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Kinross Reports 2013 Fourth-Quarter and Year-End Results

TORONTO, ONTARIO--(Marketwired - Feb 12, 2014) - Kinross Gold Corporation (TSX:K)( KGC ) today announced its results for the fourth quarter and year-ended December 31, 2013.

(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 11 of this release. All dollar amounts are expressed in U.S. dollars, unless otherwise noted. The comparative figures have been recast to exclude Fruta del Norte and Crixás.)

Highlights:

  • Production (1) : 646,234 gold equivalent ounces (Au eq. oz.), compared with 724,510 ounces in Q4 2012. Full-year production was within increased guidance, and exceeded original guidance, at 2,631,092 Au eq. oz., compared with 2,617,813 Au eq. oz. for full-year 2012.
  • Revenue: $877.1 million, compared with $1,186.9 million in Q4 2012. Full-year revenue was $3,779.5 million, compared with $4,307.3 million for full-year 2012.
  • Production cost of sales (2) : $765 per Au eq. oz., compared with $686 in Q4 2012. Full-year production cost of sales was at the lower end of guidance at $743 per Au eq. oz., compared with $705 per Au eq. oz. for full-year 2012.
  • All-in sustaining cost (2) : $1,169 per Au oz. sold, compared with $953 in Q4 2012. Full-year all-in sustaining cost was below guidance at $1,063 per Au oz., compared with $1,079 per Au oz. for full-year 2012.
  • Adjusted operating cash flow (2) : $222.8 million, or $0.19 per share, compared with $505.3 million, or $0.44 per share, in Q4 2012. Full-year adjusted operating cash flow was $1,149.6 million, or $1.01 per share, compared with $1,527.0 million, or $1.34 per share, for full-year 2012.
  • Adjusted net earnings (loss) (2), (3) : a loss of $25.1 million, or $0.02 per share, in Q4 2013 compared with adjusted earnings of $280.5 million, or $0.25 per share, in Q4 2012. Full-year adjusted net earnings were $321.2 million, or $0.28 per share, compared with net earnings of $886.2 million, or $0.78 per share, for full-year 2012.
  • Reported net loss (3) : $740.0 million, or $0.65 per share, compared with net loss of $2,984.9 million, or $2.62 per share, in Q4 2012. The Q4 reported net loss includes an after-tax non-cash impairment charge of $544.8 million, primarily comprised of property, plant and equipment at Maricunga. Full-year reported net loss was $3,012.6 million, or $2.64 per share, compared with a net loss of $2,546.2 million, or $2.24 per share for full-year 2012. Reported net loss for the full year also includes an after-tax non-cash impairment charge of $2,289.3 million, previously reported on July 31, 2013.
  • Average realized gold price: $1,268 per Au oz., compared with $1,707 per Au oz. in Q4 2012. The average realized gold price per ounce was $1,402 for full-year 2013, compared with $1,643 per ounce for full-year 2012.
  • Capital expenditures: $1.26 billion, $140 million below the Company's updated guidance, and approximately $340 million below the original capital expenditure guidance provided on February 13, 2013.
  • Mineral reserves and resources: Proven and probable mineral reserve estimates at year-end 2013 were 39.7 million ounces of gold, compared with 59.6 million ounces at year-end 2012, reflecting divesture of Fruta del Norte (FDN), depletion, and the Company's adoption of a fully-loaded costing methodology for estimating year-end mineral reserves. This methodology has resulted in a 14% increase in overall gold grade in the Company's estimated mineral reserves, including increased grades at eight of nine operating mines, and an expected increase in near-term cash flow. The new methodology does not currently sterilize known mineralization.
  • Outlook: Kinross expects to produce approximately 2.5-2.7 million Au eq. oz. in 2014 at a production cost of sales per Au eq. oz. of $730-780. All-in sustaining cost of sales per Au eq. oz. is expected to be $950-1,050 for the year. Total capital expenditures are forecast to be approximately $675 million, a reduction of approximately $585 million compared with 2013 expenditures.
  • Tasiast feasibility study: The study remains on schedule for expected completion in Q1 2014 and the Company expects to provide highlights of the results in April.
  • Exploration: The Company's 2013 exploration program delivered encouraging drill results from targets at Tasiast, La Coipa, Chirano, Kupol and Dvoinoye.

CEO Commentary

J. Paul Rollinson, CEO, made the following comments in relation to 2013 year-end and fourth-quarter results:

"Operational excellence, combined with a focus on financial discipline and a strong balance sheet, underpinned Kinross's solid performance in 2013. The fourth quarter of 2013 marked our sixth consecutive quarter of strong operational results. As a result, we produced a record 2.63 million gold equivalent ounces in 2013, exceeding our original production guidance, and within our updated guidance. We also reduced our all-in sustaining cost to $1,063 per ounce, which not only beat guidance, but was below our all-in sustaining cost for 2012.

"Part of our 'quality over quantity' strategy in 2013 included a rigorous mine plan optimization program, which applied a fully-loaded costing methodology to all of our operating sites in preparing our year-end mineral reserves estimates. The result is a reduction in proven and probable mineral reserves, primarily at Paracatu, but an increase in the value of our reserves, with higher grades and greater near-term cash flow expected at operations across the Company.

"We are forecasting another solid year of production in 2014, with Dvoinoye, our new low cost, high-grade mine, coming fully on-stream. Our focus on cost control is expected to further reduce our all-in sustaining cost. Capital expenditures, which were $140 million below our revised guidance in 2013, are expected to be further reduced by more than $585 million this year. Backed by a strong balance sheet and healthy liquidity, we enter 2014 committed to maintaining our record of financial discipline and solid operational performance."

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) 2013 2012 2013 2012
Total gold equivalent ounces (a)(e) - Produced (c) 653,805 733,117 2,658,632 2,678,131
Total gold equivalent ounces (a)(e) - Sold (c) 691,300 695,934 2,697,093 2,654,107
Gold equivalent ounces from continuing operations (a)(d) - Produced (c) 653,805 733,117 2,658,632 2,647,137
Gold equivalent ounces from continuing operations (a)(d) - Sold (c) 691,300 695,934 2,697,093 2,621,343
Total attributable gold equivalent ounces (a)(e) - Produced (c) 646,234 724,510 2,631,092 2,648,807
Total attributable gold equivalent ounces (a)(e) - Sold (c) 683,419 687,162 2,669,276 2,624,242
Attributable gold equivalent ounces from continuing operations (a)(d) - Produced (c) 646,234 724,510 2,631,092 2,617,813
Attributable gold equivalent ounces from continuing operations (a)(d) - Sold (c) 683,419 687,162 2,669,276 2,591,478
Financial Highlights from Continuing Operations (d)
Metal sales $ 877.1 $ 1,186.9 $ 3,779.5 $ 4,307.3
Production cost of sales $ 528.4 $ 477.6 $ 2,004.4 $ 1,849.2
Depreciation, depletion and amortization $ 206.7 $ 199.8 $ 828.8 $ 680.9
Impairment charges $ 736.5 $ 3,527.6 $ 3,169.6 $ 3,527.6
Operating loss $ (706.1 ) $ (3,147.3 ) $ (2,635.2 ) $ (2,241.9 )
Net loss from continuing operations attributable to common shareholders $ (740.0 ) $ (2,984.9 ) $ (3,012.6 ) $ (2,546.2 )
Basic loss per share from continuing operations attributable to common shareholders $ (0.65 ) $ (2.62 ) $ (2.64 ) $ (2.24 )
Diluted loss per share from continuing operations attributable to common shareholders $ (0.65 ) $ (2.62 ) $ (2.64 ) $ (2.24 )
Adjusted net earnings (loss) from continuing operations attributable to common shareholders (b) $ (25.1 ) $ 280.5 $ 321.2 $ 886.2
Adjusted net earnings (loss) from continuing operations per share (b) $ (0.02 ) $ 0.25 $ 0.28 $ 0.78
Net cash flow of continuing operations provided from operating activities $ 187.2 $ 487.4 $ 796.6 $ 1,317.3
Adjusted operating cash flow from continuing operations (b) $ 222.8 $ 505.3 $ 1,149.6 $ 1,527.0
Adjusted operating cash flow from continuing operations per share (b) $ 0.19 $ 0.44 $ 1.01 $ 1.34
Average realized gold price per ounce from continuing operations $ 1,268 $ 1,707 $ 1,402 $ 1,643
Consolidated production cost of sales from continuing operations per equivalent ounce (c) sold (b) $ 764 $ 686 $ 743 $ 705
Attributable (a) production cost of sales from continuing operations per equivalent ounce (c) sold (b) $ 765 $ 686 $ 743 $ 705
Attributable (a) production cost of sales from continuing operations per ounce sold on a by-product basis (b) $ 733 $ 605 $ 703 $ 627
Attributable (a) all-in sustaining cost from continuing operations per ounce sold on a by-product basis (b) $ 1,169 $ 953 $ 1,063 $ 1,079
Attributable (a) all-in sustaining cost from continuing operations per equivalent ounce (c) sold (b) $ 1,175 $ 1,008 $ 1,082 $ 1,122
(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 13 to 16 of this news release.
(c) "Gold equivalent ounces" include silver ounces produced and sold converted to a gold equivalent based on a ratio of the average spot market prices for the commodities for each period. The ratio for the fourth quarter of 2013 was 61.18:1, compared with 52.55:1 for the fourth quarter of 2012; year to date 2013 was 59.23:1, compared with 53.56:1 for 2012.
(d) On June 10, 2013, the Company announced its decision to cease development of FDN. On June 28, 2012, the Company disposed of its interest in Crixás. As a result, the comparative figures have been recast to exclude the results of FDN and Crixás.
(e) The total gold equivalent ounces and total attributable gold equivalent ounces include Crixás up to June 28, 2012.

The following operating and financial results are based on fourth-quarter and full-year 2013 attributable gold equivalent production from continuing operations:

Production: Kinross produced 646,234 attributable Au eq. oz. from continuing operations in the fourth quarter of 2013, a decrease over the fourth quarter of 2012, mainly due to the suspension of mining at La Coipa and scheduled maintenance at several other sites. Full-year production was a record 2,631,092 attributable Au eq. oz., exceeding the Company's original guidance and within its updated guidance of November 13, 2013, due to increased production at several sites.

Production cost of sales: Production cost of sales per Au eq. oz. (2) was $765 for the fourth quarter of 2013, compared with $686 for the fourth quarter of 2012, primarily as a result of the impact of lower production and increased maintenance costs. Production cost of sales per Au eq. oz. for full-year 2013 was $743, in the lower end of the Company's guidance range of $740-790, compared with $705 for full-year 2012. Production cost of sales per Au oz. on a by-product basis was $733 in Q4 2013, compared with $605 in Q4 2012, based on Q4 2013 attributable gold sales of 643,864 ounces and attributable silver sales of 2,419,941 ounces. Production cost of sales per gold ounce on a by-product basis was $703 for the full year, compared with $627 for full-year 2012.

All-in sustaining cost: Attributable all-in sustaining cost per Au oz. sold (2) on a by-product basis was $1,169 in Q4 2013, compared with $953 in Q4 2012, primarily due to an increase in production cost of sales and the timing of sustaining capital expenditures. Full-year attributable all-in sustaining cost per Au oz. sold on a by-product basis was below full-year guidance at $1,063, compared with, $1,079 in 2012, mainly due to reduced sustaining capital expenditures, and reductions in exploration and overhead expenses.

Attributable all-in sustaining cost from continuing operations per Au eq. oz. sold was $1,175 in Q4 2013, compared with $1,008 in Q4 2012. For full-year 2013, attributable all-in sustaining cost per Au eq. oz. sold was $1,082, compared with $1,122 for full-year 2012.

Revenue: Revenue from metal sales was $877.1 million in the fourth quarter of 2013, compared with $1,186.9 million during the same period in 2012. The decrease was mainly due to the lower average realized gold price for the quarter. Revenue for full-year 2013 was $3,779.5 million, compared with $4,307.3 million for full-year 2012, mainly due to a lower average realized gold price.

Average realized gold price: The average realized gold price was $1,268 per ounce in Q4 2013, compared with $1,707 per ounce in Q4 2012. The average realized gold price per ounce was $1,402 for full-year 2013, a decrease of 15%, compared with $1,643 for full-year 2012.

Margins: Kinross' margin per Au eq. oz. sold (4) was $503 for the fourth quarter of 2013, compared with the Q4 2012 margin of $1,021 per Au eq. oz. Full-year margin per Au eq. oz. sold (4) was $659, compared with $938 for full-year 2012.

Operating cash flow: Adjusted operating cash flow (2) was $222.8 million for the fourth quarter, or $0.19 per share, compared with $505.3 million, or $0.44 per share, for Q4 2012. Adjusted operating cash flow for full-year 2013 was $1,149.6 million, or $1.01 per share, compared with $1,527.0 million, or $1.34 per share, for full-year 2012.

Cash balance: Cash and cash equivalents and short-term investments were $734.5 million as at December 31, 2013, compared with $1,982.5 million as at December 31, 2012, mainly due to debt repayment and capital expenditures.

Earnings: Adjusted net loss (2), (3) was $25.1 million, or $0.02 per share, for Q4 2013, compared with adjusted earnings of $280.5 million, or $0.25 per share, for Q4 2012, mainly due to a lower average realized gold price, higher production cost of sales, and depreciation. Adjusted net earnings were $321.2 million, or $0.28 per share, for full-year 2013, compared with $886.2 million, or $0.78 per share, for full-year 2012.

Reported net loss (3) was $740.0 million, or $0.65 per share, for Q4 2013, compared with a loss of $2,984.9 million, or $2.62 per share, in Q4 2012. The Q4 2013 reported net loss includes an after-tax non-cash impairment charge of $544.8 million, primarily comprised of property, plant and equipment at Maricunga.

Reported net loss was $3,012.6 million, or $2.64 per share, for full-year 2013, compared with a loss of $2,546.2 million, of $2.24 per share, for full-year 2012. Reported net loss for the full year also includes an after-tax non-cash impairment charge of $2,289.3 million, previously reported on July 31, 2013. This impairment was largely as a result of lower short-term and long-term gold price assumptions. In addition, Kinross recorded a charge of $720.0 million in Q2 2013 relating to the decision to cease development of its FDN project in Ecuador, which has been classified as a discontinued operation.

Capital expenditures: Capital expenditures were $331.1 million for Q4 2013, compared with $497.6 million for the same period last year, a decrease due mainly to lower spending at Tasiast. Capital expenditures for the full-year 2013 were $1.26 billion, below the Company's updated guidance, and approximately $340 million below the original capital expenditure guidance provided on February 13, 2013.

Operating results

Mine-by-mine summaries for fourth-quarter and full-year 2013 operating results may be found on pages 17 and 21 of this news release. Highlights include the following:

North America: Regional performance remained strong in the fourth quarter, as North America exceeded regional production guidance for the year, while production cost of sales was below regional guidance for full-year 2013. Fort Knox production declined compared with the third quarter, due to the seasonal slow-down of the heap leach. At Kettle River-Buckhorn , production was lower than the previous quarter as a result of lower mill throughput, while production at Round Mountain was in line with Q3 2013.

Russia: Full-year production was higher, and production cost of sales lower, than 2013 regional guidance due to better than expected throughput, grade, and recoveries. This was mainly the result of a faster than planned ramp-up of the expanded Kupol mill, which is now processing up to 4,500 tonnes per day. Production in the fourth quarter was slightly higher than the previous quarter, with marginally lower grades and recoveries offset by higher mill throughput. Approximately 24,000 Au eq. oz. were produced from processing Dvoinoye ore in the quarter.

South America : Full-year regional production was at the higher end of guidance, while production cost of sales remained within the guidance range. Regional production declined compared with the previous quarter as operations at La Coipa ceased following the suspension of mining at the existing ore body. Paracatu production decreased and production cost of sales increased compared with Q3 2013 due to lower grade and lower throughput at Plant 2, as scheduled maintenance was performed in the fourth quarter. Maricunga 's Q4 production increased and production cost of sales decreased compared with Q3 2013 due to an increase in throughput and grades.

West Africa: Full-year production for 2013 exceeded regional guidance, while production cost of sales was at the low end of the guidance range. Tasiast 's Q4 2013 production improved compared with the previous quarter, and on a year-over-year basis, mainly as a result of improved mill grades. Chirano 's Q4 2013 production improved compared with Q3 2013 as a result of processing higher tonnages and mining higher grade areas.

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 11 of this news release.

In 2014, Kinross expects to produce approximately 2.5-2.7 million Au eq. oz. from its current operations, comparable to 2013. Production cost of sales per Au eq. oz. is expected to be in the range of $730-780 for 2014.

The Company has forecast an all-in sustaining cost of $950-1,050 per Au eq. oz. sold and per gold ounce sold on a by-product basis for full-year 2014.

The table below summarizes the 2014 forecasts for production and average production cost of sales on a gold equivalent and a by-product accounting basis:

Accounting basis 2014 (forecast)
Gold equivalent basis
Production (gold equivalent ounces) 2.5-2.7 million
Average production cost of sales per Au eq. oz. $730-7...