Kinross Gold Reports Q1 2017 Results- Produces 671,956 AuEq Ounces
TORONTO, ON--(Marketwired - May 02, 2017) - Kinross Gold Corporation (TSX: K) (
(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 18 of this release. All dollar amounts are expressed in U.S. dollars, unless otherwise noted.)
2017 first quarter highlights:
- Production1: 671,956 gold equivalent ounces (Au eq. oz.), compared with 687,463 Au eq. oz. in Q1 2016.
- Revenue: $796.1 million, compared with $782.6 million in Q1 2016.
- Production cost of sales(2): $701 per Au eq. oz., compared with $687 in Q1 2016.
- All-in sustaining cost2: $953 per Au eq. oz. sold, compared with $956 in Q1 2016. All-in sustaining cost per gold ounce (Au oz.) sold on a by-product basis was $945 in Q1 2017, compared with $950 in Q1 2016.
- Adjusted operating cash flow2: $250.9 million, compared with $207.6 million in Q1 2016.
- Operating cash flow: $207.8 million, compared with $214.5 million in Q1 2016.
- Adjusted net earnings2,3: $23.4 million, or $0.02 per share, compared with adjusted net earnings of $21.2 million, or $0.02 per share, in Q1 2016.
- Reported net earnings(3): $134.6 million, or $0.11 per share, compared with earnings of $35.0 million, or $0.03 per share, in Q1 2016.
- Organic development projects:
- The Tasiast Phase One expansion is progressing on time and on budget and is expected to reach full production in Q2 2018, with the Phase Two feasibility study on schedule to be completed in Q3 2017.
- At Bald Mountain, engineering work is 60% complete at the Vantage Complex project in the South area.
- At Round Mountain, the Phase W feasibility study is on schedule to be completed in Q3 2017.
- In Russia, development of the September Northeast project near Dvoinoye is now complete, while at Moroshka, located near Kupol, portal construction is now complete and construction of surface infrastructure is 50% complete.
- Outlook: Kinross expects to be within its 2017 guidance for production (2.5 - 2.7 million Au eq. oz.), production cost of sales ($660 - $720 per Au eq. oz.) and all-in sustaining cost ($925 - $1,025 per Au eq. oz.). The Company expects to be within its capital expenditures guidance of $900 million (+/- 5%).
- Cerro Casale divestment: On March 28, 2017, the Company agreed to sell its 25% interest in Cerro Casale and its 100% interest in Quebrada Seca in Chile for $260 million in cash (which includes $20 million for Quebrada Seca), a contingent payment of $40 million following a construction decision for Cerro Casale, a 1.25% royalty on 25% of gross revenues from all metals sold at the properties (with the Company foregoing the first $10 million), a contingent water supply agreement with the Cerro Casale joint venture, and the purchaser assuming a $20 million contingent payment obligation.
- Balance sheet: As of March 31, 2017, Kinross hadcash and cash equivalents of $819.0 million, and available credit of $1,433.1 million, for total liquidity of approximately $2.3 billion. After considering the closing of the Cerro Casale and Quebrada Seca divestment, the Company's pro forma cash and cash equivalent position is approximately $1.1 billion, with a total liquidity position of approximately $2.5 billion.
1 Unless otherwise stated, production figures in this news release are based on Kinross' 90% share of Chirano production.
2 These figures are non-GAAP financial measures and are defined and reconciled on pages 13 to 17 of this news release.
3 Net earnings/loss figures in this release represent "net earnings (loss) attributable to common shareholders".
J. Paul Rollinson, President and CEO, made the following comments in relation to 2017 first-quarter results:
"Kinross started the year with a strong quarter, as our portfolio of mines generated solid cash flow. With our sharp focus on delivering consistent results, we are again on track to meet our annual guidance for production and costs.
"During the quarter, we further strengthened our balance sheet with the divestment of Cerro Casale, a non-core asset in our portfolio. With the sale, our pro forma cash position is approximately $1.1 billion, with total liquidity of approximately $2.5 billion. Our strong balance sheet gives us the financial flexibility to fund our organic development projects in each of our operating regions, which are all progressing well.
"We are making excellent progress with the Tasiast Phase One expansion, which is on schedule, on budget and expected to reach full production in approximately one year. We are continuing to develop Bald Mountain's significant long-term potential, while the mine is on track to double production in 2017 compared with 2016. The feasibility studies for Tasiast Phase Two and Round Mountain Phase W are on schedule to be finalized in Q3 2017, when we expect to make a development decision for both projects. Russia's development projects remain on track to support mine life extension at Kupol-Dvoinoye. We are excited about our pipeline of projects that we expect to deliver strong production with a lower cost profile in the years ahead."
Summary of financial and operating results
|Three months ended|
|(in millions, except ounces, per share amounts, and per ounce amounts)||2017||2016(d)|
|Total gold equivalent ounces(a)|
|Attributable gold equivalent ounces(a)|
|Production cost of sales||$||458.8||$||457.7|
|Depreciation, depletion and amortization||$||217.5||$||193.2|
|Net earnings attributable to common shareholders||$||134.6||$||35.0|
|Basic earnings per share attributable to common shareholders||$||0.11||$||0.03|
|Diluted earnings per share attributable to common shareholders||$||0.11||$||0.03|
|Adjusted net earnings attributable to common shareholders(b)||$||23.4||$||21.2|
|Adjusted net earnings per share(b)||$||0.02||$||0.02|
|Net cash flow provided from operating activities||$||207.8||$||214.5|
|Adjusted operating cash flow(b)||$||250.9||$||207.6|
|Average realized gold price per ounce||$||1,220||$||1,179|
|Consolidated production cost of sales per equivalent ounce(c) sold(b)||$||703||$||689|
|Attributable(a) production cost of sales per equivalent ounce(c) sold(b)||$||701||$||687|
|Attributable(a) production cost of sales per ounce sold on a by-product basis(b)||$||686||$||674|
|Attributable(a) all-in sustaining cost per ounce sold on a by-product basis(b)||$||945||$||950|
|Attributable(a) all-in sustaining cost per equivalent ounce(c) sold(b)||$||953||$||956|
|Attributable(a) all-in cost per ounce sold on a by-product basis(b)||$||1,101||$||1,015|
|Attributable(a) all-in cost per equivalent ounce(c) sold(b)||$||1,104||$||1,019|
|(a)||"Total" includes 100% of Chirano production. "Attributable" includes Kinross' share of Chirano (90%) production.|
|(b)||The definition and reconciliation of these non-GAAP financial measures is included onpage 13 to 17 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 first quarter of 2017 was 69.99:1, compared with 79.64:1 for the first quarter of 2016.|
|(d)||The interim financial statements for the three months ended March 31, 2016 were recast to reflect the retrospective impact of the finalization of the purchase price allocation for the acquisition of Bald Mountain and 50% of Round Mountain.|
The following operating and financial results are based on first-quarter 2017 gold equivalent production. Production and cost measures are on an attributable basis:
Production: Kinross produced 671,956 attributable Au eq. oz. in Q1 2017, compared with production of 687,463 attributable Au eq. oz. in Q1 2016.
Production cost of sales: Production cost of sales per Au eq. oz.2 increased to $701 for Q1 2017, compared with $687 for the first quarter of 2016, mainly as a result of higher cost of sales per ounce at Paracatu, Round Mountain and Kupol.
Production cost of sales per Au oz. on a by-product basis2 increased to $686 in Q1 2017, compared with $674 in Q1 2016, based on Q1 2017 attributable gold sales of 627,249 ounces and attributable silver sales of 1,308,861 ounces.
All-in sustaining cost: All-in sustaining cost per Au eq. oz. sold2 decreased to $953 in Q1 2017, compared with $956 in Q1 2016. All-in sustaining cost per Au oz. sold on a by-product basis2 decreased to $945 in Q1 2017, compared with $950 in Q1 2016.
Average realized gold price: The average realized gold price in Q1 2017 increased to $1,220 per ounce, compared with $1,179 per ounce in Q1 2016.
Revenue: Revenue from metal sales increased to $796.1 million in Q1 2017, compared with $782.6 million during the same period in 2016, due to a higher average realized gold price.
Margins: Kinross' attributable margin per Au eq. oz. sold4 was $519 for Q1 2017, compared with a Q1 2016 margin of $492 per Au eq. oz.
Operating cash flow: Adjusted operating cash flow2 increased by 21% to $250.9 million for Q1 2017, compared with $207.6 million for Q1 2016.
Net operating cash flow was $207.8 million for the first quarter of 2017, compared with $214.5 million for Q1 2016.
Earnings: Adjusted net earnings2,3 were $23.4 million, or $0.02 per share, for Q1 2017, compared with $21.2 million, or $0.02 per share, for Q1 2016.
Reported net earnings3 were $134.6 million, or $0.11 per share, for Q1 2017, compared with $35.0 million, or $0.03 per share, for Q1 2016. Reported earnings increased mainly as result of the increase in operating earnings and a reversal of previously recorded impairment charges of $97.0 million related to the agreement entered into in Q1 2017 to sell Cerro Casale at a price higher than the carrying value.
Capital expenditures: Capital expenditures increased to $178.9 million for Q1 2017, compared with $139.5 million for the same period last year, primarily due to Tasiast Phase One expansion project costs, and increased spending at Paracatu and Bald Mountain.
Mine-by-mine summaries for 2017 first-quarter operating results may be found on pages eight and 12 of this news release. Highlights include the following:
At Fort Knox, production increased compared with Q1 2016 mainly as a result of higher mill grades and timing of ounces processed through the mill, but decreased compared with Q4 2016 largely as a result of lower mill throughput and the seasonal reduction in production from the heap. Cost of sales per ounce decreased compared with Q1 2016 primarily due to lower labour and contractor costs, and more ore mined relative to operating waste, which also contributed to lower cost of sales per ounce compared with Q4 2016.
At Round Mountain, performance was strong during the quarter as production increased year-over-year mainly due to more ounces recovered from the heap leach pads as a result of higher tonnes places on the pads. The strong performance from the heap leach, along with higher mill and heap leach grades, contributed to increased production quarter-over-quarter. Cost of sales per ounce increased compared with Q1 2016 largely due to an increase in operating waste mined, and decreased compared with Q4 2016 primarily due to increased grades and lower contractor costs.
At Bald Mountain, production increased year-over-year and quarter-over-quarter mainly as a result of higher grade material placed on the pads in the fourth quarter of 2016. Cost of sales per ounce decreased year-over-year and quarter-over-quarter as a result of more ore being mined relative to operating waste. Production at the mine is expected to be higher in the second half of the year, particularly in the fourth quarter, due to mine sequencing and timing from the heap leach, and the mine is on track to double production in 2017 compared with 2016.
Kettle River-Buckhorn continued to perform well, as higher grades and lower labour costs helped to decrease cost of sales per ounce compared with Q1 2016. Kettle River-Buckhorn is now expected to reach the end of its mine life by the end of Q2 2017.
4 Attributable margin per equivalent ounce sold is a non-GAAP measure defined as "average realized gold price per ounce" less "attributable production cost of sales per gold equivalent ounce sold."
At Paracatu, production decreased compared with Q1 2016 and Q4 2016 mainly due to lower mill grades. Cost of sales per ounce increased compared with Q1 2016 and Q4 2016 due to higher operating waste mined and maintenance costs. Unfavourable foreign exchange movements also contributed to higher costs during the quarter compared with Q1 2016. During the quarter, the region received lower than average rainfall and, as a result, Paracatu is expected to temporarily curtail operations early in the third quarter. The potential for curtailment was factored into the Company's annual production guidance and the site has continued to take further mitigation measures, including drilling more ground water wells and acquiring more water rights. The Company expects to provide an update with its second quarter results.
At Maricunga, gold production from the rinsing of heap materials placed on the pads prior to the suspension of mining activities continued during the quarter. Cost of sales per ounce continued to decrease as a result of higher than expected ounces recovered. Gold equivalent ounces sold were lower than production during the quarter due to timing of sales.
Kupol and Dvoinoye performed as planned in the first quarter. Production was lower than Q1 2016 and Q4 2016 due to anticipated lower grades. Cost of sales per ounce increased compared with Q1 2016 and Q4 2016 mainly as a result of the lower grades.
Tasiast had strong performance during the quarter with production 37% higher compared with Q1 2016, mainly as a result of higher mill grades. Production increased compared with Q4 2016 mainly as a result of higher throughput and stronger grades. Cost of sales per ounce was significantly lower year-over-year and quarter-over-quarter mainly as a result of higher grades.
At Chirano, production was stronger compared with Q1 2016 primarily due to higher grades from the Paboase and Akoti underground deposits, but was lower compared with Q4 2016 due to lower grades from Paboase and the Tano open pit. Cost of sales per ounce decreased compared with Q1 2016 mainly as a result of the higher grades and lower power costs, and increased compared with Q4 2016 mainly due to higher labour costs and increased operating waste mined from the Tano pit.
Organic development projects
Tasiast Phase One development is making excellent progress, with full commercial production on schedule for Q2 2018. Engineering and procurement are substantially complete and plant construction is now 35% complete. All major installation contracts have now been awarded, and 80% of all equipment and materials are on site. Installation and mechanical work for the SAG mill has begun, concrete work remains a major focus at the primary crusher, and planned upgrades to the leach tanks, cyclone towers and oxygen plant in the existing processing facilities have commenced. Phase One is expected to increase plant throughput to 12,000 t/d, and increase production to approximately 400,000 Au eq. oz. per year at an all-in sustaining cost of $760 per Au oz.
The Tasiast Phase Two expansion feasibility study is also progressing well and is on schedule to be completed in Q3 2017. The Company is expecting to make a development decision once the feasibility study is finalized.
At Bald Mountain, the Company continues to develop the mine's potential after doubling the site's proven and probable mineral reserve estimates at year-end 2016. In the South area, engineering work at the Vantage Complex project is now 60% complete. Major construction work is expected to commence in the first half of 2018, with the proposed heap leach pad and associated processing facilities and infrastructure expected to accommodate a total capacity of 68 million tonnes of ore.
The Round Mountain Phase W feasibility study continues to progress well and is expected to be completed in Q3 2017. The Company is expecting to make a development decision at that time. The scope of the Phase W expansion project involves changes to site infrastructure and processing facilities, and a substantial pre-stripping campaign to access a deeper extension of the mineralized zone. Phase W has the potential to extend life of mine at Round Mountain, one of the most consistent performing mines in the Company's portfolio.
Kinross' Russian development projects continue to progress. At the Moroshka project, located approximately four kilometres from Kupol, portal construction is now complete, decline development is on schedule, and construction of surface infrastructure is now 50% complete. At September Northeast, located approximately 15 kilometres northwest of Dvoinoye, stripping has commenced, with development of the project completed on time and on budget. Processing of September Northeast ore at the Kupol mill is expected to commence in June. The new filter cake plant at Kupol is now in operation, which allows for tailings storage for the current mineral reserve estimates, and flexibility to permit additional storage capacity for potential mine life extensions.
Cerro Casale divestment
On March 28, 2017, the Company agreed to sell to Goldcorp Inc. its 25% interest in Cerro Casale and its 100% interest in Quebrada Seca in Chile for $260 million in cash (which includes $20 million for Quebrada Seca).
The agreement also includes: $40 million in cash, payable following a construction decision for Cerro Casale; the assumption by Goldcorp of a $20 million payment obligation due to Barrick Gold Corporation under the existing Cerro Casale shareholders agreement, which is payable when commercial production at Cerro Casale commences; and a 1.25% royalty from Goldcorp based on 25% of gross revenues from all metals sold at Cerro Casale and Quebrada Seca, with Kinross foregoing the first $10 million.
Additionally, Kinross will enter into a contingent water supply agreement with the Cerro Casale joint venture. Kinross expects to use any water supplied under such agreement for its Chilean assets to enhance future optionality.
As of March 31, 2017, Kinross had cash and cash equivalents of $819.0 million, compared with $827.0 million as of December 31, 2016. The Company also had available credit of $1,433.1 million as of March 31, 2017 for total liquidity of approximately $2.3 billion.
The Company's pro forma cash and cash equivalent position is approximately $1.1 billion after considering the Cerro Casale and Quebrada Seca divestment, with a total liquidity position of approximately $2.5 billion.
With no other debt maturities until 2020, Kinross is well-positioned to fund its pipeline of organic development projects with its strong balance sheet and liquidity.
The following section of the news release represents forward-looking information and users are cautioned that actual results may vary. We refer to the risks and assumptions contained in the Cautionary Statement on Forward-Looking Information on page 18 of this news release.
As previously announced on February 15, 2017, Kinross expects to produce approximately 2.5 - 2.7 million Au eq. oz. for the year and be within its regional production guidance ranges.
The Company expects to be within its regional production cost of sales guidance ranges, its company-wide production cost of sales guidance range of $660 - $720 per Au eq. oz., and its all-in sustaining cost guidance range of $925 - $1,025 per Au eq. oz. sold in 2017.
The Company also expects to meet its 2017 capital expenditure forecast of approximately $900 million (+/- 5%).
Conference call details
In connection with the release, Kinross will hold a conference call and audio webcast on Wednesday, May 3, 2017 at 7:45 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 - 1297 followed by #.
Outside of Canada & US - 1-604-638-9010; Passcode - 1297 followed by #.
Kinross' Annual Shareholders Meeting will be held on Wednesday, May 3, 2017 at 10:00 a.m. ET at the Glenn Gould Studio, 250 Front Street West, Toronto, Ontario, Canada. A live audio webcast (listen-only mode) of the Annual Meeting will be available at www.kinross.com and will also be archived for later access.
This news release should be read in conjunction with Kinross' 2017 first-quarter unaudited Financial Statements and Management's Discussion and Analysis report at www.kinross.com. Kinross' 2017 first-quarter unaudited Financial Statements and Management's Discussion and Analysis have been filed with Canadian securities regulators (available at www.sedar.com) and furnished to the U.S. Securities and Exchange Commission (available at www.sec.gov). Kinross shareholders may obtain a copy of the financial statements free of charge upon request to the Company.
About Kinross Gold Corporation
Kinross is a Canadian-based senior gold mining company with mines and projects in the United States, Brazil, Russia, Mauritania, Chile and Ghana. Our focus is on delivering value based on the core principles of operational excellence, balance sheet strength, disciplined growth and responsible mining. Kinross maintains listings on the Toronto Stock Exchange (TSX: K) and the New York Stock Exchange (