N
EWS
R
ELEASE
Kinross Gold records strong second quarter results;
production increases 14%
Toronto, Ontario, August 1, 2007
– Kinross Gold Corporation (TSX-K; NYSE-KGC) (“Kinross”,
“Kinross Gold” or the “Company”), today announced its unaudited results for the three and six
months ended June 30, 2007.
(This news release contains forward looking information that is subject to the risk factors and assumptions set out in our Cautionary
Statement on Forward-Looking Information located on page 14 of this news release. All dollar amounts in this news release are
expressed in U.S. dollars, unless otherwise noted.)
Second Quarter Highlights
•
Production was 439,783 gold equivalent ounces in the second quarter of 2007, 14% above the
second quarter of 2006 and the Company is on track to meet full-year guidance for 2007 of
approximately 1.65 million gold equivalent ounces.
•
Revenue was $290.1 million in the second quarter, a 15% increase over the same period last
year, and the average realized gold price was $662 per ounce sold.
•
Cost of sales per ounce
1
was $348 in the second quarter on sales of 438,549 gold equivalent
ounces compared with cost of sales per ounce of $311 on sales of 403,507 gold equivalent
ounces in the second quarter of 2006 and the Company is on track to meet its full-year
guidance of $330 - $340 per ounce. Cost of sales per ounce would have been $332 before
factoring in the impact of fair value accounting on the acquired bullion inventory of the Bema
properties.
•
Net earnings for the second quarter were $53.0 million, or $0.09 per share, compared with net
earnings of $65.6 million, or $0.19 per share, in the same period last year.
•
Cash flow from operating activities was $94.5 million in the second quarter of 2007 compared to
$94.9 million for the corresponding period in 2006. The cash position was $244.4 million at June
30, 2007 compared to $154.1 million at December 31, 2006 and total debt was $460.1 million
at June 30, 2007 compared to $89.9 million at December 31, 2006.
•
Capital expenditures totaled $161.3 million in the second quarter, primarily at the Paracatu
expansion, Kupol and Kettle River – Buckhorn projects. Capital expenditures for 2007, including
the assets acquired in the Bema transaction, are expected to be $660 million, an increase of
$210 million from previous Kinross-only guidance of $450 million.
•
Construction at the Kupol and Paracatu projects is on schedule to commence production in
mid-2008, while Buckhorn is now expected to come into production in the second half of
2008. The Company remains on track to meet its previously announced production
guidance of 2.1 to 2.2 million ounces in 2008 and 2.6 to 2.7 million ounces in 2009.
1. Cost of sales per ounce is defined as cost of sales as per the financial statements divided by the number of gold equivalent ounces sold.
KINROSS GOLD CORPORATION
www.kinross.com
40 King Street West, 52nd Floor
Toronto, Ontario, Canada
M5H 3Y2
TEL: 416-365-5123
FAX: 416-363-6622
TOLL FREE: 866-561-3636
  PDF to HTML - Convert PDF files to HTML files
CEO commentary
Tye Burt, Kinross President and CEO, made the following comments in relation to the second
quarter 2007 results:
“We are pleased to record another excellent quarter, consistent with our previous guidance for
2007. We continue to get strong production from our operations, and with the Bema acquisition
complete, we are firing on all cylinders and striving to maximize production and margins in a
strong gold market.
“Like all producers we face pressures from the rising cost of energy, labour, freight and
transportation, equipment and consumables, plus in some cases unfavourable exchange rates.
However, we continue to focus strongly on cost control as a core part of the Kinross culture.
“Kinross continues to have one of the best growth profiles in the gold industry with three major
projects in development, which will increase our production by 60 per cent over the next two
years, while reducing costs.
“We have made excellent progress on our Paracatu, Kupol and Buckhorn construction
projects. Paracatu and Kupol are expected to begin production mid-2008 as planned
enabling Kinross to boost production to between 2.1 to 2.2 million ounces next year.
Buckhorn production is expected to be delayed until the second half of next year as we work
through issues related to permit appeals.
“With a great portfolio of existing mines, one of the best short-term growth profiles of any major
producer, and a growing reserve base with excellent prospects for future development, Kinross
continues to occupy a unique position in the sweet spot of today’s gold industry.”
Summary of financial and operating results
Three months ended
June 30,
(dollars in millions, except per share and per ounce amounts)
Six months ended
June 30,
2007
829,177
816,716
$ 535.8
$
$
$
$
$
$
$
$
$
$
276.6
6.0
66.7
129.9
121.5
0.24
0.23
184.7
656
339
2006
747,909
775,325
$ 450.6
$ 246.9
$
5.9
$
56.2
$
95.5
$
74.5
$
0.22
$
0.21
$ 115.0
$
581
$
318
2007
439,783
438,549
$
$
$
$
$
$
$
$
$
$
$
290.1
152.5
3.0
36.4
64.3
53.0
0.09
0.09
94.5
662
348
2006
385,514
403,507
$
$
$
$
$
$
$
$
$
$
$
252.3
125.4
2.9
27.0
73.1
65.6
0.19
0.19
94.9
625
311
Gold equivalent ounces - produced (a)
Gold equivalent ounces - sold (a)
Metal sales
Cost of sales (excludes accretion and reclamation
expense, depreciation, depletion and amortization)
Accretion and reclamation expense
Depreciation, depletion and amortization
Operating earnings
Net earnings
Basic earnings per common share
Diluted earnings per common share
Cash flow from operating activities
Average realized gold price
Cost of sales per equivalent ounce sold (b)
(a)
(b)
Gold equivalent ounces include silver ounces converted to gold based on the ratio of the average spot market prices for the commodities for each
year. This ratio for the second quarter of 2007 was 50.03:1, compared with 51.26:1 for the second quarter of 2006.
Cost of sales per ounce is defined as cost of sales as per the financial statements divided by the number of gold equivalent ounces sold.
KINROSS GOLD CORPORATION
2007 Second Quarter Results
Page 2
  PDF to HTML - Convert PDF files to HTML files
Revenue from metal sales increased 15% in the second quarter of 2007 over the second
quarter of 2006 from $252.3 million to $290.1 million, primarily as a result of the 6% increase in
the realized gold price and a 9% increase in the number of ounces sold. The average realized
gold price in the second quarter of 2007 was $662 per ounce, compared with $625 per ounce in
the second quarter of 2006. The average spot price in the second quarter of 2007 was $667
per ounce, compared with $628 per ounce in the corresponding period in 2006.
In the second quarter of 2007, Kinross produced 439,783 gold equivalent ounces, which was on
target and 14% higher than the comparable quarter in 2006. This includes 49,875 ounces of gold
equivalent production from the acquired Bema properties. The increase year-over-year can be
further attributed to increased production from La Coipa, Maricunga, and Musselwhite, which
partially offset decreases in production at Fort Knox, Round Mountain, Paracatu and Crixas and no
contribution in 2007 from the Kubaka and Kettle River operations as they were shut down as
planned in 2006. Kinross is on track to meet its full-year production guidance of approximately
1.65 million ounces.
Cost of sales was $348 per gold equivalent ounce for the second quarter of 2007, which
represents an increase of 12% compared to the corresponding period in 2006, and the Company
remains on target to meet previously announced full-year cost of sales guidance of $330 - $340
per ounce. Cost of sales in the second quarter of 2007 includes an increase of approximately $16
per ounce resulting from purchase accounting related to the Bema transaction, whereby the
bullion inventory of Julietta and the portion of Maricunga acquired was increased to reflect fair
value. The adjusted cost of sales of $332 for comparative purposes is 7% higher than the second
quarter of 2006 primarily due to the addition of the Bema assets, an increase in various
underlying costs, and a change in the mix of production within our portfolio.
Net earnings of $53.0 million in the second quarter of 2007 include $16.7 million from gains on
non-hedge derivatives, $11.0 million from losses on foreign currency translation, and $4.9
million of expense, net of tax, relating to the impact of fair value accounting on the acquired
bullion inventory of the Bema properties. These items had no net impact on earnings per
share. Net earnings were 19% lower than in the second quarter of 2006 as the increased
margin was more than offset by higher depreciation, exploration, general and administrative and
non-operating costs, and a higher tax provision. In May, the Kupol gold and silver put and call
contracts acquired in the Bema transaction were converted to forward contracts. As of the end of
May, all derivative instruments qualified for hedge accounting except for the silver and gold
options relating to the Julietta and Maricunga operations, a silver lease rate swap and a U.S.
dollar interest rate collar, all of which were acquired through the Bema transaction. During the
quarter, derivative instruments generated net gains of $16.7 million, which were included in
earnings, and $14.5 million of gains were included in other comprehensive income.
General and administrative expenses were $16.5 million in the second quarter of 2007, compared
to $14.7 million in the second quarter of 2006. The increase is primarily related to higher
personnel costs, costs related to the Bema acquisition and the strengthening of the Canadian
dollar relative to the U.S. dollar.
Cash flow from operating activities for the second quarter of 2007 was $94.5 million, compared
with $94.9 million for the second quarter of 2006. Increased margin on sales was offset by
higher exploration, general and administrative and other operating expenses and an
increase in net operating assets resulting in the slight decrease in cash flow from operating
activities in the second quarter of 2007. Net working capital increased to $232.5 million at June
30, 2007 compared with $85.3 million at December 31, 2006.
KINROSS GOLD CORPORATION
2007 Second Quarter Results
Page 3
  PDF to HTML - Convert PDF files to HTML files
Forward Sales Contracts
Under the terms of the Kupol project loan facilities arranged by Bema prior to the acquisition, the
Company is required to maintain gold and silver hedge contracts over the life of the loans in order
to cover a portion of the mine’s future operating and debt service costs. Also acquired as part of
the acquisition of Bema in February 2007, were gold and silver forward and option contracts
intended to protect against a decline in future metal prices at Maricunga and Julietta. After
accounting for the 25% of the Kupol project owned by a partner, Kinross has an economic
interest in gold forward sales contracts and call options equivalent to approximately 2% of total
gold reserves. The Company converted its gold and silver put and call contracts relating to the
Kupol project to forward sales contracts during the quarter. At June 30, 2007, the following gold
and silver derivative contracts were outstanding:
YEAR OF SETTLEMENT
(ounces in thousands)
Gold
Forward contracts (ounces)
Average price per ounce
Call options sold (ounces)
Average price per ounce
Put options purchased (ounces)
Average price per ounce
Silver
Forward contracts (ounces)
Average price per ounce
$
50.0
8.01
$
-
-
3,600
$ 10.71
$
7,200
10.71
10,850
$ 10.70
10,800
50.0
$
$
$
21.5
433
29.5
462
34.0
405
$
$
$
45.0
511
36.5
468
38.5
405
$
$
$
218.6
641
$
612.8
635
$
897.9
626
66.0
465
72.5
405
72.5
66.0
831.1
66.8
2007
2008
2009
2010-2012
Total
Kupol
Project
Julietta &
Maricunga
For the three and six months ended June 30, 2007, Kinross had net gains on non-hedge gold and
silver derivative contracts of $16.7 million and $43.6 million, respectively.
Operations review and update
Three months ended June 30, 2007
Gold equivalent ounces
Produced
Sold
(in
US$ millions
)
2007
2006
2007
2006
Fort Knox
Round Mountain
Porcupine JV
Paracatu
La Coipa
Crixas
Musselwhite
Kettle River
Maricunga
(a)
Julietta
(b)
Other operations
Total
93,930
82,353
39,522
41,183
62,220
23,884
18,201
-
57,230
21,260
(c)
Cost of sales
2007
2006
$
30.9
23.7
18.4
14.1
15.1
6.2
8.3
-
25.7
10.1
$
-
152.5
$
$
29.5
23.4
15.9
14.6
10.8
5.2
7.8
0.8
10.2
-
7.2
125.4
$
$
Cost of sales/oz
2007
2006
320
292
444
367
261
256
490
-
414
504
-
348
$
$
267
270
367
335
324
202
415
269
379
-
606
311
99,437
88,469
39,713
44,465
32,519
24,424
17,631
-
26,711
-
12,145
385,514
96,456
81,069
41,483
38,426
57,841
24,184
16,945
-
62,120
20,025
-
438,549
110,308
86,555
43,299
43,620
33,366
25,779
18,801
2,977
26,925
-
11,877
403,507
-
439,783
KINROSS GOLD CORPORATION
2007 Second Quarter Results
Page 4
  PDF to HTML - Convert PDF files to HTML files
Six months ended June 30, 2007
Gold equivalent ounces
Produced
Sold
2007
2006
2007
2006
176,644
166,633
75,322
81,915
118,515
47,624
35,231
-
98,270
29,023
(c)
(in
US$ millions
)
Cost of sales
2007
2006
$
54.7
47.9
32.5
30.1
24.8
12.4
16.1
-
41.1
17.0
$
-
276.6
$
$
51.0
51.0
30.0
29.7
22.1
9.7
15.0
0.8
20.9
-
16.7