Kinross Gold Corporation (TSX:K; NYSE:KGC) (“Kinross” or the
“Company”) today announced its robust three-year guidance, with
production expected to steadily increase by 20% to 2.9 million gold
equivalent ounces1 (+/- 5%) in 2023 and an overall downward trend
in production cost of sales and capital expenditures to drive
strong free cash flow.
The Company also announced that its Board of
Directors (“Board”) has declared a dividend of $0.03 per common
share payable on October 22, 2020 to shareholders of record at the
close of business on October 8, 2020. In addition, the Board has
approved a plan to pay quarterly dividends of $0.03 per common
share, which would amount to $0.12 per common share on an
annualized basis, and represents an annualized yield of
approximately 1.3% based on a closing share price of $9.35 on
September 17, 2020.
CEO commentary: J. Paul
Rollinson, President and CEO, commented on the dividend and
three-year guidance.
“With our investment grade balance sheet, strong
free cash flow, significant margins and substantial cash position,
we are pleased to return capital to our shareholders in the form of
a dividend.
“We expect to increase our production by
approximately half a million gold equivalent ounces, or 20%, to 2.9
million ounces over the next three years, which is indicative of
the strength of our global portfolio and our ability to optimize
mine plans and find value-enhancing opportunities. We are also
studying further organic development options given our attractive
pipeline of projects and promising exploration results.
“Our growing production profile, combined with
our declining cost structure, is expected to drive strong and
growing free cash flow. Kinross will continue to prioritize balance
sheet strength and disciplined capital allocation as we assess
future development opportunities to generate value for our
shareholders.”
Growing production and declining
costs
The expected production growth represents
additional ounces enabled by planned life of mine extensions and
projects resulting from the Company’s previous three-year major
capital reinvestment phase, which established a low-risk and timely
platform for growth in the current gold price environment.
Kinross’ comprehensive continuous improvement
programs, which have enhanced productivity and operational
efficiencies, and its exploration strategy focused on promising
prospects around existing operations, also contributed to the
anticipated production increase.
Kinross continues to prioritize adding
significant ounces to its mineral reserve estimate of 24.3 million
Au oz.2 (as of year-end 2019), which does not include the Company’s
recent addition of 6.4 million Au oz.2 from the Lobo-Marte project
announced on July 15, 2020. The Company remains optimistic of
future mine life extensions given its large estimated measured and
indicated mineral resource base of 35.5 million Au oz.2 (as of
year-end 2019 and excludes reserves).
The three-year production growth is primarily
based on additional ounces from the expected:
- higher production at Kupol and life of mine
extension at Chirano, both derived from the
successful exploration programs at the two sites;
- enhancements to the Fort Knox mine plan,
including accelerating production at the Gilmore project to bring
ounces forward;
- continued outperformance at Paracatu driven by
improved throughput, more ounces from the reprocessing of tailings
and higher grades from accelerated mining of the western area of
the pit, and;
- higher production from the north area of Bald
Mountain.
Annual gold equivalent production guidance1(+/-
5%) |
2021 |
2.4 million oz. |
2022 |
2.7 million oz. |
2023 |
2.9 million oz. |
Kinross continues to use a $1,200 per ounce gold
price assumption for its mine plans, including the 2021 - 2023
production guidance, and for the Company’s proven and probable
mineral reserve estimates.
During the next three years of expected
production growth, the Company anticipates a downward trend in
production cost of sales per ounce sold as Kinross brings on
planned lower cost projects. Cost of sales per ounce sold is
expected to be slightly higher in 2021 compared with 2020 guidance,
mainly due to COVID-19 impacts, but is expected to progressively
decrease in 2022 and 2023.
As the Company transitions from its previous
major three-year capital reinvestment phase, annual capital
expenditures are expected to decline based on Kinross’ current
production guidance. The planned capital expenditures include the
initial development of the Chulbatkan project, which has a
preliminary capital estimate of approximately $330 million during
the 2021 - 2023 timeframe, but excludes additional opportunities in
the Company’s pipeline. Kinross is studying additional options in
its portfolio that leverage its large mineral resource base and
have the potential to sustain strong production beyond 2023, which
could generate attractive returns without risking significant
capital.
Annual capital expenditures guidance (+/- 5%) |
2021 |
$900 million |
2022 |
$800 million |
2023 |
$700 million |
Kinross Gold President and CEO J. Paul Rollinson
is scheduled to speak at the Gold Forum
Americas on September 21, 2020 at
9:00 a.m. ET to discuss the Company’s outlook and
performance. The live session can be accessed here:
https://www.denvergold.org/company-live-session/dgf20/75/
In addition, Kinross' management team will host
a presentation and question and answer session on October
20, 2020 from 10:00 a.m. – 12:00 p.m.
ET to discuss operational details regarding the
Company’s three-year guidance and additional opportunities in its
portfolio. The presentation will be accessible via conference call
and audio webcast at www.kinross.com, where it will also be
archived.
Reinstating 2020 guidance
Kinross is also reinstating its 2020 guidance
originally announced on February 12, 2020. The 2020 guidance
includes:
|
2020 guidance3 (+/- 5%) |
Gold equivalent production1 |
2.4 million oz. |
Production cost of sales1, 4 |
$720 per Au eq. oz. |
All-in sustaining cost1, 4 |
$970 per Au eq. oz. |
Capital expenditures |
$900 million5 |
The Company is on track to meet its production,
cost of sales per ounce sold, all-in sustaining cost per ounce sold
and capital expenditures guidance for 2020.
Other operating costs for 2020 are now expected
to be approximately $140 million, which increased from the previous
$100 million guidance, mainly due to costs associated with the
Tasiast strike in the second quarter and COVID-19 mitigation
measures.
Sustainable dividend at an attractive
yield
With the robust free cash flow that is being
generated from its operations, and with the Company’s strong
expected cash position, Kinross is pleased to announce that its
Board has declared a dividend of $0.03 per common share, payable on
October 22, 2020 to shareholders of record at the close of business
on October 8, 2020. The dividend qualifies as an "eligible
dividend" for Canadian income tax purposes, while dividends paid to
shareholders outside Canada (non-resident investors) will
be subject to Canadian non-resident withholding taxes.
In addition, and in line with Kinross’
commitment to provide shareholder value, the Board has approved a
plan to pay quarterly dividends of $0.03 per common share, which
would amount to $0.12 per common share on an annualized basis, and
represents an attractive annualized yield of approximately 1.3%,
assuming a share price of $9.35 as of market close on
September 17, 2020. The Company anticipates that, subject to
approval of the Board, the next quarterly dividend will be declared
in connection with Kinross’ third-quarter financial results. The
declaration and payment of dividends is at the discretion of the
Board, and will depend on the Company’s financial results, cash
requirements, future prospects and other factors deemed relevant by
the Board. The Company believes the regular quarterly dividend is
sustainable at lower gold prices and provides opportunities for
growth in a prolonged higher gold price
environment.
Balance sheet strength and disciplined
capital allocation
On September 15, 2020, Kinross gave notice to
its lenders that it intends to repay the remaining $500 million of
the $750 million previously drawn from its $1.5 billion revolving
credit facility in March 2020 as a precaution against uncertainties
caused by the global COVID-19 pandemic. The Company previously
repaid $250 million of the credit facility on July 24, 2020 and the
remaining repayment is scheduled for September 18, 2020.
Consistent with the Company’s disciplined
approach to capital allocation, Kinross will continue to prioritize
maintaining and strengthening its investment grade balance sheet
while delivering on its commitments and generating free cash flow.
The Company’s capital priorities include:
- maintaining existing operations safely and to world-class
environmental standards through sustaining capital
expenditures;
- investing in organic expansion projects that provide attractive
returns and leverage existing infrastructure and experience in
operating jurisdictions to minimize execution risk;
- capitalizing on opportunities to extend or grow production
through targeted exploration activities;
- continuing to repay debt upon maturity, including $500 million
in senior notes in September 2021;
- continuing to reduce net debt, which at current gold prices is
expected to reach zero in 2021, and;
- returning capital to shareholders through a quarterly
dividend.
Kinross also intends to maintain flexibility to
make additional attractive investments and for further return of
capital.
About Kinross Gold Corporation
Kinross is a Canadian-based senior gold mining
company with mines and projects in the United States, Brazil,
Chile, Ghana, Mauritania, and Russia. Kinross maintains listings on
the Toronto Stock Exchange (symbol:K) and the New York Stock
Exchange (symbol:KGC).
Media Contact Louie DiazSenior
Director, Corporate Communicationsphone:
416-369-6469louie.diaz@kinross.com
Investor Relations ContactTom
Elliott
Senior Vice-President, Investor Relations and Corporate Development
phone:
416-365-3390
tom.elliott@kinross.com
Mineral Reserve and Resource
estimates
Kinross Gold Proven and Probable Mineral
estimates6(At December 31,
2019) |
|
Tonnes(kt) |
Grade(Au g/t) |
Ounces(Au koz) |
Proven Reserves |
655,577 |
0.5 |
11,030 |
Probable Reserves |
488,003 |
0.8 |
13,297 |
TotalProven and Probable
Reserves |
1,143,580 |
0.7 |
24,327 |
Kinross Gold Measured and Indicated Mineral
estimates6(At December
31, 2019) |
|
Tonnes(kt) |
Grade(Au g/t) |
Ounces(Au koz) |
Measured Resources |
244,666 |
0.5 |
3,929 |
Indicated Resources |
1,250,021 |
0.8 |
31,579 |
TotalMeasured and
IndicatedResources |
1,494,687 |
0.7 |
35,508 |
Lobo-Marte Reserve and Resource Mineral
estimates7(At June 30,
2020) |
|
Tonnes(kt) |
Grade(Au g/t) |
Ounces(Au koz) |
Probable Reserves |
146,771 |
1.4 |
6,394 |
Indicated Resources |
75,738 |
0.7 |
1,796 |
Cautionary statement on forward-looking
information
All statements, other than statements of
historical fact, contained or incorporated by reference in this
news release including, 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 harbor’’ 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 contained in this news release,
include, but are not limited to, those under the headings (or
headings that include) “CEO commentary”, “Growing production over
the next three years”, “Sustainable dividend and maintaining
balance sheet strength” and “Disciplined capital allocation” and
include, without limitation, statements with respect to: our
guidance for production, production costs of sales, cash flow, free
cash flow and capital expenditures; the declaration, payment and
sustainability of the Company’s dividends; optimization of mine
plans; identification of additional resources and reserves; the
schedules and budgets for the Company’s development projects; mine
life and any potential extensions; the Company’s capital
reinvestment program and continuous improvement initiatives and
project performance or outperformance, as well as references to
other possible events, the future price of gold and silver, the
timing and amount of estimated future production, costs of
production, operating costs; capital expenditures, costs and timing
of the development of projects and new deposits, estimates and the
realization of such estimates (such as mineral or gold reserves and
resources or mine life), success of exploration, development and
mining, currency fluctuations, capital requirements, project
studies, government regulation permit applications and conversions,
restarting suspended or disrupted operations; environmental risks
and proceedings; and resolution of pending litigation. The words
“anticipate”, “believe”, “continue”, “estimate”, “expect”, “focus”,
“forecast”, “guidance”, “intend”, “opportunity”, “option”, “plan”,
“potential”, “promising”, “prospect”, or variations of or similar
such words and phrases or statements that certain actions, events
or results may, could, should or will be achieved, received or
taken, or will occur or result and similar such 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 MD&A for the year ended
December 31, 2019, and the Annual Information Form dated March 30,
2020 as well as: (1) there being no significant disruptions
affecting the operations of the Company, whether due to extreme
weather events (including, without limitation, excessive or lack of
rainfall, in particular, the potential for further production
curtailments at Paracatu resulting from insufficient rainfall and
the operational challenges at Fort Knox and Bald Mountain resulting
from excessive rainfall, which can impact costs and/or production)
and other or related natural disasters, labour disruptions
(including but not limited to strikes or workforce reductions),
supply disruptions, power disruptions, damage to equipment, pit
wall slides (in particular that the effects of the pit wall slides
at Fort Knox and Round Mountain are consistent with the Company’s
expectations) or otherwise; (2) permitting, development, operations
and production from the Company’s operations and development
projects being consistent with Kinross’ current expectations
including, without limitation: the maintenance of existing permits
and approvals and the timely receipt of all permits and
authorizations necessary for the operation of the Tasiast Phase One
expansion, and the development and operation of the 24k Project;
operation of the SAG mill at Tasiast; land acquisitions and
permitting for the construction and operation of the new tailings
facility, water and power supply and continued operation of the
tailings reprocessing facility at Paracatu; the Lobo-Marte project;
commencement of production at the La Coipa project; approval of an
enhanced mine plan at Fort Knox; in each case in a manner
consistent with the Company’s expectations; and the successful
completion of exploration consistent with the Company’s
expectations at the Company’s projects, including Kupol and
Chirano; (3) political and legal developments in any jurisdiction
in which the Company operates being consistent with its current
expectations including, without limitation, the impact of any
political tensions and uncertainty in the Russian Federation and
Ukraine or any related sanctions and any other similar restrictions
or penalties imposed, or actions taken, by any government,
including but not limited to amendments to the mining laws, and
potential power rationing and tailings facility regulations in
Brazil, potential amendments to water laws and/or other water use
restrictions and regulatory actions in Chile, new dam safety
regulations, and potential amendments to minerals and mining laws
and energy levies laws, and the enforcement of labour laws in
Ghana, new regulations relating to work permits, potential
amendments to customs and mining laws (including but not limited to
amendments to the VAT) and the potential application of revisions
to the tax code in Mauritania, the European Union’s General Data
Protection Regulation or similar legislation in other jurisdictions
and potential amendments to and enforcement of tax laws in Russia
(including, but not limited to, the interpretation, implementation,
application and enforcement of any such laws and amendments
thereto), and the impact of any trade tariffs being consistent with
Kinross’ current expectations; (4) the completion of studies,
including optimization studies, improvement studies; scoping
studies and pre-feasibility and feasibility studies, on the
timelines currently expected and the results of those studies being
consistent with Kinross’ current expectations, including the
completion of the Lobo-Marte feasibility study; (5) 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; (6)
certain price assumptions for gold and silver; (7) prices for
diesel, natural gas, fuel oil, electricity and other key supplies
being approximately consistent with the Company’s expectations; (8)
production and cost of sales forecasts for the Company meeting
expectations; (9) the accuracy of: the current mineral reserve and
mineral resource estimates of the Company (including but not
limited to ore tonnage and ore grade estimates), future mineral
resource and mineral reserve estimates being consistent with
preliminary work undertaken by the Company, mine plans for the
Company’s current and future mining operations, and the Company’s
internal models; (10) labour and materials costs increasing on a
basis consistent with Kinross’ current expectations; (11) the terms
and conditions of the legal and fiscal stability agreements for the
Tasiast and Chirano operations being interpreted and applied in a
manner consistent with their intent and Kinross’ expectations and
without material amendment or formal dispute (including without
limitation the application of tax, customs and duties exemptions
and royalties); (12) goodwill and/or asset impairment potential;
(13) the regulatory and legislative regime regarding mining,
electricity production and transmission (including rules related to
power tariffs) in Brazil being consistent with Kinross’ current
expectations; (14) access to capital markets, including but not
limited to maintaining our current credit ratings consistent with
the Company’s current expectations; (15) that the Brazilian power
plants will operate in a manner consistent with our current
expectations; (16) that drawdown of remaining funds under the
Tasiast project financing will proceed in a manner consistent with
our current expectations; (17) potential direct or indirect
operational impacts resulting from infectious diseases or pandemics
such as the ongoing COVID-19 pandemic; (18) the effectiveness of
preventative actions and contingency plans put in place by the
Company to respond to the COVID-19 pandemic, including, but not
limited to, social distancing, a non-essential travel ban, business
continuity plans, and efforts to mitigate supply chain disruptions;
(19) changes in national and local government legislation or other
government actions, particularly in response to the COVID-19
outbreak; (20) litigation, regulatory proceedings and audits, and
the potential ramifications thereof, being concluded in a manner
consistent with the Corporation’s expectations (including without
limitation the ongoing industry-wide audit of mining companies in
Ghana which includes the Corporation’s Ghanaian subsidiaries,
litigation in Chile relating to the alleged damage of wetlands and
the scope of any remediation plan or other environmental
obligations arising therefrom, the ongoing litigation with the
Russian tax authorities regarding dividend withholding tax and the
ongoing Sunnyside litigation regarding potential liability under
the U.S. Comprehensive Environmental Response, Compensation, and
Liability Act); (21) that the Company will enter into definitive
documentation with the Government of Mauritania in accordance with,
and on the timeline contemplated by, the terms and conditions of
the term sheet, on a basis consistent with our expectations and
that the parties will perform their respective obligations
thereunder on the timelines agreed; (22) that the exploitation
permit for Tasiast Sud will be issued on timelines consistent with
our expectations; (23) that the benefits of the contemplated
arrangements will result in increased stability at the Company’s
operations in Mauritania; and (24) the Company’s financial results,
cash flows and future prospects being consistent with Company
expectations in amounts sufficient to permit sustained dividend
payments. 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: the
inaccuracy of any of the foregoing assumption, sanctions (any other
similar restrictions or penalties) now or subsequently imposed,
other actions taken, by, against, in respect of or otherwise
impacting any jurisdiction in which the Company is domiciled or
operates (including but not limited to the Russian Federation,
Canada, the European Union and the United States), or any
government or citizens of, persons or companies domiciled in, or
the Company’s business, operations or other activities in, any such
jurisdiction; reductions in the ability of the Company to transport
and refine doré; fluctuations in the currency markets; fluctuations
in the spot and forward price of gold or certain other commodities
(such as fuel and electricity); changes in the discount rates
applied to calculate the present value of net future cash flows
based on country-specific real weighted average cost of capital;
changes in the market valuations of peer group gold producers and
the Company, and the resulting impact on market price to net asset
value multiples; changes in various market variables, such as
interest rates, foreign exchange rates, gold or silver prices and
lease rates, or global fuel prices, that could impact the
mark-to-market value of outstanding derivative instruments and
ongoing payments/receipts under any financial 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,
production royalties, excise tax, customs/import or export
taxes/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, Mauritania, Ghana, or other
countries in which Kinross does 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;
litigation or other claims against, or regulatory investigations
and/or any enforcement actions, administrative orders or sanctions
in respect of the Company (and/or its directors, officers, or
employees) including, but not limited to, securities class action
litigation in Canada and/or the United States, environmental
litigation or regulatory proceedings or any investigations,
enforcement actions and/or sanctions under any applicable
anti-corruption, international sanctions and/or anti-money
laundering laws and regulations in Canada, the United States or any
other applicable jurisdiction; 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
ratings; 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, including but not limited to
resulting in an impairment charge on goodwill and/or assets. 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 this cautionary statement 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 Analysis” section of our
MD&A for the year ended December 31, 2019 and the Annual
Information Form dated March 30, 2020. 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.
Other information
Where we say "we", "us", "our", the "Company",
or "Kinross" in this presentation, 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
mineral properties contained in this presentation has been prepared
under the supervision of Mr. John Sims, an officer of the Company
who is a “qualified person” within the meaning of National
Instrument 43-101.
Source: Kinross Gold Corporation
1 Unless otherwise stated, production figures in this news
release are based on Kinross’ 90% share of Chirano production.
2 For more information, please see Mineral Reserve and Resource
estimates on page 5 of this news release.
3 Please see Kinross’ news release dated February 12, 2020 and
available on www.kinross.com for more information and detailed
assumptions.
4 These figures are non-GAAP financial measures and are defined
in the Company’s 2020 second-quarter news release dated July 29,
2020
5 2020 capital expenditures guidance excludes capitalized
interest of $55 million.
6 For more information on Kinross’ 2019 year-end mineral reserve
and resource estimates, including the material assumptions
underlying the estimates, please see the Company’s news release
titled “Kinross provides update on development projects and
full-year 2019 exploration results” and dated February 12,
2020.
7 For more information on Lobo-Marte’s mineral reserve and
resource estimates, including the material assumptions underlying
the estimates, please see the Company’s news release dated July 15,
2020.
Kinross Gold (NYSE:KGC)
Historical Stock Chart
From Aug 2024 to Sep 2024
Kinross Gold (NYSE:KGC)
Historical Stock Chart
From Sep 2023 to Sep 2024