this news release. (c)" Gold equivalent ounces" include silver ounces produced and sold converted to a gold equivalent based on a ratio of the average spot market prices for the commodities for each period. The ratio for the third quarter of 2014 was 64.89:1, compared with 62.21:1 for the third quarter of 2013 and for the first nine months of 2014 was 64.54:1, compared with 58.69:1 for the first nine months of 2013. | |
| Attributable(a) production cost of sales per ounce sold on a by-product basis(b) | |
| Attributable(a) all-in sustaining cost per ounce sold on a by-product basis(b) Attributable(a) all-in sustaining cost per equivalent ounce(c) sold(b) Attributable(a) all-in cost per ounce sold on a by-product basis(b) Attributable(a) all-in cost per equivalent ounce(c) sold(b) | |
| " Total" includes 100% of Chirano production. " Attributable" includes Kinross' share of Chirano (90%) production. The definition and reconciliation of these non-GAAP financial measures is included on pages12 to 16 of this news release. " Gold equivalent ounces" include silver ounces produced and sold converted to a gold equivalent based on a ratio of the average spot market prices for the commodities for each period. The ratio for the third quarter of 2014 was 64.89:1, compared with 62.21:1 for the third quarter of 2013 and for the first nine months of 2014 was 64.54:1, compared with 58.69:1 for the first nine months of 2013. |
The following operating and financial results are based on third-quarter 2014 gold equivalent production from continuing operations. Production and cost measures are on an attributable basis:
Production: Kinross produced 693,818 attributable Au eq. oz. in the third quarter of 2014, an increase over the third quarter of 2013, due mainly to increased production at Maricunga and the processing of higher grade ore from Dvoinoye, offset by the suspension of mining at La Coipa in October 2013.
Production cost of sales: Production cost of sales per Au eq. oz.2 was $698 for the third quarter of 2014, compared with $740 for the third quarter of 2013, a $42 decrease attributed to the timing of sales of lower-cost gold ounces from Russia and continued cost reduction efforts across the Company. Production cost of sales per Au oz. on a by-product basis2 was $685 in Q3 2014, compared with $709 in Q3 2013, based on Q3 2014 attributable gold sales of 721,140 ounces and attributable silver sales of 1,165,075 ounces.
All-in sustaining cost: All-in sustaining cost per Au eq. oz. sold2 decreased $163, or 15%, to $919 in Q3 2014, compared with $1,082 in Q3 2013, primarily due to reductions in sustaining capital, and exploration and business development expenditures, and an increase in gold equivalent ounces sold.
All-in sustaining cost per Au oz. sold on a by-product basis2 was $911 in Q3 2014, compared with $1,069 in Q3 2013.
p. 2 Kinross reports 2014 third-quarter results www.kinross.com Revenue: Revenue from metal sales was $945.7 million in the third quarter of 2014, compared with $876.3 million during the same period in 2013. The increase was due mainly to higher gold equivalent ounces sold from Russia due to timing of shipments and production from Dvoinoye.
Average realized gold price: The average realized gold price was $1,268 per ounce in Q3 2014, compared with $1,331 per ounce in Q3 2013.
Margins: Kinross’ attributable margin per Au eq. oz. sold4 was $570 for the third quarter of 2014, compared with the Q3 2013 margin of $591 per Au eq. oz.
Operating cash flow: Adjusted operating cash flow2 was $312.0 million for the third quarter of 2014, or $0.27 per share, compared with $256.4 million, or $0.22 per share, for Q3 2013.
Earnings: Adjusted net earnings2,3 were $70.1 million, or $0.06 per share, for Q3 2014, compared with adjusted earnings of $54.4 million, or $0.05 per share, for Q3 2013, due mainly to an increase in gold sales.
Reported net loss3 was $4.3 million, or $0.00 per share, for Q3 2014, compared with earnings of $46.9 million, or $0.04 per share, in Q3 2013, due mainly to higher deferred non-cash income tax expense in Chile resulting from changes to Chilean tax law, offset by higher revenue.
Capital expenditures: Capital expenditures decreased to $153.5 million for Q3 2014, compared with $300.8 million for the same period last year, due mainly to lower spending at Tasiast and Fort Knox.
Operating results
Mine-by-mine summaries for third-quarter 2014 operating results may be found on pages seven and eight of this news release. Highlights include the following:
Americas
The region is on track to reach the high end of its 2014 production guidance (1.33-1.43 million Au eq. oz.) and the low end of its production cost of sales guidance ($780-$840 per Au eq. oz.) for the year. At Paracatu, higher grades and recovery from processing a higher percentage of B2 ore resulted in record quarterly production of 136,078 Au eq. oz., outperforming the previous record output in Q3 2013. Production cost of sales declined for the third consecutive quarter to $776 per ounce as a result of lower mining costs and higher ounces sold. Maricunga’s production increased 82% year-over-year to a record 69,279 Au eq. oz., in what is normally a challenging winter period, due to improvements to the crushing plant and enhanced management of the heap leach and ADR plant. Production cost of sales per ounce, as a result, declined 36% compared with Q3 2013.
At Fort Knox, production was higher compared with the previous quarter due to the expected seasonal increase of heap leach processing. Production cost of sales per ounce was lower compared with Q2 2014, but higher yearover-year due to higher operating waste and lower mill grades. At Kettle River Buckhorn, production was lower compared with the previous quarter and year-over-year due to anticipated lower grades. Production increased slightly at Round Mountain year-over-year and quarter-over-quarter, while production cost of sales per ounce declined compared with both periods.
As previously announced, mill operations at Round Mountain have been temporarily suspended as of October 1, 2014, following a fire in the mill building. Mill repairs have commenced and the mill is expected to be recommissioned in March 2015 with costs expected to be almost entirely covered by insurance. Production continues uninterrupted from the mine's heap leach facilities, which account for approximately 75% of production. The Company expects no material impact on the region’s 2014 production guidance from the temporary suspension of mill operations.
4 Attributable margin per equivalent ounce sold is a non-GAAP measure defined as “average realized gold price per ounce” less “attributable production cost of sales per gold equivalent ounce sold.”
p. 3 Kinross reports 2014 third-quarter results www.kinross.com
Russia
The Company is increasing the region’s 2014 guidance range for production to 710,000-750,000 Au eq. oz. from 690,000-730,000 Au eq. oz. and is lowering its production cost of sales guidance range to $520-$550 per Au eq. oz. from $560-$590 per Au eq. oz. as strong performance from the combined Kupol and Dvoinoye operation continued in Q3. Gold grades at the combined operation increased by 17% compared with Q3 2013 due to the processing of higher grade ore from Dvoinoye, which was partially offset by the anticipated decline in grades at Kupol. Approximately 83,500 Au eq. oz. were produced from processing Dvoinoye ore in the expanded Kupol mill during Q3, a slight increase compared with the previous quarter. Production cost of sales per ounce decreased compared with the previous quarter due mainly to increased ounces sold from Dvoinoye. Production cost of sales per ounce decreased year-over-year due mainly to higher grades.
West Africa
The region remains on target to meet its 2014 production guidance range (480,000-540,000 Au eq. oz.) while its production cost of sales guidance range is being lowered to $790-$830 per Au eq. oz. from $810-$880 per Au eq. oz. Regional production was higher compared with the previous quarter due to improved Chirano production, as mill repairs that were completed in Q2 2014 increased throughput. Production cost of sales per ounce at the mine decreased to $539 per ounce, a 29% reduction year-over-year, as a result of the successful transition to selfperform mining in both the underground and open pit operations.
At Tasiast, quarter-over-quarter production was down slightly due to lower mill throughput while year-over-year production improved 18% primarily due to higher mill grades. Production cost of sales per ounce decreased slightly quarter-over-quarter, and 16% compared with Q3 2013, as a result of less tonnes mined, higher grades and continuous improvement programs.
Outlook
The following section of the news release represents forward-looking information and users are cautioned that actual results may vary. We refer to the risks and assumptions contained in the Cautionary Statement on Forward-Looking Information on page 17 of this news release.
Kinross expects to come in at the high end of its narrowed 2014 production forecast of 2.6-2.7 million Au eq. oz., from its previous range of 2.5-2.7 million Au eq. oz.
As a result of successful cost reduction initiatives, the Company is lowering its 2014 guidance range for production cost of sales per Au eq. oz. sold to $720-$750 from its previous range of $730-$780, and is narrowing downward its guidance range for all-in sustaining cost per Au eq. oz. sold to $950-$990 from its previous range of $950-$1,050.
The Company is lowering its guidance for capital expenditures from $675 million to a range of $630-$650 million and expects to come in below its 2014 guidance of $205 million for overhead (G&A and business development).
Kinross is on track to meet its 2014 exploration expenditures forecast of $90 million, which includes $5 million in capitalized exploration.
Tasiast expansion project update
Kinross continues to pursue a number of opportunities to further enhance the viability of a potential expansion at Tasiast. The project execution plan is being further defined and de-risked; bidders’ lists are being expanded and commercial terms are being solicited for key contracts, including for pre-assembly and pre-cast packages as well as for key equipment packages. The optimization of the project’s construction scope was largely completed in the third quarter, with no material changes compared to the feasibility study. As part of the Company’s annual process, the mine plan is also being updated to reflect current operating experience.
p. 4 Kinross reports 2014 third-quarter results www.kinross.com Progress continues on securing project financing, with a site visit and a series of meetings held in October between the Company and potential multilateral lenders. The Company will make a decision on whether to proceed with the mill expansion in 2015.
La Coipa Phase 7 update
Kinross has initiated a pre-feasibility study (PFS) to explore potential re-start options at La Coipa, which is expected to be completed during the third quarter of 2015. Kinross is also conducting a scoping study that focuses on processing options for known near-surface sulfide mineralization in the district. Exploration continues at La Coipa, with the assessment of some attractive opportunities to extend the mine life beyond what the PFS will contemplate.
Fruta del Norte sale
On October 21, 2014, Kinross announced that it entered into an agreement with Fortress Minerals Corp., a member of the Lundin Group of Companies, to sell all of its interest in Aurelian Resources Inc. and the Fruta del Norte (FDN) project in Ecuador for $240 million in cash and shares.
Kinross will receive $100 million to $190 million in cash, depending on the net proceeds from Fortress' announced equity financing, of which affiliates of the Lundin Family Trust have committed up to $100 million. The balance of the purchase price will be paid in Fortress shares.
The transaction is expected to be completed by mid-December 2014, subject to certain conditions, including Fortress shareholder and stock exchange approval, the granting by the Ecuadorian Government of an 18-month extension period from transaction closing to provide time for Fortress to carry out additional project feasibility work and development negotiations, the approval by the Ecuadorian Attorney General of bilateral agreements between Kinross, Fortress and the Ecuadorian Government, and certain of their wholly-owned subsidiaries, and other customary conditions for a transaction of this nature.
Liquidity
As of September 30, 2014, Kinross had cash and cash equivalents of $835.9 million, an increase of $101.4 million from the balance at December 31, 2013, primarily due to higher operating cash flows of $678.9 million for the first nine months of 2014.
Conference call details
In connection with the release, Kinross will hold a conference call and audio webcast on Thursday, November 6, 2014 at 8 a.m. ET to discuss the results, followed by a question-and-answer session. To access the call, please dial:
Canada & US toll-free – 1-800-319-4610 Outside of Canada & US – 1-604-638-5340
Replay (available up to 14 days after the call):
Canada & US toll-free – 1-800-319-6413; Passcode – 3310 followed by #.
Outside of Canada & US – 1-604-638-9010; Passcode – 3310 followed by #.
You may also access the conference call on a listen-only basis via webcast at our website www.kinross.com. The audio webcast will be archived on our website at www.kinross.com.
p. 5 Kinross reports 2014 third-quarter results www.kinross.com This release should be read in conjunction with Kinross’ 2014 third-quarter unaudited Financial Statements and Management’s Discussion and Analysis report at www.kinross.com.
Kinross’ unaudited 2014 third-quarter Financial Statements and Management’s Discussion and Analysis have been filed with Canadian securities regulators (available at www.sedar.com) and furnished to the U.S. Securities and Exchange Commission (available at www.sec.gov). Kinross shareholders may obtain a copy of the financial statements free of charge upon request to the Company.
About Kinross Gold Corporation
Kinross is a Canadian-based gold mining company with mines and projects in Brazil, Chile, Ghana, Mauritania, Russia and the United States. Kinross maintains listings on the Toronto Stock Exchange (symbol:K) and the New York Stock Exchange (symbol:KGC).
Media Contact
Andrea Mandel-Campbell Director, Corporate Communications phone: 647-788-4179 [email protected]
Investor Relations Contact
Tom Elliott Vice-President, Investor Relations phone: 416-365-3390 [email protected]
p. 6 Kinross reports 2014 third-quarter results www.kinross.com
Review of Operations
Three months ended September 30, Gold equivalent ounces Production cost of Production cost of Produced Sold
sales ($millions) sales/equivalent ounce sold
| 2014 | 2013 | 2014 | 2013 | 2014 | 2013 2014 2013 |
| Fort Knox 104,815 | 122,037 | 110,187 | 119,835 | $ | |
| 88.5 | $66.5 $ |
803 $
| Round Mountain | 44,764 | 42,073 | 45,540 | 40,042 | 35.9 | 32.5 | 788 | 812 |
| Kettle River - Buckhorn | 32,175 | 34,601 | 33,783 | 34,876 | 22.6 | 21.0 | 669 | 602 |
| Paracatu | 136,078 | 135,548 | 136,233 | 140,333 | 105.7 | 108.1 | 776 | 770 |
| La Coipa | - | 43,702 | - | 45,340 | - | 34.3 | - | 757 |
| Maricunga | 69,279 | 38,126 | 68,434 | 37,800 | 60.3 | 51.7 | 881 | 1,368 |
| Americas Total | 387,111 | 416,087 | 394,177 | 418,226 | 313.0 | 314.1 | 794 | 751 |
| Kupol | 180,838 | 150,433 | 216,225 | 120,865 | 106.6 | 62.2 | 493 | 515 |
| Russia Total | 180,838 | 150,433 | 216,225 | 120,865 | 106.6 | 62.2 | 493 | 515 |
| Tasiast | 60,438 | 51,051 | 62,727 | 49,455 | 61.0 | 57.4 | 972 | 1,161 |
| 72,701 | 70,010 | 73,296 | 69,509 | 39.5 | 53.1 | 539 | 764 |
Chirano (100%)
West Africa Total 133,139 121,061 136,023 118,964 100.5 110.5 739 929
Operations Total 701,088 687,581 746,425 658,055 520.1 486.8 697 740 Less Chirano non-controlling (7,270) (7,001) (7,330) (6,951) (3.9) (5.3)
interest (10%)
Attributable Total 693,818 680,580 739,095 651,104 $ 516.2 $ 481.5 $ 698 $
Gold equivalent ounces Nine months ended September 30, Production cost of Production cost of Produced Sold
sales ($millions) sales/equivalent ounce sold
| 2014 | 2013 | 2014 | 2013 | 2014 | 2013 2014 2013 |
| Fort Knox 279,719 | 318,029 | 308,836 | 336,867 | $ | |
| 224.4 | $189.3 $ |
727 $
| Round Mountain | 132,093 | 122,510 | 129,308 | 121,873 | 110.1 | 98.7 | 851 | 810 |
| Kettle River - Buckhorn | 98,647 | 119,515 | 98,413 | 120,564 | 63.9 | 64.1 | 649 | 532 |
| Paracatu | 387,492 | 375,686 | 384,336 | 380,604 | 320.4 | 311.4 | 834 | 818 |
| La Coipa | - | 145,668 | 1,365 | 149,156 | 1.7 | 110.6 | 1,245 | 742 |
| Maricunga | 186,298 | 142,220 | 188,624 | 147,754 | 175.1 | 170.8 | 928 | 1,156 |
| Americas Total | 1,084,249 | 1,223,628 | 1,110,882 | 1,256,818 | 895.6 | 944.9 | 806 | 752 |
| Kupol | 567,351 | 396,659 | 571,276 | 369,291 | 287.9 | 193.0 | 504 | 523 |
| Russia Total | 567,351 | 396,659 | 571,276 | 369,291 | 287.9 | 193.0 | 504 | 523 |
| Tasiast | 197,208 | 184,855 | 194,432 | 180,325 | 195.0 | 184.2 | 1,003 | 1,021 |
| 210,590 | 199,685 | 208,078 | 199,359 | 123.5 | 153.9 | 594 | 772 |
Chirano (100%)
West Africa Total 407,798 384,540 402,510 379,684 318.5 338.1 791 890
Operations Total 2,059,398 2,004,827 2,084,668 2,005,793 1,502.0 1,476.0 720 736 Less Chirano non-controlling (21,059) (19,969) (20,808) (19,936) (12.3) (15.4)
interest (10%)
Attributable Total 2,038,339 1,984,858 2,063,860 1,985,857 $ 1,489.7 $ 1,460.6 $ 722 $
p. 7 Kinross reports 2014 third-quarter results www.kinross.com
(1) Ore processed is to 100%, production and costs are to Kinross' account.
(2) Due to the nature of heap leach operations, recovery rates at M aricunga cannot be accurately measured on a quarterly basis. Recovery rates at Fort Knox, Round M ountain and Tasiast represent mill recovery only.
(3) La Coipa silver grade and recovery were as follows: Q3 (2014) nil, nil; Q2 (2014) nil, nil; Q1 (2014) nil, nil; Q4 (2013) 34.94 g/t, 58%; Q3 (2013) 32.03 g/t, 60%.
(4) The Kupol segment includes the Kupol and Dvoinoye mines.
(5) Kupol silver grade and recovery were as follows: Q3 (2014) 83.94 g/t, 88%; Q2 (2014) 88.79 g/t, 84%; Q1 (2014) 106.4 g/t, 84%; Q4 (2013) 131.91 g/t, 92%; Q3 (2013) 136.33 g/t, 86%.
(6) Gold equivalent ounces include silver ounces produced and sold converted to a gold equivalent based on the ratio of the average spot market prices for the commodities for each period. The ratios for the quarters presented are as follows: Q3 2014: 64.89:1, Q2 2014: 65.67:1, Q1 2014: 63.15:1, Q4 2013: 61.18:1, Q3 2013: 62.21:1.
(7) Dvoinoye ore processed and grade were as follows: Q3 (2014) 100,948 tonnes, 25.94 g/t; Q2 (2014) 91,204 tonnes, 28.68 g/t; Q1 (2014) 85,242 tonnes, 30.5 g/t; Q4 (2013) 26,743 tonnes, 28.15 g/t; Q3 (2013) 13,000 tonnes, 30.03 g/t.
(8) Capital expenditures are presented on a cash basis, consistent with the statement of cash flows.
(9) "nm" means not meaningful
p. 8 Kinross reports 2014 third-quarter results www.kinross.com
Consolidated balance sheets
(unaudited, expressed in millions of United States dollars, except share amounts)
As at September 30, December 31,
| Assets Current assets | |
|---|---|
| Cash and cash equivalents | $ 8 35.9 |
| Restricted cash Accounts receivable and other assets Inventories Unrealized fair value of derivative assets | 43.1 365.8 1,258.2 0.2 |
| 2,503.2 | |
| Non-current assets Property, plant and equipment Goodw ill Long-term investments Investments in associate and joint venture Unrealized fair value of derivative assets Deferred charges and other long-term assets Deferred tax assets Total assets Liabilities Current liabilities Accounts payable and accrued liabilities Current tax payable Current portion of long-term debt | 6,368.9 308.0 18.0 313.7 - 504.8 94.6 |
| $ 1 0,111.2 | |
| $ 4 27.0 20.8 60.0 | |
| Current portion of provisions | 24.2 |
| Current portion of unrealized fair value of derivative liabilities Non-current liabilities Long-term debt | 32.7 |
| 564.7 | |
| 1,997.1 | |
| Provisions | 703.8 |
| Unrealized fair value of derivative liabilities Other long-term liabilities Deferred tax liabilities Total liabilities Equity Common shareholders' equity Common share capital and common share purchase w arrants Contributed surplus Accumulated deficit Accumulated other comprehensive income (loss) | 4.9 144.7 529.1 |
| 3,944.3 | |
| $ 1 4,591.1 231.9 (8,702.5) (28.8) | |
| Total common shareholders' equity | 6,091.7 |
| Non-controlling interest Total equity | 75.2 |
| 6,166.9 | |
| $ 1 0,111.2 |
2013
$ 734.5 59.0 284.3 1,322.9 5.1 2,405.8
6,582.7 308.0 20.4 315.2 0.6 490.5 163.5 $ 10,286.7
$ 544.5 27.0 60.0 40.1 41.3 712.9
2,059.6 683.9 14.0 192.7 533.7 4,196.8
$ 14,737.1 84.5 (8,771.1)
(36.5)
6,014.0 75.9 6,089.9 $ 10,286.7
Common shares
Authorized Unlimited Unlimited Issued and outstanding 1,144,511,315 1,143,428,055
p. 9 Kinross reports 2014 third-quarter results www.kinross.com
Consolidated statements of operations
(unaudited, expressed in millions of United States dollars, except per share and share amounts)
| Three months ended Nine months ended September 30, September 30, September 30, September 30, 2014 2013 2014 2013 | ||
|---|---|---|
| 2014 | 2013 | |
| Revenue | $ 9 45.7 $ 8 76.3 $ 2 ,675.0 $ 2 ,902.4 520.1 486.8 1,502.0 1,476.0 233.8 184.3 645.5 622.1 - - - 2,433.1 753.9 671.1 2,147.5 4,531.2 191.8 205.2 527.5 (1,628.8) 13.2 21.6 46.2 55.0 27.8 39.1 79.5 120.8 38.2 42.6 127.6 124.5 112.6 101.9 274.2 (1,929.1) (4.9) 6.0 (12.2) (245.7) (2.3) - (4.3) (3.1) 2.5 1.7 8.3 6.0 (19.9) (8.2) (52.6) (25.9) 88.0 101.4 213.4 (2,197.8) (92.3) (54.8) (140.6) (74.0) (4.3) 46.6 72.8 (2,271.8) (0.8) (5.0) (4.9) (728.0) $ (5.1) $ 4 1.6 $ 6 7.9 $ (2,999.8) $ - $ (0.3) $ (0.7) $ 0 .8 $ (4.3) $ 4 6.9 $ 7 3.5 $ (2,272.6) $ - $ (0.3) $ (0.7) $ 0 .8 $ (5.1) $ 4 1.9 $ 6 8.6 $ (3,000.6) $ - $ 0 .04 $ 0 .06 $ (1.99) $ - $ 0 .04 $ 0 .06 $ (1.99) $ - $ 0 .04 $ 0 .06 $ (2.63) $ - $ 0 .04 $ 0 .06 $ (2.63) 1,144.5 1,142.7 1,144.2 1,141.7 1,144.5 1,149.4 1,152.9 1,141.7 | |
| Metal sales Cost of sales Production cost of sales Depreciation, depletion and amortization Impairment charges | $ 9 45.7 520.1 233.8 - | |
| Total cost of sales Gross profit (loss) | 753.9 | |
| 191.8 | ||
| Other operating expense Exploration and business development General and administrative Operating earnings (loss) Other income (expense) - net Equity in earnings (losses) of associate and joint venture Finance income | 13.2 27.8 38.2 | |
| 112.6 | ||
| (4.9) (2.3) 2.5 | ||
| Finance expense Earnings (loss) before tax Income tax expense - net Earnings (loss) from continuing operations after tax Loss from discontinued operations after tax Net earnings (loss) | (19.9) | |
| 88.0 (92.3) | ||
| (4.3) (0.8) | ||
| $ (5.1) | ||
| Net earnings (loss) from continuing operations attributable to: Non-controlling interest Common shareholders Net earnings (loss) attributable to: Non-controlling interest Common shareholders Earnings (loss) per share from continuing operations attributable to common shareholders Basic Diluted Earnings (loss) per share attributable to common shareholders Basic Diluted | $ - | |
| $ (4.3) | ||
| $ - | ||
| $ (5.1) | ||
| $ - $ - $ - $ - | ||
| Weighted average number of common shares outstanding (millions) | ||
| Basic Diluted | 1,144.5 1,144.5 |
| $ 2 ,675.0 1,502.0 645.5 - | ||
|---|---|---|
| 2,147.5 | ||
| 527.5 | ||
| 46.2 79.5 127.6 | ||
| 274.2 | ||
| (12.2) (4.3) 8.3 | ||
| (52.6) | ||
| 213.4 (140.6) | ||
| 72.8 (4.9) | ||
| $ 6 7.9 | ||
| $ (0.7) | ||
| $ 7 3.5 | ||
| $ (0.7) | ||
| $ 6 8.6 | ||
| $ 0 .06 $ 0 .06 $ 0 .06 $ 0 .06 | ||
| 1,142.7 1,149.4 | 1,144.2 1,152.9 | 1,141.7 1,141.7 |
p. 10 Kinross reports 2014 third-quarter results www.kinross.com
Consolidated statements of cash flows
(unaudited, expressed in millions of United States dollars)
| 2014 | |
| Net inflow (outflow) of cash related to the following activities: | |
| Operating: | |
| Earnings (loss) from continuing operations Adjustments to reconcile net earnings (loss) from continuing operations to net cash provided from (used in) operating activities: Depreciation, depletion and amortization Losses (gains) on sale of other assets - net Impairment charges Impairment of investments Equity in losses (earnings) of associate and joint venture Non-hedge derivative (gains) losses - net Settlement of derivative instruments Share-based compensation expense | $ (4.3) 233.8 (5.5) - 0.6 2.3 1.1 - 6.0 |
| Accretion expense | 7.8 |
| Deferred tax expense (recovery) Foreign exchange (gains) losses and other Changes in operating assets and liabilities: Accounts receivable and other assets Inventories Accounts payable and accrued liabilities | 62.0 8.2 (9.7) 10.6 42.6 |
| Cash flow provided from operating activities Income taxes paid Net cash flow of continuing operations provided from operating activities Net cash flow of discontinued operations used in operating activities | 355.5 |
| (51.0) | |
| 304.5 | |
| (1.5) | |
| Investing: Additions to property, plant and equipment | (153.5) |
| Net proceeds from (additions to) long-term investments and other assets | 3.1 |
| Net proceeds from the sale of property, plant and equipment | 0.4 |
| Disposals of short-term investments | - |
| Decrease (increase) in restricted cash Interest received Net cash flow of continuing operations used in investing activities Net cash flow of discontinued operations used in investing activities Financing: Issuance of common shares on exercise of options Proceeds from issuance of debt Repayment of debt Interest paid Dividends paid to common shareholders Settlement of derivative instruments Other | 0.1 0.8 |
| (149.1) | |
| - | |
| - 132.3 (162.3) (15.8) - 0.1 (2.3) | |
| Net cash flow of continuing operations used in financing activities Net cash flow of discontinued operations used in financing activities | (48.0) |
| - | |
| Effect of exchange rate changes on cash and cash equivalents of continuing operations Increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period | (8.7) |
| 97.2 738.7 | |
| $ 835.9 |
Three months ended Nine months ended
| September 30, | September 30, | September 30, |
|---|---|---|
| 2013 | 2014 | 2013 |
| $46.6 | $72.8 | $ |
(2,271.8)
| 184.3 | 645.5 | 622.1 |
| 0.4 | (6.0) | (0.2) |
| - | - | 2,433.1 |
| 4.2 | 0.6 | 237.3 |
| - | 4.3 | 3.1 |
| (4.4) | 4.7 | (4.5) |
| - | - | 0.2 |
| 8.1 | 20.2 | 26.2 |
| 5.1 | 25.3 | 15.6 |
| 6.8 | 56.9 | (178.1) |
| 5.3 | (45.0) | 43.8 |
| (26.5) | (73.2) | (100.6) |
| (76.1) | 18.9 | (118.8) |
| 53.2 | 94.9 | 145.8 |
| 207.0 | 819.9 | 853.2 |
| (69.3) | (141.0) | (243.8) |
| 137.7 | 678.9 | 609.4 |
| (8.6) | (5.9) | (18.3) |
| (300.8) | (442.4) | (931.3) |
| (37.1) | (46.1) | (80.4) |
| 1.3 | 1.8 | 2.7 |
| - | - | 349.8 |
| (0.4) | 15.9 | (1.3) |
| 1.9 | 3.3 | 6.1 |
| (335.1) | (467.5) | (654.4) |
| - | - | (14.3) |
| 3.2 | 0.1 | 6.2 |
| - | 874.5 | - |
| (30.0) | (941.6) | (523.3) |
| (1.2) | (19.1) | (3.9) |
| - | - | (91.3) |
| - | (2.0) | - |
| - | (2.1) | (1.7) |
| (28.0) | (90.2) | (614.0) |
| - | - | - |
| 3.0 | (13.9) | (9.0) |
| (231.0) | 101.4 | (700.6) |
| 1,163.1 | 734.5 | 1,632.7 |
| $ 932.1 $ 835.9 | $ 932.1 |
p. 11 Kinross reports 2014 third-quarter results www.kinross.com
Reconciliation of non-GAAP financial measures
The Company has included certain non-GAAP financial measures in this document. These measures are not defined under IFRS and should not be considered in isolation. The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. The inclusion of these measures is meant to provide additional information and should not be used as a substitute for performance measures prepared in accordance with IFRS. These measures are not necessarily standard and therefore may not be comparable to other issuers.
Adjusted net earnings attributable to common shareholders and adjusted net earnings per share are non-GAAP measures which determine the performance of the Company, excluding certain impacts which the Company believes are not reflective of the Company’s underlying performance for the reporting period, such as the impact of foreign exchange gains and losses, reassessment of prior year taxes and/or taxes otherwise not related to the current period, impairment charges, gains and losses and other one-time costs related to acquisitions, dispositions and other transactions, and non-hedge derivative gains and losses. Although some of the items are recurring, the Company believes that they are not reflective of the underlying operating performance of its current business and are not necessarily indicative of future operating results. Management believes that these measures, which are used internally to assess performance and in planning and forecasting future operating results, provide investors with the ability to better evaluate underlying performance, particularly since the excluded items are typically not included in public guidance. However, adjusted net earnings and adjusted net earnings per share measures are not necessarily indicative of net earnings and earnings per share measures as determined under IFRS.
The following table provides a reconciliation of net earnings from continuing operations to adjusted net earnings from continuing operations for the periods presented:
| Adjusted Earnings | |
| (in millions, except share and per share amounts) | Nine months ended September 30, |
| 2014 2013 |
Net earnings (loss) from continuing operations attributable to common shareholders - as reported $ (4.3) $ 46.9 $ 73.5 $ (2,272.6)
Adjusting items:
| Foreign exchange (gains) losses | 10.6 | (6.2) | 20.2 | 15.1 |
| Non-hedge derivatives (gains) losses - net of tax | 0.8 | (3.9) | 4.0 | (4.0) |
| (Gains) losses on sale of other assets - net of tax | (5.7) | 0.3 | (5.9) | (0.1) |
Foreign exchange (gains) losses on translation of tax basis and foreign exchange on deferred income taxes within income tax expense
| 50.1 | 12.6 | 26.2 | 45.5 | |
| Change in deferred income taxes due to tax reforms enacted in Chile | 35.8 | - | 35.8 | - |
| Taxes in respect of prior years | (17.8) | 0.5 | (17.3) | 0.7 |
| Impairment charges - net of tax | 0.6 | 4.2 | 0.6 | 2,561.7 |
| 74.4 | 7.5 | 63.6 | 2,618.9 |
Adjusted net earnings from continuing operations attributable to common shareholders $ 70.1 $ 54.4 $ 137.1 $ 346.3 Weighted average number of common shares outstanding - Basic 1,144.5 1,142.7 1,144.2 1,141.7 Adjusted net earnings from continuing operations per share $ 0.06 $ 0.05 $ 0.12 $ 0.30
The Company makes reference to a non-GAAP measure for adjusted operating cash flow and adjusted operating cash flow per share. Adjusted operating cash flow is defined as cash flow from operations excluding certain impacts which the Company believes are not reflective of the Company’s regular operating cash flow, and excluding changes in working capital. Working capital can be volatile due to numerous factors, including the timing of tax payments, and in the case of Kupol, a build-up of inventory due to transportation logistics. The Company uses adjusted operating cash flow internally as a measure of the underlying operating cash flow performance and future operating cash flow-generating capability of the Company. However, adjusted operating cash flow and adjusted operating cash flow per share measures are not necessarily indicative of net cash flow from operations as determined under IFRS.
The following table provides a reconciliation of adjusted operating cash flow from continuing operations for the periods presented:
p. 12 Kinross reports 2014 third-quarter results www.kinross.com