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Kinross reports 2019 second-quarter results

Three largest producing mines – Paracatu, Kupol and Tasiast – achieve lowest costs in portfolio
On track to meet production and cost of sales guidance
First gold produced at both Round Mountain Phase W and Bald Mountain Vantage Complex projects

TORONTO, July 31, 2019 (GLOBE NEWSWIRE) -- Kinross Gold Corporation (TSX: K, NYSE: KGC) today announced its results for the second-quarter ended June 30, 2019.

(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 19 of this release. All dollar amounts are expressed in U.S. dollars, unless otherwise noted.)

2019 second-quarter highlights:

  Q2 2019 results First half 2019 results 2019 guidance
(+/- 5%)
Gold equivalent production1
(ounces)
648,251 1,254,282 2.5 million
Production cost of sales2
($ per Au eq. oz.)
$663 $672
$730
All-in sustaining cost2
($ per Au eq. oz.) 
$925 $925
$995
Capital expenditures $276.7 million $541.5 million $1,050 million
  • On track to meet 2019 annual guidance for production, cost of sales per ounce, all-in sustaining cost per ounce and capital expenditures.
  • Operating cash flow of $333.0 million and adjusted operating cash flow2 of $287.7 million for Q2 2019.
  • Reported net earnings3 of $71.5 million, or $0.06 per share, and adjusted net earnings2,3 of $79.6 million, or $0.06 per share for Q2 2019.
  • Cash and cash equivalents of $475.4 million and total liquidity of approximately $1.9 billion at June 30, 2019, with no debt maturities until 2021.

Operations and development projects highlights:

  • Three largest producing mines – Paracatu, Kupol-Dvoinoye and Tasiast – representing 63% of total company production, achieve lowest costs in portfolio for Q2 2019 and the first half of the year.
  • Round Mountain Phase W and Bald Mountain Vantage Complex projects achieve major milestone and produce first gold.
  • Paracatu continues to deliver record performance, surpassing its peak quarterly production in first quarter of 2019 and maintaining its lowest costs since 2010.
  • Sustained strong performance at Tasiast as mill throughput continues to outperform. The Company expects to announce results of the evaluation of low-capital alternative approaches to increase throughput in mid-September.

CEO Commentary

J. Paul Rollinson, President and CEO, made the following comments in relation to 2019 second-quarter results:

“In the second quarter we delivered excellent operating and financial results, as our portfolio of mines increased production and lowered costs compared with the previous quarter and year. We generated robust cash flow, improved our margins, and maintained our strong liquidity position. We remain on track to meet our annual production and cost outlook for 2019 following a strong first half of the year.

“The performance of our largest producing assets bolstered our results as Paracatu, Kupol and Tasiast, which represent more than 60% of our production, delivered the lowest costs in our portfolio during the quarter and in the first half of the year. Paracatu continues to outperform, surpassing its first quarter production record and maintaining its lowest costs since 2010.

“Our Nevada development projects – Round Mountain Phase W and Bald Mountain Vantage Complex – achieved a major milestone as both produced their first gold bars. At Tasiast, our evaluation of alternative approaches to increase throughput at a significantly lower capital cost is making good progress, and we expect to announce results in mid-September.”

Financial results

Summary of financial and operating results

             
    Three months ended  Six months ended  
    June 30, June 30,  
(in millions, except ounces, per share amounts, and per ounce amounts)   2019   2018   2019   2018  
Operating Highlights             
Total gold equivalent ounces(1)            
Produced(3)     653,586   607,906     1,264,849   1,267,861  
Sold(3)     641,149   593,296     1,244,206   1,267,957  
             
Attributable gold equivalent ounces(1)           
Produced(3)     648,251   602,049     1,254,282   1,255,986  
Sold(3)     636,035   587,556     1,233,684   1,255,773  
             
Financial Highlights             
Metal sales   $    837.8 $ 775.0 $    1,624.0 $ 1,672.2  
Production cost of sales   $    426.1 $ 454.9 $    837.8 $ 899.5  
Depreciation, depletion and amortization   $    179.9 $ 190.3 $    344.0 $ 383.4  
Operating earnings   $    144.3 $ 46.3 $    259.7 $ 224.2  
Net earnings attributable to common shareholders   $    71.5 $ 2.4 $    136.2 $ 108.5  
Basic earnings per share attributable to common shareholders   $    0.06 $ 0.00 $    0.11 $ 0.09  
Diluted earnings per share attributable to common shareholders   $    0.06 $ 0.00 $    0.11 $ 0.09  
Adjusted net earnings attributable to common shareholders(2)   $    79.6 $ 37.8 $    162.9 $ 163.0  
Adjusted net earnings per share(2)   $    0.06 $ 0.03 $    0.13 $ 0.13  
Net cash flow provided from operating activities   $    333.0 $ 184.5 $    584.6 $ 478.0  
Adjusted operating cash flow(2)   $    287.7 $ 231.5 $    518.5 $ 595.2  
Capital expenditures   $    276.7 $ 247.1 $    541.5 $ 494.0  
Average realized gold price per ounce(2)   $    1,307 $ 1,306 $    1,305 $ 1,319  
Consolidated production cost of sales per equivalent ounce(3) sold(2)   $    665 $ 767 $    673 $ 709  
Attributable(1) production cost of sales per equivalent ounce(3) sold(2)   $    663 $ 767 $    672 $ 709  
Attributable(1) production cost of sales per ounce sold on a by-product basis(2)   $    650 $ 754 $    659 $ 696  
Attributable(1) all-in sustaining cost per ounce sold on a by-product basis(2)   $    918 $ 1,011 $    917 $ 918  
Attributable(1) all-in sustaining cost per equivalent ounce(3) sold(2)   $    925 $ 1,018 $    925 $ 926  
Attributable(1) all-in cost per ounce sold on a by-product basis(2)   $    1,242 $ 1,343 $    1,240 $ 1,226  
Attributable(1) all-in cost per equivalent ounce(3) sold(2)   $    1,243 $ 1,342 $    1,242 $ 1,228  
             
(1) "Total" includes 100% of Chirano production. "Attributable" includes Kinross' share of Chirano (90%) production.  
(2) The definition and reconciliation of these non-GAAP financial measures is included on pages 13 to 18 of this news release.  
(3) “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 2019 was 87.98:1 (second quarter of 2018 - 79.00:1). The ratio for the first six months of 2019 was 85.78:1 (first six months of 2018 - 79.12:1).  

The following operating and financial results are based on second-quarter 2019 gold equivalent production. Production and cost measures are on an attributable basis:

Production: Kinross produced 648,251 attributable Au eq. oz. in the second quarter of 2019, compared with 602,049 Au eq. oz. in the second quarter of 2018.

Production cost of sales: Production cost of sales per Au eq. oz.2 was $663 for the second quarter of 2019, compared with $767 for the second quarter of 2018, mainly due to lower costs at Paracatu, Tasiast and Round Mountain. Production cost of sales per Au oz. on a by-product basis2 was $650 in Q2 2019, compared with $754 in Q2 2018, based on Q2 2019 attributable gold sales of 624,098 ounces and attributable silver sales of 1,050,325 ounces.

All-in sustaining cost: All-in sustaining cost per Au eq. oz. sold2 was $925 in Q2 2019, compared with $1,018 in Q2 2018. All-in sustaining cost per Au oz. sold on a by-product basis2 was $918 in Q2 2019, compared with $1,011 in Q2 2018.

Revenue: Revenue from metal sales was $837.8 million in the second quarter of 2019, compared with $775.0 million during the same period in 2018, mainly due to an increase in gold equivalent ounces sold.

Average realized gold price4: The average realized gold price in Q2 2019 was $1,307 per ounce, compared with $1,306 per ounce in Q2 2018.

Margins: Kinross’ attributable margin per Au eq. oz. sold5 was $644 for the second quarter of 2019, compared with the Q2 2018 margin of $539 per Au eq. oz. sold.

Operating cash flow: Adjusted operating cash flow2 was $287.7 million for the second quarter of 2019, compared with $231.5 million for Q2 2018, primarily due to the increase in margins.

Net operating cash flow was $333.0 million for the second quarter of 2019, compared with $184.5 million for Q2 2018.

Earnings: Adjusted net earnings2,3 was $79.6 million, or $0.06 per share, for Q2 2019, compared with adjusted net earnings of $37.8 million, or $0.03 per share, for Q2 2018.

Reported net earnings3 was $71.5 million, or $0.06 per share, for Q2 2019, compared with earnings of $2.4 million, or $0.00 per share, in Q2 2018. The increase was primarily a result of the increase in operating earnings, partially offset by an increase in income tax expense.

Capital expenditures: Capital expenditures was $276.7 million for Q2 2019, compared with $247.1 million for the same period last year, mainly due to increased spending at our U.S. development projects offset by lower spending at Tasiast.

Operating results
Mine-by-mine summaries for 2019 second-quarter operating results may be found on pages eight and 12 of this news release. Highlights include the following:

Americas

Paracatu continued its record performance, surpassing the peak quarterly production it achieved last quarter by approximately 40,000 Au oz. and reducing cost of sales per ounce for the fifth consecutive quarter, which is at the lowest level since Q4 2010. Grades improved quarter-over-quarter and year-over-year as higher grade portions of the orebody were mined during Q2 2019, while recoveries and throughput remained strong. Mining is expected to transition to lower grade portions of the pit in the second half of the year. Cost of sales per ounce sold was lower versus last quarter mainly due to higher grades and lower maintenance costs. Favourable foreign exchange movements and lower power, maintenance and reagent costs also contributed to the decrease in costs compared with the previous year.

Round Mountain performed well during the quarter, as production increased versus Q1 2019 mainly due to timing of ounces recovered from the heap leach pads, partially offset by lower mill grades. Production decreased compared with Q2 2018 mainly due to lower mill grades. Cost of sales per ounce sold was lower quarter-over-quarter and year-over-year mainly due to timing of ounces processed through the mill.

At Bald Mountain, production was lower compared with Q1 2019 mainly due to the timing of ounces recovered from the heap leach pads and lower grades. Production was lower compared with Q2 2018 as weather-related challenges impacted mining rates resulting in less ore placed on the heap leach pads. Cost of sales per ounce sold was higher quarter-over-quarter and year-over-year mainly due to a decrease in gold equivalent ounces produced. An increase in maintenance and fuel costs also contributed to higher cost of sales per ounce sold quarter-over-quarter. The Vantage Complex project is expected to ramp up in the second half of the year, although at a lower than planned rate mainly due to weather challenges.

Exploration during the first half of the year at Bald Mountain has returned promising results at Redbird, including high grade intercepts adjacent to the current Redbird resource pit shell. Exploration in the second half of the year plans to test the high-grade mineralization along the northeast trend and the southeast extension.

At Fort Knox, production increased compared with the previous quarter mainly as a result of timing of ounces recovered from the heap leach pads, partially offset by lower mill grades and weather-related conditions that affected geotechnical stability in the northwest section of the pit. Production decreased year-over-year primarily due to lower mill throughput and less ore placed on and recovered from the heap leach pads, partially offset by higher mill grades. Cost of sales per ounce sold decreased compared with the previous quarter primarily due to the timing of ounces recovered from the heap leach pads, and decreased year-over-year mainly due to lower operating waste mined and favourable processing costs.

At Maricunga, minor production continued as a result of the rinsing of heap materials placed on the pads prior to the suspension of mining activities. Cost of sales per ounce sold increased quarter-over-quarter and year-over-year mainly due to higher processing costs.

Russia

At Kupol and Dvoinoye, production decreased slightly quarter-over-quarter mainly due to anticipated lower grades at Kupol, which was partially offset by higher mill throughput, and increased year-over-year mainly due to planned mine sequencing and better grades. Cost of sales per ounce sold decreased compared with Q1 2019 mainly due to timing of ore processed. Compared with Q2 2018, cost of sales per ounce sold in Q2 2019 was lower mainly due to higher mill grades.

Production at Dvoinoye Zone 1 commenced during the second quarter as planned. Exploration results during the first half of the year at Zone 37 West in Dvoinoye have been encouraging. At Kupol, drilling focused on depth extensions of the Kupol main zone and hanging wall. Results continue to be positive. At the Big Bend area, drilling continues to intercept significant grade, though widths are narrower than expected. Infill and extension drilling at North Extension also returned grades higher than previously modeled. The Company will continue to test targets with the goal of adding to the site’s estimated mineral resources in the second half of the year.

West Africa

Tasiast performed strongly during the quarter, with mill throughput rates continuing to outperform. Anticipated lower grades during Q2 2019 contributed to a decrease in production compared with the previous quarter’s record high. Grades are expected to improve in the second half of the year. Cost of sales per ounce sold decreased by $40 an ounce compared with the previous quarter as a result of operational efficiencies and lower operating waste mined. Production was higher and cost of sales per ounce lower compared with the previous year reflecting the benefits of the completion and commissioning of the Phase One expansion.

Chirano continued its consistent performance, with production largely in line compared with the previous quarter. Production was lower year-over-year as a result of anticipated lower grades. Cost of sales per ounce sold was higher versus Q1 2019 and Q2 2018 primarily due to higher operating waste mined as the site commenced open pit mining in late Q1 2019.

The Company continued its priority exploration program at Chirano and results during the first half of the year have been promising, including depth extensions at Akwaaba and Paboase. At both areas, drilling has identified extensions of high-grade mineralization up to approximately 100 metres beneath the current reserve base. At Akwaaba, the hanging wall mineralization identified in 2018 is proving to be continuous and high grade with depth. For the second half of the year, drilling will continue at Akwaaba and Paboase, as well as Tano, where a drift from Paboase has been completed, and Mamnao North. Exploration at site will continue to seek near near-term mine life extensions.

Organic development projects and opportunities

Tasiast phased expansion

Kinross continues to take into account Tasiast’s excellent performance since the completion of the Phase One expansion as it evaluates alternative approaches to further increase throughput. The alternatives include preserving and potentially enhancing the value proposition of the original Phase Two 30,000 tpd concept by increasing throughput to above 20,000 tpd at a significantly lower capital cost through de-bottlenecking, continuous improvement and further optimization of the existing processing circuit. The Company expects to complete the evaluation of alternative approaches and announce results in mid-September.

The Company is on schedule to complete the $300 million project financing for Tasiast from the International Finance Corporation (IFC), Export Development Canada (EDC), and two commercial banks later this year. While the financing remains subject to final approval by all lenders, final due diligence activities are advancing well, with work now focused on completing the details of the loan documentation. 

Round Mountain Phase W

The Round Mountain Phase W project continues to be on budget and on schedule. The processing circuit was commissioned ahead of schedule and is now in production, with the first gold bar from the completed vertical carbon-in-column (VCIC) plant poured in late May. Mine infrastructure, including the truck shop, warehouse, wash bay and fuel island, is now approximately 95% complete and expected to be fully commissioned in Q3 2019. Stripping activities are making excellent progress and expected to continue until late 2020 as planned, with initial near-surface Phase W ore now encountered.

Bald Mountain Vantage Complex

The Bald Mountain Vantage Complex project also commenced production, and the first gold bar from the project was poured in late June. Weather-related challenges, higher than anticipated labour rates and issues with supply for some of the fabricated components continued to challenge the project budget and ramp up of production. Despite these challenges, commissioning for the project is well-advanced, with the VCIC plant and heap leach pads now substantially complete and in production, and construction of support infrastructure, such as the truck shop, warehouse and wash bay, close to completion.

Fort Knox Gilmore

The Fort Knox Gilmore project is progressing on schedule and on budget, with initial ore now expected later in the year. Construction of the new heap leach pad is underway and proceeding well, with half the impermeable liner now laid. Dewatering for the Gilmore pit expansion is proceeding according to plan and stripping for the initial Gilmore pushback is on target to begin in late Q3 2019.

La Coipa Restart and Lobo-Marte

The La Coipa Restart project feasibility study is proceeding well and is on schedule to be completed in Q3 2019. At the Lobo-Marte project, the Company is following up the positive scoping study completed last quarter with a pre-feasibility study that is expected to be completed in mid-2020. The studies are evaluating the potential for a return to long-term production in Chile based on the concept of commencing Lobo-Marte production following the end of La Coipa’s mine life. Both studies are evaluating the degree to which resources such as personnel, water, energy and capital equipment can be shared and leveraged for synergies and efficiencies between the two potential projects.

Balance sheet and financial flexibility

As of June 30, 2019, Kinross had cash and cash equivalents of $475.4 million, compared with $349.0 million at December 31, 2018.

The Company also had available credit of $1,397.2 million, for total liquidity of approximately $1.9 billion, and no debt maturities until 2021.

On July 25, 2019, the Company extended the maturity date of its $1.5 billion revolving credit facility by one year to August 2024, restoring a five-year term.

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 19 of this news release.

Kinross is on track to meet its production guidance of 2.5 million Au eq. oz. (+/- 5%), its production cost of sales guidance of $730 per Au eq. oz. (+/- 5%) and its all-in sustaining cost guidance of $995 per Au eq. oz. (+/-5%) for 2019.

The Company is on track to meet its 2019 capital expenditure forecast of approximately $1,050 million (+/-5%).

Depreciation, depletion and amortization is now expected to be approximately $300 (+/-5%) per Au eq. oz., compared with the previously disclosed $330 (+/-5%) per Au eq. oz, mainly due to increased production at Paracatu and lower production from Bald Mountain in the first half of the year.

Conference call details

In connection with the release, Kinross will hold a conference call and audio webcast on Thursday, August 1, 2019 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 – (877) 201-0168; Conference ID: 3163386
Outside of Canada & US – +1 (647) 788-4901; Conference ID: 3163386

Replay (available up to 14 days after the call):

Canada & US toll-free – (800) 585-8367; Conference ID: 3163386
Outside of Canada & US – +1 (416) 621-4642; Conference ID: 3163386

You may also access the conference call on a listen-only basis via webcast at our website www.kinross.com. The audio webcast will be archived on www.kinross.com.

This news release should be read in conjunction with Kinross’ 2019 second-quarter unaudited Financial Statements and Management’s Discussion and Analysis report at www.kinross.com. Kinross’ 2019 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).

Media Contact
Louie Diaz
Senior Director, Corporate Communications
phone: 416-369-6469
louie.diaz@kinross.com

Investor Relations Contact
Tom Elliott
Senior Vice-President, Investor Relations and Corporate Development
phone: 416-365-3390
tom.elliott@kinross.com

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
 
  2019   2018     2019   2018       2019     2018       2019   2018
                       
Fort Knox   55,440   71,463       55,740   72,340     $    50.7   $ 70.1     $    910 $ 969
Round Mountain   90,833   97,650       87,106   95,432         57.8     72.0         664   754
Bald Mountain   40,564   71,435       31,547   60,730         27.0     27.7         856   456
Kettle River - Buckhorn   -    -       -    -         -      -         -   -
Paracatu   186,167   121,226       186,520   117,043         106.8     100.4         573   858
Maricunga   6,648   19,866       9,474   17,764         8.0     11.7         844   659
Americas Total    379,652   381,640       370,387   363,309         250.3     281.9         676   776
                       
Kupol   127,684   120,418       124,873   124,179         70.2     73.6         562   593
Russia Total    127,684   120,418       124,873   124,179         70.2     73.6         562   593
                       
Tasiast   92,901   47,276       94,748   48,409         58.9     54.8         622   1,132
Chirano (100%)   53,349   58,572       51,141   57,399         46.7     44.6         913   777
West Africa Total   146,250   105,848       145,889   105,808         105.6     99.4         724   939
                       
Operations Total   653,586   607,906       641,149   593,296         426.1     454.9         665   767
Less Chirano non-controlling
interest (10%)
  (5,335 ) (5,857 )     (5,114 ) (5,740 )       (4.7 )   (4.5 )      
Attributable Total   648,251   602,049       636,035   587,556     $    421.4   $ 450.4     $    663 $ 767
                       
                       
 
                       
Six months ended June 30,   Gold equivalent ounces              
  Produced   Sold   Production cost of
sales
($millions)
  Production cost of
sales/equivalent ounce sold
 
  2019   2018     2019   2018       2019     2018       2019   2018
                       
Fort Knox   93,053   151,391       93,677   151,951     $    89.5   $ 112.3     $    955 $ 739
Round Mountain   175,968   194,733       170,720   193,213         113.8     138.6         667   717
Bald Mountain   87,819   164,875       74,777   158,872         56.2     73.8         752   465
Kettle River - Buckhorn   -    -       -    927         -      -         -   -
Paracatu   332,943   249,426       332,917   245,322         201.7     216.3         606   882
Maricunga   17,364   42,032       17,098   40,118         12.8     27.2         749   678
Americas Total    707,147   802,457       689,189   790,403         474.0     568.2         688   719
                       
Kupol   257,772   240,599       255,287   246,803         148.2     138.2         581   560
Russia Total    257,772   240,599       255,287   246,803         148.2     138.2         581   560
                       
Tasiast   194,259   106,054       194,506   108,912         124.9     101.6         642   933
Chirano (100%)   105,671   118,751       105,224   121,839         90.7     91.5         862   751
West Africa Total   299,930   224,805       299,730   230,751         215.6     193.1         719   837
                       
Operations Total   1,264,849   1,267,861       1,244,206   1,267,957         837.8     899.5         673   709
Less Chirano non-controlling
interest (10%)
  (10,567 ) (11,875 )     (10,522 ) (12,184 )       (9.1 )   (9.2 )      
Attributable Total   1,254,282   1,255,986       1,233,684   1,255,773     $    828.7   $ 890.3     $    672 $ 709


Consolidated balance sheets
 

null
           
(unaudited expressed in millions of United States dollars, except share amounts)          
           
    As at  
    June 30,   December 31,  
    2019   2018  
           
Assets          
Current assets          
Cash and cash equivalents   $    475.4     $ 349.0    
Restricted cash       13.5       12.7    
Accounts receivable and other assets       129.8       101.4    
Current income tax recoverable