FacebookTwitterLinkedin
02.15.12 - Kinross reports 2011 fourth quarter and year-end results

Achieves record production, revenue, margins, cash flow in 2011

Dividend increased by 33%

Toronto, Ontario - February 15, 2012 - Kinross Gold Corporation (TSX: K, NYSE: KGC) today announced its results for the fourth quarter and year ended December 31, 2011.

(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 14 of this news release. All dollar amounts in this news release are expressed in U.S. dollars, unless otherwise noted.)

Financial and operating highlights:

  • Production1: 643,288 gold equivalent ounces, a 5% decrease over Q4 2010. Full-year production was 2,610,373 gold equivalent ounces, in line with guidance and a 12% increase over full-year 2010.
  • Revenue: $949.3 million, a 3% increase over Q4 2010. Full-year revenue was a record $3,943.3 million, a 31% increase over full-year 2010.
  • Production cost of sales2: $636 per gold equivalent ounce, versus $549 per gold equivalent ounce in Q4 2010. Full- year production cost of sales was in line with guidance at $596 per gold equivalent ounce, versus $506 per gold equivalent ounce for full-year 2010.
  • Attributable margin3: $965 per ounce sold, a 23% increase over Q4 2010. Full-year attributable margin was $906 per ounce sold, a 32% increase over full-year 2010.
  • Adjusted operating cash flow4: $367.3 million, or $0.32 per share, versus $357.0 million, or $0.32 per share, in Q4 2010. Full-year adjusted operating cash flow was $1,598.7 million, or $1.41 per share, versus $1,109.6 million, or $1.35 per share, for full-year 2010.
  • Adjusted net earnings4,5: $196.6 million, a 24% increase over Q4 2010. Adjusted net earnings per share were $0.17, compared with $0.14 in Q4 2010. Full-year adjusted net earnings were $871.8 million, a 79% increase over the previous year. Full-year adjusted net earnings per share were $0.77, versus $0.59 per share for full-year 2010.
  • Reported net earnings/loss5: A reported net loss of $2,783.7 million, or $2.45 per share (which includes the charge noted below), versus a loss of $72.9 million, or $0.06 per share, for Q4 2010. Full-year reported net loss was $2,073.6 million, or $1.83 per share, versus earnings of $759.7 million, or $0.92 per share, for 2010.
  • Non-cash goodwill impairment charge: The reported net loss for 2011 included a non-cash goodwill impairment charge of $2,937.6 million. The Tasiast project represents $2,490.1 million or 85% of this charge.
  • Reserves and resources: Proven and probable mineral reserves at year-end 2011 were 62.6 million ounces of gold. Measured and indicated (M&I) mineral resources at year-end were 25.4 million ounces of gold, an increase of 7.7 million ounces, or 44%. M&I mineral resources at Tasiast increased compared with the update provided on August 10, 2011, as 2.1 million gold ounces were converted from inferred mineral resources. Overall M&I mineral resources at Tasiast increased by 9.0 million gold ounces compared with year-end 2010.

Growth projects:

  • Progress continues on the Company's capital and project optimization process. Tasiast and Dvoinoye remain key development priorities, while the Company has established new parameters for project spending and timelines.

Dividend:

  • As a result of strong operational performance and cash flow the Company is increasing its semi-annual dividend from $0.06 to $0.08 per common share, an increase of 33%.

CEO Commentary

Tye Burt, President and CEO, made the following comments in relation to fourth quarter and year-end 2011 results:

"Our ten operating mines are generating strong cash flow. Tasiast remains our first development priority in a measured and prudent plan for capital allocation and growth designed for long-term value and financial strength.

"In 2011, we set new records for production, revenue, and margins, and generated $1.6 billion in adjusted operating cash flow. At year-end, our liquidity position was approximately $2.9 billion, including cash and undrawn bank lines. As a result of this strong performance, and our expectation of continued robust cash flow from operations, we are increasing our semi-annual dividend by 33%. Our recorded net loss was the result of a non-cash goodwill impairment charge of $2.9 billion.

"We are making good progress on our capital and project optimization process. Recognizing today's challenging cost environment, we are taking a conservative approach to project development and capital allocation, and are prioritizing our projects based on investment returns and long-term value creation, not just top-line production growth. Tasiast's expanding current production and long-term potential confirms its status as our first growth priority, as we continue to advance Lobo-Marte and FDN while extending the timelines for both projects."

Please click here to download the PDF of the full release.

Please click here to download the 2011 annual report.

(1) Unless otherwise stated, production figures in this release are based on Kinross' share of Kupol (75% up to April 27, 2011, 100% thereafter) and 90% of Chirano production.

(2)  "Production cost of sales per gold equivalent ounce" is a non-GAAP measure defined as production cost of sales per the financial statements divided by the attributable number of gold equivalent ounces sold, both reduced for Kupol sales attributable to a third-party shareholder (75% Kinross ownership up to April 27, 2011) and Chirano sales to a 10% minority interest holder. Production cost of sales is equivalent to total cost of sales (per the financial statements), less depreciation, depletion, amortization, reclamation expense, and impairment charges, and is generally consistent with cost of sales as reported under Canadian GAAP prior to the adoption of IFRS.

(3) "Attributable margin per ounce sold" is a non-GAAP measure and defined as "average realized gold price per ounce" less "attributable production cost of sales per gold equivalent ounce sold".

(4)  Reconciliation of non-GAAP measures is located on page 16 of this news release.

(5) "Net earnings" figures in this release represent "net earnings attributed to common shareholders."

Cautionary Statement on Forward-Looking Information
All statements, other than statements of historical fact, contained or incorporated by reference in this news release, but not limited to, any information as to the future financial or operating performance of Kinross, constitute ‘‘forward-looking information’’ or ‘‘forward-looking statements’’ within the meaning of certain securities laws, including the provisions of the Securities Act (Ontario) and the provisions for ‘‘safe harbour’’ under the United States Private Securities Litigation Reform Act of 1995 and are based on expectations, estimates and projections as of the date of this news release. Forward-looking statements include, without limitation, statements with respect to: possible events, the future price of gold and silver, the estimation of mineral reserves and mineral resources, the realization of mineral reserve and mineral resource estimates, the timing and amount of estimated future production, costs of production, capital expenditures, costs and timing of the development of projects and new deposits, success of exploration, development and mining activities, permitting timelines, currency fluctuations, requirements for additional capital, government regulation of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims and limitations on insurance coverage. The words “aim”, ‘‘plans’’, ‘‘expects’’ or ‘‘does not expect’’, ‘‘is expected’’, ‘‘budget’’, ‘‘scheduled’’, “timeline”, “envision”, ‘‘estimates’’, ‘‘forecasts”, “goal”, “guidance”, “objective”, “potential”, “prospects”, “seek”, “strategy”, “targets”, “models”, ‘‘intends’’, ‘‘anticipates’’, or ‘‘does not anticipate’’, or ‘‘believes’’, or variations of or similar 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, models and assumptions of Kinross referenced, contained or incorporated by reference in this news release, which may prove to be incorrect, include, but are not limited to, the various assumptions set forth herein and in our most recently filed Annual Information Form and our most recently filed Management’s Discussion and Analysis as well as: (1) there being no significant disruptions affecting the operations of the Company or any entity in which it now or hereafter directly or indirectly holds an investment, whether due to labour disruptions, supply disruptions, power disruptions, damage to equipment or otherwise; (2) permitting, development, operations, expansion and acquisitions at Paracatu (including, without limitation, land acquisitions and permitting for the construction and operation of the new tailings facility) being consistent with our current expectations; (3) development of and production from the Phase 7 pit expansion and 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, and its continuing ownership by the Company, being consistent with Kinross’ current expectations; (5) political and legal developments in any jurisdiction in which the Company, or any entity in which it now or hereafter directly or indirectly holds an investment, operates being consistent with its current expectations including, without limitation, the implementation of Ecuador’s new mining and investment laws and related regulations and policies, and negotiation of an exploitation contract and an investment protection contract with the government, being consistent with Kinross’ current expectations; (6) permitting, construction, development and production at Cerro Casale being consistent with 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, Mauritanian ouguiya, Ghanaian cedi 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; (14) the development of the Dvoinoye and Vodorazdelnaya deposits being consistent with Kinross’ expectations; (15) the viability of the Tasiast and Chirano mines, and the permitting, development and expansion of the Tasiast and Chirano mines on a basis consistent with Kinross’ current expectation, including but not limited to the terms and conditions of the legal and fiscal stability agreements for these operations being interpreted and applied in a manner consistent with their intent and Kinross’ expectations; and (16) access to capital markets, including but not limited to securing partial project financing for the Dvoinoye, Fruta del Norte and the Tasiast expansion projects, being consistent with the Company’s current expectations. Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements. Such factors include, but are not limited to: fluctuations in the currency markets; fluctuations in the spot and forward price of gold or certain other commodities (such as diesel fuel and electricity); changes in interest rates or gold or silver lease rates that could impact the mark-to-market value of outstanding derivative instruments and ongoing payments/receipts under any interest rate swaps and variable rate debt obligations; risks arising from holding derivative instruments (such as credit risk, market liquidity risk and mark-to-market risk); changes in national and local government legislation, taxation (including but not limited to income tax, advance income tax, stamp tax, withholding tax, capital tax, tariffs, value-added or sales tax, capital outflow tax, capital gains tax, windfall or windfall profits tax, royalty, excise tax, customs/import or export duties, asset taxes, asset transfer tax, property use or other real estate tax, together with any related fine, penalty, surcharge, or interest imposed in connection with such taxes), controls, policies and regulations; the security of personnel and assets; political or economic developments in Canada, the United States, Chile, Brazil, Russia, Ecuador, Mauritania, Ghana, or other countries in which Kinross, or entities in which it now or hereafter directly or indirectly holds an interest, do business or may carry on business; business opportunities that may be presented to, or pursued by, us; our ability to successfully integrate acquisitions and complete divestitures; operating or technical difficulties in connection with mining or development activities; employee relations; commencement of litigation against the Company including, but not limited to, securities class action in Canada and/or the U.S.; the speculative nature of gold exploration and development including, but not limited to, the risks of obtaining necessary licenses and permits; diminishing quantities or grades of reserves; adverse changes in our credit rating; and contests over title to properties, particularly title to undeveloped properties. In addition, there are risks and hazards associated with the business of gold exploration, development and mining, including environmental hazards, industrial accidents, unusual or unexpected formations, pressures, cave-ins, flooding and gold bullion losses (and the risk of inadequate insurance, or the inability to obtain insurance, to cover these risks). Many of these uncertainties and contingencies can directly or indirectly affect, and could cause, Kinross’ actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, Kinross. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Forward-looking statements are provided for the purpose of providing information about management’s expectations and plans relating to the future. All of the forward-looking statements made in this news release are qualified by these cautionary statements and those made in our other filings with the securities regulators of Canada and the United States including, but not limited to, the cautionary statements made in the ‘‘Risk Factors’’ section of our most recently filed Annual Information Form and Management Discussion and Analysis for the 2010 fiscal year. These factors are not intended to represent a complete list of the factors that could affect Kinross. Kinross disclaims any intention or obligation to update or revise any forward-looking statements or to explain any material difference between subsequent actual events and such forward-looking statements, except to the extent required by applicable law. Key Sensitivities Approximately 60%-70% of the Company's costs are denominated in US dollars. A 10% change in foreign exchange could result in an approximate $5 impact in cost of sales per ounce. A $10 change in the price of oil could result in an approximate $2 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. The technical information about the Company’s material mineral properties (other than exploration activities) contained in this news release has been prepared under the supervision of Mr. Rob Henderson, an officer of the Company who is a “qualified person” within the meaning of National Instrument 43-101.The technical information about the Company’s drilling and exploration activities contained in this news release has been prepared under the supervision of Dr. Glen Masterman, an officer with the Company who is a “qualified person” within the meaning of National Instrument 43-101.

 

Sign up for email list

Get an e-mail notice when we post our latest news release on our website.

Click here to sign up.

Kinross is Now on Twitter

Follow Kinross Gold: @KinrossGold