TORONTO, July 29, 2020 (GLOBE NEWSWIRE) — Kinross Gold Corporation (TSX: K, NYSE: KGC) today announced its results for the second-quarter ended June 30, 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 20 of this release. All dollar amounts are expressed in U.S. dollars, unless otherwise noted.)2020 Q2 highlights:Production1 of 571,978 attributable gold equivalent ounces (Au eq. oz.), and sales of 584,477 Au eq. oz.All Kinross mines continued production during the quarter, as the Company’s comprehensive COVID-19 response plans mitigated operational risk and continued to help protect the health and safety of employees and host communities.Kinross’ three largest producing mines – Paracatu, Kupol and Tasiast – delivered 63% of total production and were the lowest cost mines in the portfolio, with an average cost of sales of $596 per Au eq. oz.Reported net earnings2 and adjusted net earnings3 both more than doubled to $195.7 million, or $0.16 per share, and $194.0 million, or $0.15 per share, respectively, compared with Q2 2019.Operating cash flow of $432.8 million and adjusted operating cash flow3 of $416.9 million, a 30% and 45% increase, respectively, compared with Q2 2019.Production cost of sales1,3 of $725 per Au eq. oz. and all-in sustaining cost1,3 of $984 per Au eq. oz. sold, both of which are within the Company’s original annual 2020 guidance range.Attributable margin per Au eq. oz. sold4 increased 53% to $987 per Au eq. oz. compared with Q2 2019, outpacing the 31% increase in average realized gold price to $1,712 per Au oz. compared with Q2 2019.Cash and cash equivalents of $1,527.1 million and total liquidity of $2.3 billion at June 30, 2020, as both improved quarter-over-quarter. The Company also further improved its debt metrics, including its net debt to EBITDA ratio, and has no debt maturities until September 2021.While the Company withdrew its full-year guidance as a precautionary measure given the global uncertainties caused by the pandemic, production, cost of sales per ounce, all-in sustaining cost per ounce and capital expenditures are on track to meet Kinross’ original 2020 guidance.On June 15, 2020, Kinross announced an agreement in principle with the Government of Mauritania to enhance the parties’ partnership.On July 15, 2020, Kinross announced the results of the Lobo-Marte project pre-feasibility study in Chile, which added 6.4 million Au oz.5to the Company’s mineral reserve estimates and increased its reserve life index by approximately 2.5 years6.CEO commentary:
J. Paul Rollinson, President and CEO, made the following comments in relation to 2020 second-quarter results.“Kinross had a strong second quarter, as we generated robust free cash flow, more than doubled earnings year-over-year, and continued to strengthen our investment grade balance sheet. Our margins increased 53% year-over-year, well above the 31% increase in the average realized gold price. Our portfolio of mines performed well and continued production during the quarter, with our three largest producing mines – Paracatu, Kupol and Tasiast – delivering the lowest costs.“We have been able to effectively manage COVID-19 impacts on our portfolio of mines during the first half of the year, as our comprehensive pandemic response plan continued to help protect the health of our employees and communities, while supporting the successful continuation of our business. Although we prudently withdrew our full-year guidance given the potential impacts of the pandemic on our operations, we continue to work towards the safe delivery of our annual targets. I would like to thank our employees around the world for their dedication, hard work and commitment to safety during these challenging times.“During the quarter, we announced an agreement in principle with the Government of Mauritania that enhances our partnership and will provide further stability for the long-term success of our Tasiast mine. Earlier this month, we also announced an addition of 6.4 million ounces to our gold reserve estimates with the completion of the Lobo-Marte pre-feasibility study. This high-quality asset increases our reserve life index and further enhances optionality on our long-term development project pipeline.“For the first half of the year, more than 50% of our production came from the Americas, and more than 80% from five key assets in five diverse regions. With the recent acquisition in Russia, and taking into account our track record of exploration success, we expect these assets and regions will continue to produce for at least 10 years.”Financial resultsSummary of financial and operating results(a) Total includes 100% of Chirano production. “Attributable” includes Kinross’ share of Chirano (90%) production
(b) The definition and reconciliation of these non-GAAP measures is included on pages 14 to 19 of this news release
(c) “Gold equivalent ounces” include silver ounces produced and sold converted to a gold equivalent based on a ratio of the average spot market prices for the commodities for each period. The ratio for the second quarter of 2020 was 104.49:1 (second quarter of 2019: 87.98:1). The ratio for the first six months of 2020 was 98.85:1 (first six months of 2019: 85.78:1)
(d) “Capital expenditures” is as reported as “Additions to property, plant and equipment” on the interim condensed consolidated statement of cash flows and excludes “Interest paid capitalized to property, plant and equipment”.The following operating and financial results are based on 2020 second-quarter gold equivalent production. Production and cost measures are on an attributable basis:Production1: Kinross produced 571,978 attributable Au eq. oz. in Q2 2020, compared with 648,251 Au eq. oz. in Q2 2019. The decrease was mainly due to lower production at Paracatu, Round Mountain and Chirano, partially offset by higher production at Bald Mountain and Kupol.Production cost of sales1,3: Production cost of sales per Au eq. oz. was $725 for Q2 2020, compared with $663 for Q2 2019. Production cost of sales per Au oz. on a by-product basis was $707 in Q2 2020, compared with $650 in Q2 2019, based on Q2 2020 attributable gold sales of 574,299 ounces and attributable silver sales of 1,063,572 ounces.All-in sustaining cost1,3: All-in sustaining cost per Au eq. oz. sold was $984 in Q2 2020, compared with $925 in Q2 2019. All-in sustaining cost per Au oz. sold on a by-product basis was $971 in Q2 2020, compared with $918 in Q2 2019.Revenue: Revenue from metal sales increased 20% to $1,007.2 million in Q2 2020, compared with $837.8 million during the same period in 2019.Average realized gold price7: The average realized gold price in Q2 2020 increased 31% to $1,712 per ounce, compared with $1,307 per ounce in Q2 2019.Margins: Kinross’ attributable margin per Au eq. oz. sold4 increased 53% to $987 per Au eq. oz. for Q2 2020, compared with the Q2 2019 margin of $644 per Au eq. oz. sold.Operating cash flow: Adjusted operating cash flow3 for Q2 2020 increased significantly by 45% to $416.9 million, compared with $287.7 million for Q2 2019, primarily due to the increase in margins.Net operating cash flow was $432.8 million for Q2 2020, an increase of 30% compared with $333.0 million for Q2 2019.Earnings: Adjusted net earnings3 more than doubled to $194.0 million, or $0.15 per share, for Q2 2020, compared with adjusted net earnings of $79.6 million, or $0.06 per share, for Q2 2019, primarily due to the increase in margins.Reported net earnings2 also more than doubled to $195.7 million, or $0.16 per share, for Q2 2020, compared with net earnings of $71.5 million, or $0.06 per share, in Q2 2019. The increase was mainly due to higher operating earnings and a non-cash impairment reversal of $48.3 million at Lobo-Marte as a result of the addition of mineral reserves at the project in conjunction with the recently completed pre-feasibility study, partially offset by the increase in income tax expense in Q2 2020.Capital expenditures: Capital expenditures were $214.3 million for Q2 2020, compared with $275.8 million for the same period last year, primarily due to a decrease in spending at Tasiast as a result of impacts of the pandemic on stripping rates, and decreases at Bald Mountain and Round Mountain.Balance sheet and financial positionAs of June 30, 2020, Kinross had cash and cash equivalents of $1,527.1 million, which increased compared with $1,138.6 million at March 31, 2020. The quarter-over-over increase was due to free cash flow generated during Q2 2020 and the $200 million drawdown from the Tasiast project financing.The Company had additional available credit of $811.2 million as of June 30, 2020, and total liquidity of approximately $2.3 billion, with no scheduled debt repayments until September 2021. The Company had total debt of approximately $2.7 billion, which includes the $750 million draw from the revolving credit facility in the first quarter and the $200 million in Tasiast project financing, and net debt8 of approximately $1.1 billion. Kinross has further improved its debt metrics, including its net debt to EBITDA ratio.The Company drew down from its revolving credit facility in March 2020 as a precautionary measure to protect against economic and business uncertainties caused by the COVID-19 pandemic. The Company repaid $250 million of the drawn amount on July 24, 2020 given the increase in the Company’s cash and cash equivalents and its strong financial position, and does not plan to deploy the remaining funds.On July 1, 2020, Kinross extended the maturity date of its $300 million letter of credit guarantee facility with Export Development Canada for two years to June 30, 2022.Operating resultsAll of Kinross’ mines continued production during Q2 2020, as the Company’s ongoing response to COVID-19 safeguarded the health and safety of employees and host communities and mitigated material operational impacts to the portfolio. However, COVID-19 did partially affect overall performance and productivity rates, mainly as a result of global travel constraints and the implementation of rigorous safety protocols and measures at all mines and projects.Mine-by-mine summaries for 2020 second-quarter results can be found on pages nine and 13 of this news release. Operational highlights from Q2 2020 include the following:AmericasParacatu performed well during the quarter, with production increasing compared with Q1 2020 mainly due to higher mill throughput and grades, while cost of sales per ounce sold decreased largely as a result of favourable foreign exchange rates. Production was lower compared with Q2 2019’s record performance, as grades and recoveries decreased as planned. Cost of sales per ounce sold was higher year-over-year mainly due to the lower production, which was offset by favourable foreign exchange rates.At Round Mountain, production was lower quarter-over-quarter mainly due to fewer ounces recovered from the heap leach pads, and decreased year-over-year mainly due to lower mill grades. Cost of sales per ounce sold was higher versus Q1 2020 and Q2 2019 largely due to lower production as a result of fewer ounces from the heap leach pads, with higher maintenance and contractor costs also contributing to the increase year-over-year. Bald Mountain had good performance during the quarter, as production increased compared with Q1 2020 and Q2 2019 largely as a result of more ounces recovered from the Vantage Complex heap leach pad and higher grades. Cost of sales per ounce sold increased compared with Q1 2020 mainly due to higher cost ounces recovered from the heap leach pads, and was largely in line with Q2 2019. At Fort Knox, production increased compared with Q1 2020 primarily as a result of higher mill grades and recoveries, while cost of sales per ounce sold decreased mainly due to higher mill grades and lower energy costs. Production was largely in line year-over-year, with cost of sales per ounce sold increasing mainly due to a higher percentage of operating waste mined and higher maintenance costs, partially offset by lower energy costs.RussiaThe Russia region continued its strong and consistent performance during the quarter, with production at Kupol and Dvoinoye increasing quarter-over-quarter and year-over-year, mainly due to higher gold grades. Cost of sales per ounce sold was lower compared with Q1 2020 largely as a result of favourable foreign exchange rates, and was higher versus Q2 2019 mainly due to higher royalties associated with the increase in the average realized gold price.West AfricaAt Tasiast, production was lower compared with Q1 2020 and Q2 2019 mainly due to the 17-day strike during the quarter and mine sequencing, which was slightly offset by higher grades. The principal impact of COVID-19 was a lower-than-planned mining rate, which resulted in deferrals of some stripping and associated capital expenditures. Production is expected to increase during the second half of the year, and, as a result, 2020 production is not expected to be materially impacted by the deferrals. Throughput performance adjusted for the impact of the strike continued to be strong, with average daily rates slightly better than the record performance in Q1 2020. Cost of sales per ounce sold increased compared with the previous quarter mainly due to the lower production and impacts from COVID-19. Cost of sales per ounce sold decreased compared with the previous year mainly due to lower fuel and overhead costs. In 2021, stripping rates and capital expenditures are expected to be higher compared to those presented in the Tasiast Technical Report as the mine makes up for the stripping deferred from 2020. A modest reduction in 2021 gold production is also expected compared to the Technical Report due to a longer-than-planned period of stockpile feed and delayed access to higher grade ore. The Company expects no impacts to Tasiast’s life of mine production, mineral reserve estimates and overall value, and was able to adjust short-term mine plans given the availability of large stockpiles at site. At Chirano, production was lower quarter-over-quarter mainly due to temporary downtime at the mill and decreased mining rates from COVID-19 impacts, both of which were slightly offset by higher grades, while cost of sales per ounce sold decreased mainly due to lower operating waste mined. Production decreased compared with the previous year mainly due to lower throughput, grades and recoveries, with cost of sales per ounce sold increasing mainly due to higher operating waste mined.Development projects
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