Earnings increase to $50.3 million; production ahead of target and
operating cash flow up 63 percent
TORONTO, Nov. 3 /CNW/ - Kinross Gold Corporation (TSX-K; NYSE-KGC)
("Kinross", "Kinross Gold" or the "Company"), today announced its unaudited
results for the three and nine months ended September 30, 2006.
(This media release contains forward-looking information that is subject
to risk factors and assumptions set out in our Cautionary Statement on
Forward-Looking Information. All dollar amounts in this media release are
expressed in U.S. dollars, unless otherwise noted)
<<
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Third Quarter Highlights
- Production was 365,555 gold equivalent ounces in the third quarter of
2006. Gold equivalent production in the first nine months of
1.11 million was above plan. The Company currently expects to exceed
previous annual production estimates of 1.44 million ounces by
approximately 20,000 ounces.
- Revenue was $223.6 million in the third quarter, representing a
23 percent increase over the same period last year while realizing
$621 per ounce of gold sold, an increase of 41 percent over the same
period last year.
- Cost of sales per ounce(1) was $321 in the third quarter on sales of
359,827 ounces of gold equivalent. Kinross anticipates that cost of
sales per ounce(1) will be approximately $320 for the full year 2006.
- Net earnings for the third quarter of 2006 were $50.3 million, or
$0.14 per share, compared with a net loss of $44.4 million in the
same period last year. Net earnings before non-recurring items would
have been $44.8 million or $0.13 per share. The non-recurring items
consist of a gain on disposal of assets, non-cash reclamation charges
for the DeLamar reclamation property in Idaho and a non-cash
write-down of supplies inventory at Kubaka.
- Cash flow from operating activities in the third quarter increased
63 percent to $85.8 million when compared with the $52.5 million
generated in the third quarter of 2005. The cash position was
$134.8 million as at September 30, 2006 compared with $149 million
at June 30, 2006 and debt was reduced by $75 million during the
quarter.
- Completed the acquisition of Crown Resources Corporation and the
Buckhorn Mountain deposit on August 31, 2006. In late September,
Kinross began construction at the Buckhorn mine after receipt of the
necessary permitting(2).
- Completed a $300 million three-year revolving credit facility and a
five-and-a-half-year $200 million term loan to support letters of
credit and expansion project at Paracatu in Brazil.
- Entered into definitive purchase agreement to sell the idled New
Britannia mine in northern Manitoba.
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1. Cost of sales per ounce is calculated by dividing cost of sales as
per the financial statements by the number of gold equivalent ounces
sold.
2. Please read the disclosure in our cautionary statement as well as the
section "Project updates and other third quarter developments -
Crown/Buckhorn update" contained in this media release for further
information and risks and uncertainties associated with the project.
"We are making great strides in creating both a stronger company and real
wealth for our shareholders," said Tye Burt, President and CEO. "We delivered
on our production and operating targets, refinanced and reduced our debt,
initiated two major construction projects, divested non-core assets and
delivered strong cash flow and earnings. Kinross' stock has significantly
outperformed both the price of gold and our senior peer group. Thank you to
our employees for their hard work."
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Summary of financial and operating results
Three months ended Nine months ended
(dollars in millions, September 30, September 30,
except per share and ----------------------- -----------------------
per ounce amounts) 2006 2005 2006 2005
----------------------- -----------------------
Gold equivalent ounces -
produced(a) 365,555 406,195 1,114,301 1,230,272
Gold equivalent ounces -
sold(a) 359,827 409,564 1,135,152 1,238,638
Metal sales $ 223.6 $ 181.1 $ 674.2 $ 535.5
Cost of sales (excludes
accretion and
reclamation expense,
depreciation, depletion
and amortization) $ 115.6 $ 113.1 $ 362.5 $ 337.2
Accretion and
reclamation expense $ 25.8 $ 3.1 $ 31.7 $ 9.0
Depreciation, depletion
and amortization $ 25.0 $ 41.3 $ 81.2 $ 130.2
Operating earnings
(loss) $ 60.8 $ (34.1) $ 156.3 $ (34.8)
Net earnings (loss) $ 50.3 $ (44.4) $ 124.8 $ (61.7)
Basic and diluted
earnings (loss) per
common share $ 0.14 $ (0.13) $ 0.36 $ (0.18)
Cash flow from operating
activities $ 85.8 $ 52.5 $ 200.8 $ 109.9
Realized gold price $ 621 $ 440 $ 593 $ 430
Cost of sales per
equivalent ounce
sold(b) $ 321 $ 276 $ 319 $ 272
(a) Gold equivalent ounces include silver ounces converted to gold based
on the ratio of the average spot market prices for the commodities
for each period. This ratio for the three and nine months ended
September 30, 2006 was 53.12:1, compared with 53.61:1, respectively,
compared with 62.19:1 and 61.09:1, respectively, for the three and
nine months ended September 30, 2005.
(b) Cost of sales per ounce is calculated by dividing cost of sales as
per the financial statements with gold equivalent ounces sold.
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>>
Revenue from metal sales in the third quarter of 2006 increased
23 percent year-over-year to $223.6 million from $181.1 million in the same
period of 2005, primarily as a result of higher realized gold prices. This was
partially offset by a 12 percent reduction in gold equivalent ounces sold. The
average realized gold price in the third quarter of 2006 was $621 per ounce,
compared with $440 per ounce in the third quarter of 2005. The average spot
price for the third quarter was $622 per ounce, compared with $440 per ounce
in the same period of 2005.
Gold equivalent production of 365,555 ounces for the third quarter of
2006 and 1,114,301 ounces year-to-date were ahead of plan. In the third
quarter of 2006, the Company sold 359,827 gold equivalent ounces, down from
the 409,564 ounces sold in 2005, primarily as a result of reduced production.
The reduction in gold equivalent ounces produced and sold in the third quarter
of 2006 when compared with the same period in 2005 is due to planned lower
production from Round Mountain, Paracatu and Musselwhite, as discussed in the
Operations review and update section of this media release, as well as the
planned shut down at Kettle River and the winding down of operations at
Kubaka. This was offset by strong production from the Porcupine Joint Venture
and the additional ore from the now fully operating Refugio mine which was not
at full capacity during the comparable period in 2005. The Company currently
expects to exceed previous annual production estimates of 1.44 million ounces
by approximately 20,000 ounces.
Cost of sales increased two percent in the third quarter of 2006 as
compared to the similar period in 2005 largely due to industry-wide factors
such as increased fuel, power, labour and other production costs and the high
cost of producing the remaining low-grade stockpiles at Kubaka. In addition,
the strengthening of the Canadian dollar, Brazilian real and Chilean peso
against the U.S. dollar has increased costs at the Company's non-U.S. mines.
Earnings included a gain on the disposal of assets and investments of
$35.9 million, primarily from the sale of Katanga Mining Limited shares. This
was partially offset by a non-cash charge of $22.8 million to reclamation
expense related to the DeLamar reclamation property in Idaho due to increases
in the estimated cost of long-term water treatment which may include the
installation of a water treatment plant. In addition, the Company took a
$7.6 million non-cash write-down on the value of supplies inventory for
supplies no longer needed as the mine has completed processing of stockpiled
ore. The net effect of these non-recurring items was to add $5.5 million to
earnings.
General and administrative expense increased 5 percent in the third
quarter of 2006 to $13.6 million, compared to $12.9 million in the third
quarter of 2005. The increase is primarily related to higher personnel costs,
stock-based compensation expense, professional advisory fees and the Canadian
dollar strengthening against the U.S. dollar.
Cash flow from operating activities during the third quarter of 2006
increased by $33.3 million, or 63 percent, to $85.8 million, compared to
$52.5 million in the third quarter of 2005. The increase in cash flow from
operating activities in 2006 was largely due to the higher realized gold
price, partially offset by higher costs and changes in working capital
requirements in 2006 versus 2005. Changes in working capital was $82.8 million
in the third quarter of 2006 compared with $74.7 million in the third quarter
of 2005.
<<
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Operations review and update
Three months ended September 30,
Gold equivalent ounces
-----------------------------------------------
Produced Sold
----------------------- -----------------------
2006 2005 2006 2005
----------------------- -----------------------
Fort Knox 81,348 88,298 86,519 78,773
Round Mountain 85,975 98,357 87,377 106,291
La Coipa 28,233 27,701 23,209 27,098
Crixas 24,063 24,055 23,360 20,309
Paracatu 43,649 48,366 45,047 48,065
Musselwhite 18,031 20,877 17,936 20,649
Porcupine Joint Venture 42,869 38,747 40,494 38,358
Refugio(a) 29,883 6,234 26,129 6,261
Kettle River 3,141 15,811 935 18,243
Other operations(b) 8,363 37,749 8,821 39,110
Corporate and other(c) 6,407
----------------------- -----------------------
Total 365,555 406,195 359,827 409,564
----------------------- -----------------------
Cost of sales(d) Cost of sales/oz
----------------------- -----------------------
2006 2005 2006 2005
----------------------- -----------------------
(US$ millions)
Fort Knox $ 24.3 $ 21.9 $ 281 $ 278
Round Mountain 25.2 26.8 288 252
La Coipa 9.2 10.8 396 399
Crixas 4.0 3.2 171 158
Paracatu 16.8 12.8 373 266
Musselwhite 8.3 7.0 463 339
Porcupine Joint Venture 14.0 12.4 346 323
Refugio(a) 8.6 1.6 329 256
Kettle River - 5.4 - 296
Other operations(b) 5.5 10.6 624 271
Corporate and other(c) (0.3) 0.6 94
----------------------- -----------------------
Total $ 115.6 $ 113.1 $ 321 $ 276
----------------------- -----------------------
-------------------------------------------------------------------------
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Nine months ended September 30,
Gold equivalent ounces
-----------------------------------------------
Produced Sold
----------------------- -----------------------
2006 2005 2006 2005
----------------------- -----------------------
Fort Knox 260,462 248,677 264,435 237,510
Round Mountain 259,535 294,495 267,999 291,826
La Coipa 99,379 92,077 96,641 97,687
Crixas 72,608 72,400 73,077 69,362
Paracatu 131,014 132,227 134,794 132,378
Musselwhite 51,830 61,824 53,597 61,200
Porcupine Joint Venture 112,714 143,112 115,946 141,018
Refugio(a) 88,808 11,129 85,002 11,425
Kettle River 3,978 54,446 3,978 53,143
Other operations(b) 33,973 119,885 35,947 119,581
Corporate and other(c) 3,736 22,419
----------------------- -----------------------
Total 1,114,301 1,230,272 1,135,152 1,237,549
----------------------- -----------------------
Cost of sales(d) Cost of sales/oz
----------------------- -----------------------
2006 2005 2006 2005
----------------------- -----------------------
(US$ millions)
Fort Knox $ 75.3 $ 62.5 $ 285 $ 263
Round Mountain 76.2 73.8 284 253
La Coipa 31.3 34.9 324 357
Crixas 13.7 10.4 187 150
Paracatu 46.5 36.4 345 275
Musselwhite 23.3 20.3 435 332
Porcupine Joint Venture 44.0 39.1 379 277
Refugio(a) 29.5 2.9 347 254
Kettle River 0.8 15.2 201 286
Other operations(b) 21.2 36.2 590 303
Corporate and other(c) 0.7 5.5 187 245
----------------------- -----------------------
Total $ 362.5 $ 337.2 $ 319 $ 272
----------------------- -----------------------
(a) The Refugio mine commenced production in late 2005.
(b) Other operations include ounces produced and sold from Kubaka 2006.
(c) Corporate and other includes ounces sold from Lupin and New
Britannia, although production is not included since the properties
are in closure.
(d) Cost of sales excludes accretion, depreciation, depletion and
amortization.
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>>
At the Paracatu mine in Brazil, gold equivalent production was 10 percent
lower in the third quarter of 2006 when compared with the same quarter in 2005
as a result of encountering harder ore with lower grades sooner than
anticipated. Cost of sales in the third quarter of 2006 increased 31 percent
over the same quarter of 2005 primarily due to increased energy and
consumables costs, higher production taxes which are directly related to the
higher gold prices and the seven percent appreciation of the Brazilian real
against the U.S. dollar.
At Round Mountain in the United States, production declined 13 percent in
the third quarter of 2006 relative to the same period in 2005 due a decrease
in stockpile material being placed on the leach pads as the stockpile has been
depleted. Stripping of the pit expansion continues and ore is now being
delivered from this area. Cost of sales decreased six percent due to an
18 percent reduction in ounces sold offset by higher commodity costs and
royalties.
Production at the Fort Knox mine in the United States decreased eight
percent in the third quarter of 2006 when compared to the same period in 2005
due to a 17 percent decrease in grade and a two percent decrease in recovery.
Cost of sales increased 11 percent mainly due to the higher number of ounces
sold and increases in commodity costs.
At the Porcupine Joint Venture in Canada, gold production in the third
quarter of 2006 was 11 percent higher than the third quarter of 2005. This
improvement was the result of the completion of road construction allowing
access to the higher grade ore at the east end of the Pamour pit. Cost of
sales increased 13 percent through the impact of higher energy and commodity
costs, and a seven percent appreciation of the Canadian dollar against the
U.S. dollar year-over-year. Kinross will be filing an up-dated technical
report for the Porcupine Joint Venture operated by Goldcorp Inc.
At the La Coipa joint venture in Chile, gold equivalent production was
slightly higher in the third quarter of 2006 compared with the same period in
2005 due to the earlier than scheduled processing of material from the Puren
pit. Cost of sales decreased by 15 percent due to higher costs in the third
quarter of 2005 resulting from pit slope failures. This was partially offset
by higher power costs and a two percent appreciation of the Chilean peso
against the U.S. dollar in the third quarter of 2006 compared with the third
quarter of 2005.
At the Crixas joint venture mine in Brazil, gold production was
essentially the same in the third quarters of 2006 and 2005. Cost of sales per
ounce increased year-over-year by 25 percent due to the mining of additional
tonnes of ore at lower grades, increased commodity costs and a seven percent
appreciation of the Brazilian real against the U.S. dollar.
The Refugio joint venture mine in Chile went into production in the
second half of 2005, achieving its targeted production rate late in the same
year. As a result, comparative amounts from the first half of 2005 are not
meaningful. Cost of sales during the third quarter of 2006 were negatively
impacted by increased labour rates, commodity costs and a two percent
appreciation of the Chilean peso against the U.S. dollar.
Gold equivalent production at the Musselwhite joint venture in Canada was
14 percent lower in the third quarter of 2006 compared to the same period in
2005 as a result of processing fewer tonnes due to reduced labour and
equipment availability, which was offset by a 16 percent grade improvement.
Cost of sales increased by 19 percent due to increased energy and commodity
costs and a seven percent appreciation in the Canadian dollar against the U.S.
dollar in the third quarter of 2006, compared with the third quarter of 2005.
At Kubaka in Russia, mining was completed in June 2005, and processing of
remnant stockpiles was completed in August 2006. During the third quarter of
2006, the mine sold 8,821 gold equivalent ounces for a total of 35,947 gold
equivalent ounces sold in the first nine months of 2006.
Project updates and other third quarter developments
With respect to Kinross' projects, certain risks and uncertainties apply.
Please refer to our Cautionary Statement on Forward-looking Information
contained in this media release for material assumptions and risk factors
associated with these projects.
Paracatu expansion project
The project is moving ahead. The construction camp is expected to be
completed by the end of November, earthworks are progressing, the civil
contract has been awarded and is presently mobilizing, and long lead time
equipment has been ordered. The project has experienced some delays resulting
from an early rainy season, geotechnical assessments requiring some redesign
and harder foundation excavation than anticipated though we do not expect any
overall delays in completion of the project in 2008.
Sale of Katanga shares
Kinross sold its 5,751,500 shares in Katanga Mining Limited ("Katanga")
for pre-tax cash proceeds of approximately $35.9 million Canadian dollars
through a private placement. The Company measures its investment and asset
portfolio against its strategic four-point plan and makes decisions on
divestitures based on those metrics. It was deemed that the Katanga investment
did not represent a strategic fit within Kinross' portfolio.
Crown/Buckhorn update
On August 31, 2006, Crown shareholders voted in favour of the plan of
merger between Crown and a wholly-owned subsidiary of Kinross. Crown
shareholders received 0.32 of a common share of Kinross for each common share
of Crown. The purchase price for Crown was $219.6 million.
The Company received the necessary mine construction permits and site
surface excavation commenced at Buckhorn in late September. Also, site
preparation is underway for construction of the upper portal area and other
basic surface infrastructure. The project remains on track for targeted
initial production in late 2007.
State and federal permitting is continuing on the Buckhorn project.
Federal permits for the proposed haul road are anticipated for mid-2007. On
October 17, 2006, the Okanagan Highlands Alliance filed an administrative
appeal of the water rights and stormwater permits issued by the Washington
State Department of Ecology and the reclamation permit issued by the
Washington State Department of Natural Resources. The appeal asserts that the
permits were improperly issued and that the State-prepared Supplemental
Environmental Impact Statement supporting the permits is inadequate. While it
would be premature to predict the outcome of the appeal at this stage of the
proceedings, the Company believes it has substantial defences to the appeal,
including any motion for a stay of operations.
$500 million credit facility
The Company entered into an amended and restated revolving credit
facility and term loan dated August 18, 2006 with a group of lenders for
$500 million. The $300 million three-year revolving credit facility will
support Kinross' liquidity and letter of credit needs, extending the previous
credit facility of $295 million. The new five-and-a-half-year $200 million
term loan will support the previously announced expansion program at the
Paracatu mine in Brazil. In addition to the LIBOR loans of $60 million, the
$300 million corporate revolving credit facility continues to provide support
for letters of credit to satisfy financial assurance requirements, primarily
associated with activities related to reclamation. As at September 30, 2006,
letters of credit totaling $131.4 million were outstanding under this
facility. During the three months ended September 30, 2006, the Company repaid
$80 million of amounts previously drawn on the credit facility.
Sale of the New Britannia mine
On September 29, 2006, Kinross entered into a definitive purchase
agreement with Pegasus Mines Limited, Piper Capital Inc. (TSX Venture:PCL)
("Piper") and Garson Resources Ltd. (CNQ:GARR) ("Garson") to sell its
50 percent interest in the joint venture company which holds the New Britannia
mine in Northern Manitoba. The mine had completed mining and milling
operations in September 2004. Kinross will receive shares consisting of
19.9 percent of the issued and outstanding share capital from each of Piper
and Garson at closing of the transaction.
Fort Knox heap leach project
A heap leach option at Fort Knox is in the advanced stage of testing and
results on the viability of the project are expected by year-end. Mine
personnel are currently focused on completing a feasibility study and an
environmental impact assessment.
2006 Outlook
Gold equivalent production in the first nine months of 1.11 million is
above budget. The Company currently expects to exceed previous annual
production estimates of 1.44 million ounces by approximately 20,000 ounces.
Costs are expected to be higher in the fourth quarter of 2006, thus the
Company expects its cost of sales per ounce guidance to be approximately $320
for the full year. Kinross is also adjusting its capital expenditures for the
year, which are now expected to be approximately $230 million for 2006 as a
result of delayed progress at the Buckhorn project pending completion of the
acquisition of Crown and at the Paracatu expansion project. Exploration and
business development expense is expected to be above the previous estimate at
approximately $39 million for the year and reclamation and remediation
expenditures are expected to be $23 million.
Exploration and business development
Exploration and business development expense for the third quarter of
2006 was $10.2 million, compared with $7.3 million for the corresponding
period in 2005, an increase of 40 percent. During the third quarter of 2006,
Kinross completed 74,661 metres of drilling for a total of 242,549 metres
year-to-date. Most of the drilling was focused on reserve growth at and around
active mining properties. To that end, the Company is aggressively drilling
prospects at Refugio, La Coipa, Fort Knox and Porcupine. An in-fill program
has commenced on the Buckhorn deposit Southwest Zone in order to optimize the
mine plan. The delay in finalizing the transaction may impact updating the
underground reserves on portions of the orebody. At Round Mountain, the
underground exploration decline is nearing completion and two drill stations
have been cut. Underground drilling has commenced and approximately 882 meters
were completed. The drill program will extend through the first quarter of
2007. At Refugio, 8,978 meters of drilling on the Pancho deposit was completed
in the third quarter, completing Phase I of the drill program. It is
anticipated that results from this program will be included in Kinross' 2007
Mineral Reserve and Resource update.
The Company continues to make progress towards building a pipeline of
greenfield projects. Kinross has optioned the Patrocinio project in Brazil
from Verena Minerals Limited ("Verena"). Kinross has the right to earn a
51 percent equity interest by spending $3 million in exploration over a
three-year period and has the exclusive right to earn a further 14 percent by
spending an additional $5 million by the fifth anniversary of the agreement.
Kinross has also purchased seven million common shares of Verena.
<<
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Other income (expense) - net
(in US$ millions) Three months ended Nine months ended
September 30, September 30,
----------------------- -----------------------
2006 2005 2006 2005
----------------------- -----------------------
Interest and other
income $ 1.8 $ 1.8 $ 5.1 $ 5.3
Interest expense (2.2) (2.0) (6.9) (5.6)
Foreign exchange gain
(loss) 0.9 (8.5) (9.7) (21.4)
Non-hedge derivative
gain - (0.8) - (0.7)
----------------------- -----------------------
Other income (expense) -
net $ 0.5 $ (9.5) $ (11.5) $ (22.4)
----------------------- -----------------------
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>>
Interest expense
The increase in interest expense in the third quarter of 2006 compared
with the same period in 2005 is the result of higher interest rates partially
offset by a reduction in outstanding debt. Total long-term debt at
September 30, 2006, was $88.2 million compared to $159.3 million at December
31, 2005. The Company capitalized interest of $2.3 million during the first
nine months of 2006 relating to capital development projects at Fort Knox,
Paracatu and Round Mountain.
Foreign exchange
The Company recorded a foreign exchange gain of $0.9 million in the third
quarter of 2006, compared with a loss of $8.5 million in the same period in
2005. The gain on foreign exchange in the third quarter of 2006 was largely
the result of the impact of the strengthening foreign currencies on net
monetary liabilities at the Company's non-U.S. operations.
Income and mining taxes
For the nine months ended September 2006, the Company recorded a
provision for income and mining taxes of $19.7 million on earnings before tax
of $144.8 million. During the comparable period in 2005, the Company recorded
a provision for income and mining taxes of $4 million on a loss before tax of
$57.2 million.
Liquidity and capital resources
The following table summarizes Kinross' cash flow activity for the three
and nine months ended September 30, 2006 and 2005:
<<
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Cash flow summary
(in US$ millions) Three months ended Nine months ended
September 30, September 30,
----------------------- -----------------------
2006 2005 2006 2005
----------------------- -----------------------
Cash flow:
Provided from
operating activities $ 85.8 $ 52.5 $ 200.8 $ 109.9
Used in investing
activities (24.5) (27.6) (99.1) (112.2)
Provided from (used
in) financing
activities (75.5) - (66.5) 36.0
Effect of exchange rate
changes on cash - - 2.0 -
----------------------- -----------------------
Increase (decrease) in
cash and cash
equivalents (14.2) 24.9 37.2 33.7
Cash and cash
equivalents:
Beginning of period 149.0 56.7 97.6 47.9
----------------------- -----------------------
End of period $ 134.8 $ 81.6 $ 134.8 $ 81.6
----------------------- -----------------------
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>>
Operating Activities
Cash flow provided by operating activities was $85.8 million in the third
quarter of 2006, compared with $52.5 million in the corresponding period in
2005. The difference year-over-year is due to increased earnings, largely the
result of a higher realized gold price and changes in working capital
requirements partially offset by higher cost of sales.
Investing Activities
Net cash used in investing activities was $24.5 million in the third
quarter of 2006, versus $27.6 million during the same period in 2005. This
included additions to property, plant and equipment of $61.1 million and
$32.8 million in the third quarters of 2006 and 2005, respectively. The
following table provides a breakdown of capital expenditures:
<<
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Capital expenditures
(in US$ millions) Three months ended Nine months ended
September 30, September 30,
----------------------- -----------------------
2006 2005 2006 2005
----------------------- -----------------------
Operating Segments
Fort Knox $ 15.0 $ 11.0 $ 36.5 $ 33.3
Round Mountain 10.3 0.9 18.7 3.6
La Coipa 1.2 0.6 7.1 2.8
Crixas 2.1 1.9 6.1 4.8
Paracatu 20.5 4.5 38.1 13.8
Musselwhite 1.0 1.3 3.3 3.2
Porcupine Joint Venture 4.0 5.5 14.4 18.3
Refugio 0.3 5.6 3.3 27.1
Kettle River 6.7 0.2 8.6 0.2
Other operations - - - 0.2
Corporate & other - 1.3 1.5 2.2
----------------------- -----------------------
$ 61.1 $ 32.8 $ 137.6 $ 109.5
----------------------- -----------------------
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>>
Capital expenditures in the third quarter of 2006 included costs related
to accessing the phase six ore zone at Fort Knox, pit expansion at Round
Mountain, ongoing underground development of Hoyle Pond at the Porcupine Joint
Venture and costs at Paracatu related to the mine and mill expansion.
Financing Activities
Net cash of $75.5 million was used in financing activities in the third
quarter of 2006, versus $nil in the third quarter of 2005. Cash used in
financing activities in the third quarter of 2006 was primarily related to the
repayment of debt of $84.8 million. The Company issued net debt of
$9.7 million in the third quarter of 2006 and did not issue any debt in the
corresponding period in 2005.
<<
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Balance sheet
(in US$ millions) As at:
---------------------------
September 30, December 31,
2006 2005
------------- -------------
Cash and cash equivalents $ 134.8 $ 97.6
Current assets $ 271.5 $ 241.9
Total assets $ 2,005.4 $ 1,698.1
Current liabilities $ 188.7 $ 177.9
Total debt (includes current portion)(a) $ 102.9 $ 176.1
Total liabilities(b) $ 581.6 $ 622.0
Shareholders' equity $ 1,423.8 $ 1,076.1
Statistics
Working capital $ 82.8 $ 64.0
Working capital ratio(c) 1.44x 1.36x
(a) Includes long-term debt plus the current portion thereof and
preferred shares plus current portion of debt.
(b) Includes preferred shares and non-controlling interest.
(c) Current assets divided by current liabilities.
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>>
Cash during the first nine months of the year increased by $37.2 million
to $134.8 million, with cash flow from operating activities offsetting cash
used in investing and financing activities. The Company's net working capital
increased $18.8 million to $82.8 million in the first nine months of 2006
primarily as a result of increases in cash and accounts receivable and other
assets, along with a decrease in accounts payable and accrued liabilities.
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Cautionary Statement on Forward-Looking Information
All statements, other than statements of historical fact, contained or
incorporated by reference in this media release, including any information as
to our future financial or operating performance, constitute "forward-looking
statements" within the meaning of certain securities laws, including the "safe
harbour" provisions of the Securities Act (Ontario) and the United States
Private Securities Litigation Reform Act of 1995 and are based on
expectations, estimates and projections as of the date of this media release.
The words "believe", "expect", "anticipate", "plan", "intend", "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 as of the date of this media release, are
inherently subject to significant business, economic and competitive
uncertainties and contingencies which give rise to the possibility that the
predictions or projections expressed in such statements will not be achieved.
We caution readers to not place undue reliance upon these statements as a
number of 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 any material deviation from the
material assumptions identified below, as well as: 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, Russia 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 mineral 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 media 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, or to explain any material difference between subsequent actual
events and such forward-looking statements, except to the extent required by
applicable laws.
Material assumptions
These forward-looking statements are based on a number of assumptions
which may prove to be incorrect, including but not limited to the various
assumptions set forth in our most recent annual information form and annual
report as well as: (1) there being no significant disruptions affecting
operations, whether due to labour disruptions, supply disruptions, damage to
equipment or otherwise during the balance of 2006; (2) permitting, development
and the expansion project at Paracatu proceeding on a basis consistent with
our current expectations; (3) permitting and development at Buckhorn
proceeding on a basis consistent with our current expectations; (4) that the
exchange rate between the Canadian dollar, Brazilian real, Chilean peso and
the U.S. dollar will be approximately consistent with current levels; (5)
certain price assumptions for gold and silver; (6) prices for natural gas,
fuel oil, electricity and other key supplies remaining consistent with current
levels; (7) production forecasts meet expectations for the balance of 2006;
and (8) the accuracy of our current mineral reserve and mineral resource
estimates. Some of the material assumptions made by Kinross involve
confidential or particularly sensitive information and, accordingly, Kinross
does not believe it is appropriate to disclose such assumptions for
competitive or other business reasons.
The technical information about the Company's material mineral properties
contained in this media release has been prepared under the supervision of Mr.
Rob Henderson an officer of the Company who is a "qualified person" within the
meaning of National Instrument 43-101.
Key sensitivities
Approximately 55%-60% of our costs are denominated in U.S. dollars.
A 10% change in foreign exchange could result in an approximate
$13 impact in cost of sales per ounce.
A $10 change in the price of oil could result in an approximate $4 impact
on cost of sales per ounce.
Conference call details
Kinross will host a conference call to discuss the third quarter results
on Friday, November 3, 2006 at 10 am EST. Details to access the call are as
follows:
<<
To access the call, please dial:
Toronto and internationally - 416-644-3416
Toll free in North America - 1-800-796-7558
Replay: (available Nov 3 to Nov 17, 2006)
Toronto and internationally - 416-640-1917
Passcode - 21205399 followed by the number sign.
Toll free in North America - 1-877-289-8525
Passcode - 21205399 followed by the number sign.
You may also access the conference call on a listen-only basis through via
webcast at our website www.kinross.com.
The conference call and webcast will be archived on our website at
www.kinross.com.
-------------------------------------------------------------------------
About Kinross Gold Corporation
Kinross, a Canadian-based gold mining company, is the fourth largest
primary gold producer in North America and the eighth largest in the
world. With eight mines in Canada, the United States, Brazil and Chile,
Kinross employs more than 4,000 people.
Kinross maintains a strong balance sheet and a no gold hedging policy.
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).
-------------------------------------------------------------------------
Consolidated balance sheets
(Expressed in millions of U.S. dollars, except share amounts)
-------------------------------------------------------------------------
As at:
---------------------------
September 30, December 31,
2006 2005
-------------------------------------------------------------------------
Assets (unaudited)
Current assets
Cash and cash equivalents $ 134.8 $ 97.6
Restricted cash 1.3 1.3
Accounts receivable and other assets 34.5 27.8
Inventories 100.9 115.2
---------------------------
271.5 241.9
Property, plant and equipment 1,319.5 1,064.7
Goodwill 321.2 321.2
Long-term investments 30.5 21.2
Deferred charges and other long-term assets 62.7 49.1
---------------------------
$ 2,005.4 $ 1,698.1
---------------------------
---------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 139.5 $ 132.2
Current portion of long-term debt 20.4 9.4
Current portion of reclamation and
remediation obligations 28.8 36.3
---------------------------
188.7 177.9
Long-term debt 67.8 149.9
Reclamation and remediation obligations 164.7 139.6
Future income and mining taxes 138.1 129.6
Other long-term liabilities 7.6 7.9
Redeemable retractable preferred shares - 2.7
---------------------------
566.9 607.6
---------------------------
Commitments and contingencies
Non-controlling interest - 0.3
---------------------------
Convertible preferred shares of
subsidiary company 14.7 14.1
---------------------------
Common shareholders' equity
Common share capital and common share
purchase warrants 1,998.6 1,777.6
Contributed surplus 54.5 52.6
Accumulated deficit (628.1) (752.9)
Cumulative translation adjustments (1.2) (1.2)
---------------------------
1,423.8 1,076.1
---------------------------
$ 2,005.4 $ 1,698.1
---------------------------
---------------------------
Common shares
Authorized Unlimited Unlimited
Issued and outstanding 362,431,089 345,417,147
-------------------------------------------------------------------------
Consolidated statements of operations
Unaudited (expressed in millions of U.S. dollars, except per share and
share amounts)
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
-------------------------------------------
2006 2005 2006 2005
-------------------------------------------------------------------------
Revenue
Metal sales $ 223.6 $ 181.1 $ 674.2 $ 535.5
Operating costs and expenses
Cost of sales (excludes
accretion, depreciation,
depletion and amortization) 115.6 113.1 362.5 337.2
Accretion and reclamation
expense 25.8 3.1 31.7 9.0
Depreciation, depletion
and amortization 25.0 41.3 81.2 130.2
-------------------------------------------
57.2 23.6 198.8 59.1
Other operating costs 8.5 0.7 15.8 5.1
Exploration and business
development 10.2 7.3 27.1 18.6
General and administrative 13.6 12.9 38.4 33.8
Impairment charges:
Goodwill - 6.7 - 6.7
Property, plant and
equipment - 30.1 - 30.1
Investments - 0.1 - 0.7
Gain on disposal of assets
and investments - net (35.9) (0.1) (38.8) (1.1)
-------------------------------------------
Operating earnings (loss) 60.8 (34.1) 156.3 (34.8)
Other income (expense) - net 0.5 (9.5) (11.5) (22.4)
-------------------------------------------
Earnings (loss) before taxes
and other items 61.3 (43.6) 144.8 (57.2)
Income and mining taxes
expense (11.0) (0.5) (19.7) (4.0)
Non-controlling interest 0.2 (0.1) 0.3 0.1
Dividends on convertible
preferred shares of
subsidiary (0.2) (0.2) (0.6) (0.6)
-------------------------------------------
Net earnings (loss) $ 50.3 $ (44.4) $ 124.8 $ (61.7)
-------------------------------------------
-------------------------------------------
Earnings (loss) per share
Basic $ 0.14 $ (0.13) $ 0.36 $ (0.18)
Diluted $ 0.14 $ (0.13) $ 0.36 $ (0.18)
Weighted average number of
common shares outstanding
(millions)
Basic 352.6 345.3 348.6 345.2
Diluted 353.9 345.3 349.6 345.2
-------------------------------------------------------------------------
Consolidated statements of cash flows
Unaudited (expressed in millions of U.S. dollars)
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
-------------------------------------------
2006 2005 2006 2005
-------------------------------------------
Net inflow (outflow) of
cash related to the
following activities:
Operating:
Net earnings (loss) $ 50.3 $ (44.4) $ 124.8 $ (61.7)
Adjustments to reconcile net
earnings (loss) to net cash
provided from (used in)
operating activities:
Depreciation, depletion
and amortization 25.0 41.3 81.2 130.2
Impairment charges:
Goodwill - 6.7 - 6.7
Property, plant and
equipment - 30.1 - 30.1
Investments - 0.1 - 0.7
Gain on disposal of assets
and investments - net (35.9) (0.1) (38.8) (1.1)
Future income and mining
taxes 0.8 (3.4) (1.1) (4.9)
Non-controlling interest (0.2) 0.1 (0.3) (0.1)
Stock-based compensation
expense 3.3 1.6 7.9 3.2
Unrealized foreign exchange
(gains) losses and other (1.7) 10.8 (0.7) 20.1
Changes in operating assets
and liabilities:
Accounts receivable and
other assets 1.6 1.5 (6.5) 9.1
Inventories 7.2 (2.9) 8.9 (14.0)
Accounts payable and
other liabilities 35.4 11.1 25.4 (8.4)
-------------------------------------------
Cash flow provided from
operating activities 85.8 52.5 200.8 109.9
-------------------------------------------
Investing:
Additions to property,
plant and equipment (61.1) (32.8) (137.6) (109.5)
Crown Resources Corporation
transaction costs - net (0.6) - (0.6) -
Proceeds from the sale of
marketable securities - 0.5 - 0.6
Proceeds from the sale of
(additions to) long-
term investments and
other assets 28.6 3.8 29.0 (14.4)
Proceeds from the sale of
property, plant and
equipment 8.6 2.4 10.1 6.3
Disposals of short-term
investments - (1.7) - 4.7
Increase in restricted cash - 0.2 - 0.1
-------------------------------------------
Cash flow used in investing
activities (24.5) (27.6) (99.1) (112.2)
-------------------------------------------
Financing:
Issuance of common shares 2.1 0.4 7.1 1.5
Proceeds from the issuance
of debt 9.7 - 23.7 35.8
Debt issuance costs (2.5) (2.5)
Repayment of debt (84.8) (0.4) (94.8) (1.3)
-------------------------------------------
Cash flow (used in) provided
from financing activities (75.5) - (66.5) 36.0
-------------------------------------------
Effect of exchange rate
changes on cash - - 2.0 -
-------------------------------------------
Increase in cash and cash
equivalents (14.2) 24.9 37.2 33.7
Cash and cash equivalents,
beginning of period 149.0 56.7 97.6 47.9
-------------------------------------------
Cash and cash equivalents,
end of period $ 134.8 $ 81.6 $ 134.8 $ 81.6
-------------------------------------------------------------------------
2006/Q3 Operating Summary
Gold
Ore equiv.
processed Recovery produc-
Mine Ownership (1) Grade (2) tion
-------------------------------------------------------
(000
tonnes) (g/t) (%) (ounces)
-------------------------------------------------------
North America
Fort Knox 100% 3,507 0.76 86.8% 81,348
Round Mountain 50% 8,550 0.79 nm 85,975
Porcupine 49% 1,055 2.54 92.0% 42,869
Musselwhite 32% 299 6.4 96.4% 18,031
South America
Paracatu 100% 4,408 0.41 75.1% 43,649
La Coipa(3) 50% 1,278 0.76 77.9% 28,233
Crixas 50% 195 8.03 95.4% 24,063
Refugio 50% 3,962 0.7 nm 29,833
Gold Capital
equiv. expend-
Mine sold Cost of sales iture
--------------------------------------------
($ ($
(ounces) millions) ($/ounce) millions)
--------------------------------------------
North America
Fort Knox 86,519 $ 24.3 $ 281 $ 15.0
Round Mountain 87,377 $ 25.2 $ 288 $ 10.3
Porcupine 40,494 $ 14.0 $ 346 $ 4.0
Musselwhite 17,936 $ 8.3 $ 463 $ 1.0
South America
Paracatu 45,047 $ 16.8 $ 373 $ 20.5
La Coipa(3) 23,209 $ 9.2 $ 396 $ 1.2
Crixas 23,360 $ 4.0 $ 171 $ 2.1
Refugio 26,129 $ 8.6 $ 329 $ 0.3
(1) Ore processed is to 100%, production and costs are to Kinross'
account.
(2) Due to the nature of the heap leach operation at Round Mountain and
Refugio, recovery rates cannot be accurately measured on a quarterly
basis.
(3) La Coipa silver grade was 73.99 g/t; recovery 58.0%.
nm - not meaningful
>>
%SEDAR: 00002968E
