Margins increase by 38%; Adjusted net earnings up 34%; adjusted operating cash flow up 20%
$7.1-billion friendly combination with Red Back creates new high-growth gold producer
Toronto, Ontario - August 4, 2010 - Kinross
Gold Corporation (TSX: K, NYSE: KGC) today announced its unaudited
results for the second quarter ended June 30, 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 8 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 second quarter 2010 was
538,270 gold equivalent ounces, a slight decrease of 4% over the
same period last year.
• Revenue for the quarter was $696.6 million, compared with
$598.1 million in the second quarter of 2009, an increase of 16%.
The average realized gold price for the quarter was $1,158 per
ounce sold, compared with $915 per ounce sold in Q2 2009, an
increase of 27%.
• Cost of sales(2) per gold equivalent ounce
was $496 for Q2, an increase of 14% compared with Q2 2009. Cost of
sales per gold ounce on a by-product basis was $459 in Q2 compared
with $382 for the same period last year.
• Kinross' attributable margin per ounce sold(3) was
a record $662 in Q2, a year-over-year increase of 38%.
• Adjusted operating cash flow(4) was $271.4
million, or $0.39 per share, compared with $227.1 million, or $0.33
per share, in Q2 2009, an increase of 20% in adjusted operating
cash flow.
• Adjusted net earnings(4) were $113.1 million, or
$0.16 per share, compared with $84.3 million, or $0.12 per share,
in Q2 2009, an increase of 34% in adjusted net earnings. Reported
net earnings were $103.8 million, or $0.15 per share, compared with
$19.3 million, or $0.03 per share, in Q2 2009.
• On August 2, Kinross and Red Back Mining Inc. announced a
$7.1-billion transaction to create a pure gold senior producer with
an exceptional growth profile, combining Kinross' strong base of
high-quality mines, growth projects, and proven track record, with
Red Back's early-stage operating mines and outstanding exploration
and expansion potential.
• On July 23, Kinross announced that it had sold its 19.9%
equity interest in Harry Winston Diamond Corporation. Proceeds from
this sale are approximately $186 million. The Company also agreed
to sell its interest in the Diavik Diamond Mine joint venture for
approximate proceeds of $220 million(5).
• Kinross has agreed to acquire B2Gold Corp.'s right to an
interest in the Kupol East and West exploration licence areas,
further consolidating the Company's interests in the area
surrounding the Kupol mine.
• The Board of Directors declared a dividend of $0.05 per
share payable on September 30, 2010 to shareholders of record at
the close of business on August 31, 2010.
CEO Commentary
Tye Burt, President and CEO, made the following comments in
relation to second quarter 2010 results:
"Kinross recorded another quarter of strong financial results, with
record margins and year-over-year increases in revenue, operating
cash flow, and adjusted net earnings4. We remain on target to meet
our overall 2010 production and cost of sales per ounce
forecast.
"Our friendly combination with Red Back gives Kinross immediate
additional production and exceptional growth opportunities, plus a
major presence in one of the world's fastest growing gold regions.
With Kinross' ability to realize the significant upside potential
in Red Back's assets, this combination presents an outstanding
opportunity for the shareholders of both companies.
"We continue to make good progress on Kinross' stand-alone growth
program. We've commenced engineering on the Maricunga optimization
project, advanced our exploration and site activities at Dvoinoye
in anticipation of closing our acquisition, acquired B2Gold's
rights in the Kupol East and West exploration areas, and made solid
progress at our major development projects during the quarter,
receiving key permits at Fruta del Norte in Ecuador, and advancing
our drilling program and permitting activities at Lobo-Marte.
"We were pleased to realize a significant gain for our shareholders
with the sale of our Harry Winston shares and expected sale of our
interest in the Diavik mine, which will help fund future
growth."
(1) Unless otherwise stated, production figures in this
release are based on Kinross' 75% share of Kupol production.
(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 10
of this news release.
(5) Preliminary proceeds based on the Harry Winston share
price on July 22.
Please download the PDF for the full version of
this release.
Click here to download the Second Quarter 2010 Report.
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 and in the “Cautionary Statement on Forward looking Information” in our news release dated August 2, 2010 regarding the combination of the Company with Red Back Mining Inc., 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) permitting, construction, development and production at Cerro Casale being consistent with the new feasibility study prepared and approved by the joint venture and 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 closing of Kinross’ acquisition of the Dvoinoye and Vodorazdelnaya deposits being 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 $7 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.
About Kinross
Kinross is a Canadian-based gold mining company with mines and projects in Canada, 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
Erwyn Naidoo
Vice-President, Investor Relations
phone: 416-365-2744
erwyn.naidoo@kinross.com