Kinross Gold Corporation · TSX:K
Kinross Gold — Investor Presentation (September 2016)
71 slides from Kinross Gold's investor presentation, Sep 15, 2016
Slide 1: Kinross Gold Corporation 2016 GMP Sales Desk Presentation
September 15 KINROSS GOLD CORPORATION 2016 GMP Sales Desk Presentation 1 www.kinross.com
Slide 2: Cautionary Statement on Forward-Looking Information
CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION All statements, other than statements of historical fact, contained or incorporated by reference in or made in giving this presentation and responses to questions, including but not limited to any information as to the future performance of Kinross
Slide 3: Kinross Value Proposition
KINROSS VALUE PROPOSITION EXCELLENT OPERATIONAL TRACK RECORD • Continuing to meet or outperform our operational targets STRONG BALANCE SHEET • $2.2B in liquidity with net debt to EBITDA ratio of 1.0x ATTRACTIVE FUTURE GROWTH OPPORTUNITIES • Proceeding with TASIAST PHASE ONE; expected to reach full p
Slide 4: Delivering Operational Excellence
DELIVERING OPERATIONAL EXCELLENCE 4 www.kinross.com
Slide 5: Strong Track Record
OPERATIONAL EXCELLENCE STRONG TRACK RECORD 2012 2013 2014 2015 MET or EXCEEDED annual production guidance MET or came in UNDER annual cost of sales guidance MET or came in UNDER annual capital expenditures guidance CONSISTENTLY MEETING OR OUTPERFORMING TARGETS www.kinross.com
Slide 6: 2016 Production & Cost Outlook
OPERATIONAL EXCELLENCE 2016 PRODUCTION & COST OUTLOOK(4) Forecasting increased production in 2016 of over 2.7M oz. Au eq. Gold Equivalent Production(1) Production Cost of Sales(2) All-in Sustaining Cost(3) (millions) ($ per ounce) ($ per ounce) 2.7 – 2.9 $975 $890 to $990 2.6 $675 to $735 $696 2015
Slide 7: 2016 Outlook
OPERATIONAL EXCELLENCE 2016 OUTLOOK(4) 2016 PRODUCTION & COST OF SALES OUTLOOK Gold Production % of Total Production Cost of Sales(2) Region (000 Au eq. oz.) Production ($/oz. Au eq.) Americas 1,670 – 1,770 61% $730 - $790 West Africa 360 - 420 14% $850 - $920 (attributable) Russia 670 – 710 25% $46
Slide 8: Diversified Portfolio of Operating Mines
OPERATIONAL EXCELLENCE DIVERSIFIED PORTFOLIO OF OPERATING MINES Over RUSSIA 60% of estimated 2016 gold equivalent production from mines located in the Americas AMERICAS Dvoinoye Kupol Fort Knox Kettle River-Buckhorn Bald Mountain Round Mountain 2016E GOLD EQUIVALENT PRODUCTION(1,4) Tasiast 25% Chira
Slide 9: Americas
• Six mines located in the US, Brazil and Chile AMERICAS • Over 60% of annual production is from the Americas in 2016 9 www.kinross.com
Slide 10: Second Quarter 2016 Highlights: Americas
SECOND QUARTER 2016 HIGHLIGHTS AMERICAS • Strong performances at FORT KNOX, ROUND • PARACATU production increased due to MOUNTAIN, KETTLE-RIVER BUCKHORN and higher ore processed and benefits from the PARACATU tailings reprocessing initiative • BALD MOUNTAIN production higher compared Region receiv
Slide 11: Bald Mountain, Nevada
OPERATIONAL EXCELLENCE BALD MOUNTAIN, NEVADA Bald Mountain has the potential to be a long-life mine in Kinross’ portfolio Multiple opportunities to add to proven and probable mineral reserve estimates and extend estimated mine life • Near-Term: potential to double current proven and probable reserve
Slide 12: Near-Term Opportunities: Bald Mountain
BALD MOUNTAIN, NEVADA NEAR-TERM OPPORTUNITIES Focused on developing deposits in the North and South Zones which have potential to double mineral reserve estimates by end of Q1 2017 NORTH ZONE (100% Kinross) 2016 Priority Exploration Targets • Drilling to focus on converting estimated mineral resourc
Slide 13: Round Mountain, Nevada
OPERATIONAL EXCELLENCE ROUND MOUNTAIN, NEVADA Strong cash flow generator with opportunities to extend mine life STRONG NEAR-TERM CASH FLOW CONTRIBUTOR • Operation currently benefitting from previously-completed stripping campaign • Incremental, high-margin ounces from Process Solution Management (PS
Slide 14: Process Solution Management
ROUND MOUNTAIN, NEVADA PROCESS SOLUTION MANAGEMENT Achieving results from continuous improvement, with additional future opportunities OPPORTUNITY TO UNLOCK VALUE FROM THE HEAP LEACH PADS • Significant amount of ore stacked on the pads since heap leaching commenced in 1993 ~800Mt of ore stacked on
Slide 15: Maricunga Update
DISCIPLINED CAPITAL ALLOCATION MARICUNGA UPDATE Suspended mining and crushing operations at Maricunga in August • Reached a decision to suspend operations in Q4 2016 due to competing capital priorities • Suspension implemented in August, earlier than planned, due to operational restrictions imposed
Slide 16: Russia
• Continued strong performance from the high-grade, low-cost Kupol and RUSSIA Dvoinoye underground mines 16 www.kinross.com
Slide 17: Second Quarter 2016 Highlights: Russia
SECOND QUARTER 2016 HIGHLIGHTS RUSSIA KUPOL-DVOINOYE • Continued strong performance • Q2 production cost of sales decreased to $417/oz. Lowest level since Q2 2011 Benefiting from sustained favourable FX rates and rigorous cost management GOLD EQUIVALENT PRODUCTION PRODUCTION COST OF SALES ($/oz.
Slide 18: Kupol: Moroshka
EXPLORATION HIGHLIGHTS KUPOL: MOROSHKA Advancing development of the Moroshka satellite deposit located near Kupol mill HIGH-GRADE DEPOSIT • Located approximately 4km east of Kupol and within the Kupol license • Initial discovery in 2012 • Completed pre-feasibility study in 2015, adding ~180koz. to m
Slide 19: Dvoinoye: September North-East
EXPLORATION HIGHLIGHTS DVOINOYE: SEPTEMBER NORTH-EAST SEPTEMBER NORTH-EAST • Defined near-surface, high-grade M&I mineral resource estimate of 68koz. Au grading 32 g/t(7) • Material being fast-tracked to production, expected in 2017 DVOINOYE ZONE 1 • Located on the current mining lease • Drilling co
Slide 20: Foreign Investment
RUSSIA FOREIGN INVESTMENT The world’s leading companies continued to invest in Russia in 2016 20 www.kinross.com
Slide 21: Foreign Investment Advisory Council
RUSSIA FOREIGN INVESTMENT ADVISORY COUNCIL FIAC is chaired by the Russian Prime Minister and includes CEOs from over 50 international companies 21 www.kinross.com
Slide 22: West Africa
• Two operating mines located in a region with excellent growth and WEST exploration prospects AFRICA • Strong focus on optimizing efficiency and performance 22 www.kinross.com
Slide 23: West Africa
OPERATIONAL EXCELLENCE WEST AFRICA • TASIAST Q2 production lower due to 18-day strike and temporary suspension of mining and processing • Improved performance expected in H2 2016 • CHIRANO production decreased as site transitions from mining in the Awkaaba underground to Paboase Resulted in fewer
Slide 24: Tasiast Update
OPERATIONAL EXCELLENCE TASIAST UPDATE Normal mining and processing operations resumed in mid-August • Temporarily suspended mining and processing operations at Tasiast on June 18, 2016 due to expatriate work permit issues • Agreed on required “Mauritanization” plan to increase number of skilled nati
Slide 25: Tasiast District
EXPLORATION HIGHLIGHTS TASIAST DISTRICT Prospective 80km trend with encouraging results on near-mine and step-out targets Operating Mine Satellite deposit Imkebdene license New deposit 2015 FENNEC WEST BRANCH C67 Tmeimichat license C68 TAMAYA El Gaicha license Tasiast Sud license N’Daouas license Fo
Slide 26: Chirano, Ghana
EXPLORATION HIGHLIGHTS CHIRANO, GHANA Exploration focused on 8 km mine trend to target open-pit and underground extensions SURAW • Significant gold mineralization was extended 200 m south of the existing M&I mineral resource estimates and also 300 m down dip • 2015 results demonstrate upside potenti
Slide 27: Strong Financial Discipline
STRONG FINANCIAL DISCIPLINE 27 www.kinross.com
Slide 28: Solid Financial Position
STRONG BALANCE SHEET SOLID FINANCIAL POSITION Maintaining balance sheet strength & financial flexibility remain priority objectives LIQUIDITY POSITION(i) MAINTAINING FINANCIAL FLEXIBILITY • Robust cash flow generation added $218M to cash balance in Q2 2016 NO DEBT MATURITIES PRIOR TO 2020 $0.7 • Rep
Slide 29: Reduced Overhead
2016 OUTLOOK REDUCED OVERHEAD • 2016 overhead expense expected to be Overhead Expense US$165 million(4) (US$ millions) $208 • 20% REDUCTION year-over-year reflects savings from corporate headcount reduction $165 • Benefits from lower Canadian dollar reflected in guidance 2015 2016E (4) Overhead expe
Slide 30: Fuel & Currency Hedges
FINANCIAL DISCIPLINE FUEL & CURRENCY HEDGES Managing exposure to fluctuations in foreign currency and input commodity prices • Strategic decision to hedge 50% of the Tasiast Phase One project’s fuel oil requirements at $46/bbl for next 36 months Will look for additional opportunities to hedge an a
Slide 31: Currency & Oil Benefits
2016 OUTLOOK CURRENCY & OIL BENEFITS Well-positioned to benefit from further currency and oil weakness • Benefits of favourable FX and oil prices 2016 Budget Assumptions & Sensitivities(4) partially offsetting lower gold prices Budget Spot(i) 110 Gold US$1,100 US$1,345 100 Oil US$55/bbl. US$45/bbl.
Slide 32: Attractive Growth Opportunities
ATTRACTIVE GROWTH OPPORTUNITIES 32 www.kinross.com
Slide 33: Results of the Tasiast Two-Phased Expansion Studies
TASIAST EXPANSION PROJECT RESULTS OF THE TASIAST TWO-PHASED EXPANSION STUDIES • Two-phased approach offers an attractive path to Tasiast’s significant growth potential at a significantly lower forecast capital cost than previously estimated • Proceeding with Phase One of the expansion 33 www.kinross
Slide 34: Tasiast, Mauritania
ATTRACTIVE GROWTH OPPORTUNITIES TASIAST, MAURITANIA • Existing mine with an 8,000 t/d mill originally designed to process ore from a series of small open pits 34 www.kinross.com
Slide 35: Large Orebody with Low Execution Risk
TASIAST EXPANSION PROJECT LARGE OREBODY WITH LOW EXECUTION RISK Challenge is to right-size the processing capacity to capture the full value and potential of Tasiast’s large mineral resource estimate RELATIVELY LOW-RISK BROWNFIELDS EXPANSION PROJECT • Have owned and operated the mine for over 5 year
Slide 36: Phased Approach to a Tasiast Mill Expansion
DISCIPLINED PROJECT DEVELOPMENT PHASED APPROACH TO A TASIAST MILL EXPANSION • Phase One expansion offers a number of expected attractive attributes: Leverages existing infrastructure Relatively low execution risk Manageable capital expenditure Robust economics on a stand-alone basis Offers
Slide 37: Two-Phased Expansion Concept: Phase One
TASIAST EXPANSION PROJECT TWO-PHASED EXPANSION CONCEPT PHASE ONE: EXPANSION TO 12,000 t/d • Leverages existing mill infrastructure to increase throughput to 12,000 t/d from 8,000 t/d • Includes installation of an oversized 40’ SAG mill and gyratory crusher • Enhances processing of the harder, higher
Slide 38: Phase One Feasibility Study Results
TASIAST EXPANSION PROJECT PHASE ONE FEASIBILITY STUDY RESULTS Phase One expected to reduce cost per ounce by ~50% and to increase annual production by ~90% Metric Estimates Average annual production (2018-2027) 409,000 ounces Production cost of sales (2018-2027) $535 per ounce All-in sustaining cost
Slide 39: Two-Phased Expansion Concept: Phase Two
TASIAST EXPANSION PROJECT TWO-PHASED EXPANSION CONCEPT PHASE TWO: EXPANSION TO 30,000 t/d • Contemplates installation of an additional 18,000 t/d of throughput capacity for a total combined capacity of 30,000 t/d • Project would consist of: • Replacing the two current ball mills with a larger, new b
Slide 40: Phase Two Pre-Feasibility Study Results
TASIAST EXPANSION PROJECT PHASE TWO PRE-FEASIBILITY STUDY RESULTS Combined Phase One and Two expansion expected to transform Tasiast into Kinross’ largest mine with estimated costs amongst the lowest in our portfolio Metric Estimates for Phase One and Two combined Average annual production (2020-202
Slide 41: Two-Phased Approach: Capital Discipline
TASIAST EXPANSION PROJECT TWO-PHASED APPROACH: CAPITAL DISCIPLINE Objective was to achieve similar production and cost output as the 38k t/d case with significantly lower initial and sustaining capital Estimates for Phase One & Estimates for Previous Metric Two Combined 30k t/d 38k t/d Scenario Aver
Slide 42: Reduced Capex Estimate
TASIAST EXPANSION PROJECT REDUCED CAPEX ESTIMATE Phase One and Phase Two combined initial capital estimated to be $920 million(i) FACTORS DRIVING THE LOWER ESTIMATED INITIAL CAPITAL COST • Most of the equipment is smaller (e.g. crusher) Smaller Smaller scalescale • Fewer units required (e.g. few lea
Slide 43: Reduced Sustaining Capital
TASIAST EXPANSION PROJECT REDUCED SUSTAINING CAPITAL Expecting significant sustaining capital savings FACTORS DRIVING THE LOWER ESTIMATED SUSTAINING CAPITAL • Highly confident seawater pipeline no longer required Results of hydrological and hydrogeological studies increased confidence that an expa
Slide 44: Phase Two: Next Steps
TASIAST EXPANSION PROJECT PHASE TWO: NEXT STEPS Phase Two pre-feasibility study envisions full production beginning in 2020 • The timeline contemplated in the pre- feasibility study assumes: Initiating a feasibility study in late 2016 Being in a position to make a decision in late 2017 If a po
Slide 45: Tasiast Expansion Project Site Layout
Airstrip Camp New SAG mill New stockpile Phase One and Two expansions New crusher West Branch Pit Truck shop Piment pits Dump leach Power Plant ADR plant Current tailings facility Phase One tailings facility TASIAST EXPANSION PROJECT SITE LAYOUT 45 www.kinross.com
Slide 46: Sensitivities Table
TASIAST EXPANSION PROJECT SENSITIVITIES TABLE PHASE ONE GOLD PRICE SENSITIVITY ESTIMATES $1,100 $1,200 $1,300 $1,400 $1,500 IRR 13% 20% 26% 33% 40% NPV $345M $635M $910M $1.2B $1.5B PHASE ONE AND PHASE TWO COMBINED GOLD PRICE SENSITIVITY ESTIMATES $1,100 $1,200 $1,300 $1,400 $1,500 IRR 12% 17% 22% 2
Slide 47: Illustrative Mine Plan Schedule (30k t/d)
TASIAST EXPANSION PROJECT ILLUSTRATIVE MINE PLAN SCHEDULE (30k t/d) 2017 2019 2020 2016 2018 2021 2019 2019 2022 2016 2017 2020 2017 2020 2018 2023 2019 2021 2024 2022 2023 2025 2026 For additional information, please refer to the Tasiast Technical Report dated March 30, 2016, available on our websi
Slide 48: Phase W - Overview
ROUND MOUNTAIN PHASE W PHASE W - OVERVIEW Phase W is an opportunity to potentially extend estimated mine life • Phase W is a large zone of known mineralization at depth and to the west of the open-pit Geological extension of the same deposit that has been mined for past 38 years • Declared an addi
Slide 49: Phase 1 Scoping Study Results
ROUND MOUNTAIN PHASE W PHASE 1 SCOPING STUDY RESULTS • Focused on a 1.3Moz portion of the • Initial results of Phase 1 looks encouraging; new resource estimate (Phase 1)(5,6), more work required which could extend mine life Post-scoping optimization studies planned 51Mt with an average grade of
Slide 50: La Coipa Project
ORGANIC GROWTH OPPORTUNITIES LA COIPA PROJECT • Pre-feasibility study on La Coipa completed during Q3 2015 • Project offers a number of expected attractive attributes: Leverages existing infrastructure Relatively low execution risk Modest capital investment Exploration upside Located in an
Slide 51: La Coipa, Chile
EXPLORATION HIGHLIGHTS LA COIPA, CHILE Encouraging results along a prospective 3 km trend The Pompeya deposit is also referred to as La Coipa Phase 7. For additional information, please see Kinross’ news release dated February 10, 2016 and Appendices A and B, which are available on our website at 51
Slide 52: Compelling Valuation
COMPELLING VALUATION 52 www.kinross.com
Slide 53: Track Record Over the Past Four Years
LOWERED 4 annual capex by MET $1.9 $1.3B guidance $1.3 Consecutive targets $0.6 $0.6 years Produced over 2012 2013 2014 2015 10Moz. DECREASED STRENGTHENED gold equivalent all-in balance $950M sheet sustaining Debt repaid 10% cost $2.2 BILLION Liquidity position TRACK RECORD OVER THE PAST FOUR YEARS
Slide 54: Net Debt to EBITDA (LTM)
COMPELLING RELATIVE VALUE NET DEBT TO EBITDA (LTM) Net debt to EBITDA ratio of 1.0x as of June 30, 2016 2.5 2.3 1.6 1.4 1.3 1.0 Yamana Barrick Goldcorp Newmont Agnico Kinross Source: Bloomberg, company reports. 54 www.kinross.com
Slide 55: Enterprise Value versus Production
COMPELLING RELATIVE VALUE ENTERPRISE VALUE VERSUS PRODUCTION Market capitalization $29.0 Enterprise value Multiple of 2016E Gold Delta with Kinross Production Kinross $26.3 Enterprise (Moz.)(ii) (US$B) Value Enterprise value (US$ billions)(i) Barrick 5.3 22.9 4.8 Newmont 5.1 20.2 4.3 $16.1 Goldcorp
Slide 56: 2016E Metrics
COMPELLING RELATIVE VALUE 2016E METRICS Attractive value opportunity relative to peers, considering Kinross’ annual production, cost structure, track record and growth opportunities EV / 2016E EBITDA P / 2016E OPERATING CF 13.4 14.5 10.5 11.0 8.2 7.5 7.4 8.0 7.8 6.5 4.9 4.8 Agnico Goldcorp Newmont Y
Slide 57: Building Momentum for the Future
2020E Start-up of potential 2018E TASIAST PHASE TWO TASIAST PHASE 2017E ONE expected to ramp up to full 2016E Stronger year production expected at Expecting to BALD MOUNTAIN deliver HIGHER production BUILDING MOMENTUM FOR THE FUTURE 57 www.kinross.com
Slide 58: Appendix
APPENDIX 58 www.kinross.com
Slide 59: 2016 Capital Expenditures Outlook
FINANCIAL DISCIPLINE 2016 CAPITAL EXPENDITURES OUTLOOK(4) 2016 capital expenditures are expected to be $755 million, including estimated capitalized interest of $25 million Region Sustaining Non-Sustaining Regional Total Americas $220 $10 $230 West Africa $120 $280 $400 Russia $85 $10 $95 Corporate
Slide 60: Fort Knox, USA (100%)
AMERICAS FORT KNOX, USA (100%) Among the world’s few cold climate heap leach facilities • Impressive track record of operational excellence • Achieved its 2nd highest production level in 2015, Fort Knox’s 19th year in operation • Estimated mine life: mill – 2018; mining – 2020* OPERATING RESULTS(2)
Slide 61: Bald Mountain, USA (100%)
AMERICAS BALD MOUNTAIN, USA (100%) Forecasting strong near-term cash flow with significant upside potential • Acquired in January 2016 from Barrick • ~600 km2 under-explored land package among the largest in the United States • Well-capitalized operation: previous owner invested ~$385M over the past
Slide 62: Round Mountain, USA (100%)
AMERICAS ROUND MOUNTAIN, USA (100%) Strong cash flow generator with opportunities to extend mine life • Incremental, high-margin ounces from Process Solution ESTIMATED MINE LIFE* Management (PSM) 16 17 18 19 20 21 22 23 - 27 • Opportunity to extend mine life beyond current estimates Mining with Phas
Slide 63: Kettle River-Buckhorn, USA (100%)
AMERICAS KETTLE RIVER-BUCKHORN, USA (100%) Low-cost, high-grade underground mine located in Washington state • Historically, a significant cash flow contributor with costs among the lowest in the portfolio • Estimated mine life: late 2016* OPERATING RESULTS(2) 2014 2015 Production (Au. Eq. oz.) 123,
Slide 64: Paracatu, Brazil (100%)
AMERICAS PARACATU, BRAZIL (100%) Large gold mine with a long mine life that extends to 2030 • Paracatu is among the world’s largest gold operations with annual throughput of ~60Mt • Realizing benefits from weakness in the Brazilian real • Estimated mine life: 2030* OPERATING RESULTS(2) 2014 2015 Pro
Slide 65: Maricunga, Chile (100%)
AMERICAS MARICUNGA, CHILE (100%) High-altitude heap leach operation located in the highly prospective Maricunga District • Operations suspended Q3 2016 • Will continue to explore further permitting efforts and review the operation and its mineral resource model to consider possible options for re-st
Slide 66: La Coipa Project: Pre-Feasibility Study Results
PRE-FEASIBILTY STUDY RESULTS LA COIPA PROJECT Project expected to generate a 20% IRR at an assumed gold price of $1,200 per ounce • PFS based on using existing infrastructure to blend and process higher grade material from the recently delineated Phase 7 deposit with oxide/transition material from t
Slide 67: La Coipa Project: Pre-Feasibility Study Results
PRE-FEASIBILTY STUDY RESULTS LA COIPA PROJECT • The pre-feasibility study estimates a 5.5 year mine life, following receipt of permits and commencement of stripping Processing expected to commence 1.5 years after pre-stripping has been initiated and continue for 4 years • Received project DIA appr
Slide 68: Kupol-Dvoinoye (100%)
RUSSIA KUPOL-DVOINOYE (100%) Our Russian operations are a model for successfully operating in a remote location • High-grade, low-cost underground mines • Estimated mine life: Kupol – 2020; Dvoinoye – 2018* OPERATING RESULTS(2) 2014 2015 Production (Au. Eq. oz.) 751,101 758,563 Production cost of sa
Slide 69: Chirano, Ghana (90%)
WEST AFRICA CHIRANO, GHANA (90%) Cost reductions achieved at Chirano by transitioning to self-perform mining • Expecting higher production and lower costs in the second half of the year • Exploration focused on 8 km mine trend to target open-pit and underground extensions • Estimated mine life: 2021
Slide 70: Tasiast, Mauritania (100%)
WEST AFRICA TASIAST, MAURITANIA (100%) Operating mine with a large gold resource located in a prospective district • Proceeding with Phase One of the expansion, with Phase Two an option to further add significant production • Estimated mine life: Phase One – 2033; if we proceed with a Phase Two expa
Slide 71: Endnotes
ENDNOTES 1) Unless otherwise noted, gold equivalent production, gold equivalent ounces sold and production cost of sales figures in this presentation are based on Kinross’ 90% share of Chirano production and sales. 2) Attributable production cost of sales per gold equivalent ounce sold and per gold
Kinross Gold — Investor Presentation (September 2016) on 6ix