CEO Quarterly Update: 2019 Q3 Results

Today, we released our 2019 Q3 results, and below are some key highlights.

Our global portfolio of mines delivered another solid quarter, contributing to an overall strong performance during the first nine months of this year. We continue to advance our project pipeline, including approving the Tasiast 24k project and announcing the acquisition of the Chulbatkan project. We are on track for a strong finish to the year and expect to meet our production and cost guidance.

First Priorities

  • Safety continues to be at the forefront globally, and I am pleased with our excellent results this year. A few achievements from this quarter include:
    • Fort Knox’s excellent safety performance was recognized by the U.S. National Mining Association as the mine received the prestigious Sentinels of Safety Award in the Large Metal Mine group for achieving 1.5 million hours without a Lost Time Injury.
    • Round Mountain and Bald Mountain ranked in the top three safest mines in Nevada at the Nevada Mining Association’s Mine Operator Safety Awards.
    • Paracatu hosted two days of emergency simulation training for four surrounding communities to prepare them in the unlikely event of a dam failure.

Deliver Mine and Financial Performance

Generating cash flow is a key priority, and we continue to focus on optimizing and improving our working capital, particularly our supplies inventory, to further improve our cash flow profile. Working capital is the amount of money that we have tied up in items like inventory or accounts payables and receivables that would otherwise be available to us as cash. Every time that we increase working capital, it negatively impacts our cash flow since the cash is tied up. While it will never be possible to completely eliminate working capital, we are taking measures to optimize it.

  • Operational highlights: We produced approximately 608,000 Au eq. oz. during the third quarter. Paracatu, Kupol and Tasiast, our three largest producing mines accounting for over 60% of total production, continued their excellent performance and achieved the lowest costs in our portfolio for Q3 and the first nine months of 2019.
  • Financial performance: Q3production cost of sales was $735 per ounce, all-in sustaining cost was $1,028 an ounce, and adjusted net earnings was $104.0 million, or $0.08 per share.
  • We ended the third quarter with adjusted operating cash flow of $295.4 million, more than double the same period last year, primarily due to the increase in margins as we achieved lower costs and realized a higher gold price. 
  • As a result of our strong performance during the first nine months of the year, we remain on track to meet our annual production guidance, and are tracking towards the lower end of our cost guidance. We ended the quarter in a strong financial position, with $358 million in cash and total liquidity of approximately $1.8 billion, with no debt maturities until 2021.

Deliver Future Value

In the recent reviews and consolidation of our Company’s Strategic Business Plans (SBP), there was a significant focus on cash flow and ensuring that we are generating cash in the near and long terms.

The “Our Tasiast 2020” and “Paracatu 950” projects were SBP highlights this year. It is clear that our culture of Continuous Improvement leads to major cost transformations and value creation. At all of our sites, we have seen strong progress to increase productivity while controlling costs.

During the quarter we continued to advance our project pipeline: 

  • In September, we announced that we are moving forward with the value-enhancing Tasiast 24k project to incrementally increase throughput capacity to 24,000 tonnes per day. This project allows us to optimize value at Tasiast through a capital efficient, low-risk investment that maximizes the mine’s potential through continuous improvement.
    • We remain on schedule to complete the $300 million project financing for Tasiast before year-end. A key step was completed in October 2019 with the International Finance Corporation obtaining Board approval.
  • Construction and commissioning of the Round Mountain Phase W and Bald Mountain Vantage Complex projects have been completed. Both projects have been handed over to their respective Operations teams.
  • The Fort Knox Gilmore project is proceeding on schedule and on budget, with initial stripping commencing during the quarter.
  • The Chulbatkan acquisition is progressing as anticipated, and is on track to close early next year. We are making good progress on various conditions to the deal and the Russian authorities have been very supportive of our proposed investment. 
  • As we assess the potential to re-start long-term production in Chile, the La Coipa Restart project feasibility study is now scheduled to be completed early next year, with study results expected to be released in February 2020. The Lobo-Marte project pre-feasibility study remains on schedule to be completed in mid-2020.

Continuous Improvement and Innovation

I’m pleased to see that our operations are constantly pursuing ways to continuously improve. As part of our commitment to Operational Excellence, we need to focus on executing all initiatives and sustaining the improvements made to date.

We recently approved two ideas for funding from the Innovation Opportunity Fund. Both of these innovations are aimed at improving our geological understanding of our orebodies. As we continue to enhance our operations, I encourage you to apply to use the Innovation Opportunity Fund.

In October, we also celebrated our 2019 Living Our Values Awards winners at the 11th annual gala. Congratulations to all of the winners! In addition, Fort Knox recently celebrated pouring its eight millionth ounce of gold, over 20 years into its mine life.

As we are now half way through the fourth quarter, it is important we finish the year focused, disciplined and committed to delivering excellent results. Let’s continue to seek opportunities to boost cash flow and optimize our working capital. Safety must remain our First Priority, every day, every shift. Thank you for your hard work.

Paul

J. Paul Rollinson
President & CEO Kinross Gold Corporation