Kinross in strong financial position with robust cash flow and total liquidity of $1.9 billion
Tasiast delivers record production and throughput rates for the second consecutive quarterTORONTO, May 05, 2020 (GLOBE NEWSWIRE) — Kinross Gold Corporation (TSX: K, NYSE: KGC) today announced its results for the first-quarter ended March 31, 2020.
(This news release contains forward-looking information about expected future events and financial and operating performance of the Company. We refer to the risks and assumptions set out in our Cautionary Statement on Forward-Looking Information located on page 19 of this release. All dollar amounts are expressed in U.S. dollars, unless otherwise noted.)2020 Q1 highlights:Production¹ of 567,327 attributable gold equivalent ounces (Au eq. oz.), and sales of 552,742 Au eq. oz.Reported net earnings² almost doubled to $122.7 million, or $0.10 per share, and adjusted net earnings³ increased by 53% to $127.4 million, or $0.10 per share, compared with Q1 2019.Operating cash flow of $299.6 million and adjusted operating cash flow³ of $418.6 million, a 19% and 81% increase respectively compared with Q1 2019.Production cost of sales³ of $754 per Au eq. oz. and all-in sustaining cost³ of $993 per Au eq. oz. sold, both of which are within the Company’s original annual guidance range.Attributable margin per Au eq. oz. sold⁴ increased 33% to $827 per Au eq. oz. compared with Q1 2019, while the average realized gold price increased 21% to $1,581 per ounce compared with Q1 2019.Cash and cash equivalents of $1,138.6 million and total liquidity of $1.9 billion at March 31, 2020. The Company has no debt maturities until September 2021.On March 2, 2020, Moody’s upgraded Kinross’ credit rating to investment grade. Kinross’ debt is now rated investment grade by each of the agencies that cover it – Moody’s, S&P Global Ratings and Fitch Ratings.Three largest producing mines – Paracatu, Kupol and Tasiast – delivered 62% of total production and achieved an average cost of sales of $642 per Au eq. oz., with average costs lower than the previous quarter.Tasiast, for the second consecutive quarter, achieved record quarterly production and a record average throughput rate of 16,100 tonnes per day (t/d), as the mine continues to benefit from the Phase One expansion.On March 10, 2020, a new Paracatu technical report was filed confirming the benefits of an asset optimization program at the mine, which has resulted in a 24% increase in life of mine production compared to the prior report.COVID-19 response:During the first quarter, all Kinross mines remained in operation and were not materially impacted by COVID-19. However, operations may be challenged over time given the future global impacts of a prolonged crisis.The Company has committed $5.3 million to support host governments and communities in their response to COVID-19, focusing on providing medical supplies, food security and assistance to vulnerable groups.Kinross’ protocols and contingency plans, which the Company began implementing in late January, have continued to safeguard the health and safety of employees, their families and local communities.With the support of host governments, business continuity plans have been prepared and implemented for each site to mitigate operational and supply chain risks. On March 20, 2020, Kinross drew down $750 million from its $1.5 billion revolving credit facility as a precautionary measure to protect against economic and business uncertainties related to the pandemic. The Company does not currently plan to deploy the funds given its strong financial position.On April 1, 2020, the Company withdrew its full-year 2020 guidance as a precautionary measure given the pandemic’s significant global impacts, despite no material impacts on operations to date.CEO Commentary:
J. Paul Rollinson, President and CEO, made the following comments in relation to 2020 first-quarter results.“During the quarter, we focused on protecting the health and well-being of our employees and communities against the spread of COVID-19 while maintaining the continuity of our operations in a safe manner. As a result of our business continuity plans and precautionary protocols implemented across our global portfolio, and with the support of our host governments, all our mines remained operational during the quarter and were not materially impacted by the pandemic. While we prudently withdrew our 2020 guidance given the pandemic’s significant global impacts, we will continue to work safely on meeting our 2020 operational targets.“We also took steps to further strengthen our financial position against the economic and business uncertainties caused by the global health crisis. The Company generated strong free cash flow and increased earnings year-over-year, ending the quarter with excellent liquidity, low net debt, and with investment grade credit ratings from all three major rating agencies. During the quarter, our margins increased by 33%, outpacing the 21% increase in average realized gold price.“Looking forward, we are confident that our commitment to health and safety, our risk mitigation plans, our financial and operational strengths, and our positive relationships with our host governments put us in a strong position to effectively manage through this challenging time. We have built a strong foundation, expect to continue generating strong cash flow, and offer an exciting future and a compelling value opportunity for our shareholders.”Financial resultsSummary of financial and operating results
The following operating and financial results are based on 2020 first-quarter gold equivalent production. Production and cost measures are on an attributable basis:
Production¹: Kinross produced 567,327 attributable Au eq. oz. in Q1 2020, compared with 606,031 Au eq. oz. in Q1 2019. The decrease was mainly due to lower production at Paracatu, Kupol and Chirano, and the end of production at Maricunga, partially offset by higher production at Fort Knox. Production cost of sales³: Production cost of sales per Au eq. oz. was $754 for Q1 2020, compared with $682 for Q1 2019, which was partly due to cost increases related to COVID-19 impacts. Production cost of sales per Au oz. on a by-product basis was $738 in Q1 2020, compared with $668 in Q1 2019, based on Q1 2020 attributable gold sales of 542,043 ounces and attributable silver sales of 1,001,743 ounces.All-in sustaining cost³: All-in sustaining cost per Au eq. oz. sold was $993 in Q1 2020, compared with $925 in Q1 2019. All-in sustaining cost per Au oz. sold on a by-product basis was $982 in Q1 2020, compared with $917 in Q1 2019.Revenue: Revenue from metal sales increased to $879.8 million in Q1 2020, compared with $786.2 million during the same period in 2019.Average realized gold price⁵: The average realized gold price in Q1 2020 increased 21% to $1,581 per ounce, compared with $1,304 per ounce in Q1 2019.Margins: Kinross’ attributable margin per Au eq. oz. sold⁴ increased 33% to $827 per Au eq. oz. for Q1 2020, compared with the Q1 2019 margin of $622 per Au eq. oz. sold.Operating cash flow: Adjusted operating cash flow³ for Q1 2020 increased significantly by 81% to $418.6 million, compared with $230.8 million for Q1 2019.Net operating cash flow was $299.6 million for Q1 2020, an increase of 19% compared with $251.6 million for Q1 2019.Earnings: Adjusted net earnings³ increased 53% to $127.4 million, or $0.10 per share, for Q1 2020, compared with adjusted net earnings of $83.3 million, or $0.07 per share, for Q1 2019.Reported net earnings² almost doubled to $122.7 million, or $0.10 per share, for Q1 2020, compared with net earnings of $64.7 million, or $0.05 per share, in Q1 2019. The increase was mainly due to higher margins, which outpaced the increase in average realized gold price, and lower other operating expense and reduced overhead, partially offset by higher income tax expense.Capital expenditures: Capital expenditures were $191.4 million for Q1 2020, compared with $243.9 million for the same period last year, primarily due to decreased spending on development projects at Bald Mountain and Round Mountain, which both began production in Q3 2019.Balance sheet and financial positionAs of March 31, 2020, Kinross had cash and cash equivalents of $1,138.6 million, compared with $575.1 million at December 31, 2019. The increase was primarily due to the drawdown of $750 million from the Company’s $1.5 billion revolving credit facility on March 20, 2020 and cash flow from operations during the quarter. This was partially offset by the acquisition of the Chulbatkan development project and repayment of the amount drawn on the revolving credit facility at December 31, 2019.The Company drew down from its revolving credit facility as a precautionary measure to protect against economic and business uncertainties caused by the COVID-19 pandemic and subsequent government actions. The Company does not currently plan to deploy the funds given its strong financial position.The Company has additional available credit of $805.3 million as of March 31, 2020, and total liquidity of approximately $1.9 billion, with no scheduled debt repayments until September 2021. The Company has total debt of approximately $2.5 billion, and net debt⁶ of approximately $1.3 billion.Kinross also drew down $200 million from the $300 million Tasiast project financing facility in early April. The financing, which was signed on December 16, 2019, is an asset recourse loan with the IFC (a member of the World Bank Group), Export Development Canada, ING Bank and Société Générale.On March 2, 2020, Moody’s Investors Service (“Moody’s”) announced that it upgraded Kinross’ credit rating to investment grade. Kinross now has investment grade credit ratings from Moody’s, S&P Global Ratings and Fitch Ratings, all three rating agencies that rate the Company’s debt.Operating resultsAll of Kinross’ mines remained in operation during Q1 2020 and were not materially impacted by COVID-19. However, over time, the Company’s mines may be challenged with potential disruptions as they continue to operate given the future global impacts of a prolonged crisis.As previously announced on April 1, 2020, numerous preventative actions have been implemented to safeguard employees and local communities, to help prevent the spread of COVID-19, and to mitigate operational risk. A global platform has been established for sites to share best practices on pandemic response. Each site is complying with COVID-19 related protocols and guidelines in their respective jurisdictions, including implementing detailed site isolation plans to manage cases should they occur and comprehensive physical distancing measures.For Kinross’ remote camp-based sites, rigorous screening, isolation and quarantine procedures for employees arriving at camp have been implemented. Rotations and shift schedules have been adjusted to limit travel to and from sites.With the support of host governments, business continuity plans have been prepared and put in place for each site to mitigate operational risk. Sustaining the supply chain and maintaining access to refining capacity have also been key areas of focus for the Company. Kinross continues to work closely with critical suppliers to minimize potential disruptions and has initiated a process to increase stocks of key consumables to at least three months on hand. Kupol, which is in a unique situation due to its location and seasonality of the supply chain, has approximately 12 months of inventory on hand, including fuel. Kinross has also ordered additional critical spares at its other operations, assessed potential disruptions and identified alternative sources of supply.To help maintain scheduled and timely gold sales, Kinross has contingency plans in place to ensure sustained access to global refining capacity, including actively managing metal shipments and securing alternative transportation channels.Mine-by-mine summaries for 2020 first-quarter results can be found on pages eight and 12 of this news release. Operational highlights from Q1 2020 include the following:AmericasAt Paracatu, production was lower compared with the previous quarter and year mainly due to a decrease in mill throughput as a result of temporary downtime at the crusher, and temporary lower recoveries primarily related to anticipated variations in ore characteristics during the quarter. Cost of sales per ounce sold was lower quarter-over-quarter mainly due to favourable foreign exchange rates and lower operating waste. Cost of sales per ounce sold was higher year-over-year mainly due to lower mill throughput, partially offset by favourable foreign exchange rates. On March 10, 2020, a new Paracatu technical report was filed confirming the benefits of an asset optimization program at the mine, which has resulted in a 24% increase in life of mine production compared to the prior report. Paracatu is expected to produce an average of approximately 540k oz. Au annually over 12 years from 2020 to 2031.At Round Mountain, production decreased quarter-over-quarter mainly due to lower mill grades and fewer ounces recovered from the heap leach pads, while production was largely in line year-over-year. Cost of sales per ounce sold was lower compared with Q4 2019 largely as a result of increased capital development at Phase W during the quarter. Cost of sales per ounce sold was lower compared with Q1 2019 mainly due to the focus on capital stripping during the quarter and lower milling supplies.At Bald Mountain, production was lower compared with the previous quarter and year mainly due to fewer ounces recovered from the heap leach pads, while the timing of ounces recovered from the Vantage Complex heap leach pads also contributed to lower production compared with Q4 2019. Cost of sales per ounce sold was higher versus both comparable periods largely due to higher operating waste mined, higher labour and contractor costs, and impacts from COVID-19.At Fort Knox, production was mainly in line quarter-over-quarter and was higher compared with the previous year largely as a result of more ounces recovered from the heap leach pad. Cost of sales per ounce sold was higher compared with the previous quarter and year mainly due to higher operating waste mined and impacts from COVID-19, which affected mining rates. Higher maintenance and power costs also contributed to the increase in costs compared with Q1 2019.RussiaThe Russia region performed as planned during the quarter, with production at Kupol and Dvoinoye decreasing slightly compared to Q4 2019 and Q1 2019 mainly due to anticipated lower grades. Cost of sales per ounce sold was largely in line with the previous quarter and increased compared with Q1 2019 mainly due to lower production.West AfricaTasiast continued its strong performance and delivered, for the second consecutive quarter, record quarterly production and throughput. Throughput averaged 16,100 t/d during the quarter, as the mine continued to ramp up capacity. Production was slightly higher quarter-over-quarter and year-over-year mainly due to improved mill performance. Cost of sales per ounce sold increased compared with Q4 2019 mainly due to higher operating waste mined and impacts from COVID-19, which affected mining rates. Cost of sales per ounce sold decreased compared with Q1 2019 primarily due to lower operating waste mined, and reduced contractor and site overhead costs.The Company issued a news release earlier today regarding a strike at Tasiast which can be found at www.kinross.com. There have been four short labour actions at Tasiast since Kinross acquired the mine, the last being in 2016. The average length of these labour actions have been approximately nine days, and none have had a material impact on the Company.At Chirano, production was lower quarter-over-quarter and year-over-year mainly due to lower grades in the underground deposits. Cost of sales per ounce sold was higher quarter-over-quarter mainly due to lower production. Higher operating waste mined also contributed to the increase in costs compared with the same period last year, as the re-start of open pit mining only commenced in late in Q1 2019.Development projects
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