CEO Quarterly Update: 2018 Q4/Year-End Results

Today, we released our 2018 Q4/year-end results, which includes an update on our organic development projects and exploration activities. I have listed below some key highlights

First Priorities

  • Our safety performance was very strong, and in 2018, we reported our lowest Total Reportable Injury Frequency Rate (TRIFR) in Company history. I commend everyone for this sharp focus on safety, which is, and always will be, our number one priority.
  • Maricunga, Fort Knox, Kettle River-Buckhorn and Dvoinoye all completed the year without any lost or restricted workdays.
  • We continue to make positive contributions in our host communities this year:
    • Bald Mountain won the Nevada Mine Reclamation Award for conserving 10,000 acres of sage grouse habitat.
    • Kupol extended its commitment to the highly successful Kupol Foundation through 2020.
    • We continue to see tangible improvements in communities near our mines. For example, at Tasiast, poverty rates in communities around the mine have dropped by 20% between 2011 and 2017.

Deliver Mine and Financial Performance

We have delivered on our annual production, cost and capital expenditure guidance for the seventh consecutive year – an accomplishment that has required sustained effort from all of our operations. We’ve also maintained our balance sheet strength and liquidity as we advanced our pipeline of development projects.

  • Operational highlights: We produced 610,152 Au eq. oz. during the fourth quarter, and 2,452,398 Au eq. oz. in full-year 2018. Several of our operations had standout performances, including Paracatu and Bald Mountain achieving record annual production, and Tasiast achieving record quarterly production in Q4.
  • Financial performance: Our full-year production cost of sales was $734 per ounce sold, which is in line with our guidance. Full-year all-in sustaining cost was $965 per ounce, and capital expenditures was $1,043.4 million, both of which are on the low end of our guidance.  In 2018, we also generated $874.2 million of adjusted operating cash flow.
  • Cost performance was very strong at Bald Mountain, our lowest cost mine in 2018 with a 15% reduction in year-over-year cost of sales per ounce, while our Russia region outperformed on cost expectations.  
  • During this period of reinvestment back into our business, we ended 2018 with $349 million in cash, which decreased compared with year-end 2017 primarily due to capital expenditures to fund our portfolio of development projects and the acquisition of two hydroelectric power plants in Brazil.
  • At year-end 2018, total liquidity was approximately $1.9 billion, with no debt repayments due until 2021.

Deliver Future Value

Over the past year, a strong emphasis was placed on reducing costs and finding efficiencies to improve cash flow and maximize budgets with a long-term focus. While we did achieve several targeted strategic accomplishments, we also experienced challenges, and saw a deterioration in Strategic Business Plan value.

Over the past year, our organic development projects continued to make good progress:

  • Following successful completion of the Tasiast Phase One expansion project, the mine delivered record production in Q4, with throughput and recoveries exceeding expectations. A Phase Two expansion continues to be a viable option as we continue to evaluate alternative approaches to further increase throughput. We also remain in discussions with the Government of Mauritania.
  • The Round Mountain Phase W project continues to progress on schedule and on budget, with pre-stripping advancing well. Initial low-grade ore has been encountered and is being placed on the existing heap leach pads. Commissioning of the processing circuit is expected to begin in Q2 2019.
  • The Fort Knox Gilmore project is on schedule and on budget, with initial ore expected in early 2020. Construction of the heap leach pad has begun, and stripping is expected to commence in Q3 2019.
  • The Bald Mountain Vantage Complex project is proceeding well, with commissioning of the heap leach and processing facilities expected to begin in late Q1 2019.
  • Our studies in Chile – the feasibility study for the La Coipa Restart project and the scoping study for the Lobo-Marte project – are both proceeding well, and are expected to be completed in the third quarter of 2019 and first quarter of 2019, respectively.
  • With strong exploration results, mine life was extended by one year at Kupol and Chirano, and approximately 2.3 million ounces was added to mineral reserve estimates in 2018.

Continuous Improvement and Innovation

  • All of our mines have demonstrated a strong commitment to Continuous Improvement (CI) through various initiatives aimed at cost cutting and productivity improvements.
  • Over the past year, all of our Operations made targeted performance improvements, particularly around our global CI priorities: drill-to-mill, dispatch and tire optimization.
  • In particular, major improvements on cost structure were made at Paracatu and Chirano.
  • Since launching in early 2018, the Innovation Opportunity Fund received a large number of competitive submissions from all of our sites and seven projects were approved for execution. Given the success of the past year, the program will continue in 2019.

There were many accomplishments at our operations and projects in 2018 – let’s continue to build on this momentum for the year ahead and focus on reaching our operational goals and project milestones. I am proud of our safety performance and the new record we have set as a Company. Let’s keep working safely and continue delivering on our goals in 2019.   


J. Paul Rollinson
President & CEO
Kinross Gold Corporation

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