Kinross Gold Corporation · TSX:K
Kinross Gold — 2016 European Gold Forum
72 slides from Kinross Gold's conference presentation, Apr 19, 2016
Slide 1: Kinross Gold Corporation 2016 European Gold Forum
April 19-20 KINROSS GOLD CORPORATION 2016 European Gold Forum 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 • $2.2B in liquidity with net debt to EBITDA ratio of 1.2x • Repaid the Kupol loan during Q3, ahead of schedule ATTRACTIVE FUTURE GROWTH OPPORTUNITIES • Procee
Slide 4: Delivering Operational Excellence
DELIVERING OPERATIONAL EXCELLENCE 4 www.kinross.com
Slide 5: Strong Track Record
OPERATIONAL EXCELLENCE STRONG TRACK RECORD 2012 2013 2014 2015 MET or EXCEEDED annual production guidance MET or came in UNDER annual cost of sales guidance MET or came in UNDER annual capital expenditures guidance CONSISTENTLY MEETING OR OUTPERFORMING TARGETS www.kinross.com
Slide 6: Delivering Strong Performance
2015 HIGHLIGHTS DELIVERING STRONG PERFORMANCE Continued track record of meeting or beating our operational targets • Operations delivered solid results in 2015: HIGH-END of 2015 revised guidance for production LOW-END of 2015 revised guidance for cost of sales and all-in sustaining cost BELOW
Slide 7: 2016 Production & Cost Outlook
OPERATIONAL EXCELLENCE 2016 PRODUCTION & COST OUTLOOK(4) Forecasting record production and lower all-in sustaining cost in 2016 Gold Equivalent Production(1) Production Cost of Sales(2) All-in Sustaining Cost(3) (millions) ($ per ounce) ($ per ounce) 2.7 – 2.9 $975 $890 to $990 2.6 $675 to $735 $696
Slide 8: 2016 Outlook
OPERATIONAL EXCELLENCE 2016 OUTLOOK(4) 2016 PRODUCTION & COST OF SALES OUTLOOK Gold Production % of Total Production Cost of Sales(2) Region (000 Au eq. oz.) Production ($/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 9: 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 10: Americas
• Six mines located in the US, Brazil and Chile AMERICAS • Over 60% of annual production is from the Americas in 2016 10 www.kinross.com
Slide 11: Americas
OPERATIONAL EXCELLENCE AMERICAS 2016E: Expected to produce 1.67-1.77Moz. Au eq. at cost of sales of $730-$790/oz.(4) 2015 HIGHLIGHTS Fort Knox • Region met 2015 production and cost guidance, despite unforeseen weather challenges in Chile & Brazil • FORT KNOX produced over 400koz., second highest lev
Slide 12: Bald Mountain, Nevada
OPERATIONAL EXCELLENCE BALD MOUNTAIN, NEVADA Quality producing mine with significant exploration potential EXCELLENT FIT WITHIN KINROSS’ PORTFOLIO • Open-pit run-of-mine heap leach operation Opportunity to leverage Kinross’ expertise as a world-class open-pit and heap leach operator • Large estima
Slide 13: Bald Mountain Exploration
OPERATIONAL EXCELLENCE BALD MOUNTAIN EXPLORATION Bald Mountain to be a priority focus of Kinross’ 2016 exploration program 2016 SPENDING 2016 Priority Exploration Targets ~15km • Allocated $6M of exploration budget to Bald Mountain • Immediate priority is within the footprint of the active Winrock m
Slide 14: Round Mountain CI Benefits
OPERATIONAL EXCELLENCE ROUND MOUNTAIN CI BENEFITS 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 ~950Mt of ore stacked on
Slide 15: Process Solution Management (PSM)
OPERATIONAL EXCELLENCE PROCESS SOLUTION MANAGEMENT (PSM) Unlocking value through heap leach optimization projects IMPROVING LEACH PERFORMANCE • Re-grading areas of the heap • Enhancing application rate of solution to older ore • Optimizing efficient leaching of the entire pad IMPROVING RECOVERY • Im
Slide 16: Paracatu, Brazil
OPERATIONAL EXCELLENCE PARACATU, BRAZIL Large gold mine with a long mine life that extends to 2030 SIGNIFICANT GOLD PRODUCTION • Paracatu produced 478koz. at a cost of sales of $772/oz. in 2015 • Costs continuing to benefit from weakening local currency ACHIEVING RESULTS THROUGH CONTINUOUS IMPROVEME
Slide 17: 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 18: 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 18
Slide 19: Russia
• Continued strong performance from the high-grade, low-cost Kupol and RUSSIA Dvoinoye underground mines 19 www.kinross.com
Slide 20: Russia
OPERATIONAL EXCELLENCE RUSSIA 2016E: Expected to produce 670-710koz. Au eq. at cost of sales of $460-$490/oz.(4) 2015 HIGHLIGHTS • Continued outperformance of the combined KUPOL-DVOINOYE operation • Production increased year-over-year due to an increase of tonnes mined at DVOINOYE • KUPOL mill achie
Slide 21: 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 mi
Slide 22: September North-East
EXPLORATION HIGHLIGHTS SEPTEMBER NORTH-EAST SEPTEMBER NORTH-EAST • Defined near-surface, high-grade M&I mineral resource estimate of 68koz. Au grading 32 g/t(5) • Material being fast-tracked to production, expected in 2017 DVOINOYE ZONE 1 • Located on the current mining lease • Drilling confirmed co
Slide 23: Foreign Investment
RUSSIA FOREIGN INVESTMENT The world’s leading companies continued to invest in Russia in 2016 23 www.kinross.com
Slide 24: 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 24 www.kinross.com
Slide 25: West Africa
• Two operating mines located in a region with excellent growth and WEST exploration prospects AFRICA • Strong focus on optimizing efficiency and performance 25 www.kinross.com
Slide 26: West Africa
OPERATIONAL EXCELLENCE WEST AFRICA 2016E: Expected to produce 360-420koz. Au eq. at cost of sales of $850-$920/oz.(4) 2015 HIGHLIGHTS • Production at the high-end and cost of sales at the low-end of 2015 guidance ranges • Cost of sales at TASIAST improved in Q4 as a result of continuous improvement
Slide 27: Tasiast, Mauritania
OPERATIONAL EXCELLENCE TASIAST, MAURITANIA In Q4 2015, Tasiast achieved lowest cost of sales since Q1 2013 COST REDUCTIONS • Reduced oil and labour costs benefitting operation Reduced workforce by 240 employees CONTINUOUS IMPROVEMENT BENEFITS • Comprehensive review of crushing and grinding circuit
Slide 28: 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 29: 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 30: Strong Financial Discipline
STRONG FINANCIAL DISCIPLINE 30 www.kinross.com
Slide 31: Solid Financial Position $2.2B
STRONG BALANCE SHEET SOLID FINANCIAL POSITION Maintaining balance sheet strength & financial flexibility remain priority objectives PRO-FORMA LIQUIDITY POSITION(i) MAINTAINING FINANCIAL FLEXIBILITY • Improved balance sheet during 2015: Added $60M to cash position, ending the period with over $1.0B
Slide 32: 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 33: Fuel & Currency Hedges
FINANCIAL DISCIPLINE FUEL & CURRENCY HEDGES Managing exposure to fluctuations in foreign currency and input commodity prices • Made strategic decision to reduce tenor and amount of oil and currency hedges: Prefer to be hedged no more than 18 months out No more than 50% of exposure Summary of for
Slide 34: 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$1,258 100 Oil US$55/bbl. US$40/bbl.
Slide 35: Attractive Growth Opportunities
ATTRACTIVE GROWTH OPPORTUNITIES 35 www.kinross.com
Slide 36: 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 36 www.kinross
Slide 37: 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 37 www.kinross.com
Slide 38: 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 39: 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 40: 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 41: 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 / Estimate Estimates Average annual production (2018-2027) 409,000 ounces Production cost of sales (2018-2027) $535 per ounce All-in sust
Slide 42: Advancing Phase One
TASIAST EXPANSION PROJECT ADVANCING PHASE ONE Phase One expected to ramp up to full production in Q1 2018 CONSTRUCTION AND ENGINEERING • Preparations for construction activities is expected to commence immediately • Engineering work is 35% complete Expected to reach 80% by end of July 2016 • Proje
Slide 43: 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 consists of: • Replacing the two current ball mills with a larger, new ball m
Slide 44: 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 / Estimate Phase One and Two combined Average annual production (2020-2026)
Slide 45: 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 Phase One & Two Combined Metric / Estimate Previous 38k t/d Scenario 30k t/d Average annual produc
Slide 46: 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 47: 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 48: 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 49: Compelling Valuation
COMPELLING VALUATION 49 www.kinross.com
Slide 50: Growing Production, Reducing Costs
COMPELLING RELATIVE VALUE GROWING PRODUCTION, REDUCING COSTS Expecting record production in 2016, with a lower all-in sustaining cost GOLD PRODUCTION(i) ALL-IN SUSTAINING COST(ii) 2015 vs. 2016E 2015 vs. 2016E 6% 7% 0% 4% -1% % change % change -7% -1% -15% -15% -4% -4% -5% Kinross Newmont Yamana Agn
Slide 51: Net Debt to EBITDA (LTM)
COMPELLING RELATIVE VALUE NET DEBT TO EBITDA (LTM) Net debt to EBITDA ratio of 1.2x well-within debt covenant of 3.5x 3.1 2.3 1.9 1.3 1.2 1.1 Yamana Barrick Goldcorp Newmont Kinross Agnico Source: Bloomberg, company reports. Kinross net debt to EBTIDA ratio adjusted to reflect Nevada transaction whi
Slide 52: Enterprise Value versus Production
COMPELLING RELATIVE VALUE ENTERPRISE VALUE VERSUS PRODUCTION $28.8 Market capitalization Enterprise value Multiple of 2016E Gold Delta with Kinross Production Kinross Enterprise (Moz.)(ii) (US$B) Value $22.8 Enterprise value (US$ billions)(i) Barrick 5.3 22.6 4.6 $17.3 Newmont 5.1 16.6 3.7 Goldcorp
Slide 53: 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 13.1 13.1 11.6 10.5 9.5 8.8 8.5 8.1 8.0 6.4 5.4 5.0 Agnico Goldcorp Newmont B
Slide 54: Track Record Over the Past Four Years
LOWERED 4 years MET guidance Consecutive targets $1.9 2012 annual capex by $1.3 2013 $1.3B $0.6 2014 $0.6 2015 Produced over 10Moz. DECREASED MAINTAINED gold equivalent all-in a strong $700M balance sustaining Debt repaid sheet 10% cost $2.2 BILLION Liquidity position TRACK RECORD OVER THE PAST FOUR
Slide 55: Appendix
APPENDIX 55 www.kinross.com
Slide 56: 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 57: 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 2nd highest production level in 2015, its 19th year in operation • Estimated mine life: mill – 2018; mining – 2020* OPERATING RESULTS(2) 2014 2015 Pr
Slide 58: 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 59: Round Mountain, USA (100%)
AMERICAS ROUND MOUNTAIN, USA (100%) Round Mountain is a best-practice leader in many areas, including preventative maintenance • Production & cost benefits of an ongoing long-term continuous improvement project focused on enhancing heap leach performance and improvements to recovery • Estimated mine
Slide 60: 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 61: 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 62: Maricunga, Chile (100%)
AMERICAS MARICUNGA, CHILE (100%) High-altitude heap leach operation located in the highly prospective Maricunga District • Focused on improving operating efficiencies and reducing costs • Estimated mine life: mining – mid-2018; heap leach processing – 2020* OPERATING RESULTS(2) 2014 2015 Production
Slide 63: 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 64: La Coipa Project
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 ADDITIONAL OPERATING METRIC
Slide 65: 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 66: Chirano, Ghana (90%)
WEST AFRICA CHIRANO, GHANA (90%) Cost reductions achieved at Chirano by transitioning to self-perform mining • Chirano is now among our lowest cost operations following transition to self-perform mining in open pits and underground • Estimated mine life: 2021* OPERATING RESULTS(1,2) 2014 2015 Produc
Slide 67: 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 68: Tasiast Expansion 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 SITE LAYOUT 68 www.kinross.com
Slide 69: 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 70: 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 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
Slide 72: Kinross Gold Corporation
KINROSS GOLD CORPORATION 25 York Street, 17th Floor │Toronto, ON │ M5J 2V5 www.kinross.com 72 www.kinross.com