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TORONTO, ONTARIO--(Marketwire - Nov. 2, 2011) - Kinross Gold Corporation KKGC today announced its results for the third quarter ended September 30, 2011.
(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 9 of this news release. All dollar amounts in this news release are expressed in U.S. dollars, unless otherwise noted.)
Third quarter highlights
Financial and operating results:
-- Production(2): 647,983 gold equivalent ounces, a 13% increase over Q3
2010.
-- Revenue: $1,069.2 million, a 45% increase over Q3 2010.
-- Production cost of sales(3): $634 per gold equivalent ounce, compared
with $517 in Q3 2010.
-- Attributable margin(4): $1,012 per ounce sold, a 50% increase over Q3
2010.
-- Adjusted operating cash flow(5): $421.6 million, an 82% increase over Q3
2010. Adjusted operating cash flow per share was $0.37 in Q3, compared
with $0.30 in Q3 2010.
-- Adjusted net earnings(1,5): $273.4 million, a 134% increase over Q3
2010. Adjusted net earnings per share were $0.24, compared with $0.15 in
Q3 2010.
-- Reported net earnings(1): $212.6 million, or $0.19 per share, compared
with $540.9 million, or $0.71 per share, for Q3 2010. Q3 2010 earnings
included significant one-time gains.
-- Outlook: The Company expects to be within its 2011 forecast guidance for
production (2.6 - 2.7 million attributable gold equivalent ounces) and
production cost of sales ($565 - 610 per gold equivalent ounce).
Growth projects:
-- Kinross continues to advance its major growth projects at Tasiast, Fruta
del Norte, Lobo-Marte, and Dvoinoye, all of which are proceeding on
schedule.
-- The Company has received approval of the Environmental Impact Assessment
for early works at Tasiast and mobilization for construction has
commenced. Capital commitments at Tasiast to the end of Q3 were $782
million.
Exploration:
-- Further drilling and exploration at Tasiast continue to increase the
Company's confidence in the orebody and define new areas for potential
growth.
-- In Chile, recent drilling at the Pompeya target at La Coipa has led to
the discovery of a significant area of mineralization close to surface,
and drilling to further define this new zone will continue in Q4 2011.
Corporate responsibility:
-- During the third quarter, Kinross was named to both the Dow Jones
Sustainability World Index and the Dow Jones Sustainability North
America Index, indices composed of global and regional leaders in
corporate responsibility.
(1) "Net earnings" figures in this release represent " net earnings attributed to common shareholders."
(2) Unless otherwise stated, production figures in this release are based on Kinross' share of Kupol (75% up to April 27, 2011, 100% thereafter) and 90% of Chirano production.
(3) "Production cost of sales per gold equivalent ounce" is a non-GAAP measure defined as production cost per the financial statements divided by the attributable number of gold equivalent ounces sold, both reduced for Kupol sales attributable to a third-party shareholder (75% up to April 27, 2011) and Chirano sales to a 10% minority interest holder. Production cost is equivalent to total cost of sales (per the financial statements), less depreciation and amortization, and is generally consistent with cost of sales as reported under Canadian GAAP prior to the adoption of IFRS.
(4) "Attributable margin per ounce sold" is a non-GAAP measure and defined as "average realized gold price per ounce" less "attributable production cost of sales per gold equivalent ounce sold."
(5) Reconciliation of non-GAAP measures is located on page 11 of this news release.
CEO Commentary
Tye Burt, President and CEO, made the following comments in relation to third quarter 2011 results:
"Kinross recorded another strong quarter, with revenue exceeding $1 billion for the first time, and adjusted operating cash flow increasing by more than 82% year-over-year to a record $422 million. Adjusted net earnings were more than double those of the same period last year, while adjusted net earnings per share increased by 60%. Cost of sales per ounce was higher than the previous quarter, due to industry-wide cost pressures, as well as the impact of mining lower grade portions of the orebody at several operations. Overall, we remain on track to meet our 2011 production and cost of sales guidance.
"We made significant progress in the quarter advancing our industry-leading growth program. Our drilling campaign at Tasiast continues both to confirm our confidence in the resource and indicate potential further expansions to our previous model. We received approval of the first phase environmental impact assessment at Tasiast, and mobilization for construction is underway. We continued to advance our other growth projects, all of which remain on schedule. Meanwhile, our global exploration effort continues to bear fruit, with the discovery of an important new area of mineralization close to surface at La Coipa in Chile.
"Our successful completion of a $1 billion debt offering during the quarter confirmed the market's confidence in Kinross' ability to deliver on our strategy, and strengthened our foundation for growth."
Financial results
Summary of financial and operating results
Three months ended Nine months ended
September 30, Septem ber 30,
--------------------------------------------
(dollars in millions, except per
share and per ounce amounts) 2011 2010(i) 2011 2010(i)
----------------------------------------------------------------------------
Total(a) gold equivalent
ounces(b) - produced 654,820 616,178 2,051,930 1,793,569
Total(a) gold equivalent
ounces(b) - sold 670,386 618,698 2,093,410 1,840,820
Attributable(c) gold equivalent
ounces - produced 647,983 575,065 1,967,085 1,657,469
Attributable(c) gold equivalent
ounces - sold 663,517 576,955 2,010,128 1,696,011
Metal sales $ 1,069.2 $ 735.5 $ 2,994.0 $ 2,089.7
Production cost of sales(d) $ 425.5 $ 313.2 $ 1,209.7 $ 876.4
Depreciation, depletion and
amortization $ 143.4 $ 124.9 $ 446.4 $ 372.4
Operating earnings $ 416.9 $ 228.4 $ 1,105.8 $ 678.7
Net earnings attributed to
common shareholders $ 212.6 $ 540.9 $ 710.1 $ 832.6
Basic earnings per share $ 0.19 $ 0.71 $ 0.63 $ 1.15
Diluted earnings per share $ 0.19 $ 0.69 $ 0.62 $ 1.12
Adjusted net earnings attributed
to common shareholders(e) $ 273.4 $ 116.8 $ 675.2 $ 327.9
Adjusted net earnings per
share(e) $ 0.24 $ 0.15 $ 0.59 $ 0.45
Cash flow provided from
operating activities $ 302.4 $ 248.9 $ 998.8 $ 707.5
Adjusted operating cash flow (e) $ 421.6 $ 231.5 $ 1,231.4 $ 752.5
Adjusted operating cash flow per
share(e) $ 0.37 $ 0.30 $ 1.08 $ 1.04
Average realized gold price per
ounce $ 1,646 $ 1,190 $ 1,472 $ 1,138
Consolidated production cost of
sales per equivalent ounce
sold(f) $ 635 $ 506 $ 578 $ 476
Attributable(c) production cost
of sales per equivalent ounce
sold(g) $ 634 $ 517 $ 585 $ 489
Attributable production cost of
sales per ounce sold on a by-
product basis(h) $ 593 $ 477 $ 527 $ 448
a. " Total" includes 100% of Kupol and Chirano production.
b. " 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 ratio for the
third quarter of 2011 was 43.87:1, compared with 64.84:1 for the third
quarter of 2010 and for the first nine months of 2011 was 42.36:1,
compared with 65.26:1 for the first nine months of 2010.
c. " Attributable" includes Kinross' share of Kupol (75% up to April 27,
2011, 100% thereafter) and Chirano (90%) production.
d. " Production cost of sales" is equivalent to " Total cost of sales" per
the consolidated financial statements less " depreciation, depletion and
amortization", and is generally consistent with " Cost of sales" as
reported under CDN GAAP prior to the adoption of IFRS.
e. " Adjusted net earnings attributed to common shareholders", " Adjusted
net earnings per share", " Adjusted operating cash flow" and " Adjusted
operating cash flow per share" are non-GAAP measures. The reconciliation
of these non-GAAP financial measures is located on page 11 of this news
release.
f. " Consolidated production cost of sales per ounce" is a non-GAAP measure
and is defined as production costs as per the consolidated financial
statements divided by the total number of gold equivalent ounces sold.
g. " Attributable production cost of sales per ounce" is a non-GAAP measure
and is defined as attributable production cost of sales divided by the
attributable number of gold equivalent ounces sold.
h. " Attributable production cost of sales per ounce on a by-product basis"
is a non-GAAP measure and is defined as production costs as per the
consolidated financial statements less attributable(c)silver revenue
divided by the total number of attributable(c)gold ounces sold.
i. Prior year figures have been restated to conform to IFRS.
Kinross produced 647,983 attributable gold equivalent ounces in the third quarter of 2011, a 13% increase over the third quarter of 2010, mainly due to a full quarter of production from the West Africa operations, which the Company acquired on September 17, 2010, and additional production from Kupol, as the Company increased its ownership to 100% in the second quarter of this year.
Production cost of sales per gold equivalent ounce(3)was $634 compared with $517 for the third quarter of 2010, an increase of 23%, mainly due to increases in labour costs, diesel and power costs, and royalties. Production cost of sales per ounce(3)for the full year are expected to be within the previously-stated guidance range of $565 - 610. Production cost of sales per gold ounce on a by-product basis was $593 in the third quarter of 2011, compared with $477 in Q3 2010, and based on Q3 2011 attributable gold sales of 604,739 ounces and attributable silver sales of 2,578,612 ounces.
Revenue from metal sales was a record $1,069.2 million in the third quarter of 2011, versus $735.5 million during the same period in 2010, an increase of 45%, due to an increase in total ounces produced and a higher average realized gold price. The average realized gold price was $1,646 per ounce in Q3, compared with $1,190 per ounce for Q3 2010, an increase of 38%.
Kinross' margin per gold equivalent ounce sold(4)was $1,012 for the quarter, an increase of 50% compared with the third quarter of 2010, due mainly to a higher realized gold price.
Adjusted operating cash flow(5)was $421.6 million for the quarter, or $0.37 per share, compared with $231.5 million, or $0.30 per share, for Q3 2010. Cash and cash equivalents were $1,874.6 million as at September 30, 2011, compared with $1,466.6 million as at December 31, 2010.
Adjusted net earnings(1, 5)were $273.4 million, or $0.24 per share for Q3 2011, compared with $116.8 million, or $0.15 per share, for Q3 2010.
Reported net earnings(1)were $212.6 million, or $0.19 per share, for Q3 2011, compared with $540.9 million, or $0.71 per share, for Q3 2010. The decrease is due to one-time income gains in Q3 2010 from the sale of the Company's interest in Harry Winston Diamond Corporation and Diavik Diamond Mines, and the unrealized increase in fair value of the initial investment in Red Back at the time of the acquisition.
Capital expenditures were $395.0 million for Q3 2011, compared with $150.7 million for the same period last year, an increase due mainly to project-related expenditures at Paracatu, Tasiast and Chirano.
Operating results
Mine-by-mine summaries of third quarter 2011 operating results may be found on pages 13 and 17 of this news release. Highlights include the following:
-- North America: Third quarter results from North American operations
remained strong, despite the expected reduction in grades at all three
mines. While the heap leach at Fort Knox continues to perform well,
production was lower compared to Q3 2010, as expected, due to processing
of lower grade stockpiled ore. At Round Mountain, production increased
compared to Q3 2010 due to increased processing levels.
-- Russia: At Kupol, production and costs remain on target for the year,
while grades declined as expected. Open pit operations continued
successfully through the quarter, with open pit operations expected to
end in Q4 as the mine makes the transition to a fully underground
operation.
-- South America: Production for the region was higher year-over-year,
mainly due to production increases at Paracatu and Maricunga. Paracatu
achieved record ore processed, as the third ball mill had its first full
quarter of operation. Maricunga's production increased year-over-year,
despite being impacted by a slower than expected release of gold from
the heap leach as a result of severe winter conditions. At La Coipa, Q3
production and cost of sales were negatively impacted by lower than
expected grades and higher sulphide content, which are being encountered
as the final parts of Puren Phase 3 are mined out. Mining of this phase
is expected to be completed early next year.
Paracatu's Plant 2 was temporarily shut down in late October to address
an electrical malfunction affecting the SAG mill motor. Repairs are
underway and the plant is expected to restart within a week.
-- West Africa: At Tasiast, production remained at a similar level to the
previous quarter, but costs were higher, largely due to maintenance
issues, a ramp-up in administration costs in preparation for expansion
activities, and higher royalties. At Chirano, production was slightly
lower and costs were slightly higher than planned, as it took longer
than expected to enter a higher grade zone of the Akwaaba orebody.
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 9 of this news release.
Growth projects at sites
Tasiast expansion project
Key project development activities at Tasiast are proceeding on schedule. Work on the expansion project feasibility study continues and is expected to be completed at the end of the first quarter of 2012. Production start- up is targeted for mid-2014.
The Company continued its aggressive drill campaign with 13 core and 10 reverse circulation (RC) rigs in operation. An update on the Tasiast exploration program is contained in the Exploration section of this news release (page 6).
The Phase 1 Environmental Impact Assessment (EIA) for on-site improvements and early works has been approved. The contract for general construction has been awarded, and mobilization of the contractor is underway. Phase 1 construction will include: early earthworks and concrete foundations for the mill and on-site power plant; interim expansion of the existing water supply system to meet construction and current operational requirements; construction and operation of the initial phase of the new tailings facility; and expansion of camp facilities by approximately 6,600 additional beds.
The terms of reference for the Phase 2 EIA (on-site project expansion construction, operations and closure) and Phase 3 EIA (off-site sea water supply construction, operation and closure) have now been submitted. Development and submission of the EIAs are on schedule to support the project execution timeline.
Basic and detailed engineering is continuing on the 60,000 tonne per day process plant and associated process infrastructure facilities. Equipment ordered during the third quarter includes two concrete batch plants and associated crushing and screening plants, and also the first phase of the power plant, including three gas turbines with a combined capacity of 120 MW. In addition, commitments have recently been made for a catering camp and additional camp facilities which will bring the total capacity to approximately 9,500 beds to cover the peak requirements for construction and ramp-up of operations. Capital commitments as of the end of September for mining, processing and power generation equipment total $782 million, with commitments expected to be approximately $1.0 billion by year-end. Total actual spending by year-end is expected to be approximately $400 million.
Construction of the Piment and West Branch dump leach pads and ADR (Adsorption, Desorption and Refining) plant at Tasiast have been completed on budget and schedule and are currently being commissioned.
Dvoinoye
Key project development activities at Dvoinoye are proceeding on schedule. The feasibility study is expected to be completed in the first quarter of 2012, and the processing of Dvoinoye ore remains on target to commence in the second half of 2013.
Approximately 650 metres of underground decline development have been completed as of the end of the third quarter. Additional underground mining equipment is en route to site to increase the rate of development, which is expected to accelerate as more faces become available.
The permanent camp, truck shop and water storage buildings have been delivered to the port of Pevek and are in the process of being transported to site. Earthworks for the fuel farm, truck shop, power house, water building, access roads, and utility trenches have been completed, and earthworks associated with the west portal are nearing completion. Foundations for the truck shop are complete and civil foundation work for the water building and water tanks, fuel tank farm and permanent man camp are progressing well. Construction of maintenance and office facilities at the east mine portal are nearing completion and expansion of the second phase of the temporary camp is proceeding. Procurement and engineering activities for all remaining site facilities are proceeding on target.
Paracatu ball mills
Engineering on the fourth Paracatu ball mill was 90% complete and procurement was at 98% as of the end of September. Construction progress was 20%, with both concrete and structural steel approximately 68% and 40% complete, respectively. Pre-assembly of the mill has commenced and ball mill installation will commence in December. The project is expected to be operational in the third quarter of 2012, as envisioned in the mine plan.
A new flash flotation gold recovery process for the first two ball mills at Paracatu is now ready for commissioning. Once fully operational, the $13-million upgrade project is expected to improve recovery by an average of approximately 1%.
Maricunga SART plant
Construction of the Maricunga SART (Sulphidization, Acidification, Recycling and Thickening) plant is expected to re-start in late November. The re-start of construction is later than originally planned, as the construction camp was damaged by severe winter storms and has required repair work. The SART project is now targeted for expected completion in the first half of 2012.
New developments
Lobo-Marte
At Lobo-Marte, drilling for the feasibility study is now complete, and equipment will be re-deployed to drilling programs at Valy and Marte Northwest.
The project feasibility study is on schedule for completion at the end of 2011. Geotechnical and mine block models in support of the feasibility study have been completed and mine and metallurgical plans are expected to be completed in the fourth quarter. Further geotechnical drilling is being undertaken for the crusher and leach pad facilities. Permitting remains on schedule. Construction is expected to commence in the fourth quarter of 2012, and the project is on target to commence expected commissioning in 2014.
Fruta del Norte
Development of the underground exploration decline at Fruta del Norte (FDN) is continuing and is on target for expected completion in 2013.
The Company is finalizing a project feasibility study for expected completion by year-end 2011. Final mine and plant EIAs were submitted in October, consistent with the project schedule. Kinross continues to target start-up of the mine in late 2014.
Kinross and the Ecuadorean government have made progress on negotiations regarding the exploitation agreement for FDN, and have commenced negotiations on the investment protection agreement.
Cerro Casale
At the Company's 25%-owned Cerro Casale project in Chile, the Environmental Impact Assessment was submitted in the third quarter. The permitting process is anticipated to take approximately 18 months, at which time the joint venture will consider a construction decision and commence detailed engineering. Exploration programs will continue in parallel with completing basic engineering and permitting. Discussions with the government and meetings with local communities and indigenous groups are continuing in conjunction with these activities.
Cerro Casale is not included in Kinross' project construction capital estimates or production estimates for the next three years. Kinross expects its share of capital expenditures to be approximately $35 million per year during this period to advance project development activities.
Exploration update
Tasiast
The infill drilling program was extended in the third quarter to upgrade iron formation-hosted mineral resources in the Piment areas in support of the feasibility study. Drilling also continued to follow-up encouraging results encountered in greenschist host-rocks between Piment Sud Sud and Piment Central. District exploration was focused at C67 with three core drills active on the target by the end of the quarter. A total of 140 holes for 96,366 metres were drilled at Tasiast during the third quarter.
The infill program occupied approximately 90% of drilling resources in the third quarter with the program now 95% complete in the Piment areas. Kinross will redeploy drills in the fourth quarter to accelerate exploration for new greenschist-style ore shoots hosted within the footprint of the mine corridor, and to continue scoping the full extent of mineralization encountered at district targets such as C67 and C69 (seven kilometres north and 10 kilometres south of the processing plant, respectively).
Deep drilling at West Branch continued to identify extensions of the zone of greenschist-style mineralization which is now delineated 750 metres beyond the deepest holes incorporated in the last Tasiast mineral resource update (provided in Kinross' update in the 2011 second quarter earnings release). Further deep drilling of the Greenschist Zone will depend on results of the year-end mineral resource update and pit optimization studies that will determine the ultimate depth of the pit. Drilling highlights from the deep zone at West Branch are summarized below and illustrated in Figure 1 (http://www.kinross.com/media/222458/q3%202011%20figure%201.pdf):
-- 62 metres @ 2.22 g/t Au from 885 metres (hole TA05137BRD)
-- 53 metres @ 1.76 g/t Au from 857 metres (hole TA05151DD)
-- 57 metres @ 1.14 g/t Au from 899 metres (hole TA05046RD)
-- 51 metres @ 1.03 g/t Au from 897 metres (hole TA05140ARD)
A complete list of recent step-out drill results from this target and related technical information can be found in the appendix athttp://www.kinross.com/media/222470/q3%202011%20appendix.pdf.
Additional drilling was completed in Q3 to follow-up encouraging results in previous holes intersecting mineralized greenschist rocks under Piment Sud Sud. The first hole to test the target (TA05149RD) was reported in Kinross' second quarter 2011 earnings release. Results from the second hole (TA05193DD, completed in Q2) were received in the third quarter and returned 34 metres grading 0.94 g/t Au in greenschist host rocks from 1022 metres down hole (Figure 1: http://www.kinross.com/media/222461/q3%202011%20figure%202.pdf). The third and fourth holes returned 26 metres grading 1.25 g/t Au from 418 metres and 24 metres grading 0.6 g/t Au from 495 metres in TA05176DD and TA05174DD, respectively. Mineralized intercepts in both these holes occurred in the position of the Piment Sud Sud (hanging wall) iron formation. Hole TA05176DD encountered weakly mineralized greenschist rocks down hole of the mineralized iron formation, whereas the greenschist unit is interpreted to be developed down dip of hole TA05174DD. Results of the fifth and sixth holes were not available as of the date of this release, although both holes intersected greenschist host rocks. Further drilling is underway to understand the significance of these results and to continue vectoring to potential new ore shoots in the same structural position as the Greenschist Zone at West Branch.
Three core drills were mobilized to C67 toward the end of the quarter, with five core holes completed for a total of 1,070 metres. Results continue to be strongly encouraging. Kinross expects to start the basic work of geological modeling for C67 in 2012, which is the first step in the process of completing a resource estimate.
The objective of core drilling at C67 was to understand the geologic controls on mineralization encountered in several fences of RC holes completed at the beginning of Q3. Gold mineralization is currently defined over 800 strike metres, but the true width of the zone is not well understood (Figure 2: http://www.kinross.com/media/222461/q3%202011%20figure%202.pdf). Additional core drilling will more accurately determine the general orientation, geometry and potential vertical depth of mineralization. Significant results from RC drilling at C67 are summarized below:
-- 100 metres @ 1.18 g/t Au from 32 metres (hole TA06382RC)
-- 50 metres @ 2.70 g/t Au from 20 metres and
21 metres @ 4.94 g/t Au from 94 metres (hole TA06402RC)
-- 27 metres @ 2.93 g/t Au from 143 metres (hole TA06403RC)
-- 37 metres @ 1.51 g/t Au from 19 metres (hole TA06410RC)
-- 31 metres @ 1.47 g/t Au from 91 metres (hole TA06380RC)
A complete list of drill results from this target since those included in Kinross' March 28, 2011 news release may be found in the appendix at http://www.kinross.com/media/222470/q3%202011%20appendix.pdf.
La Coipa
Kinross is pleased to announce a significant gold and silver discovery at La Coipa called Pompeya. Currently, two diamond drills and one RC rig are drilling on the project, which is located four kilometres northeast of the existing La Coipa processing plant (Figure 3: http://www.kinross.com/media/222464/q3%202011%20figure%203.pdf) on the Compania Minera La Coipa joint venture property (75% Kinross). Mineralization drilled to date has been delineated in sixteen core and RC holes, and occurs as primarily oxide material close to surface. Dimensions currently define a mineralized area of approximately 800 by 600 meters, with extensions to the west, south and northeast remaining open.
Kinross initially carried out drilling at Pompeya in 2010 following up anomalous results in historical drill holes (Figure 4: http://www.kinross.com/media/222467/q3%202011%20figure%204.pdf). Five holes were drilled in the Andean summer months from late 2010 to early 2011 (DPMP-001 to DPMP-005) and encountered strong oxide gold and silver mineralization between 40 and 250 metres from surface. Follow-up drilling led to completion of the main discovery hole in the second quarter of 2011, which returned 58.2 metres grading 1.2 g/t Au and 256 g/t Ag (6.99 g/t Au equivalent) starting 20 metres down hole. The hole was lost at 78.2 metres in the middle of the mineralized zone owing to poor ground conditions and was re-drilled as DPMP-007. Sampling in DPMP-007 commenced from the bottom of hole DPMP-006 and returned a further 33.9 metres grading 0.37 g/t Au and 173 g/t Ag (4.32 g/t Au equivalent).
Drilling in the third quarter of 2011 continued to step-out in all directions around the main discovery hole and returned the following significant intersections:
-- 50.0 metres @ 1.16 g/t Au and 48.3 g/t Ag (2.26 g/t Au Eq.) from 90
metres (hole DPMP-008)
-- 108.0 metres @ 0.41 g/t Au & 42.7 g/t Ag (1.38 g/t Au Eq.) from 88.0
metres (hole DPMP-012)
-- 146.0 metres @ 2.4 g/t Au & 95.2 g/t Ag (4.58 g/t Au Eq.) from 74.0
metres (hole DPMP-015)
-- 166.0 metres @ 1.86 g/t Au & 84.8 g/t Ag (3.79 g/t Au Eq.)from 12 metres
(hole DPMP-016)
-- 40.0 metres @ 0.70 g/t Au and 43 g/t Ag (1.68 g/t Au Eq.) from 30.0
metres (hole DMMP-018)
-- 212.0 metres @ 1.45 g/t Au & 26.7 g/t Ag (2.06 g/t Au Eq.) from 156.0
metres (hole DPMP-020)
A complete list of drill results from this target and related technical information may be found in the appendix at http://www.kinross.com/media/222470/q3%202011%20appendix.pdf.
Gold equivalent (Au Eq.) ounces include silver ounces converted to a gold equivalent based on the average spot market prices for the commodities for a specified quarterly period assuming 100% gold and silver recoveries. The gold equivalent calculation applied to silver assayed in the Pompeya results was approximately 44:1 based on the ratio for the third quarter of 2011 (see note "b" in the Financial Results table on page 2 of this news release).
Mineralization is interpreted to be localized by volcaniclastic breccia units that occur as sub-horizontal bodies. Feeder-type structural controls on mineralization are not clearly evident in the information collected to date. The drill hole highlights listed above reflect gold-silver mineralization hosted by predominately vuggy quartz rock, typical of a high-sulfidation epithermal precious metals deposit and analogous to mineralization observed in the Ladera Farellon ore body at La Coipa. Full details of oxide and sulfide mineralized intervals are provided in the table of Pompeya drill hole assay results in the appendix at http://www.kinross.com/media/222470/q3%202011%20appendix.pdf. Further infill and step-out drilling is ongoing to better understand the limits of the mineralized system and the controls on distribution of gold and silver grades.
Step out and infill drilling will further define this new zone throughout the fourth quarter of 2011 and into 2012. Kinross expects to include results from Pompeya in the 2012 year-end update on mineral reserves and mineral resources.
Completion of $1 billion unsecured debt offering
On August 22, 2011, Kinross completed a $1 billion offering of debt securities, consisting of $250 million principal amount of its 3.625% senior notes due 2016, $500 million principal amount of its 5.125% senior notes due 2021 and $250 million principal amount of its 6.875% senior notes due 2041 (collectively, the "notes"). The notes are senior unsecured obligations of Kinross. Kinross received investment grade ratings with stable outlook from all three major rating agencies in connection with the offering.
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 9 of this news release.
Kinross expects to be within its previously stated full-year production guidance of 2.6 - 2.7 million gold equivalent ounces for 2011, and within its previously stated full-year cost of sales guidance of $565 - 610 per gold equivalent ounce. On a regional basis, the Company has revised its 2011 forecast as summarized below:
Previous Revised Previous cost Revised cost
production production of of
Region forecast forecast sales sales
(gold (gold forecast forecast
equivalent equivalent ($ per gold ($ per gold
oz) oz) equivalent equivalent
oz) oz)
-----------------------------------------------------
1,000,000- 945,000-
South America 1,070,000 980,000 585-650 650-675
590,000- 625,000-
North America 630,000 645,000 625-685 Unchanged
440,000- 440,000-
West Africa(2) 500,000 480,000 595-655 685-715
535,000- 555,000-
Russia(2) 555,000 575,000 395-435 Unchanged
-----------------------------------------------------
2.6-2.7
Total Kinross million Unchanged 565-610 Unchanged
Conference call details
In connection with this news release, Kinross will hold a conference call and audio webcast on Thursday, November 3, 2011 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' third quarter 2011 Financial Statements and Management's Discussion and Analysis report at www.kinross.com.
Kinross' unaudited third quarter 2011 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 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 7,500 people worldwide.
Kinross' strategic focus is to maximize net asset value and cash flow per share through a four-point plan built on: delivering mine and financial performance; attracting and retaining the best people in the industry; achieving operating excellence through the "Kinross Way"; and delivering future value through profitable growth opportunities.
Kinross maintains listings on the Toronto Stock Exchange K and the New York Stock Exchange 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", "proposes", "expects" or "does not expect", "is expected", "budget", "scheduled","timeline", "envision", "estimates", "forecasts", "guidance", "opportunity", "objective", "outlook", "potential", "targets", "models", "intends", "anticipates", or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would","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) development of and production from the Phase 7 pit expansion and heap leach project at Fort Knox continuing on a basis consistent with Kinross' current expectations; (4) the viability, permitting and development of the Fruta del Norte deposit being consistent with Kinross' current expectations; (5) 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 new mining and investment laws and related regulations and policies, and negotiation of an exploitation contract and an investment protection contract with the government, being consistent with Kinross' current expectations; (6) permitting, construction, development and production at Cerro Casale being consistent with the Company's current expectations; (7) the viability, permitting and development of the Lobo-Marte project, including, without limitation, the metallurgy and processing of its ore, being consistent with our current expectations; (8) 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; (9) certain price assumptions for gold and silver; (10) prices for natural gas, fuel oil, electricity and other key supplies being approximately consistent with current levels; (11) 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; (12) the accuracy of the current mineral reserve and mineral resource estimates of the Company and any entity in which it now or hereafter directly or indirectly holds an investment; (13) labour and materials costs increasing on a basis consistent with Kinross' current expectations; (14) the development of the Dvoinoye and Vodorazdelnaya deposits being consistent with Kinross' expectations; (15) the viability of the Tasiast and Chirano mines, and the permitting, development and expansion of the Tasiast and Chirano mines on a basis consistent with Kinross' current expectations;
and (16) access to capital markets, including but not limited to 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); 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, 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; 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. 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 Management Discussion and Analysis for the 2010 fiscal year. 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 $7 impact in cost of sales per ounce. (6)
A $10 change in the price of oil could result in an approximate $3 impact on cost of sales per ounce.
The impact on royalties of a $100 change in the gold price could result in an approximate $3 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 drilling and other exploration activities) contained in this news release has been prepared under the supervision of Mr. Rob Henderson, 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.
(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. The Company believes that these measures, together with measures determined in accordance with GAAP, 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 GAAP. These measures are not necessarily standard and therefore may not be comparable to other issuers.
Adjusted net earnings attributed 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, such as the impact of foreign exchange gains and losses, reassessment of prior year taxes and non-hedge derivative gains and losses. Management believes that these measures, which are also used internally, provide investors with the ability to better evaluate underlying performance particularly since the excluded items are typically not included in public guidance. The following table provides a reconciliation of consolidated net earnings to adjusted net earnings for the periods presented:
GAAP to Adjusted Earnings
Reconciliation
----------------------------------------
Three months
(in US$ millions) ended Nine months ended
September 30 September 30
----------------------------------------
2011 2010(1) 2011 2010(1)
----------------------------------------
Net earnings attributed to common
shareholders - as reported $ 212.6 $ 540.9 $ 710.1 $ 832.6
----------------------------------------
Adjusting items:
Foreign exchange (gains) losses 7.4 (3.0) (14.1) 6.5
Non-hedged derivatives (gains)
losses - net of tax 3.1 (1.4) (45.5) (48.5)
Gains on acquisition/disposition
of assets and investments -
net of tax (0.2) (447.7) (31.4) (499.2)
Red Back acquisition costs - 41.5 - 41.5
Change in future income tax due to
change in Chile's
corporate income tax rate - (2.3) - (2.3)
Inventory fair value adjustment -
net of tax 2.7 3.5 9.7 3.5
FX (gain) loss on translation of
tax basis and FX on deferred
income taxes within income tax
expense 47.8 (14.7) 46.4 (6.2)
----------------------------------------
60.8 (424.1) (34.9) (504.7)
----------------------------------------
Net earnings attributed to common
shareholders - Adjusted $ 273.4 $ 116.8 $ 675.2 $ 327.9
----------------------------------------
----------------------------------------
Weighted average number of common
shares outstanding - Basic 1,136.7 766.6 1,135.5 720.9
----------------------------------------
Net earnings per share - Adjusted $ 0.24 $ 0.15 $ 0.59 $ 0.45
----------------------------------------
----------------------------------------
(1) Prior year figures have been restated to conform to IFRS.
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. Management believes that, by excluding these items from operating cash flow, this non-GAAP measure provides investors with the ability to better evaluate the cash flow performance of the Company.
The following table provides a reconciliation of adjusted cash flow from operations:
GAAP to Adjusted Operating Cash Flow
-------------------------------------
(in US$ millions) Three months ended Nine months ended
September 30 September 30
-------------------------------------
2011 2010(1) 2011 2010(1)
-------------------------------------
Cash flow provided from operating
activities - as reported 302.4 248.9 998.8 707.5
-------------------------------------
Adjusting items:
Close out and early settlement of
derivative instruments 112.8 - 112.8 -
Working capital changes:
Accounts receivable and other
assets (26.4) 22.7 139.8 85.3
Inventories 93.3 20.1 97.2 15.4
Accounts payable and other
liabilities, including taxes (60.5) (60.2) (117.2) (55.7)
-------------------------------------
119.2 (17.4) 232.6 45.0
-------------------------------------
Adjusted operating cash flow 421.6 231.5 1,231.4 752.5
-------------------------------------
-------------------------------------
Weighted average number of common
shares outstanding - Basic 1,136.7 766.6 1,135.5 720.9
-------------------------------------
Adjusted operating cash flow per share 0.37 0.30 1.08 1.04
-------------------------------------
-------------------------------------
(1) Prior year figures have been restated to conform to IFRS.
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, which is also used internally, 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 Per Ounce Sold
on a By-Product Basis
--------------------------------------------
(in US$ millions) Three months ended Nine months ended
September 30 September 30
--------------------------------------------
2011 2010(3) 2011 2010(3)
--------------------------------------------
Production cost of sales(1) $ 425.5 $ 313.2 $ 1,209.7 $ 876.4
Less: portion attributable to
Kupol non-controlling
interest(2) - (14.2) (21.0) (46.2)
Less: portion attributable to
Chirano non-controlling
interest (5.0) (0.6) (13.6) (0.6)
Less: attributable silver sales (61.9) (39.2) (227.5) (116.9)
--------------------------------------------
Attributable production cost of
sales net of silver by-product
revenue $ 358.6 $ 259.2 $ 947.6 $ 712.7
--------------------------------------------
--------------------------------------------
Gold ounces sold 611,575 578,638 1,868,236 1,715,032
Less: portion attributable to
Kupol non-controlling
interest(2) - (34,969) (49,299) (124,915)
Less: portion attributable to
Chirano non-controlling
interest (6,836) (645) (19,388) (645)
--------------------------------------------
Attributable gold ounces sold 604,739 543,024 1,799,549 1,589,472
--------------------------------------------
--------------------------------------------
Attributable production cost of
sales per ounce sold on a by-
product basis $ 593 $ 477 $ 527 $ 448
--------------------------------------------
--------------------------------------------
(1) "Production cost of sales" is equivalent to "Total cost of sales" per
the consolidated financial statements less "depreciation, depletion and
amortization", and is generally consistent w ith "Cost of sales" as
reported under CDN GAAP prior to the adoption of IFRS.
(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) Prior year figures have been restated to conform to IFRS.
Review of Operations
Three
months
ended
September
30, Gold equivalent ounces
------------------------------------
Production
cost of Production
sales(1)($ cost of
Produced Sold millions) sales(1)/oz
------------------------------------
------------------ ----------------- --------------- -----------
2011 2010 2011 2010 2011 2010 2011 2010
------------------ ----------------- --------------- -----------
Fort Knox 76,261 108,680 75,611 112,797 $ 53.8 $ 56.5 $ 712 $ 501
Round
Mountain 54,588 48,477 52,658 49,892 35.2 31.2 668 625
Kettle
River -
Buckhorn 41,200 46,687 42,109 46,996 19.5 17.3 463 368
------------------ ----------------- --------------- -----------
North
America
Total 172,049 203,844 170,378 209,685 108.5 105.0 637 501
Kupol
(100%) 124,912 159,393 138,278 164,392 58.4 57.0 422 347
------------------ ----------------- --------------- -----------
Russia
Total 124,912 159,393 138,278 164,392 58.4 57.0 422 347
Paracatu 135,099 129,257 133,827 134,702 89.7 68.1 670 506
Crixas 15,551 19,866 16,594 20,743 15.3 10.0 922 483
La Coipa 38,539 53,471 35,566 46,747 32.1 34.1 903 729
Maricunga 53,123 28,844 58,591 31,215 30.2 27.1 515 868
------------------ ----------------- --------------- -----------
South
America
Total 242,312 231,438 244,578 233,407 167.3 139.3 684 597
Tasiast (1) 47,175 8,853 48,455 4,761 40.8 5.6 842 1,176
Chirano
(100%) (1) 68,372 12,650 68,697 6,453 50.5 6.3 735 970
------------------ ----------------- --------------- -----------
West Africa
Total 115,547 21,503 117,152 11,214 91.3 11.9 779 1,061
------------------ ----------------- --------------- -----------
Operations
Total 654,820 616,178 670,386 618,698 425.5 313.2 $ 635 506
Less Kupol
non-
controlling
interest - (39,848) - (41,098) - (14.2)
(25%)(2)
Less
Chirano
non-
controlling
interest
(10%) (6,837) (1,265) (6,869) (645) (5.0) (0.6)
------------------ ----------------- --------------- -----------
Attributable 647,983 575,065 663,517 576,955 $420.5 $ 298.4 $ 634 $ 517
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) "Production cost of sales" is equivalent to "Total cost of sales" per
the consolidated financial statements less "depreciation, depletion and
amortization", and is generally consistent with " Cost of sales" as reported
under CDN GAAP prior to the adoption of IFRS. Prior year figures for
production costs have been restated to conform to IFRS.
(2) On April 27, 2011, Kinross acquired the remaining 25% of CM GC, and
thereby obtained 100% ownership of Kupol. As such, the results up to April
27, 2011 reflect 75% and results thereafter reflect 100%.
----------------------------------------------------------------------------
Nine months ended September 30, Gold equivalent ounces
----------------------------------------
Produced Sold
----------------------------------------
2011 2010 2011 2010
----------------------------------------
Fort Knox 219,035 264,590 217,546 263,612
Round Mountain 143,860 141,033 141,154 140,872
Kettle River - Buckhorn 133,289 145,555 135,180 146,440
----------------------------------------
North America Total 496,184 551,178 493,880 550,924
Kupol (100%) 514,653 539,339 541,389 576,657
----------------------------------------
Russia Total 514,653 539,339 541,389 576,657
Paracatu 335,419 364,830 337,557 375,354
Crixas 45,802 56,798 46,378 58,078
La Coipa 143,852 136,310 155,403 144,098
Maricunga 181,968 123,611 177,841 124,495
----------------------------------------
South America Total 707,041 681,549 717,179 702,025
Tasiast (1) 145,745 8,853 146,161 4,761
Chirano (100%) (1) 188,307 12,650 194,801 6,453
----------------------------------------
West Africa Total 334,052 21,503 340,962 11,214
----------------------------------------
Operations Total 2,051,930 1,793,569 2,093,410 1,840,820
Less Kupol non-controlling
interest (25%)(2) (66,014) (134,835) (63,802) (144,164)
Less Chirano non-controlling
interest (10%) (1) (18,831) (1,265) (19,480) (645)
----------------------------------------
Attributable 1,967,085 1,657,469 2,010,128 1,696,011
----------------------------------------
----------------------------------------
Nine months ended September 30, Production cost of Production cost of
sales(1) sales (1)
($ millions) /oz
----------------------------------------
2011 2010 2011 2010
----------------------------------------
Fort Knox $ 146.8 $ 144.2 $ 675 $ 547
Round Mountain 102.8 82.3 728 584
Kettle River - Buckhorn 55.7 46.6 412 318
----------------------------------------
North America Total 305.3 273.1 618 496
Kupol (100%) 193.0 184.9 356 321
----------------------------------------
Russia Total 193.0 184.9 356 321
Paracatu 241.3 198.0 715 528
Crixas 39.0 27.7 841 477
La Coipa 110.1 95.9 708 666
Maricunga 83.3 84.9 468 682
----------------------------------------
South America Total 473.7 406.5 661 579
Tasiast (1) 101.0 5.6 691 1,176
Chirano (100%) (1) 136.7 6.3 702 970
----------------------------------------
West Africa Total 237.7 11.9 697 1,061
----------------------------------------
Operations Total 1,209.7 876.4 $ 578 476
Less Kupol non-controlling
interest (25%)(2) (21.0) (46.2)
Less Chirano non-controlling
interest (10%) (1) (13.6) (0.6)
----------------------------------------
Attributable $ 1,175.1 $ 829.6 $ 585 $ 489
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) "Production cost of sales" is equivalent to "Total cost of sales" per
the consolidated financial statements less "depreciation, depletion and
amortization", and is generally consistent with "Cost of sales" as reported
under CDN GAAP prior to the adoption of IFRS. Prior year figures for
production costs have been restated to conform to IFRS.
(2) On April 27, 2011, Kinross acquired the remaining 25% of CM GC, and
thereby obtained 100% ownership of Kupol. As such, the results up to April
27, 2011 reflect 75% and results thereafter reflect 100%.
----------------------------------------------------------------------------
Consolidated balance sheets
(Unaudited expressed in millions of United States dollars, except share
amounts)
As at
-----------------------------------------------
September 30, December 31, January 1,
2011 2010 2010
-----------------------------------------------
Assets
Current assets
Cash and cash equivalents $ 1,874.6 $ 1,466.6 $ 597.4
Restricted cash 24.2 2.1 24.3
Short-term investments 1.8 - 35.0
Accounts receivable and
other assets 337.3 329.4 135.5
Inventories 828.8 731.6 554.4
Unrealized fair value of
derivative assets 6.5 133.4 44.3
-----------------------------------------------
3,073.2 2,663.1 1,390.9
Non-current assets
Property, plant and
equipment 8,523.4 7,884.6 4,836.7
Goodwill 6,357.9 6,357.9 1,179.9
Long-term investments 76.6 203.8 157.8
Investments in associates
and Working Interest 496.5 467.5 150.7
Unrealized fair value of
derivative assets 0.1 2.6 1.9
Deferred charges and
other long-term assets 293.8 204.6 158.4
Deferred tax assets 26.3 11.1 -
-----------------------------------------------
$ 18,847.8 $ 17,795.2 $ 7,876.3
-----------------------------------------------
Liabilities
Current liabilities
Accounts payable and
accrued liabilities $ 435.0 $ 409.0 $ 287.6
Current tax payable 129.6 87.6 24.4
Current portion of long-
term debt 41.3 48.4 177.0
Current portion of
provisions 19.6 23.4 17.1
Current portion of
unrealized fair value of
derivative liabilities 67.8 407.7 214.6
-----------------------------------------------
693.3 976.1 720.7
Non-current liabilities
Long-term debt 1,401.1 426.0 475.8
Provisions 599.3 577.8 448.5
Unrealized fair value of
derivative liabilities 55.2 97.0 290.0
Other long-term
liabilities 120.5 115.0 50.7
Deferred tax liabilities 807.5 810.0 234.3
-----------------------------------------------
3,676.9 3,001.9 2,220.0
-----------------------------------------------
Equity
Common shareholders' equity
Common share capital and
common share purchase w
arrants $ 14,650.5 $ 14,576.4 $ 6,379.3
Contributed surplus 76.8 185.5 107.4
Retained earnings
(accumulated deficit) 533.8 (51.5) (740.6)
Accumulated other
comprehensive loss (167.5) (179.3) (218.4)
-----------------------------------------------
15,093.6 14,531.1 5,527.7
-----------------------------------------------
Non-controlling interest 77.3 262.2 128.6
-----------------------------------------------
15,170.9 14,793.3 5,656.3
-----------------------------------------------
Commitments and contingencies
Subsequent events
-----------------------------------------------
$ 18,847.8 $ 17,795.2 $ 7,876.3
-----------------------------------------------
Common shares
Authorized Unlimited Unlimited Unlimited
Issued and outstanding 1,137,354,666 1,133,294,930 696,027,270
----------------------------------------------------------------------------
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,
----------------------------------------------------
2011 2010 2011 2010
----------------------------------------------------
Revenue
Metal sales $ 1,069.2 $ 735.5 $ 2,994.0 $ 2,089.7
Cost of sales
Production costs 425.5 313.2 1,209.7 876.4
Depreciation,
depletion and
amortization 143.4 124.9 446.4 372.4
----------------------------------------------------
Total Cost of sales 568.9 438.1 1,656.1 1,248.8
----------------------------------------------------
Gross Profit 500.3 297.4 1,337.9 840.9
----------------------------------------------------
Other operating costs 9.0 1.3 23.6 0.4
Exploration and
business development 38.2 27.3 88.9 59.5
General and
administrative 36.2 40.4 119.6 102.3
----------------------------------------------------
Operating earnings 416.9 228.4 1,105.8 678.7
Other income (expense)
- net (7.4) 413.6 97.3 527.4
Equity in gains
(losses) of
associates (1.4) 0.2 (1.4) (1.9)
Finance income 1.8 2.4 5.8 3.8
Finance expense (23.1) (15.3) (55.6) (48.2)
----------------------------------------------------
Earnings before taxes 386.8 629.3 1,151.9 1,159.8
Income tax expense -
net (171.4) (65.1) (384.2) (248.1)
----------------------------------------------------
Net earnings $ 215.4 $ 564.2 $ 767.7 $ 911.7
----------------------------------------------------
----------------------------------------------------
Attributed to non-
controlling interest $ 2.8 $ 23.3 $ 57.6 $ 79.1
----------------------------------------------------
----------------------------------------------------
Attributed to common
shareholders $ 212.6 $ 540.9 $ 710.1 $ 832.6
----------------------------------------------------
----------------------------------------------------
Earnings per share
Basic $ 0.19 $ 0.71 $ 0.63 $ 1.15
Diluted $ 0.19 $ 0.69 $ 0.62 $ 1.12
Weighted average number
of common
shares outstanding
(millions)
Basic 1,136.7 766.6 1,135.5 720.9
Diluted 1,142.4 786.9 1,141.3 740.7
----------------------------------------------------------------------------
Consolidated statements of cash flows
(Unaudited expressed in millions of United States dollars)
Three months ended Nine months ended
September 30, September 30,
---------------------- --------------------
2011 2010 2011 2010
---------------------- --------- ---------
Net inflow (outflow ) of cash
related to the following
activities:
Operating:
Net earnings $ 215.4 $ 564.2 $ 767.7 $ 911.7
Adjustments to reconcile net
earnings to net cash provided
from (used in)
operating activities:
Depreciation, depletion and
amortization 143.4 124.9 446.4 372.4
Gains on
acquisition/disposition of
assets and investments - net (0.3) (447.9) (31.7) (526.3)
Equity in (gains) losses of
associates 1.4 (0.2) 1.4 1.9
Non-hedge derivative (gains)
losses - net 3.4 (1.5) (44.7) (46.6)
Settlement of derivative
instruments (112.8) - (112.8) -
Share-based compensation
expense 8.8 9.3 27.2 26.3
Accretion expense 14.0 11.2 40.6 31.9
Deferred tax (recovery)
expense 33.4 (21.2) 20.9 (15.3)
Foreign exchange (gains)
losses and other 2.1 (7.3) 3.6 (3.5)
Changes in operating assets
and liabilities:
Accounts receivable and
other assets 26.4 (22.7) (139.8) (85.3)
Inventories (93.3) (20.1) (97.2) (15.4)
Accounts payable and accrued
liabilities, excluding
interest and taxes 140.7 138.9 388.3 244.0
---------------------- --------- ---------
Cash flow provided from
operating activities 382.6 327.6 1,269.9 895.8
---------------------- --------- ---------
Income taxes paid (80.2) (78.7) (271.1) (188.3)
---------------------- --------- ---------
Net cash flow provided from
operating activities 302.4 248.9 998.8 707.5
---------------------- --------- ---------
Investing:
Additions to property, plant
and equipment (395.0) (150.7) (1,066.5) (365.3)
Business acquisitions - net of
cash acquired - 536.7 - 547.5
Net proceeds from the sale of
long-term investments and
other assets - 297.5 101.1 748.1
Additions to long-term
investments and other assets (48.1) (16.0) (124.6) (609.4)
Net proceeds from the sale of
property, plant and equipment 1.1 2.3 2.0 2.9
Disposals (additions) to
short-term investments (0.5) - (1.8) 35.0
Note receivable from Harry
Winston 70.0 - 70.0 -
Decrease (increase) in
restricted cash (10.9) 15.7 (22.1) 14.9
Interest received 4.6 2.4 6.8 3.8
Other (0.2) 5.0 (3.2) 2.8
---------------------- --------- ---------
Cash flow provided from (used
in) investing activities (379.0) 692.9 (1,038.3) 380.3
---------------------- --------- ---------
Financing:
Issuance of common shares on
exercise of options and
warrants 11.9 1.9 26.8 8.3
Acquisition of CMGC 25% non-
controlling interest - - (335.4) -
Proceeds from issuance of debt 1,136.5 - 1,329.1 127.5
Repayment of debt (168.1) (191.5) (385.0) (309.0)
Interest paid (4.7) (5.7) (9.9) (14.6)
Dividends paid to common
shareholders (68.0) (35.7) (124.8) (70.5)
Dividends paid to non-
controlling shareholder - (21.7) - (28.9)
Settlement of derivative
instruments (23.9) (5.6) (43.6) (17.3)
Other (0.5) (0.2) (6.2) (0.2)
---------------------- --------- ---------
Cash flow provided from (used
in) financing activities 883.2 (258.5) 451.0 (304.7)
---------------------- --------- ---------
Effect of exchange rate changes
on cash (12.3) 2.7 (3.5) 0.3
---------------------- --------- ---------
Increase in cash and cash
equivalents 794.3 686.0 408.0 783.4
---------------------- --------- ---------
Cash and cash equivalents,
beginning of period 1,080.3 694.8 1,466.6 597.4
---------------------- --------- ---------
Cash and cash equivalents, end
of period $ 1,874.6 $ 1,380.8 $ 1,874.6 $ 1,380.8
----------------------------------------------------------------------------
For more information, please see Kinross' 2011 third quarter Financial Statements and MD&A at www.kinross.com
----------------------------------------------------------------------------
Operating Summary
----------------------------------------------------------------------------
Ore Gold Eq
Ownership Processed Grade Recovery Production
Mine Period (1) (2) (9)
----------------------------------------------------------------------------
(%) ('000 (g/t) (%) (ounces)
tonnes)
----------------------------------------------------------------------------
North America
------------------------------------------------------------
Q3 2011 100 9,415 0.49 77% 76,261
------------------------------------------------------------
Q2 2011 100 10,000 0.59 79% 77,727
Fort Knox(3) Q1 2011 100 3,466 0.66 77% 65,047
Q4 2010 100 6,350 0.72 77% 85,139
Q3 2010 100 7,655 0.96 82% 108,680
---------------------------------------------------------------------------
Q3 2011 50 8,186 0.47 nm 54,588
------------------------------------------------------------
Q2 2011 50 8,338 0.46 nm 47,151
Round Mountain Q1 2011 50 7,130 0.49 nm 42,121
Q4 2010 50 7,830 0.46 nm 43,521
Q3 2010 50 7,196 0.50 nm 48,477
---------------------------------------------------------------------------
Q3 2011 100 110 13.06 91% 41,200
------------------------------------------------------------
Q2 2011 100 104 14.77 89% 46,237
Kettle River Q1 2011 100 106 15.29 88% 45,852
Q4 2010 100 131 14.80 87% 53,255
Q3 2010 100 114 13.39 87% 46,687
----------------------------------------------------------------------------
Russia
------------------------------------------------------------
Q3 2011 100 303 10.39 93% 124,912
------------------------------------------------------------
Q2 2011 100 305 15.88 94% 184,066
Kupol - 100% Q1 2011 75 305 16.56 95% 205,675
Q4 2010 75 321 16.94 95% 199,338
Q3 2010 75 269 16.55 94% 159,393
---------------------------------------------------------------------------
Q3 2011 100 303 10.39 93% 124,912
------------------------------------------------------------
Q2 2011 100 305 15.88 94% 169,470
Kupol (5)(6) Q1 2011 75 305 16.56 95% 154,257
Q4 2010 75 321 16.94 95% 149,504
Q3 2010 75 269 16.55 94% 119,545
----------------------------------------------------------------------------
South America
------------------------------------------------------------
Q3 2011 100 13,202 0.43 74% 135,099
------------------------------------------------------------
Q2 2011 100 10,014 0.41 76% 99,893
Paracatu Q1 2011 100 9,738 0.41 78% 100,427
Q4 2010 100 11,225 0.43 76% 117,567
Q3 2010 100 11,144 0.45 79% 129,257
---------------------------------------------------------------------------
Q3 2011 50 300 3.49 92% 15,551
------------------------------------------------------------
Q2 2011 50 312 3.35 93% 15,438
Crixas Q1 2011 50 256 3.85 93% 14,813
Q4 2010 50 272 4.38 94% 17,979
Q3 2010 50 296 4.51 93% 19,866
---------------------------------------------------------------------------
Q3 2011 100 1,011 0.70 76% 38,539
------------------------------------------------------------
Q2 2011 100 1,131 0.72 81% 50,867
La Coipa(4) Q1 2011 100 1,076 0.83 75% 54,446
Q4 2010 100 1,092 1.18 80% 60,020
Q3 2010 100 1,124 1.29 79% 53,471
---------------------------------------------------------------------------
Q3 2011 100 3,284 0.80 nm 53,123
------------------------------------------------------------
Q2 2011 100 4,023 0.86 nm 70,105
Maricunga Q1 2011 100 3,991 0.85 nm 58,740
Q4 2010 100 4,243 0.77 nm 32,979
Q3 2010 100 3,302 0.71 nm 28,844
----------------------------------------------------------------------------
West Africa
------------------------------------------------------------
Q3 2011 100 2,679 2.05 87% 47,175
------------------------------------------------------------
Q2 2011 100 1,990 1.60 91% 47,249
Tasiast(8) Q1 2011 100 2,204 2.10 88% 51,321
Q4 2010 100 1,942 2.32 87% 47,758
Q3 2010 100 117 2.51 94% 8,853
---------------------------------------------------------------------------
Q3 2011 90 949 2.45 91% 68,372
------------------------------------------------------------
Q2 2011 90 858 2.28 91% 57,898
Chirano -
100%(8) Q1 2011 90 848 2.42 91% 62,037
Q4 2010 90 930 2.72 91% 76,570
Q3 2010 90 212 2.07 90% 12,650
---------------------------------------------------------------------------
Q3 2011 90 949 2.45 91% 61,535
------------------------------------------------------------
Q2 2011 90 858 2.28 91% 52,108
Chirano (7)(8) Q1 2011 90 848 2.42 91% 55,833
Q4 2010 90 930 2.72 91% 68,913
Q3 2010 90 212 2.07 90% 11,385
----------------------------------------------------------------------------
Production
Production cost of
Gold Eq costs of sales
Sales sales (10)(11) / Cap Ex D D &A
Mine Period (9) (10)(11) degree (11) (11)
---------------------------------------------------------------------------
(ounces) ($ ($/ounce) ($ ($
millions) millions) millions)
---------------------------------------------------------------------------
North America
----------------------------------------------------------
Q3 2011 75,611 53.8 712 26.8 15.4
----------------------------------------------------------
Q2 2011 77,269 52.4 678 26.2 17.2
Fort Knox(3) Q1 2011 64,666 40.6 628 22.1 15.0
Q4 2010 85,848 45.4 529 24.9 14.9
Q3 2010 112,797 56.5 501 24.5 19.7
---------------------------------------------------------------------------
Q3 2011 52,658 35.2 668 9.6 8.8
----------------------------------------------------------
Q2 2011 46,941 34.7 739 7.9 7.2
Round Mountain Q1 2011 41,555 32.9 792 8.5 6.6
Q4 2010 43,631 33.1 759 9.5 4.9
Q3 2010 49,892 31.2 625 7.7 5.9
--------------------------------------------------------------------------
Q3 2011 42,109 19.5 463 3.9 17.5
----------------------------------------------------------
Q2 2011 45,442 18.3 403 3.4 20.0
Kettle River Q1 2011 47,629 17.9 375 3.1 21.8
Q4 2010 49,842 19.7 395 2.9 24.3
Q3 2010 46,996 17.3 368 1.5 23.2
---------------------------------------------------------------------------
Russia
----------------------------------------------------------
Q3 2011 138,278 58.4 422 8.0 25.7
----------------------------------------------------------
Q2 2011 199,773 69.1 346 16.1 37.0
Kupol - 100% Q1 2011 203,338 65.5 322 5.8 39.5
Q4 2010 163,909 51.3 313 14.3 34.1
Q3 2010 164,392 57.0 347 16.7 34.8
---------------------------------------------------------------------------
Q3 2011 138,278 58.4 422 8.0 25.7
----------------------------------------------------------
Q2 2011 186,805 65.0 348 15.2 35.4
Kupol (5)(6) Q1 2011 152,504 48.6 319 4.4 32.4
Q4 2010 122,933 38.5 313 10.7 25.6
Q3 2010 123,294 42.8 347 12.5 26.1
---------------------------------------------------------------------------
South America
----------------------------------------------------------
Q3 2011 133,827 89.7 670 105.9 16.9
----------------------------------------------------------
Q2 2011 95,773 77.1 805 65.2 14.3
Paracatu Q1 2011 107,957 74.5 690 36.7 14.4
Q4 2010 112,523 63.0 560 67.0 12.0
Q3 2010 134,702 68.1 505 43.2 18.4
---------------------------------------------------------------------------
Q3 2011 16,594 15.3 922 5.4 3.7
----------------------------------------------------------
Q2 2011 16,165 13.6 841 6.9 3.6
Crixas Q1 2011 13,619 10.1 741 2.9 2.4
Q4 2010 19,078 9.8 514 8.0 5.0
Q3 2010 20,743 10.0 482 6.1 5.3
---------------------------------------------------------------------------
Q3 2011 35,566 32.1 903 17.4 6.6
----------------------------------------------------------
Q2 2011 56,906 40.5 712 15.3 8.1
La Coipa(4) Q1 2011 62,931 37.5 596 8.7 10.5
Q4 2010 59,528 36.1 606 9.4 12.4
Q3 2010 46,747 34.1 729 5.0 8.1
---------------------------------------------------------------------------
Q3 2011 58,591 30.2 515 29.9 5.5
----------------------------------------------------------
Q2 2011 63,407 26.2 413 44.3 7.1
Maricunga Q1 2011 55,843 26.9 482 41.1 1.8
Q4 2010 30,825 31.0 1,006 29.9 3.1
Q3 2010 31,215 27.1 868 18.1 3.5
---------------------------------------------------------------------------
West Africa
----------------------------------------------------------
Q3 2011 48,455 40.8 842 88.3 18.4
----------------------------------------------------------
Q2 2011 46,213 33.6 727 92.1 14.5
Tasiast(8) Q1 2011 51,493 26.6 517 84.2 15.8
Q4 2010 52,336 39.5 755 50.8 22.9
Q3 2010 4,761 5.6 1,176 3.4 1.1
---------------------------------------------------------------------------
Q3 2011 68,697 50.5 735 19.5 23.6
----------------------------------------------------------
Q2 2011 56,558 37.1 656 29.0 19.3
Chirano -
100%(8) Q1 2011 69,546 49.1 706 17.2 24.1
Q4 2010 78,835 45.3 575 13.1 44.2
Q3 2010 6,453 6.3 976 0.5 3.8
---------------------------------------------------------------------------
Q3 2011 61,828 45.5 735 17.6 21.2
----------------------------------------------------------
Q2 2011 50,902 33.4 656 26.1 17.4
Chirano (7)(8) Q1 2011 62,591 44.2 706 15.5 21.7
Q4 2010 70,952 40.8 575 11.8 39.8
Q3 2010 5,808 5.7 976 0.5 3.4
---------------------------------------------------------------------------
(1) Ore processed is to 100%, production and costs are to Kinross' account.
(2) Due to the nature of heap leach operations at Round Mountain and M
aricunga, recovery rates cannot be accurately measured on a quarterly
basis. Fort Knox recovery represents mill recovery only and excludes
the heap leach.
(3) Includes 5,889,000 tonnes placed on the heap leach pad during the third
quarter of 2011, and 12,805,000 tonnes for the first nine months. Grade
and recovery represent mill processing only. Ore placed on the heap
leach pad had an average grade of 0.32 grams per tonne for the third
quarter of 2011, and 0.35 grams per tonne for the first nine months.
(4) La Coipa silver grade and recovery were as follows: Q3 (2011) 65.00
g/t, 43%; Q2 (2011) 58.85 g/t, 55%; Q1 (2011) 75.64 g/t, 53%; Q4 (2010)
77.70 g/t, 57% ; Q3 (2010) 48.84g/t, 57%
(5) Kupol silver grade and recovery were as follows: Q3 (2011) 159.03 g/t,
82%; Q2 (2011) 215.21 g/t, 84%; Q1 (2011) 237.90 g/t, 84%; Q4 (2010)
213.90 g/t, 84% Q3 (2010) 202.27g/t, 85%
(6) On April 27, 2011, Kinross acquired the remaining 25% of CM GC, and
thereby obtained 100% ownership of Kupol. As such, the results up to
April 27, 2011 reflect 75% and results thereafter reflect 100%.
(7) Includes Kinross' share of Chirano at 90%.
(8) Certain Q3 2010, Q4 2010 and Q1 2011 results have been recast as a
result of finalizing the Red Back purchase price allocation.
(9) 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 2011: 43.87:1, Q2 2011: 39.67:1,
Q1 2011: 43.51:1, Q4 2010: 51.93:1, Q3 2010: 64.84.1.
(10) " Production cost of sales" is equivalent to " Total cost of sales" per
the consolidated financial statements less " depreciation, depletion
and amortization", and is generally consistent with " Cost of sales" as
reported under CDN GAAP prior to the adoption of IFRS.
(11) Prior year figures have been restated to conform to IFRS.
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