Summary

  • Kinross Gold is a senior gold mining company with a diverse portfolio of mines and projects in the United States, Brazil, Chile, Ghana, Mauritania, and Russia.
  • Headquartered in Toronto, Canada, Kinross employs approximately 9,000 people worldwide.
  • Kinross Americas operation is a strong and stable region with four mines that account for more than half our production.
  • Kinross announces sale of Chirano mine in Ghana.

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Company Overview

Founded in 1993, Kinross Gold (NYSE:KGC, TSX:K) is a senior gold mining company with a diverse portfolio of mines and projects in the United States, Brazil, Chile, Ghana, Mauritania, and Russia. Headquartered in Toronto, Canada, Kinross employs approximately 9,000 people worldwide. The Company is focused on delivering value through operational excellence, balance sheet strength, disciplined growth, and responsible mining.1

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Operations

Kinross’ strong operating results are driven by solid and consistent performance from a diverse portfolio of mines located in three core regions: the Americas, West Africa and Russia2

Americas

A central focus for Kinross, the Americas is a strong and stable region with four mines that account for more than half its production.

Fort Knox, USA

Fort Knox is an open-pit gold mine located near the city of Fairbanks, Alaska. It is mined by conventional open-pit methods, with ore processed at a mill and heap leach facility.

Fort Knox is a center of excellence for Kinross as one of the few cold weather heap leach facilities in the world. In 2019, the site poured its eighth millionth ounce of gold, more than 20 years into its mine life.

The mill has a capacity of up to 45,000 tonnes per day, with large volumes of lower grade ore and mineralized waste materials processed in the heap leach.

In October 2019, Fort Knox’s excellent safety performance was recognized by the U.S. National Mining Association as the mine received the prestigious Sentinels of Safety Award in the Large Metal Mine group for achieving 1.5 million hours without a Lost Time Injury.

In September 2020, Kinross acquired 70% of the Manh Choh project (formerly the Peak project) in Alaska, located approximately 400 kilometres southeast Fort Knox

Round Mountain, Nevada, USA

Round Mountain is an open-pit mine located in Nevada, one of the best mining jurisdictions in the world. Round Mountain uses conventional open-pit mining methods and processes ore by mill and heap leach.

In January 2016, Kinross acquired the 50% of Round Mountain it did not already own from Barrick Gold, consolidating ownership of one of Kinross’ best run and established mines. The Company continues to advance promising initiatives to optimize the operation and potentially extend estimated mine life.

Kinross began operating the mine in 2003, and it has since become a continuous improvement leader in the Company’s portfolio. Round Mountain poured its 15 millionth ounce in 2018.

In 2021, approximately 792 Au koz. were added to Round Mountain’s proven and probable mineral reserves, after depletion, mostly due to the Phase S pushback in the south area of the pit. In 2022, exploration activities at Round Mountain will be focused on construction of a drift for underground exploration drilling at Phase X, and surface exploration work at Gold Hill.

Bald Mountain, Nevada, USA

Bald Mountain is an open-pit mine with a large estimated mineral resource base located in Nevada along the southern extension of the prolific Carlin trend, and was acquired by Kinross in January 2016.

In October 2018, Kinross acquired the remaining 50% of the Bald Mountain joint venture zone from Barrick Gold to consolidate ownership of the property, the largest private mining land package in the U.S.

With approximately 3.6 million gold ounces of estimated measured and indicated gold resources (as at December 31, 2021) and a pipeline of high-quality targets, the Company is exploring further opportunities for additional resource conversions and exploration success.

Paracatu, Brazil

Paracatu is a long life, cornerstone operation located near the city of Paracatu in Brazil’s Minas Gerais region. Paracatu is the largest gold mine in Brazil and one of the largest in the world.

Paracatu is an open-pit mine with ore processed in ball and SAG mills. The mills are expected to continue processing stockpiled ore until 2031.

In February 2018, Kinross acquired two hydroelectric power plants that are expected to lower production costs over the life of mine and increase the use of renewable power to support the Company's goals of reducing greenhouse gas emissions.

At Paracatu, the tailings facilities are constructed using a centerline design and are engineered compacted zoned earth fill dams. All of Kinross’ tailings facilities are designed and constructed to the highest engineering and best practice standards and are not constructed with tailings.

West Africa

Two operating mines in a region with excellent exploration and growth potential.

Tasiast, Mauritania

The Tasiast mine is an open-pit operation located in northwestern Mauritania, approximately 300 kilometres north of the capital Nouakchott, which processes ore via mill.

Kinross acquired the Tasiast gold mine in September 2010. Since then, Kinross has successfully expanded capacity at the site and ramped up throughput rates at the operation from 8,000 tonnes per day (“tpd”). In 2018, Kinross completed the Phase One project to increase throughput to 12,000 tpd. Kinross expects to further increase throughput rates with the Tasiast 24k expansion project.

The Tasiast 24k project, which is expected to increase throughput capacity to 21,000 tpd by the end of Q1 2022 and then to 24,000 t/d by mid-2023, is proceeding on plan. The capital-efficient project is expected to further increase production, lower costs, and generate significant cash flow and attractive returns. It is expected to extend mine life by four years to 2033.

Tasiast is also developing a 35MW solar power plant to reduce greenhouse gas emissions at site.

Chirano, Ghana

Chirano is an open-pit and underground operation located in southwestern Ghana, approximately 100 kilometres southwest of Kumasi, the country’s second largest city.

Chirano ore is processed at the mine’s mill, which has capacity of approximately 3.5 million tonnes per year.

Exploration and mine optimization have been successful at extending mine life. In 2020, exploration and engineering success added 660 Au koz. to Chirano’s mineral reserve estimates before depletion, which resulted in a three-year mine life extension to 2025. In 2021, the site added 400 Au koz. in Measured and Indicated Resources, and extended mine life again by one year 2026.

A total of 40,600 metres of drilling was completed in 2021 at Chirano as near-mine exploration activities and infill drilling continued to focus on resource conversion and further mine life extension.

Russia

Kinross has a successful 25+-year history of operating in Russia and currently operates the high-quality, low cost underground Kupol mine in the country’s Chukotka region. The Udinsk project in Khabarovsk Krai, is currently in the feasibility study stage.

Kupol - Dvoinoye, Russia

Kupol is a high grade underground mine located in the Chukotka region of the Russian Far East. It is the leading gold mine in Russia and has one of the lowest operating costs in Kinross’ portfolio.

Kupol’s consistently strong operating results make it a model for successfully operating in a remote region, with the nearest major city approximately 200 kilometres away. Supplies and equipment are transported to the mine from around mid-January to early May via a 260-kilometre winter road.

Mining activities were completed at Dvoinoye, located approximately 100 kilometres north of the Kupol operation, as planned in 2020. Stockpiles from Dvoinoye are expected to be processed at the Kupol mill until approximately 2024.

In January 2020, Kinross acquired the high-quality Chulbatkan license in Russia’s Far East. The first project the Company expects to develop on the Chulbatkan license is Udinsk, where a feasibility study is on schedule to be completed in Q3 2022. First production at Udinsk is expected in Q4 2025, pending a positive development decision.

In 2021, two remote field camps were established at Kayenmyvaam and Kavralyanskaya to support exploration work within the eastern and southern regions of the Kupol Synergy Zone of Influence, the 130 kilometre radius around Kupol based on an economic trucking distance to the mill.

   Ownership percentage at December 31, 
Operating MinesOperatorLocation20212020
Fort KnoxKinrossUSA100%100%
Round MountainKinrossUSA100%100%
Bald MountainKinrossUSA100%100%
ParacatuKinrossBrazil100%100%
Kupol(a)KinrossRussian Federation100%100%
TasiastKinrossMauritania100%100%
ChiranoKinrossGhana90%90%

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Industry Overview

The price of gold is the largest single factor in determining profitability and cash flow from operations, therefore, the financial performance of the Company has been, and is expected to be, closely linked to the price of gold. Historically, the price of gold has been subject to volatile price movements over short periods of time and is affected by numerous macroeconomic and industry factors that are beyond the Company’s control. Major influences on the gold price include currency exchange rate fluctuations and the relative strength of the U.S. dollar, the supply of and demand for gold and macroeconomic factors such as the level of interest rates and inflation expectations. During 2021, the price of gold fluctuated between a low of $1,684 per ounce in March to a high of $1,950 per ounce in January, based on daily closing prices. The average price for the year based on the London Bullion Market Association PM Fix was $1,799 per ounce, a $29 per ounce increase over the 2020 average price of $1,770 per ounce. Major influences on the gold price during 2021 included rising U.S. yields, a stronger U.S. dollar and reduced safe haven demand.3

In 2021, the Company realized an average gold price of $1,797 per ounce compared to the average PM Fix of $1,799 per ounce.

According to the World Gold Council, total gold supply in 2021 decreased marginally, by approximately 1%, compared to 2020. Mine production recovered 2% in 2021 but growth was counteracted by a 11% drop in recycling. Mine production and recycled gold remain the dominant sources of gold supply, and in 2021 they represented approximately 75% and 25% of total supply, respectively.

According to the World Gold Council, total demand for gold in 2021 increased by approximately 10% compared to 2020. Annual demand recovered across most sectors except ETF and similar products which saw net annual outflows. Central bank buying outpaced that of 2020 and increased approximately 82% compared to 2020. Demand for gold in the consumer-driven jewelry sector recovered throughout the year in line with economic growth and sentiment, and increased approximately 67% compared to 2020.

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Financial Highlights

J. Paul Rollinson, President and CEO, made the following comments in relation to 2021 fourth-quarter and year-end results:4

“Despite some challenges during 2021, the company produced approximately 2.1 million ounces. The company expect to increase its production in 2022 and 2023 to 2.65 million and 2.8 million ounces, respectively, to drive robust free cash flow. The company's long-term production profile remains strong, with expected production of 2.6 million ounces in 2024 and an annual average production estimate of at least 2.5 million ounces over the remainder of the decade.

“Kinross Gold is pleased to report that the Tasiast mill is now operating at sustained throughput levels comparable to the first half of 2021. The company's development projects are also advancing well and Kinross Gold has started commissioning at La Coipa, where Kinross Gold has increased life of mine production estimates to approximately 1 million ounces and extended estimated mine life to early 2026. Kinross also successfully added to its mineral reserve estimates, which increased by 2.7 million ounces to 32.6 million gold equivalent ounces at year-end 2021.

“In addition, the company enhanced its return of capital to shareholders by returning more than $250 million through its quarterly dividend and share buyback programs. The company also finalized its agreement with the Government of Mauritania to underpin its strong partnership and announced an agreement to acquire Great Bear Resources to further strengthen its long-term growth pipeline.

“Safety and sustainability continue to be priorities, and the company again ranked in the top quartile of its peer group as measured by a number of ESG ranking agencies in 2021. The company also outlined a Climate Change Strategy, with the objective of a 30% reduction in intensity of scope 1 and scope 2 emissions by 2030.”

Over the full year, Kinross produced 2,067,549 attributable Au eq. oz., in line with the Company’s revised production guidance, compared with full-year 2020 production of 2,366,648 attributable Au eq. oz. The decrease was mainly due to the temporary suspension of milling operations at Tasiast as a result of a mill fire in June 2021 and deferred mining activities at Round Mountain after wall instability was detected in Q1 2021. The decrease was slightly offset by increases in production at Fort Knox and at Bald Mountain.

The average realized gold price in Q4 2021 was $1,797 per ounce, compared with $1,875 per ounce in Q4 2020. For full-year 2021, the average realized gold price per ounce was $1,797, compared with $1,774 per ounce for full-year 2020.

During the fourth quarter, revenue was $879.5 million, compared with $1,195.1 million during Q4 2020. Revenue was $3,729.4 million for full-year 2021, compared with $4,213.4 million for full-year 2020.

Consolidated production cost of sales per Au eq. oz. sold was $868 for Q4 2021, compared with $685 in Q4 2020, and was $832 for full-year 2021 versus $726 in 2020.

Free cash flow was a net cash outflow of $100.7 million in Q4 2021, compared with a net cash inflow of $382.8 million for Q4 2020. For the full year, free cash flow was $196.6 million, compared with $1,041.5 million the previous year. The decrease in both periods were mainly due to lower margins, higher taxes paid and unfavourable working capital movements.

Adjusted net earnings were $101.8 million, or $0.08 per share, for Q4 2021, compared with $335.1 million, or $0.27 per share, for Q4 2020. Full-year adjusted net earnings were $541.3 million, or $0.43 per share, compared with $966.8 million, or $0.77 per share, for full-year 2020, primarily due to the decrease in revenue and an increase in exploration expenses.

Reported net loss was $2.7 million for Q4 2021, compared with reported net earnings of $783.3 million, or $0.62 per share, for Q4 2020. Reported net earnings in full-year 2021 were $221.2 million, or $0.18 per share, compared with $1,342.4 million, or $1.07 per share, in 2020. The decrease in reported net earnings for both periods was mainly as a result of the temporary suspension of milling operations at Tasiast and the deferred mining activity at Round Mountain. A non-cash, after-tax write-down of $106.1 million at Bald Mountain related to a reduced estimate of recoverable ounces from the Vantage heap leach pad in the South area of the mine also contributed to the decrease in net earnings.

Capital expenditures were $298.0 million for Q4 2021, in line with $298.3 million for Q4 2020. Capital expenditures for full-year 2021 were $938.6 million and were within the Company’s annual guidance range, compared with $916.1 in 2020. The increase was primarily due to higher expenditures for development activities at La Coipa, the studies at Lobo-Marte and Udinsk, and an increase in capital stripping at Tasiast, partially offset by reduced capital stripping at Bald Mountain, Round Mountain and Fort Knox.

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2022 First Quarter Results

May 10, 2022; Kinross Gold Corporation announced its results for the first-quarter ended March 31, 2022.5

In Q1 2022, Kinross announced its plan to divest all of its Russian assets. As such, the Company’s Russian assets have been excluded from its Q1 2022 results, along with comparative figures, due to the classification of these assets as discontinued as of March 31, 2022.

Q1 2022 highlights from continuing operations:

  • Tasiast achieved record production in Q1 2022, with the 24k project progressing well and on schedule.
  • La Coipa poured its first gold bar in February, on schedule and under budget.
  • At the Great Bear project, exploration, study and permitting activities have ramped up since the completion of the acquisition on February 24, 2022, with assay results reaffirming the world-class potential of the deposit.
  • Kinross’ Board of Directors declared a quarterly dividend of $0.03 per common share payable on June 16, 2022 to shareholders of record at the close of business on June 2, 2022.
  • Attributable gold equivalent production 1 of 409,857 Au eq. oz. produced.
  • Attributable production cost of sales 1, 2 of $1,000 per Au eq. oz., consolidated production cost of sales of $1,003 per Au eq. oz., and attributable all-in sustaining cost1,2 of $1,245 per Au eq. oz. sold.
  • Margins 4 of $872 per Au eq. oz. sold. 
  • Adjusted operating cash flow 2 of $261.0 million and operating cash flow of $105.2 million.
  • Reported net earnings 6 of $82.3 million, or $0.07 per share, with adjusted net earnings, 7 of $70.6 million, or $0.06 per share.
  • Cash and cash equivalents of $454.2 million, and totalliquidity of approximately $1.7 billion at March 31, 2022.

Pro-forma Company guidance:

  • Kinross maintained its 2022 company-wide guidance for its pro-forma portfolio after excluding its assets from Russia and Ghana due to their pending divestments. The Company has adjusted gold and oil price assumptions for cost of sales and all-in sustaining cost guidance to reflect current prices.
  • Kinross expects to produce 2.15 and 2.3 million Au eq. oz. (+/- 5%) in 2022 and 2023, respectively, which is expected to drive strong free cash flow.
  • The Company expects to produce 2.1 million Au eq. oz. in 2024 and an average of two million Au eq. oz. per year over the remainder of the decade.
  • Taking into account current gold and oil prices, the Company maintained its production cost of sales guidance of $830 per Au eq. oz. sold (+/- 5%) for the year, with all-in sustaining cost of sales of $1,150 per eq. oz. sold (+/-5%). Consolidated production cost of sales was $8329 per Au eq. oz. sold and attributable all-in sustaining cost of sales was $1,138 per eq. oz. sold1, 2, 9 for the year ended December 31, 2021.
  • Capital expenditures expected to decrease to $850 million (+/- 5%) in 2022. Capital expenditures are expected to be approximately $750 million per year in 2023 and 2024, excluding potential inflationary impacts and based on the Company’s current production guidance.

Russia and Ghana divestments: 

  • Kinross entered into an agreement with the Highland Gold group of companies to sell 100% of its Russian assets for total consideration of $680 million in cash on April 5, 2022. The parties are continuing to advance the closing process and the transaction remains subject to Russian government approval.
  • Kinross entered into an agreement with Asante Gold Corporation (“Asante”) to sell the Company’s 90% interest in the Chirano mine in Ghana for total consideration of $225 million in cash and shares on April 25, 2022. The transaction closing is targeted for the end of May.

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Recent developments

Kinross announces sale of Chirano mine in Ghana

April 25, 2022;  Kinross Gold Corporation announced that it has entered into a sale agreement with Asante Gold Corporation (CSE: ASE; FSE: 1A9) (“Asante”) to sell its 90% interest in the Chirano mine in Ghana for a total consideration of $225 million in cash and shares. The Ghanaian government has a 10% carried interest in Chirano.6

Upon closing of the transaction, Kinross will receive $115 million in cash. Kinross will also receive a number of Asante common shares having a value of $50 million based on the 30-day volume-weighted average price of Asante common shares prior to closing, provided that the issuance of Asante common shares will not result in Kinross exceeding a 9.9% ownership in Asante. Kinross will also receive a total deferred payment of $60 million in cash, with 50% payable on the first anniversary of closing and the other 50% payable on the second anniversary of closing. If the 9.9% share ownership limit is reached, the remainder of the $50 million will be paid by increasing the deferred cash payments in equal portions. The Company has agreed that it will hold its Asante common shares for at least 12 months following the closing of the transaction.

The transaction is expected to be completed on or around May 31, 2022. The Government of Ghana has issued a  “letter of no objection” regarding the change of control.

Chirano represented approximately 3% of Kinross’ total mineral reserve estimates as of year-end 2021. With the expected close of the transaction, Kinross will have no assets or interests in Ghana.

Kinross expects to update its 2022 and three-year guidance reflecting the recently announced pending sales of its assets in Russia and Ghana, as well as provide additional commentary regarding the sale transactions, as part of its upcoming Q1 2022 results disclosures.

Treadstone Resource Partners and Scotiabank are acting as financial advisors to Kinross, with Osler, Hoskin & Harcourt LLP acting as legal advisor, for the transaction.

References

  1. ^ https://www.kinross.com/about/default.aspx
  2. ^ https://www.kinross.com/operations/default.aspx#americas-fortknox
  3. ^ https://s2.q4cdn.com/496390694/files/doc_financials/annual/2022/Kinross-Gold-2021-Annual-Report-FINAL.pdf
  4. ^ https://s2.q4cdn.com/496390694/files/doc_financials/2021/q4/KGC-Q4-year-end-2021-news-release_clean-Final.pdf
  5. ^ https://www.kinross.com/news-and-investors/news-releases/press-release-details/2022/Kinross-reports-2022-first-quarter-results/default.aspx
  6. ^ https://www.kinross.com/news-and-investors/news-releases/press-release-details/2022/Kinross-announces-sale-of-Chirano-mine-in-Ghana/default.aspx
Tags: US:KGC CA:K
Created by Asif Farooqui on 2022/05/11 01:13
     

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