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Kinross reports 2019 third-quarter results

On track to meet production guidance and lower end of cost of sales guidance
Construction and commissioning of Nevada projects completed
Largest producing mines – Paracatu, Kupol and Tasiast – continue to achieve lowest costs in portfolio

TORONTO, Nov. 06, 2019 (GLOBE NEWSWIRE) -- Kinross Gold Corporation (TSX: K, NYSE: KGC) today announced its results for the third-quarter ended September 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 third-quarter highlights:

  Q3 2019 results First nine months
2019 results
2019 guidance
Gold equivalent production1
(ounces)
608,033 1,862,315 2.5 million (+/- 5%)
Production cost of sales2
($ per Au eq. oz.)
$735 $692 $730 (+/- 5%)
All-in sustaining cost2
($ per Au eq. oz.) 
$1,028 $958 $995 (+/- 5%)
Capital expenditures $265.5 million $807.0 million $1,050 million (+/- 5%)
  • Kinross remains on track to meet 2019 annual guidance for production, cost of sales per ounce, all-in sustaining cost per ounce and capital expenditures. The Company is tracking towards the lower end of its 2019 production cost of sales guidance and the higher end of its capital expenditure guidance.
  • Operating cash flow of $231.7 million, an 82% increase over Q3 2018, with adjusted operating cash flow2 more than doubling to $295.4 million compared with Q3 2018.
  • Reported net earnings3 of $60.9 million, or $0.05 per share, and adjusted net earnings2,3 of $104.0 million, or $0.08 per share.
  • Cash and cash equivalents of $358.0 million and total liquidity of approximately $1.8 billion at September 30, 2019, with no debt maturities until 2021.

Operations and organic development projects highlights:

  • Kinross’ three largest producing mines – Paracatu, Kupol and Tasiast – which accounted for 62% of total company production, achieved the lowest costs in the portfolio for Q3 and the first nine months of 2019.
  • The Company approved the value-enhancing Tasiast 24k project and announced the acquisition of the high-quality Chulbatkan development project during the quarter.
    --  Tasiast 24k project work has commenced, with detailed engineering now 65% complete.
    --  The Chulbatkan acquisition is progressing as anticipated and is on track to close early next year.
  • Construction and commissioning of the Round Mountain Phase W and Bald Mountain Vantage Complex projects have been completed. Both projects have been handed over to their respective Operations teams.
  • The Fort Knox Gilmore project is proceeding on schedule and on budget, with initial stripping commencing during the quarter.

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

“Our portfolio of mines continued to perform well during the third quarter, delivering higher production, lower costs and more than doubling adjusted operating cash flow compared with the same period last year. Paracatu, Kupol and Tasiast, our largest producing mines, once again achieved our lowest costs. We remain on track to meet our annual production guidance, and given strong results year-to-date, are tracking towards the low end of our cost of sales guidance.

“During the quarter, we announced we were proceeding with the Tasiast 24k project and the acquisition of the Chulbatkan project, two exciting opportunities that are expected to add significant value to our Company. Tasiast 24k is expected to generate strong free cash flow, attractive returns and further unlock the mine’s substantial value, while Chulbatkan adds a high-quality asset with upside potential to our project pipeline.

“In our Americas region, we are making excellent progress in advancing our projects. We completed the construction and commissioning of both our Nevada projects, started stripping at the Fort Knox Gilmore project and are targeting completion of the La Coipa feasibility study in February.”

Financial results

Summary of financial and operating results

                           
               
      Three months ended Nine months ended  
      September 30, September 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)   612,697   591,928     1,877,546   1,859,789  
  Sold(3)   597,635   623,854     1,841,841   1,891,811  
               
  Attributable gold equivalent ounces(1)          
  Produced(3)   608,033   586,260     1,862,315   1,842,246  
  Sold(3)   592,689   618,463     1,826,373   1,874,236  
               
  Financial Highlights          
  Metal sales $ 877.1 $ 753.9   $ 2,501.1 $ 2,426.1  
  Production cost of sales $ 440.6 $ 484.6   $ 1,278.4 $ 1,384.1  
  Depreciation, depletion and amortization $ 176.9 $ 204.7   $ 520.9 $ 588.1  
  Operating earnings (loss) $ 162.6 $ (48.8 ) $ 422.3 $ 175.4  
  Net earnings (loss) attributable to common shareholders $ 60.9 $ (104.4 ) $ 197.1 $ 4.1  
  Basic earnings (loss) per share attributable to common shareholders $ 0.05 $ (0.08 ) $ 0.16 $ 0.00  
  Diluted earnings (loss) per share attributable to common shareholders $ 0.05 $ (0.08 ) $ 0.16 $ 0.00  
  Adjusted net earnings (loss) attributable to common shareholders(2) $ 104.0 $ (48.4 ) $ 266.9 $ 114.6  
  Adjusted net earnings (loss) per share(2) $ 0.08 $ (0.04 ) $ 0.21 $ 0.09  
  Net cash flow provided from operating activities $ 231.7 $ 127.2   $ 816.3 $ 605.2  
  Adjusted operating cash flow(2) $ 295.4 $ 143.2   $ 813.9 $ 738.4  
  Capital expenditures $ 265.5 $ 276.4   $ 807.0 $ 770.4  
  Average realized gold price per ounce(2) $ 1,467 $ 1,209   $ 1,358 $ 1,283  
  Consolidated production cost of sales per equivalent ounce(3) sold(2) $ 737 $ 777   $ 694 $ 732  
  Attributable(1) production cost of sales per equivalent ounce(3) sold(2) $ 735 $ 777   $ 692 $ 731  
  Attributable(1) production cost of sales per ounce sold on a by-product basis(2) $ 716 $ 768   $ 677 $ 719  
  Attributable(1) all-in sustaining cost per ounce sold on a by-product basis(2) $ 1,016 $ 1,046   $ 949 $ 960  
  Attributable(1) all-in sustaining cost per equivalent ounce(3) sold(2) $ 1,028 $ 1,049   $ 958 $ 967  
  Attributable(1) all-in cost per ounce sold on a by-product basis(2) $ 1,305 $ 1,360   $ 1,261 $ 1,270  
  Attributable(1) all-in cost per equivalent ounce(3) sold(2) $ 1,309 $ 1,356   $ 1,264 $ 1,270  
               
  (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 third quarter of 2019 was 86.73:1 (third quarter of 2018 - 80.80:1). The ratio for the first nine months of 2019 was 86.13:1 (first nine months of 2018 - 79.65:1).  
               


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

Production: Kinross produced 608,033 attributable Au eq. oz. in Q3 2019, compared with 586,260 Au eq. oz. in Q3 2018.

Production cost of sales: Production cost of sales per Au eq. oz.2 decreased to $735 in Q3 2019, compared with $777 for Q3 2018, mainly due to lower costs at Paracatu, Tasiast and Kupol. Production cost of sales per Au oz. on a by-product basis2 was $716 in Q3 2019, compared with $768 in Q3 2018, based on Q3 2019 attributable gold sales of 577,691 ounces and attributable silver sales of 1,300,693 ounces.

All-in sustaining cost: All-in sustaining cost per Au eq. oz. sold2 was $1,028 in Q3 2019, compared with $1,049 in Q3 2018. All-in sustaining cost per Au oz. sold on a by-product basis2 was $1,016 in Q3 2019, compared with $1,046 in Q3 2018.

Revenue: Revenue from metal sales increased to $877.1 million in Q3 2019, compared with $753.9 million during the same period in 2018, due to a higher average realized gold price.

Average realized gold price4: The average realized gold price in Q3 2019 was $1,467 per ounce, a 21% increase compared with $1,209 per ounce in Q3 2018.

Margins: Kinross’ attributable margin per Au eq. oz. sold5 increased by 69% to $732 for Q3 2019, compared with the Q3 2018 margin of $432 per Au eq. oz. sold, due to an increase in average realized gold price and lower cost of sales per ounce.

Operating cash flow: Adjusted operating cash flow2 in Q3 2019 more than doubled to $295.4 million, compared with $143.2 million for Q3 2018, primarily due to the increase in margins.  

Net operating cash flow was $231.7 million for Q3 2019, an 82% increase compared with $127.2 million for Q3 2018.

Earnings/loss: Adjusted net earnings2,3 increased to $104.0 million, or $0.08 per share, for Q3 2019, compared with adjusted net loss2,3 of $48.4 million, or $0.04 per share, for Q3 2018.

Reported net earnings3 increased to $60.9 million, or $0.05 per share, for Q3 2019, compared with a net loss3 of $104.4 million, or $0.08 per share, in Q3 2018. The increase was primarily a result of higher operating earnings, largely due to an increase in margins and a decrease in depreciation, depletion and amortization, partially offset by an increase in income tax expense.

Capital expenditures: Capital expenditures was $265.5 million for Q3 2019, compared with $276.4 million for the same period last year, mainly due to decreased spending at Tasiast and Kupol, partially offset by increases at Paracatu and Fort Knox.   

Operating results
Mine-by-mine summaries for Q3 2019 operating results may be found on pages eight and 12 of this news release. Highlights include the following:

Americas

Paracatu continued to perform well during the quarter, with production and cost of sales per ounce sold both improving compared with the same period in 2018. The mine continues to benefit from the more efficient operation of the mill, and improved throughput and recovery. Production decreased and cost of sales per ounce sold increased compared with last quarter’s record results mainly due to the expected decrease in grade.

At Round Mountain, production was lower compared with the previous quarter and year mainly due to the timing of ounces recovered from the heap leach pads and lower mill grades. Production is expected to improve in Q4 2019 as recoveries from the pads are expected to increase. Cost of sales per ounce sold was largely in line year-over-year and was higher quarter-over-quarter mainly due to higher processing costs and less ounces recovered from the heap leach pads. 

At Bald Mountain, production was lower compared with the previous quarter and year mainly due to the slower than expected ramp up at the Vantage Complex. Fewer ounces were recovered from the heap leach pads, including from the recently completed Vantage Complex pad, which also contributed to the lower production. Cost of sales per ounce sold decreased quarter-over-quarter mostly due to timing of ounces recovered from the heap leach pads, and increased year-over-year mainly due to fewer ounces recovered from the pads. Production is expected to increase in Q4 2019, with costs expected to decrease, as the Vantage Complex project continues to ramp up.

At Fort Knox, production was largely in line with the previous quarter, and was higher compared with the same period in 2018 mainly due to an increase in ounces recovered from the heap leach pads and higher mill grades, partially offset by a planned decrease in mill throughput. Cost of sales per ounce sold increased compared with Q2 2019 and Q3 2018 mainly due to a larger proportion of production from the heap leach pads, a planned mill liner replacement during the quarter and higher maintenance costs.

At Maricunga, the rinsing of heap materials placed on the pads prior to the suspension of mining activities and the timing of ounces recovered from the pads resulted in better than expected production during the quarter. Cost of sales per ounce sold decreased compared with the previous quarter mainly due to lower processing costs. Final Maricunga production is expected in Q4 2019, as the mine transitions to care and maintenance. For tax planning purposes, the sale of residual gold ounces are expected to continue after the closure of the mine.

Russia

Kupol and Dvoinoye continued to achieve strong results with production increasing quarter-over-quarter and year-over-year mainly due to higher grades. Cost of sales per ounce sold increased compared with the previous quarter mainly due to the timing of ore processed through the mill, and was lower compared with Q3 2018 primarily as a result of higher grades. 

West Africa

Tasiast’s strong performance continued during the third quarter, with production increasing slightly compared with the previous quarter mainly due to the planned mining of higher grade ore. Cost of sales per ounce sold was higher quarter-over-quarter primarily due to increased maintenance costs. Production and cost of sales per ounce sold both improved significantly year-over-year as a result of the benefits realized from the Phase One expansion, which was completed in the third quarter of 2018.

At Chirano, lower mill throughput was the main contributor to the decrease in production compared with Q2 2019 and Q3 2018. Cost of sales per ounce sold was higher quarter-over-quarter and year-over-year mainly due to an increase in operating waste mined associated with the return to open pit mining. 

Organic development projects and opportunities

Tasiast 24k

On September 15, 2019, Kinross announced it was proceeding with the Tasiast 24k project to incrementally increase throughput capacity at the mine to 24,000 tonnes per day (t/d).

Initial work has commenced at the project, including mobilization of construction teams to begin work on additional onsite power generation and water supply. Detailed engineering is 65% complete and several contracts and work packages have been awarded. Stripping has ramped up, as the project is expected to increase throughput to 21,000 t/d by the end of 2021, and then to 24,000 t/d by mid-2023. In October 2019 the Company also finalized a new three-year collective labour agreement with unionized employees at Tasiast.

The Company remains 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 before year end. While the financing remains subject to completion of documentation and all lenders obtaining final approvals, a key step was completed in October 2019 with the IFC obtaining Board approval.

Round Mountain Phase W

Construction and commissioning of the Round Mountain Phase W project have been completed, with the project now fully transferred to the Operations team. Stripping and dewatering activities continue to progress well and are expected to continue until late 2020.

Bald Mountain Vantage Complex

Construction and commissioning of the Bald Mountain Vantage Complex project have been completed, with the project now fully transferred to the Operations team. Weather-related issues impacted project timing and ramp up of production, as the heap leach pad was only fully completed in September 2019.

Fort Knox Gilmore

The Fort Knox Gilmore project is progressing on schedule and on budget, with heap leach construction  approximately 50% complete and dewatering activities planned for 2019 now completed. Heap leach construction and dewatering will re-commence in the spring of 2020. Stripping for the initial project pushback commenced in the third quarter and is expected to continue throughout 2020, with initial Gilmore ore expected to be encountered later this year, ahead of schedule. Approximately 5% of Gilmore ore is expected to be stacked on the existing Walter Creek pad in early 2020, and 95% of Gilmore ore is expected to be stacked on the new Barnes Creek heap leach pad, with stacking scheduled to begin in late 2020.

La Coipa Restart and Lobo-Marte

The La Coipa Restart project feasibility study is now scheduled to be completed early next year, with study results expected to be released in February 2020. The timing of the completion of the feasibility study is not expected to have an impact on the overall project timeline. The Lobo-Marte project pre-feasibility study is progressing and is on schedule to be completed in mid-2020. Both 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.

Chulbatkan

On July 31, 2019, the Company announced the acquisition of the high-quality Chulbatkan development project located in the Chukotka region of Russia. The acquisition is progressing as anticipated and is on track to close early next year. On October 18, 2019, the Company was pleased to receive a timely anti-monopoly approval from the Russian regulators.

Balance sheet and financial flexibility

As of September 30, 2019, Kinross had cash and cash equivalents of $358.0 million, compared with $349.0 million at December 31, 2018.

The Company also had available credit of $1,452.2 million, for total liquidity of approximately $1.8 billion, and no debt maturities until September 2021.

On October 11, 2019, Moody’s revised its outlook for Kinross to positive from stable and reaffirmed its Ba1 rating.

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%) and all-in sustaining cost guidance of $995 per Au eq. oz. (+/-5%) for 2019.

The Company is tracking towards the lower end of its 2019 production cost of sales guidance of $730 per Au eq. oz. (+/- 5%) and the higher end of its capital expenditure guidance of $1,050 million (+/-5%).

The Company now expects its income tax expense to be in the range of $175 - $195 million on an adjusted basis. The change in forecasted tax expense from the previous guidance is primarily a result of stronger gold prices and production mix.

Board update

The Board of Directors of Kinross has appointed Ms. Elizabeth McGregor, CPA, CA as a Director. Ms. McGregor has almost 20 years of financial experience and over 10 years of experience in the mining sector. She was most recently the Executive Vice-President and Chief Financial Officer of Tahoe Resources Inc. and was previously at Goldcorp and KPMG earlier in her career. Ms. McGregor has a wide variety of executive financial experience, including debt financing, stakeholder management, board reporting, and corporate, mine site and project management experience. She has a B.A. (Hons) from Queen’s University and is a Canadian Chartered Professional Accountant.

Conference call details

In connection with the release, Kinross will hold a conference call and audio webcast on Thursday, November 7, 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: 9089414
Outside of Canada & US – +1 (647) 788-4901; Conference ID: 9089414

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

Canada & US toll-free – (800) 585-8367; Conference ID: 9089414
Outside of Canada & US – +1 (416) 621-4642; Conference ID: 9089414

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 third-quarter unaudited Financial Statements and Management’s Discussion and Analysis report at www.kinross.com. Kinross’ 2019 third-quarter unaudited Financial Statements and Management’s Discussion and Analysis have been filed with Canadian securities regulators (available at www.sedar.com) and furnished to the U.S. Securities and Exchange Commission (available at www.sec.gov). Kinross shareholders may obtain a copy of the financial statements free of charge upon request to the Company. 

About Kinross Gold Corporation

Kinross is a Canadian-based senior gold mining company with mines and projects in the United States, Brazil, Russia, Mauritania, Chile and Ghana. 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 September 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 54,027   51,984     51,606   52,197     $ 58.3   $ 53.0     $ 1,130 $ 1,015
Round Mountain 82,195   94,153     81,617   96,496       57.5     69.0       705   715
Bald Mountain 33,995   72,560     37,644   90,931       30.6     53.4       813   587
Kettle River - Buckhorn -   -     -   -       -     -       -   -
Paracatu 146,396   126,515     145,662   125,700       99.5     97.6       683   776
Maricunga 18,016   10,808     9,203   30,442       7.0     22.4       761   736
Americas Total 334,629   356,020     325,732   395,766       252.9     295.4       776   746
                       
Kupol 137,562   125,870     136,088   123,624       82.6     81.3       607   658
Russia Total 137,562   125,870     136,088   123,624       82.6     81.3       607   658
                       
Tasiast 93,865   53,363     86,357   50,549       55.1     66.2       638   1,310
Chirano (100%) 46,641   56,675     49,458   53,915       50.0     41.7       1,011   773
West Africa Total 140,506   110,038     135,815   104,464       105.1     107.9       774   1,033
                       
Operations Total 612,697   591,928     597,635   623,854       440.6     484.6       737   777
Less Chirano non-controlling interest (10%) (4,664 ) (5,668 )   (4,946 ) (5,391 )     (5.0 )   (4.2 )      
Attributable Total 608,033   586,260     592,689   618,463     $ 435.6   $ 480.4     $ 735 $ 777
                       
                       
 
                       
Nine months ended September 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 147,080   203,375     145,283   204,148     $ 147.8   $ 165.3     $ 1,017 $ 810
Round Mountain 258,163   288,886     252,337   289,709       171.3     207.6       679   717
Bald Mountain 121,814   237,435     112,421   249,803       86.8     127.2       772   509
Kettle River - Buckhorn -   -     -   927       -     -       -   -
Paracatu 479,339   375,941     478,579   371,022       301.2     313.9       629   846
Maricunga 35,380   52,840     26,301   70,560       19.8     49.6       753   703
Americas Total 1,041,776   1,158,477     1,014,921   1,186,169       726.9     863.6       716   728
                       
Kupol 395,334   366,469     391,375   370,427       230.8     219.5       590   593
Russia Total 395,334   366,469     391,375   370,427       230.8     219.5       590   593
                       
Tasiast 288,124   159,417     280,863   159,461       180.0     167.8       641   1,052
Chirano (100%) 152,312   175,426     154,682   175,754       140.7     133.2       910   758
West Africa Total 440,436   334,843     435,545   335,215       320.7     301.0       736   898
                       
Operations Total 1,877,546   1,859,789     1,841,841   1,891,811       1,278.4     1,384.1       694   732
Less Chirano non-controlling interest (10%) (15,231 ) (17,543 )   (15,468 ) (17,575 )     (14.1 )   (13.3 )      
Attributable Total 1,862,315   1,842,246     1,826,373   1,874,236     $ 1,264.3   $ 1,370.8     $ 692 $ 731


Interim condensed consolidated balance sheets

null
             
  (unaudited expressed in millions of United States dollars, except share amounts)          
             
      As at  
      September 30,   December 31,  
      2019   2018  
             
  Assets          
  Current assets          
  Cash and cash equivalents   $ 358.0     $ 349.0    
  Restricted cash     12.9       12.7    
  Accounts receivable and other assets     174.4       101.4    
  Current income tax recoverable     40.0       79.0    
  Inventories     1,033.6       1,052.0    
  Unrealized fair value of derivative assets     5.7       3.8    
        1,624.6       1,597.9    
  Non-current assets          
  Property, plant and equipment     5,852.7       5,519.1    
  Goodwill     158.8       162.7    
  Long-term investments     181.1       155.9    
  Investments in joint ventures     18.3       18.3    
  Unrealized fair value of derivative assets     0.5       0.8    
  Other long-term assets     577.1       564.1    
  Deferred tax assets     30.9       45.0    
  Total assets   $ 8,444.0     $ 8,063.8