For more information, please see Kinross’ 2016 second quarter Financial Statements and MD&A
For more information, please see Kinross’ 2016 second quarter Financial Statements and MD&A at www.kinross.com
NEWS RELEASE
Kinross reports 2016 second-quarter results
Adjusted operating cash flow increases by 16% and attributable margins by 14% Maintained strong balance sheet with robust cash position of $968 million
Toronto, Ontario – July 27, 2016 – Kinross Gold Corporation (TSX: K, NYSE: KGC) today announced its results for the second quarter ended June 30, 2016.
(This news release contains forward-looking information about expected future events and financial and operating performance of the Company. We refer to the risks and assumptions set out in our Cautionary Statement on Forward-Looking Information located on page 17 of this release. All dollar amounts are expressed in U.S. dollars, unless otherwise noted.)
2016 second quarter highlights:
- Production1: 671,267 gold equivalent ounces (Au eq. oz.), compared with 660,898 Au eq. oz. in Q2 2015.
- Revenue: $876.4 million, compared with $755.2 million in Q2 2015.
- Production cost of sales2: $731 per Au eq. oz., compared with $724 in Q2 2015.
- All-in sustaining cost2: $988 per Au eq. oz. sold, compared with $1,011 in Q2 2015. All-in sustaining cost per gold ounce (Au oz.) sold on a by-product basis was $976 in Q2 2016, compared with $1,006 in Q2 2015.
- Adjusted operating cash flow2: $187.2 million, or $0.15 per share, compared with $161.4 million, or $0.14 per share, in Q2 2015.
- Adjusted net loss2,3: $9.8 million, or $0.01 per share, compared with adjusted net loss of $13.6 million, or $0.01 per share, in Q2 2015.
- Reported net loss3: $25.0 million, or $0.02 per share, compared with a loss of $83.2 million, or $0.07 per share, in Q2 2015.
- Balance sheet: Increased cash and cash equivalents to $968.2 million, adding $217.8 million during the quarter, with total liquidity of approximately $2.5 billion.
- Average realized gold price: $1,266 per ounce, compared with $1,194 per ounce in Q2 2015.
Tasiast update: Kinross has resolved the expatriate work permit issue with the Government of Mauritania and expects to resume normal operations in August 2016.
- Outlook: Kinross expects to be within its 2016 guidance range for production (2.7 - 2.9 million Au eq. oz.), production cost of sales ($675 - $735 per Au eq. oz.) and all-in sustaining cost ($890 - $990 per Au eq. oz.).
CEO Commentary
J. Paul Rollinson, President and CEO, made the following comments in relation to 2016 second-quarter results:
“Kinross generated robust free cash flow of more than $200 million4 from its operations and ended the second quarter with approximately $970 million in cash and cash equivalents. We remain on track to be within our full-year guidance range for both production and cost of sales as strong production from Russia and North America offset temporary production curtailments at Tasiast and Maricunga.
“Maricunga resumed operations in early July, subject to ongoing regulatory proceedings, while at Tasiast, we expect to resume normal operations in August. We have resolved the expatriate work permit issue with the Government of Mauritania as part of an agreed ‘Mauritanization’ plan to increase the number of skilled local workers at Tasiast. The required plan is an important milestone for the country and is a positive example of the ongoing partnership between the Government and Kinross.
“Our continued focus on cost management and capital discipline, combined with our high leverage to stronger gold prices, help to ensure we maximize cash generation. With an excellent balance sheet, financial flexibility, a diverse portfolio of producing mines and high-quality development projects, we remain well positioned to deliver value now and for the future.”
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) attributable to common shareholders”.
4 Free cash flow is a non-GAAP measure defined as net operating cash flow less capital expenditures.
p. 1 Kinross reports 2016 second-quarter results www.kinross.com
Financial results Summary of financial and operating results
| Three months ended Six months ended June 30, June 30, (in millions, except ounces, per share amounts, and per ounce amounts) 2016 2015 2016 2015 | |||
| Operating Highlights Total gold equivalent ounces(a) Produced(c) 675,623 667,529 1,367,533 1,303,657 Sold(c) 690,983 633,148 1,355,148 1,274,900 Attributable gold equivalent ounces(a) Produced(c) 671,267 660,898 1,358,730 1,290,258 Sold(c) 686,752 626,246 1,346,149 1,260,811 Financial Highlights Metal sales $ 8 76.4 $ 7 55.2 $ 1 ,659.0 $ 1 ,536.6 Production cost of sales $ 5 06.7 $ 4 58.5 $ 9 64.4 $ 9 13.1 Depreciation, depletion and amortization $ 2 10.2 $ 2 16.7 $ 4 03.4 $ 4 22.9 Impairment charges $ - $ 2 4.5 $ - $ 2 4.5 Operating earnings (loss) $ 6 9.2 $ (67.8) $ 1 12.0 $ (25.3) Net earnings (loss) attributable to common shareholders $ (25.0) $ (83.2) $ 1 0.0 $ (89.9) Basic earnings (loss) per share attributable to common shareholders $ (0.02) $ (0.07) $ 0 .01 $ (0.08) Diluted earnings (loss) per share attributable to common shareholders $ (0.02) $ (0.07) $ 0 .01 $ (0.08) Adjusted net earnings (loss) attributable to common shareholders (b) $ (9.8) $ (13.6) $ 1 1.4 $ 1 .7 Adjusted net earnings (loss) per share(b) $ (0.01) $ (0.01) $ 0 .01 $ 0 .00 Net cash flow provided from operating activities $ 3 15.9 $ 1 67.2 $ 5 30.4 $ 4 17.3 Adjusted operating cash flow (b) $ 1 87.2 $ 1 61.4 $ 3 94.8 $ 3 76.2 Adjusted operating cash flow per share(b) $ 0 .15 $ 0 .14 $ 0 .33 $ 0 .33 Average realized gold price per ounce $ 1 ,266 $ 1 ,194 $ 1 ,223 $ 1 ,206 Consolidated production cost of sales per equivalent ounce(c) sold(b) $ 7 33 $ 7 24 $ 7 12 $ 7 16 Attributable(a) production cost of sales per equivalent ounce(c) sold(b) $ 7 31 $ 7 24 $ 7 09 $ 7 17 Attributable(a) production cost of sales per ounce sold on a by-product basis (b) $ 7 11 $ 7 12 $ 6 93 $ 7 04 Attributable(a) all-in sustaining cost per ounce sold on a by-product basis (b) $ 9 76 $ 1 ,006 $ 9 63 $ 9 82 Attributable(a) all-in sustaining cost per equivalent ounce(c) sold(b) $ 9 88 $ 1 ,011 $ 9 72 $ 9 87 Attributable(a) all-in cost per ounce sold on a by-product basis(b) $ 1 ,027 $ 1 ,092 $ 1 ,022 $ 1 ,071 Attributable(a) all-in cost per equivalent ounce(c) sold(b) $ 1 ,037 $ 1 ,094 $ 1 ,028 $ 1 ,074 | |||
| 675,623 667,529 1,367,533 1,303,657 690,983 633,148 1,355,148 1,274,900 | |||
| 671,267 660,898 1,358,730 1,290,258 686,752 626,246 1,346,149 1,260,811 | |||
| $ 8 76.4 $ 7 55.2 $ 5 06.7 $ 4 58.5 $ 2 10.2 $ 2 16.7 $ - $ 2 4.5 $ 6 9.2 $ (67.8) | $ 1 ,659.0 $ 9 64.4 $ 4 03.4 $ - $ 1 12.0 | $ 1 ,536.6 $ 9 13.1 $ 4 22.9 $ 2 4.5 $ (25.3) | |
| $ (25.0) $ (83.2) $ 1 0.0 $ (89.9) $ (0.02) $ (0.07) $ 0 .01 $ (0.08) $ (0.02) $ (0.07) $ 0 .01 $ (0.08) | |||
| $ (9.8) $ (13.6) $ 1 1.4 $ (0.01) $ (0.01) $ 0 .01 $ 3 15.9 $ 1 67.2 $ 5 30.4 $ 1 87.2 $ 1 61.4 $ 3 94.8 | |||
| $ 0 .15 $ 0 .14 $ 1 ,266 $ 1 ,194 |
| (a) | "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 page 12 to 16 of this news release. |
| (b) | |
| (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 second quarter of 2016 was 75.06:1, compared with 72.75:1 for the second quarter of 2015 and for the first six months of 2016 was 77.20:1, compared with 72.84:1 for the first six months of 2015. |
The following operating and financial results are based on second-quarter 2016 gold equivalent production. Production and cost measures are on an attributable basis:
Production: Kinross produced 671,267 attributable Au eq. oz. in Q2 2016, a 2% increase compared with Q2 2015, due mainly to higher production at Paracatu and the acquisition of Bald Mountain and 50% of Round Mountain.
Production cost of sales: Production cost of sales per Au eq. oz.2 was $731 for Q2 2016, compared with $724 for Q2 2015, mainly as a result of higher costs at Tasiast, Chirano, and Fort Knox.
Production cost of sales per Au oz. on a by-product basis2 was $711 in Q2 2016, compared with $712 in Q2 2015, based on Q2 2016 attributable gold sales of 665,032 ounces and attributable silver sales of 1,630,139 ounces.
p. 2 Kinross reports 2016 second-quarter results www.kinross.com All-in sustaining cost: All-in sustaining cost per Au eq. oz. sold2 decreased to $988 in Q2 2016, compared with $1,011 in Q2 2015. All-in sustaining cost per Au oz. sold on a by-product basis2 was $976 in Q2 2016, compared with $1,006 in Q2 2015.
Average realized gold price: The average realized gold price in Q2 2016 increased to $1,266 per ounce, compared with $1,194 per ounce in Q2 2015.
Revenue: Revenue from metal sales was $876.4 million in Q2 2016, compared with $755.2 million during the same period in 2015, primarily due to increases in gold equivalent ounces sold and the average realized gold price.
Margins: Kinross’ attributable margin per Au eq. oz. sold5 was $535 per Au eq. oz. for Q2 2016, compared with a Q2 2015 margin of $470 per Au eq. oz.
Operating cash flow: Adjusted operating cash flow2 was $187.2 million, or $0.15 per share, for Q2 2016, compared with $161.4 million, or $0.14 per share, for Q2 2015.
Earnings/loss: Adjusted net loss2,3 was $9.8 million, or $0.01 per share, for Q2 2016, compared with adjusted net loss of $13.6 million, or $0.01 per share, for Q2 2015.
Reported net loss3 was $25.0 million, or $0.02 per share, for Q2 2016, mainly as a result of a $69.4 million tax expense, compared with reported net loss of $83.2 million, or $0.07 per share, for Q2 2015.
Capital expenditures: Capital expenditures decreased to $114.0 million for Q2 2016, compared with $128.5 million for the same period last year, primarily due to lower spending at Fort Knox and Paracatu.
Operating results and update
Mine-by-mine summaries for 2016 second-quarter operating results may be found on pages seven and 11 of this news release. Highlights include the following:
Americas
The region is tracking at the low end of its guidance range for production and the high end of its guidance range for cost of sales per ounce for the year. At Fort Knox, production increased compared with the previous quarter as a result of higher mill throughput and recoveries. Production decreased compared with Q2 2015 mainly as a result of lower mill grades and recoveries. Cost of sales per ounce increased compared with Q1 2016 and Q2 2015 primarily due to higher costs associated with mined operating waste.
Round Mountain continued to perform well, with production in line with Q1 2016, as an increase in the amount of ore processed and strong performance from the heap leach offset lower mill grades. Cost of sales per ounce increased compared with the previous quarter due to higher input costs.
As announced on June 29, 2016, Kinross added 2.4 million Au oz. to the Company’s estimated inferred mineral resource6 at Round Mountain and expects that the Process Solution Management program will produce approximately 200,000 - 230,000 Au eq. oz. over life of mine at a low cost of approximately $200 - $400 per Au eq. oz. (which includes production cost of sales and capital expenditures).
At Bald Mountain, production increased compared with Q1 2016 as a result of an increase in ore mined and processed, offset by lower grades. Cost of sales per ounce increased quarter-over-quarter as a result of a higher level of operating stripping.
5 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.”
6 See Kinross’ news release dated June 29, 2016 and the "Phase W scoping study" section contained within regarding incremental additions to Round Mountain's mineral resource estimates, which were calculated using a $1,400/oz. gold price assumption.
p. 3 Kinross reports 2016 second-quarter results www.kinross.com The Company believes it can substantially increase Bald Mountain’s current mineral reserve estimate and extend life of mine by developing additional deposits in the near-term. The current mine plan conservatively assumes an approximate 30% conversion of Bald Mountain's current estimated mineral resources to mineral reserves upon receipt of permits, a process which is proceeding as planned and nearly complete, and completion of modest infill drilling at the Vantage Complex and additional drilling at the Saga deposit.
Kettle-River Buckhorn continued with its strong performance as it nears the end of its mine life, which is expected at year end. Production was largely in line with the previous quarter, with cost of sales per ounce decreasing as a result of slightly higher grades and recoveries.
At Paracatu, production was higher compared with Q1 2016 and Q2 2015 mainly due to an increase in ore processed, which included approximately 20,000 Au eq. oz. from the Santo Antonio tailing reprocessing initiative, offset by lower recoveries. Cost of sales per ounce increased slightly compared with the previous quarter mainly due to higher input costs, while costs decreased compared with Q2 2015 mainly as a result of favourable foreign exchange rates and currency hedge losses incurred in 2015.
Due to the lack of rainfall at Paracatu during the 2015-2016 rainy season, the Company now expects to temporarily suspend operation of the mine’s Plant 1 facility in the second half of the third quarter. Plant 1 will remain suspended until the water balance rises sufficiently to allow for production to restart. To help mitigate the effect of the lack of rainfall in the area, the Company has increased the water capture area and water conservation activities at the site and commenced operation of an enhanced water pumping system. The Company’s 2016 full-year regional and company-wide production guidance includes an allocation to production and costs for a potential curtailment at Paracatu.
At Maricunga, production was lower compared with Q1 2016 and Q2 2015 as a result of the regulatory suspension of mining and crushing activities which began on May 2, 2016. Operations resumed on July 9, 2016, the continuation of which remains subject to the ongoing regulatory proceedings. Cost of sales per ounce increased quarter-overquarter due to the suspension, but was lower year-over-year as the mine incurred higher costs due to the extreme weather event in Q2 2015.
The regulatory suspension was a result of water curtailment orders imposed by Chile’s environmental regulatory authority (SMA). As previously announced on March 21, 2016, the Company received notification from the SMA of a resolution commencing a legal process to seek closure of Maricunga’s water pumping wells. On June 24, 2016, the SMA issued a revised resolution amending the initial sanction which, if affirmed by Chile’s Environmental Tribunal, would require the Company to effectively cease operations and close the mine. The Company vigorously disputes the resolution and the curtailment orders and has appeals pending with Chile’s Environmental Tribunal7.
The Company has been assessing Maricunga’s mine plan in the context of other capital priorities in its global portfolio and now expects to suspend mining in Q4 2016 and commence rinsing the residual gold from the heap leach pads, subject to the ongoing regulatory proceedings.
Russia
Kupol and Dvoinoye performed well in the second quarter, and achieved higher than expected production and lower cost of sales per ounce in the first half of 2016. As a result, the region expects to be at the higher end of production and at the lower end of cost of sales guidance for the year. Production was lower compared with Q1 2016 and Q2 2015 mainly as a result of anticipated lower grades at both mines, which was offset by an increase in ore processed. Cost of sales per ounce continued to decline mainly due to the sustained benefits from foreign exchange rates and rigorous cost management. Approximately 84,000 Au eq. oz. were produced from processing Dvoinoye ore in Q2 2016.
At the Russian development projects, haulage roads to both Moroshka, located near Kupol, and September Northeast, located near Dvoinoye, have been constructed. Portal construction is expected to begin in Q4 2016 at
7 For more information on these regulatory proceedings see the Company’s second-quarter unaudited Management’s Discussion and Analysis report at www.kinross.com.
p. 4 Kinross reports 2016 second-quarter results www.kinross.com Moroskha, with mining scheduled to commence in 2018. Camp facilities have been constructed and site preparation is on schedule to be completed in Q4 2016 at September Northeast, with mining expected to commence in early 2017.
West Africa
The region expects to be at the lower end of its 2016 guidance range for production and at the higher end of its range for cost of sales per ounce. At Tasiast, production was lower quarter-over-quarter and year-over-year mainly as a result of the 18-day strike which ended on June 11, 2016 and the temporary suspension of mining and processing which began on June 18, 2016. Production cost of sales per ounce increased due to the decrease in gold equivalent ounces sold. Tonnes of ore mined increased compared with Q1 2016 and Q2 2015 due to additional heap leach material encountered in the West Branch footwall and planned mine sequencing to support the higher mill throughput rate, which continued to average more than 8,000 tonnes per day (tpd) in the quarter.
The Company and the Government of Mauritania have resolved the expatriate work permit issue as part of reaching a mutually acceptable “Mauritanization” plan to increase the number of local workers who have the necessary skills and experience to work at Tasiast, a requirement under Mauritanian law. Kinross has remobilized its workforce and expects to resume normal mining and processing activities in August 2016. As a result of the suspension, the Phase One expansion’s expected timing for commercial production may extend to Q2 2018.
Labour negotiations respecting the Company’s collective labour agreement at Tasiast are expected to recommence in the near term following resumption of normal mining and processing activities.
At Chirano, production was lower compared with Q1 2016 and Q2 2015 as the site continued to transition to the Paboase underground deposit, which resulted in lower grades. Production cost of sales per ounce was higher compared with both Q1 2016 and Q2 2015 as a result of fewer ounces sold, higher power costs and increased maintenance costs. The Company expects to mine higher grades and larger volumes from Paboase in the second half of the year resulting in improved mine performance.
Balance sheet and liquidity
As of June 30, 2016, Kinross had cash and cash equivalents of $968.2 million, a decrease of $75.7 million since December 31, 2015, mainly as a result of the $588.0 million used in the acquisition of the Bald Mountain mine and the remaining 50% interest in the Round Mountain mine, offset by net proceeds of $275.7 million from the equity issuance in Q1 2016 and $276.9 million of free cash flow generated from its operations in the first half of 2016. The Company also has available credit of $1,499.6 million as of June 30, 2016 for total liquidity of approximately $2.5 billion.
The Company expects that its existing liquidity sources will be sufficient to fund the Tasiast Phase One expansion and the repayment of $250 million in senior notes due in September. After September, Kinross will have no other debt maturities until 2020, as the Company has extended the maturity dates of its $500 million term loan and $1,500 million revolving credit facility by one year to August 10, 2020 and August 10, 2021, respectively.
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.
The Company expects to be within its 2016 production guidance range of approximately 2.7 - 2.9 million Au eq. oz., its production cost of sales guidance range of $675 - $735 per Au eq. oz., and its all-in sustaining cost guidance range of $890 - $990 per Au eq. oz. sold.
Kinross is tracking below its capital expenditure forecast of $755 million and is reviewing timing of its capital spend for the second half of 2016. The Company expects to provide an update in the third quarter.
p. 5 Kinross reports 2016 second-quarter results www.kinross.com Other operating costs are now forecast to be approximately $95 million, compared with the previously-stated forecast of $45 million, mainly due to the temporary suspension of mining at Tasiast and Maricunga during the quarter.
Depreciation, depletion and amortization is now forecast to be approximately $350 per Au eq. oz., compared with the previous forecast of $375 per Au eq. oz.
Conference call details
In connection with the release, Kinross will hold a conference call and audio webcast on Thursday, July 28, 2016 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 – 00585 followed by #.
Outside of Canada & US – 1-604-638-9010; Passcode – 00585 followed by #.
You may also access the conference call on a listen-only basis via webcast at our www.kinross.com, where it will be archived.
This news release should be read in conjunction with Kinross’ 2016 second-quarter unaudited Financial Statements and Management’s Discussion and Analysis report at www.kinross.com. Kinross’ 2016 second-quarter unaudited 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 senior gold mining company with mines and projects in the United States, Brazil, Russia, Mauritania, Chile and Ghana. Our focus is on delivering value based on the core principles of operational excellence, balance sheet strength, disciplined growth and responsible mining. Kinross maintains listings on the Toronto Stock Exchange (symbol:K) and the New York Stock Exchange (symbol:KGC).
Media Contact
Louie Diaz Director, Corporate Communications phone: 416-369-6469 [email protected]
Investor Relations Contact
Tom Elliott Senior Vice-President, Investor Relations and Corporate Development phone: 416-365-3390 [email protected]
p. 6 Kinross reports 2016 second-quarter results www.kinross.com
Review of operations
Three months ended June 30, Gold equivalent ounces Production cost of Production cost of Produced Sold
sales ($millions) sales/equivalent ounce sold 2016 2015 2016 2015 2016 2015 2016 2015
Fort Knox 97,221 116,061 97,625 113,697 $ 77.4 $ 68.9 $ 793 $
| Round Mountain | 92,813 | 48,448 | 91,646 | 47,893 | 71.3 | 36.4 | 778 | 760 |
| Bald Mountain | 32,704 | - | 35,508 | - | 43.2 | - | 1,217 | - |
| Kettle River - Buckhorn | 25,031 | 29,580 | 24,808 | 29,524 | 18.2 | 23.4 | 734 | 793 |
| Paracatu | 126,774 | 110,366 | 126,365 | 107,169 | 87.5 | 90.5 | 692 | 844 |
| Maricunga | 44,304 | 47,713 | 45,362 | 50,957 | 42.6 | 55.0 | 939 | 1,079 |
| Americas Total | 418,847 | 352,168 | 421,314 | 349,240 | 340.2 | 274.2 | 807 | 785 |
| Kupol | 183,638 | 191,160 | 198,890 | 159,950 | 82.9 | 78.3 | 417 | 490 |
| Russia Total | 183,638 | 191,160 | 198,890 | 159,950 | 82.9 | 78.3 | 417 | 490 |
| Tasiast | 29,577 | 57,890 | 28,467 | 54,941 | 35.3 | 58.4 | 1,240 | 1,063 |
| Chirano (100%) | 43,561 | 66,311 | 42,312 | 69,017 | 48.3 | 47.6 | 1,142 | 690 |
| West Africa Total | 73,138 | 124,201 | 70,779 | 123,958 | 83.6 | 106.0 | 1,181 | 855 |
| Operations Total | 675,623 | 667,529 | 690,983 | 633,148 | 506.7 | 458.5 | 733 | 724 |
Less Chirano non-controlling (4,356) (6,631) (4,231) (6,902) (4.8) (4.8)
interest (10%)
Attributable Total 671,267 660,898 686,752 626,246 $ 501.9 $ 453.7 $ 731 $
| Six months ended June 30, Gold equivalent ounces Production cost of Production cost of Produced Sold sales ($millions) sales/equivalent ounce sold 2016 2015 2016 2015 2016 2015 2016 2015 Fort Knox 185,021 198,734 185,514 195,700 $ 139.6 $ 124.0 $ 753 $ 634 Round Mountain 185,739 88,710 182,120 88,340 131.7 72.4 723 820 Bald Mountain 53,126 - 46,705 - 56.3 - 1,205 - Kettle River - Buckhorn 53,343 53,845 53,072 53,691 40.4 47.7 761 888 Paracatu 246,150 235,051 243,455 232,098 167.4 184.4 688 794 Maricunga 103,380 104,535 102,852 105,333 89.9 111.0 874 1,054 Americas Total 826,759 680,875 813,718 675,162 625.3 539.5 768 799 Kupol 376,088 376,889 374,581 352,117 161.1 169.8 430 482 Russia Total 376,088 376,889 374,581 352,117 161.1 169.8 430 482 Tasiast 76,655 111,899 76,858 106,731 82.5 110.3 1,073 1,033 Chirano (100%) 88,031 133,994 89,991 140,890 95.5 93.5 1,061 664 West Africa Total 164,686 245,893 166,849 247,621 178.0 203.8 1,067 823 Operations Total 1,367,533 1,303,657 1,355,148 1,274,900 964.4 913.1 712 716 Less Chirano non-controlling (8,803) (13,399) (8,999) (14,089) (9.6) (9.4) interest (10%) Attributable Total 1,358,730 1,290,258 1,346,149 1,260,811 $ 954.8 $ 903.7 $ 709 $ 717 | ||
|---|---|---|
| 185,021 198,734 185,514 195,700 $ 139.6 $ 124.0 $ 753 | ||
| 185,739 88,710 182,120 88,340 131.7 72.4 723 | ||
| 53,126 - 46,705 - 56.3 - 1,205 | ||
| 53,343 53,845 53,072 53,691 40.4 47.7 761 | ||
| 246,150 235,051 243,455 232,098 167.4 184.4 688 | ||
| 103,380 104,535 102,852 105,333 89.9 111.0 874 | ||
| 826,759 680,875 813,718 675,162 625.3 539.5 768 | 799 482 | |
| 376,088 376,889 374,581 352,117 161.1 169.8 430 | ||
| 376,088 376,889 374,581 352,117 161.1 169.8 430 | 482 1,033 664 | |
| 76,655 111,899 76,858 106,731 82.5 110.3 1,073 | ||
| 88,031 133,994 89,991 140,890 95.5 93.5 1,061 164,686 245,893 166,849 247,621 178.0 203.8 1,067 1,367,533 1,303,657 1,355,148 1,274,900 964.4 913.1 712 (8,803) (13,399) (8,999) (14,089) (9.6) (9.4) 1,358,730 1,290,258 1,346,149 1,260,811 $ 954.8 $ 903.7 $ 709 | ||
| 823 | ||
| 716 | ||
| $ 717 |
p. 7 Kinross reports 2016 second-quarter results www.kinross.com
Consolidated balance sheets
(unaudited expressed in millions of United States dollars, except share amounts)
As at June 30 December 31, 2016 2015
Assets
Current assets
| Cash and cash equivalents | $ 9 68.2 |
|---|---|
| Restricted cash Accounts receivable and other assets Current income tax recoverable Inventories Unrealized fair value of derivative assets | 11.4 126.4 80.8 1,056.5 21.4 |
| 2,264.7 | |
| Non-current assets Property, plant and equipment Goodw ill Long-term investments Investments in associate and joint ventures Unrealized fair value of derivative assets Other long-term assets Deferred tax assets Total assets Liabilities Current liabilities Accounts payable and accrued liabilities Current income tax payable Current portion of long-term debt | 5,059.8 162.7 145.6 163.3 5.3 413.2 92.3 |
| $ 8 ,306.9 | |
| $ 4 32.4 40.8 249.9 | |
| Current portion of provisions | 53.3 |
| Current portion of unrealized fair value of derivative liabilities Non-current liabilities Long-term debt | 1.0 |
| 777.4 | |
| 1,733.1 | |
| Provisions | 857.3 |
| Other long-term liabilities Deferred tax liabilities Total liabilities Equity Common shareholders' equity Common share capital Contributed surplus Accumulated deficit Accumulated other comprehensive income (loss) | 195.8 432.1 |
| 3,995.7 | |
| $ 1 4,890.6 233.8 (10,912.1) 58.4 | |
| Total common shareholders' equity | 4,270.7 |
| Non-controlling interest Total equity | 40.5 |
| 4,311.2 | |
| $ 8 ,306.9 |
1,043.9 10.5 108.2 123.3 1,005.2 1.0
2,292.1
4,593.7 162.7 83.1 157.1 - 370.2 76.5 $ 7,735.4
$ 379.6 6.4 249.5 50.3 16.0 701.8
1,731.9 720.8 148.7 499.0 3,802.2
$ 14,603.5 239.2 (10,922.1)
(31.3)
3,889.3 43.9 3,933.2 $ 7,735.4
Common shares
Authorized Unlimited Unlimited Issued and outstanding 1,244,357,781 1,146,540,188
p. 8 Kinross reports 2016 second-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 Six months ended June 30, June 30, June 30, June 30, 2016 2015 2016 2015 | ||
|---|---|---|
| 2016 | 2015 | |
| Revenue Metal sales $ 8 76.4 $ 7 55.2 $ 1 ,659.0 $ 1 ,536.6 Cost of sales Production cost of sales 506.7 458.5 964.4 913.1 Depreciation, depletion and amortization 210.2 216.7 403.4 422.9 Impairment charges - 24.5 - 24.5 Total cost of sales 716.9 699.7 1,367.8 1,360.5 Gross profit 159.5 55.5 291.2 176.1 Other operating expense 36.1 49.0 70.0 65.3 Exploration and business development 21.8 29.7 38.5 52.5 General and administrative 32.4 44.6 70.7 83.6 Operating earnings (loss) 69.2 (67.8) 112.0 (25.3) Other income (expense) - net 3.7 (6.3) 13.2 (8.2) Equity in earnings (losses) of associate and joint ventures (0.1) 5.9 0.1 4.9 Finance income 1.9 2.0 3.5 4.2 Finance expense (32.3) (23.7) (65.5) (47.7) Earnings (loss) before tax 42.4 (89.9) 63.3 (72.1) Income tax recovery (expense) - net (69.4) 5.4 (56.7) (19.9) Net earnings (loss) $ (27.0) $ (84.5) $ 6 .6 $ (92.0) Net earnings (loss) attributable to: Non-controlling interest $ (2.0) $ (1.3) $ (3.4) $ (2.1) Common shareholders $ (25.0) $ (83.2) $ 1 0.0 $ (89.9) Earnings (loss) per share attributable to common shareholders Basic $ (0.02) $ (0.07) $ 0 .01 $ (0.08) Diluted $ (0.02) $ (0.07) $ 0 .01 $ (0.08) Weighted average number of common shares outstanding (millions) Basic 1,244.2 1,146.2 1,208.9 1,145.7 Diluted 1,244.2 1,146.2 1,219.4 1,145.7 | ||
| Revenue | ||
| Metal sales Cost of sales Production cost of sales Depreciation, depletion and amortization Impairment charges | $ 8 76.4 506.7 210.2 - | |
| Total cost of sales Gross profit | 716.9 | |
| 159.5 | ||
| 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 ventures Finance income | 36.1 21.8 32.4 | |
| 69.2 | ||
| 3.7 (0.1) 1.9 | ||
| Finance expense Earnings (loss) before tax Income tax recovery (expense) - net Net earnings (loss) Net earnings (loss) attributable to: Non-controlling interest Common shareholders Earnings (loss) per share attributable to common shareholders Basic Diluted | (32.3) | |
| 42.4 (69.4) | ||
| $ (27.0) | ||
| $ (2.0) | ||
| $ (25.0) | ||
| $ (0.02) $ (0.02) | ||
| Weighted average number of common shares outstanding (millions) | ||
| Basic Diluted | 1,244.2 1,244.2 |
| $ 1 ,659.0 964.4 403.4 - | ||
|---|---|---|
| 1,367.8 | ||
| 291.2 | ||
| 70.0 38.5 70.7 | ||
| 112.0 | ||
| 13.2 0.1 3.5 | ||
| (65.5) | ||
| 63.3 (56.7) | ||
| $ 6 .6 | ||
| $ (3.4) | ||
| $ 1 0.0 | ||
| $ 0 .01 $ 0 .01 | ||
| 1,146.2 1,146.2 | 1,208.9 1,219.4 | 1,145.7 1,145.7 |
p. 9 Kinross reports 2016 second-quarter results www.kinross.com
Consolidated statements of cash flows
(unaudited expressed in millions of United States dollars)
| 2016 | |
| Net inflow (outflow) of cash related to the following activities: | |
| Operating: | |
| Net earnings (loss) Adjustments to reconcile net earnings (loss) to net cash provided from operating activities: Depreciation, depletion and amortization Impairment of inventory Equity in losses (earnings) of associate and joint ventures Non-hedge derivative losses (gains) - net Share-based compensation expense | $ (27.0) 210.2 - 0.1 5.9 3.3 |
| Finance expense | 32.3 |
| Deferred tax expense (recovery) Foreign exchange losses (gains) and other Changes in operating assets and liabilities: Accounts receivable and other assets Inventories Accounts payable and accrued liabilities | (45.0) 7.4 4.9 49.6 101.0 |
| Cash flow provided from operating activities Income taxes paid Net cash flow provided from operating activities | 342.7 |
| (26.8) | |
| 315.9 | |
| Investing: Additions to property, plant and equipment Business acquisition | (114.0) 22.0 |
| Net additions to long-term investments and other assets | (9.0) |
| Net proceeds from the sale of property, plant and equipment Decrease (increase) in restricted cash Interest received and other Net cash flow used in investing activities Financing: Issuance of common shares on exercise of options Proceeds from issuance of equity Proceeds from issuance of debt Repayment of debt Interest paid Other | 2.5 (0.5) 0.9 |
| (98.1) | |
| 1.0 - - - (3.6) - | |
| Net cash flow provided from (used in) financing activities | (2.6) |
| Effect of exchange rate changes on cash and cash equivalents Increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period | 2.6 |
| 217.8 750.4 | |
| $ 968.2 |
Three months ended Six months ended
June 30, June 30, June 30, 2015 2016 2015
$ (84.5) $ 6.6 $ (92.0)
| 216.7 | 403.4 | 422.9 |
| 24.5 | - | 24.5 |
| (5.9) | (0.1) | (4.9) |
| (1.8) | 0.4 | (0.8) |
| 4.3 | 7.1 | 8.9 |
| 23.7 | 65.5 | 47.7 |
| 12.7 | (104.0) | (17.1) |
| (28.3) | 15.9 | (13.0) |
| (29.8) | 3.6 | 11.0 |
| 36.5 | 83.9 | 87.2 |
| 28.0 | 115.0 | 0.4 |
| 196.1 | 597.3 | 474.8 |
| (28.9) | (66.9) | (57.5) |
| 167.2 | 530.4 | 417.3 |
| (128.5) | (253.5) | (278.0) |
| - | (588.0) | - |
| (20.0) | (20.1) | (41.7) |
| 1.6 | 6.9 | 2.9 |
| 2.6 | (0.9) | 2.8 |
| 1.0 | 1.5 | 2.1 |
| (143.3) | (854.1) | (311.9) |
| - | 1.0 | - |
| - | 275.7 | - |
| 3.0 | - | 22.5 |
| (3.0) | - | (52.5) |
| (2.5) | (33.2) | (23.5) |
| (1.0) | - | (1.0) |
| (3.5) | 243.5 | (54.5) |
| 0.5 | 4.5 | (3.0) |
| 20.9 | (75.7) | 47.9 |
| 1,010.5 | 1,043.9 | 983.5 |
| $ 1,031.4 $ 968.2 | $ 1,031.4 |
p. 10 Kinross reports 2016 second-quarter results www.kinross.com
| Operating Summary | Ore T o nnes Ore P ro cessed Grade Ore M ined P ro cessed (H eap Grade (H eap P erio d Ownership ( 1 ) (M illed) ( 1 ) Leach) ( 1 ) (M ill) Leach) (%) ('000 tonnes) ('000 tonnes) ('000 tonnes) (g/t) (g/t) Q2 2016 100 6,141 3,467 4,914 0.64 0.28 Q1 2016 100 6,786 3,246 7,495 0.66 0.26 Q4 2015 100 4,454 3,407 6,712 0.66 0.26 Q3 2015 100 5,950 3,328 6,697 0.86 0.27 Q2 2015 100 6,543 3,345 8,255 0.87 0.28 Q2 2016 100 ( 8 ) 6,632 942 6,234 0.80 0.40 Q1 2016 (8) 100(8) 4,018 869 3,617 1.17 0.44 Q4 2015 50 6,392 898 3,724 0.86 0.42 Q3 2015 50 6,962 924 4,546 0.91 0.47 Q2 2015 50 5,286 748 4,372 1.08 0.40 Q2 2016 100 2,182 - 2,182 - 0.48 Q1 2016 (8) 100 1,766 - 1,766 - 0.62 Q2 2016 100 101 101 - 7.40 - Q1 2016 100 86 107 - 7.23 - Q4 2015 100 84 90 - 9.67 - Q3 2015 100 97 106 - 6.93 - Q2 2015 100 95 130 - 8.58 - Q2 2016 100 12,109 12,331 - 0.44 - | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Americas | M ine F o rt Kno x R o und M o untain B ald M o untain ( 8 ) , ( 9 ) Kettle R iver- B uckho rn P aracatu | R eco very ( 2 ) (%) 83% 81% 82% 83% 84% 80% 83% 77% 81% 75% nm nm 93% 92% 92% 92% 93% 70% | Go ld Eq P ro ductio n ( 5 ) (ounces) 97,221 87,800 87,561 115,258 116,061 92,813 92,926 51,034 58,074 48,448 32,704 20,422 25,031 28,312 19,301 24,222 29,580 126,774 | Go ld Eq Sales ( 5 ) (ounces) 97,625 87,889 87,426 118,978 113,697 91,646 90,474 52,882 54,559 47,893 35,508 11,197 24,808 28,264 19,601 24,284 29,524 126,365 | P ro ductio n co st o f sales ($ millions) $ 77.4 62.2 62.6 66.2 68.9 $ 71.3 60.4 37.0 37.5 36.4 $ 43.2 13.1 $ 18.2 22.2 14.6 1 9.3 2 3.4 $ 87.5 | P ro ductio n co st o f sales / o z ($/ounce) $ 793 708 716 556 606 $ 778 668 700 687 760 $ 1,217 1,170 $ 734 785 745 795 793 $ 692 | C ap Ex ( 7 ) | D D &A ($ millions) $ 22.3 23.5 31.7 36.8 37.2 $ 20.8 16.1 11.0 12.9 12.0 $ 8.6 2.0 $ 0.8 1.4 2.0 2.6 3.3 $ 35.4 | |||||||
| ($ millions) | |||||||||||||||
| $ 15.2 18.0 35.3 37.4 26.7 $ 12.3 16.3 14.2 12.3 10.8 $ 4.5 1.7 $ - - - - - $ 15.9 | |||||||||||||||
| Q1 2016 Q4 2015 Q3 2015 Q2 2015 | 100 100 100 100 | 11,825 10,730 13,969 11,435 | 11,439 9,738 12,322 11,392 | - - - - | 0.44 0.51 0.43 0.41 | - - - - | 73% 76% 76% 72% | 119,376 113,547 129,064 110,366 | 117,090 117,796 134,838 107,169 | 79.9 89.2 1 00.7 90.5 | 682 757 747 844 | 10.7 30.1 36.9 29.4 | 35.4 34.9 38.4 36.4 | ||
| M aricunga ( 9 ) | Q2 2016 | 100 | 1,346 | - | 1,475 | 0.61 | nm | 44,304 | 45,362 | $ 42.6 | $ 939 | $ 1.3 | $ 11.6 | ||
| Q1 2016 Q4 2015 Q3 2015 Q2 2015 | 100 100 100 100 | 3,947 3,870 3,476 2,220 | - - - - | 4,254 4,099 3,822 1,957 | - - - - | 0.69 0.78 0.74 0.81 | nm nm nm nm | 59,076 54,948 52,672 47,713 | 57,490 56,440 52,282 50,957 | 4 7.3 5 2.6 5 2.5 55.0 | 823 932 1,004 1,079 | 0.8 4.7 5.2 7.1 | 10.8 8.2 7.3 6.4 | ||
| West Africa Russia | Kupo l ( 3 ) ( 4 ) ( 6 ) T asiast | Q2 2016 | 100 | 513 | 428 | - | 12.75 | - | 95% | 183,638 | 198,890 | $ 82.9 | $ 417 | $ 15.1 | $ 59.9 |
| Q1 2016 Q4 2015 Q3 2015 Q2 2015 Q2 2016 | 100 100 100 100 100 | 494 449 468 516 1,937 | 416 429 410 423 489 | - - - - 1,542 | 13.92 13.81 13.65 13.43 1.39 | - - - - 0.45 | 95% 96% 96% 95% 92% | 192,450 191,308 190,366 1 91,160 29,577 | 175,691 195,465 217,031 159,950 28,467 | 7 8.2 9 1.3 101.7 78.3 $ 35.3 | 445 467 469 490 $ 1,240 | 27.8 9.0 21.4 10.0 $ 36.0 | 52.9 73.8 77.3 56.3 $ 22.3 | ||
| Q1 2016 Q4 2015 Q3 2015 Q2 2015 | 100 100 100 100 | 1,891 1,318 1,259 1,609 | 777 689 618 605 | 1,187 587 364 521 | 1.51 2.27 2.21 2.21 | 0.41 0.55 0.48 0.56 | 91% 89% 92% 92% | 47,078 53,706 53,440 57,890 | 48,391 52,146 57,163 54,941 | 47.2 49.9 60.4 58.4 | 975 957 1,057 1,063 | 49.9 49.6 44.1 31.1 | 22.7 26.5 19.5 18.7 | ||
| C hirano - 100% | Q2 2016 | 90 | 547 | 882 | - | 1.72 | - | 91% | 43,561 | 42,312 | $ 48.3 | $ 1,142 | $ 11.1 | $ 25.8 | |
| Q1 2016 Q4 2015 Q3 2015 Q2 2015 | 90 90 90 90 | 453 559 873 875 | 847 853 917 823 | - - - - | 1.77 2.32 2.36 2.73 | - - - - | 91% 91% 91% 92% | 44,470 58,123 63,981 66,311 | 47,679 56,284 62,792 69,017 | 47.2 42.2 44.0 47.6 | 990 750 701 690 | 11.7 11.6 6.7 4.9 | 25.7 44.1 42.7 44.6 | ||
| C hirano - 90% | Q2 2016 Q1 2016 Q4 2015 Q3 2015 Q2 2015 | 90 90 90 90 90 | 547 453 559 873 875 | 882 847 853 917 823 | - - - - - | 1.72 1.77 2.32 2.36 2.73 | - - - - - | 91% 91% 91% 91% 92% | 39,205 40,023 52,311 57,583 59,680 | 38,081 42,911 50,655 56,513 62,115 | $ 43.5 42.5 38.0 39.6 42.8 | $ 1,142 990 750 701 689 | $ 10.0 10.5 10.4 6 .0 4.4 | $ 23.2 2 3.1 39.7 38.4 40.1 |
(1) Tonnes of ore mined and processed represent 100% Kinross for all periods presented.
(2) Due to the nature of heap leach operations, recovery rates at M aricunga and Bald M ountain cannot be accurately measured on a quarterly basis. Recovery rates at Fort Knox, Round M ountain and Tasiast represent mill recovery only.
(3) The Kupol segment includes the Kupol and Dvoinoye mines.
(4) Kupol silver grade and recovery were as follows: Q2 (2016) 105.89 g/t, 86.5%; Q1 (2016) 104.19 g/t, 88%; Q4 (2015) 100.58 g/t, 87%; Q3 (2015) 100.55 g/t, 88%; Q2 (2015) 106.19 g/t, 87%.
(5) 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: Q2 2016:
75.06:1 , Q1 2016: 79.64:1; Q4 2015: 74.78:1; Q3 2015: 75.40:1, Q2 2015: 72.75:1.
(6) Dvoinoye ore processed and grade were as follows: Q2 (2016) 118,057 tonnes, 22.42 g/t; Q1 (2016) 129,675 tonnes, 22.69 g/t; Q4 (2015) 122,987 tonnes, 22.91 g/t; Q3 (2015) 111,806 tonnes, 24.52 g/t; Q2 (2015) 104,465 tonnes, 26.43 g/t.
(7) Capital expenditures are presented on a cash basis, consistent with the statement of cash flows.
(8) On January 11, 2016, Kinross completed the acquisition of 100% of the Bald M ountain gold mine and the remaining 50% interest in the Round M ountain gold mine. The interim financial statements for the three months ended M arch 31, 2016 have been recasted to reflect the retrospective impact of the finalization of the purchase price allocation.
(9) "nm" means not meaningful.
p. 11 Kinross reports 2016 second-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 to adjusted net earnings for the periods presented:
Adjusted Earnings
(in millions, except share and per share amounts) Three months ended Six months ended
June 30, June 30,
2016 2015 2016 2015
Net earnings (loss) attributable to common shareholders - as reported $ (25.0) $ (83.2) $ 10.0 $ (89.9)
| 6.2 | 9.0 | ||
| 6.9 | 0.3 | ||
| (2.7) | (6.2) | ||
| (31.6) | (37.8) | ||
| - | 7.6 | ||
| - | (27.7) | ||
| - | - | ||
| 24.0 | 45.2 | ||
| - | - | ||
| 22.7 | 22.7 | ||
| (10.3) | (11.7) | ||
| 15.2 | 69.6 | 1.4 | 91.6 |
Adjusting items:
Foreign exchange losses Non-hedge derivatives losses (gains) - net of tax Losses (gains) on sale of other assets - net of tax Foreign exchange losses (gains) on translation of tax basis and foreign exchange on deferred income taxes within income tax expense Acquisition costs Tax benefits realized upon acquisition Impairment charges - net of tax Taxes in respect of prior years Chile weather event related costs, net of tax Tasiast and Maricunga suspension related costs - net of tax Insurance recoveries and other - net of tax
Adjusted net earnings (loss) attributable to common shareholders $ (9.8) $ (13.6) $ 11.4 $ 1.7 Weighted average number of common shares outstanding - Basic 1,244.2 1,146.2 1,208.9 1,145.7 Adjusted net earnings (loss) per share (0.01) (0.01) 0.01 0.00
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 for the periods presented:
p. 12 Kinross reports 2016 second-quarter results www.kinross.com