(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.)
2015 second quarter highlights:
- Production 1 : 660,898 gold equivalent ounces (Au eq. oz.), compared with 679,831 ounces in Q2 2014.
- Revenue: $755.2 million, compared with $911.9 million in Q2 2014.
- Production cost of sales 2 : $724 per Au eq. oz., compared with $742 in Q2 2014.
- All-in sustaining cost 2 : $1,011 per Au eq. oz. sold, compared with $976 in Q2 2014. All-in sustaining cost per gold ounce (Au oz.) sold on a by-product basis was $1,006 in Q2 2015, compared with $967 in Q2 2014.
- Adjusted operating cash flow 2 : $161.4 million, or $0.14 per share, compared with $240.3 million, or $0.21 per share, in Q2 2014.
- Adjusted net earnings/loss 2,3 : Loss of $13.6 million, or $0.01 per share, compared with adjusted earnings of $32.9 million, or $0.03 per share, in Q2 2014.
- Reported net earnings/loss 3 : Loss of $83.2 million, or $0.07 per share, compared with earnings of $46.0 million, or $0.04 per share, in Q2 2014.
- Balance sheet strength: Increased cash and cash equivalents to $1,031.4 million, decreased net debt 4 to $960.2 million, $250 million in senior notes due in 2016 only significant debt maturity until 2019.
- Average realized gold price: $1,194 per ounce, compared with $1,285 per ounce in Q2 2014.
- Outlook: Kinross is tracking at the high end of 2015 guidance for production (2.4 - 2.6 million Au eq. oz.), at the low end of guidance for production cost of sales ($720 - $780 per Au eq. oz.) and all-in sustaining cost ($1,000 - $1,100 per Au eq. oz.), and below total capital expenditure guidance ($725 million).
- Comprehensive spending review: Kinross is continuing its comprehensive review of its non-operating discretionary spending in order to further reduce costs. This is in addition to further measures being taken to strengthen the business, including plans to reduce costs and enhance performance at its Tasiast operation, and an agreement reached in July to extend Kinross debt profile and amend its debt covenant.
J. Paul Rollinson, CEO, made the following comments in relation to 2015 second quarter results:
"Kinross continued to deliver on its targets, with production in the first half of 2015 tracking at the high-end of guidance for the year, and all-in sustaining cost tracking at the low-end of the full-year forecast. The Company achieved these results despite a temporary suspension of operations at Maricunga and fewer ounces sold due to timing of some gold sales, which, together with a decline in the gold price, impacted earnings. Kinross nonetheless continued to generate free cash flow in Q2, in large part as a result of its strong operational performance, benefits from foreign exchange and lower oil prices, and a company-wide effort to drive down procurement costs and reduce working capital.
With strong liquidity, including more than $1 billion in cash on the balance sheet, Kinross is well-positioned to weather the current market volatility. This is no coincidence -- over the past three years we have actively and prudently managed the balance sheet in a declining gold price environment -- and we will continue to do so, with a number of ongoing initiatives to further strengthen the Companys financial position and drive down costs.
|Summary of financial and operating results|
| Three months ended June 30, ||Six months ended June 30,|
|(in millions, except ounces, per share amounts, and per ounce amounts)||2015||2014||2015||2014|
|Operating Highlights from Continuing Operations|
|Total gold equivalent ounces (a)|
|Attributable gold equivalent ounces (a)|
|Financial Highlights from Continuing Operations|
|Production cost of sales||$||458.5||$||525.9||$||913.1||$||981.9|
|Depreciation, depletion and amortization||$||216.7||$||215.3||$||422.9||$||411.7|
|Operating (loss) earnings||$||(67.8||)||$||80.2||$||(25.3||)||$||161.6|
|Net earnings (loss) attributable to common shareholders||$||(83.2||)||$||46.0||$||(89.9||)||$||77.8|
|Basic earnings (loss) per share attributable to common shareholders||$||(0.07||)||$||0.04||$||(0.08||)||$||0.07|
|Diluted earnings (loss) per share attributable to common shareholders||$||(0.07||)||$||0.04||$||(0.08||)||$||0.07|
|Adjusted net earnings (loss) attributable to common shareholders (b)||$||(13.6||)||$||32.9||$||1.7||$||67.0|
|Adjusted net earnings (loss) per share (b)||$||(0.01||)||$||0.03||$||0.00||$||0.06|
|Net cash flow provided from operating activities||$||167.2||$||163.9||$||417.3||$||374.4|
|Adjusted operating cash flow (b)||$||161.4||$||240.3||$||376.2||$||482.5|
|Adjusted operating cash flow per share (b)||$||0.14||$||0.21||$||0.33||$||0.42|
|Average realized gold price per ounce||$||1,194||$||1,285||$||1,206||$||1,292|
|Consolidated production cost of sales per equivalent ounce (c) sold (b)||$||724||$||741||$||716||$||734|
|Attributable (a) production cost of sales per equivalent ounce (c) sold (b)||$||724||$||742||$||717||$||735|
|Attributable (a) production cost of sales per ounce sold on a by-product basis (b)||$||712||$||725||$||704||$||717|
|Attributable (a) all-in sustaining cost per ounce sold on a by-product basis (b)||$||1,006||$||967||$||982||$||978|
|Attributable (a) all-in sustaining cost per equivalent ounce (c) sold (b)||$||1,011||$||976||$||987||$||988|
|Attributable (a) all-in cost per ounce sold on a by-product basis (b)||$||1,092||$||1,055||$||1,071||$||1,078|
|Attributable (a) all-in cost per equivalent ounce (c) sold (b)||$||1,094||$||1,062||$||1,074||$||1,084|
|(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 17 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 second quarter of 2015 was 72.75:1, compared with 65.67:1 for the second quarter of 2014 and for the first six months of 2015 was 72.84:1, compared with 64.36:1 for the first six months of 2014.|
The following operating and financial results are based on second-quarter 2015 gold equivalent production from continuing operations. Production and cost measures are on an attributable basis:
Production: Kinross produced 660,898 attributable Au eq. oz. in Q2 2015, a 3% decrease compared with Q2 2014, due mainly to lower production at Maricunga as a result of heavy rains in March, which temporarily suspended operations, and at Paracatu, due to lower mill throughput and recoveries, partially offset by increased production at Fort Knox.
Production cost of sales: Production cost of sales per Au eq. oz. 2 decreased to $724 for Q2 2015, compared with $742 for Q2 2014, mainly as a result of lower energy costs and favourable foreign exchange rates.
Production cost of sales per Au oz. on a by-product basis 2 was $712 in Q2 2015, compared with $725 in Q2 2014, based on Q2 2015 attributable gold sales of 608,893 ounces and attributable silver sales of 1,262,492 ounces.
All-in sustaining cost: All-in sustaining cost per Au eq. oz. sold 2 was $1,011 in Q2 2015, compared with $976 in Q2 2014, primarily due to higher capital expenditures and fewer attributable gold ounces sold, partially offset by lower energy costs and favourable foreign exchange rates. All-in sustaining cost per Au oz. sold on a by-product basis 2 was $1,006 in Q2 2015, compared with $967 in Q2 2014.
Revenue: Revenue from metal sales was $755.2 million in Q2 2015, compared with $911.9 million during the same period in 2014, primarily due to a lower average realized gold price and lower gold equivalent ounces sold as a result of timing of sales.
Average realized gold price: The average realized gold price in Q2 2015 declined to $1,194 per ounce, compared with $1,285 per ounce in Q2 2014.
Margins: Kinross' attributable margin per Au eq. oz. sold(5) was $470 per Au eq. oz. for Q2 2015, compared with a Q2 2014 margin of $543 per Au eq. oz.
Operating cash flow: Adjusted operating cash flow 2 was $161.4 million for Q2 2015, or $0.14 per share, compared with $240.3 million, or $0.21 per share, for Q2 2014.
Earnings/loss: Adjusted net loss 2,3 was $13.6 million, or $0.01 per share, for Q2 2015, compared with adjusted net earnings of $32.9 million, or $0.03 per share, for Q2 2014.
Reported net loss 3 was $83.2 million, or $0.07 per share, compared with reported net earnings of $46.0 million, or $0.04 per share, for Q2 2014. Reported net loss was due mainly to a $24.5 million inventory write-down at Maricunga as a result of an extreme weather event in Chile, and lower revenue due to a lower average gold price and timing of gold sales from Russia.
Capital expenditures: Capital expenditures increased to $128.5 million for Q2 2015, compared with $120.0 million for the same period last year, primarily due to the Paracatu Santo Antonio tailings reprocessing initiative.
Balance sheet strength
Kinross continued to strengthen its financial position despite recent declines in the gold price, increasing its cash position, decreasing its net debt and optimizing its debt portfolio.
As of June 30, 2015, Kinross had cash and cash equivalents of $1,031.4 million, excluding restricted cash, adding $20.9 million during the quarter, and $47.9 million since December 31, 2014. The Company has available credit of $1,513.1 million.
As of June 30, 2015, Kinross' net debt 4 was $960.2 million, a reduction of $17.3 million during the quarter and $73.1 million since December 31, 2014.
On July 24, 2015, the Company extended the maturity dates of its $500 million term loan and $1.5 billion revolving credit facility by one year, to 2019 and 2020 respectively. As part of this extension, the terms of Kinross' debt covenant were amended, resulting in an improvement in the net debt to EBITDA ratio 6 . Based on this amendment, the June 30, 2015 ratio would decrease by 24 basis points to 1.02, well below the maximum permitted level of 3.50.
Other than $250 million in senior notes and $50 million of the outstanding Kupol loan, both of which are scheduled to be repaid by September 2016, Kinross has no debt maturities until 2019.
Mine-by-mine summaries for 2015 second-quarter operating results may be found on pages eight and 12 of this news release. Highlights include the following:
The region performed well in the quarter and is on track to meet its production and cost of sales forecast for the year. At Fort Knox , production increased compared with Q1 2015 due to higher grade mill material and the seasonal impact of warmer weather on heap leach performance. Cost of sales per ounce decreased compared with the previous quarter due to higher mill grades and an increase in gold ounces sold, and decreased year-over-year mainly as a result of lower fuel and power costs. At Kettle River-Buckhorn , production increased slightly compared with Q1 2015, but was down compared with Q2 2014 due to lower grades associated with the expected wind-down of the operation in 2016. Cost of sales per ounce was lower compared with Q1 2015 due to a decrease in fuel costs but increased year-over-year as a result of lower grades. At Round Mountain , cost of sales decreased compared with the previous year and quarter due to lower costs for fuel and supplies related to the heap. Round Mountain also benefited from a continuous improvement initiative, launched in Q4 2014, to improve heap leach performance, which has contributed to increased production and lower costs. The initiative includes optimizing the flow of loaded solution to the carbon columns and other leaching operational improvements.
Paracatu's production decreased year-over-year and compared with Q1 2015 due to reduced throughput and recovery, primarily as a result of the metallurgical characteristics of the ore mined in the open pit during the quarter. Recoveries improved in June, and better performance is expected for the remainder of the year, as mining moved to other areas of the pit. Paracatu's production cost of sales declined compared with Q2 2014 as a result of lower power costs and favourable foreign exchange rates, but increased on a per ounce basis compared with the previous quarter as result of lower production. Maricunga's production decreased year-over-year and compared with Q1 2015 primarily due to heavy rains in late March which suspended mining and crushing operations for nine weeks. While operations have resumed, third quarter production will be impacted by the lack of ore placed on the leach pad during the suspension. Production is expected to improve in Q4. Maricunga's production cost of sales increased compared with Q1 2015 and Q2 2014 due to the resulting reduction in production.
The region continues to perform well, and is on track to be at the higher end of production and the lower end of cost of sales guidance for the year. Second quarter production at the combined Kupol and Dvoinoye operation was slightly higher compared with the previous quarter as the region began to increase the proportion of higher grade Dvoinoye ore processed through the Kupol mill. The mill is now expected to process approximately 1,200 tonnes of Dvoinoye ore per day, representing approximately 25% of the total throughput, and thereby increasing overall mill grade. Approximately 87,500 Au eq. oz. were produced from processing Dvoinoye ore in Q2 2015. Production cost of sales per ounce for Q2 2015 decreased 8% to $490 per Au eq. oz. compared with the prior year, due mainly to productivity enhancements and favourable foreign exchange movements.
Revenue and production cost of sales per ounce would have benefited further, and overall Company earnings were impacted, by the timing of gold sales. The region produced 191,160 attributable Au eq. oz, but sold 159,950 attributable Au eq. oz. The outstanding ounces were sold in July and the region is expected to see the benefits of additional gold sales in Q3.
The region is on track to be at the higher end of production and lower end of cost of sales guidance for the year. At Chirano , production was fairly consistent with the previous quarter, and higher year-over-year, mainly as a result of the mill repairs carried out in Q2 2014. Production cost of sales per ounce increased year-over-year due to higher underground mobile equipment maintenance costs and fuel consumption.
Tasiast's production increased compared with Q1 2015 as a result of higher mill grades and mill recoveries but decreased compared to Q2 2014 due to the wind-down of the dump leach. Production cost of sales per ounce increased year-over-year due mainly to higher maintenance and material supply costs.
Tasiast optimization update
Following the Q1 2015 decision to defer the 38,000 t/d mill expansion in order to preserve balance sheet strength, Kinross continues to focus on optimizing the Tasiast operation to enhance performance and reduce costs.
In addition to a number of continuous improvement initiatives, Kinross is exploring opportunities to optimize mill throughput to address the hardness of the higher grade ore. One concept, which is currently being analysed, involves enhancing the comminution circuit with the installation of additional grinding equipment to improve milling capacity. The objective is to optimize throughput in the near term, while preserving optionality for a possible future expansion at the appropriate time.
In July, Kinross also initiated discussions with the Government of Mauritania and employee representatives regarding cost saving measures; one option under consideration includes a potential workforce reduction.
Tasiast remains an attractive brownfield growth opportunity with a significant mineral resource base. In order to leverage Tasiast's future potential, the Company will continue to look for ways to reduce costs and advance growth opportunities in a financially disciplined way.
Organic production initiatives
La Coipa Phase 7 update: A pre-feasibility study (PFS), begun in Q2 2014 to explore potential re-start options at La Coipa, remains on track to be completed during the third quarter of 2015. The Company continues to believe in the project's potential to mine higher grade material and leverage existing infrastructure in an attractive jurisdiction. The PFS contemplates blending and processing material from the recently delineated Phase 7 mineralization and material from other already defined mineral deposits on the property. Metallurgical test work to understand optimal blend and throughput continues to be a major component of the PFS.
A decision on whether to continue advancing the project will be based on the gold price environment and the status of permit applications. Exploration continues at several district targets, including Catalina, with the assessment of some attractive opportunities to extend the mine life beyond what the PFS will contemplate.
Paracatu Santo Antonio tailings reprocessing: The new continuous improvement project to reprocess tailings from the Santo Antonio tailings facility continues on track for an expected launch in the fourth quarter. The project remains on budget, with an estimated capital cost of $20 million. The project expects to add 34,000 Au oz. per year at a production cost of sales of $400 per ounce. The tailings will be reprocessed through Plant 1, with an expected production of approximately 11,000 Au oz. in Q4 2015.
Chirano mine life extension: Development of the decline at the Akoti deposit commenced in the second quarter, as the Company continues to proceed with plans to extend Chirano's estimated mine life by one year to 2020. Kinross expects to mine additional ounces at two known mineral deposits, Paboase and Akoti, with Akoti being the third underground mine expected to open. The anticipated mine life extension will also provide additional time to realize the exploration potential at Chirano, which is one of Kinross' most cost competitive operations and is located in a highly prospective and low cost mining area.
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.
Kinross is tracking at the high end of its 2015 production guidance of approximately 2.4 - 2.6 million Au eq. oz.
The Company is tracking at the low end of its production cost of sales guidance range of $720 - $780 per Au eq. oz. and all-in sustaining cost guidance range of $1,000 - $1,100 per Au eq. oz. sold, and below its capital expenditure forecast of approximately $725 million.
Other operating costs are now expected to be approximately $120 million, compared with the previously-stated guidance of $50 million, partly due to the impact of the extreme weather event in Chile, and changes to legal and tax-related accounting provisions.
Corporate Responsibility update
Kinross released its 2014 Corporate Responsibility Data Supplement, which provides updates on the Company's performance in the key areas of health and safety, environment, governance and community from its 2013 Corporate Responsibility Report . The Supplement also measures the Company's performance against the principles and standards of the UN Global Compact, which it joined in 2010.
Highlights from the 2014 report include: achieved best safety performance in Company history and among the best in the industry; reduced water usage by a net 25% compared with 2013; reduced non-mineral waste by 32% compared with 2013; 77% of total procurement spent in host countries; 98% of total workforce from host countries; contributed to 687 local community programs, initiatives and events that benefitted over 800,000 people; updated corporate Diversity Policy and achieved new gender diversity target of 33% female representation on Kinross' Board of Directors. Click here to read full report .
In June, Kinross was ranked as the top mining company on the list of Top 50 Most Socially Responsible Companies in Canada developed by Maclean's magazine in partnership with Sustainalytics, an independent sustainability investment research firm. Kinross was also recognized as one of Canada's Best 50 Corporate Citizens for the sixth consecutive year by Corporate Knights, a media and research firm that promotes social responsibility in the private sector.
Conference call details
In connection with the release, Kinross will hold a conference call and audio webcast on Thursday, July 30, 2015 at 8:00 a.m. ET to discuss the results, followed by a question-and-answer session. To access the call, please dial:
Canada & US toll-free -- 1-800-319-4610
Outside of Canada & US -- 1-604-638-5340
Replay (available up to 14 days after the call):
Canada & US toll-free -- 1-800-319-6413; Passcode - 3310 followed by #.
Outside of Canada & US -- 1-604-638-9010; Passcode - 3310 followed by #.
This release should be read in conjunction with Kinross' 2015 second-quarter unaudited Financial Statements and Management's Discussion and Analysis report at www.kinross.com . Kinross' 2015 second-quarter unaudited Financial Statements and Management's Discussion and Analysis have been filed with Canadian securities regulators (available at www.sedar.com ) and furnished to the U.S. Securities and Exchange Commission (available at www.sec.gov ). Kinross shareholders may obtain a copy of the financial statements free of charge upon request to the Company.
About Kinross Gold Corporation
Kinross is a Canadian-based senior gold mining company with mines and projects in the United States, Brazil, Russia, Mauritania, Chile and Ghana. Kinross maintains listings on the Toronto Stock Exchange (symbol: K ) and the New York Stock Exchange ( KGC ).
|Review of operations|
|Three months ended June 30,||Gold equivalent ounces|
|Produced||Sold||Production cost of sales ($millions)||Production cost of sales/equivalent ounce sold|
|Kettle River - Buckhorn||29,580||40,555||29,524||38,801||23.4||24.9||793||642|
|West Africa Total||124,201||128,090||123,958||129,043||106.0||106.7||855||827|
|Less Chirano non-controlling interest (10%)||(6,631||)||(6,299||)||(6,902||)||(6,372||)||(4.8||)||(4.0||)|
|(1) "nm" means not meaningful|
|Six months ended June 30,||Gold equivalent ounces|
|Produced||Sold||Production cost of sales ($millions)||Production cost of sales/equivalent ounce sold|
|Kettle River - Buckhorn||53,845||66,472||53,691||64,630||47.7||41.3||888||639|
|West Africa Total||245,893||274,659||247,621||266,487||203.8||218.0||823||818|
|Less Chirano non-controlling interest (10%)||(13,399||)||(13,789||)||(14,089||)||(13,478||)||(9.4||)||(8.4||)|