Kinross reports 2019 fourth-quarter and full-year results
Meets production and cost guidance for eighth consecutive year Tasiast delivers record annual production and costs; Paracatu achieves record annual production Solid production with lower all-in sustaining cost per ounce and capital expenditures forecast in 2020
TORONTO, Feb. 12, 2020 -- Kinross Gold Corporation (TSX: K, NYSE: KGC) today announced its results for the fourth-quarter and year-end December 31, 2019.
(This news release contains forward-looking information about expected future events and financial and operating performance of the Company. We refer to the risks and assumptions set out in our Cautionary Statement on Forward-Looking Information located on page 21 of this release. All dollar amounts are expressed in U.S. dollars, unless otherwise noted.)
2019 full-year results and 2020 guidance:
| 2019 guidance (+/- 5%) | 2019 full-year results | 2020 guidance (+/- 5%) | |
| Gold equivalent production1 2.5 million 2.5 million 2.4 million (ounces) Production cost of sales1, 2 $730 $706 $720 ($ per Au eq. oz.) All-in sustaining cost1, 2 $995 $983 $970 ($ per Au eq. oz.) Capital expenditures $1,050 million $1,105 million3 $900 million3 |
CEO Commentary:
J. Paul Rollinson, President and CEO, made the following comments in relation to 2019 fourth-quarter and year-end results:
“In 2019, our portfolio of mines performed strongly, as we increased production and lowered costs year-over-year and generated robust free cash flow. Our strong performance ensured we met our production, cost and capital guidance for the eighth consecutive year.
“Our three largest producers in 2019 – Paracatu, Kupol and Tasiast – accounted for 61% of our total production and delivered the lowest costs in the portfolio. Paracatu and Tasiast each had an outstanding year, posting record annual production, with Tasiast also delivering record low costs.
“In terms of 2019 financial performance, Kinross increased operating cash flow by 55% to $1.2 billion, more than tripled adjusted net earnings to $423 million, grew our margins by 28%, and improved liquidity to $2 billion while continuing to invest in our development projects.
“We also took steps to strengthen our future production profile. We approved and launched the capital efficient Tasiast 24k expansion project and completed the IFC-led project financing. We improved our development pipeline by acquiring the high-quality and highly prospective Chulbatkan project in Russia and are now proceeding with the La Coipa Restart project in Chile. In addition, we made excellent progress at our U.S. projects, commencing production at our Round Mountain Phase W and Bald Mountain Vantage Complex projects in Nevada, and advancing Fort Knox Gilmore in Alaska.
“In 2020, we expect to continue our strong performance, producing approximately 2.4 million gold equivalent ounces, with all-in sustaining costs and capital expenditures guidance lower than last year. In 2021, generating strong free cash flow will continue to be a priority, with production expected to be at or above 2019 levels and capital expenditures and all-in sustaining costs expected to decrease compared with 2020. We currently expect a further reduction in capital expenditures and all-in sustaining costs for 2022, with production expected to remain at the 2.5 million ounce level.”
2019 Q4 and full-year highlights:
- Production1: 645,344 gold equivalent ounces (Au eq. oz.) in Q4 2019 and 2,507,659 Au eq. oz. in 2019.
- Revenue: $996.2 million in Q4 2019 and $3,497.3 million in 2019.
- Production cost of sales2: $744 per Au eq. oz. in Q4 2019 and $706 per Au eq. oz. in 2019.
- All-in sustaining cost2: $1,050 per Au eq. oz. sold in Q4 2019 and $983 per Au eq. oz. sold in 2019. All-in sustaining cost per Au oz. sold on a byproduct basis was $1,041 in Q4 2019 and $974 per Au oz. sold in 2019.
- Operating cash flow: $408.6 million in Q4 2019 and $1,224.9 million in 2019.
- Adjusted operating cash flow2: $387.6 million in Q4 2019 and $1,201.5 million for 2019.
- Reported net earnings4: $521.5 million, or $0.41 per share in Q4 2019, and $718.6 million, or $0.57 per share, in 2019.
- Adjusted net earnings2,3: adjusted net earnings of $156.0 million, or $0.13 per share in Q4 2019, and adjusted net earnings of $422.9 million, or $0.34 per share, in 2019.
- Margins5: attributable margins of $741 per Au eq. oz. sold in Q4 2019 and $686 per Au eq. oz. sold for 2019.
Operations highlights:
- Paracatu delivered record annual production of approximately 620,000 Au eq. oz., mainly due to benefits from an asset optimization program that improved mill efficiencies and enhanced the understanding of the orebody.
- Tasiast achieved record production and costs in 2019, as the mine continued to benefit from the Phase One expansion and the mill’s strong performance. Year-over-year production increased by 140,000 Au eq. oz., or 56%, with cost of sales per ounce decreasing by $374 per ounce sold, or 38%.
- Kupol-Dvoinoye production was 8% higher year-over-year primarily due to higher-grade ore processed from Kupol’s Northeast Extension and Moroshka deposits.
- Round Mountain performed well in full-year 2019 with the completion of the Phase W project and increases in ounces recovered from the heap leach pads and lower full-year cost of sales.
Balance sheet and liquidity:
- Cash and cash equivalents of $575.1 million, and total liquidity of $2,028.2 million at December 31, 2019. No debt maturities until September 2021.
- Completed the $300 million project financing for Tasiast with the IFC (a member of the World Bank Group), Export Development Canada and two commercial banks.
- Sold remaining shares in Lundin Gold Inc. for gross proceeds of approximately $113 million.
- Sold royalty portfolio to Maverix Metals Inc. (“Maverix”) for total consideration of approximately $74 million, which includes $25 million in cash and approximately 11.2 million Maverix common shares.
Environment, Social, Governance (ESG):
- Maintained industry-leading health and safety performance.
- Delivered strong environmental management and sustainability performance; achieved lowest energy-use and greenhouse gas emission intensities among gold industry peers.
- Published best practice approach to safe and responsible tailings management, based on an overriding commitment to safety and environmental stewardship.
- Governance standards continued to be robust: achieved 33% Board gender diversity target and welcomed two new independent Board members.
Financial results
Summary of financial and operating results
Three months ended Years ended December 31, December 31,
(in millions, except ounces, per share amounts, and per ounce amounts) 2019 2018 2019 2018
Operating Highlights
Total gold equivalent ounces(1)
Produced(3)
650,242 615,279 2,527,788 2,475,068 Sold(3) 670,917 641,101 2,512,758 2,532,912
Attributable gold equivalent ounces(1)
Produced(3) 645,344 610,152 2,507,659 2,452,398 Sold(3) 666,199 636,183 2,492,572 2,510,419
Financial Highlights
| Metal sales | $ | 996.2 $ | 786.5 $ | 3,497.3 $ | 3,212.6 |
| Production cost of sales | $ | 500.5 $ | 476.4 $ | 1,778.9 $ | 1,860.5 |
| Depreciation, depletion and amortization | $ | 210.4 $ | 184.3 $ | 731.3 $ | 772.4 |
| Reversals of impairment charges | $ | (361.8) $ | - $ | (361.8) $ | - |
| Operating earnings | $ | 568.8 $ | 25.1 $ | 991.1 $ | 200.5 |
| Net earnings (loss) attributable to common shareholders | $ | 521.5 $ | (27.7) $ | 718.6 $ | (23.6) |
| Basic earnings (loss) per share attributable to common shareholders | $ | 0.41 $ | (0.02) $ | 0.57 $ | (0.02) |
| Diluted earnings (loss) per share attributable to common shareholders | $ | 0.41 $ | (0.02) $ | 0.57 $ | (0.02) |
| $ | 156.0 $ | 13.5 $ | 422.9 $ | 128.1 |
Adjusted net earnings attributable to common shareholders(2)
| Adjusted net earnings per share(2) | $ | 0.13 $ | 0.01 $ | 0.34 $ | 0.10 |
| Net cash flow provided from operating activities | $ | 408.6 $ | 183.5 $ | 1,224.9 $ | 788.7 |
| Adjusted operating cash flow(2) | $ | 387.6 $ | 135.8 $ | 1,201.5 $ | 874.2 |
| Capital expenditures | $ | 298.2 $ | 273.0 $ | 1,105.2 $ | 1,043.4 |
| Average realized gold price per ounce(2) | $ | 1,485 $ | 1,226 $ | 1,392 $ | 1,268 |
| Consolidated production cost of sales per equivalent ounce(3)sold(2) | $ | 746 $ | 743 $ | 708 $ | 735 |
| Attributable(1)production cost of sales per equivalent ounce(3)sold(2) | $ | 744 $ | 743 $ | 706 $ | 734 |
| $ | 728 $ | 733 $ | 691 $ | 723 |
Attributable(1) production cost of sales per ounce sold on a by-product basis(2)
| Attributable(1)all-in sustaining cost per ounce sold on a by-product basis(2) | $ | 1,041 $ | 955 $ | 974 $ | 959 |
| Attributable(1)all-in sustaining cost per equivalent ounce(3)sold(2) | $ | 1,050 $ | 961 $ | 983 $ | 965 |
| Attributable(1)all-in cost per ounce sold on a by-product basis(2) | $ | 1,337 $ | 1,287 $ | 1,282 $ | 1,275 |
| Attributable(1)all-in cost per equivalent ounce(3)sold(2) | $ | 1,340 $ | 1,286 $ | 1,284 $ | 1,274 |
(1) "Total" includes 100% of Chirano production. "Attributable" includes Kinross' share of Chirano (90%) production.
(2) The definition and reconciliation of these non-GAAP financial measures is included on pages 16 to 20 of this news release.
(3) “Gold equivalent ounces” include silver ounces produced and sold converted to a gold equivalent based on a ratio of the average spot market prices for the commodities for each period. The ratio for 2019 was 85.99:1 (2018 - 80.74:1). The ratio for Q4 2019 was 85.59:1 (Q4 2018 - 84.42:1).
The following operating and financial results are based on fourth-quarter and year-end 2019 gold equivalent production. Production and cost measures are on an attributable basis:
Production: Kinross produced 645,344 attributable Au eq. oz. in the fourth quarter of 2019, compared with 610,152 in the fourth quarter of 2018, mainly due to record quarterly production at Tasiast and higher production at Round Mountain and Bald Mountain.
Kinross produced 2,507,659 attributable Au eq. oz. for full-year 2019, which was in line with the Company’s 2019 annual guidance, and an increase compared with full-year 2018 production of 2,452,398 Au eq. oz.
Production cost of sales: Production cost of sales per Au eq. oz.2 was $744 for Q4 2019, compared with $743 for the fourth quarter of 2018. Production cost of sales per Au oz. on a by-product basis2 was $728 in Q4 2019, compared with $733 in Q4 2018, based on Q4 2019 attributable gold sales of 652,462 ounces and attributable silver sales of 1,175,772 ounces.
Production cost of sales per Au eq. oz. was $706 for full-year 2019, which was at the low end of the Company’s 2019 guidance. This compares with production cost of sales of $734 per Au eq. oz. for full-year 2018. The full-year decrease was mainly due lower costs at Paracatu, Tasiast and Round Mountain. Production cost of sales per Au oz. on a by-product basis2 was $691 for full-year 2019, compared with $723 for full-year 2018, based on 2019 attributable gold sales of 2,438,678 ounces and attributable silver sales of 4,633,932 ounces.
All-in sustaining cost2: All-in sustaining cost per Au eq. oz. sold was $1,050 in Q4 2019, compared with $961 in Q4 2018. All-in sustaining cost per Au oz. sold on a by-product basis increased to $1,041 in Q4 2019, compared with $955 in Q4 2018.
All-in sustaining cost per Au eq. oz. sold was $983 for full-year 2019, which was within the Company’s 2019 guidance range, compared with $965 for full-year 2018. All-in sustaining cost per Au oz. sold on a by-product basis was $974 for full-year 2019, compared with $959 for full-year 2018.
Revenue: Revenue from metal sales was $996.2 million in the fourth quarter of 2019, compared with $786.5 million during the same period in 2018.
Revenue for full-year 2019 increased to $3,497.3 million, compared with $3,212.6 million for full-year 2018.
Average realized gold price6: The average realized gold price in Q4 2019 increased 21% to $1,485 per ounce, compared with $1,226 per ounce in Q4 2018.
The average realized gold price per ounce increased 10% to $1,392 for full-year 2019, compared with $1,268 per ounce for full-year 2018.
Margins5: Kinross’ attributable margin per Au eq. oz. sold increased 53% to $741 per Au eq. oz. for the fourth quarter of 2019, compared with the Q4 2018 margin of $483 per Au eq. oz. sold.
Full-year 2019 margin per Au eq. oz. sold increased 28% to $686, compared with $534 for full-year 2018.
Operating cash flow: Adjusted operating cash flow2 increased significantly to $387.6 million for the fourth quarter of 2019, compared with $135.8 million for Q4 2018. Adjusted operating cash flow for full-year 2019 increased 37% to $1,201.5 million, compared with $874.2 million for full-year 2018.
Net operating cash flow was $408.6 million for the fourth quarter of 2019, compared with $183.5 million for Q4 2018. Net operating cash flow for full-year 2019 increased 55% to $1,224.9 million, compared with $788.7 million for full-year 2018.
Impairment reversal: At December 31, 2019, Kinross recorded non-cash after-tax impairment reversals totalling $293.6 million, including $161.1 million at Tasiast and $132.5 million at Paracatu. The reversals were entirely related to property, plant and equipment, and were mainly due to an increase in the Company’s long-term gold price estimates.
Earnings/loss: Adjusted net earnings2,3 increased to $156.0 million, or $0.13 per share, for Q4 2019, compared with adjusted net earnings of $13.5 million, or $0.01 per share, for Q4 2018. Full-year 2019 adjusted net earnings more than tripled to $422.9 million, or $0.34 per share, compared with adjusted net earnings of $128.1 million, or $0.10 per share, for full-year 2018, mainly due to higher margins.
Reported net earnings increased to $521.5 million, or $0.41 per share, for Q4 2019, compared with net loss of $27.7 million, or $0.02 per share, in Q4 2018. Full-year 2019 reported net earnings increased to $718.6 million, or $0.57 per share, compared with net loss of $23.6 million, or $0.02 per share, for full-year 2018. The increase was mainly due to higher margins, non-cash impairment reversals, a gain of $72.7 million on the sale of the royalty portfolio, and a decrease in depreciation, depletion and amortization.
Capital expenditures3: Capital expenditures were $298.2 million for Q4 2019, compared with $273.0 million for the same period last year.
Capital expenditures for full-year 2019 were $1,105.2 million, compared with $1,043.4 million for 2018, primarily due to increased spending on projects at Bald Mountain, Fort Knox and Round Mountain, partially offset by lower spending at Tasiast. Capital expenditures were within the Company’s guidance.
Balance sheet
As of December 31, 2019, Kinross had cash and cash equivalents of $575.1 million, compared with $349.0 million at December 31, 2018. The increase was primarily due to net operating cash flow inflows, partially offset by capital expenditures at the Company’s development projects.
The Company has available credit of $1,453.1 million as of year-end 2019, for total liquidity of $2,028.2 million.
Operating results
Mine-by-mine summaries for 2019 fourth-quarter and full-year operating results may be found on pages 11 and 15 of this news release. Highlights include the following:
Americas
Paracatu had an outstanding year in 2019, achieving record annual production of 619,563 Au eq. oz. while lowering costs. The strong performance was mainly due to an asset optimization program started in 2018, which resulted in improved mill efficiencies and an enhanced understanding of the orebody. Full-year production increased approximately 98,000 Au eq. oz., or 19%, compared with 2018, as both throughput and recoveries improved. Full-year cost of sales per ounce sold decreased by approximately 19% compared with 2018 mainly due to operational efficiencies, lower power costs, and favourable foreign exchange movements. During Q4 2019 cost of sales per ounce sold increased versus Q3 2019 mainly due to higher maintenance costs, as the crusher was repaired during the quarter. Quarterly production was slightly lower compared with Q3 2019 mainly due to lower throughput.
Round Mountain performed well for full-year 2019. While there was a slight year-over-year reduction in annual production, Q4 2019 production increased 26% compared with Q3 2019 mainly due to strong performance from the heap leach pads as a result of the Phase W project. Full-year cost of sales per ounce sold was lower versus 2018 primarily due to lower operating waste. Cost of sales per ounce sold in Q4 2019 was largely in line quarter-over-quarter.
At Bald Mountain, full-year production was lower compared with 2018 mainly due to a slower-than-anticipated ramp up at the Vantage Complex project and unfavourable weather conditions at the site early in the year. As expected, production was significantly higher in Q4 2019, increasing by 95% compared with Q3 2019, as more ounces were recovered from the Vantage Complex. Cost of sales per ounce sold for 2019 was higher compared with 2018 mostly due to lower production. Cost of sales per ounce sold decreased during Q4 2019 compared with Q3 2019 primarily due an increase in production.
At Fort Knox, production for 2019 was lower compared with 2018 mainly due to a decrease in mill throughput, while 2019 cost of sales per ounce sold increased compared with the previous year mainly due to lower production and higher maintenance costs. Production and cost of sales per ounce sold for Q4 2019 were largely in line with the previous quarter.
Maricunga delivered higher-than-expected annual production from the rinsing of materials placed on the heap leach pads prior to the suspension of mining activities. Full-year cost of sales per ounce sold were largely in line with 2018. The mine has now transitioned into care and maintenance, with final production occurring in Q4 2019. For tax planning purposes, the sale of residual gold ounces are expected to continue during 2020.
Russia
The Russia region continued its strong and consistent performance in 2019. Combined full-year production at Kupol and Dvoinoye was 8% higher compared with 2018 primarily due to higher grade ore processed from Kupol’s Northeast Extension and Moroshka deposits. Production quarter-over-quarter was lower primarily due to planned lower mill grades at Kupol. Full-year cost of sales per ounce sold was higher compared with 2018 primarily due to an increase in operating waste mined, and was largely in line quarter-over-quarter.
West Africa
Tasiast outperformed in 2019, achieving record production and a record low cost of sales per ounce sold, as the mine continued to benefit from the Phase One expansion and the mill’s strong performance. During 2019, production increased by approximately 140,000 Au eq. oz., or 56%, while cost of sales decreased by $374 per ounce sold, or 38%, compared with 2018. Tasiast finished the year strongly, achieving a record quarterly production of 102,973 Au eq. oz. at a cost of sales of $494 per ounce sold, the lowest in its history. The mine also achieved a record average throughput of 15,000 tonnes per day during the quarter. Higher grades, operational efficiencies and lower operating waste during Q4 2019 also contributed to a decrease in costs compared with the same period in 2018.
At Chirano, full-year production decreased slightly compared with 2018 mainly due to lower grades. Production for Q4 2019 was higher compared with the previous quarter primarily as a result of improved mill throughput. Cost of sales per ounce sold was higher for full-year 2019 mainly due to an increase in operating waste mined associated with the return to open pit mining, and was largely in line quarter-over-quarter.
2020 Outlook
The following section of the news release represents forward-looking information and users are cautioned that actual results may vary. We refer to the risks and assumptions contained in the Cautionary Statement on Forward-Looking Information on page 21 of this news release.
In 2020, Kinross expects to produce 2.4 million Au eq. oz. (+/- 5%) from its operations. In 2021, annual production is expected to be at or above 2019 levels, and is expected to remain at the 2.5 million Au eq. oz. level for 2022.
The slight forecast decrease compared to full-year 2019 production is primarily due to Maricunga transitioning to care and maintenance, and expected lower production at Paracatu following its record year, partially offset by an expected production increase at Tasiast and Fort Knox.
Production is expected to be relatively flat quarter-over-quarter throughout 2020, with a slight increase in the fourth quarter. Tasiast is expected to have higher production in the first half of the year mainly as a result of higher grade ore. Paracatu and Round Mountain are expected to have higher production in the second half of the year mainly due to anticipated higher grades at Paracatu and more ounces recovered at Round Mountain as the benefits of Phase W continue to be realized.
Production cost of sales is expected to be $720 per Au eq. oz. (+/- 5%) for 2020. The Company expects all-in sustaining cost to be $970 (+/- 5%) per ounce sold on both a gold equivalent and by-product basis for 2020, which is lower than full-year 2019 all-in sustaining cost per ounce, mainly due to the expected lower cost of sales per ounce sold and capital expenditures for 2020. All-in sustaining cost per ounce is expected to decrease in 2021 and 2022, compared with 2020 levels.
The table below summarizes the 2020 forecast for production and production cost of sales on a gold equivalent and by-product accounting basis:
2020 Guidance Accounting basis
(+/- 5%)
Gold equivalent basis
2.4 million Production (Au eq. oz.)1,2 $720 Average production cost of sales per Au eq. oz. 1,2 $970 All-in sustaining cost per Au eq. oz. 1,2
By-product basis
2.3 million Gold ounces1 Silver ounces 4.0 million $710 Average production cost of sales per Au oz. 1,2
The following table provides a summary of the 2020 production and production cost of sales forecast by region:
Forecast 2020 production Forecast 2020 Percentage of total Region production cost of sales
forecast production7 (Au eq. oz.) (per Au eq. oz.)2 1.3 million (+/- 5%) 54% $770 (+/- 5%)
Americas
| West Africa (attributable)* | 600,000(+/- 10%) | 25% | $670(+/- 10%) |
| Russia | 500,000(+/- 3%) | 21% | $650(+/- 3%) |
| Total | 2.4 million(+/- 5%) | 100% | $720(+/- 5%) |
*Based on Kinross’ 90% share of Chirano
Material assumptions used to forecast 2020 production cost of sales are as follows:
- a gold price of $1,200 per ounce,
- a silver price of $16 per ounce,
- an oil price of $65 per barrel,
- foreign exchange rates of:
◦3.50 Brazilian reais is to the U.S. dollar, ◦1.30 Canadian dollars to the U.S. dollar, ◦60 Russian roubles to the U.S. dollar, ◦650 Chilean pesos to the U.S. dollar, ◦5.0 Ghanaian cedis to the U.S. dollar, ◦35 Mauritanian ouguiyas to the U.S. dollar, and ◦1.11 U.S. dollars to the Euro.
Taking into account existing currency and oil hedges:
- a 10% change in foreign currency exchange rates would be expected to result in an approximate $14 impact on production cost of sales per ounce8;
- specific to the Russian rouble, a 10% change in this exchange rate would be expected to result in an approximate $15 impact on Russian production cost of sales per ounce;
- specific to the Brazilian real, a 10% change in this exchange rate would be expected to result in an approximate $25 impact on Brazilian production cost of sales per ounce;
- a $10 per barrel change in the price of oil would be expected to result in an approximate $4 impact on production cost of sales per ounce;
- a $100 change in the price of gold would be expected to result in an approximate $4 impact on production cost of sales per ounce as a result of a change in royalties.
Total capital expenditures for 2020 are forecast to be approximately $900 million3 (+/- 5%) and are summarized in the table below.
Capital expenditures for 2021 are expected to be lower by approximately $100 million compared with 2020 capital guidance. Capital expenditures are expected to be further reduced in 2022 compared with 2021 levels.
Forecast 2020 Forecast 2020 Total forecast capital sustaining capital non-sustaining capital
Region (+/- 5%) (million)
(million) (million)
Americas $265 $270 $535
| West Africa | $35 | $280 | $315 |
| Russia | $25 | $20 | $45 |
| Corporate | $5 | $0 | $5 |
| TOTAL | $330 | $570 | $900* |
*Starting in 2020, the Company will exclude capitalized interest from its capital expenditures guidance and intends to report interest as a separate item going forward in order to provide greater transparency.
Sustaining capital includes the following forecast spending estimates:
- Mine development: $110 million (Americas); $15 million (Russia); $10 million (West Africa)
- Mobile equipment: $70 million (Americas); $10 million (Russia); $5 million (West Africa)
- Tailings facilities: $50 million (Americas); $5 million (West Africa)
- Mill facilities: $20 million (Americas); $5 million (West Africa)
- Leach facilities: $15 million (Americas)
Non-sustaining capital includes the following forecast spending estimates:
- Tasiast West Branch stripping: $225 million
- Round Mountain Phase W $125 million (primarily stripping):
- Fort Knox Gilmore: $95 million
- Tasiast 24k project: $55 million
- La Coipa Restart $45 million
- Development projects and other: $25 million
The 2020 forecast for exploration is approximately $90 million, all of which is expected to be expensed. The increase compared to full-year 2019 is primarily due to the addition of Chulbatkan to the Company’s project pipeline.
The 2020 forecast for overhead (general and administrative and business development expenses) is approximately $150 million, approximately $20 million less than 2019 results primarily as a result of Kinross’ comprehensive cost and efficiency review across the organization. 2020 annual overhead guidance is down $55 million compared with 2015 overhead guidance.
Other operating costs expected to be incurred in 2020 are approximately $100 million, which includes approximately $50 million of care and maintenance costs in Chile and at Kettle River-Buckhorn.
Based on assumed gold price of $1,200 and other budget assumptions, tax expense is expected to be a recovery of $25 million and taxes paid is expected to be $110 million. Adjusting the Brazilian real to the exchange rate of 4.03 at the end of 2019, tax expense is expected to be $30 million. Tax expense is expected to increase at 23% of any profit resulting from higher gold prices. For every $100 increase in the realized gold price, taxes paid is expected to increase by $20 million.
Depreciation, depletion and amortization is forecast to be approximately $340 (+/-5%) per Au eq. oz.
Interest paid is forecast to be approximately $110 million, which includes $55 million of capitalized interest.
Tasiast project financing
On December 16, 2019, Kinross signed a $300 million project financing for Tasiast with the IFC (a member of the World Bank Group), Export Development Canada, and with the participation of ING Bank and Société Générale. The loan is non-recourse to Kinross, underscores the attractive foreign investment climate in Mauritania, and was signed following a comprehensive due diligence process with the lenders, including site visits, meetings with the Government of Mauritania, and significant technical and environmental reviews and evaluations. The first funding draw from the loan is expected later in Q1 2020.
Sale of Lundin Gold shares
As part of its portfolio management strategy and to further strengthen its balance sheet, on December 9, 2019 Kinross sold its remaining share position in Lundin Gold Inc. to a syndicate of buyers for gross proceeds of approximately $113 million.
Sale of royalty portfolio to Maverix Metals
On December 19, 2019, Kinross completed the sale of its royalty portfolio to Maverix for total consideration of $73.9 million, which includes $25 million in cash and approximately 11.2 million Maverix common shares, representing a 9.4% ownership interest in Maverix. The transaction enables Kinross to realize the value of its royalty portfolio and retain upside exposure through its meaningful equity position in Maverix.
Environment, Social, Governance highlights (ESG)
Kinross’ performance in its First Priorities – safety, environment and social responsibility – remains among the best in the industry, with a 2019 safety record on par with rates in low-risk non-industrial sectors. In 2019, we made major advancements in the implementation of critical risk management systems that are designed to prevent serious injuries and fatalities. Kinross’ robust approach to environmental management includes addressing climate change impacts and risks. Overall, the Company’s energy-use and greenhouse gas emission intensities are the lowest amongst gold industry peers. In 2019, Kinross published its best practice approach to safe and responsible tailings management, which is based on an overriding commitment to safety and the environment. For its strong sustainability performance, Kinross was recently ranked in the top 10 among metals and mining companies in The Sustainability Yearbook 2020, published by S&P Global in collaboration with RobecoSAM.
Kinross engages directly with local communities around its operations to understand their economic, social and development goals, working together to ensure that meaningful, long-term benefits are realized through job creation, training programs, procurement, tax payments, and targeted community programs. In 2019, Kinross interacted with more than 90,000 stakeholders and registered more than 650,000 beneficiaries from its community projects. Employing a diverse workforce comprised of 98% of people from host countries also enabled Kinross to contribute greater economic value in the areas where it operates.
Studies measuring quality of life metrics have found significant improvements in communities around the Company’s mines at Paracatu and Tasiast. In Chile, 60% of local Colla indigenous people around the La Coipa project now have access to electricity after solar panels were installed in their communities. In Chirano, more than 90% of people in communities around the mine now have access to safer piped water, compared to less than 40% in 2000, as a result of significant improvements in essential infrastructure over the past 15 years.
Kinross’ robust corporate governance standards for its Board of Directors continue to be driven by a focus on delivering value through a mix of skills and experience, diversity, director independence and succession planning. In 2019, Kinross appointed a new Chair of the Board and welcomed two new Board members. Kinross maintained its top tier governance performance by, among other things, achieving its 33% Board gender diversity target and reducing average Board tenure. Kinross was the top ranked gold mining company in The Globe and Mail’s 2019 annual corporate governance survey for the second consecutive year.
In September 2019, the World Gold Council (WGC) launched its Responsible Gold Mining Principles (RGMPs), which are an overarching framework that defines responsible gold mining. Kinross was a participant in the WGC committee that developed the RGMPs, which are largely consistent with the Company’s current approach. Kinross is well-positioned to be in substantial conformance, including obtaining external assurance within the next three years.
Conference call details
In connection with the release, Kinross will hold a conference call and audio webcast on Thursday, February 13, 2020 at 8 a.m. ET to discuss the results, followed by a question-and-answer session. To access the call, please dial:
Canada & US toll-free – (877) 201-0168; Conference ID: 1756358 Outside of Canada & US – +1 (647) 788-4901; Conference ID: 1756358
Replay (available up to 14 days after the call):
Canada & US toll-free – (800) 585-8367; Conference ID: 1756358 Outside of Canada & US – +1 (416) 621-4642; Conference ID: 1756358
You may also access the conference call on a listen-only basis via webcast at our website www.kinross.com. The audio webcast will be archived on our website at www.kinross.com.
This release should be read in conjunction with Kinross’ 2019 year-end Financial Statements and Management’s Discussion and Analysis report at www.kinross.com. Kinross’ 2019 year-end Financial Statements and Management’s Discussion and Analysis have been filed with Canadian securities regulators (available at www.sedar.com) and furnished with the U.S. Securities and Exchange Commission (available at www.sec.gov). Kinross shareholders may obtain a copy of the financial statements free of charge upon request to the Company.
About Kinross Gold Corporation
Kinross is a Canadian-based senior gold mining company with mines and projects in the United States, Brazil, Russia, Mauritania, Chile and Ghana. Kinross maintains listings on the Toronto Stock Exchange (symbol:K) and the New York Stock Exchange (symbol:KGC).
Media Contact
Louie Diaz Senior Director, Corporate Communications phone: 416-369-6469 [email protected]
Investor Relations Contact
Tom Elliott Senior Vice-President, Investor Relations and Corporate Development phone: 416-365-3390 [email protected]
1 Unless otherwise stated, production figures in this news release are based on Kinross’ 90% share of Chirano production.
2 These figures are non-GAAP financial measures and are defined and reconciled on pages 16 to 20 of this news release.
3 2020 capital expenditures guidance excludes capitalized interest of $55 million. The 2019 capital expenditures guidance and capital expenditures results includes capitalized interest of $65 million and $45 million, respectively.
4 Net earnings/loss figures in this release represent “net (loss) earnings from continuing operations attributable to common shareholders.”
5 Attributable margin per equivalent ounce sold is a non-GAAP financial measure defined as “average realized gold price per ounce” less “attributable production cost of sales per gold equivalent ounce sold.”
6 Average realized gold price is a non-GAAP financial measure and is defined as gold metal sales divided by the total number of gold ounces sold.
7 The percentages are calculated based on the mid-point of regional 2020 forecast production.
8 Refers to all of the currencies in the countries where the Company has mining operations, fluctuating simultaneously by 10% in the same direction, either appreciating or depreciating, taking into consideration the impact of hedging and the weighting of each currency within our consolidated cost structure.
Review of operations
Three months ended December 31, Gold equivalent ounces Production cost of Produced Sold Production cost of
sales ($millions) sales/equivalent ounce sold 2019 2018 2019 2018 2019 2018 2019 2018
| Fort Knox | 53,183 | 52,194 | 55,040 | 51,889 $ | 65.9 $ | 49.1 $ | 1,197 $ | 946 |
| Round Mountain | 103,501 | 96,715 | 108,402 | 91,769 | 79.3 | 70.0 | 732 | 763 |
| Bald Mountain | 66,147 | 47,211 | 65,381 | 68,288 | 49.8 | 46.9 | 762 | 687 |
| Kettle River - Buckhorn | - | - | - - | - | - | - | - | |
| Paracatu | 140,224 | 145,634 | 140,430 | 152,395 | 111.1 | 116.6 | 791 | 765 |
| Maricunga | 3,221 | 7,226 | 17,455 | 19,399 | 11.7 | 16.1 | 670 | 830 |
| Americas Total | 366,276 | 348,980 | 386,708 | 383,740 | 317.8 | 298.7 | 822 | 778 |
| Kupol | 132,009 | 123,478 | 135,083 | 124,408 | 83.3 | 68.7 | 617 | 552 |
| Russia Total | 132,009 | 123,478 | 135,083 | 124,408 | 83.3 | 68.7 | 617 | 552 |
| Tasiast | 102,973 | 91,548 | 101,940 | 83,780 | 50.4 | 69.5 | 494 | 830 |
| Chirano (100%) | 48,984 | 51,273 | 47,186 | 49,173 | 49.0 | 39.5 | 1,038 | 803 |
| West Africa Total | 151,957 | 142,821 | 149,126 | 132,953 | 99.4 | 109.0 | 667 | 820 |
| Operations Total | 650,242 | 615,279 | 670,917 | 641,101 | 500.5 | 476.4 | 746 | 743 |
| Less Chirano non-controlling interest (10%) | (4,898) | (5,127) | (4,718) | (4,918) | (4.9) | (4.0) | ||
| Attributable Total | 645,344 | 610,152 | 666,199 | 636,183 $ | 495.6 $ | 472.4 $ | 744 $ | 743 |
Years ended December 31, Gold equivalent ounces Production cost of Produced Sold Production cost of
sales ($millions) sales/equivalent ounce sold
| 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |
| Fort Knox | 200,263 | 255,569 | 200,323 | 256,037 $ | 213.7 $ | 214.4 $ | 1,067 $ | 837 |
| Round Mountain | 361,664 | 385,601 | 360,739 | 381,478 | 250.6 | 277.6 | 695 | 728 |
| Bald Mountain | 187,961 | 284,646 | 177,802 | 318,091 | 136.6 | 174.1 | 768 | 547 |
| Kettle River - Buckhorn | - | - | - 927 | - | - | - | - | |
| Paracatu | 619,563 | 521,575 | 619,009 | 523,417 | 412.3 | 430.5 | 666 | 822 |
| Maricunga | 38,601 | 60,066 | 43,756 | 89,959 | 31.5 | 65.7 | 720 | 730 |
| Americas Total | 1,408,052 | 1,507,457 | 1,401,6291,569,909 1,044.71,162.3 | 745 | 740 | |||
| Kupol | 527,343 | 489,947 | 526,458 | 494,835 | 314.1 | 288.2 | 597 | 582 |
| Russia Total | 527,343 | 489,947 | 526,458 | 494,835 | 314.1 | 288.2 | 597 | 582 |
| Tasiast | 391,097 | 250,965 | 382,803 | 243,241 | 230.4 | 237.3 | 602 | 976 |
| Chirano (100%) | 201,296 | 226,699 | 201,868 | 224,927 | 189.7 | 172.7 | 940 | 768 |
| West Africa Total | 592,393 | 477,664 | 584,671 | 468,168 | 420.1 | 410.0 | 719 | 876 |
| Operations Total | 2,527,788 | 2,475,068 | 2,512,7582,532,912 1,778.91,860.5 | 708 | 735 | |||
| Less Chirano non-controlling interest (10%) | (20,129) | (22,670) | (20,186) | (22,493) | (19.0) | (17.3) | ||
| Attributable Total | 2,507,659 | 2,452,398 | 2,492,5722,510,419 $ 1,759.9 $ 1,843.2 $ | 706 $ | 734 |
Consolidated balance sheets
(expressed in millions of United States dollars, except share amounts)
As at December 31, December 31, 2019 2018
Assets
Current assets
| Cash and cash equivalents | $ 575.1 $ | 349.0 |
| Restricted cash | 15.2 | 12.7 |
| Accounts receivable and other assets | 130.2 | 101.4 |
| Current income tax recoverable | 43.2 | 79.0 |
| Inventories | 1,053.8 | 1,052.0 |
| Unrealized fair value of derivative assets | 7.2 | 3.8 |
1,824.7 1,597.9 Non-current assets
| Property, plant and equipment | 6,340.0 | 5,519.1 |
| Goodwill | 158.8 | 162.7 |
| Long-term investments | 126.2 | 155.9 |
| Investment in joint venture | 18.4 | 18.3 |
| Unrealized fair value of derivative assets | 4.5 | 0.8 |
| Other long-term assets | 568.2 | 564.1 |
| Deferred tax assets | 35.2 | 45.0 |
| Total assets | $ 9,076.0 $ | 8,063.8 |
Liabilities
Current liabilities
| Accounts payable and accrued liabilities | $ 469.3 $ | 465.9 |
| Current income tax payable | 68.0 | 21.7 |
| Current portion of provisions | 57.9 | 72.6 |
| Other current liabilities | 20.3 | 52.2 |
615.5 612.4 Non-current liabilities Long-term debt and credit facilities 1,837.4 1,735.0 Provisions 838.6 816.4 Long-term lease liabilities -
38.9
| Unrealized fair value of derivative liabilities | 0.8 | 9.6 |
| Other long-term liabilities | 107.7 | 97.9 |
| Deferred tax liabilities | 304.5 | 265.2 |
| Total liabilities | 3,743.4 | 3,536.5 |
Equity
Common shareholders' equity
| Common share capital | $ 14,926.2 $ | 14,913.4 |
| Contributed surplus | 242.1 | 239.8 |
| Accumulated deficit | (9,829.4) | (10,548.0) |
| Accumulated other comprehensive income (loss) | (20.4) | (98.5) |
| Total common shareholders' equity | 5,318.5 | 4,506.7 |
Non-controlling interest 20.6
14.1
Total equity 5,332.6 4,527.3 Total liabilities and equity $ 9,076.0 $ 8,063.8
Common shares
Authorized Unlimited Unlimited Issued and outstanding 1,253,765,724 1,250,228,821
Consolidated statements of operations
(expressed in millions of United States dollars, except share and per share amounts)
Years ended
December 31, December 31, 2019 2018
Revenue
Metal sales $ 3,497.3 $ 3,212.6
Cost of sales
| Production cost of sales | 1,778.9 | 1,860.5 |
| Depreciation, depletion and amortization | 731.3 | 772.4 |
| Reversals of impairment charges | (361.8) | - |
| Total cost of sales | 2,148.4 | 2,632.9 |
| Gross profit | 1,348.9 | 579.7 |
| Other operating expense | 108.5 | 137.0 |
| Exploration and business development | 113.5 | 109.2 |
| General and administrative | 135.8 | 133.0 |
| Operating earnings | 991.1 | 200.5 |
| Other income - net | 72.6 | 3.2 |
| Equity in earnings (losses) of joint ventures - net | 0.1 | (0.3) |
| Finance income | 7.9 | 11.0 |
| Finance expense | (107.9) | (101.2) |
| Earnings before tax | 963.8 | 113.2 |
| Income tax expense - net | (246.7) | (138.8) |
| Net earnings (loss) | $ 717.1 $ | (25.6) |
Net earnings (loss) attributable to:
Non-controlling interest $ (1.5) $ (2.0) Common shareholders $ 718.6 $ (23.6)
Earnings (loss) per share attributable to common shareholders
Basic $ 0.57 $ (0.02) Diluted $ 0.57 $ (0.02)
Weighted average number of common shares outstanding (millions)
Basic 1,252.3 1,249.5 Diluted 1,262.3 1,249.5
Consolidated statements of cash flows
(expressed in millions of United States dollars)
Years ended
December 31, December 31, 2019 2018
Net inflow (outflow) of cash related to the following activities:
Operating:
Net earnings (loss) $ 717.1 $ (25.6) Adjustments to reconcile net earnings (loss) to net cash provided from operating activities:
| Depreciation, depletion and amortization | 731.3 | 772.4 |
| Gain on disposition of associate and other interests - net | - | (2.1) |
| Reversals of impairment charges | (361.8) | - |
| Equity in (earnings) losses of joint ventures - net | (0.1) | 0.3 |
| Share-based compensation expense | 14.3 | 14.6 |
| Finance expense | 107.9 | 101.2 |
| Deferred tax expense | 41.1 | 8.9 |
| Foreign exchange (gains) losses and other | (53.1) | 12.5 |
| Reclamation recovery | (11.9) | (8.0) |
Changes in operating assets and liabilities:
| Accounts receivable and other assets | (64.5) | (22.7) |
| Inventories | 53.8 | (5.7) |
| Accounts payable and accrued liabilities | 165.9 | 69.8 |
| Cash flow provided from operating activities | 1,340.0 | 915.6 |
| Income taxes paid | (115.1) | (126.9) |
| Net cash flow provided from operating activities | 1,224.9 | 788.7 |
Investing:
| Additions to property, plant and equipment | (1,105.2) | (1,043.4) |
| Acquisitions | (30.0) | (304.2) |
| Net proceeds from the sale of (additions to) long-term investments and other assets | 71.6 | (52.9) |
| Net proceeds from the sale of property, plant and equipment | 31.9 | 6.4 |
| Increase in restricted cash | (2.5) | (0.6) |
| Interest received and other - net | 7.6 | 7.7 |
| Net cash flow used in investing activities | (1,026.6) | (1,387.0) |
Financing:
| Proceeds from drawdown of debt | 300.0 | 80.0 |
| Repayment of debt | (200.0) | (80.0) |
| Payment of lease liabilities | (14.3) | - |
| Interest paid | (55.6) | (57.9) |
| Dividends paid to non-controlling interest | (5.0) | (13.0) |
| Other - net | - | (1.7) |
| Net cash flow provided from (used in) financing activities | 25.1 | (72.6) |
| Effect of exchange rate changes on cash and cash equivalents | 2.7 | (5.9) |
| Increase (decrease) in cash and cash equivalents | 226.1 | (676.8) |
| Cash and cash equivalents, beginning of period | 349.0 | 1,025.8 |
| Cash and cash equivalents, end of period | $ 575.1 $ | 349.0 |
| Operating Summary | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Mine | Period | Ownership | Tonnes Ore Mined (1) | Ore Processed (Milled) (1) | Ore Processed (Heap Leach) (1) | Grade (Mill) | Grade (Heap Leach) | Recovery (2) | Gold Eq Production (5) | Gold Eq Sales (5) | Production cost of sales | Production cost of sales/oz | Cap Ex (7) | DD&A | |
| (%) | ('000 tonnes) | ('000 tonnes) | ('000 tonnes) | (g/t) | (g/t) | (%) | (ounces) | (ounces) | ($ millions) | ($/ounce) | ($ millions) | ($ millions) | |||
| Fort Knox | Q4 2019 | 100 | 7,648 | 2,615 | 5,498 | 0.43 | 0.20 | 81% | 53,183 | 55,040 | $ 65.9 | $ 1,197 | $ 37.1 | $ 25.0 | |
| Q3 2019 Q2 2019 Q1 2019 Q4 2018 | 100 100 100 100 | 7,094 4,829 5,796 5,645 | 2,097 1,811 1,556 2,856 | 5,250 3,440 4,295 2,927 | 0.52 0.59 0.72 0.44 | 0.21 0.20 0.22 0.19 | 83% 81% 84% 83% | 54,027 55,440 37,613 52,194 | 51,606 55,740 37,937 51,889 | 58.3 50.7 38.8 49.1 | $ 1,130 $ 910 $ 1,023 $ 946 | 40.9 35.0 28.9 30.5 | 24.7 22.6 18.0 21.9 | ||
| Round Mountain | Q4 2019 | 100 | 7,408 | 882 | 7,140 | 1.00 | 0.36 | 82% | 103,501 | 108,402 | $ 79.3 | $ 732 | $ 62.7 | $ 12.6 | |
| Q3 2019 Q2 2019 Q1 2019 Q4 2018 | 100 100 100 100 | 7,128 4,074 3,904 4,386 | 1,004 909 845 987 | 7,557 3,910 3,557 4,172 | 1.05 1.17 1.31 1.38 | 0.32 0.33 0.38 0.43 | 85% 86% 86% 83% | 82,195 90,833 85,135 96,715 | 81,617 87,106 83,614 91,769 | 57.5 57.8 56.0 70.0 | $ 705 $ 664 $ 670 $ 763 | 48.3 58.9 64.2 68.0 | 9.1 10.2 7.9 9.6 | ||
| Q4 2019 | 100 | 2,928 | - | 3,007 | - | 0.48 | nm | 66,147 | 65,381 | $ 49.8 | $ 762 | $ 54.6 | $ 36.3 |
Q3 100 6,494 - 6,494 - 0.41 nm 33,995 37,644 30.6 $ 813 44.0 14.8 2019
Bald
Q2 Americas Mountain 100 3,725 - 4,138 - 0.36 nm 40,564 31,547 27.0 $ 856 57.5 12.2
(8) 2019 Q1 100 2,659 - 2,836 - 0.48 nm 47,255 43,230 29.2 $ 675 64.6 16.2 2019 Q4 100 4,929 - 5,406 - 0.47 nm 47,211 68,288 46.9 $ 687 40.4 22.4 2018
| Paracatu | Q4 2019 | 100 | 12,393 | 14,168 | - | 0.38 | - | 76% | 140,224 | 140,430 | $ 111.1 | $ 791 | $ 21.4 | $ 42.8 | |
| Q3 2019 Q2 2019 Q1 2019 Q4 2018 | 100 100 100 100 | 12,442 12,307 12,393 11,680 | 14,731 14,439 14,283 13,479 | - - - - | 0.38 0.48 0.38 0.44 | - - - - | 78% 80% 80% 81% | 146,396 186,167 146,776 145,634 | 145,662 186,520 146,397 152,395 | 99.5 106.8 94.9 116.6 | $ 683 $ 573 $ 648 $ 765 | 39.0 34.6 16.5 33.3 | 39.5 45.2 35.9 41.7 | ||
| Maricunga (8) | Q4 2019 | 100 | - | - | - | - | - | nm | 3,221 | 17,455 | $ 11.7 | $ 670 | $ - | $ 0.4 | |
| Q3 2019 Q2 2019 Q1 2019 Q4 2018 | 100 100 100 100 | - - - - | - - - - | - - - - | - - - - | - - - - | nm nm nm nm | 18,016 6,648 10,716 7,226 | 9,203 9,474 7,624 19,399 | 7.0 8.0 4.8 16.1 | $ 761 $ 844 $ 630 $ 830 | - - - - | 0.4 0.5 0.4 0.6 | ||
| Russia | Kupol (3)(4) (6) | Q4 2019 | 100 | 468 | 435 | - | 9.14 | - | 95% | 132,009 | 135,083 | $ 83.3 | $ 617 | $ 15.8 | $ 34.8 |
| Q3 2019 Q2 2019 Q1 2019 Q4 2018 | 100 100 100 100 | 338 431 362 400 | 431 432 425 425 | - - - - | 9.65 9.23 9.62 8.77 | - - - - | 95% 94% 93% 95% | 137,562 127,684 130,088 123,478 | 136,088 124,873 130,414 124,408 | 82.6 70.2 78.0 68.7 | $ 607 $ 562 $ 598 $ 552 | 7.8 8.2 8.2 19.4 | 32.2 30.7 27.4 30.1 | ||
| West Africa | Tasiast | Q4 2019 | 100 | 1,129 | 1,379 | - | 2.39 | - | 96% | 102,973 | 101,940 | $ 50.4 | $ 494 | $ 86.3 | $ 35.0 |
| Q3 2019 Q2 2019 Q1 2019 Q4 2018 | 100 100 100 100 | 1,010 819 1,962 3,267 | 1,297 1,281 1,269 1,301 | - - - - | 2.37 2.19 2.37 2.19 | - - - - | 97% 97% 97% 94% | 93,865 92,901 101,358 91,548 | 86,357 94,748 99,758 83,780 | 55.1 58.9 66.0 69.5 | $ 638 $ 622 $ 662 $ 830 | 74.3 75.2 75.7 71.1 | 32.0 32.2 31.0 28.5 | ||
| Chirano - 100% | Q4 2019 | 90 | 737 | 844 | - | 2.00 | - | 91% | 48,984 | 47,186 | $ 49.0 | $ 1,038 | $ 8.0 | $ 21.4 | |
| Q3 2019 Q2 2019 Q1 2019 Q4 2018 | 90 90 90 90 | 714 619 499 527 | 801 904 908 840 | - - - - | 2.02 1.95 1.97 2.08 | - - - - | 92% 92% 92% 92% | 46,641 53,349 52,322 51,273 | 49,458 51,141 54,083 49,173 | 50.0 46.7 44.0 39.5 | $ 1,011 $ 913 $ 814 $ 803 | 4.8 2.7 3.3 5.7 | 22.0 23.8 25.4 28.3 | ||
| Chirano - 90% | Q4 2019 | 90 | 737 | 844 | - | 2.00 | - | 91% | 44,086 | 42,468 | $ 44.1 | $ 1,038 | $ 7.2 | $ 19.3 | |
| Q3 2019 Q2 2019 Q1 2019 Q4 2018 | 90 90 90 90 | 714 619 499 527 | 801 904 908 840 | - - - - | 2.02 1.95 1.97 2.08 | - - - - | 92% 92% 92% 92% | 41,977 48,014 47,090 46,146 | 44,512 46,027 48,675 44,255 | 45.0 42.0 39.6 35.5 | $ 1,011 $ 913 $ 814 $ 802 | 4.3 2.4 3.0 5.1 | 19.8 21.4 22.9 25.5 |
(1) Tonnes of ore mined and processed represent 100% Kinross for all periods presented.
(2) Due to the nature of heap leach operations, recovery rates at Maricunga and Bald Mountain cannot be accurately measured on a quarterly basis. Recovery rates at Fort Knox, Round Mountain and Tasiast represent mill recovery only.
(3) Kupol includes the Kupol and Dvoinoye mines.
(4) Kupol silver grade and recovery were as follows: Q4 2019: 65.63 g/t, 84.8%; Q3 2019: 67.44 g/t, 87.8%; Q2 2019: 75.29 g/t, 84.9%; Q1 2019: 69.61 g/t, 82.1%; Q4 2018: 73.35 g/t, 83.5%.
(5) Gold equivalent ounces include silver ounces produced and sold converted to a gold equivalent based on the ratio of the average spot market prices for the commodities for each period. The ratios for the quarters presented are as follows: Q4 2019: 85.59:1; Q3 2019: 86.73:1; Q2 2019: 87.98:1; Q1 2019: 83.74:1;
Q4 2018: 84.42:1.
(6) Dvoinoye ore processed and grade were as follows: Q4 2019: 100,685, 9.89 g/t; Q3 2019: 113,497, 9.82 g/t; Q2 2019: 113,872, 9.24 g/t; Q1 2019: 135,529, 7.46 g/t; Q4 2018: 104,495, 9.82 g/t.
(7) Capital expenditures are presented on a cash basis, consistent with the statement of cash flows.
(8) "nm" means not meaningful.
Reconciliation of non-GAAP financial measures
The Company has included certain non-GAAP financial measures in this document. These measures are not defined under IFRS and should not be considered in isolation. The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. The inclusion of these measures is meant to provide additional information and should not be used as a substitute for performance measures prepared in accordance with IFRS. These measures are not necessarily standard and therefore may not be comparable to other issuers.
Adjusted net earnings attributable to common shareholders and adjusted net earnings per share are non-GAAP measures which determine the performance of the Company, excluding certain impacts which the Company believes are not reflective of the Company’s underlying performance for the reporting period, such as the impact of foreign exchange gains and losses, reassessment of prior year taxes and/or taxes otherwise not related to the current period, impairment charges (reversals), gains and losses and other one-time costs related to acquisitions, dispositions and other transactions, and non-hedge derivative gains and losses. Although some of the items are recurring, the Company believes that they are not reflective of the underlying operating performance of its current business and are not necessarily indicative of future operating results. Management believes that these measures, which are used internally to assess performance and in planning and forecasting future operating results, provide investors with the ability to better evaluate underlying performance, particularly since the excluded items are typically not included in public guidance. However, adjusted net earnings and adjusted net earnings per share measures are not necessarily indicative of net earnings and earnings per share measures as determined under IFRS.
The following table provides a reconciliation of net earnings (loss) to adjusted net earnings for the periods presented:
Adjusted Net Earnings (Loss)
(in millions, except per share amounts) Three months ended Years ended
December 31, December 31,
2019 2018 2019 2018
Net earnings (loss) attributable to common shareholders - as reported $ 521.5 $ (27.7) $ 718.6 $ (23.6) Adjusting items:
Foreign exchange (gains) losses 6.0 5.5 (0.6) 4.3 Foreign exchange (gains) losses on translation of tax basis and foreign exchange
| on deferred income taxes within income tax expense | (12.3) | 8.3 | 1.6 | 62.0 |
| Gain on disposition of royalty portfolio | (72.7) | - | (72.7) | - |
| Reversals of impairment charges(a) | (361.8) | - | (361.8) | - |
| Taxes in respect of prior periods | (0.1) | 36.3 | 33.3 | 59.9 |
| Reclamation and remediation recoveries | (11.9) | (8.0) | (11.9) | (3.5) |
| Tasiast Phase One commissioning costs | - | - | - | 6.4 |
| Fort Knox pit wall slide related costs | 8.0 | 16.5 | 25.1 | 37.9 |
| Restructuring costs | - | - | 12.2 | - |
| U.S. Tax Reform impact | - | (8.7) | - | (8.7) |
| Other | 2.7 | (0.1) | 7.6 | 5.1 |
| Tax effect of the above adjustments(a) | 76.6 | (8.6) | 71.5 | ||
| (365.5) | 41.2 | (295.7) | 151.7 | ||
| Adjusted net earnings attributable to common shareholders | $ | 156.0 $ | 13.5 $ | 422.9 $ | 128.1 |
| Weighted average number of common shares outstanding - Basic | 1,253.5 | 1,250.2 | 1,252.3 | 1,249.5 | |
| $ | 0.13 $ | 0.34 $ | 0.10 |
(11.7)
Adjusted net earnings per share 0.01 $
a) During the year ended December 31, 2019, the Company recognized non-cash reversals of impairment charges of $361.8 million related to property, plant and equipment at Paracatu and Tasiast. The tax impact on the impairment reversal at Paracatu was an expense of $68.2 million. There was no tax impact on the impairment reversal at Tasiast.
The Company makes reference to a non-GAAP measure for adjusted operating cash flow. Adjusted operating cash flow is defined as cash flow from operations excluding certain impacts which the Company believes are not reflective of the Company’s regular operating cash flow, and excluding changes in working capital. Working capital can be volatile due to numerous factors, including the timing of tax payments, and in the case of Kupol, a build-up of inventory due to transportation logistics. The Company uses adjusted operating cash flow internally as a measure of the underlying operating cash flow performance and future operating cash flow-generating capability of the Company. However, the adjusted operating cash flow measure is not necessarily indicative of net cash flow from operations as determined under IFRS.
The following table provides a reconciliation of adjusted operating cash flow for the periods presented:
Adjusted Operating Cash Flow
(in millions) Three months ended Years ended
December 31, December 31,
2019 2018 2019 2018
Net cash flow provided from operating activities - as reported $ 408.6 $ 183.5 $ 1,224.9 $ 788.7
Adjusting items:
Tax payments in respect of prior years - - 16.7 - Working capital changes:
Accounts receivable and other assets (37.4) (95.4) 64.5 22.7 Inventories (44.3) 19.8 (53.8) 5.7 Accounts payable and other liabilities, including income taxes 60.7 27.9 (50.8) 57.1 paid (21.0) (47.7) (23.4) 85.5 Adjusted operating cash flow $ 387.6 $ 135.8 $ 1,201.5 $ 874.2
Consolidated production cost of sales per gold equivalent ounce sold is a non-GAAP measure and is defined as production cost of sales as per the consolidated financial statements divided by the total number of gold equivalent ounces sold. This measure converts the Company’s non-gold production into gold equivalent ounces and credits it to total production.
Attributable production cost of sales per gold equivalent ounce sold is a non-GAAP measure and is defined as attributable production cost of sales divided by the attributable number of gold equivalent ounces sold. This measure converts the Company’s non-gold production into gold equivalent ounces and credits it to total production.
Management uses these measures to monitor and evaluate the performance of its operating properties. The following table presents a reconciliation of consolidated and attributable production cost of sales per equivalent ounce sold for the periods presented:
Consolidated and Attributable Production Cost of Sales Per Equivalent Ounce Sold
| (in millions, except ounces and production cost of sales per | Three months ended | Years ended | ||
|---|---|---|---|---|
| equivalent ounce) | December 31, | December 31, | ||
| 2019 | 2018 | 2019 2018 | ||
| Production cost of sales - as reported | $ | 500.5 $ | 476.4 $ | 1,778.9 $ 1,860.5 |
| (4.9) | (4.0) | (19.0) |
Less: portion attributable to Chirano non-controlling interest(1) (17.3) Attributable(2) production cost of sales $ 495.6 $ 472.4 $ 1,759.9 $ 1,843.2
| Gold equivalent ounces sold | 670,917 | 641,101 | 2,512,758 | 2,532,912 |
| Less: portion attributable to Chirano non-controlling interest(10) | (4,718) | (4,918) | (20,186) | (22,493) |
| 666,199 | 636,183 | 2,492,572 | 2,510,419 |
Attributable(2) gold equivalent ounces sold Consolidated production cost of sales per equivalent ounce sold $ 746 $ 743 $ 708 $ 735 Attributable(2) production cost of sales per equivalent ounce sold $ 744 $ 743 $ 706 $ 734
Attributable production cost of sales per ounce sold on a by-product basis is a non-GAAP measure which calculates the Company’s non-gold production as a credit against its per ounce production costs, rather than converting its non-gold production into gold equivalent ounces and crediting it to total production, as is the case in co-product accounting. Management believes that this measure provides investors with the ability to better evaluate Kinross’ production cost of sales per ounce on a comparable basis with other major gold producers who routinely calculate their cost of sales per ounce using by-product accounting rather than co-product accounting.
The following table provides a reconciliation of attributable production cost of sales per ounce sold on a by-product basis for the periods presented:
Attributable Production Cost of Sales Per Ounce Sold on a By-Product Basis
(in millions, except ounces and production cost of sales per
Three months ended Years ended
ounce)
December 31, December 31,
| 2019 | 2018 | 2019 | 2018 | |
| Production cost of sales - as reported | $ 500.5 $ | 476.4 $ | 1,778.9 $ | 1,860.5 |
| Less: portion attributable to Chirano non-controlling interest(1) | (4.9) | (4.0) | (19.0) | (17.3) |
| Less: attributable(2)silver revenue(3) | (20.4) | (15.2) | (75.1) | (66.4) |
Attributable(2) production cost of sales net of silver by-product $ 475.2 $ 457.2 $ 1,684.8 $ 1,776.8 revenue
Gold ounces sold 657,179 628,842 2,458,839 2,480,529 Less: portion attributable to Chirano non-controlling interest(10)
(4,717) (4,912) (20,161) (22,460) Attributable(2) gold ounces sold 652,462 623,930 2,438,678 2,458,069 Attributable(2) production cost of sales per ounce sold on a by- $ 728 $ 733 $ 691 $ 723 product basis
In November 2018, the World Gold Council (“WGC”) published updates to its guidelines for reporting all-in sustaining costs and all-in costs to address how the costs associated with leases, after a company’s adoption of IFRS 16, should be treated. The WGC is a market development organization for the gold industry and is an association whose membership comprises leading gold mining companies including Kinross. Although the WGC is not a mining industry regulatory organization, it worked closely with its member companies to develop these non-GAAP measures. Adoption of the all-in sustaining cost and all-in cost metrics is voluntary and not necessarily standard, and therefore, these measures presented by the Company may not be comparable to similar measures presented by other issuers. The Company believes that the all-in sustaining cost and all-in cost measures complement existing measures reported by Kinross.
All-in sustaining cost includes both operating and capital costs required to sustain gold production on an ongoing basis. The value of silver sold is deducted from the total production cost of sales as it is considered residual production. Sustaining operating costs represent expenditures incurred at current operations that are considered necessary to maintain current production. Sustaining capital represents capital expenditures at existing operations comprising mine development costs and ongoing replacement of mine equipment and other capital facilities, and does not include capital expenditures for major growth projects or enhancement capital for significant infrastructure improvements at existing operations.
All-in cost is comprised of all-in sustaining cost as well as operating expenditures incurred at locations with no current operation, or costs related to other