For more information, please see Kinross’ 2016 third-quarter Financial Statements and MD&A
For more information, please see Kinross’ 2016 third-quarter Financial Statements and MD&A at www.kinross.com
NEWS RELEASE
Kinross reports 2016 third-quarter results
Adjusted operating cash flow up 55%, adjusted net earnings up $153 million year-over-year Development projects advancing on schedule Company on track to meet production and cost guidance for fifth straight year
Toronto, Ontario – November 2, 2016 – Kinross Gold Corporation (TSX: K, NYSE: KGC) today announced its results for the third quarter ended September 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 18 of this release. All dollar amounts are expressed in U.S. dollars, unless otherwise noted.)
2016 third quarter highlights:
Production1: 684,129 gold equivalent ounces (Au eq. oz.), compared with 680,679 Au eq. oz. in Q3 2015.
- Revenue: $910.2 million, compared with $809.4 million in Q3 2015.
- Production cost of sales2: $719 per Au eq. oz., compared with $668 in Q3 2015.
- All-in sustaining cost2: $1,001 per Au eq. oz. sold, compared with $941 in Q3 2015. All-in sustaining cost per gold ounce (Au oz.) sold on a by-product basis was $987 in Q3 2016, compared with $936 in Q3 2015.
- Adjusted operating cash flow2: $320.3 million, compared with $206.6 million in Q3 2015.
Operating cash flow: $266.2 million, compared with $232.1 million in Q3 2015.
- Adjusted net earnings (loss)2,3: adjusted net earnings of $128.7 million, or $0.10 per share, compared with adjusted net loss of $23.9 million, or $0.02 per share, in Q3 2015.
- Reported net earnings (loss)3: reported net earnings of $2.5 million, or $0.00 per share, compared with a loss of $52.7 million, or $0.05 per share, in Q3 2015. The Q3 reported net earnings include a non-cash impairment charge of $68.3 million related to property, plant and equipment, and an inventory write-down of $71.3 million, at Maricunga.
- Balance sheet and liquidity: Kinross ended the quarter with cash and cash equivalents of $756.4 million and total liquidity of approximately $2.2 billion. The Company has no debt maturities until 2020.
Average realized gold price: $1,336 per ounce, compared with $1,122 per ounce in Q3 2015.
- Development projects: Kinross continued to make good progress advancing the pipeline of high-quality development projects spanning its three operating regions:
- The Tasiast Phase One expansion project is proceeding well and a feasibility study for the Phase Two expansion is expected to be completed in Q3 2017.
- Bald Mountain received a Record of Decision that allows for increased exploration and mining activities, which commenced in the quarter, and provides significant flexibility for future growth and expansion. A prefeasibility study for the Vantage Complex is expected to be completed in Q2 2017.
- The Russian development projects – September Northeast near Dvoinoye and Moroshka near Kupol – are expected to commence mining in Q1 2017 and the first half of 2018, respectively.
- A feasibility study for Round Mountain’s Phase W project is expected to be completed in Q3 2017.
- Outlook: Kinross is tracking towards the lower half of its 2016 guidance range for production (2.7 - 2.9 million Au eq. oz.), and the upper half of its guidance range for production cost of sales ($675 - $735 per Au eq. oz.) and all-in sustaining cost ($890 - $990 per Au eq. oz.). The capital expenditure forecast has been reduced to a range of $650-$675 million, compared with the previous forecast of $755 million.
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 13 to 17 of this news release.
3 Net earnings/loss figures in this release represent “net earnings (loss) attributable to common shareholders”.
p. 1 Kinross reports 2016 third-quarter results www.kinross.com
CEO Commentary
J. Paul Rollinson, President and CEO, made the following comments in relation to 2016 third-quarter results:
“Our portfolio of mines continued to deliver consistent and solid operational performance in the third quarter. Strong production, combined with a higher gold price, increased adjusted operating cash flow by 55% and adjusted net earnings by $153 million, year-over-year.
“With a strong balance sheet, total liquidity of approximately $2.2 billion, and no debt maturities until 2020, we have the financial strength and flexibility to fund our pipeline of high-quality organic development projects. The Tasiast Phase One expansion is advancing as planned, and we now expect to complete the Phase Two feasibility study in Q3 2017. At Bald Mountain, our new permit provides significant flexibility for future growth and expansion and we expect to complete a pre-feasibility study on the promising Vantage Complex in Q2 2017. Our two projects in Russia are in the advanced stages of development, and we expect to complete a feasibility study on the Round Mountain Phase W project in Q3 2017.
"We are delivering on our strategy with consistent operational performance and robust cash flow, a strong balance sheet, and a suite of exciting development projects that provide a clear path to future value."
Financial results Summary of financial and operating results
p. 2 Kinross reports 2016 third-quarter results www.kinross.com The following operating and financial results are based on third-quarter 2016 gold equivalent production. Production and cost measures are on an attributable basis:
Production: Kinross produced 684,129 attributable Au eq. oz. in Q3 2016, a slight increase compared with 680,679 Au eq. oz. in Q3 2015, mainly due to the acquisition of Bald Mountain and 50% of Round Mountain, offset by the temporary suspension of mining at Tasiast during the summer, the suspension of mining at Maricunga, and lower production at Paracatu.
Production cost of sales: Production cost of sales per Au eq. oz.2 was $719 for Q3 2016, compared with $668 for Q3 2015, mainly as a result of the temporary suspension at Tasiast, higher costs at Fort Knox and Chirano, and a decrease in high-margin ounces from Kupol-Dvoinoye.
Production cost of sales per Au oz. on a by-product basis2 was $695 in Q3 2016, compared with $655 in Q3 2015, based on Q3 2016 attributable gold sales of 651,259 ounces and attributable silver sales of 1,552,537 ounces.
All-in sustaining cost: All-in sustaining cost per Au eq. oz. sold2 was $1,001 in Q3 2016, compared with $941 in Q3 2015, mainly as a result of higher production cost of sales. All-in sustaining cost per Au oz. sold on a by-product basis2 was $987 in Q3 2016, compared with $936 in Q3 2015.
For the nine months ended September 30, 2016, all-in sustaining cost per Au eq. oz. sold was $973, compared with $970 for the same period in 2015, and all-in sustaining cost per Au oz. sold on a by-product basis was $962, compared with $965 for same the period in 2015.
Average realized gold price: The average realized gold price in Q3 2016 increased to $1,336 per ounce, compared with $1,122 per ounce in Q3 2015.
Revenue: Revenue from metal sales was $910.2 million in Q3 2016, compared with $809.4 million during the same period in 2015, due to the increase in the average realized gold price.
Margins: Kinross’ attributable margin per Au eq. oz. sold4 was $617 per Au eq. oz. for Q3 2016, compared with a Q3 2015 margin of $454 per Au eq. oz.
Operating cash flow: Operating cash flow of $266.2 million for Q3 2016, compared with $232.1 million for Q3 2015.
Adjusted operating cash flow2 was $320.3 million for Q3 2016, compared with $206.6 million for Q3 2015.
Earnings/loss: Adjusted net earnings2,3 were $128.7 million, or $0.10 per share, for Q3 2016, compared with adjusted net loss of $23.9 million, or $0.02 per share, for Q3 2015.
Reported net earnings3 were $2.5 million, or $0.00 per share, for Q3 2016, compared with reported net loss of $52.7 million, or $0.05 per share, for Q3 2015. Reported net earnings for Q3 2016 include a non-cash impairment charge of $68.3 million related to property, plant and equipment, and a write down of inventory of $71.3 million, at Maricunga.
Capital expenditures: Capital expenditures decreased to $153.8 million for Q3 2016, compared with $171.3 million for the same period last year, primarily due to lower spending at Fort Knox and Tasiast.
Operating results and update
Mine-by-mine summaries for 2016 third-quarter operating results may be found on pages eight and 12 of this news release. Highlights include the following:
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 2016 third-quarter results www.kinross.com
Americas
Fort Knox performed well during the quarter, as production increased compared with Q2 2016 mainly as a result of higher mill grades, higher tonnes of ore mined, planned mine sequencing and the positive seasonal effect on the heap leach. Production decreased slightly year-over-year mainly as a result of lower mill grades. Cost of sales per ounce decreased compared with Q2 2016 mainly due to higher mill grades and recoveries, while cost of sales per ounce increased compared with Q3 2015 primarily due to higher operating waste and lower mill grades.
Round Mountain continued to perform well, with production slightly higher than Q2 2016 mainly due to stronger mill grades. Cost of sales per ounce increased compared with the previous quarter mainly as a result of an increase in the consumption of reagents and fuel.
At Bald Mountain, production was largely in line with Q2 2016. Cost of sales per ounce decreased quarter-overquarter as a result of lower maintenance and contractor costs. The site continues to achieve higher mining rates and expects increased production in the fourth quarter due to higher grade materials placed on the heap leach in the third quarter, commissioning of a second heap leach pad, and the mine plan entering into the higher grade area of the ore body.
Kettle-River Buckhorn continued its strong performance as it nears the end of its mine life, which has now been extended into Q1 2017. Production increased quarter-over-quarter and year-over-year mainly as a result of higher grades, recoveries and throughput. The site achieved its lowest cost of sales per ounce in three years, mainly as a result of lower labour and contractor costs.
At Paracatu, production was lower compared with Q2 2016 and Q3 2015 mainly as a result of a lack of rainfall in the region which caused a temporary 16-day production curtailment, and localized metallurgical characteristics affecting throughput and recoveries. A number of Continuous Improvement initiatives have thus far offset these challenges. In Q3, the production shortfall was partially offset by approximately 20,000 Au eq. oz. of production from the Santo Antonio tailings reprocessing initiative. The site also continued with its ongoing water conservation activities, including establishing alternative water sources and enhancing water catchment areas, to mitigate the effect of the lack of rainfall. Cost of sales per ounce was largely in line with the previous quarter, and lower compared with Q3 2015, primarily as a result of foreign exchange gains derived from the Company’s hedging strategy.
At Maricunga, production was lower quarter-over-quarter and year-over-year as the Company placed the mine into suspension in August. The Company expects to continue rinsing the heap leach pads in the fourth quarter. Cost of sales per ounce was slightly higher than the previous quarter mainly due to fewer gold ounces sold.
Russia
The combined Kupol and Dvoinoye operation continued its consistent performance and achieved a solid quarter. Production was lower quarter-over-quarter and year-over-year primarily as a result of the anticipated lower grades, which were consistent with the mine plan. Cost of sales per ounce was higher compared with Q2 2016 mainly due to higher one time contractor costs, and was lower compared with Q3 2015 primarily due to a decrease in labour and fuel costs as a result of favourable foreign exchange movements. Approximately 71,000 Au eq. oz. were produced from processing Dvoinoye ore in Q3 2016.
Construction of a filter cake plant at Kupol is in its advanced stages, and is expected to be completed by year end. The plant will allow for increased treatment of tailings, giving the site more flexibility for potential mine life extensions going forward.
West Africa
At Tasiast, production was slightly higher quarter-over-quarter primarily as a result of higher mill grades, and lower compared with Q3 2015 mainly as a result of the temporary suspension of mining. Cost of sales per ounce was largely in line with the previous quarter and higher compared with Q3 2015 mainly due to the decrease in ounces produced.
p. 4 Kinross reports 2016 third-quarter results www.kinross.com Tasiast resumed normal mining and processing operations in mid-August following the temporary suspension caused by the now resolved expatriate work permit issue and the filing of a Mauritanization plan. A new three-year collective labour agreement (CLA) was signed on October 4, 2016 with union employees. The new CLA provides labour stability and underscores the ongoing partnerships the Company continues to build with its employees.
Chirano performed well during the quarter, substantially increasing production by 42% and decreasing cost of sales per ounce by 26% compared with Q2 2016. The production increase was mainly as a result of mining higher grades and volumes from the Paboase underground deposit, which is expected to continue into the fourth quarter. Production was largely consistent year-over-year, with cost of sales per ounce higher mainly due to increases in electricity costs, fuel costs, and taxes, which are expected to remain higher at the site.
Organic development projects
Tasiast Phase One expansion
The Tasiast Phase One expansion is progressing well, with engineering 80% complete and the majority of procurement for long lead packages now concluded. Major earthworks have begun and substantial construction has commenced on the crusher and the SAG mill foundations. Major contracts for the construction of the tailings storage facility (TSF) have been awarded while the TSF haul road is now approximately 65% complete. Full commercial production at the Phase One expansion is expected in Q2 2018.
The Company has also initiated the process for the Phase Two expansion feasibility study, which is expected to be completed in Q3 2017. Phase Two contemplates installing an additional 18,000 t/d of throughput capacity for a total combined capacity of 30,000 t/d for both phases.
Bald Mountain
On August 25, 2016, the Company announced that it received the Record of Decision from the U.S. Bureau of Land Management (BLM) to allow for increased exploration activities and expansion of existing mine operations at Bald Mountain. The decision opens up areas within the site’s large land package previously unavailable for mining and provides significant flexibility for future growth and expansion.
Since the BLM Record of Decision, Kinross has mobilized seven drill rigs and completed metallurgical and geological drilling at the Vantage Complex in the South area of the property. Approximately 18,000 metres of drilling have been completed at Vantage to support the pre-feasibility study (PFS) and an expected conversion of a portion of Bald Mountain's current estimated mineral resources to mineral reserves, with plans to drill a total of approximately 30,000 metres by year end. The Vantage Complex PFS, which is contemplating plans for a carbon adsorption plant, additional heap leach capacity and infrastructure, has commenced and is expected to be completed in Q2 2017.
The Record of Decision has also allowed for the start of mining activities at the Redbird pit in the North area of the property and granted access to the Poker and Winrock pits, which are expected to be included in the mine plan in 2017 and will provide greater operational flexibility.
Moroshka and September Northeast
Kinross’ Russian development projects continue to advance as planned. At the Moroshka project, located approximately four kilometres from Kupol, portal construction has commenced, with decline development and the installation of limited surface infrastructure expected to begin by year end. Mining is on schedule to commence in the first half of 2018. At September Northeast, located approximately 15 kilometres from Dvoinoye, preparations for the mining of the small open pit are progressing well, site infrastructure is now 90% complete, and mining is on schedule to commence in the first quarter of 2017. These two additional sources of ore are expected to add highmargin ounces into the mine plan, contributing to the one-year mine life extension at Kupol-Dvoinoye to 2021.
p. 5 Kinross reports 2016 third-quarter results www.kinross.com
Round Mountain Phase W
At the Round Mountain Phase W project, geotechnical and metallurgical drilling has commenced, along with infill drilling which is expected to continue into Q1 2017. The Company is on track to convert a portion of the project’s inferred mineral resource estimate to an indicated mineral resource by year end. Post-scoping study mine plan optimization is underway to identify strategies to potentially increase the value and economics of the project, while permitting work continues to advance. A feasibility study on Phase W is expected to be completed in Q3 2017.
La Coipa Phase 7
At La Coipa Phase 7, the Company received approval on the project DIA (Declaration of Impact to Environment) permit and is now proceeding with sectoral permits, which are expected in late 2017. Exploration drilling is continuing, with positive results at several targets, including Catalina, located less than one kilometre southeast of the Phase 7 deposit.
Balance sheet and liquidity
As of September 30, 2016, Kinross had cash and cash equivalents of $756.4 million, a decrease of $287.5 million since December 31, 2015. The Company has available credit of $1,427.2 million as of September 30, 2016 for total liquidity of approximately $2.2 billion.
On September 1, 2016, the Company repaid $250 million in senior notes. With no debt maturing until 2020, a strong balance sheet and excellent liquidity, Kinross expects to have the financial flexibility to fund organic growth opportunities within its global portfolio, including the Tasiast Phase One expansion and potential Bald Mountain expansion.
Non-cash impairment
As at September 30, 2016, the Company identified an indicator of impairment at Maricunga as a result of the suspension of mining activities. As a result, the Company recorded non-cash impairment charges of $68.3 million to property, plant and equipment, and $71.3 million to inventory, at Maricunga.
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 18 of this news release.
The Company is tracking towards the lower half of its 2016 production guidance range of approximately 2.7 - 2.9 million Au eq. oz., and the upper half of its production cost of sales guidance range of $675 - $735 per Au eq. oz. and all-in sustaining cost guidance range of $890 - $990 per Au eq. oz. sold.
Kinross’ capital expenditure forecast has been reduced to a range of $650-$675 million, compared with the previous forecast of $755 million. The decrease is mainly as a result of lower than expected spending at Tasiast’s Phase One expansion project, which has now been deferred to 2017, after the temporary suspension of activities earlier in the year.
The Company’s other operating cost forecast is now expected to be in excess of $110 million, compared with the previously-stated forecast of $95 million, mainly due to the temporary suspension at Tasiast and the suspension of mining at Maricunga.
Depreciation, depletion and amortization is now forecast to be approximately $325 per Au eq. oz., compared with the previous forecast of $350 per Au eq. oz.
p. 6 Kinross reports 2016 third-quarter results www.kinross.com
Senior management changes
On August 17, 2016, the Company announced the appointments of Lauren Roberts as Chief Operating Officer and Paul Tomory as Chief Technical Officer, a new role within the senior leadership team, both effective January 1, 2017. Mr. Roberts will replace Warwick Morley-Jepson, whose departure was also announced on August 17, 2016. Kinross’ Board of Directors and management team would like to thank Mr. Morley-Jepson for his many positive contributions to the Company and wish him well in his future endeavours.
Conference call details
In connection with the release, Kinross will hold a conference call and audio webcast on Thursday, November 3, 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 – 0783 followed by #.
Outside of Canada & US – 1-604-638-9010; Passcode – 0783 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 third-quarter unaudited Financial Statements and Management’s Discussion and Analysis report at www.kinross.com. Kinross’ 2016 third-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. 7 Kinross reports 2016 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 2016 2015 2016 2015 2016 2015 2016 2015
Fort Knox 110,396 115,258 107,444 118,978 $ 79.8 $ 66.2 $ 743 $
| Round Mountain | 93,215 | 58,074 | 88,477 | 54,559 | 73.7 | 37.5 | 833 | 687 |
| Bald Mountain | 32,675 | - | 30,174 | - | 30.9 | - | 1,024 | - |
| Kettle River - Buckhorn | 28,241 | 24,222 | 28,104 | 24,284 | 17.1 | 19.3 | 608 | 795 |
| Paracatu | 111,889 | 129,064 | 111,796 | 134,838 | 77.5 | 100.7 | 693 | 747 |
| Maricunga | 39,253 | 52,672 | 39,458 | 52,282 | 37.5 | 52.5 | 950 | 1,004 |
| Americas Total | 415,669 | 379,290 | 405,453 | 384,941 | 316.5 | 276.2 | 781 | 718 |
| Kupol | 178,032 | 190,366 | 181,508 | 217,031 | 82.4 | 101.7 | 454 | 469 |
| Russia Total | 178,032 | 190,366 | 181,508 | 217,031 | 82.4 | 101.7 | 454 | 469 |
| Tasiast | 34,793 | 53,440 | 30,793 | 57,163 | 38.1 | 60.4 | 1,237 | 1,057 |
| Chirano (100%) | 61,817 | 63,981 | 62,573 | 62,792 | 53.0 | 44.0 | 847 | 701 |
| West Africa Total | 96,610 | 117,421 | 93,366 | 119,955 | 91.1 | 104.4 | 976 | 870 |
| Operations Total | 690,311 | 687,077 | 680,327 | 721,927 | 490.0 | 482.3 | 720 | 668 |
Less Chirano non-controlling (6,182) (6,398) (6,257) (6,279) (5.3) (4.4)
interest (10%)
Attributable Total 684,129 680,679 674,070 715,648 $ 484.7 $ 477.9 $ 719 $
| Nine months ended September 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 295,417 313,992 292,958 314,678 $ 219.4 $ 190.2 $ 749 $ 604 Round Mountain 278,954 146,784 270,597 142,899 205.4 109.9 759 769 Bald Mountain 85,801 - 76,879 - 87.2 - 1,134 - Kettle River - Buckhorn 81,584 78,067 81,176 77,975 57.5 67.0 708 859 Paracatu 358,039 364,115 355,251 366,936 244.9 285.1 689 777 Maricunga 142,633 157,207 142,310 157,615 127.4 163.5 895 1,037 Americas Total 1,242,428 1,060,165 1,219,171 1,060,103 941.8 815.7 772 769 Kupol 554,120 567,255 556,089 569,148 243.5 271.5 438 477 Russia Total 554,120 567,255 556,089 569,148 243.5 271.5 438 477 Tasiast 111,448 165,339 107,651 163,894 120.6 170.7 1,120 1,042 Chirano (100%) 149,848 197,975 152,564 203,682 148.5 137.5 973 675 West Africa Total 261,296 363,314 260,215 367,576 269.1 308.2 1,034 838 Operations Total 2,057,844 1,990,734 2,035,475 1,996,827 1,454.4 1,395.4 715 699 Less Chirano non-controlling (14,985) (19,797) (15,256) (20,368) (14.9) (13.8) interest (10%) Attributable Total 2,042,859 1,970,937 2,020,219 1,976,459 $ 1,439.5 $ 1,381.6 $ 713 $ 699 | ||
|---|---|---|
| 295,417 313,992 292,958 314,678 $ 219.4 $ 190.2 $ 749 | ||
| 278,954 146,784 270,597 142,899 205.4 109.9 759 | ||
| 85,801 - 76,879 - 87.2 - 1,134 | ||
| 81,584 78,067 81,176 77,975 57.5 67.0 708 | ||
| 358,039 364,115 355,251 366,936 244.9 285.1 689 | ||
| 142,633 157,207 142,310 157,615 127.4 163.5 895 | ||
| 1,242,428 1,060,165 1,219,171 1,060,103 941.8 815.7 772 | 769 477 | |
| 554,120 567,255 556,089 569,148 243.5 271.5 438 | ||
| 554,120 567,255 556,089 569,148 243.5 271.5 438 | 477 1,042 675 | |
| 111,448 165,339 107,651 163,894 120.6 170.7 1,120 | ||
| 149,848 197,975 152,564 203,682 148.5 137.5 973 261,296 363,314 260,215 367,576 269.1 308.2 1,034 2,057,844 1,990,734 2,035,475 1,996,827 1,454.4 1,395.4 715 (14,985) (19,797) (15,256) (20,368) (14.9) (13.8) 2,042,859 1,970,937 2,020,219 1,976,459 $ 1,439.5 $ 1,381.6 $ 713 | ||
| 838 | ||
| 699 | ||
| $ 699 |
p. 8 Kinross reports 2016 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, 2016 2015
Assets
Current assets
| Cash and cash equivalents | $ 7 56.4 |
|---|---|
| Restricted cash Accounts receivable and other assets Current income tax recoverable Inventories Unrealized fair value of derivative assets | 11.5 178.3 94.9 1,013.7 7.8 |
| 2,062.6 | |
| 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 | 4,908.0 162.7 179.0 163.7 4.9 435.2 96.2 |
| $ 8 ,012.3 | |
| $ 4 40.0 44.8 - | |
| Current portion of provisions | 50.1 |
| Current portion of unrealized fair value of derivative liabilities Non-current liabilities Long-term debt | 0.6 |
| 535.5 | |
| 1,732.5 | |
| Provisions | 856.6 |
| 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) | 166.1 392.0 |
| 3,682.7 | |
| $ 1 4,894.1 235.8 (10,909.6) 69.1 | |
| Total common shareholders' equity | 4,289.4 |
| Non-controlling interest Total equity | 40.2 |
| 4,329.6 | |
| $ 8 ,012.3 |
$ 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 1,244,958,559 1,146,540,188
p. 9 Kinross reports 2016 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, 2016 2015 2016 2015 | ||
|---|---|---|
| 2016 | 2015 | |
| Revenue Metal sales $ 910.2 $ 8 09.4 $ 2 ,569.2 $ 2 ,346.0 Cost of sales Production cost of sales 490.0 482.3 1,454.4 1,395.4 Depreciation, depletion and amortization 213.8 239.8 617.2 662.7 Impairment charges 139.6 - 139.6 24.5 Total cost of sales 843.4 722.1 2,211.2 2,082.6 Gross profit 66.8 87.3 358.0 263.4 Other operating expense 27.2 13.5 97.2 78.8 Exploration and business development 29.8 29.9 68.3 82.4 General and administrative 39.9 44.2 110.6 127.8 Operating earnings (loss) (30.1) (0.3) 81.9 (25.6) Other income (expense) - net 2.1 2.8 15.3 (5.4) Equity in earnings (losses) of associate and joint ventures (0.3) (1.1) (0.2) 3.8 Finance income 2.1 2.1 5.6 6.3 Finance expense (31.0) (21.9) (96.5) (69.6) Earnings (loss) before tax (57.2) (18.4) 6.1 (90.5) Income tax recovery (expense) - net 59.4 (34.7) 2.7 (54.6) Net earnings (loss) $ 2.2 $ (53.1) $ 8 .8 $ (145.1) Net earnings (loss) attributable to: Non-controlling interest $ ( 0.3) $ (0.4) $ (3.7) $ (2.5) Common shareholders $ 2.5 $ (52.7) $ 1 2.5 $ (142.6) Earnings (loss) per share attributable to common shareholders Basic $ 0.00 $ (0.05) $ 0 .01 $ (0.12) Diluted $ 0.00 $ (0.05) $ 0 .01 $ (0.12) Weighted average number of common shares outstanding (millions) Basic 1,244.9 1,146.3 1,221.0 1,145.9 Diluted 1,256.5 1,146.3 1,231.8 1,145.9 | ||
| Revenue | ||
| Metal sales Cost of sales Production cost of sales Depreciation, depletion and amortization Impairment charges | $ 910.2 490.0 213.8 139.6 | |
| Total cost of sales Gross profit | 843.4 | |
| 66.8 | ||
| 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 ventures Finance income | 27.2 29.8 39.9 | |
| (30.1) | ||
| 2.1 (0.3) 2.1 | ||
| 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 | (31.0) | |
| (57.2) 59.4 | ||
| $ 2.2 | ||
| $ ( 0.3) | ||
| $ 2.5 | ||
| Basic | $ 0.00 | |
| Diluted | $ 0.00 | |
| Weighted average number of common shares outstanding (millions) | ||
| Basic Diluted | 1,244.9 1,256.5 |
| $ 2 ,569.2 1,454.4 617.2 139.6 | ||
|---|---|---|
| 2,211.2 | ||
| 358.0 | ||
| 97.2 68.3 110.6 | ||
| 81.9 | ||
| 15.3 (0.2) 5.6 | ||
| (96.5) | ||
| 6.1 2.7 | ||
| $ 8 .8 | ||
| $ (3.7) | ||
| $ 1 2.5 | ||
| $ 0 .01 | ||
| $ 0 .01 | ||
| 1,146.3 1,146.3 | 1,221.0 1,231.8 | 1,145.9 1,145.9 |
p. 10 Kinross reports 2016 third-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 Imppairment charges Equity in losses (earnings) of associate and joint ventures Share-based compensation expense | $ 2.2 213.8 139.6 0.3 3.7 |
| Finance expense | 31.0 |
| Deferred tax recovery Foreign exchange losses (gains) and other Changes in operating assets and liabilities: Accounts receivable and other assets Inventories Accounts payable and accrued liabilities | (46.7) (23.6) (55.5) (16.9) 40.3 |
| Cash flow provided from operating activities Income taxes paid Net cash flow provided from operating activities | 288.2 |
| (22.0) | |
| 266.2 | |
| Investing: Additions to property, plant and equipment Business acquisition | (153.8) - |
| Net additions to long-term investments and other assets | (35.4) |
| 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 | 1.1 (0.1) 1.1 |
| (187.1) | |
| 1.8 - - (250.0) (37.2) (3.3) | |
| Net cash flow used in financing activities | (288.7) |
| 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 | (2.2) |
| (211.8) 968.2 | |
| $ 756.4 |
Three months ended Nine months ended
September 30, September 30, September 30, 2015 2016 2015
$ (53.1) $ 8.8 $ (145.1)
| 239.8 | 617.2 | 662.7 |
| - | 139.6 | 24.5 |
| 1.1 | 0.2 | (3.8) |
| 5.0 | 10.8 | 13.9 |
| 21.9 | 96.5 | 69.6 |
| (24.9) | (150.7) | (42.0) |
| 16.8 | (7.3) | 3.0 |
| (3.6) | (51.9) | 7.4 |
| 23.2 | 67.0 | 110.4 |
| 27.7 | 155.3 | 28.1 |
| 253.9 | 885.5 | 728.7 |
| (21.8) | (88.9) | (79.3) |
| 232.1 | 796.6 | 649.4 |
| (171.3) | (407.3) | (449.3) |
| - | (588.0) | - |
| (18.7) | (55.5) | (60.4) |
| 0.1 | 8.0 | 3.0 |
| 31.9 | (1.0) | 34.7 |
| 1.0 | 2.6 | 3.1 |
| (157.0) | (1,041.2) | (468.9) |
| - | 2.8 | - |
| - | 275.7 | - |
| - | - | 22.5 |
| (50.0) | (250.0) | (102.5) |
| (24.1) | (70.4) | (47.6) |
| (1.9) | (3.3) | (2.9) |
| (76.0) | (45.2) | (130.5) |
| (5.7) | 2.3 | (8.7) |
| (6.6) | (287.5) | 41.3 |
| 1,031.4 | 1,043.9 | 983.5 |
| $ 1,024.8 $ 756.4 | $ 1,024.8 |
p. 11 Kinross reports 2016 third-quarter results www.kinross.com
| Operating Summary | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| M ine | P erio d | Ownership | T o nnes Ore M ined ( 1 ) | Ore P ro cessed (M illed) ( 1 ) | Ore P ro cessed (H eap Leach) ( 1 ) | Grade (M ill) | Grade (H eap Leach) | R eco very ( 2 ) | Go ld Eq P ro ductio n ( 5 ) | Go ld Eq Sales ( 5 ) | P ro ductio n co st o f sales | P ro ductio n co st o f sales / o z | C ap Ex ( 7 ) | D D &A | |
| (%) | ('000 tonnes) | ('000 tonnes) | ('000 tonnes) | (g/t) | (g/t) | (%) | (ounces) | (ounces) | ($ millions) | ($/ounce) | ($ millions) | ($ millions) | |||
| Americas | F o rt Kno x | Q3 2016 | 100 | 8,959 | 3,270 | 9,507 | 0.68 | 0.26 | 85% | 110,396 | 107,444 | $ 79.8 | $ 743 | $ 13.8 | $ 20.4 |
| Q2 2016 | 100 | 6,141 | 3,467 | 4,914 | 0.64 | 0.28 | 83% | 97,221 | 97,625 | 77.4 | 793 | 15.2 | 22.3 | ||
| Q1 2016 | 100 | 6,786 | 3,246 | 7,495 | 0.66 | 0.26 | 81% | 87,800 | 87,889 | 62.2 | 708 | 18.0 | 23.5 | ||
| Q4 2015 | 100 | 4,454 | 3,407 | 6,712 | 0.66 | 0.26 | 82% | 87,561 | 87,426 | 62.6 | 716 | 35.3 | 31.7 | ||
| Q3 2015 | 100 | 5,950 | 3,328 | 6,697 | 0.86 | 0.27 | 83% | 115,258 | 118,978 | 66.2 | 556 | 37.4 | 36.8 | ||
| R o und M o untain | Q3 2016 | 100 | 5,392 | 953 | 6,900 | 0.98 | 0.43 | 82% | 93,215 | 88,477 | $ 73.7 | $ 833 | $ 14.8 | $ 24.2 | |
| Q2 2016 | 100 | 6,632 | 942 | 6,234 | 0.80 | 0.40 | 80% | 92,813 | 91,646 | 71.3 | 778 | 12.3 | 20.8 | ||
| Q1 2016 (8) | 100(8) | 4,018 | 869 | 3,617 | 1.17 | 0.44 | 83% | 92,926 | 90,474 | 60.4 | 668 | 16.3 | 16.1 | ||
| Q4 2015 | 50 | 6,392 | 898 | 3,724 | 0.86 | 0.42 | 77% | 51,034 | 52,882 | 37.0 | 700 | 14.2 | 11.0 | ||
| Q3 2015 | 50 | 6,962 | 924 | 4,546 | 0.91 | 0.47 | 81% | 58,074 | 54,559 | 37.5 | 687 | 12.3 | 12.9 | ||
| B ald M o untain ( 8 ) , ( 9 ) | Q3 2016 | 100 | 3,081 | - | 3,081 | - | 0.66 | nm | 32,675 | 30,174 | $ 30.9 | $ 1,024 | $ 16.6 | $ 10.7 | |
| Q2 2016 | 100 | 2,182 | - | 2,182 | - | 0.48 | nm | 32,704 | 35,508 | 43.2 | 1,217 | 4.5 | 8.6 | ||
| Q1 2016 (8) | 100 | 1,766 | - | 1,766 | - | 0.62 | nm | 20,422 | 11,197 | 13.1 | 1,170 | 1.7 | 2.0 | ||
| Kettle R iver- B uckho rn | Q3 2016 | 100 | 123 | 111 | - | 8.14 | - | 94% | 28,241 | 28,104 | $ 17.1 | $ 608 | $ - | $ 1.0 | |
| Q2 2016 | 100 | 101 | 101 | - | 7.40 | - | 93% | 25,031 | 24,808 | 18.2 | 734 | - | 0.8 | ||
| Q1 2016 | 100 | 86 | 107 | - | 7.23 | - | 92% | 28,312 | 28,264 | 22.2 | 785 | - | 1.4 | ||
| Q4 2015 | 100 | 84 | 90 | - | 9.67 | - | 92% | 19,301 | 19,601 | 14.6 | 745 | - | 2.0 | ||
| Q3 2015 | 100 | 97 | 106 | - | 6.93 | - | 92% | 24,222 | 24,284 | 19.3 | 795 | - | 2.6 | ||
| P aracatu | Q3 2016 | 100 | 12,597 | 11,084 | - | 0.48 | - | 73% | 111,889 | 111,796 | $ 77.5 | $ 693 | $ 34.0 | $ 31.0 | |
| Q2 2016 Q1 2016 Q4 2015 Q3 2015 | 100 100 100 100 | 12,109 11,825 10,730 13,969 | 12,331 11,439 9,738 12,322 | - - - - | 0.44 0.44 0.51 0.43 | - - - - | 70% 73% 76% 76% | 126,774 119,376 113,547 129,064 | 126,365 117,090 117,796 134,838 | 87.5 79.9 89.2 100.7 | 692 682 757 747 | 15.9 10.7 30.1 36.9 | 35.4 35.4 34.9 38.4 | ||
| M aricunga ( 9 ) | Q3 2016 | 100 | 766 | - | 779 | 0.68 | nm | 39,253 | 39,458 | $ 37.5 | $ 950 | $ 0.9 | $ 10.8 | ||
| Q2 2016 Q1 2016 Q4 2015 Q3 2015 | 100 100 100 100 | 1,346 3,947 3,870 3,476 | - - - - | 1,475 4,254 4,099 3,822 | - - - | 0.61 0.69 0.78 0.74 | nm nm nm nm | 44,304 59,076 54,948 52,672 | 45,362 57,490 56,440 52,282 | 42.6 47.3 52.6 52.5 | 939 823 932 1,004 | 1.3 0.8 4.7 5.2 | 11.6 10.8 8.2 7.3 | ||
| Russia | Kupo l ( 3 ) ( 4 ) ( 6 ) | Q3 2016 | 100 | 492 | 440 | - | 11.79 | - | 95% | 178,032 | 181,508 | $ 82.4 | $ 454 | $ 24.8 | $ 60.9 |
| Q2 2016 Q1 2016 Q4 2015 Q3 2015 | 100 100 100 100 | 513 494 449 468 | 428 416 429 410 | - - - - | 12.75 13.92 13.81 13.65 | - - - - | 95% 95% 96% 96% | 183,638 192,450 191,308 190,366 | 198,890 175,691 195,465 217,031 | 82.9 78.2 91.3 101.7 | 417 445 467 469 | 15.1 27.8 9.0 21.4 | 59.9 52.9 73.8 77.3 | ||
| West Africa | T asiast | Q3 2016 | 100 | 2,462 | 457 | 1,585 | 1.78 | 0.45 | 91% | 34,793 | 30,793 | $ 38.1 | $ 1,237 | $ 36.3 | $ 22.0 |
| Q2 2016 Q1 2016 Q4 2015 Q3 2015 | 100 100 100 100 | 1,937 1,891 1,318 1,259 | 489 777 689 618 | 1,542 1,187 587 364 | 1.39 1.51 2.27 2.21 | 0.45 0.41 0.55 0.48 | 92% 91% 89% 92% | 29,577 47,078 53,706 53,440 | 28,467 48,391 52,146 57,163 | 35.3 47.2 49.9 60.4 | 1,240 975 957 1,057 | 36.0 49.9 49.6 44.1 | 22.3 22.7 26.5 19.5 | ||
| C hirano - 100% | Q3 2016 | 90 | 858 | 918 | - | 2.35 | - | 92% | 61,817 | 62,573 | $ 53.0 | $ 847 | $ 9.5 | $ 30.0 | |
| Q2 2016 Q1 2016 Q4 2015 Q3 2015 | 90 90 90 90 | 547 453 559 873 | 882 847 853 917 | - - - - | 1.72 1.77 2.32 2.36 | - - - - | 91% 91% 91% 91% | 43,561 44,470 58,123 63,981 | 42,312 47,679 56,284 62,792 | 48.3 47.2 42.2 44.0 | 1,142 990 750 701 | 11.1 11.7 11.6 6.7 | 25.8 25.7 44.1 42.7 | ||
| C hirano - 90% | Q3 2016 | 90 | 858 | 918 | - | 2.35 | - | 92% | 55,635 | 56,316 | $ 47.7 | $ 847 | $ 8.5 | $ 27.0 | |
| Q2 2016 Q1 2016 Q4 2015 Q3 2015 | 90 90 90 90 | 547 453 559 873 | 882 847 853 917 | - - - - | 1.72 1.77 2.32 2.36 | - - - - | 91% 91% 91% 91% | 39,205 40,023 52,311 57,583 | 38,081 42,911 50,655 56,513 | 43.5 42.5 38.0 39.6 | 1,142 990 750 701 | 10.0 10.5 10.4 6.0 | 23.2 23.1 39.7 38.4 |
(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: Q3 (2016) 104.36 g/t, 90%; 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%
(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: Q3 2016:68.05:1, Q2 2016: 75.06:1 , Q1 2016: 79.64:1; Q4 2015: 74.78:1; Q3 2015: 75.40:1
(6) Dvoinoye ore processed and grade were as follows: Q3 (2016) 117,814 tonnes, 18.96 g/t ; 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
(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. 12 Kinross reports 2016 third-quarter results www.kinross.com