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02.13.13 - Kinross reports 2012 fourth-quarter and year-end results

Company exceeds full-year production forecast; meets full-year cost of sales forecast

Toronto, Ontario - February 13, 2013 - Kinross Gold Corporation (TSX: K, NYSE: KGC) today announced its results for the fourth quarter and full year ended December 31, 2012.

(This news release contains forward-looking information subject to the risks and assumptions set out in our Cautionary Statement on Forward-Looking Information located on page 12 of this release. All dollar amounts in this release are expressed in U.S. dollars, unless otherwise noted. The comparative figures have been recast to exclude Crixás due to its disposal.)

Financial and operating highlights:

  • Production(1): 724,510 gold equivalent ounces (Au eq. oz.), compared with 622,507 ounces in Q4 2011. Full-year production was 2,617,813 Au eq. oz., exceeding guidance, compared with 2,543,790 Au eq. oz. for full-year 2011.
  • Revenue: $1,186.9 million, compared with $919.8 million in Q4 2011. Full-year revenue was $4,311.4 million, compared with $3,842.5 million for full-year 2011.
  • Production cost of sales(2) : $686 per Au eq. oz., compared with $635 in Q4 2011. Full-year production cost of sales was in line with guidance at $706 per Au eq. oz., compared with $592 per Au eq. oz. for full-year 2011.
  • Attributable margin(3) : $1,021 per ounce sold, compared with $963 in Q4 2011. Full-year attributable margin was $937 per ounce sold, compared with $908 for full-year 2011.
  • Adjusted operating cash flow(4) : $501.4 million, or $0.44 per share, compared with $353.4 million, or $0.31 per share, in Q4 2011. Full-year adjusted operating cash flow was $1,527.0 million, or $1.34 per share, compared with $1,561.8 million, or $1.37 per share, for full-year 2011.
  • Adjusted net earnings(4,5): $276.5 million, or $0.24 per share, compared with $187.2 million, or $0.16 per share, in Q4 2011. Full-year adjusted net earnings were $879.2 million, or $0.77 per share, compared with $850.8 million, or $0.75 per share, for full-year 2011.
  • Reported net loss(5): A reported net loss of $2,989.1 million, or $2.62 per share, compared with a net loss of $2,791.0 million, or $2.45 per share, for Q4 2011. Full-year reported net loss was $2,548.8 million, or $2.24 per share, compared with a net loss of $2,093.4 million, or $1.84 per share, for full-year 2011.
  • Non-cash impairment charge: The reported net loss for 2012 included an after-tax non-cash impairment charge of $3,206.1 million. The Tasiast project represents $3,094.8 million of this charge.
  • Mineral reserves and resources: Proven and probable mineral reserve estimates at year-end 2012 were 59.6 million ounces of gold, compared with 62.6 million ounces of gold at year-end 2011, both estimated using a $1,200 per ounce gold price. Measured and indicated mineral resource estimates at year-end were 20.3 million ounces of gold, compared with 25.4 million ounces of gold at year-end 2011, both estimated using a $1,400 per ounce gold price.

Outlook, growth projects, and exploration:

  • Kinross expects to produce approximately 2.4-2.6 million gold equivalent ounces in 2013 at a production cost of sales per gold equivalent ounce of $740-790. Total capital expenditures are forecast to be approximately $1.6 billion, a reduction of approximately $325 million compared with 2012.
  • The Tasiast pre-feasibility study remains on schedule for expected completion in Q1 2013. Dvoinoye remains on schedule for expected delivery of first ore to the Kupol mill in the second half of the year.
  • Recent exploration results from two step-out drilling targets outside the current resource footprint at Tasiast have confirmed the presence of narrow, high-grade veins. At Kupol, Kinross has identified a new structure with strong potential as a result of the discovery of additional mineralization at the Moroshka target.

Dividend:

  • The Board of Directors declared a dividend of $0.08 per share payable on March 28, 2013 to shareholders of record at the close of business on March 21, 2013.

CEO Commentary

J. Paul Rollinson, CEO, made the following comments in relation to fourth-quarter and year-end 2012 results:

"As promised, we remained strongly focused on operational fundamentals in the second half of 2012, and finished the year by exceeding our full-year production guidance, and meeting our full-year cost of sales guidance. While we recorded a non-cash impairment charge related to our Tasiast project, our pre-feasibility study work and recent exploration results continue to increase our confidence in Tasiast's potential, and confirm its importance as part of our long-term future.

"Our planning and outlook for 2013 reflects our continued focus on cost control, margin improvement and free cash flow. Although our 2013 operating costs are expected to increase due to higher consumable costs and anticipated lower grades, we are pursuing every opportunity for cost reduction. We are also forecasting a reduction in capital expenditures of approximately $325 million over 2012. Our pursuit of margin and quality ounces is also reflected in our strategic decision to use conservative gold price assumptions in our mineral reserve and resource estimates, which resulted in a lower mineral resource estimate, but which targets higher margin ounces with less capital intensity.

"At Dvoinoye, we continue to make excellent progress, as we are on schedule and on budget for planned delivery of first ore to Kupol in the second half of the year. At Kupol, our site exploration team has identified a new structure with strong potential as a result of the discovery of additional mineralization at the Moroshka target."

(1)Unless otherwise stated, production figures in this news release are based on Kinross' 90% share of Chirano production and 75% of Kupol production up to April 27, 2011 (100% thereafter). Prior year production figures have been adjusted to exclude Crixás due to its sale in Q2 2012.

(2) "Production cost of sales per gold equivalent ounce" is a non-GAAP measure defined as production cost of sales per the financial statements divided by the attributable number of gold equivalent ounces sold, both reduced to reflect a 90% ownership interest in Chirano sales. Production cost of sales is equivalent to total cost of sales (per the financial statements), less depreciation, depletion, amortization, and impairment charges.

(3)"Attributable margin per 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".

(4)Reconciliation of non-GAAP measures are provided on page 14 of this news release.

(5)"Net earnings (loss)" figures in this release represent "net earnings (loss) from continuing operations attributable to common shareholders."

Please click here to download the PDF for the full version of the news release.

Please click here to download the Management's Discussion & Analysis for the period ended December 31, 2012

Please click here to downalod the Consolidated Financial Statements for the period ended December 31, 2012

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 “anticipates”, ‘‘plans’’, ‘‘expects’’, “indicative”, “intend”, ‘‘scheduled’’, “timeline”, ‘‘estimates’’, ‘‘forecasts”, “guidance”, “opportunity”, “outlook”, “potential”, “projected”, “seek”, “strategy”, “targets”, “models”, or ‘‘believes’’, or variations of or similar such words and phrases or statements that certain actions, events or results ‘‘may’’, ‘‘could’’, ‘‘would’’, or ‘‘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 full-year 2012 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) the viability, permitting and development of the Fruta del Norte deposit, and its continuing ownership by the Company, being consistent with Kinross’ current expectations; (4) 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 mining and investment laws (and prospective amendment to these laws) and related regulations and policies, being consistent with Kinross’ current expectations, and the unenforceability of any new law in Brazil requiring that all Paracatu tailings facilities have an impermeable liner; (5) negotiation of an exploitation contract and an investment protection contract for Fruta del Norte with the Ecuadorian government being consistent with Kinross’ current expectations, including but not limited to Kinross and the government jointly declaring a phase change from economic evaluation to exploitation prior to August 1, 2013 (or any government approved extension of up to 1.5 years) and entering into an exploitation agreement with the government within six months of such declared phase change, the failure of which will likely result in forfeiture of the FDN concession and related project infrastructure to the government; (6) 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; (7) certain price assumptions for gold and silver; (8) prices for diesel, natural gas, fuel oil, electricity and other key supplies being approximately consistent with current levels; (9) 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; (10) the accuracy of the current mineral reserve and mineral resource estimates of the Company (including but not limited to ore tonnage and ore grade estimates) and any entity in which it now or hereafter directly or indirectly holds an investment; (11) labour and materials costs increasing on a basis consistent with Kinross’ current expectations; (12) the development of the Dvoinoye deposit being consistent with Kinross’ expectations; (13) the viability of the Tasiast and Chirano mines (including but not limited to, at Tasiast, the impact of ore tonnage and grade variability reconciliation analysis) as well as permitting, development and expansion (including but not limited to, at Tasiast, expansion optimization initiatives leading to changes in processing approach and maintenance and, as required, conversion of exploration licences to mining licences) of the Tasiast and Chirano mines being consistent with Kinross’ current expectations; (14) the terms and conditions of the legal and fiscal stability agreements for the Tasiast and Chirano operations being interpreted and applied in a manner consistent with their intent and Kinross’ expectations; (15) goodwill and/or asset impairment potential; and (16) access to capital markets, including but not limited to maintaining an investment grade debt rating and 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); increases in the discount rates applied to present value net future cash flows based on country-specific real weighted average cost of capital; declines in the market valuations of peer group gold producers and the Company, and the resulting impact on market price to net asset value multiples; 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 (including but not limited to income tax, advance income tax, stamp tax, withholding tax, capital tax, tariffs, value-added or sales tax, capital outflow tax, capital gains tax, windfall or windfall profits tax, royalty, excise tax, customs/import or export taxes/duties, asset taxes, asset transfer tax, property use or other real estate tax, together with any related fine, penalty, surcharge, or interest imposed in connection with such taxes), 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; commencement of litigation against the Company including, but not limited to, securities class actions in Canada and/or the United States; 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, including but not limited to resulting in an impairment charge on goodwill and/or assets. 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 full-year 2012 Management Discussion and Analysis. 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 $9 impact in production cost of sales per ounce.8 A $10 per barrel change in the price of oil could result in an approximate $2 impact on production 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 exploration activities) contained in this news release has been prepared under the supervision of Mr. Jim Fowler, 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.

 

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