Today, we released our 2020 Q1 results. This quarterly update comes against the backdrop of an unprecedented global crisis, as we continue to experience the impact of the COVID-19 pandemic in all areas of our lives, including our business.
The health and safety of our employees, their families and our communities continue to be our top priority as we manage through this crisis. This is a priority that every member of our team has continued to embrace despite global uncertainty, changes to work routines, and the demands of new protocols.
I know this has been a challenging time, and I want to thank all of you for your commitment to keeping each other safe. Our global efforts in this regard are documented in our COVID-19 response, which you can see in this video.
I commend you for your resilience, long working hours, and for supporting your teams with dedication and focus. I also want to acknowledge the efforts of first responders and front line workers who are making great personal sacrifices to help keep us in good health.
This is a difficult time worldwide, and we recognize its impacts on the communities where we operate. As a Company, we have committed over $5 million to our host communities and governments to support COVID-19 mitigation efforts. We have some great examples of this support at our operations through the following links, where you can read more about efforts at Tasiast, Paracatu, Kupol and Dvoinoye, and Round Mountain.
Thanks to the risk mitigation measures in place at every operation, and with the support of our host governments, our portfolio of mines produced good results in Q1. However, operations may be challenged over time given the future global impacts of a prolonged crisis. While we took the prudent step of withdrawing our full-year guidance for 2020 as a result of the pandemic, we are still aiming towards safely reaching our goals.
During the quarter, Kinross continued to maintain a strong financial position and liquidity. We also generated strong cash flow and increased earnings year-over-year. In short, both from an operations and financial standpoint, we continue to be in strong position to manage through this challenging time.
Key first-quarter highlights include:
- Health & safety was our primary focus over the quarter as we responded to the pandemic. As part of our COVID-19 response all sites have developed response plans, and implemented measures such as physical distancing, to mitigate risk.
- We recorded an impressive safety milestone to start the year with the first back-to-back months with zero lost or restricted work days across the entire Company in January and February. It’s great to see the continued focus on working safely in these challenging times.
- In addition, Bald Mountain, Fort Knox, Round Mountain, La Coipa, Maricunga, Paracatu, Dvoinoye, and Chirano completed the quarter without lost or restricted days.
Delivering Sustainable Cash Flow
- Operational highlights: In the first quarter we produced 567,327 Au eq. oz., with results driven by our top three mines – Paracatu, Kupol and Tasiast – which also achieved an average cost of sales of $642 per Au eq. oz. sold.
- Tasiast achieved record quarterly production and a record average throughput ratefor the second consecutive quarter as the mine continues to benefit from the Phase One expansion.
- Financial performance: Cost of sales was $754 per Au eq. oz. sold and all-in sustaining cost was $993 per Au eq. oz. ounce sold. While costs increased year-over-year partly due to COVID-19 impacts, both were still within our original annual guidance range.
- Adjusted operating cash flow was 419 million for the quarter, a significant 81% increase from the prior year. We also generated robust free cash flow in Q1.
- Adjusted net earnings increased 53% to $127 million compared with the previous year.
- Our margins increased by 33% compared with the prior year, outpacing the increase in the average realized gold price.
- We ended the first quarter with strong liquidity of $1.9 billion and have no debt maturities until September 2021.
- On March 2, 2020, Moody’s upgraded Kinross’ credit rating to investment grade. Kinross’ credit is now rated investment grade by each of the agencies that cover it – Moody’s, S&P Global Ratings and Fitch Ratings.
Deliver Future Value
- The Tasiast 24k project continues to advance. While the project currently remains on schedule to increase throughput capacity to 24,000 t/d by mid-2023, timing could be challenged by COVID-19-related impacts.
- At the Chulbatkan development project, approximately 23,500 metres of infill, step-out and metallurgical drilling have been completed as of the end of Q1 2020. The drilling program for the rest of the year will focus on updating the high-grade portion of the known resource with the goal of defining and further extending the resource base at year end.
- The Fort Knox Gilmore project is progressing on schedule and on budget. Stripping continued during the quarter and all procurement was completed for work planned for 2020, with all critical materials delivered to site. The new Barnes Creek heap leach is expected to be completed in the fourth quarter.
- At the La Coipa Restart project, our team completed the transfer of the mine fleet from Maricunga to La Coipa in early April. As a result of limitations placed on people movement within Chile, first production is expected to be delayed by approximately three months to mid-2022. The Lobo-Marte pre-feasibility study (PFS) is advancing well and is scheduled to be completed by early summer.
Continuous Improvement and Innovation
- CI initiatives continued into 2020, including transformational projects well underway at Round Mountain, Bald Mountain and Fort Knox. It is good to see fragmentation improvements in blasting and energy management projects are helping reduce cash costs across our portfolio.
- The Innovation Opportunity Fund continues to receive strong submissions, with two projects funded in 2020 that are expected to improve exploration and drill/blast programs at Kinross. I encourage you to keep submitting your ideas to the Fund.
While our collective efforts have delivered a strong first quarter, the effects of the prolonged crisis are far from over.
I encourage you all to remain vigilant, and to continue to keep health and safety top of mind, especially as governments start to relax emergency restrictions. It is crucial we remain alert against the spread of COVID-19 as we move forward.
Again, I want to thank you for your ongoing efforts during this time, and for your commitment to keeping yourselves, your families and your colleagues safe.
J. Paul Rollinson
President & CEO