Today, we released our 2019 Q4/full-year results, which includes an update on our development projects and exploration activities. Below are some key highlights.
First Priorities
Our continued commitment to the core values of Putting People First and Outstanding Corporate Citizenship were exemplified by our strong on-the-ground performance in 2019:
- Our Health and Safety metrics are among the best in the industry, and reflect the professional attitude and personal commitment of all our employees to doing the job right. In 2019, we made major advancements in the implementation of critical risk management systems that are designed to help prevent serious injuries and fatalities.
- In Environment, we had several permitting successes over the course of the year and maintained our strong compliance record.
- Through our Site Responsibility Plans and metrics, we continue to be one of the few mining companies maintaining a comprehensive view of the status of our relationships with communities, resulting in better on-the-ground strategies.
- Our focus on First Priorities helps build our positive
reputation, with numerous
awards and recognitions in 2019:
- 2019 Corporate Conservation Award from Trout Unlimited
- Chirano won CR, safety and sustainability awards
- Ranked in the top 10 among metals and mining companies in The Sustainability Yearbook 2020, published by S&P Global in collaboration with RobecoSAM
- For the second year running, received a top ranking in WWF Russia’s environmental transparency ranking.
Deliver Mine and Financial Performance
For the eighth consecutive year, we delivered on our annual production, cost and capital guidance. We generated robust free cash flow as a result of increased production and lowered costs compared to 2018.
- Operational highlights: We produced approximately 645,000 Au eq. oz. during the fourth quarter, and approximately 2.5 million in full-year 2019.
- Financial performance: Our full-year production cost of sales was $706 and all-in sustaining cost was $983. Capital expenditures were $1,105 million.
- Paracatu, Kupol and Tasiast accounted
for over 60% of our total production and delivered our lowest costs.
- Paracatu posted record annual production of approximately 620,000 ounces mainly due to benefits from an asset optimization program and continuous improvement initiative.
- Tasiast delivered record annual production and costs, with year-over-year production increasing by approximately 140,000 Au eq. oz., or 56%, and cost of sales decreasing by $374 per ounce sold, or 38%, as the mine continued to benefit from the Phase One expansion and the mill’s strong performance.
- Kupol increased production by 8% and was our lowest cost mine for the year.
- In 2019, we increased operating cash flow by 55% to $1.2 billion and more than tripled adjusted net earnings to $423 million primarily due to the increase in margins.
- At
year-end, total liquidity improved to over $2 billion during a phase of growth
and investment. Cash and cash equivalents improved to approximately $575
million.
- Our balance sheet and liquidity was strengthened with the sale of our royalty portfolio for total consideration of approximately $74 million and the sale of our remaining shares in Lundin Gold for approximately $113 million.
- While we optimized and improved our working capital, we did not meet the target. This will continue to be a key focus in the year ahead, along with generating consistent cash flow from all of our operations as we reinvest in our business.
Deliver Future Value
Over the past year, reducing costs, increasing margins and generating meaningful cash flow continued to be priorities, as well as strengthening our portfolio and future production profile. We achieved many of our targeted strategic accomplishments, including: cost improvements at Tasiast and Paracatu, progressing our Chile projects, delivering our Nevada projects and advancing Fort Knox Gilmore.
We also made key additions to our project pipeline, as well as replacing depletions and extending mine life:
- The Tasiast 24k project continues to advance well, and remains on budget and on schedule to increase throughput capacity to 21,000 t/d by the end of 2021 and then to 24,000 t/d by mid-2023. We also completed the $300 million project financing for Tasiast, which underscores third-party confidence in our project and Mauritania’s investment climate.
- We acquired the high-quality Chulbatkan project, which closed on January 16, 2020. We have a robust drilling program planned for 2020 with the goal of adding to the current 3.9 million Au oz. indicated resource base by year-end.
- In Chile, we are proceeding with the La Coipa Restart project to mine the Phase 7 deposit. The plan includes refurbishing the existing plant and other infrastructure, as well as the mine fleet from Maricunga. The project has strong economics, adds to our production profile, and provides optionality to continue studying opportunities in the area.
- The pre-feasibility study at Lobo-Marte is proceeding as planned and scheduled to be completed mid-year.
- The Fort Knox Gilmore project is proceeding on schedule and on budget, with stacking on the new heap leach pad expected to commence in Q4 2020.
- At Paracatu, significant additions to mineral reserve and resource estimates more than offset depletion and improved the mine’s long-term production outlook, while the mineral reserve additions from our exploration programs at Kupol and Chirano extended mine life by one year at both operations to 2024 and 2022, respectively.
- We also added 7.7 million gold ounces to estimated measured and indicated resources, a 28% year-over-year increase.
Continuous Improvement and Innovation
Year after year, I continue to be impressed by both the ideas and value generated through our Continuous Improvement programs. It is clear that Continuous Improvement is engrained in our day-to-day operations, and we have seen the positive impact of major transformational continuous improvement projects at Tasiast, Paracatu and Round Mountain in 2019.
Now entering its third year, the Innovation Opportunity Fund continues to make us a more safe and efficient Company globally, with eight projects receiving funding in 2019. I encourage our sites to continue to use this fund to pilot new ideas that can push our business forward.
In closing, I’d like to thank you for your hard work and commitment. Our global portfolio delivered a strong year on production and costs, while achieving key project and exploration milestones. Looking ahead, let’s continue to maximize opportunities to generate cash flow while we safely and efficiently deliver on our operational and project goals.
Paul
J. Paul Rollinson
President & CEO Kinross Gold Corporation
