Kinross reports 2018 fourth-quarter and full-year results Achieves seventh consecutive year of meeting production and cost guidance Paracatu and Bald Mountain deliver record annual production; Tasiast achieves record quarterly production
Kinross reports 2018 fourth-quarter and full-year results
Achieves seventh consecutive year of meeting production and cost guidance
Paracatu and Bald Mountain deliver record annual production; Tasiast achieves record quarterly production
Strong 2019 outlook forecasting production of 2.5 million Au eq. oz. and costs in line with 2018
TORONTO, Feb. 13, 2019 -- Kinross Gold Corporation (TSX: K, NYSE: KGC) today announced its results for the fourth-quarter and year-end December 31,
2018.
(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 37 of this release. All dollar amounts are
expressed in U.S. dollars, unless otherwise noted.)
2018 full-year results and 2019 outlook:
2018 outlook
(+/- 5%) 2018 full-year results
2019 outlook
(+/- 5%)
Gold equivalent production 1
(ounces) 2.5 million 2.45 million
2.5 million
Production cost of sales2
($ per Au eq. oz.) $730 $734 $ 730
All-in sustaining cost2
($ per Au eq. oz.) $975 $965 $ 995
Capital expenditures $1,075 million $1,043 million $1,050 million
CEO Commentary:
J. Paul Rollinson, President and CEO, made the following comments in relation to 2018 fourth-quarter and year-end results:
“Kinross once again delivered on its commitments in 2018, as we met our production, cost and capital guidance for the seventh consecutive year. Our
portfolio of mines produced solid results, with standout performances from Paracatu and Bald Mountain, both of which delivered record annual production.
Following successful completion of the Tasiast Phase One expansion, the mine achieved record production in the fourth quarter, with throughput and
recoveries exceeding expectations. Kinross also generated approximately $790 million in operating cash flow and maintained its strong balance sheet, with
$1.9 billion in liquidity and no debt maturities until 2021.
“We expect to deliver another strong year in 2019, producing approximately 2.5 million gold equivalent ounces at costs similar to 2018. Our development
projects are proceeding well, and we look forward to a number of milestones this year, including: the start of commissioning of the Bald Mountain Vantage
Complex processing circuit and completion of the Lobo-Marte scoping study in the first quarter; the start of commissioning of the Round Mountain Phase W
processing circuit in the second quarter; and, the completion of the La Coipa Restart feasibility study and the start of stripping at Fort Knox Gilmore in the
third quarter.
“At Tasiast, we continue to evaluate alternative approaches to further increase throughput and reduce capital while preserving the overall value of the project.
The project financing is progressing well and we are targeting completion mid-year.”
2018 Q4 and full-year highlights:
• Production1: 610,152 gold equivalent ounces (Au eq. oz.) in Q4 2018 and 2,452,398 Au eq. oz. in 2018.
• Revenue: $786.5 million in Q4 2018 and $3,212.6 million in 2018.
• Production cost of sales2: $743 per Au eq. oz. in Q4 2018 and $734 per Au eq. oz. in 2018.
• All-in sustaining cost2: $961 per Au eq. oz. sold in Q4 2018 and $965 per Au eq. oz. sold in 2018. All-in sustaining cost per Au oz. sold on a by-
product basis was $955 in Q4 2018 and $959 per Au oz. sold in 2018.
• Operating cash flow: $183.5 million in Q4 2018 and $788.7 million in 2018.
• Adjusted operating cash flow 2: $135.8 million in Q4 2018 and $874.2 million for 2018.
• Reported net loss3: $27.7 million, or $0.02 per share in Q4 2018, and $23.6 million, or $0.02 per share, in 2018.
• Adjusted net earnings2,3: adjusted net earnings of $13.5 million, or $0.01 per share in Q4 2018, and adjusted net earnings of $128.1 million, or
$0.10 per share, in 2018.
• Balance sheet: Cash and cash equivalents of $349.0 million, and total liquidity of $1,901.9 million at December 31, 2018. No debt maturities until
2021.
Operations and organic development projects:
• Paracatu delivers record annual production mainly due to higher recoveries and throughput, increasing production 45% year-over-year while reducing
costs.
• Bald Mountain achieves record annual production, and Tasiast delivers record quarterly production in the fourth quarter as throughput and recoveries
exceed expectations.
• The Round Mountain Phase W project continues to progress on budget and on schedule, with pre-stripping advancing well and commissioning of the
processing circuit expected to begin in Q2 2019.
• The Bald Mountain Vantage Complex project is proceeding well, with commissioning of the processing circuit expected to begin in Q1 2019.
• The Fort Knox Gilmore project in Alaska remains on schedule, with stripping expected to commence in Q3 2019.
• In Chile, the La Coipa Restart project feasibility study is scheduled to be completed in Q3 2019 and the Lobo-Marte scoping study is expected to be
completed in Q1 2019.
• The Tasiast Phase Two expansion continues to be a viable option as the Company completes its evaluation of alternative approaches to further
increase throughput at the site.
Exploration and mineral reserves and resources update 4:
• Kinross added approximately 2.3 million ounces to reserve estimates in 2018, including approximately 1.9 million ounces at Fort Knox , to largely
offset depletion.
• Mineral reserve estimates at year-end 2018 were 25.5 million ounces, compared with 25.9 million ounces at year-end 2017.
• The Company extended mine life at Kupol and Chirano by one year, with strong exploration results at both sites.
• Exploration activities added a total of approximately 343 Au koz. to the Company’s estimated mineral reserves and 414 Au koz. to estimated
measured and indicated mineral resources.
Financial results
Summary of financial and operating results
Three months ended Years ended
December 31, December 31,
(in millions, except ounces, per share amounts, and per ounce amounts) 2018 2017 2018 2017
Operating Highlights
Total gold equivalent ounces(a)
Produced(c) 615,279 659,339 2,475,068 2,698,136
Sold(c) 641,101 634,762 2,532,912 2,621,875
Attributable gold equivalent ounces(a)
Produced(c) 610,152 652,710 2,452,398 2,673,533
Sold(c) 636,183 628,565 2,510,419 2,596,754
Financial Highlights
Metal sales $ 786.5 $ 810.3 $ 3,212.6 $ 3,303.0
Production cost of sales $ 476.4 $ 414.5 $ 1,860.5 $ 1,757.4
Depreciation, depletion and amortization $ 184.3 $ 190.3 $ 772.4 $ 819.4
Impairment, net of reversals $ - $ 21.5 $ - $ 21.5
Operating earnings $ 25.1 $ 102.9 $ 200.5 $ 336.5
Net (loss) earnings attributable to common shareholders $ (27.7) $ 217.6 $ (23.6) $ 445.4
Basic (loss) earnings per share attributable to common shareholders $ (0.02) $ 0.17 $ (0.02) $ 0.36
Diluted (loss) earnings per share attributable to common shareholders $ (0.02) $ 0.17 $ (0.02) $ 0.35
Adjusted net earnings attributable to common shareholders(b) $ 13.5 $ 16.3 $ 128.1 $ 178.7
Adjusted net earnings per share(b) $ 0.01 $ 0.01 $ 0.10 $ 0.14
Net cash flow provided from operating activities $ 183.5 $ 366.4 $ 788.7 $ 951.6
Adjusted operating cash flow(b) $ 135.8 $ 364.2 $ 874.2 $ 1,166.7
Capital expenditures $ 273.0 $ 313.3 $ 1,043.4 $ 897.6
Average realized gold price per ounce(d) $ 1,226 $ 1,276 $ 1,268 $ 1,260
Consolidated production cost of sales per equivalent ounce(c) sold(b) $ 743 $ 653 $ 735 $ 670
Attributable(a) production cost of sales per equivalent ounce(c) sold(b) $ 743 $ 653 $ 734 $ 669
Attributable(a) production cost of sales per ounce sold on a by-product
basis(b) $ 733 $ 637 $ 723 $ 653
Attributable(a) all-in sustaining cost per ounce sold on a by-product
basis(b) $ 955 $ 1,013 $ 959 $ 946
Attributable(a) all-in sustaining cost per equivalent ounce(c) sold(b) $ 961 $ 1,019 $ 965 $ 954
Attributable(a) all-in cost per ounce sold on a by-product basis (b) $ 1,287 $ 1,308 $ 1,275 $ 1,164
Attributable(a) all-in cost per equivalent ounce(c) sold(b) $ 1,286 $ 1,308 $ 1,274 $ 1,166
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 pages 27 to 31 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 2018 was 80.74:1 (2017 - 73.72:1). The ratio for Q4 2018 was 84.42:1 (Q4 2017 – 76.22:1)
d. The definition of this non-GAAP financial measure is included on page 31 of this news release.
The following operating and financial results are based on fourth-quarter and year-end 2018 gold equivalent production. Production and cost measures are on
an attributable basis:
Production: Kinross produced 610,152 attributable Au eq. oz. in the fourth quarter of 2018, compared with 652,710 in the fourth quarter of 2017, mainly due
to lower production at Fort Knox and Bald Mountain, partially offset by record production at Tasiast and Paracatu.
Kinross produced 2,452,398 attributable Au eq. oz. for full-year 2018, which was in line with the Company’s 2018 guidance range. This compares with
production of 2,673,533 Au eq. oz. for full-year 2017.
Production cost of sales: Production cost of sales per Au eq. oz. 2 was $743 for the fourth quarter of 2018, compared with $653 for the fourth quarter of 2017,
largely due to higher cost of sales per ounce sold at Fort Knox. Production cost of sales per Au oz. on a by-product basis 2 was $733 in Q4 2018, compared
with $637 in Q4 2017, based on Q4 2018 attributable gold sales of 623,930 ounces and attributable silver sales of 1,034,273 ounces.
Production cost of sales per Au eq. oz. was $734 for full-year 2018, which was in line with the Company’s 2018 guidance. This compares with production
cost of sales of $669 per Au eq. oz. for full-year 2017. The full-year increase was mainly due to increases in cost of sales per ounce sold at Fort Knox and
Tasiast. Production cost of sales per Au oz. on a by-product basis 2 was $723 for full-year 2018, compared with $653 for full-year 2017, based on 2018
attributable gold sales of 2,458,069 ounces and attributable silver sales of 4,229,257 ounces.
All-in sustaining cost: All-in sustaining cost per Au eq. oz. sold 2 decreased to $961 in Q4 2018, compared with $1,019 in Q4 2017. All-in sustaining cost
per Au oz. sold on a by-product basis 2 decreased to $955 in Q4 2018, compared with $1,013 in Q4 2017.
All-in sustaining cost per Au eq. oz. sold was $965 for full-year 2018, which was at the lower end of the Company’s 2018 guidance range, compared with
$954 for full-year 2017. All-in sustaining cost per Au oz. sold on a by-product basis was $959 for full-year 2018, compared with $946 for full-year 2017.
Revenue : Revenue from metal sales was $786.5 million in the fourth quarter of 2018, compared with $810.3 million during the same period in 2017.
Revenue was $3,212.6 million for full-year 2018, which was largely in line with revenue of $3,303.0 million for full-year 2017.
Average realized gold price 5: The average realized gold price in Q4 2018 decreased to $1,226 per ounce, compared with $1,276 per ounce in Q4 2017.
The average realized gold price per ounce was $1,268 for full-year 2018, mainly in line with $1,260 per ounce for full-year 2017.
Margins: Kinross’ attributable margin per Au eq. oz. sold6 was $483 per Au eq. oz. for the fourth quarter of 2018, compared with the Q4 2017 margin of $623
per Au eq. oz. sold. Full-year 2018 margin per Au eq. oz. sold was $534, compared with $591 for full-year 2017.
Operating cash flow : Adjusted operating cash flow 2 was $135.8 million for the fourth quarter of 2018, compared with $364.2 million for Q4 2017. Adjusted
operating cash flow for full-year 2018 was $874.2 million, compared with $1,166.7 million for full-year 2017.
Net operating cash flow was $183.5 million for the fourth quarter of 2018, compared with $366.4 million for Q4 2017. Net operating cash flow for full-year 2018
was $788.7 million, compared with $951.6 million for full-year 2017.
Earnings/loss: Adjusted net earnings 2,3 was $13.5 million, or $0.01 per share, for Q4 2018, compared with adjusted net earnings of $16.3 million, or $0.01
per share, for Q4 2017. Full-year 2018 adjusted net earnings was $128.1 million, or $0.10 per share, compared with adjusted net earnings of $178.7 million, or
$0.14 per share, for full-year 2017.
Reported net loss3 was $27.7 million, or $0.02 per share, for Q4 2018, compared with net earnings of $217.6 million, or $0.17 per share, in Q4 2017. Full-year
2018 reported net loss was $23.6 million, or $0.02 per share, compared with net earnings of $445.4 million, or $0.36 per share, for full-year 2017. This change
was primarily a result of decreased operating earnings, a reversal of impairment charges related to the Cerro Casale sale in 2017, and an increase in 2018
income tax expense.
Capital expenditures : Capital expenditures decreased to $273.0 million for Q4 2018, compared with $313.3 million for the same period last year.
Capital expenditures for full-year 2018 were $1,043.4 million, compared with $897.6 million for 2017, primarily due to increased spending at Round Mountain,
Bald Mountain and Tasiast, partially offset by lower spending at Paracatu and Chirano. Capital expenditures were at the low end of the Company’s guidance.
Balance sheet
As of December 31, 2018, Kinross had cash and cash equivalents of $349.0 million, compared with $1,025.8 million at December 31, 2017. The decrease
was primarily due to capital expenditures at the Company’s development projects and the acquisition of two hydroelectric power plants in Brazil, partially
offset by net operating cash inflows.
The Company has available credit of $1,552.9 million as of year-end 2018, for total liquidity of $1,901.9 million, and no scheduled debt repayments until 2021.
Operating results
Mine-by-mine summaries for 2018 fourth-quarter and full-year operating results may be found on pages 22 and 26 of this news release. Highlights include the
following:
Americas
The Americas region, which represented 61% of Kinross’ 2018 production, delivered strong results during the year. Paracatu and Bald Mountain achieved
record annual production, while Round Mountain continued to perform well.
Paracatu performed strongly in 2018, with production increasing 45% compared with full-year 2017. The record annual production was mainly as a result of
record recoveries in Plant 2, and significant increases in tonnes of ore mined and processed. Production in Q4 2018 was higher compared with the previous
quarter mainly due to an increase in grades and higher recoveries. Cost of sales per ounce in 2018 was lower compared with 2017 primarily as a result of
lower power costs due to the acquisition of the power plants in the third quarter and favourable foreign exchange movements. Higher grades also contributed
to the lower cost of sales per ounce in Q4 2018 versus the previous quarter.
At Round Mountain , 2018 production met expectations but was lower compared with 2017 primarily due to fewer ounces recovered from the heap leach
pads, partially offset by the timing of ounces processed through the mill. Production in Q4 2018 was largely consistent compared with the previous quarter.
Full-year cost of sales per ounce was higher year-over-year mainly due to lower heap leach grades and higher fuel and power costs. Cost of sales per ounce
increased in Q4 2018 compared with the previous quarter mainly due to higher processing costs.
Bald Mountain continued to perform well, achieving record full-year production in 2018. Production in Q4 2018 was lower compared with Q3 2018 mainly as
a result of timing of recoveries from the heap leach pads. Cost of sales per ounce for 2018 was lower than full-year 2017 mainly as a result of less operating
waste mined and the timing of gold equivalent ounces sold. Cost of sales per ounce in Q4 2018 increased compared with the previous quarter mainly due to
fewer ounces recovered from the heap leach pads.
Fort Knox full-year production decreased year-over-year largely due to a decrease in grades and tonnes of ore processed in the mill and placed on the heap
leach pads. The pit wall failure in Q1 2018 also limited access to higher-grade ore and higher than average rainfall in the second half of 2018 affected
geotechnical stability. Production in the fourth quarter was largely consistent with the third quarter of 2018. Full-year cost of sales per ounce was higher
compared with 2017 mainly due to a decline in grades and an increase in operating waste mined. Cost of sales per ounce in Q4 2018 was lower versus Q3
2018 mainly due to lower processing costs.
Maricunga delivered strong results during the year, as production from the rinsing of heap materials placed on the pads prior to the suspension of mining
activities was better than expected. Cost of sales per ounce for full-year 2018 was higher than 2017 mainly due to timing of sales.
Russia
The region continued its strong and consistent performance, as Kupol and Dvoinoye’s combined full-year production met expectations, while cost of sales
per ounce outperformed. Full-year production was lower than the previous year mainly due to the expected decrease in grades and the completion of mining
of the September Northeast deposit at the end of 2017. Production quarter-over-quarter was largely consistent.
Full-year cost of sales per ounce was slightly higher versus 2017 mainly due to lower grades at Dvoinoye and increased maintenance costs. Q4 2018 cost of
sales per ounce was lower quarter-over-quarter mainly due to less operating waste mined and lower labour costs at Dvoinoye.
At the Dvoinoye Zone 1 deposit, development is continuing as scheduled and production is expected to commence in mid-2019.
West Africa
Full-year production at Tasiast was slightly higher compared with 2017 mainly due to the completion of the Phase One expansion in the third quarter. The
site achieved record quarterly production in Q4 2018 mainly due to higher than expected throughput at the new mill and better mill grades and recoveries.
Cost of sales per ounce for the full year was higher compared with 2017 mainly due to higher fuel and maintenance costs and an increase in operating waste
mined. Cost of sales per ounce was lower in Q4 2018 compared with Q3 2018 mainly due to higher mill grades and lower operating waste mined.
Production at Chirano was slightly lower for the full-year compared with 2017 mainly due to anticipated lower grades, and was lower quarter-over-quarter
primarily as a result of lower mill throughput. Cost of sales per ounce for full-year 2018 decreased compared with 2017 mainly due to lower overhead,
maintenance and power costs, as open pit mining was suspended in Q3 2017. Cost of sales per ounce was higher in Q4 2018 versus Q3 2018 mainly due to
lower mill throughput, partially offset by lower power costs and favourable foreign exchange movements.
Organic development projects
Tasiast expansion update
Tasiast continues to perform strongly, achieving record quarterly production in Q4 2018. The site is currently exceeding throughput and recovery
expectations. The Phase One expansion has been completed successfully and the new SAG mill is performing very well. In addition, continuous improvement
initiatives have been undertaken which are expected to result in meaningful cost and operational improvements. The Company expects Tasiast to continue to
deliver strong operational performance in 2019.
The Phase Two expansion continues to be a viable option as the Company completes its evaluation of alternative approaches to further increase throughput at
Tasiast. The evaluation is seeking ways to reduce capital expenditures, while preserving the overall value proposition, and incorporates strong Phase One
performance results, including throughput averaging above nameplate capacity. Phase Two expansion considerations include, among other matters: results
from the Company’s evaluation of alternative throughput approaches; acceptable project financing terms; capital priorities across the Company’s portfolio;
and, the ongoing discussions with the Government of Mauritania.
These discussions with the Government have focused on matters that arise occasionally and are generally common to the mining sector. These matters
include tax issues, expatriate work permits, and increasing opportunities for local suppliers, in accordance with Kinross policy and applicable laws. In
addition, the parties have engaged in an ongoing dialogue regarding the Company’s exemption from importation duties on fuel under the Tasiast Mining
Convention. Further, the Company continues to seek from the Government an exploitation license for Tasiast Sud.
The Government has not expressed an intention to re-open the Tasiast Mining Convention, and in any event, Kinross remains protected by its rights under the
Mining Convention, which includes international arbitration provisions. The existing Tasiast operation is also covered under the Company’s political risk
insurance policy with the Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group.
Kinross continues to advance discussions to obtain the approximately $300 million in project financing for Tasiast. In addition to the previously signed
mandate letters with Export Development Canada (EDC) and the International Finance Corporation (IFC), which indicated their interest in the financing,
subject to completing due diligence, two commercial banks have also expressed interest in the financing and are now engaged in the due diligence process.
The financing is progressing and completion is targeted for mid-2019.
Round Mountain Phase W
The Round Mountain Phase W project continues to progress on schedule and on budget, with pre-stripping advancing well. Initial low grade Phase W ore
has been encountered and is being placed on the existing heap leach pads. Construction of the new heap leach pad is now approximately 80% complete,
while construction of the vertical carbon-in-column (VCIC) plant is approximately 50% complete, with commissioning for both expected to start in Q2 2019.
Construction of mine infrastructure such as the truck shop, warehouse, wash bay and fuel island are all proceeding as planned and are approximately 35%
complete.
Fort Knox Gilmore project
The Fort Knox Gilmore project is progressing well, on schedule and on budget, with initial ore expected in early 2020. Construction of the heap leach has
begun and will continue during the 2019 and 2020 construction seasons. Expansion of the dewatering system will continue throughout the year in anticipation
of stripping that is expected to commence in Q3 2019.
Bald Mountain Vantage Complex
The Bald Mountain Vantage Complex project is proceeding well, with construction of the heap leach approximately 85% complete, and the VCIC
approximately 30% complete. Some challenges due to weather and a tight labour market have been encountered, but commissioning of the heap leach and
processing facilities remain on track to begin in late Q1 2019. Support infrastructure including the truck shop, warehouse, and wash bay is approximately
25% complete. Stacking of economic but previously leached ore on the new heap leach pad is underway with approximately 50% of the material moved onto
a segregated portion. Mining activities at the Vantage Complex have commenced and initial ore is now being mined and stockpiled in preparation for
placement on the new heap.
Chile projects
The feasibility study for the La Coipa Restart project and the scoping study for the Lobo-Marte project are both proceeding well, and are expected to
conclude in the third quarter of 2019 and first quarter of 2019, respectively. Permitting is in place for the La Coipa Restart project and permitting strategy
planning has begun at Lobo-Marte.
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 37 of this news release.
In 2019, Kinross expects to produce 2.5 million Au eq. oz. (+/- 5%) from its operations, in line with 2018 production.
Production is expected to be lower in the first quarter of 2019 compared with the rest of the year, mainly as a result of the expected Bald Mountain Vantage
Complex project ramp up and lower production from Fort Knox as per the operation’s mining and milling strategy.
Production cost of sales is expected to be $730 per Au eq. oz. (+/- 5%) for 2019, which is in line with full-year 2018 cost of sales. The Company expects all-
in sustaining cost to be $995 (+/- 5%) per ounce sold on both a gold equivalent and by-product basis for 2019, which is largely in line with full-year 2018 all-in
sustaining cost per ounce.
The table below summarizes the 2019 forecast for production and production cost of sales on a gold equivalent and by-product accounting basis:
Accounting basis
2019 Outlook
(+/- 5%)
Gold equivalent basis
Production (Au eq. oz.) 2.5 million
Average production cost of sales per Au eq. oz. $730
All-in sustaining cost per Au eq. oz. $995
By-product basis
Gold ounces 2.4 million
Silver ounces 3.7 million
Average production cost of sales per Au oz. $720
The following table provides a summary of the 2019 production and production cost of sales forecast by region:
Region
Forecast 2019 production
(Au eq. oz.) Percentage of total forecast production 7
Forecast 2019 production cost of sales
(per Au eq. oz.)
Americas 1.44 million (+/- 5%) 58% $750 (+/- 5%)
West Africa (attributable)* 560,000 (+/- 10%) 22% $800 (+/- 10%)
Russia 500,000 (+/- 3%) 20% $600 (+/- 3%)
Total 2.5 million (+/- 5%) 100% $730 (+/- 5%)
*Based on Kinross’ 90% share of Chirano
Material assumptions used to forecast 2019 production cost of sales are as follows:
• a gold price of $1,200 per ounce,
• a silver price of $16 per ounce,
• an oil price of $65 per barrel,
• foreign exchange rates of:
◦ 3.50 Brazilian reais to the U.S. dollar,
◦ 1.30 Canadian dollars to the U.S. dollar,
◦ 60 Russian roubles to the U.S. dollar,
◦ 650 Chilean pesos to the U.S. dollar,
◦ 4.50 Ghanaian cedi to the U.S. dollar,
◦ 35 Mauritanian ouguiya to the U.S. dollar, and
◦ 1.11 U.S. dollars to the Euro.
Taking into account existing currency and oil hedges:
• a 10% change in foreign currency exchange rates would be expected to result in an approximate $15 impact on production cost of sales per ounce 8;
• specific to the Russian rouble, a 10% change in this exchange rate would be expected to result in an approximate $19 impact on Russian production
cost of sales per ounce;
• specific to the Brazilian real, a 10% change in this exchange rate would be expected to result in an approximate $27 impact on Brazilian production
cost of sales per ounce;
• a $10 per barrel change in the price of oil would be expected to result in an approximate $3 impact on production cost of sales per ounce;
• a $100 change in the price of gold would be expected to result in an approximate $5 impact on production cost of sales per ounce as a result of a
change in royalties owing.
Total capital expenditures for 2019 are forecast to be approximately $1,050 million (+/- 5%), which includes capitalized interest of approximately $65 million,
and are summarized in the table below:
Region
Forecast 2019
sustaining capital
(million)
Forecast 2019
non-sustaining capital
(million)
Total forecast capital
(+/- 5%) (million)
Americas $375 $295 $670
West Africa $35 $240 $275
Russia $30 $5 $35
Corporate $5 $0 $5
Total $445 $540 $985
Capitalized interest $65
TOTAL $1,050
Sustaining capital includes the following forecast spending estimates:
• Mine development:
$180 million (Americas); $15 million (Russia)
• Mobile equipment:
$70 million (Americas); $10 million (Russia); $5 million (West Africa)
• Tailings facilities:
$50 million (Americas);
• Leach facilities:
$20 million (Americas)
• Mill facilities:
$20 million (Americas); $10 million (West Africa)
Non-sustaining capital includes the following forecast spending estimates:
• Tasiast West Branch Stripping:
$180 million
• Round Mountain Phase W:
$175 million
• Tasiast Project:
$60 million
• Fort Knox Gilmore:
$45 million
• Bald Mountain Vantage Complex:
$20 million
• Development projects and other:
$60 million
The 2019 forecast for exploration is approximately $75 million, none of which is expected to be capitalized, with 2019 overhead (general and administrative
and business development expenses) forecast to be approximately $165 million, both of which are consistent with last year’s guidance.
Other operating costs expected to be incurred in 2019 are approximately $100 million, which includes approximately $40 million of care and maintenance
costs in Chile and at Kettle River-Buckhorn.
Based on our assumed gold price of $1,200 and other inputs, tax expense is expected to be negligible and taxes paid are expected to be $95 million, with
tax expense increasing at 16% of any profit resulting from higher gold prices and taxes paid increasing at a lower rate of 5%. With a $100 increase in the
realized gold price, tax expense and taxes paid are expected to be $40 million and $105 million, respectively.
Depreciation, depletion and amortization is forecast to be approximately $330 (+/-5%) per Au eq. oz.
2018 Mineral Reserves and Mineral Resources update
(See also the Company’s detailed Annual Mineral Reserve and Mineral Resource Statement estimated as at December 31, 2018 and explanatory notes
starting at page 32.)
In preparing the Company’s 2018 year-end mineral reserves and mineral resource estimates as of December 31, 2018, Kinross has maintained gold price
assumptions used since 2011 of $1,200 per ounce for mineral reserves and $1,400 per ounce for mineral resources. Kinross continues to focus on estimated
higher margin, lower cost ounces, and has maintained its fully-loaded costing methodology.
Proven and Probable Mineral Reserves 4
Kinross’ total proven and probable gold reserve estimates were 25.5 million Au oz. at year-end 2018, largely in line with reserve estimates of 25.9 million Au
oz. at year-end 2017. The addition of approximately 1.9 million ounces of estimated mineral reserves from Fort Knox Gilmore and approximately 343 Au koz.
from exploration mostly offset depletion and engineering changes during the year.
Measured and Indicated Mineral Resources 4
Kinross’ total estimated measured and indicated mineral resources at year-end 2018 were 27.8 million Au oz. compared with mineral resource estimates of
29.6 million Au oz. at year-end 2017. The slight reduction was mostly due to the conversion of 1.9 million ounces of estimated resources from Fort Knox
Gilmore to estimated mineral reserves.
Inferred Mineral Resources 4
Kinross’ total estimated inferred gold resources at year-end 2018 increased to approximately 6.5 million Au oz., compared with 6.4 million Au oz. at year-end
2017. Exploration gains at Kupol, Bald Mountain and Chirano, and engineering changes at Paracatu, offset the loss of ounces at Tasiast Sud after the
Company was not granted an exploitation license at the project.
Kinross Gold Mineral Reserve and Mineral Resource Estimates 4
2017
(Au koz)
Ownership
(Au koz)
Depletion
(Au koz)
Exploration
(Au koz)
Engineering
(Au koz)
2018*
(Au koz)
Proven and
Probable Reserves 25,934 (144) (2,554) 343 1,945 25,521
Measured and
Indicated Resources 29,594 (192) (72) 414 (1,962) 27,781
Inferred
Resources 6,382 (817) (15) 505 486 6,540
*Totals may not fully add up due to rounding.
Exploration update
The Company’s 2018 exploration efforts continued to focus within the footprint of existing mines. A total of more than 300,000 metres of drilling was
completed, of which approximately 47% was drilled in Russia. A total of 343 koz. was added to Kinross’ estimated mineral reserves from exploration activities
during the year. Exploration also added 414 Au koz. to estimated measured and indicated resources and 505 Au koz. to estimated inferred mineral
resources. Most of the additions were from Kupol, Bald Mountain and Chirano. 2018 exploration highlights include:
• Kupol-Dvoinoye: A total of 258 Au koz. was added to estimated mineral reserves and 40 Au koz. to estimated measured and indicated resources
from exploration activities, mainly from Kupol and Zone 1 and Zone 37 at Dvoinoye. At Kupol, the primary objective of 2018 drilling was to test the
depth and north extensions of the Kupol main vein system. Drill intercepts continue to confirm high-grade narrow-vein mineralization extending
northwards and at depths below the Kupol mine workings. As a result of continued exploration success at Kupol and engineering optimization work at
Dvoinoye, scheduled mill production at Kupol has again been extended by one year to late 2023.
• Chirano: Exploring the depth extensions of Akwaaba, Paboase and Tano increased the site’s estimated mineral reserves by 94 Au koz. in 2018. As
well, 142 Au koz. was added to measured and indicated resource estimates and 179 Au koz. to inferred resource estimates. These additions have
extended the Chirano mine life by one year to 2021. Exploration results have also shown the increased depth potential at Chirano.
• Bald Mountain: The drill extensions at Redbird south extensions, Saga, and Winrock added 260 Au koz. to inferred mineral resource estimates at
Bald Mountain. During the year, Kinross acquired the remaining 50% portion of the joint venture (JV) area within the Bald Mountain land package that it
did not already own and the Company has outlined a series of generative targets, which are planned to be explored in 2019.
For 2019, the brownfields exploration program will follow up on the mineralized targets identified in 2018 with infill drilling and geologic modelling with the goal
of converting the mineralization to estimated measured, indicated and inferred mineral resources.
• Kupol-Dvoinoye: Kinross is expected to spend up to $20 million in 2019 to continue exploring and delineating high potential targets at Kupol and
Dvoinoye. At Kupol, the program will continue to explore for depth extensions of the Kupol Central deeps and hanging wall trends. A portion of the
budget has also been allocated for exploration of brownfield targets around the mine site. The program at Dvoinoye involves infilling intercepts which
were identified in 2018 at the Zone 37 West target. A significant number of brownfield targets are planned to be drill tested during 2019.
• Chirano: Following successful results in 2018, the Company is increasing exploration spending at Chirano to $7 million to drill depth extensions at
Akwaaba and Paboase. The program also includes drifting from the Paboase underground to the Tano underground, where economic gold
mineralization was encountered at depth in 2018.
• Bald Mountain: Kinross is increasing exploration spending to $12 million at Bald Mountain in 2019. This is expected to be allocated to infill drill
programs with the goal of upgrading estimated mineral resources to mineral reserves at Top, Redbird, Saga, Winrock and Yelland. Exploration will also
focus on other target areas for mineral resource growth, including targets within the Central Zone (which was previously the JV area).
• Fort Knox: Kinross will continue to explore the western extension of Gilmore in 2019 as well as continue exploration at the East Wall target.
Brownfield targets around the Fort Knox site will also be tested in 2019, including Gil-Sourdough, a satellite deposit from the main Fort Knox deposit.
A more detailed summary of the 2018 highlights is presented below. Additional details may be found in the Appendices. “Appendix A” provides illustrations
and captions, and “Appendix B” provides complete drilling results and drill hole location data and accompanying explanatory notes corresponding to the
values below.
Appendix A: https://www.kinross.com/files/doc_news/2019/02/Appendix-A_Q4-YE-2018-ExplorationFigures_February-13.pdf
Appendix B: https://www.kinross.com/files/doc_news/2019/02/Appendix-B_Q4-YE-2018-Exploration-Drill-Results_February-13.xlsx
Kupol - Dvoinoye
Exploration during 2018 at Kupol and Dvoinoye successfully added 258 Au koz. to estimated mineral reserves and 40 Au koz. to estimated measured and
indicated resources, mainly from Kupol and Zone 1 and Zone 37 at Dvoinoye.
A total of approximately 98,000 metres was drilled at Kupol depth extension at the Central Zone, the Northeast Extension and at the Kupol hanging wall
target areas. (See Appendix A: Figure 1) During the early part of the year, a review of the 2017 interpreted mineralized wireframes identified a potential down
plunge extension, where the Premolar fault separates the northern end of the North Upper domain from the southern end of the North Extension domain.
Follow-up drilling resulted in the confirmation of mineralization within the down plunged zone. The Company will continue to focus on infill and depth extension
in 2019. (See Appendix A: Figure 2)
The Kupol Deeps (an area stretching from Big Bend to the southern limit of North Upper – see Appendix A: Figure 3) drilling encountered a series of good
intercepts that generated most of the inferred resource additions at Kupol. Mineralization, though narrow, is open at depth for which the Company will
continue to drill test in 2019. The Northeast Deeps is the direct extension of the Kupol Main vein outside the Kupol mining lease. Drilling in 2018 intersected
narrow quartz-carbonate veinlets and breccia fill on the main structure with some high grades.
Results from 2018 drilling indicate that the hanging wall can be traced along the length of the Kupol main vein, however, drilling was widely spaced along the
strike and it was challenging to trace the narrow but high-grade veins over appreciable strike length. The Company plans to drill from the underground through
current Kupol workings to better target the high-grade veins in 2019.
During the latter part of 2018, drilling provided critical stratigraphic information, which resulted in a new interpretation of the entire Kupol far hanging wall (East
Wedge) vein, now seen to consist of a 0.5 km trend, directly east of Kupol. Some of the holes confirmed northward continuation of the favourable Moroshka
andesite with altered zones around narrow low-grade quartz veins. At this stage, this interpretation is mostly based on a few holes that will be tested in 2019.
(See Appendix A: Figure 1) In addition to the hanging wall, the Kupol Footwall remains largely untested and will be a focus in 2019.
Kupol Mining Licence and Kupol West Property significant down-hole drill intercepts
Hole ID From (m) To (m) Interval (m)
True Width
(m) Au (g/t) Ag (g/t)
Central Strike Deeps
KP18-1406 302 309 7 4 21.80 65.34
KP18-1389 439 445 6 3 12.74 83.95
KP18-1413 412 420 8 4 8.27 120.15
KP18-1438 29 37 8 6 6.23 84.39
KP18-1357 622 627 5 3 8.10 63.94
KP18-1408 494 503 10 5 4.33 25.73
KP18-1371 699 727 27 11 1.29 19.43
KP18-1367 573 574 1 1 26.91 12.06
South Zone
KP18-1465 354 361 7 4 9.75 153.14
KP18-1465 365 378 12 8 3.42 59.32
Northeast Extension
KP18-1429 405 408 2 1 96.89 1217.81
KP18-1393 485 486 1 1 121.90 1773.70
KP18-1439 455 456 1 1 83.77 1362.66
KP18-1387 473 474 1 1 24.34 733.95
At Dvoinoye, a total of approximately 43,000 metres of drilling was achieved during the year, which is double the original plan at the beginning of the year as
initial results were very positive. Drilling at Zone 37 West constitutes most of the total drilling at Dvoinoye. The area is west of the Dvoinoye main underground
mine. Drilling provided encouraging intercepts that the Company then followed up in order to test the high grades. The veins at Zone 37 West intersected to
date point to a series of short strike and parallel domains that are planned for additional testing during 2019. In addition to Zone 37 West, Zone 1, and the
September area were also tested in 2018 (see Appendix A: Figure 4).
Dvoinoye significant down-hole drill intercepts
Hole ID From (m) To (m) Interval (m)
True Width
(m) Au (g/t) Ag (g/t)
September Northeast
SP18-026 186 192 6 2 33.90 19.53
SP18-018 32 33 1 1 376.18 192.42
SP18-011 85 87 3 1 37.73 27.03
SP18-018 34 36 2 2 34.59 67.89
SP18-023 71 85 14 5 4.33 4.90
Zone 1 Southwest
Z1-18-004 60 61 1 1 65.18 21.00
Z1-18-014 77 80 3 1 16.79 5.94
Zone 37 West
VO18-042 337 341 4 3 130.10 109.34
VO18-018 345 351 6 2 45.41 57.96
VO18-042 348 352 5 3 6.81 23.16
VO18-031 331 335 4 2 6.45 28.17
Kinross is expected to increase exploration spending in Russia to approximately $20 million in 2019 to continue exploring high potential targets in the Kupol
and Dvoinoye land packages. For full drill results and explanatory notes, see Appendix B.
Kupol - Dvoinoye Mineral Reserve and Mineral Resource Estimates 4
2017
(Au koz)
Depletion
(Au koz)
Exploration &
Engineering
(Au koz)
2018*
(Au koz)
Proven and Probable
Reserves 2,011 (466) 288 1,832
Measured and
Indicated Resources 323 - 39 362
Inferred Resources 151 - 368 519
*Totals may not fully add up due to rounding.
Chirano
At Chirano, the exploration focus continues to add incremental ounces to the mine life. In 2018, a total of approximately 34,000 metres of drilling was
completed at Akwaaba, Paboase, Tano, Mamnao, and Obra. Most of the program focused on infilling the depth potential at Akwaaba and Paboase. In both
cases, the results increased the estimated underground reserve leading to a one-year addition to Chirano’s estimated mine life. In total, 94 Au koz. was
added to estimated mineral reserves, 142 Au koz. added to estimated measured and indicated mineral resources and 179 Au koz. was added to estimated
inferred mineral resources from exploration activities in 2018.
Chirano Mineral Reserve and Mineral Resource Estimates 4
2017
(Au koz)
Depletion
(Au koz)
Exploration &
Engineering
(Au koz)
2018*
(Au koz)
Proven and Probable
Reserves 567 (205) 54 415
Measured and
Indicated Resources 746 - 19 765
Inferred Resources 152 - 173 325
*Totals may not fully add up due to rounding.
At Akwaaba, a previously untested hanging wall breccia was drilled, which has proven to be more continuous with depth. Further testing of the upper portions
of this mineralized zone is planned for 2019. Within the main orebody, drilling in 2018 extended the indicated reserve base by 100 metres while mineralization
remains open at depth. At Paboase, drilling extended the reserve base by 100 metres and recent grade-control close-spaced drilling is returning assay
grades higher than the exploration hole results. Though the width of the orebody is becoming narrow, it is interpreted as a feature (pinch and swell) with this
type of deposit, and as seen at the upper elevations, a thicker width is expected to be encountered. Mineralization is open at depth.
During 2018, a study was conducted to assess the possibility of underground mining at Tano via the Paboase underground infrastructure. A number of holes
were planned to infill a portion of the Tano orebody to confirm if the grades used in the study could be achieved. The results were encouraging, and a drift from
Paboase to Tano is being constructed to allow for underground drilling. Drift construction is expected to be completed by mid-2019. The Mamnao orebody
was drilled to close the gap between the south and central pit to assess if there is enough potential between the two pits. The results received were
encouraging and the Company is planning to mine Mamnao and Akoti South by open pit methods. During the latter part of 2018, three holes were drilled at
Obra to investigate the potential to commence a study for the viability of mining Obra by underground mining methods. The holes returned encouraging results
and a model will be updated in 2019 for the study. A budget of $7 million has been allocated to Chirano for 2019 to drill the depth extensions of Akwaaba,
Paboase, and Tano. (See Appendix A: Figure 5)
Chirano significant down-hole drill intercepts
Hole ID From (m) To (m) Interval (m) True Width (m) Au (g/t)
Akwaaba
CHDD2619UG 145 164 18 17 9.58
CHDD2598UG 114 142 28 24 4.26
CHDD2693UG 208 232 24 23 4.43
CHDD2669UG 161 193 32 25 3.60
CHDD2603UG 129 169 40 30 2.54
CHDD2629UG 165 173 8 7 12.29
Mamnao
CHRC2685 82 100 18 12 3.86
CHRC2667 63 84 21 20 2.85
CHRC2662 144 156 12 9 3.51
CHRC2668 100 115 15 11 2.12