Mr. Steve Mitchell reports
KINROSS REPORTS 2014 SECOND QUARTER RESULTS
Kinross Gold Corp. has released its results for the second quarter ended June 30, 2014.
Highlights:
- Production: 679,831 gold equivalent ounces, compared
with 655,381 ounces in second quarter 2013;
- Revenue: $911.9-million, compared with $968.0-million in second quarter 2013;
- Production cost of sales: $742 per gold equivalent ounce, compared with $737 in
second quarter 2013;
- All-in sustaining cost: $976 per gold equivalent ounce sold, compared with
$1,038 in second quarter 2013;
- Adjusted operating cash flow: $228.3-million, or 20 cents per share,
compared with $256.7-million, or 22 cents per share, in second quarter 2013;
- Adjusted net earnings: $32.9-million, or three cents per share, compared
with adjusted earnings of $119.5-million, or 10 cents per share, in second quarter
2013;
- Reported net earnings: $46.0-million, or four cents per share, compared
with a net loss of $2,481.9-million, or $2.17 per share, in second quarter 2013;
- Average realized gold price: $1,285 per gold ounce, compared with $1,394 per
gold ounce in second quarter 2013;
- Outlook: expects to be within 2014 forecast guidance for
production (2.5 million to 2.7 million gold equivalent ounces), production cost of sales ($730 to
$780 per gold equivalent ounce sold), all-in sustaining cost ($950 to $1,050 per gold equivalent ounce sold) and total capital expenditures ($675-million);
- Corporate responsibility report: Kinross has published its 2013 CR
report, available on the company's website.
Chief executive officer commentary
J. Paul Rollinson, CEO, made the following comments in relation to second quarter 2014 results: "Kinross's focus on financial discipline and operational excellence continues to deliver results, with another strong quarter that puts the company at the high end of its 2014 guidance range on production, and the low end of its 2014 guidance range on costs at the half-year mark.
"All-in sustaining cost is down compared with the first quarter of 2014 and the same quarter last year, as we continue to focus on opportunities to reduce spending across the company. The Russia region is outperforming on both costs and production, while our West Africa operations have reduced their operating costs in the first half of 2014 compared with the last six months of 2013. In the Americas, operational improvements at Maricunga in the first half of 2014 have increased production by 40 per cent and reduced cost of sales per ounce, compared with the second half of 2013.
"With strong, consistent performance from our core assets, we are also advancing opportunities for new production. We continue to explore project financing options for a potential Tasiast expansion as we pursue opportunities to enhance project economics and reduce execution risk. In addition, with encouraging exploration results at La Coipa, we plan to launch a prefeasibility study in the second half of 2014 to explore the possible restart of operations."
Financial results
SUMMARY OF FINANCIAL AND OPERATING RESULTS
(in millions, except ounces, per-share amounts and per-ounce amounts)
Three months ended Six months ended
June 30, June 30,
2014 2013 2014 2013
Operating highlights from
continuing operations
Total gold equivalent
ounces
Produced 686,130 661,636 1,358,310 1,317,246
Sold 709,606 695,541 1,338,243 1,347,738
Attributable gold equivalent
ounces
Produced 679,831 655,381 1,344,521 1,304,278
Sold 703,234 689,501 1,324,765 1,334,753
Financial highlights from
continuing operations
Metal sales $ 911.9 $ 968.0 $ 1,729.3 $ 2,026.1
Production cost of sales $ 525.9 $ 513.5 $ 981.9 $ 989.2
Depreciation, depletion and
amortization $ 215.3 $ 210.1 $ 411.7 $ 437.8
Impairment charges $ -- $ 2,433.1 $ -- $ 2,433.1
Operating earnings (loss) $ 80.2 $ (2,283.7) $ 161.6 $ (2,031.0)
Net earnings (loss)
attributable to common
shareholders $ 46.0 $ (2,481.9) $ 77.8 $ (2,319.5)
Basic earnings (loss) per
share attributable to common
shareholders $ 0.04 $ (2.17) $ 0.07 $ (2.03)
Diluted earnings (loss) per
share attributable to common
shareholders $ 0.04 $ (2.17) $ 0.07 $ (2.03)
Adjusted net earnings
attributable to common
shareholders $ 32.9 $ 119.5 $ 67.0 $ 291.9
Adjusted net earnings per
share $ 0.03 $ 0.10 $ 0.06 $ 0.26
Net cash flow provided from
operating activities $ 163.9 $ 106.4 $ 374.4 $ 471.7
Adjusted operating cash
flow $ 228.3 $ 256.7 $ 467.3 $ 670.4
Adjusted operating cash flow
per share $ 0.20 $ 0.22 $ 0.41 $ 0.59
Average realized gold price
per ounce $ 1,285 $ 1,394 $ 1,292 $ 1,505
Consolidated production cost
of sales per equivalent
ounce sold $ 741 $ 738 $ 734 $ 734
Attributable production
cost of sales per equivalent
ounce sold $ 742 $ 737 $ 735 $ 734
Attributable production
cost of sales per ounce sold
on a byproduct basis $ 725 $ 697 $ 717 $ 686
Attributable all-in
sustaining cost per ounce
sold on a byproduct basis $ 967 $ 1,017 $ 978 $ 1,006
Attributable all-in
sustaining cost per
equivalent ounce sold $ 976 $ 1,038 $ 988 $ 1,034
Attributable all-in cost
per ounce sold on a
byproduct basis $ 1,055 $ 1,350 $ 1,078 $ 1,333
Attributable all-in cost
per equivalent ounce
sold $ 1,062 $ 1,351 $ 1,084 $ 1,342
The following operating and financial results are based on second quarter 2014 gold equivalent production from continuing operations. Production and cost measures are on an attributable basis.
Production
Kinross produced 679,831 attributable gold equivalent ounces in the second quarter of 2014, a 4-per-cent increase over the second quarter of 2013, mainly due to increased production at Kupol as a result of processing higher-grade ore from Dvoinoye.
Production cost of sales
Production cost of sales per gold equivalent ounce was $742 for the second quarter of 2014, compared with $737 for the second quarter of 2013. Production cost of sales per gold ounce on a byproduct basis was $725 in second quarter 2014, compared with $697 in second quarter 2013, based on second quarter 2014 attributable gold sales of 681,974 ounces and attributable silver sales of 1,396,135 ounces.
All-in sustaining cost
All-in sustaining cost per gold equivalent ounce sold decreased to $976 in second quarter 2014, compared with $1,038 in second quarter 2013, primarily due to decreases in sustaining capital and exploration and business development expenditures.
All-in sustaining cost per gold ounce sold on a byproduct basis was $967 in second quarter 2014, compared with $1,017 in second quarter 2013.
Revenue
Revenue from metal sales was $911.9-million in the second quarter of 2014, compared with $968.0-million during the same period in 2013. The decrease was due mainly to the lower average realized gold price for the quarter.
Average realized gold price
The average realized gold price was $1,285 per ounce in second quarter 2014, compared with $1,394 per ounce in second quarter 2013.
Margins
Kinross's attributable margin per gold equivalent ounce sold was $543 for the second quarter of 2014, compared with the second quarter 2013 margin of $657 per gold equivalent ounce sold.
Operating cash flow
Adjusted operating cash flow was $228.3-million for the second quarter of 2014, or 20 cents per share, compared with $256.7-million, or 22 cents per share, for second quarter 2013.
Earnings
Adjusted net earnings were $32.9-million, or three cents per share, for second quarter 2014, compared with adjusted earnings of $119.5-million, or 10 cents per share, for second quarter 2013, mainly due to a lower average realized gold price.
Reported net earnings were $46.0-million, or four cents per share, for second quarter 2014, compared with a loss of $2,481.9-million, or $2.17 per share, in second quarter 2013. The reported net loss from second quarter 2013 included an after-tax non-cash impairment charge of $2,289.3-million.
Capital expenditures
Capital expenditures decreased to $120.0-million for second quarter 2014, compared with $321.0-million for the same period last year, due mainly to lower spending at Tasiast.
Operating results
Americas
Regional performance was strong in second quarter, as production was higher compared with the previous quarter due to the expected seasonal increase of heap leach processing at Fort Knox, better grades at Kettle-River Buckhorn and improved heap leach performance at Maricunga. Regional production was in line year over year due to higher grades and improved performance at Maricunga, offset by the impact of lower mill grades at Fort Knox. Maricunga saw a 40-per-cent increase in production in the first half of 2014 compared with the last six months of 2013 as a result of improvements to the crushing plant and enhanced management of the heap leach and ADR plant. As a result of the variability of B1 ore, Paracatu began processing a greater percentage of B2 ore, which has higher grades and a higher work index. This includes blending B1 and B2 ore through both plant 1 and plant 2, which resulted in second quarter production comparable with the previous quarter, as higher grades and better recoveries in both plants offset lower throughput.
Production cost of sales per ounce in the second quarter increased compared with first quarter 2014 and second quarter 2013. The increase was due mainly to higher cost of sales at Fort Knox as the operation entered a phase of the mine that has more operating waste and lower grades, which are expected to continue for another quarter, with mill grades expected to improve in the fourth quarter. Paracatu has maintained its cost of sales per ounce compared with the previous quarter, while improved efficiencies at Maricunga have resulted in a 19-per-cent reduction in costs per ounce compared with second quarter 2013. The region is on target to meet both production and production cost of sales guidance for the year.
Russia
The combined Kupol and Dvoinoye operation continued to perform well in second quarter, with higher production compared with the previous quarter and year over year. Gold grades at the combined operation increased by 23 per cent compared with second quarter 2013 due to the processing of higher-grade ore from Dvoinoye, partially offset by the anticipated decline in grades at Kupol. Approximately 83,000 gold equivalent ounces were produced from processing Dvoinoye ore in the expanded Kupol mill during second quarter, in line with the previous quarter.
Production cost of sales per ounce increased slightly compared with the previous quarter, due mainly to higher ounces sold from Kupol. The region is on track to be at the higher end of production and lower end of cost of sales guidance for the year.
West Africa
The region remains on target to meet its production guidance for the year, although production was lower compared with the previous quarter and year over year. As expected, Chirano production was down compared with first quarter 2014 due mainly to lower throughput as a result of mill repairs, which were completed ahead of schedule in June. The lower throughput at Chirano was partially offset by prioritizing the processing of higher-grade ore. At Tasiast, production was down slightly from the previous quarter as a result of lower mill grades.
Production cost of sales per ounce decreased 13 per cent compared with second quarter 2013 due mainly to the move to self-perform at Chirano and continuous improvement programs at Tasiast. Production cost of sales per ounce was comparable with the previous quarter, with a small increase at Chirano due to lower production and mill repair costs. The region remains on target to meet its production cost of sales guidance for the year.
Tasiast expansion project update
Kinross continues to pursue a number of opportunities to further enhance the viability of a potential expansion at Tasiast. The project execution plan is being further defined and optimized, the bidders list for preassembly work has been expanded and commercial terms solicited, permitting approval for the seawater pipeline has been obtained, and an agreement in principle has been reached with an engineering firm for the project execution stage. The company has engaged BNP Paribas to assist with securing project financing and is considering financing in the range of $700-million to $750-million of the project's cost, with the balance of financing expected to come from existing cash balances and cash flow.
Discussions continue between the company and the government of Mauritania on a range of tax- and labour-related issues. The company has advised the government that the results of this exercise will be an important consideration in its investment decision and is targeting to have these issues resolved in advance of its decision, which is not expected until 2015.
La Coipa phase 7 update
Kinross expects to move forward with a prefeasibility study in the second half of 2014 to explore restart options at La Coipa. The proposed PFS will focus on the Pompeya pit (phase 7), and oxide/transition mineral resources at the existing Puren deposit, and follows the completion of a phase 7 scoping study in 2013. Kinross will also conduct a scoping study focusing on processing options for known near-surface sulphide mineralization in the district. Exploration continues at La Coipa, with some attractive opportunities being assessed to extend the mine life beyond what the PFS will contemplate.
Liquidity
On July 28, 2014, the company extended the maturity dates of its $500-million term loan and $1.5-billion revolving credit facility by one year to Aug. 10, 2018, and Aug. 10, 2019, respectively. With this extension completed, the company's only debt maturity prior to 2018 is the $250-million in senior notes due 2016 and regular principal amortization payments due on the Kupol loan of $110-million.
During the quarter, the company also increased the Export Development Canada letter-of-credit guarantee facility for reclamation bonding obligations on its U.S. properties from $200-million to $250-million.
Cash and cash equivalents and short-term investments were $738.7-million as at June 30, 2014, compared with $734.5-million as at Dec. 31, 2013.
Board of directors update
John Macken has resigned from the Kinross board of directors, effective today. Kinross thanks him for his contributions to the company.
Outlook
As previously announced on Feb. 12, 2014, Kinross expects to produce approximately 2.5 million to 2.7 million gold equivalent ounces for the year.
The company expects to be within its regional production cost-of-sales guidance and meet its companywide production cost of sales guidance range of $730 to $780 per gold equivalent ounce and its all-in sustaining cost guidance range of $950 to $1,050 per gold ounce sold in 2014. The company also expects to meet its 2014 capital expenditures forecast of approximately $675-million.
Conference call details
In connection with the release, Kinross will hold a conference call and audio webcast on July 31, 2014, at 8 a.m. ET to discuss the results, followed by a question-and-answer session. To access the call, please dial:
Canada and the United States toll-free: 1-800-319-4610
Outside of Canada and the U.S.: 1-604-638-5340
Replay (available up to 14 days after the call):
Canada and the U.S. toll-free: 1-800-319-6413; passcode 3310 followed by the number sign
Outside of Canada and the U.S.: 1-604-638-9010; passcode 3310 followed by the number sign
You may also access the conference call on a listen-only basis by webcast at the company's website. The audio webcast will be archived on the company's website.
This release should be read in conjunction with Kinross's second quarter 2014 unaudited financial statements and management's discussion and analysis report at the company's website.
Kinross's unaudited second quarter 2014 financial statements and management's discussion and analysis have been filed with Canadian securities regulators (available at SEDAR) and furnished to the U.S. Securities and Exchange Commission (available at the SEC website). Kinross shareholders may obtain a copy of the financial statements free of charge upon request to the company.
CONSOLIDATED STATEMENTS OF OPERATIONS
(expressed in millions of U.S. dollars, except per-share amounts)
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2014 2013 2014 2013
Revenue
Metal sales $ 911.9 $ 968.0 $ 1,729.3 $ 2,026.1
Cost of sales
Production cost of sales 525.9 513.5 981.9 989.2
Depreciation, depletion and
amortization 215.3 210.1 411.7 437.8
Impairment charges -- 2,433.1 -- 2,433.1
Total cost of sales 741.2 3,156.7 1,393.6 3,860.1
Gross profit (loss) 170.7 (2,188.7) 335.7 (1,834.0)
Other operating expense 15.3 9.4 33.0 33.4
Exploration and business
development 29.0 43.2 51.7 81.7
General and administrative 46.2 42.4 89.4 81.9
Operating earnings (loss) 80.2 (2,283.7) 161.6 (2,031.0)
Other income (expense) -- net (1.1) (243.3) (7.3) (251.7)
Equity in earnings (losses) of
associate and joint venture (0.7) (2.2) (2.0) (3.1)
Finance income 4.4 2.3 5.8 4.3
Finance expense (19.9) (9.1) (32.7) (17.7)
Earnings (loss) before tax 62.9 (2,536.0) 125.4 (2,299.2)
Income tax recovery (expense) --
net (17.2) 53.6 (48.3) (19.2)
Earnings (loss) from continuing
operations after tax 45.7 (2,482.4) 77.1 (2,318.4)
(Loss) from discontinued
operations
after tax (1.9) (721.1) (4.1) (723.0)
Net earnings (loss) $ 43.8 $(3,203.5) $ 73.0 $(3,041.4)
Net earnings (loss) from
continuing operations
attributable to
Non-controlling interest $ (0.3) $ (0.5) $ (0.7) $ 1.1
Common shareholders $ 46.0 $(2,481.9) $ 77.8 $(2,319.5)
Net earnings (loss) attributable
to
Non-controlling interest $ (0.3) $ (0.5) $ (0.7) $ 1.1
Common shareholders $ 44.1 $(3,203.0) $ 73.7 $(3,042.5)
Earnings (loss) per share from
continuing operations
attributable to common
shareholders
Basic $ 0.04 $ (2.17) $ 0.07 $ (2.03)
Diluted $ 0.04 $ (2.17) $ 0.07 $ (2.03)
Earnings (loss) per share
attributable to common
shareholders
Basic $ 0.04 $ (2.81) $ 0.06 $ (2.67)
Diluted $ 0.04 $ (2.81) $ 0.06 $ (2.67)
We seek Safe Harbor.
© 2024 Canjex Publishing Ltd. All rights reserved.