2005 marked by strong revenues and completion of comprehensive review
resulting in non-cash charges and investment in future growth
TORONTO, March 30 /CNW/ - Kinross Gold Corporation (TSX-K; NYSE-KGC)
("Kinross" or the "Company"), announced today its unaudited results for the
fourth quarter and year ended December 31, 2005.
(All dollar amounts in this press release are expressed in U.S. dollars,
unless otherwise noted)
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Highlights as at year end 2005
- Kinross achieved its planned production of 378,533 gold equivalent
ounces for the fourth quarter and 1,608,805 gold equivalent ounces for
the year. Gold equivalent sales were 389,037 ounces in the fourth
quarter and 1,627,675 ounces for the year at a cost of sales per
ounce(1) of $285 per ounce for the fourth quarter and $275 per
ounce for the year.
- Net loss of $154.3 million, or $0.45 per share in the fourth quarter
and net loss for the year of $216.0 million or $0.63 per share.
Contributing to the net loss in the fourth quarter were non-cash
impairment charges of $147.2 million (which included a charge of
$141.8 related to the Fort Knox operations in Alaska), or
$184.7 million for the year (which also includes the previously
reported impairment charge of $36.8 million related to the Aquarius
project). Also included were accruals for future reclamation
obligations of $47.0 million for the fourth quarter and $56.0 million
for the year.
- Revenue in the fourth quarter was $190.0 million and $725.5 million
for the year. At year end, revenue was 9% higher year-over-year mainly
due to increased gold prices.
- Cash flow from operating activities in the fourth quarter was
$23.8 million and $133.7 million for the year down from $161.2 million
in 2004 primarily due to higher operating costs and changes in working
capital.
- Kinross' cash position was $97.6 million at year end, up from
$47.9 million at year end last year.
- Capital expenditures were $32.9 million in the fourth quarter and
$142.4 million for the year.
- Gold reserves increased 27% year-over-year to 24.7 million ounces.
- Strengthened management team and completed a comprehensive strategic
review of Kinross' assets and investments. Disposed of non-core assets
and prioritized exploration and acquisition targets.
- Steps commenced to increase future production through successful
refurbishment and restart of the Refugio mine in Chile and Crown
Resources agreement extended with amended terms.
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(1) Cost of sales per ounce is computed by dividing cost of sales by gold
equivalent ounces sold.
<<
Summary of financial and operating results
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Fourth Quarter Years ended
December 31,
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(dollars in millions, except 2005 2004 2005 2004
per share amounts)
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Gold equivalent ounces -
produced 378,533 424,484 1,608,805 1,653,784
Gold equivalent ounces -
sold (a) 389,037 413,966 1,627,675 1,654,617
Metal sales $ 190.0 $ 179.2 $ 725.5 $ 666.8
Cost of sales (excludes
accretion and reclamation
expenses, depreciation,
depletion and
amortization) $ 110.9 $ 104.2 $ 448.1 $ 402.4
Accretion and reclamation
expenses $ 47.0 $ 14.8 $ 56.0 $ 21.4
Impairment of goodwill $ 2.0 $ 12.4 $ 8.7 $ 12.4
Impairment of property,
plant and equipment $ 141.8 $ 46.1 $ 171.9 $ 46.1
Operating loss $ (176.4) $ (81.4) $ (211.2) $ (67.9)
Net loss $ (154.3) $ (88.0) $ (216.0) $ (63.1)
Basic and diluted loss
per common share $ (0.45) $ (0.25) $ (0.63) $ (0.18)
Cash flow from operating
activities $ 23.8 $ 57.9 $ 133.7 $ 161.2
Realized gold price $ 491 $ 434 $ 445 $ 404
Cost of sale per
ounce sold $ 285 $ 252 $ 275 $ 243
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(a) Gold equivalent ounces include silver ounces produced converted to
gold based on the ratio of the average spot market prices for the
commodities for each year. The ratios were 2005-60.79:1 and
2004-61.46:1.
Revenue from metal sales increased by 9% year-over-year to $725.5 million
in 2005 from $666.8 million in 2004. The increase was primarily as a result of
a higher realized gold price. During 2005, the Company realized an average
price of $445 per ounce on the sale of its gold against an average spot price
of gold for the year of $444 per ounce. During 2004, the Company realized an
average gold price of $404 per ounce versus an average spot price of
$409 per ounce.
"In 2005, Kinross operations delivered strong results in terms of
production and cost of sales. We completed a comprehensive review of our
assets, investments and reserves and as a result took a number of non-cash
charges which negatively impacted our earnings."
"When I joined Kinross a year ago, we knew that 2005 would be a year of
strengthening and refocusing Kinross for the future and resolving accounting
matters," said Tye Burt, President and Chief Executive Officer of Kinross. "We
are now driving ahead with a strategic blueprint for growth in net assets and
cash flow for shareholders guided by our four point plan. Key aspects include
growth from core operations, expanding our systems and operational capacity,
attracting and retaining the industry's best people and seeking new
acquisitions and exploration opportunities."
"Kinross' investments will serve the Company well in 2006 and beyond.
Historically strong gold prices, turning the corner on merger and accounting
matters and implementing the four point plan have created a strong platform
for the Company," added Burt. "Our pipeline of in-house projects provides an
exciting opportunity to create further shareholder value."
In 2005, gold equivalent ounces sold were similar to sales in 2004.
Production and ounces sold decreased at Fort Knox, Round Mountain, Lupin, New
Britannia and La Coipa. This was partially offset by increases at Kubaka,
Musselwhite and attributable production at Paracatu due to the purchase of the
remaining 51% at the end of 2004.
Between 2004 and 2005, cost of sales increased largely due to
industry-wide factors such as higher costs of fuel, power, labour and other
production costs. In addition, the weakening of the U.S. dollar has increased
costs at the Company's mines not located in the United States. Approximately
half of Kinross' production and over 60% of our costs are based in U.S.
dollars which have helped to insulate the Company from rising costs related to
foreign exchange.
"Kinross is committed to continuous improvement and cost control," said
Burt. "As a non-hedged producer, we benefit from the full upside of higher
gold prices. These factors contribute to a competitive cash margin per ounce."
Accretion and reclamation expenses increased to $56.0 million in 2005,
from $21.4 million in 2004. Accretion and reclamation expenses are comprised
of $46.0 million related to increased long-term cost estimates of reclamation
costs at mines no longer in production resulting from reclamation plan changes
and increased cost estimates mainly due to higher costs for fuel and
contractors and $10.0 million of annual charges.
Non-cash impairment charges of $184.7 million in 2005 included a charge
at the Fort Knox operation of $141.8 million and a $30.1 million asset
impairment charge related to the Aquarius project recorded in the third
quarter of 2005.
During 2005, Kinross conducted a comprehensive review of its assets and
investments. This review included an assessment of the Fort Knox operation to
examine the impact of higher operating costs as result of electricity costs,
increased fuel prices and lower grade ore at the True North deposit. As
previously disclosed, True North and Gil deposits were reclassified from
reserves to resources and Kinross elected to withdraw from the Ryan Lode
project. These factors contributed to the $141.8 million non-cash impairment
charge relating to the Fort Knox operation. Kinross utilized the same
impairment methodology as in 2004, using nominal prices and cost assumptions
reflecting inflation and currency impacts. The gold price assumptions utilized
were based on gold price forecasts by an independent external research firm as
well as other external market data.
Analysis of Operating Loss (for the year ended December 31, 2005)
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As reported Adjusted
in US$ millions per GAAP Adjustments Earnings(1)
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Metal sales $ 725.5 $ - $ 725.5
Cost of sales
(excludes accretion and
reclamation expenses,
depreciation, depletion
and amortization) 448.1 - 448.1
Accretion 56.0 (46.0) 10.0
Depreciation, depletion
and amortization 167.7 - 167.7
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53.7 46.0 99.7
Other operating costs 14.3 - 14.3
Exploration and business
development 26.6 - 26.6
General and administrative 45.3 (10.0) 35.3
Impairment charges: - -
Goodwill 8.7 (8.7) -
Property, plant and
equipment 171.9 (171.9) -
Investments 4.1 (4.1) -
Gain on disposal of assets (6.0) 6.0 -
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Operating (loss) earnings $ (211.2) $ 234.7 $ 23.5
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1. Adjusted earnings shown in the table above is a non-GAAP measure and
is provided to give a breakdown of the operating loss.
General and administrative expenses increased to $45.3 million, from
$36.4 million in 2004. The increase was largely due to costs related to the
regulatory review of the Company's accounting for goodwill and subsequent
restatement and other one-time charges. Other general and administrative costs
of approximately $10.0 million related primarily to the review of Kinross'
financial statements and organizational changes.
Cash flow from operating activities during 2005 decreased by
$27.5 million to $133.7 million. The decrease in operating cash flow in 2005
was the result of higher operating costs and changes in working capital
requirements, partially offset by higher gold prices.
Kinross has pursued a growth strategy to increase its reserves and future
production capabilities and as a result the capital expenditures on additions
to property, plant and equipment was $142.4 million in 2005 and $169.5 million
in 2004.
Outlook
Kinross plans to produce 1.44 million ounces of gold equivalent in 2006
at cost of sales per ounce of approximately $285 - $295 per ounce. Capital
spending is expected to be approximately $115.0 million for sustaining capital
and $170.0 million in capital expansions, primarily at Paracatu, Kettle River
and Round Mountain.
Based on the average gold price to date in 2006(2), it is expected that
the Company's existing cash balances, cash flow from operations and existing
credit facility will be sufficient to fund the exploration, capital and
reclamation programs budgeted for 2006. The Company is reviewing financing
alternatives and is in negotiations to secure additional debt financing for
the Paracatu expansion project.
These increases in capital expenditure are expected to contribute to an
increase in production to 1.65 to 1.75 million ounces in 2009.
In 2006, general and administrative expenses are expected to decline
somewhat from 2005 levels. In addition, the Company currently does not
anticipate any scope changes or costs to increase above the 2005 year end
reclamation and remediation estimates. As a result, accretion expense in 2006
is expected to be lower at approximately $12.0 million, reflecting only the
change related to the interest element of the discounted liability.
Planned exploration and business development spending will increase in
2006 to $30.7 million. Exploration will focus on Kinross' core assets with a
goal of replacing reserves at existing locations and adding new projects and
investment opportunities.
"2006 represents the transition year in our operational profile," said
Burt. "We have sold or closed non-core operations. We are focusing our capital
expenditure program on low risk additions to core operations which will drive
production and margin growth in 2007 and beyond. We are bullish on the gold
price and, with a no gold hedging policy, will reap the benefits of increasing
gold prices."
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(2) Average gold price from January 1 to March 30, 2006 has been
$553 per ounce
Operations Review and Update
At Paracatu, Brazil, gold equivalent production increased by 95% between
2004 and 2005. The increase was due to the increase in Kinross' ownership of
Paracatu from 49% in 2004 to 100% in 2005. On a 100% basis, gold equivalent
production decreased by 4% year-over-year. The decrease was due to lower grade
ore and the processing of fewer tonnes, partially offset by a higher recovery
rate. Revenue increased by 107%, or approximately 1% on a 100% basis. Revenue,
on a 100% basis, increased despite fewer ounces being sold as a result of a
higher realized gold price. Cost of sales during 2005 increased by 19% against
2004, on a 100% basis. The increase was due to increased energy and consumable
costs, and appreciation of the Brazilian real against the U.S. dollar,
year-over-year, of approximately 20%. Gold equivalent production in 2006 is
expected to increase slightly from 2005 due to more tonnes being processed and
a marginally higher recovery rate.
In 2005, Kinross' Board of Directors approved funding for basic
engineering for a semi-autogenous grinding mill expansion project at the
Paracatu mine. The mill is planned to be expanded over a four-year period from
its current capacity of 17 million tonnes per year. Upon completion of the
basic engineering, expected in April 2006, a complete capital cost estimate
will form the basis for a final decision by Kinross' Board of Directors.
Management currently anticipates a two stage expansion from the current
throughput rate of 17 million tonnes per annum ("mtpa") to 30 mtpa and from 30
mtpa to 50 mtpa over a 3 to 4 year period. Total costs associated with both
expansions are expected to be between $400.0 million and $500.0 million.
At Round Mountain in the United States, production was 4% lower in 2005
than in the prior year due to fewer tonnes delivered to the dedicated pads.
Tonnes processed were lower during the year due to pit phasing and pit slope
failures. Despite fewer ounces being sold, revenues were up by 6% as a result
of higher realized gold prices. Cost of sales increased by 14% due to
increased commodity related costs, higher costs on replacement parts,
increased contractor costs on equipment maintenance and higher royalties and
taxes due to a stronger gold price. Production in 2006 is expected to be
approximately 10% lower than in 2005. Expenditures on a new layback program
began in 2005 in order to expand the pit. Ore from this layback is expected to
benefit production in late 2006.
Production at the Fort Knox mine in the United States decreased by 3% due
to lower grade and mill throughput, which was partially offset by a higher
recovery. The lower grade in 2005 was the result of the suspension of
production at the True North deposit in 2004. The lower mill throughput was
the result of processing the harder Fort Knox ore compared with the blended
ore from True North and Fort Knox for much of the prior year. Despite selling
9% fewer gold equivalent ounces in 2005, revenues remained largely unchanged,
due to a higher realized gold price. The decrease in cost of sales reflects
lower gold ounces sold. The cost of sales per ounce of gold sold increased as
a result of higher energy costs partially offset by improved cost efficiencies
as a result of the continuous improvement program. In 2005, the Company
recorded an impairment charge against the Fort Knox mine totaling $141.8
million. Production for 2006 is forecast to be lower than 2005, with improved
recovery rates expected to be offset by lower grades.
At the Porcupine Joint Venture in Canada, gold production in 2005 was 5%
lower than 2004. Production was positively impacted by higher recoveries and
increased mill throughput; however, this was offset by lower grade. Mill
throughput was higher as a result of a mill expansion undertaken to ensure the
harder ores originating from the Pamour pit could be processed through the
Dome mill. Feed grade was lower due to localized highwall instability in the
Dome pit, no production from the Dome underground mine and the commencement of
mining at the Pamour pit which has a lower average grade than the Dome pit.
Revenue increased by 3% despite a 6% drop in ounces sold as a result of higher
realized gold prices. Operating costs were also up despite selling fewer
ounces due to higher energy and commodity costs, and a 7% increase in value of
the Canadian dollar against the U.S. dollar year-over-year. During the year,
the Company's portion of the estimated reclamation and remediation obligation
relating to areas of the joint venture no longer in production amounting to
$10.9 million were expensed and have been included as part of accretion and
reclamation expenses. Due to lower than expected grades in the Pamour pit,
production is expected to be lower in 2006 than 2005.
At the La Coipa operation in Chile, tonnes mined and milled, along with
grade and recoveries were lower than 2004 due to changes in the mine plan
caused by pit slope failures during the year. As a result, production was down
16%. Geotechnical studies are being conducted in order to assess the current
situation. While gold equivalent ounces sold were 13% lower in 2005, due to
lower production, a higher realized gold price resulted in a 2% increase in
revenue. Operating costs were 14% higher year-over-year as a result of
increased stripping costs. The increase was also due to higher power and other
consumable costs, in addition to the strengthening of the Chilean peso,
against the U.S. dollar, of approximately 9% year-over-year. There was no
significant change during the year to the average ratio for conversion of
silver into equivalent gold ounces. Production at La Coipa in 2006 is now
expected to be higher than 2005, with an increase in the tonnes of ore
processed partially offset by lower grade and recovery rates.
At the Crixas mine in Brazil, gold production was 3% higher in 2005,
compared with 2004, due to higher grade and increased mill throughput. Revenue
increased by 9% as a result of a higher realized gold price. Costs of sales
increased year-over-year by 16% due to the appreciation of the Brazilian real
against the U.S. dollar, and higher energy, service and consumable costs. The
average exchange rate of the Brazilian real against the U.S. dollar increased,
year-over-year, by approximately 20%. Production for 2006 is expected to be
similar to 2005, with lower grade being offset by an increased in the number
of tonnes processed.
Commissioning of the expanded facilities at the Refugio mine in Chile was
completed in 2005. The mine has achieved its continuous production rate of
40,000 tonnes per day by year end 2005. The plant has processed in excess of
40,000 tonnes on a number of days during the quarter. Total capital costs for
the recommissioning was $100.0 million, plus $34.0 million for the lease of a
new mining fleet (these costs reflect 100% of the costs, and Kinross is
responsible for 50%).
Gold equivalent production at the Musselwhite mine in Canada increased by
4% in 2005 due to a 3% increase in grade year-over-year and an increase in
tonnes processed. The increased grade was the result of increased tonnage from
underground sources which replaced low grade stockpile feed. Revenue from
metal sales increased by 9% due to a higher realized gold price and a 2%
increase in the number of ounces sold. Cost of sales increased 25% due to the
increased tonnage from higher-cost underground ore, increased underground
development costs and higher energy and commodity costs. Cost of sales was
also negatively impacted by a 7% appreciation of the Canadian dollar against
the U.S. dollar year-over-year. Production in 2006 is expected to be
approximately 4% lower due to lower grade ore.
Kinross acquired Kettle River, located in the state of Washington, in the
acquisition of Echo Bay on January 31, 2003. At the time of acquisition the
mine was shut down. The Company recommenced operations in December 2003.
During 2005, gold equivalent production was 68,146 ounces, which was 30% lower
than the 96,789 ounces produced in 2004. The drop in production was expected
in 2005 due to fewer tonnes being mined and milled, as mining at Emanuel Creek
was completed in November and the mill temporarily shutdown. Grade and
recovery rates were also lower in 2005, compared with 2004. With the mine on
care and maintenance beginning in November, the remaining staff focused on the
permitting and engineering of the Buckhorn mine. During 2005, accretion and
reclamation expenses of $6.1 million were recorded as a result of an increase
to the estimated reclamation and remediation liability relating to the
operation.
All mining activity at the Kubaka underground mine and Birkachan open pit
mine in Russia was completed by June 2005, with only stockpiles processed in
the second half of the year. Gold equivalent production increased by 13% in
2005 to 140,195 ounces. The increase was due to a 10% increase in mill
throughput and 7% increase in grades. The change in mill throughput was
largely the result of an 8-week scheduled shutdown in 2004. Revenue from metal
sales increased by 27% due to more ounces being sold and a higher realized
gold price. Costs of sales increased as a result of higher throughput and an
increase in the number of ounces sold.
While there is no specific development plans for the Kubaka mine, there
are still areas of interest that management will continue to evaluate. Closure
of the mine is expected to take place largely during 2006.
Exploration and business development
Exploration expenditures in 2005 focused primarily on mine exploration.
The two highest priorities were the resource expansion project at Paracatu and
the pit expansion at Round Mountain. During 2005, the Company spent $5.2
million at Paracatu, while $2.4 million was spent at Round Mountain. In
addition, exploration expenditures at the other Company operated mines totaled
$3.3 million. The Company's share of exploration expenditures at non-operated
joint venture properties totaled $6.5 million.
Other expenses - net
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in US$ millions
2005 2004
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Interest and other income $ 7.0 $ 9.1
Non-hedge derivative gain (loss) (3.2) 3.1
Interest expense on long-term liabilities (6.8) (5.1)
Foreign exchange loss (14.0) (13.3)
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Other expense - net $ (17.0) $ (6.2)
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Other expense was $17.0 million in 2005 compared with $6.2 million in
2004. Interest income was lower in 2005 due to lower average cash balances
throughout the year. A foreign exchange loss of $14.0 million was recorded in
2005 compared with a loss of $13.3 million in 2004. The loss on foreign
exchange was largely the result of the impact of strengthening foreign
currencies on net monetary liabilities in the Company's non-U.S. operations.
Interest expense increased in 2005, compared with the prior year, as the
Company's debt has increased. During 2005, the Company capitalized interest
totaling $1.8 million relating to capital expenditures at Fort Knox, the
Porcupine Joint Venture, Refugio and Round Mountain. Interest and other income
is expected to be lower in 2006 due to lower cash balances, while interest
expense is expected to increase as a result of higher debt levels and rising
interest rates.
Liquidity and capital resources
Cash flow provided from operating activities decreased to $133.7 million
in 2005 from $161.2 million in 2004. The decrease was largely the result of
fewer ounces sold combined with increased operating costs, partially offset by
higher realized gold prices.
Net cash used in investing activities was $121.1 million in 2005 compared
with $442.3 million in 2004. The decrease in 2005 was largely related to the
$261.2 million used in the 2004 acquisition of the remaining 51% of the
Paracatu mine. In 2005, additions to property, plant and equipment were
$142.4 million, compared with $169.5 million in 2004.
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For the years ended
December 31,
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2005 2004
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Operating segments
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Fort Knox $ 44.6 $ 58.7
Round Mountain 5.9 8.8
La Coipa 4.9 1.0
Crixas 6.2 3.6
Paracatu 21.3 5.8
Musselwhite 5.7 3.9
Porcupine Joint Venture 24.7 24.5
Other operations 28.1 62.0
Corporate and other 1.0 1.2
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Total $ 142.4 $ 169.5
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Capital expenditures during 2005 included costs related to accessing
phase five and phase six ore zones at Fort Knox, development of the Pamour pit
at the Porcupine Joint Venture, mine and mill expansion costs at Paracatu, and
continuing recommissioning costs at Refugio.
During 2004, the major focus of the Company's program included
expenditures at Fort Knox on the tailings dam, equipment and mine development,
recommissioning of Refugio and development of the Pamour pit at the Porcupine
joint venture.
Net cash provided by financing activities during 2005 was $35.7 million,
compared with $82.6 million in 2004. During 2005, cash from financing
activities was primarily from the issuance of debt. There was a net increase
to the LIBOR loan of $35.0 million under the corporate credit facility and
$5.5 million was drawn down on a $6.0 million credit facility for the Refugio
mine. During the fourth quarter of 2005, the Company paid the remaining
$2.7 million outstanding on Kubaka's outstanding project financing debt from
the European Bank for Reconstruction and Development.
Crown update
On February 27, Kinross and Crown Resources Corporation (OTCBB-CRCE)
("Crown") signed an amendment (the "Amendment") to extend the termination date
of the definitive acquisition agreement to December 31, 2006 and adjust the
price that Kinross will pay to acquire Crown and its 100 per cent-owned
Buckhorn Mountain gold deposit. Upon completion of acquisition and required
permitting, mining the Buckhorn deposit will allow the restart of the Kettle
River mill and will add to future production growth. Crown is continuing to
move forward with mining permits.
In 2006, Kinross will update and file its F-4 registration and after
regulatory review Crown will provide an information circular to its
shareholders who will vote on the merger. This is expected to be completed
within the first half of the year. Mining is expected to commence in late
2006.
New CFO appointed; retirement of Lars-Eric Johansson
As previously announces Lars-Eric Johansson will retire as Executive Vice
President and Chief Financial Officer on April 7, 2006. Lars-Eric has been
instrumental in leading Kinross through the accounting review process,
purchase price reallocation and development of an impairment testing model.
"Lars-Eric has played a key role in establishing new accounting
methodologies and refocusing the company for the future," added Burt. "The
senior management and the Board of Directors wish to thank Lars-Eric Johansson
for his valuable contribution to the Company and wish him well in his
retirement."
We are pleased that Mr. Thomas M. Boehlert will join Kinross as Executive
Vice President and Chief Financial Officer of Kinross.
Mr. Boehlert has more than 20 years experience in finance and banking.
Most recently, he was Executive Vice President and Chief Financial Officer of
Texas Genco of Houston, an independent electric power company. Prior to that,
he was Executive Vice President and Chief Financial Officer of Direct Energy
of Toronto, a North American energy services company.
"Thomas Boehlert is an outstanding financial executive with an excellent
track record," said Burt. "Attracting and retaining the industry's best people
is part of our four-point strategic plan for growth and Thomas is a great
addition to our team."
Shareholder rights plan
Kinross' Board of Directors has adopted a shareholders rights plan (the
"Plan") to ensure all shareholders are treated fairly in any transaction
involving a change of control of the Company. The Plan is effective
immediately and is subject to regulatory and shareholder approval.
"We are pleased to implement this plan. It is similar to Kinross'
previous shareholder rights plan with amendments to reflect current corporate
governance standards," said Burt. "This plan is being adopted to allow
Kinross' senior management team and Board of Directors time to evaluate any
alternatives that would optimize shareholder value, should an unsolicited
offer arise," added Burt.
The Plan will address the Company's concern that existing legislation
does not permit sufficient time for the board of directors and shareholders of
the Company to properly evaluate a take-over bid or pursue alternatives with a
view to maximizing shareholder value.
The Plan is similar to those adopted by other Canadian companies, is
consistent with corporate practice and addresses guidelines for such plans set
out by institutional investors. The Plan was not adopted in response to any
specific take-over threat and the Company is not aware of any pending or
threatened take-over bids for the Company. The Plan is not intended to prevent
take-over bids. "Permitted Bid" provisions of the Plan do not invoke the
dilutive effects of the Plan if a bid meets certain requirements intended to
protect the interests of all shareholders. A bid will be a Permitted Bid if it
is made by way of a take-over bid circular, remains open for a minimum of 60
days and otherwise complies with the Permitted Bid provisions of the Plan. The
Plan will be invoked by an acquisition, other than pursuant to a Permitted
Bid, of 20% or more of the outstanding common shares of the Company or the
commencement of a take-over bid that is not a Permitted Bid.
Under the Plan one right is issued for each of the common shares of the
Company. The rights will trade together with the common shares and will not be
separable from the common shares or exercisable unless a take over bid is made
that does not comply with the Permitted Bid requirements. In such event, such
rights will entitle shareholders, other than shareholders making the take-over
bid, to purchase additional common shares of the Company at a substantial
discount to the market price at the time.
The adoption of the Plan is subject to acceptance by the Toronto Stock
Exchange. The Plan must be ratified by shareholders of the Company at a
meeting to be held to consider the Plan. A complete copy of the Plan is
available from the Secretary of the Company.
Annual and special meeting
Kinross will hold its annual and special meeting on May 4, 2006, at
9:00 am EST at the Fairmont Royal York Hotel, Upper Canada Ballroom,
18th Floor, 100 Front Street West, Toronto, Ontario, Canada.
Conference call details
Kinross will host a conference call on March 30, 2006, at 11:00 a.m. EST
to discuss the year end results announcement followed by a question and answer
session.
To access the call, please dial:
Toronto and internationally - 416-644-3424
Toll free in North America - 1-866-250-4877
Replay: (available Mar. 30 - Apr. 6, 2006) Passcode - 21183156 followed
by the number sign
Toronto and internationally - 416-640-1917
Toll free in North America - 1-877-289-8525
The conference call will also be available on a listen-only basis via
webcast. The webcast can be accessed and will be archived at www.kinross.com.
About Kinross Gold Corporation
Kinross, a world-class gold company based in Canada, has since 1993
become the third largest primary gold producer in North America and the
seventh largest in the world. With nine mines in stable countries including
Canada, the United States, Brazil and Chile, Kinross employs more than 4,000
people worldwide. In 2006, Kinross is expected to produce 1.44 million ounces
of gold equivalent at cost of sales per ounce of approximately $285 - $295.
Kinross' strong balance sheet and no gold hedging policy allow us to take
full advantage of increasing cash flow, revenues and profit margins per ounce
of gold. Kinross is focused on a strategic objective to maximize net asset
value and cash flow per share through a four-point plan built on growth from
core operations; expanding capacity for the future; attracting and retaining
the best people in the industry; and driving new opportunities through
exploration and acquisition.
Kinross maintains listings on the Toronto Stock Exchange (symbol:K) and
the New York Stock Exchange (symbol:KGC).
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Cautionary Statement on Forward Looking Information
Certain information contained or incorporated by reference in this press
release, including any information as to our future financial or operating
performance, constitutes "forward-looking statements". All statements, other
than statements of historical fact, are forward-looking statements. The words
"believe", "expect", "anticipate", "plan", "intends", "continue", "budget",
"estimate", "may", "will", "schedule" and similar expressions identify
forward-looking statements. Forward-looking statements are necessarily based
upon a number of estimates and assumptions that, while considered reasonable
by us, are inherently subject to significant business, economic and
competitive uncertainties and contingencies. 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:
fluctuations in the currency markets; fluctuations in the spot and forward
price of gold or certain other commodities (such as silver, diesel fuel and
electricity); changes in national and local government legislation, taxation,
controls, regulations and political or economic developments in Canada, the
United States, Chile, Brazil or other countries in which we do or may carry on
business in the future; business opportunities that may be presented to, or
pursued by, us; operating or technical difficulties in connection with mining
or development activities; the speculative nature of gold exploration and
development, including the risks of obtaining necessary licenses and permits;
and diminishing quantities or grades of reserves. 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 inability to obtain insurance, to
cover these risks). Many of these uncertainties and contingencies can affect
our actual results and could cause actual results to differ materially from
those expressed or implied in any forward-looking statements made by, or on
behalf of, us. Readers are cautioned that forward-looking statements are not
guarantees of future performance. All of the forward-looking statements made
in this press release are qualified by these cautionary statements. We refer
the readers to our most recent annual information form, management discussion
and analysis and other filings with the securities regulators of Canada and
the United States for more details of the risks affecting Kinross.
We disclaim any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future
events or otherwise, except to the extent required by applicable laws.
The technical information about the Company's material mineral properties
contained in this press release has been prepared under the supervision of Mr.
Wes Hanson an officer of the Company who is a "qualified person" within the
meaning of National Instrument 43-101.
-------------------------------------------------------------------------
Supplementary Information:
Revenue Analysis
-------------------------------------------------------------------------
Years ended
Fourth Quarter December 31,
-------------------------------------------------------------------------
(in US$ millions, except
ounces and per share
amounts) 2005 2004 2005 2004
-------------------------------------------------------------------------
Gold equivalent ounces -
sold 389,037 413,966 1,627,675 1,654,617
Gold ounces - sold 374,956 393,803 1,575,267 1,585,109
Silver ounces - sold 844,520 1,209,572 3,185,776 4,271,980
Average realized gold
price ($/ounce) $ 491 $ 434 $ 445 $ 404
Gold sales - revenue $ 182.0 $ 170.0 $ 702.7 $ 649.8
Gain (loss) on metal
derivative
contracts 2.2 0.8 (2.4) (9.3)
Silver sales revenue 5.8 8.4 25.2 26.3
-----------------------------------------------
Total revenue $ 190.0 $ 179.2 $ 725.5 $ 666.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Operating statistics (for the years ended December 31,)
Years ended December 31:
-------------------------------------------------------------------------
Gold equivalent ounces
-----------------------------------------------
(in US$ millions) Produced Sold
-----------------------------------------------
2005 2004 2005 2004
-----------------------------------------------
Fort Knox 329,320 338,334 320,798 351,738
Round Mountain 373,947 387,785 367,581 375,421
La Coipa 125,991 150,887 131,051 149,785
Crixas 96,212 93,540 93,309 93,265
Paracatu 180,522 92,356 177,806 93,279
Musselwhite 79,916 76,640 79,919 78,430
Porcupine Joint
Venture 183,976 193,799 179,585 191,296
Other operations 238,921 230,214 253,836 231,278
Corporate and other - 90,229 23,790 90,125
-----------------------
-------------------------------------------------------------------------
Total 1,608,805 1,653,784 1,627,675 1,654,617
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(in US$ millions) Cost of sales Cost/oz
-----------------------------------------------
2005 2004 2005 2004
-----------------------------------------------
Fort Knox $ 88.1 $ 89.2 $ 275 $ 254
Round Mountain 93.7 82.3 $ 255 $ 219
La Coipa 45.4 39.7 $ 346 $ 265
Crixas 14.1 12.2 $ 151 $ 131
Paracatu 50.0 20.6 $ 281 $ 221
Musselwhite 26.4 21.1 $ 330 $ 269
Porcupine Joint
Venture 50.7 44.4 $ 282 $ 232
Other operations 73.4 60.2 $ 289 $ 260
Corporate and other 6.3 32.7 $ 265 $ 363
-----------------------
-------------------------------------------------------------------------
Total $ 448.1 $ 402.4 $ 275 $ 243
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Fourth Quarter
-------------------------------------------------------------------------
Gold equivalent ounces
-----------------------------------------------
(in US$ millions) Produced Sold
-----------------------------------------------
2005 2004 2005 2004
-----------------------------------------------
Fort Knox 80,643 98,609 83,288 103,176
Round Mountain 79,452 85,648 75,755 75,941
La Coipa 33,914 42,755 33,364 34,946
Crixas 23,812 23,731 23,947 23,356
Paracatu 48,295 22,546 45,428 22,484
Musselwhite 18,092 20,469 17,630 18,902
Porcupine Joint Venture 40,864 43,628 38,567 42,300
Other operations 53,461 68,903 69,687 65,611
Corporate and other - 18,195 1,371 27,250
-------------------------------------------------------------------------
Total 378,533 424,484 389,037 413,966
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(in US$ millions) Cost of sales Cost/oz
-----------------------------------------------
2005 2004 2005 2004
-----------------------------------------------
Fort Knox $ 25.6 $ 25.0 $ 307 $ 242
Round Mountain 19.9 17.8 $ 263 $ 234
La Coipa 10.5 10.0 $ 315 $ 286
Crixas 3.7 3.3 $ 155 $ 141
Paracatu 13.6 5.9 $ 299 $ 262
Musselwhite 6.1 4.9 $ 346 $ 259
Porcupine Joint Venture 11.6 10.3 $ 301 $ 243
Other operations 19.1 17.5 $ 274 $ 267
Corporate and other 0.8 9.5 $ 584 $ 349
-------------------------------------------------------------------------
Total $ 110.9 $ 104.2 $ 285 $ 252
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated balance sheets
(expressed in millions of U.S. dollars, except share amounts)
As at December 31,
-------------------------------------------------------------------------
2005 2004
-------------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $ 97.6 $ 47.9
Restricted cash 1.3 1.4
Short-term investments - 5.7
Accounts receivable and other assets 27.8 37.6
Inventories 115.2 111.0
-----------------------
241.9 203.6
Property, plant and equipment 1,064.7 1,244.1
Goodwill 321.2 329.9
Long-term investments 21.2 25.7
Deferred charges and other long-term assets 49.1 30.9
-----------------------
$ 1,698.1 $ 1,834.2
-----------------------
-----------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 132.2 $ 146.4
Current portion of long-term debt 9.4 6.0
Current portion of reclamation and
remediation obligations 36.3 23.6
-----------------------
177.9 176.0
Long-term debt 149.9 116.9
Reclamation and remediation obligations 139.6 108.1
Future income and mining taxes 129.6 120.3
Other long-term liabilities 7.9 9.5
Redeemable retractable preferred shares 2.7 2.6
-----------------------
607.6 533.4
-----------------------
Commitments and contingencies
Non-controlling interest 0.3 0.4
-----------------------
Convertible preferred shares of subsidiary company 14.1 13.3
-----------------------
Common shareholders' equity 1,076.1 1,287.1
-----------------------
$ 1,698.1 $ 1,834.2
-----------------------
-----------------------
Common shares
Issued and outstanding 345,417,147 345,066,324
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated statements of operations
(expressed in millions of U.S. dollars, except per share amounts)
-------------------------------------------------------------------------
Years ended
Fourth Quarter December 31,
2005 2004 2005 2004
-------------------------------------------------------------------------
Revenue
Metal sales $ 190.0 $ 179.2 $ 725.5 $ 666.8
Operating costs and
expenses
Cost of sales (excludes
accretion and
reclamation expenses,
depreciation,
depletion and
amortization) 110.9 104.2 448.1 402.4
Accretion and
reclamation expenses 47.0 14.8 56.0 21.4
Depreciation, depletion
and amortization 37.5 42.9 167.7 170.1
------------------------------------------------
(5.4) 17.3 53.7 72.9
Other operating costs 9.2 18.9 14.3 25.8
Exploration and
business development 8.0 5.8 26.6 20.4
General and
administrative 11.5 14.4 45.3 36.4
Impairment charges:
Goodwill 2.0 12.4 8.7 12.4
Property, plant and
equipment 141.8 46.1 171.9 46.1
Investments and other
assets 3.4 1.4 4.1 1.4
Gain on disposal of
assets (4.9) (0.3) (6.0) (1.7)
------------------------------------------------
Operating loss (176.4) (81.4) (211.2) (67.9)
Other income (expense)
- net 5.4 (10.2) (17.0) (6.2)
------------------------------------------------
Loss before taxes and
other items (171.0) (91.6) (228.2) (74.1)
Income and mining taxes
recovery (expense) 16.9 3.5 12.9 11.5
Non-controlling interest - 0.3 0.1 0.3
Dividends on convertible
preferred shares of
subsidiary (0.2) (0.2) (0.8) (0.8)
------------------------------------------------
Net loss $ (154.3) $ (88.0) $ (216.0) $ (63.1)
------------------------------------------------
------------------------------------------------
Loss per share
Basic and diluted $ (0.45) $ (0.25) $ (0.63) $ (0.18)
Weighted average number
of common shares
outstanding (millions)
Basic and diluted 345.4 346.4 345.2 346.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated statements of cash flows
(expressed in millions of U.S. dollars)
-------------------------------------------------------------------------
Years ended
Fourth Quarter December 31,
2005 2004 2005 2004
-------------------------------------------------------------------------
Net inflow (outflow) of
cash related to the
following activities:
Operating:
Net loss $ (154.3) $ (88.0) $ (216.0) $ (63.1)
Adjustments to reconcile
net loss to net cash
provided from (used in)
operating activities
Depreciation, depletion
and amortization 37.5 42.9 167.7 170.1
Impairment charges 147.2 59.9 184.7 59.9
Gain on disposal
of assets (4.9) (0.3) (6.0) (1.7)
Future income and
mining taxes (10.1) (10.5) (15.0) (29.3)
Deferred revenue
recognized - (8.1) - (6.3)
Stock-based
compensation expense (0.1) 0.5 3.1 1.8
Unrealized foreign
exchange losses
and other (18.2) 5.8 1.8 1.3
Changes in operating
assets and liabilities:
Accounts receivable
and other assets (6.4) 0.2 2.7 4.2
Inventories 4.1 (7.0) (9.9) (19.3)
Accounts payable and
other current
liabilities 29.0 62.5 20.6 43.6
------------------------------------------------
Cash flow provided from
operating activities 23.8 57.9 133.7 161.2
------------------------------------------------
Investing:
Additions to property,
plant and equipment (32.9) (62.5) (142.4) (169.5)
Business acquisitions,
net of cash acquired - (261.2) - (261.2)
Proceeds on sale of
marketable securities - - 0.6 0.7
Proceeds from (additions to)
long-term investments
and other assets, net 17.3 5.1 2.9 (11.8)
Proceeds from the sale of
property, plant and
equipment 4.1 0.5 10.4 1.5
Disposals of (additions to)
short-term investments 2.6 (0.4) 7.3 (5.7)
Decrease in restricted cash - - 0.1 3.7
------------------------------------------------
Cash flow used in
investing activities (8.9) (318.5) (121.1) (442.3)
------------------------------------------------
Financing:
Repurchase of common shares - (11.8) - (11.8)
Issuance of common shares 0.4 (0.5) 1.9 3.1
Debt issue costs (0.5) (1.4) (0.5) (1.4)
Proceeds from issuance
of debt 14.7 113.9 50.5 119.5
Repayment of debt (14.9) (0.5) (16.2) (26.8)
------------------------------------------------
Cash flow provided from
financing activities (0.3) 99.7 35.7 82.6
------------------------------------------------
Effect of exchange rate
changes on cash 1.4 0.2 1.4 0.6
------------------------------------------------
Increase (decrease) in cash
and cash equivalents 16.0 (160.7) 49.7 (197.9)
Cash and cash equivalents,
beginning of period 81.6 208.6 47.9 245.8
------------------------------------------------
Cash and cash equivalents,
end of period $ 97.6 $ 47.9 $ 97.6 $ 47.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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%SEDAR: 00002968E
