Kinross Reports 2012 Third-Quarter Results
Company on Track to Meet Full-Year Production and Cost of Sales ForecastsTORONTO, ONTARIO -- (Marketwire) -- 11/07/12 -- Kinross Gold Corporation (TSX: K) (NYSE: KGC) today announced its results for the third quarter ended September 30, 2012.
(This news release contains forward-looking information that is subject to the risks and assumptions set out in our Cautionary Statement on Forward-Looking Information located on page seven of this news release. All dollar amounts in this news release are expressed in U.S. dollars, unless otherwise noted. The comparative figures have been recast to exclude Crixas due to its disposal.)
Financial and operating highlights:
-- Production(1): 672,173 gold equivalent ounces, compared with 632,432
ounces in Q3 2011.
-- Revenue: $1,109.7 million, compared with $1,041.0 million in Q3 2011.
-- Production cost of sales(2): $677 per gold equivalent ounce, compared
with $626 in Q3 2011.
-- Attributable margin(3): $972 per ounce sold, compared with $1,018 in Q3
2011.
-- Adjusted operating cash flow(4): $434.4 million, compared with $412.9
million in Q3 2011. Adjusted operating cash flow per share was $0.38,
compared with $0.36 in Q3 2011.
-- Adjusted net earnings(4), (5): $250.4 million, compared with $269.4
million in Q3 2011. Adjusted net earnings per share were $0.22, compared
with $0.24 in Q3 2011.
-- Reported net earnings(5): $224.9 million, or $0.20 per share, compared
with $207.1 million, or $0.18 per share, for Q3 2011.
-- Outlook: The Company remains on track to meet its 2012 production
forecast of approximately 2.5-2.6 million gold equivalent ounces from
its continuing operations, and its cost of sales forecast of $690-$725
per gold equivalent ounce. As a result of the cost reduction initiative
announced in Q2 2012, Kinross has identified approximately $200 million
in capital expenditure reductions for 2012, and has reduced its full-
year capital expenditure forecast to $2.0 billion from the previous
forecast of $2.2 billion.
Other developments:
-- The Tasiast pre-feasibility study (PFS) remains on schedule to be
completed in Q1 2013.
-- Development at Dvoinoye continues to advance and the project remains on
schedule to deliver first ore to the Kupol mill in the second half of
2013.
-- On August 17, 2012 Kinross announced a new three-year unsecured $1.0
billion term loan and amended its unsecured revolving credit facility to
increase available credit to $1.5 billion from $1.2 billion and extend
the maturity date from March 2015 to August 2017.
-- On October 31, 2012 the Company announced the appointment of Tony S.
Giardini as Executive Vice-President and Chief Financial Officer,
effective December 1, 2012. Mr. Giardini will replace Paul H. Barry,
whose departure was announced on October 10, 2012.
-- During the third quarter, Kinross was named to the Dow Jones
Sustainability World Index for the second consecutive year and the Dow
Jones Sustainability North America Index for the third year in a row.
CEO Commentary
J. Paul Rollinson, CEO, made the following comments in relation to third-quarter 2012 results:
"We recorded solid results in the third quarter and remain on track to deliver on our full-year guidance for production and costs. In line with our cost reduction initiative announced last quarter, we are reducing our forecast capital expenditures for 2012 by approximately $200 million.
"As we go through our budgeting process for 2013, and looking beyond, we are seeking every available opportunity to control costs, with a focus on margins and free cash flow across our operations.
"To that end, we have launched a systematic, long-term program which we call internally 'The Kinross Way Forward', with the objective of delivering greater value at both our mines and projects. Our focus will be on quality, and not just quantity, in our mine planning, production, exploration and resource strategy, and on margins and free cash flow in all of our business decisions."
Financial results
Summary of financial and operating results
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Three months ended Nine months ended
September 30, September 30,
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(dollars in millions, except per
share and per ounce amounts) 2012 2011 2012 2011
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Total gold equivalent
ounces(a)(e) - Produced (c) 678,933 654,820 1,945,014 2,051,930
Total gold equivalent
ounces(a)(e) - Sold (c) 672,221 670,386 1,958,173 2,093,410
Gold equivalent ounces from
continuing operations (a)(d) -
Produced (c) 678,933 639,269 1,914,020 2,006,128
Gold equivalent ounces from
continuing operations (a)(d) -
Sold (c) 672,221 653,792 1,925,409 2,047,032
Total attributable gold
equivalent ounces(a)(e) -
Produced (c) 672,173 647,983 1,924,297 1,967,085
Total attributable gold
equivalent ounces(a)(e) - Sold
(c) 665,251 663,517 1,937,080 2,010,128
Attributable gold equivalent
ounces from continuing
operations (a)(d) - Produced
(c) 672,173 632,432 1,893,303 1,921,283
Attributable gold equivalent
ounces from continuing
operations (a)(d) - Sold (c) 665,251 646,923 1,904,316 1,963,750
Financial Highlights from
Continuing Operations (d)
Metal sales $ 1,109.7 $ 1,041.0 $ 3,124.5 $ 2,922.7
Production cost of sales $ 455.7 $ 410.2 $ 1,373.2 $ 1,170.7
Depreciation, depletion and
amortization $ 181.6 $ 139.7 $ 481.3 $ 436.7
Operating earnings $ 343.1 $ 408.8 $ 904.8 $ 1,086.7
Net earnings from continuing
operations attributable to
common shareholders $ 224.9 $ 207.1 $ 440.3 $ 697.6
Basic earnings per share from
continuing operations
attributable to common
shareholders $ 0.20 $ 0.18 $ 0.39 $ 0.61
Diluted earnings per share from
continuing operations
attributable to common
shareholders $ 0.20 $ 0.18 $ 0.38 $ 0.61
Adjusted net earnings from
continuing operations
attributable to common
shareholders(b) $ 250.4 $ 269.4 $ 602.7 $ 663.6
Adjusted net earnings from
continuing operations per
share(b) $ 0.22 $ 0.24 $ 0.53 $ 0.58
Net cash flow of continuing
operations provided from
operating activities $ 368.8 $ 289.0 $ 822.7 $ 976.2
Adjusted operating cash flow
from continuing operations(b) $ 434.4 $ 412.9 $ 1,025.6 $ 1,208.4
Adjusted operating cash flow
from continuing operations per
share(b) $ 0.38 $ 0.36 $ 0.90 $ 1.06
Average realized gold price per
ounce from continuing
operations $ 1,649 $ 1,644 $ 1,620 $ 1,470
Consolidated production cost of
sales from continuing
operations per equivalent
ounce(c) sold(b) $ 678 $ 627 $ 713 $ 572
Attributable(a) production cost
of sales from continuing
operations per equivalent
ounce(c) sold(b) $ 677 $ 626 $ 713 $ 579
Attributable(a) production cost
of sales from continuing
operations per ounce sold on a
by-product basis(b) $ 594 $ 584 $ 634 $ 518
(a) Total includes 100% of Kupol and Chirano production. "Attributable"
includes Kinross' share of Kupol (75% up to April 27, 2011, 100%
thereafter) and Chirano (90%) production.
(b) "Adjusted net earnings from continuing operations attributable to
common shareholders", "Adjusted net earnings from continuing operations
per share", "Adjusted operating cash flow from continuing operations",
"Adjusted operating cash flow from continuing operations per share",
"Consolidated production cost of sales from continuing operations per
equivalent ounce sold", "Attributable production cost of sales from
continuing operations per equivalent ounce sold", and "Attributable
production cost of sales from continuing operations per ounce sold on a
by-product basis" are non-GAAP measures. The definition and
reconciliation of these non-GAAP financial measures is included on page
nine 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
third quarter of 2012 was 55.44:1, compared with 43.87:1 for the third
quarter of 2011 and for the first nine months of 2012 was 53.92:1,
compared with 42.36:1 for the first nine months of 2011.
(d) The comparative figures have been recast to exclude Crixas' results due
to its disposal.
(e) The total gold equivalent ounces and total attributable gold equivalent
ounces include Crixas.
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The following operating and financial results are based on Q3 2012 attributable gold equivalent production from continuing operations:
Kinross produced 672,173 attributable gold equivalent ounces from continuing operations in the third quarter of 2012, a 6% increase over the third quarter of 2011, mainly due to production increases at Fort Knox and Kupol. Production increased 6% in Q3 2012 compared with Q2 2012, in line with an expected increase in production in the second half of 2012 based on the full-year mining plan.
Production cost of sales per gold equivalent ounce(2) was $677 compared with $626 for the third quarter of 2011, mainly due to higher costs for energy, labour, and consumables. On a quarter-over-quarter basis, compared with Q2 2012, production cost of sales was reduced by $48 per gold equivalent ounce, or 7%, due primarily to increased production. Production cost of sales per gold ounce on a by-product basis was $594 in the third quarter of 2012, compared with $584 in Q3 2011, based on Q3 2012 attributable gold sales of 613,617 ounces and attributable silver sales of 2,862,528 ounces.
Revenue from metal sales was $1,109.7 million in the third quarter of 2012, compared with $1,041.0 million during the same period in 2011, an increase of 7%, mainly due to increased production. The average realized gold price was $1,649 per ounce in Q3 2012, compared with $1,644 per ounce for Q3 2011.
Kinross' margin per gold equivalent ounce sold(3) was $972 for the third quarter of 2012, a decrease of 5% compared with Q3 2011, due primarily to higher production cost of sales per ounce for the quarter.
Adjusted operating cash flow(4) was $434.4 million for the quarter, or $0.38 per share, compared with $412.9 million, or $0.36 per share, for Q3 2011. Cash and cash equivalents and short-term investments were $2,089.3 million as at September 30, 2012 compared with $1,767.3 million as at December 31, 2011.
Adjusted net earnings(4), (5) were $250.4 million, or $0.22 per share, for Q3 2012, compared with $269.4 million, or $0.24 per share, for Q3 2011. Adjustments included a one-time severance expense of $16.4 million related to the departure of the former CEO.
Reported net earnings(5) were $224.9 million, or $0.20 per share, for Q3 2012, compared with reported net earnings of $207.1 million, or $0.18 per share, for Q3 2011.
Capital expenditures were $451.2 million for Q3 2012, compared with $389.6 million for the same period last year, an increase due mainly to project related expenditures at Tasiast, offset by a decrease at Paracatu.
Operating results
Mine-by-mine summaries for third-quarter 2012 operating results may be found on pages 12 and 16 of this news release. Highlights include the following:
North America: Production from the region was strong during the quarter, and higher than in Q3 2011, primarily as a result of increased production at Fort Knox. All three mines also increased production compared with Q2 2012.
Fort Knox's strong performance relative to Q3 2011 was due to an increase in tonnes of ore mined and processed, as well as higher mill grades, mill recoveries and accelerating heap leach production. Kettle River-Buckhorn's year-over-year increase in production was a result of higher grades and recoveries. Round Mountain's production compared with the same period last year was slightly lower due to lower grades and tonnes processed, but marginally higher than Q2 2012 due to strong heap leach performance. Regional cost of sales per ounce improved both on a year-over-year and quarter-over-quarter basis mainly due to higher production. North America is expected to complete the year at the high end of regional production guidance.
Russia: Production at Kupol increased year-over-year, mainly due to record mill throughput, higher grades and process improvements resulting in higher silver recoveries. Plant throughput has increased to over 3,500 tonnes per day on average, compared with the design throughput of 3,000 tonnes per day, due mainly to Continuous Improvement initiatives. Compared with Q2 2012, production increased due to slightly higher throughput and recoveries. Kupol's strong performance is projected to continue in Q4 2012, with production expected to be at the high end and production cost of sales at the low end of the regional guidance range for full-year 2012.
West Africa: Tasiast Q3 2012 production improved compared with the previous quarter and on a year-over-year basis. However, production was negatively impacted by variability in gold grade that continues to be encountered in the banded iron formation-type ore currently being mined in the Piment pits. In addition, water supply rates continue to have some impact on leach production. Ongoing repairs to the existing pipelines are expected to progressively improve water availability through the remainder of the year. Chirano's production for the quarter was slightly higher than Q2 2012, as a result of improved plant throughput.
Year-to-date operating costs remain high for the region, mainly as a result of lower than expected production. Full-year production and cost guidance for the region remain unchanged.
South America: Regional quarterly results were lower compared with Q3 2011, and the previous quarter, mainly due to lower than expected production at Paracatu. Paracatu encountered lower recoveries at both Plants 1 and 2. A task force has been established to focus on the recovery issue, and the Company expects improvement in the last quarter of the year. Commissioning of Paracatu's fourth ball mill began during the third quarter and is expected to be completed in the fourth quarter.
Due to suspended solids in the leach solution, Maricunga had lower production for the quarter compared with the same period last year. The issue has been addressed, and as a result, production is expected to improve in the fourth quarter. La Coipa's production was higher compared with the previous quarter as a result of stronger silver grades and improved gold recoveries. Full-year production and cost guidance for the region remain unchanged.
Project update and new developments
The forward-looking information contained in this section of the release is subject to the risks and assumptions contained in the Cautionary Statement on Forward-Looking Information on page seven of this news release.
Tasiast expansion project
As previously disclosed, Kinross expects to complete a pre-feasibility (PFS) study for construction of a mid-sized, expandable CIL mill in the 30,000 tonne per day (tpd) range, for the purpose of comparison with a 60,000 tpd mill option, in the first quarter of 2013.
The Company has completed a program of heap leach column testing begun earlier this year to determine the viability of heap leaching sulphide ore at Tasiast. The oxide low grade ores are currently leached successfully on the dump leach pads without crushing. The average gold recovery rate obtained in tests of sulphide samples taken from different representative zones of the ore body (after fine crushing to predominately -8mm) was approximately 60%.
The Company has concluded that based on this recovery level, heap leaching is not an economically attractive alternative to CIL processing for sulphide ore. In addition, capital investment in a fine crush heap leach supplement to CIL production is not justified at this time. Heap leaching is not contemplated in the pre-feasibility study and therefore these test results will not affect the PFS economics.
Work continues on building basic infrastructure improvements, including the permanent camp, tailings facility, truck shop, warehouse facilities, West Branch dump leach pads, main access road, and other infrastructure components. Permitting for a seawater supply system is progressing as expected.
Dvoinoye
Construction at Dvoinoye made good progress through the third quarter of 2012, and the project remains on schedule for expected delivery of first ore to Kupol in the second half of 2013. Underground development is 52% complete and is progressing ahead of plan.
Construction of infrastructure and surface facilities is 45% complete. Construction of the all-season road between Dvoinoye and Kupol has progressed well. All necessary permits for the current scope of underground development and construction activities are in place.
Fruta del Norte
Exploitation and investment protection agreement negotiations with the Ecuadorian government on an enhanced economic, investment and legal package for Fruta del Norte (FDN) continue. Kinross understands that the government intends to make mining and tax legislative reforms to mitigate the effects of the Windfall Profits Tax and to enhance the mining investment climate, which Kinross believes to be critical to the negotiations. The Company expects negotiations with the government to extend into 2013.
In parallel with the negotiation process, Kinross continues to advance the project optimization studies for the project and regional exploration drilling and sampling in the Condor district around FDN. As part of the project optimization, Kinross is exploring alternative processing scenarios including gravity float leach, which could result in lower capital expenditures and reduced operating risk, while improving overall project economics.
Other developments
Term loan and revolving credit facility: On August 17, 2012, Kinross closed a three-year, $1.0 billion term loan that will mature on August 10, 2015, and has no mandatory amortization payments. Kinross also announced that it amended its unsecured revolving credit facility to increase available credit to $1.5 billion from $1.2 billion, and extended the term to August 10, 2017 from March 31, 2015.
Exploration update
Total exploration expenditures for the third quarter of 2012 were $51.0 million, including $40.0 million for expensed exploration and $11.0 million for capitalized exploration. Exploration expenditures for the third quarter of 2011 totaled $57.5 million.
Kinross was active on 34 mine site, near-mine and greenfield initiatives in the third quarter of 2012, with drilling across all projects totalling 136,991 metres. Highlights include:
- Tasiast: District drilling outside of the Tasiast deposit footprint has been accelerated in 2012, with approximately 2,400 holes (200,000 metres) completed year-to-date up and down the 80-kilometre belt (Figure 1: www.kinross.com/media/239677/figure%201%20tasiast%20exploration%20kinross%20-%20q3%202012.pdf). Drilling, mapping and sampling in the third quarter has encountered encouraging results at seven new targets, along with positive results in follow-up drilling at C67 and C68. A total of 11 district targets have been prioritized for additional work, with the expectation of providing further confirmation that the Tasiast district has additional development potential.
- La Coipa: The infill drilling program at Pompeya was completed during the quarter, along with metallurgical, geotechnical and condemnation work. The Company is currently in the process of transitioning Pompeya from Exploration to the Projects team.
- Kupol: Drilling on the Kupol West licence to follow up results in previous holes completed at Moroshka (located four kilometres east of Kupol) has encountered further precious metals mineralization along strike and at depth.
- Chirano: Follow-up drilling under the open pits during the quarter has returned positive results, and reinforces the potential for mineralization to continue at depth.
Outlook
The forward-looking information contained in this section is subject to the risk factors and assumptions contained in the Cautionary Statement on Forward-Looking Information located on page seven of this news release.
Kinross expects to be toward the higher end of both its 2012 production forecast of approximately 2.5-2.6 million gold equivalent ounces from its continuing operations, and its 2012 cost of sales forecast of $690-$725 per gold equivalent ounce.
The Company has reduced its forecast 2012 capital expenditures to approximately $2.0 billion, compared with the previous forecast of $2.2 billion. This is the result of approximately $200 million in cost reductions, deferrals, and eliminations, approximately two-thirds of which is related to development capital, and one-third of which is related to sustaining capital.
The Company's depreciation, depletion and amortization is forecast to be approximately $255 per gold equivalent ounce, compared with the previously-stated guidance of $235 per gold equivalent ounce.
Conference call details
In connection with this news release, Kinross will hold a conference call and audio webcast on Thursday, November 8, 2012 at 8 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 #.
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 our website at www.kinross.com.
This release should be read in conjunction with Kinross' unaudited third-quarter 2012 Financial Statements and Management's Discussion and Analysis report at www.kinross.com. Kinross' unaudited third-quarter 2012 financial statements have been filed with Canadian securities regulators (available at www.sedar.com) and furnished with 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 gold mining company with mines and projects in Brazil, Canada, Chile, Ecuador, Ghana, Mauritania, Russia and the United States, employing approximately 8,000 people worldwide. Kinross maintains listings on the Toronto Stock Exchange (symbol: K) and the New York Stock Exchange (symbol: KGC).
Cautionary statement on forward-looking information
All statements, other than statements of historical fact, contained or incorporated by reference in this news release, but not limited to, any information as to the future financial or operating performance of Kinross, constitute "forward-looking information" or "forward-looking statements" within the meaning of certain securities laws, including the provisions of the Securities Act (Ontario) and the provisions for "safe harbour" under the United States Private Securities Litigation Reform Act of 1995 and are based on expectations, estimates and projections as of the date of this news release. Forward-looking statements include, without limitation, statements with respect to: possible events, the future price of gold and silver, the estimation of mineral reserves and mineral resources, the realization of mineral reserve and mineral resource estimates, the timing and amount of estimated future production, costs of production, capital expenditures, costs and timing of the development of projects and new deposits, success of exploration, development and mining activities, permitting timelines, currency fluctuations, requirements for additional capital, government regulation of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims and limitations on insurance coverage. The words "plans", "expects", "indicative", "scheduled", "timeline", "estimates", "forecasts", "guidance", "opportunity", "outlook", "potential", "projected", "seek", "strategy", "targets", "models", or "believes", or variations of or similar such words and phrases or statements that certain actions, events or results "may", "could", "would", or "should", "might", or "will be taken", "occur" or "be achieved" and similar expressions identify forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by Kinross as of the date of such statements, are inherently subject to significant business, economic and competitive uncertainties and contingencies.
The estimates, models and assumptions of Kinross referenced, contained or incorporated by reference in this news release, which may prove to be incorrect, include, but are not limited to, the various assumptions set forth herein and in our most recently filed Annual Information Form and our most recently filed Management's Discussion and Analysis as well as: (1) there being no significant disruptions affecting the operations of the Company or any entity in which it now or hereafter directly or indirectly holds an investment, whether due to labour disruptions, supply disruptions, power disruptions, damage to equipment or otherwise; (2) permitting, development, operations, expansion and acquisitions at Paracatu (including, without limitation, land acquisitions and permitting for the construction and operation of the new tailings facility) being consistent with our current expectations; (3) the viability, permitting and development of the Fruta del Norte deposit, and its continuing ownership by the Company, being consistent with Kinross' current expectations; (4) political and legal developments in any jurisdiction in which the Company, or any entity in which it now or hereafter directly or indirectly holds an investment, operates being consistent with its current expectations including, without limitation, the implementation of Ecuador's mining and investment laws (and prospective amendment to these laws) and related regulations and policies, being consistent with Kinross' current expectations, and the unenforceability of any new law in Brazil requiring that all Paracatu tailings facilities have an impermeable liner; (5) negotiation of an exploitation contract and an investment protection contract for Fruta del Norte with the Ecuadorian government being consistent with Kinross' current expectations, including but not limited to Kinross requesting and the government declaring a phase change from economic evaluation to exploitation in Q1, 2013 (or any government approved extension of up to two years) and entering into an exploitation agreement with the government within six months of such declared phase change, the failure of which will likely result in forfeiture of the FDN concession and related project infrastructure to the government; (6) the exchange rate between the Canadian dollar, Brazilian real, Chilean peso, Russian rouble, Mauritanian ouguiya, Ghanaian cedi and the U.S. dollar being approximately consistent with current levels;
(7) certain price assumptions for gold and silver; (8) prices for diesel, natural gas, fuel oil, electricity and other key supplies being approximately consistent with current levels; (9) production and cost of sales forecasts for the Company, and entities in which it now or hereafter directly or indirectly holds an investment, meeting expectations; (10) the accuracy of the current mineral reserve and mineral resource estimates of the Company (including but not limited to ore tonnage and ore grade estimates) and any entity in which it now or hereafter directly or indirectly holds an investment; (11) labour and materials costs increasing on a basis consistent with Kinross' current expectations; (12) the development of the Dvoinoye deposit being consistent with Kinross' expectations; (13) the viability of the Tasiast and Chirano mines (including but not limited to, at Tasiast, the impact of ore tonnage and grade variability reconciliation analysis) as well as permitting, development and expansion (including but not limited to, at Tasiast, expansion optimization initiatives leading to changes in processing approach and maintenance and, as required, conversion of exploration licences to mining licences) of the Tasiast and Chirano mines being consistent with Kinross' current expectations; (14) the terms and conditions of the legal and fiscal stability agreements for the Tasiast and Chirano operations being interpreted and applied in a manner consistent with their intent and Kinross' expectations; (15) goodwill and/or asset impairment potential; and (16) access to capital markets, including but not limited to maintaining an investment grade debt rating and securing partial project financing for the Dvoinoye, Fruta del Norte and the Tasiast expansion projects, being consistent with the Company's current expectations.
Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements. Such factors include, but are not limited to: fluctuations in the currency markets; fluctuations in the spot and forward price of gold or certain other commodities (such as diesel fuel and electricity); increases in the discount rates applied to present value net future cash flows based on country-specific real weighted average cost of capital; declines in the market valuations of peer group gold producers and the Company, and the resulting impact on market price to net asset value multiples; changes in interest rates or gold or silver lease rates that could impact the mark-to-market value of outstanding derivative instruments and ongoing payments/receipts under any interest rate swaps and variable rate debt obligations; risks arising from holding derivative instruments (such as credit risk, market liquidity risk and mark-to-market risk); changes in national and local government legislation, taxation (including but not limited to income tax, advance income tax, stamp tax, withholding tax, capital tax, tariffs, value-added or sales tax, capital outflow tax, capital gains tax, windfall or windfall profits tax, royalty, excise tax, customs/import or export taxes/duties, asset taxes, asset transfer tax, property use or other real estate tax, together with any related fine, penalty, surcharge, or interest imposed in connection with such taxes), controls, policies and regulations; the security of personnel and assets; political or economic developments in Canada, the United States, Chile, Brazil, Russia, Ecuador, Mauritania, Ghana, or other countries in which Kinross, or entities in which it now or hereafter directly or indirectly holds an interest, do business or may carry on business; business opportunities that may be presented to, or pursued by, us; our ability to successfully integrate acquisitions and complete divestitures; operating or technical difficulties in connection with mining or development activities; employee relations; commencement of litigation against the Company including, but not limited to, securities class action in Canada and/or the U.S.; the speculative nature of gold exploration and development including, but not limited to, the risks of obtaining necessary licenses and permits; diminishing quantities or grades of reserves; adverse changes in our credit rating; and contests over title to properties, particularly title to undeveloped properties.
In addition, there are risks and hazards associated with the business of gold exploration, development and mining, including environmental hazards, industrial accidents, unusual or unexpected formations, pressures, cave-ins, flooding and gold bullion losses (and the risk of inadequate insurance, or the inability to obtain insurance, to cover these risks). Many of these uncertainties and contingencies can directly or indirectly affect, and could cause, Kinross' actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, Kinross, including but not limited to resulting in an impairment charge on goodwill and/or assets. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Forward-looking statements are provided for the purpose of providing information about management's expectations and plans relating to the future. All of the forward-looking statements made in this news release are qualified by these cautionary statements and those made in our other filings with the securities regulators of Canada and the United States including, but not limited to, the cautionary statements made in the "Risk Factors" section of our most recently filed Annual Information Form and full-year 2011 and Q3 2012 Management Discussion and Analysis. These factors are not intended to represent a complete list of the factors that could affect Kinross. Kinross disclaims any intention or obligation to update or revise any forward-looking statements or to explain any material difference between subsequent actual events and such forward-looking statements, except to the extent required by applicable law.
Key Sensitivities
Approximately 60%-70% of the Company's costs are denominated in US dollars.
A 10% change in foreign exchange could result in an approximate $5 impact in production cost of sales per ounce.(6)
A $10 per barrel change in the price of oil could result in an approximate $2 impact on production cost of sales per ounce.
The impact on royalties of a $100 change in the gold price could result in an approximate $4 impact on cost of sales per ounce.
Other information
Where we say "we", "us", "our", the "Company", or "Kinross" in this news release, we mean Kinross Gold Corporation and/or one or more or all of its subsidiaries, as may be applicable.
The technical information about the Company's material mineral properties (other than exploration activities) contained in this news release has been prepared under the supervision of Mr. Jim Fowler, an officer of the Company who is a "qualified person" within the meaning of National Instrument 43-101. The technical information about the Company's drilling and exploration activities contained in this news release has been prepared under the supervision of Dr. Glen Masterman, an officer with the Company who is a "qualified person" within the meaning of National Instrument 43-101.
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(1) Unless otherwise stated, production figures in this news release are
based on Kinross' 90% share of Chirano production. Prior year
production figures have been adjusted to exclude Crixas due to its sale
in Q2 2012.
(2) "Production cost of sales per gold equivalent ounce" is a non-GAAP
measure defined as production cost of sales per the financial
statements divided by the attributable number of gold equivalent ounces
sold, both reduced to reflect a 90% ownership interest in Chirano
sales. Production cost of sales is equivalent to total cost of sales
(per the financial statements), less depreciation, depletion,
amortization, and impairment charges.
(3) "Attributable margin per ounce sold" is a non-GAAP measure and is
defined as "average realized gold price per ounce" less "attributable
production cost of sales per gold equivalent ounce sold".
(4) Reconciliation of non-GAAP measures are provided on page nine of this
news release.
(5) "Net earnings" figures in this release represent "net earnings from
continuing operations attributable to common shareholders."
(6) Refers to all of the currencies in the countries where the Company has
mining operations, fluctuating simultaneously by 10% in the same
direction, either appreciating or depreciating, taking into
consideration the impact of hedging and the weighting of each currency
within our consolidated cost structure.
Reconciliation of non-GAAP financial measures
The Company has included certain non-GAAP financial measures in this document. These measures are not defined under IFRS and should not be considered in isolation. The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. The inclusion of these measures is meant to provide additional information and should not be used as a substitute for performance measures prepared in accordance with IFRS. These measures are not necessarily standard and therefore may not be comparable to other issuers.
Adjusted net earnings attributable to common shareholders and adjusted net earnings per share are non-GAAP measures which determine the performance of the Company, excluding certain impacts which the Company believes are not reflective of the Company's underlying performance for the reporting period, such as the impact of foreign exchange gains and losses, reassessment of prior year taxes and/or taxes otherwise not related to the current period, impairment charges, gains and losses and other one-time costs related to acquisitions, dispositions and other transactions, and non-hedge derivative gains and losses. Although some of the items are recurring, the Company believes that they are not reflective of the underlying operating performance of its current business and are not necessarily indicative of future operating results. Management believes that these measures, which are used internally to assess performance and in planning and forecasting future operating results, provide investors with the ability to better evaluate underlying performance, particularly since the excluded items are typically not included in public guidance. However, adjusted net earnings and adjusted net earnings per share measures are not necessarily indicative of net earnings and earnings per share measures as determined under IFRS.
The following table provides a reconciliation of net earnings from continuing operations to adjusted net earnings from continuing operations for the periods presented:
----------------------------------------------------------------------------
GAAP to Adjusted Earnings from
Continuing Operations Reconciliation
----------------------------------------
(in US$ millions) Three months ended Nine months ended
September 30, September 30,
----------------------------------------
2012 2011 2012 2011
----------------------------------------
Net earnings from continuing
operations attributable to common
shareholders - as reported $ 224.9 $ 207.1 $ 440.3 $ 697.6
----------------------------------------
Adjusting items:
Foreign exchange (gains) losses (3.5) 9.1 2.7 (12.8)
Non-hedge derivatives (gains)
losses - net of tax 7.1 3.1 (6.4) (45.5)
(Gains) losses on
acquisition/disposition of assets
and investments - net of tax 0.1 (0.2) 0.4 (31.4)
Foreign exchange (gain) loss on
translation of tax basis and
foreign exchange on deferred
income taxes within income tax
expense (0.8) 47.6 11.3 46.0
Change in deferred tax due to a
change in statutory corporate
income tax rate 6.2 - 116.5 -
Taxes in respect of prior years - - 1.3 -
Impairment of investments - - 20.2 -
Inventory fair value adjustment -
net of tax - 2.7 - 9.7
Severance expense 16.4 - 16.4 -
----------------------------------------
25.5 62.3 162.4 (34.0)
----------------------------------------
Net earnings from continuing
operations attributable to common
shareholders - Adjusted $ 250.4 $ 269.4 $ 602.7 $ 663.6
----------------------------------------
Weighted average number of common
shares outstanding - Basic 1,139.4 1,136.7 1,138.8 1,135.5
----------------------------------------
Net earnings from continuing
operations per share - Adjusted $ 0.22 $ 0.24 $ 0.53 $ 0.58
----------------------------------------------------------------------------
The Company makes reference to a non-GAAP measure for adjusted operating cash flow and adjusted operating cash flow per share. Adjusted operating cash flow is defined as cash flow from operations excluding certain impacts which the Company believes are not reflective of the Company's regular operating cash flow, and excluding changes in working capital. Working capital can be volatile due to numerous factors, including the timing of tax payments, and in the case of Kupol, a build-up of inventory due to transportation logistics. The Company uses adjusted operating cash flow internally as a measure of the underlying operating cash flow performance and future operating cash flow-generating capability of the Company. However, adjusted operating cash flow and adjusted operating cash flow per share measures are not necessarily indicative of net cash flow from operations as determined under IFRS.
The following table provides a reconciliation of adjusted operating cash flow from continuing operations for the periods presented:
----------------------------------------------------------------------------
GAAP to Adjusted Operating Cash Flow
from Continuing Operations
----------------------------------------
(in US$ millions) Three months ended Nine months ended
September 30, September 30,
----------------------------------------
2012 2011 2012 2011
----------------------------------------
Net cash flow of continuing
operations provided from operating
activities - as reported $ 368.8 $ 289.0 $ 822.7 $ 976.2
----------------------------------------
Adjusting items:
Close out and early settlement of
derivative instruments - 112.8 (48.7) 112.8
Working capital changes:
Accounts receivable and other
assets (30.6) (26.1) 54.8 141.8
Inventories 110.0 93.9 158.6 96.4
Accounts payable and other
liabilities, including taxes (13.8) (56.7) 38.2 (118.8)
----------------------------------------
65.6 123.9 202.9 232.2
----------------------------------------
Adjusted operating cash flow from
continuing operations $ 434.4 $ 412.9 $1,025.6 $1,208.4
----------------------------------------
Weighted average number of common
shares outstanding - Basic 1,139.4 1,136.7 1,138.8 1,135.5
----------------------------------------
Adjusted operating cash flow from
continuing operations per share $ 0.38 $ 0.36 $ 0.90 $ 1.06
----------------------------------------------------------------------------
Consolidated production cost of sales per gold equivalent ounce sold is a non-GAAP measure and is defined as production cost of sales as per the consolidated financial statements divided by the total number of gold equivalent ounces sold. This measure converts the Company's non-gold production into gold equivalent ounces and credits it to total production.
Attributable production cost of sales per gold equivalent ounce sold is a non-GAAP measure and is defined as attributable production cost of sales divided by the attributable number of gold equivalent ounces sold. This measure converts the Company's non-gold production into gold equivalent ounces and credits it to total production.
Management uses these measures to monitor and evaluate the performance of its operating properties.
----------------------------------------------------------------------------
Consolidated and Attributable Cost of Sales
from Continuing Operations Per Equivalent Ounce
Sold
------------------------------------------------
(in US$ millions) Three months ended Nine months ended
September 30, September 30,
------------------------------------------------
2012 2011 2012 2011
------------------------------------------------
Production cost of sales
from continuing operations $ 455.7 $ 410.2 $ 1,373.2 $ 1,170.7
Less: portion attributable
to Kupol non-controlling
interest(1) - - - (21.0)
Less: portion attributable
to Chirano non-controlling
interest (5.1) (5.0) (15.4) (13.6)
------------------------------------------------
Attributable production cost
of sales from continuing
operations $ 450.6 $ 405.2 $ 1,357.8 $ 1,136.1
------------------------------------------------
Gold equivalent ounces sold
from continuing operations 672,221 653,792 1,925,409 2,047,032
Less: portion attributable
to Kupol non-controlling
interest(1) - - - (63,802)
Less: portion attributable
to Chirano non-controlling
interest (6,970) (6,869) (21,093) (19,480)
------------------------------------------------
Attributable gold equivalent
ounces sold 665,251 646,923 1,904,316 1,963,750
------------------------------------------------
Consolidated production cost
of sales from continuing
operations per equivalent
ounce sold $ 678 $ 627 $ 713 $ 572
Attributable production cost
of sales from continuing
operations per equivalent
ounce sold $ 677 $ 626 $ 713 $ 579
----------------------------------------------------------------------------
(1) On April 27, 2011, Kinross acquired the remaining 25% of CMGC, and
thereby obtained 100% ownership of Kupol. As such, the results up to
April 27, 2011 reflect 75% and results thereafter reflect 100%.
Attributable production cost of sales per ounce sold on a by-product basis is a non-GAAP measure which calculates the Company's non-gold production as a credit against its per ounce production costs, rather than converting its non-gold production into gold equivalent ounces and crediting it to total production, as is the case in co-product accounting. Management believes that this measure provides investors with the ability to better evaluate Kinross' production cost of sales per ounce on a comparable basis with other major gold producers who routinely calculate their cost of sales per ounce using by-product accounting rather than co-product accounting.
The following table provides a reconciliation of attributable production cost of sales per ounce sold on a by-product basis for the periods presented:
----------------------------------------------------------------------------
Attributable Cost of Sales from Continuing
Operations Per Ounce Sold on a By-Product Basis
------------------------------------------------
(in US$ millions) Three months ended Nine months ended
September 30, September 30,
------------------------------------------------
2012 2011 2012 2011
------------------------------------------------
Production cost of sales
from continuing
operations(1) $ 455.7 $ 410.2 $ 1,373.2 $ 1,170.7
Less: portion attributable
to Kupol non-controlling
interest(2) - - - (21.0)
Less: portion attributable
to Chirano non-controlling
interest (5.1) (5.0) (15.4) (13.6)
Less: attributable silver
sales (86.3) (61.9) (244.5) (227.4)
------------------------------------------------
Attributable production cost
of sales from continuing
operations net of silver
by-product revenue $ 364.3 $ 343.3 $ 1,113.3 $ 908.7
------------------------------------------------
Gold ounces sold 620,567 595,001 1,777,374 1,821,924
Less: portion attributable
to Kupol non-controlling
interest(2) - - - (49,299)
Less: portion attributable
to Chirano non-controlling
interest (6,950) (6,836) (21,035) (19,388)
------------------------------------------------
Attributable gold ounces
sold 613,617 588,165 1,756,339 1,753,237
------------------------------------------------
Attributable production cost
of sales from continuing
operations per ounce sold
on a by-product basis $ 594 $ 584 $ 634 $ 518
------------------------------------------------
----------------------------------------------------------------------------
(1) "Production cost of sales" is equivalent to "Total cost of sales" per
the consolidated financial statements less depreciation, depletion and
amortization and impairment charges.
(2) On April 27, 2011, Kinross acquired the remaining 25% of CMGC, and
thereby obtained 100% ownership of Kupol. As such, the results up to
April 27, 2011 reflect 75% and results thereafter reflect 100%.
----------------------------------------------------------------------------
Review of Operations
----------------------------------------------------------------------------
Three months ended September 30, Gold equivalent ounces
------------------------------------------
Produced Sold
------------------------------------------
2012 2011 2012 2011
------------------------------------------
Fort Knox 106,698 76,261 100,172 75,611
Round Mountain 53,205 54,588 53,237 52,658
Kettle River - Buckhorn 43,942 41,200 44,049 42,109
------------------------------------------
North America Total 203,845 172,049 197,458 170,378
Kupol (100%) 155,533 124,912 164,025 138,278
------------------------------------------
Russia Total 155,533 124,912 164,025 138,278
Paracatu 111,558 135,099 104,937 133,827
La Coipa 41,585 38,539 42,240 35,566
Maricunga 46,971 53,123 45,818 58,591
------------------------------------------
South America Total 200,114 226,761 192,995 227,984
Tasiast 51,842 47,175 48,045 48,455
Chirano (100%) 67,599 68,372 69,698 68,697
------------------------------------------
West Africa Total 119,441 115,547 117,743 117,152
------------------------------------------
Continuing operations 678,933 639,269 672,221 653,792
Discontinued operations(2) - 15,551 - 16,594
------------------------------------------
Operations Total 678,933 654,820 672,221 670,386
Less Chirano non-controlling
interest (10%) (6,760) (6,837) (6,970) (6,869)
------------------------------------------
Attributable - Continuing
operations 672,173 632,432 665,251 646,923
------------------------------------------
Attributable Total 672,173 647,983 665,251 663,517
----------------------------------------------------------------------------
----------------------------------------------------------------------------
--------------------------------------------------------------------------
Three months ended September 30,
Production Production
cost of cost of
sales(1) sales(1)
($millions) /oz
------------------------------------------
2012 2011 2012 2011
------------------------------------------
Fort Knox $ 64.9 $ 53.8 $ 648 $ 712
Round Mountain 32.2 35.2 605 668
Kettle River - Buckhorn 20.7 19.5 470 463
------------------------------------------
North America Total 117.8 108.5 597 637
Kupol (100%) 76.5 58.4 466 422
------------------------------------------
Russia Total 76.5 58.4 466 422
Paracatu 92.0 89.7 877 670
La Coipa 45.9 32.1 1,087 903
Maricunga 40.0 30.2 873 515
------------------------------------------
South America Total 177.9 152.0 922 667
Tasiast 32.2 40.8 670 842
Chirano (100%) 51.3 50.5 736 735
------------------------------------------
West Africa Total 83.5 91.3 709 779
------------------------------------------
Continuing operations 455.7 410.2 678 627
Discontinued operations(2) - 15.3 - 922
------------------------------------------
Operations Total $ 455.7 $ 425.5 $ 678 $ 635
Less Chirano non-controlling
interest (10%) (5.1) (5.0)
------------------------------------------
Attributable - Continuing
operations $ 450.6 $ 405.2 $ 677 $ 626
------------------------------------------
Attributable Total $ 450.6 $ 420.5 $ 677 $ 634
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(1) "Production cost of sales" is equivalent to "Total cost of sales" per
the consolidated financial statements less depreciation, depletion and
amortization and impairment charges.
(2) On June 28, 2012, the Company completed the sale of its 50% interest in
the Crixas gold mine.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Nine months ended September
30, Gold equivalent ounces
----------------------------------------------
Produced Sold
----------------------------------------------
2012 2011 2012 2011
----------------------------------------------
Fort Knox 240,366 219,035 232,515 217,546
Round Mountain 151,110 143,860 149,221 141,154
Kettle River - Buckhorn 122,545 133,289 123,724 135,180
----------------------------------------------
North America Total 514,021 496,184 505,460 493,880
Kupol (100%) 431,717 514,653 447,476 541,389
----------------------------------------------
Russia Total 431,717 514,653 447,476 541,389
Paracatu 334,595 335,419 333,853 337,557
La Coipa 115,438 143,852 116,277 155,403
Maricunga 171,801 181,968 176,248 177,841
----------------------------------------------
South America Total 621,834 661,239 626,378 670,801
Tasiast 139,283 145,745 135,168 146,161
Chirano (100%) 207,165 188,307 210,927 194,801
----------------------------------------------
West Africa Total 346,448 334,052 346,095 340,962
----------------------------------------------
Continuing operations 1,914,020 2,006,128 1,925,409 2,047,032
Discontinued operations(3) 30,994 45,802 32,764 46,378
----------------------------------------------
Operations Total 1,945,014 2,051,930 1,958,173 2,093,410
Less Kupol non-controlling
interest (25%)(2) - (66,014) - (63,802)
Less Chirano non-controlling
interest (10%) (20,717) (18,831) (21,093) (19,480)
----------------------------------------------
Attributable - Continuing
operations 1,893,303 1,921,283 1,904,316 1,963,750
----------------------------------------------
Attributable Total 1,924,297 1,967,085 1,937,080 2,010,128
----------------------------------------------------------------------------
---------------------------------------------------------------------------
Production
cost of Production
Nine months ended September sales(1) cost of
30, ($millions) sales(1)/oz
-----------------------------------------------
2012 2011 2012 2011
-----------------------------------------------
Fort Knox $ 171.4 $ 146.8 $ 737 $ 675
Round Mountain 104.1 102.8 698 728
Kettle River - Buckhorn 60.2 55.7 487 412
-----------------------------------------------
North America Total 335.7 305.3 664 618
Kupol (100%) 210.9 193.0 471 356
-----------------------------------------------
Russia Total 210.9 193.0 471 356
Paracatu 305.6 241.3 915 715
La Coipa 126.1 110.1 1,084 708
Maricunga 128.2 83.3 727 468
-----------------------------------------------
South America Total 559.9 434.7 894 648
Tasiast 112.6 101.0 833 691
Chirano (100%) 154.1 136.7 731 702
-----------------------------------------------
West Africa Total 266.7 237.7 771 697
-----------------------------------------------
Continuing operations 1,373.2 1,170.7 713 572
Discontinued operations(3) 27.4 39.0 836 841
-----------------------------------------------
Operations Total $ 1,400.6 $ 1,209.7 $ 715 $ 578
Less Kupol non-controlling
interest (25%)(2) - (21.0)
Less Chirano non-controlling
interest (10%) (15.4) (13.6)
-----------------------------------------------
Attributable - Continuing
operations $ 1,357.8 $ 1,136.1 $ 713 $ 579
-----------------------------------------------
Attributable Total $ 1,385.2 $ 1,175.1 $ 715 $ 585
---------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) "Production cost of sales" is equivalent to "Total cost of sales" per
the consolidated financial statements less depreciation, depletion and
amortization and impairment charges.
(2) On April 27, 2011, Kinross acquired the remaining 25% of CMGC, and
thereby obtained 100% ownership of Kupol. As such, the results up to
April 27, 2011 reflect 75% and results thereafter reflect 100%.
(3) On June 28, 2012, the Company completed the sale of its 50% interest in
the Crixas gold mine.
----------------------------------------------------------------------------
Consolidated balance sheets
(unaudited expressed in millions of United States dollars, except share amounts)
----------------------------------------------------------------------------
As at
--------------------------------
September 30, December 31,
2012 2011
--------------------------------
Assets
Current assets
Cash and cash equivalents $ 1,339.7 $ 1,766.0
Restricted cash 61.1 62.1
Short-term investments 749.6 1.3
Accounts receivable and other assets 327.7 309.4
Inventories 1,123.3 976.2
Unrealized fair value of derivative
assets 17.1 2.8
--------------------------------
3,618.5 3,117.8
--------------------------------
Non-current assets
Property, plant and equipment 9,874.0 8,959.4
Goodwill 3,382.3 3,420.3
Long-term investments 75.7 79.4
Investments in associates 514.5 502.5
Unrealized fair value of derivative
assets 12.4 1.1
Deferred charges and other long-term
assets 482.3 406.4
Deferred tax assets 33.3 21.9
--------------------------------
Total assets $ 17,993.0 $ 16,508.8
--------------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 591.5 $ 575.3
Current tax payable 78.3 82.9
Current portion of long-term debt 512.0 32.7
Current portion of provisions 33.2 38.1
Current portion of unrealized fair value
of derivative liabilities 33.6 66.7
--------------------------------
1,248.6 795.7
--------------------------------
Non-current liabilities
Long-term debt 2,117.5 1,600.4
Provisions 591.2 597.1
Unrealized fair value of derivative
liabilities 18.3 32.7
Other long-term liabilities 134.2 133.1
Deferred tax liabilities 970.7 879.1
Total liabilities 5,080.5 4,038.1
--------------------------------
Equity
Common shareholders' equity
Common share capital and common share
purchase warrants $ 14,686.0 $ 14,656.6
Contributed surplus 85.4 81.4
Accumulated deficit (1,948.0) (2,249.9)
Accumulated other comprehensive income
(loss) 16.1 (97.7)
--------------------------------
Total common shareholders' equity 12,839.5 12,390.4
--------------------------------
Non-controlling interest 73.0 80.3
--------------------------------
Total equity 12,912.5 12,470.7
--------------------------------
Commitments and contingencies
--------------------------------
Total liabilities and equity $ 17,993.0 $ 16,508.8
--------------------------------
Common shares
Authorized Unlimited Unlimited
Issued and outstanding 1,139,703,976 1,137,732,344
----------------------------------------------------------------------------
Consolidated statements of operations
(unaudited expressed in millions of United States dollars, except per share and share amounts)
----------------------------------------------------------------------------
Three months ended Nine months ended
--------------------------------------------------------
September 30, September 30, September 30, September 30,
2012 2011 2012 2011
--------------------------------------------------------
Revenue
Metal sales $ 1,109.7 $ 1,041.0 $ 3,124.5 $ 2,922.7
Cost of sales
Production cost of
sales 455.7 410.2 1,373.2 1,170.7
Depreciation,
depletion and
amortization 181.6 139.7 481.3 436.7
--------------------------------------------------------
Total cost of sales 637.3 549.9 1,854.5 1,607.4
--------------------------------------------------------
Gross profit 472.4 491.1 1,270.0 1,315.3
--------------------------------------------------------
Other operating
costs 20.1 8.6 42.4 21.6
Exploration and
business
development 56.9 37.5 186.8 87.4
General and
administrative 52.3 36.2 136.0 119.6
--------------------------------------------------------
Operating earnings 343.1 408.8 904.8 1,086.7
--------------------------------------------------------
Other income
(expense) - net (2.7) (9.1) (18.9) 96.0
Equity in losses
of associates (1.8) (1.4) (4.7) (1.4)
Finance income 1.5 1.7 3.6 5.4
Finance expense (13.4) (22.9) (32.2) (55.2)
--------------------------------------------------------
Earnings before
taxes 326.7 377.1 852.6 1,131.5
Income tax expense
- net (100.5) (167.2) (419.6) (376.3)
--------------------------------------------------------
Earnings from
continuing
operations after
tax 226.2 209.9 433.0 755.2
Earnings from
discontinued
operations after
tax - 5.5 43.9 12.5
--------------------------------------------------------
Net earnings $ 226.2 $ 215.4 $ 476.9 $ 767.7
--------------------------------------------------------
Net earnings from
continuing
operations
attributable to:
Non-controlling
interest $ 1.3 $ 2.8 $ (7.3) $ 57.6
--------------------------------------------------------
Common
shareholders $ 224.9 $ 207.1 $ 440.3 $ 697.6
--------------------------------------------------------
Net earnings
attributable to:
--------------------------------------------------------
Non-controlling
interest $ 1.3 $ 2.8 $ (7.3) $ 57.6
--------------------------------------------------------
Common
shareholders $ 224.9 $ 212.6 $ 484.2 $ 710.1
--------------------------------------------------------
Earnings per share
from continuing
operations
attributable to
common shareholders
Basic $ 0.20 $ 0.18 $ 0.39 $ 0.61
Diluted $ 0.20 $ 0.18 $ 0.38 $ 0.61
Net earnings per
share attributable
to common
shareholders
Basic $ 0.20 $ 0.19 $ 0.43 $ 0.63
Diluted $ 0.20 $ 0.19 $ 0.42 $ 0.62
Weighted average
number of common
shares outstanding
(millions)
Basic 1,139.4 1,136.7 1,138.8 1,135.5
Diluted 1,145.6 1,142.4 1,145.0 1,141.3
----------------------------------------------------------------------------
Consolidated statements of cash flows
(expressed in millions of United States dollars)
----------------------------------------------------------------------------
Three months ended Nine months ended
--------------------------------------------------------
September 30, September 30, September 30, September 30,
2012 2011 2012 2011
--------------------------------------------------------
Net inflow (outflow)
of cash related to
the following
activities:
Operating:
Net earnings from
continuing
operations $ 226.2 $ 209.9 $ 433.0 $ 755.2
Adjustments to
reconcile net
earnings from
continuing
operations to net
cash provided from
(used in) operating
activities:
Depreciation,
depletion and
amortization 181.6 139.7 481.3 436.7
(Gains) losses on
acquisition/
disposition of
assets and
investments - net 0.2 (0.3) 0.7 (31.7)
Equity in losses
of associates 1.8 1.4 4.7 1.4
Non-hedge
derivative
(gains) losses -
net 7.1 3.4 (6.4) (44.7)
Settlement of
derivative
instruments (0.2) (112.8) 48.5 (112.8)
Share-based
compensation
expense 9.9 8.8 28.8 27.2
Accretion expense 9.0 13.9 19.7 40.4
Deferred tax
expense 1.9 33.3 85.4 21.2
Foreign exchange
(gains) losses
and other (3.1) 2.8 (21.4) 2.7
Changes in
operating assets
and liabilities:
Accounts
receivable and
other assets 30.6 26.1 (54.8) (141.8)
Inventories (110.0) (93.9) (158.6) (96.4)
Accounts payable
and accrued
liabilities 100.2 136.3 240.3 381.3
--------------------------------------------------------
Cash flow provided
from operating
activities 455.2 368.6 1,101.2 1,238.7
--------------------------------------------------------
Income taxes paid (86.4) (79.6) (278.5) (262.5)
--------------------------------------------------------
Net cash flow of
continuing
operations provided
from operating
activities 368.8 289.0 822.7 976.2
--------------------------------------------------------
Net cash flow of
discontinued
operations provided
from (used in)
operating
activities (62.4) 13.4 (47.6) 22.6
--------------------------------------------------------
Investing:
Additions to
property, plant
and equipment (451.2) (389.6) (1,412.6) (1,051.3)
Net proceeds from
the sale of long-
term investments
and other assets - - 0.2 101.1
Additions to long-
term investments
and other assets (5.4) (48.1) (18.1) (124.6)
Net proceeds from
the sale of
property, plant
and equipment 0.2 1.0 0.4 1.8
Additions to
short-term
investments (749.6) (0.5) (748.3) (1.8)
Note received from
Harry Winston - 70.0 - 70.0
Decrease in
restricted cash (6.3) (11.9) (5.0) (15.8)
Interest received 1.2 4.5 3.3 6.4
Other 0.1 (0.2) 0.2 (3.2)
Net cash flow of
continuing
operations used in
investing
activities (1,211.0) (374.8) (2,179.9) (1,017.4)
--------------------------------------------------------
Net cash flow of
discontinued
operations provided
from (used in)
investing
activities - (4.2) 198.9 (20.9)
--------------------------------------------------------
Financing:
Issuance of common
shares on
exercise of
options and
warrants 1.2 11.9 4.7 26.8
Acquisition of
CMGC 25% non-
controlling
interest - - - (335.4)
Proceeds from
issuance of debt 1,140.8 1,136.5 1,437.1 1,329.1
Repayment of debt (145.0) (167.0) (467.5) (382.6)
Interest paid (1.7) (4.6) (6.5) (9.7)
Dividends paid to
common
shareholders (91.2) (68.0) (182.3) (124.8)
Settlement of
derivative
instruments - (23.9) - (43.6)
Other (4.2) (0.5) (5.0) (6.2)
--------------------------------------------------------
Net cash flow of
continuing
operations provided
from financing
activities 899.9 884.4 780.5 453.6
--------------------------------------------------------
Net cash flow of
discontinued
operations used in
financing
activities - (1.2) (0.6) (2.6)
--------------------------------------------------------
Effect of exchange
rate changes on
cash and cash
equivalents of
continuing
operations 4.1 (12.3) (0.3) (3.5)
--------------------------------------------------------
Increase (decrease)
in cash and cash
equivalents (0.6) 794.3 (426.3) 408.0
Cash and cash
equivalents,
beginning of period 1,340.3 1,080.3 1,766.0 1,466.6
--------------------------------------------------------
Cash and cash
equivalents, end of
period $ 1,339.7 $ 1,874.6 $ 1,339.7 $ 1,874.6
--------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating Summary
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Ore Gold Eq
Processed Recovery Production
Mine Period Ownership (1) Grade (2) (10)
----------------------------------------------------------------------------
('000
(%) tonnes) (g/t) (%) (ounces)
----------------------------------------------------------------------------
North Fort Q3 2012
America Knox(3) 100 16,111 0.76 84% 106,698
---------------------------------------------------------
Q2 2012 100 13,084 0.51 85% 71,952
Q1 2012 100 4,156 0.46 84% 61,716
Q4 2011 100 8,197 0.51 79% 70,759
Q3 2011 100 9,415 0.49 77% 76,261
--------------------------------------------------------------------
Round Q3 2012
Mountain
(4) 50 6,144 0.72 71% 53,205
---------------------------------------------------------
Q2 2012 50 4,674 0.82 74% 53,147
Q1 2012 50 5,121 0.92 78% 44,758
Q4 2011 50 6,317 0.98 81% 43,584
Q3 2011 50 6,989 0.95 74% 54,588
--------------------------------------------------------------------
Kettle Q3 2012
River 100 95 15.23 94% 43,942
---------------------------------------------------------
Q2 2012 100 111 11.52 92% 35,985
Q1 2012 100 112 12.81 90% 42,618
Q4 2011 100 123 12.24 89% 42,003
Q3 2011 100 110 13.06 91% 41,200
----------------------------------------------------------------------------
Russia Kupol - Q3 2012
(6)(7) 100 332 12.34 94% 155,533
---------------------------------------------------------
Q2 2012 100 329 12.23 93% 149,214
Q1 2012 100 309 11.76 93% 126,970
Q4 2011 100 325 10.81 93% 138,410
Q3 2011 100 303 10.39 93% 124,912
----------------------------------------------------------------------------
South Paracatu Q3 2012
America 100 13,386 0.38 70% 111,558
---------------------------------------------------------
Q2 2012 100 12,988 0.38 74% 118,419
Q1 2012 100 12,910 0.35 72% 104,618
Q4 2011 100 11,578 0.42 74% 117,977
Q3 2011 100 13,202 0.43 74% 135,099
--------------------------------------------------------------------
Crixas(12) Q3 2012 0 - - - -
---------------------------------------------------------
Q2 2012 50 302 3.43 91% 15,105
Q1 2012 50 282 3.82 91% 15,889
Q4 2011 50 302 4.58 93% 20,781
Q3 2011 50 300 3.49 92% 15,551
--------------------------------------------------------------------
La Coipa Q3 2012
(5) 100 1,297 0.65 79% 41,585
---------------------------------------------------------
Q2 2012 100 1,256 0.72 77% 36,113
Q1 2012 100 1,467 0.56 78% 37,740
Q4 2011 100 1,060 0.58 85% 34,435
Q3 2011 100 1,011 0.70 76% 38,539
---------------------------------------------------------
Maricunga Q3 2012 100 3,755 0.64 nm 46,971
---------------------------------------------------------
Q2 2012 100 3,487 0.65 nm 60,841
Q1 2012 100 4,014 0.66 nm 63,989
Q4 2011 100 3,960 0.76 nm 54,281
Q3 2011 100 3,284 0.80 nm 53,123
--------------------------------------------------------------------
West Tasiast(9) Q3 2012
Africa 100 2,530 1.55 92% 51,842
---------------------------------------------------------
Q2 2012 100 5,133 1.74 86% 49,807
Q1 2012 100 1,597 1.71 89% 37,634
Q4 2011 100 4,581 2.33 88% 54,874
Q3 2011 100 2,679 2.05 87% 47,175
--------------------------------------------------------------------
Chirano - Q3 2012
100% 90 846 2.67 93% 67,599
---------------------------------------------------------
Q2 2012 90 802 2.70 92% 63,660
Q1 2012 90 854 2.97 93% 75,906
Q4 2011 90 917 2.70 93% 73,539
Q3 2011 90 949 2.45 91% 68,372
--------------------------------------------------------------------
Chirano(8) Q3 2012 90 846 2.67 93% 60,839
---------------------------------------------------------
Q2 2012 90 802 2.70 92% 57,294
Q1 2012 90 854 2.97 93% 68,315
Q4 2011 90 917 2.70 93% 66,185
Q3 2011 90 949 2.45 91% 61,535
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Production Production
Gold Eq costs of cost of
Sales sales sales
Mine Period (10) (11) (11)/oz Cap Ex DD&A
----------------------------------------------------------------------------
($ ($ ($
(ounces) millions) ($/ounce) millions) millions)
----------------------------------------------------------------------------
North Fort Q3 2012
America Knox(3) 100,172 $ 64.9 $ 648 $ 13.7 $ 25.7
---------------------------------------------------------
Q2 2012 71,978 54.5 757 38.4 11.3
Q1 2012 60,365 52.0 861 24.8 9.1
Q4 2011 69,973 52.3 747 28.4 10.0
Q3 2011 75,611 53.8 712 26.8 15.4
--------------------------------------------------------------------
Round Q3 2012
Mountain
(4) 53,237 32.2 605 14.4 6.6
---------------------------------------------------------
Q2 2012 52,433 34.7 662 19.3 8.4
Q1 2012 43,551 37.3 856 13.6 7.8
Q4 2011 44,231 26.4 597 22.2 6.1
Q3 2011 52,658 35.2 668 9.6 8.8
--------------------------------------------------------------------
Kettle Q3 2012
River 44,049 20.7 470 1.0 21.7
---------------------------------------------------------
Q2 2012 40,354 20.5 508 3.2 18.2
Q1 2012 39,321 18.9 481 0.5 18.9
Q4 2011 43,089 19.2 446 3.0 21.6
Q3 2011 42,109 19.5 463 3.9 17.5
----------------------------------------------------------------------------
Russia Kupol - Q3 2012
(6)(7) 164,025 76.5 466 17.0 30.1
---------------------------------------------------------
Q2 2012 156,716 73.2 467 12.3 29.4
Q1 2012 126,735 61.2 483 10.4 23.6
Q4 2011 113,936 54.8 481 18.5 21.3
Q3 2011 138,278 58.4 422 8.0 25.7
----------------------------------------------------------------------------
South Paracatu Q3 2012
America 104,937 92.0 877 81.0 20.0
---------------------------------------------------------
Q2 2012 118,389 108.2 914 67.2 19.2
Q1 2012 110,527 105.4 954 74.6 14.6
Q4 2011 112,048 82.6 737 131.6 15.1
Q3 2011 133,827 89.7 670 105.9 16.9
--------------------------------------------------------------------
Crixas(12) Q3 2012 - - - - -
---------------------------------------------------------
Q2 2012 15,611 13.6 871 3.6 4.9
Q1 2012 17,153 13.8 805 3.8 4.0
Q4 2011 17,379 11.3 650 7.1 3.6
Q3 2011 16,594 15.3 922 5.4 3.7
--------------------------------------------------------------------
La Coipa Q3 2012
(5) 42,240 45.9 1,087 25.9 12.2
---------------------------------------------------------
Q2 2012 30,325 35.7 1,177 22.2 6.2
Q1 2012 43,712 44.5 1,018 15.3 4.5
Q4 2011 35,629 35.4 994 23.2 3.3
Q3 2011 35,566 32.1 903 17.4 6.6
---------------------------------------------------------
Maricunga Q3 2012 45,818 40.0 873 33.9 4.9
---------------------------------------------------------
Q2 2012 61,367 44.5 725 50.7 5.5
Q1 2012 69,063 43.7 633 35.6 6.3
Q4 2011 52,987 22.2 419 34.0 4.8
Q3 2011 58,591 30.2 515 29.9 5.5
--------------------------------------------------------------------
West Tasiast(9) Q3 2012
Africa 48,045 32.2 670 190.4 18.6
---------------------------------------------------------
Q2 2012 46,296 44.5 961 124.3 19.9
Q1 2012 40,827 35.9 879 260.0 13.8
Q4 2011 50,800 37.2 732 204.6 14.8
Q3 2011 48,455 40.8 842 88.3 18.4
--------------------------------------------------------------------
Chirano - Q3 2012
100% 69,698 51.3 736 15.9 39.5
---------------------------------------------------------
Q2 2012 62,978 49.1 780 20.6 36.9
Q1 2012 78,251 53.7 686 22.5 41.8
Q4 2011 67,876 45.3 667 28.6 28.4
Q3 2011 68,697 50.5 735 19.5 23.6
--------------------------------------------------------------------
Chirano(8) Q3 2012 62,728 46.2 736 14.3 35.6
---------------------------------------------------------
Q2 2012 56,680 44.2 780 18.5 33.2
Q1 2012 70,426 48.3 686 20.3 37.6
Q4 2011 61,086 40.8 667 25.7 25.6
Q3 2011 61,828 45.5 735 17.6 21.2
----------------------------------------------------------------------------
(1) Ore processed is to 100%, production and costs are to Kinross' account.
(2) Due to the nature of heap leach operations, recovery rates at Maricunga
cannot be accurately measured on a quarterly basis. Recovery rates at
Fort Knox, Round Mountain and Tasiast represent mill recovery only.
(3) Includes 12,873,000 tonnes placed on the heap leach pad during the
third quarter of 2012, and 23,420,000 tonnes for the first nine months
of 2012. Grade and recovery represent mill processing only. Ore placed
on the heap leach pad had an average grade of 0.30 grams per tonne for
the third quarter of 2012 and 0.31 for the nine months ended September
30, 2012.
(4) Includes 5,118,000 tonnes placed on the heap leach pad during the third
quarter of 2012, and 13,180,000 tonnes for the first nine months of
2012. The presentation has been amended to reflect mill grade and
recovery only, with heap leach grade disclosed separately, rather than
a blended rate for mill and heap leach grades. Ore placed on the heap
leach pad had an average grade of 0.44 grams per tonne for the third
quarter of 2012 and the first nine months of 2012. In addition, the
presentation has been amended to exclude tonnes transferred between
heap leach pads.
(5) La Coipa silver grade and recovery were as follows: Q3 (2012) 55.58
g/t, 45%; Q2 (2012) 42.04 g/t, 46%; Q1 (2012) 38.78 g/t, 51%; Q4 (2011)
56.82 g/t, 54%; Q3 (2011) 65.00 g/t, 43%.
(6) The Kupol segment excludes Dvoinoye capital expenditures.
(7) Kupol silver grade and recovery were as follows: Q3 (2012) 163.68 g/t,
85%; Q2 (2012) 187.49 g/t, 87%; Q1 (2012) 171.8 g/t, 85%; Q4 (2011)
170.52 g/t, 85%; Q3 (2011) 159.03 g/t, 82%.
(8) Includes Kinross' share of Chirano at 90%.
(9) Includes 1,887,000 tonnes placed on the heap leach pad during the third
quarter of 2012, and 7,366,000 tonnes for the first nine months of
2012. Grade and recovery represent mill processing only. Ore placed on
the heap leach pad had an average grade of 0.51 grams per tonne for the
third quarter of 2012, and 0.50 grams per tonne for the first nine
months of 2012.
(10) Gold equivalent ounces include silver ounces produced and sold
converted to a gold equivalent based on the ratio of the average spot
market prices for the commodities for each period. The ratios for the
quarters presented are as follows: Q3 2012: 55.44:1, Q2 2012: 54.77:1,
Q1 2012: 51.82:1, Q4 2011: 52.64:1, Q3 2011: 43.87:1.
(11) "Production cost of sales" is equivalent to "Total cost of sales" per
the consolidated financial statements less depreciation, depletion and
amortization and impairment charges.
(12) On June 28, 2012, the Company completed the sale of its 50% interest in
the Crixas gold mine.
For more information, please see Kinross' 2012 third quarter Financial Statements and MD&A at www.kinross.com.
Contacts:
Media Contact: Kinross Gold Corporation
Steve Mitchell
Vice-President, Corporate Communications
416-365-2726
steve.mitchell@kinross.com
Investor Relations Contact: Kinross Gold Corporation
Tom Elliott
Vice-President, Investor Relations
416-365-3390
tom.elliott@kinross.com
www.kinross.com
