Margins increase by 26%; revenue up 23%
Adjusted net earnings increase by 38%
Toronto, Ontario - May 4, 2010 - Kinross Gold
Corporation (TSX: K, NYSE: KGC) today announced its results for the
first quarter ended March 31, 2010.
(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 7 of this
news release. All dollar amounts in this news release are expressed
in U.S. dollars, unless otherwise noted.)
Highlights
• Production(1) in the first quarter 2010 was
544,134 gold equivalent ounces, an increase of 3% over the same
period last year. Consistent with previously stated guidance, the
Company remains on track to produce approximately 2.2 million
attributable gold equivalent ounces in 2010.
• Revenue for the quarter was $657.6 million, compared
with $532.7 million in the first quarter of 2009, an increase of
23%. The average realized gold price for the quarter was $1,065 per
ounce sold, compared with $897 per ounce sold in Q1 2009, an
increase of 19%.
• Cost of sales per gold equivalent ounce(2) was
$461 for Q1, an increase of 10% compared with Q1 2009. Cost of
sales per gold ounce on a by-product basis was $417 in Q1. Cost of
sales per gold equivalent ounce is expected to be approximately
$460 - $490 for the full-year 2010, consistent with previously
stated guidance.
• Kinross' attributable margin per ounce sold(3)
was $604 in Q1, a year-over-year increase of 26%.
• Adjusted operating cash flow(4) in Q1 was
$226.3 million, a 5% increase over Q1 2009. Adjusted operating cash
flow4 per share in Q1 was $0.32 per share, consistent with the same
period last year.
• Adjusted net earnings(4) were $97.4 million, or
$0.14 per share, in Q1, compared with adjusted net earnings of
$70.7 million, or $0.10 per share, for the same period last year,
an increase of 38%. Reported net earnings were $110.6 million, or
$0.16 per share in Q1, compared with reported net earnings of $76.5
million, or $0.11 per share, for Q1 2009.
• On April 26, 2010, Kinross announced that it had been
successful in its bid to acquire control of Underworld Resources
Inc. by way of a friendly acquisition. The Company now owns a total
of 42,663,059 common shares of Underworld, representing
approximately 81.6% of Underworld's common shares on a
fully-diluted basis, and plans to acquire the balance during the
third quarter.
• Pursuant to a private placement, Kinross has subscribed
for 24 million common shares of Red Back Mining Inc. representing
approximately 9.4% of Red Back's issued and outstanding common
shares. The subscription price is CDN $25 per common share for an
aggregate purchase price of CDN $600 million.
CEO Commentary
Tye Burt, President and CEO, made the following comments in
relation to first quarter 2010 results:
"Kinross had a strong first quarter, with significant
year-over-year increases in revenue, margins and adjusted net
earnings(4). We are pleased with the progress being
made at our Paracatu expansion plant, as its performance to date in
2010 continues to exceed plan.
"We continue to advance our organic growth projects at existing
operations while making good progress at the major development
projects. At Fruta del Norte in Ecuador, we have completed an
18,000 metre drilling program ahead of schedule, while at
Lobo-Marte, we are advancing our drilling program and permitting
activities.
"We were successful in our offer to acquire control of Underworld
Resources in Canada's Yukon Territory, adding a major new project
in a mining-friendly jurisdiction to our pipeline. With the
announcement of the acquisition of Dvoinoye and sale of one-half of
our interest in Cerro Casale in the first quarter, we continue to
optimize our portfolio while adding significant new growth
potential for the near, medium and longer-term.
"Kinross' investment in Red Back enhances our leverage to the gold
price and gives us a strategic stake in a fast-growing producer
with great exploration potential, a first-class management team,
and assets in one of the world's most prolific gold regions."
(1) Unless otherwise stated, production figures in this
release are based on Kinross' share of Kupol production
(75%).
(2) Cost of sales per ounce is a non-GAAP measure and
is defined as cost of sales as per the financial statements divided
by the number of gold equivalent ounces sold, both reduced for
Kupol sales attributable to a third-party 25% shareholder.
(3) Attributable margin per ounce sold is a non-GAAP measure
and is defined as average realized gold price per ounce less
attributable cost of sales per gold equivalent sold.
(4) Reconciliation of non-GAAP measures is located on page 9 of
this news release.
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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, possible events, statements with respect to possible events, the future price of gold and silver, the estimation of mineral reserves and resources, the realization of mineral reserve and resource estimates, the timing and amount of estimated future production, costs of production, expected capital expenditures, costs and timing of the development of new deposits, success of exploration, development and mining activities, permitting timelines, currency fluctuations, requirements for additional capital, government regulation of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims and limitations on insurance coverage. The words ‘‘plans’’, ‘‘expects’’ or ‘‘does not expect’’, ‘‘is expected’’, ‘‘budget’’, ‘‘scheduled’’, ‘‘estimates’’, ‘‘forecasts’’, “targets”, ‘‘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 and assumptions of Kinross 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, or as otherwise expressly incorporated herein by reference 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 for and permitting and construction of the new tailings facility) being consistent with our current expectations; (3) development of the Phase 7 pit expansion and the 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 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 law and related regulations and policies, and negotiation of an exploitation contract with the government, being consistent with Kinross’ current expectations; (6) the new feasibility study prepared and approved by the joint venture for Cerro Casale, incorporating updated geological, mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors, and permitting, 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 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; and (14) the satisfaction of the closing conditions under the subscription agreement pursuant to which Kinross will acquire an approximately 9.4% interest in Red Back Mining Inc. and the closing of such transaction consistent with Kinross’ 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, and political or economic developments in Canada, the United States, Chile, Brazil, Russia, Ecuador, or other countries in which Kinross, or entities in which it now or hereafter directly or indirectly holds an investment, do business or may carry on business in the future; business opportunities that may be presented to, or pursued by, us; our ability to successfully integrate acquisitions; operating or technical difficulties in connection with mining or development activities; employee relations; the speculative nature of gold exploration and development, including 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. 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 50%-60% of the Company's costs are denominated in US dollars.
A 10% change in foreign exchange could result in an approximate $8 impact in cost of sales per ounce.
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 $4 impact on cost of sales per ounce.
Other information
Where we say ‘‘we’’, ‘‘us’’, ‘‘our’’, the ‘‘Company’’, or ‘‘Kinross’’ in this news release, we mean Kinross Gold Corporation and/or one or more or all of its subsidiaries, as may be applicable.
The technical information about the Company’s material mineral properties 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.
About Kinross
Kinross is a Canadian-based gold mining company with mines and projects in the United States, Brazil, Chile, Ecuador and Russia, employing approximately 5,500 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 (symbol:K) and the New York Stock Exchange (symbol:KGC).
Media Contact
Steve Mitchell
Vice President, Corporate Communications
phone: 416-365-2726
steve.mitchell@kinross.com
Investor Relations Contact
Erwyn Naidoo
Vice-President, Investor Relations
phone: 416-365-2744
erwyn.naidoo@kinross.com