Company on track to meet annual guidance

Three largest producing mines – Paracatu, Kupol and Tasiast – deliver lowest costs in portfolio

Kinross Gold Corporation (TSX: K) (NYSE: KGC) announced its results for the first-quarter ended March 31, 2021.

(This news release contains forward-looking information about expected future events and financial and operating performance of the Company. We refer to the risks and assumptions set out in our Cautionary Statement on Forward-Looking Information located on pages 20-22. All dollar amounts are expressed in U.S. dollars, unless otherwise noted.)

2021 first-quarter highlights:  

• The Company is on track to meet 2021 annual guidance.
• Production¹ of 558,777 attributable gold equivalent ounces (Au eq. oz.).
• Production cost of sales^1,2 was $756 per Au eq. oz. and largely in line with Q1 2020, while all-in sustaining cost^1,2  decreased to $975 per Au eq. oz. sold year-over-year.
• Attributable margins³ increased 25% to $1,031 per Au eq. oz. sold compared with Q1 2020, and outpaced the rise in average realized gold price².
• Adjusted operating cash flow² of $399.6 million, operating cash flow of $279.8 million and free cash flow² of $75.6 million.
• Reported net earnings⁴ increased 22% to $149.5 million, or $0.12 per share, with adjusted net earnings² increasing 51% to $192.8 million, or $0.15 per share, compared with Q1 2020.
• Cash and cash equivalents of $1,056.1 million, and total liquidity of $2.6 billion at March 31, 2021.
• Kinross’ Board of Directors declared a quarterly dividend of $0.03 per common share payable on June 17, 2021 to shareholders of record at the close of business on June 3, 2021.

Operations and sustainability highlights:

• Three largest producing mines – Paracatu, Kupol and Tasiast – accounted for 60% of production and were the lowest cost mines in the portfolio.
• The Tasiast 24k and La Coipa Restart projects advanced well and both remain on schedule, with studies at Udinsk, Manh Choh (formerly known as “Peak”) and Lobo-Marte all proceeding as planned.
• Kinross commits to reach net-zero greenhouse gas emissions by 2050 and expects to finalize a strategy to support this goal by year-end, including identifying tangible GHG reduction targets for 2030.

CEO Commentary:

1. Paul Rollinson, President and CEO, made the following comments in relation to 2021 first-quarter results:

“Our diversified portfolio of mines performed well to start the year, as we continued to mitigate the impacts of COVID-19 across all our operations and projects. The Company delivered a 51% year-over-year increase in adjusted net earnings, with margins increasing 25% to $1,031 per ounce sold, once again outpacing the increase in the average realized gold price. We are well-positioned to continue generating strong cash flow through the year, are on track to meet our annual guidance, and we are in an excellent financial position.

“Our three largest producing mines – Paracatu, Kupol and Tasiast – delivered our lowest costs for the quarter, with Paracatu and Tasiast achieving record quarterly throughput. Development at our Tasiast 24k and La Coipa projects advanced well and both projects remain on schedule. Our studies at Udinsk, Manh Choh and Lobo-Marte are all proceeding as planned.

“In line with our values and commitment to responsible environmental stewardship, Kinross is taking an important step and committing to reach net-zero greenhouse gas emissions by 2050. To support this goal, we are currently developing a strategy that we expect to finalize by year-end that will identify tangible GHG reduction targets for 2030, and the steps the Company plans to take to achieve those targets, leveraging our position as one of the lowest GHG emitters among our peers.”

Financial results
Summary of financial and operating results

The following operating and financial results are based on 2021 first-quarter gold equivalent production. Production and cost measures are on an attributable basis:

Production¹: Kinross produced 558,777 Au eq. oz. in Q1 2021, compared with 567,327 Au eq. oz. in Q1 2020. This slight decrease was primarily due to lower production at Tasiast and at Round Mountain, partially offset by higher production at Bald Mountain.

Average realized gold price²: The average realized gold price increased 13% to $1,787 per ounce in Q1 2021 compared with $1,581 per ounce for the same period in 2020.

Revenue: Revenue increased 12% to $986.5 million in Q1 2021 compared with $879.8 million during Q1 2020.

Production cost of sales^1, 2: Production cost of sales per Au eq. oz. was $756 in Q1 2021, in line with $754 in Q1 2020.

Production cost of sales per Au oz. on a by-product basis was $728 in Q1 2021 compared with $738 in Q1 2020, based on attributable gold sales of 533,207 ounces and attributable silver sales of 1,016,549 ounces.

Margins³: Kinross’ attributable margin per Au eq. oz. sold increased by 25% to $1,031 for Q1 2021, compared with $827 in Q1 2020, which outpaced the 13% year-over-year increase in average realized gold price.

All-in sustaining cost^{1, 2}: All-in sustaining cost per Au eq. oz. sold decreased to $975 in Q1 2021, compared with $993 in Q1 2020.

All-in sustaining cost per Au oz. sold on a by-product basis decreased to $953 in Q1 2021, compared with $982 in Q1 2020.

Operating cash flow: Adjusted operating cash flow² was $399.6 million in Q1 2021, compared with $418.6 million for Q1 2020 primarily due to an increase in current tax expense, offset by increased operating earnings.

Net operating cash flow was $279.8 million for Q1 2021, compared with $299.6 million for Q1 2020.

Free cash flow²: Free cash flow was $75.6 million in Q1 2021, compared with $108.2 million for Q1 2020 due to increases in income taxes paid and capital expenditures, partially offset by increased margins. Free cash flow is reported on an unadjusted basis and includes net outflows for working capital and taxes paid of $119.8 million.

Earnings: Adjusted net earnings² increased 51% to $192.8 million, or $0.15 per share, for Q1 2021, compared with $127.4 million, or $0.10 per share, for Q1 2020.

Reported net earnings⁴ increased 22% to $149.5 million, or $0.12 per share, for Q1 2021, compared with $122.7 million, or $0.10 per share, for Q1 2020, primarily due to the increase in operating earnings, partially offset by the increase in income tax expense.

Capital expenditures: Capital expenditures increased slightly to $204.2 million for Q1 2021, compared with $191.4 million for Q1 2020 primarily due to increased spending at the La Coipa, Lobo-Marte and Udinsk projects, partially offset by decreased capital development activities at Bald Mountain and Round Mountain.

Balance sheet

As of March 31, 2021, Kinross had cash and cash equivalents of $1,056.1 million, compared with $1,210.9 million at December 31, 2020. The decrease was primarily due to the final payment for the Chulbatkan license and the quarterly dividend payments, partially offset by free cash flow² generated in the quarter.

The Company had additional available credit of $1,563.9 million as of March 31, 2021 and total liquidity of approximately $2.6 billion. Kinross had total debt of approximately $1.9 billion at March 31, 2021.

Kinross announced on April 29, 2021 that it will redeem all the outstanding 5.125% Senior Notes due September 1, 2021, which have an aggregate principal amount of $500 million, on June 1, 2021. After the 2021 notes are redeemed, $1,250 million in aggregate principal amount of Kinross Senior Notes will remain outstanding, with the next maturity date on March 15, 2024 for $500 million in aggregate principal amount.

Operating results

The Company’s comprehensive response to the COVID-19 pandemic continued to maintain the safety of its global workforce and mitigate operational impacts.

Mine-by-mine summaries for 2021 first-quarter operating results may be found on pages nine and 13. Highlights include the following:

Americas

Paracatu performed well in Q1 2021, with production increasing year-over-year as the site delivered record quarterly throughput. Production was lower quarter-over-quarter mainly as a result of a decrease in mill grade due to mine sequencing, which was largely offset by strong throughput. Cost of sales per ounce sold was lower compared with Q1 2020 mainly due to favourable foreign exchange, and increased compared with Q4 2020 primarily due to lower production.

At Round Mountain, mining activities during the quarter were impacted by precautionary measures taken after  wall movements in the north wall of the pit were detected by the site’s comprehensive monitoring system. The site deferred mining in the area, which delayed access to Phase W ore and affected production and cost of sales per ounce during the quarter. The site has accelerated dewatering in the area and is moving waste material to mitigate the issue and to enhance the stability of the wall. A mine optimization program has also commenced, which is expected to be completed in the second quarter of next year and will evaluate opportunities for Phase S, the mine’s next planned pushback after Phase W. While production timing and mine sequencing are expected to be impacted, including potentially deferring access to higher grade Phase W ore for approximately two years, Kinross does not anticipate this issue to impact the Company’s 2021 production and cost of sales guidance and its longer-term production profile, or Round Mountain’s total life of mine production.

At Bald Mountain, production was in line with the previous quarter, and was higher year-over-year mainly due to timing of ounces recovered from the heap leach pads. Cost of sales per ounce decreased quarter-over-quarter primarily due to lower contractor and fuel costs, partially offset by higher operating waste mined. The year-over-year decrease in cost of sales per ounce was mainly as a result of higher production and lower contractor costs.

At Fort Knox, production was slightly lower compared with the previous quarter mainly due to lower mill grades and throughput, which was largely offset by higher heap leach production. Year-over-year, production was higher mainly as a result of timing of ounces processed through the mill and an increase in ounces recovered from the heap leach pads. Cost of sales per ounce increased quarter-over-quarter primarily due to lower production and a higher proportion of production from the heap leach pads, and decreased year-over-year primarily due to lower operating waste mined.

Russia

At Kupol and Dvoinoye, production was lower than the previous quarter mainly as a result of a decrease in throughput and anticipated lower grade ore as the site transitioned to Dvoinoye stockpiles. Production was largely in line with the previous year. Cost of sales per once sold increased slightly quarter-over-quarter due to lower production and was largely offset by lower mining costs as a result of the completion of mining activities at Dvoinoye. Cost of sales per ounce sold was lower year-over-year mainly due to lower mining costs as a result of the completion of mining activities at Dvoinoye and favourable foreign exchange.

West Africa

Tasiast performed to plan during the first quarter, with the site achieving record quarterly mill throughput rates and shift rotations returning to pre-pandemic schedules in March. Compared with the previous quarter and year, production decreased primarily as result of lower mill grade, which was expected as the site processed more stockpile ore, largely offset by record mill throughput. Cost of sales per ounce sold was higher quarter-over-quarter and year-over-year mainly as a result of lower production, with higher royalty expenses also contributing to the increase versus Q1 2020.

At Chirano, production was higher quarter-over-quarter mainly due to an increase in throughput and higher grades from the underground deposits. Production was largely in line year-over-year. Cost of sales per ounce sold was higher compared with the previous quarter mainly as a result of an increase in operating waste mined, and higher maintenance, milling and power costs. Cost of sales per ounce sold increased versus the first quarter of 2020 mainly due to higher maintenance and mill costs, partially offset by lower operating waste mined.

Development projects

Tasiast 24k

The Tasiast 24k project remains on budget and on schedule to increase throughput capacity to 21,000 tonnes per day (t/d) by the end of 2021, and then to 24,000 t/d by mid-2023. The first phase of the project is now 80% complete. Power plant construction is advancing well and is now 80% complete, with commissioning expected to commence shortly. The new leach tank has been assembled and the thickener is now mechanically complete.

Chulbatkan – Udinsk

Kinross continues to make good progress at Udinsk, the first project that is expected to be developed on the Chulbatkan license. The project’s pre-feasibility study is on track to be completed in Q4 2021 and is focusing on fast-tracking construction. First production is anticipated to occur in 2025.

Exploration activities on the larger Chulbatkan license that were planned for 2021 have commenced, with drilling focused on new targets showing soil and geophysics anomalies near the Udinsk resource pit to the northeast and southwest.

Alaska projects

The “Peak” project, which was formally re-named “Manh Choh,” continued to advance well during the quarter. The Athabascan name of “Manh Choh” (meaning “Big Lake”) has considerable cultural significance to the local community and was chosen for the project after close consultation with the Upper Tanana Athabascan Village of Tetlin.

The project’s scoping study remains on schedule to be completed by the end of Q2 2021, with infill, metallurgical and geotechnical drilling now complete. Engineering, environmental studies for permitting, and community engagement initiatives are all progressing well. The Manh Choh feasibility study is expected to be completed by the end of 2022 and first production is expected in 2024.

The Company has also commenced development of the Gil satellite pits, which are located approximately 13 kilometres east of Fort Knox. The Gil pits are expected to produce approximately 160,000 Au eq. oz. over a two year mine life at an estimated average cost of sales of approximately $920 per Au eq. oz., with expected average mining grades of 0.8 g/t⁵. Production is scheduled to commence in Q4 2021⁵. Initial non-sustaining capital and sustaining capital expenditures are expected to be approximately $30 million and $10 million, respectively⁵. The Company plans to haul Gil ore to the Fort Knox mill for processing using the mine’s existing road network.

La Coipa Restart and Lobo-Marte

The La Coipa Restart project is on schedule to commence production in mid-2022 and continues to progress well, with pre-stripping now ramped up after commencing in January 2021. Fleet refurbishments are expected to be completed during Q2 2021, with plant refurbishments and mine road construction advancing as planned. Work on studies to incorporate adjacent deposits into La Coipa’s mine plan to potentially extend mine life is proceeding well. The Company is also evaluating the option of sourcing renewable power for the project.

The Lobo-Marte feasibility study is advancing on schedule and is expected to be completed in Q4 2021. Kinross is targeting to commence production in 2027 subject to permitting and after the completion of mining at La Coipa, with construction potentially starting in 2025. Kinross continues to believe that Lobo-Marte has the potential to be a long-life, cornerstone asset with attractive costs.

Company Guidance

The following section of the news release represents forward-looking information and users are cautioned that actual results may vary. We refer to the risks and assumptions contained in the Cautionary Statement on Forward-Looking Information on pages 20-22.

The Company is on track to meet its 2021 production guidance of 2.4 million Au eq. oz. (+/- 5%). Production is expected to increase quarter-over-quarter in 2021, largely driven by anticipated higher production at Paracatu, and expected higher production in the fourth quarter at Tasiast.

The Company is also on track to meet its 2021 guidance for production cost of sales of $790 per Au eq. oz. (+/- 5%), all-in sustaining cost of $1,025 per Au eq. oz. (+/-5%) and capital expenditures of $900 million (+/-5%). Cost of sales is expected to increase through the year as a result of planned increases in operating waste mined.

In 2022 and 2023, consistent with the three-year guidance the Company provided in October 2020, annual production is expected to increase to approximately 2.7 million Au eq. oz. (+/- 5%) and 2.9 million Au eq. oz. (+/- 5%), respectively. The Company also expects to produce an average of 2.5 million Au eq. oz. per year through the end of the decade.

Sustainability update – commitment to net-zero GHG by 2050

In line with the Company’s core values and focus on responsible environmental stewardship, Kinross is committing to working toward the goals of the United Nations Framework Convention on Climate Change (UNFCCC) Paris Agreement, with the ultimate objective of being a net-zero GHG emissions company by 2050. To support this objective, Kinross is currently developing a strategy that it expects to finalize by year-end that will include tangible GHG reduction targets for 2030 and the steps the Company plans to take to achieve those targets. This strategy is expected to be based on site-specific analysis of mining and processing technologies, renewable resources, and alternative energy sources potentially available over the life-of-mine across all of the Company’s assets.

The strategy will also leverage the Company’s current position as one of the lowest GHG emitters among its peers, and build on its record of incorporating energy efficiencies into its projects and operations, such as the acquisition of two hydroelectric power plants in 2018 to increase renewable energy use at Paracatu. As potential elements of its strategy, Kinross is also exploring on-site renewable energy generation, including studying solar photovoltaic power at Tasiast, and sourcing renewable energy power from the grid at La Coipa, which is under evaluation as part of the project.

Kinross has a long record of transparency on climate-related disclosures and GHG emissions. The Company has been reporting on its emissions through the Global Reporting Initiative (GRI) Standards and Carbon Disclosure Project (CDP) frameworks since 2005, and in 2020, began implementation of the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

More information on Kinross’ approach to climate change and energy is available in the Company’s latest Sustainability Report. Kinross expects to publish a Sustainability Report Update in mid-2021.

About Kinross Gold Corporation

Kinross is a Canadian-based senior gold mining company with mines and projects in the United States, Brazil, Russia, Mauritania, Chile and Ghana. Our focus is on delivering value based on the core principles of operational excellence, balance sheet strength, disciplined growth and responsible mining. Kinross maintains listings on the Toronto Stock Exchange (symbol:K) and the New York Stock Exchange (symbol:KGC).

Review of operations

Interim condensed consolidated balance sheets

Interim condensed consolidated statements of operations

Interim condensed consolidated statements of cash flows