Kinross Gold achieves record Fourth Quarter and
Full-year results
Full-year revenue increases to $906 million and earnings per share to
$0.47, production ahead of target and operating cash flow more than
doubles
Toronto, Ontario,
February 21, 2007 – Kinross Gold Corporation (TSX-K; NYSE-KGC)
(“Kinross”, “Kinross Gold” or the “Company”), today announced its unaudited results for
the fourth quarter and year ended December 31, 2006.
(This news release contains forward looking information that is subject to risk factors and assumptions as set
out in our Cautionary Statement on Forward-Looking Information located on page 11 of this news release. All
dollar amounts in this release are expressed in U.S. dollars, unless otherwise noted)
Highlights
•
Gold equivalent production was 362,028 ounces in the fourth quarter of 2006 and
1,476,329 ounces for the full year, both above target.
•
Revenue was $231.4 million in the fourth quarter, a 22 percent increase over the
same period last year, and the average gold price realized was $615 per ounce of
gold sold. Full-year revenue was a record $905.6 million, a 25 percent increase over
the same period last year, and the average gold price realized was $604 per ounce
of gold sold.
•
Cost of sales per ounce
1
was $317 in the fourth quarter on sales of 375,684 gold
equivalent ounces, and $319 for the full-year on sales of 1,510,836 gold equivalent
ounces.
•
Net earnings for the fourth quarter were $41.0 million or $0.11 per share (diluted),
compared to a net loss of $154.3 million or $0.45 per share in the same period last
year. Net earnings for the full-year were a record $165.8 million or $0.47 per share
(diluted), compared with a net loss of $216.0 million in the same period last year.
Net earnings in the fourth quarter were reduced by $0.01 per share (diluted) as a
result of the impairment of certain long-term investments, partially offset by a gain
on asset sales.
•
Cash flow from operating activities was $91.2 million in the fourth quarter and $292.0
million for the full-year compared to $23.8 million and $133.7 million for the
comparable periods in 2005. The cash position was $154.1 million at December 31,
2006 compared to $97.6 million at December 31, 2005 and total debt was $89.9
million at December 31, 2006 compared to $159.3 million at December 31, 2005.
•
Capital expenditures were $65.3 million in the fourth quarter and $202.9 million for
the full-year.
•
Proven and Probable Mineral Reserves at December 31, 2006 increased by 3.1
million ounces of gold, net of 2006 production, to 27.9 million ounces, a 13 percent
increase over year end 2005. These amounts do not include the effects of the Bema
acquisition.
•
Production
2
for 2007 is expected to be approximately 1.5 million gold equivalent
ounces at a cost of sales per ounce
1,2
in the range of $320 to $330. Beyond 2007,
gold equivalent production
2
is expected to grow to 1.6 to 1.7 million ounces in 2008
and 1.8 to 1.9 million ounces in 2009. These amounts do not include the effects of
the Bema acquisition.
•
The Bema Gold acquisition will close on February 27, 2007, subject to customary
closing conditions.
1. Cost of sales per ounce is calculated by dividing cost of sales as per the financial statements by the number of gold
equivalent ounces sold.
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2. Please refer to the risk factors and assumptions set out in our Cautionary Statement on Forward-Looking Information
on page 11 of this news release for information related to risks and uncertainties associated with guidance presented
in this release.
This past year has been outstanding for Kinross and I am proud of the performance our employees
have delivered,” said Tye Burt, President and CEO of Kinross. “This quarter, and indeed 2006, has
seen record revenues, cash flow and earnings for the Company. The Kinross team has been
completely focused in the drive to meet and exceed our targets.”
“Positive financial results were accompanied by the significant increase in our gold reserves year-
over-year. This is due to additions from exploration and soon will be supplemented through the
planned acquisition of Bema Gold,” said Burt. “Kinross’ disciplined strategy is paying off for
investors.”
“Looking through 2007 and beyond, we will be executing our production and cash flow growth plan
as we integrate the Bema acquisition. Kinross has the best growth metrics among the major gold
producers as projects like the Paracatu mine expansion in Brazil, Buckhorn mine in Washington State
and Kupol mine in Russia are completed. We will also be driving to complete our plan to optimize
value at Cerro Casale in Chile. The Kinross team is wholly-committed to building high-quality, low-
cost gold production in a balanced geographic portfolio, all for the benefit of shareholders.”
Summary of financial and operating results
Three months ended
December 31,
2005
2006
362,028
375,684
$
231.4
$
$
$
$
$
$
$
$
$
$
119.2
1.8
27.1
45.2
41.0
0.11
0.11
91.2
615
317
378,533
389,037
$
190.0
$
$
$
$
$
$
$
$
$
$
110.9
47.0
37.5
(176.4)
(154.3)
(0.45)
(0.45)
23.8
491
285
Years ended December
31,
2005
2006
1,476,329
1,510,836
$
905.6
$
$
$
$
$
$
$
$
$
$
481.7
33.5
108.3
201.5
165.8
0.47
0.47
292.0
604
319
1,608,805
1,627,675
$
725.5
$
$
$
$
$
$
$
$
$
$
448.1
56.0
167.7
(211.2)
(216.0)
(0.63)
(0.63)
133.7
445
275
(dollars in millions, except per share amounts)
Gold equivalent ounces - produced
(a)
Gold equivalent ounces - sold
Metal sales
Cost of sales (excludes accretion and reclamation
expense, depreciation, depletion and amortization)
Accretion and reclamation expense
Depreciation, depletion and amortization
Operating earnings (loss)
Net earnings (loss)
Earnings (loss) per common share
- basic
- diluted
Cash flow from operating activities
Average realized gold price ($/ounce)
Cost of sales per ounce sold
(a)
(a)
Gold equivalent ounces include silver ounces converted to gold based on the ratio of the average spot market prices for the commodities for
each period. This ratio for the three and twelve months ended December 31, 2006 was 48.74:1 and 52.28:1, respectively, compared with
60.16:1 and 60.79:1, respectively, for the three and twelve months ended December 31, 2005.
Cost of sales per ounce is calculated by dividing cost of sales as per the financial statements with gold equivalent ounces sold.
(b)
Revenue from metal sales increased 25 percent in 2006 over 2005 from $725.5 million to $905.6
million, primarily as a result of higher realized gold prices. This was partially offset by a seven percent
reduction in gold equivalent ounces sold. The average realized gold price for the fourth quarter and
full-year of 2006 was $615 and $604 per ounce, respectively, compared with $491 and $445 per
ounce, in the same respective periods of 2005. The average spot price for the fourth quarter and
full-year of 2006 was $614 and $604 per ounce, respectively, compared with $485 and $444 per
ounce in the same respective periods in 2005.
Kinross produced 362,028 gold equivalent ounces in the fourth quarter and 1,476,329 gold
equivalent ounces for the full-year, both ahead of plan.
2006 Fourth Quarter and Year End Results
Kinross Gold Corporation
Page 2
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The Company sold 375,684 gold equivalent ounces in the fourth quarter and 1,510,836 gold
equivalent ounces in 2006, a decrease from the 1,627,675 gold equivalent ounces sold in 2005. The
year-over-year reduction was the result of the planned winding down of the Kubaka operations and
Kettle River mine. In addition, the Porcupine Joint Venture did not perform to plan. These declines
were partially offset by a full year of production from Refugio.
Cost of sales was $317 per ounce for the fourth quarter and $319 per ounce for the year. Cost of
sales increased seven percent in 2006 as compared to 2005 largely due to increased fuel, power,
labour and other production costs, which impacted mining companies industry-wide. In addition,
the strengthening of the Canadian dollar, Brazilian real and Chilean peso against the U.S. dollar in
2006 has increased costs at the Company’s non-U.S. mines.
Kinross recorded accretion and reclamation expense in 2006 of $33.5 million. This includes $21.2
million for increased cost estimates at mines no longer in production, primarily related to the third
quarter increase in the fair value estimate of reclamation liabilities at the Company’s DeLamar
closure property. In 2005, the Company recorded accretion and reclamation expense of $56.0
million, of which $46.0 million related to increases in fair value estimates at mines no longer in
production.
Other items effecting fourth quarter earnings included the gain on the sale of New Britannia (+$8.9
million) and an impairment charge against our investments in St Andrew Goldfields Ltd. and
Caledonia Mining Corporation (-$10.5 million).
General and administrative expense was $52.1 million in 2006, compared to $45.3 million in 2005. The
increase is primarily related to stock-based compensation expense, higher personnel costs in part
associated with new hires and the Canadian dollar strengthening against the U.S. dollar.
Cash flow from operating activities in 2006 increased by $158.3 million, or 118 percent, to $292.0
million, compared to $133.7 million in 2005. The increase in cash flow from operating activities in 2006
was largely due to the higher realized gold price and an increase in accounts payable and
accrued liabilities, partially offset by higher costs in 2006 versus 2005.
Operations review and update
Three months ended December 31,
Gold equivalent ounces
Produced
2006
Fort Knox
Round Mountain
La Coipa
Crixas
Paracatu
Musselwhite
Porcupine Joint Venture
Refugio
(a)
Sold
2006
78,020
81,498
57,551
21,909
39,027
17,808
45,250
30,196
-
4,425
-
2005
83,288
75,755
33,364
23,947
45,428
17,630
38,567
19,150
16,980
27,942
6,986
Cost of sales
(d)
Cost of sales/oz
2006
2005
(in US$ millions)
$
354
285
283
183
287
483
351
325
-
588
-
$
307
263
315
155
299
346
301
350
218
340
-
2005
80,643
79,452
33,914
23,812
48,295
18,092
40,864
19,451
13,700
20,310
-
2006
2005
(in US$ millions)
$
27.6
23.2
16.3
4.0
11.2
8.6
15.9
9.8
-
2.6
-
$ 25.6
19.9
10.5
3.7
13.6
6.1
11.6
6.7
3.7
9.5
-
72,921
75,580
55,801
24,401
43,240
18,004
44,021
28,060
-
(b)
(c)
Kettle River
Other operations
Corporate and other
-
-
Total
362,028
375,684
$ 119.2
$ 110.9
$ 317
$ 285
378,533
389,037
(a) The Refugio mine commenced production in late 2005.
(b) Other operations include ounces produced and sold from Kubaka in 2006.
(c) Corporate and other includes ounces sold from Lupin and New Britannia, although production is not included since the properties
are in closure.
(d) Cost of sales excludes accretion, depreciation, depletion and amortization.
2006 Fourth Quarter and Year End Results
Kinross Gold Corporation
Page 3
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Years ended December 31,
Gold equivalent ounces
Produced
2006
Fort Knox
Round Mountain
La Coipa
Crixas
Paracatu
Musselwhite
Porcupine Joint Venture
Refugio
(a)
Kettle River
Other operations
Total
(a)
(b)
(c)
(d)
(b)
Sold
2006
342,455
349,497
154,192
94,986
173,821
71,405
161,196
115,198
3,978
40,372
3,736
1,510,836
2005
320,798
367,581
131,051
93,309
177,806
79,919
179,585
30,575
70,123
153,138
23,790
1,627,675
Cost of sales
(d)
2005
2006
(in US$ millions)
$ 102.9
99.4
47.6
17.7
57.7
31.9
59.9
39.3
0.8
23.9
0.6
$ 481.7
$ 88.1
93.7
45.4
14.1
50.0
26.4
50.7
9.6
18.9
51.2
-
$ 448.1
Cost of sales/oz
2005
2006
(in US$ millions)
$
300
284
309
186
332
447
372
341
201
592
161
$
319
$
$
275
255
346
151
281
330
282
314
270
334
-
275
2005
329,320
373,947
125,991
96,212
180,522
79,916
183,976
30,580
68,146
140,195
-
1,608,805
333,383
335,115
155,180
97,009
174,254
69,834
156,735
116,868
3,978
33,973
-
1,476,329
Corporate and other
(c)
The Refugio mine commenced production in late 2005.
Other operations include ounces produced and sold from Kubaka in 2006.
Corporate and other includes ounces sold from Lupin and New Britannia, although production is not included since the properties
are in closure.
Cost of sales excludes accretion, depreciation, depletion and amortization.
At the
Paracatu
mine in Brazil, gold equivalent production in 2006 was three percent lower when
compared with 2005 as a result of encountering harder ore with lower grades. Revenue increased to
$104.1 million in 2006 from $79.0 million in 2005 due to the higher price of gold. Cost of sales in 2006
increased 15 percent over 2005 primarily due to increased energy, consumables and labour costs
and higher production taxes that are directly related to the higher gold price and the 11 percent
appreciation of the Brazilian real against the U.S. dollar.
At
Round Mountain
in Nevada, U.S., gold equivalent production declined 10 percent in 2006 relative
to 2005 due to less low-grade stockpile material being available for leaching. Stripping of the pit
expansion is now complete and ore from the area is contributing to production resulting in improved
grade and recovery rates. Revenue increased 29 percent as a result of higher realized gold price.
Cost of sales increased six percent as a result of higher commodity and energy costs and royalties.
Increased exploration costs to $5.0 million in 2006 from $2.4 million in 2005 reflect the Company’s
commitment to extending the life of the mine.
The
Fort Knox
mine in Alaska, U.S. increased gold equivalent production slightly in 2006 when
compared to 2005 due to the completion of phases IV and V mining and the cessation of
production from the True North deposit. Revenue increased 46 percent due to the increased price
of gold and a seven percent increase in ounces sold compared to 2005. Cost of sales increased 17
percent mainly due to increases in commodity and energy costs. Exploration spending increased to
$1.4 million from $0.6 million in 2005 as the Company continues to look for opportunities to extend
the life of the mine. Phase VI of the mine development plan is expected to come into full production
in early 2007.
At the
Porcupine Joint Venture
in Ontario, Canada, gold equivalent production in 2006 was 15
percent lower than in 2005. This was the result of planned lower grades from the Pamour pit due to
delayed access to the higher-grade area of the pit and the mine transitioning from the higher-
grade Dome Pit, which was closed as planned in December 2005. As a result, gold equivalent sales
declined 10 percent from 2005 levels. Revenue from overall sales partially offset this, with a 21
percent increase due to a higher realized gold price. Cost of sales increased 18 percent through the
impact of higher energy and commodity costs, and in particular a six percent appreciation of the
Canadian dollar against the U.S. dollar year-over-year.
2006 Fourth Quarter and Year End Results
Kinross Gold Corporation
Page 4
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At the
La Coipa
joint venture in Chile, gold equivalent production increased 23 percent in 2006
compared with 2005 due to the earlier than scheduled processing of material from the Puren pit