On November 4th, we released our 2020 Q3 results. Despite the ongoing challenges associated with the COVID-19 pandemic, our mines performed well over the quarter and the first nine months of 2020. We remain on track to meet our guidance for production, cost of sales per ounce, all-in sustaining cost per ounce and capital expenditures for the ninth consecutive year.
Across our global operations, our teams have continued to demonstrate their commitment to working safely and observing numerous protocols to mitigate the spread of the virus. By continuing to prioritize safety, you are not only protecting yourselves, but also your colleagues, families and communities against COVID-19, while still delivering on our goals and maintaining the economic benefits our operations create for our host communities. All the things you have done, large and small, have allowed us to continue working in a safe and productive manner. Your hard work and dedication have resulted in another strong quarter for Kinross, and I would like to thank you again for your ongoing efforts.
2020 Q3 Results
During the third quarter, we recorded a significant increase in earnings and cash flow, returned capital to our shareholders by declaring a dividend and continued to strengthen our investment grade balance sheet. We also announced an expected 20% production increase over the next three years to 2.9 million Au eq. oz. in 2023. In October, we announced a long-term outlook of 2.5 million gold equivalent ounces in average annual production through to 2029.
- Health & safety remained our priority as we continued to work to mitigate the impacts of the COVID-19 pandemic. Despite ongoing demands associated with managing these risks, our safety record remained strong.
- We continued to support our host communities during this ongoing global pandemic through initiatives that focused on health and safety, economic assistance and aiding vulnerable groups. We have now provided a total of $5.8 million in COVID-19 support in countries where we operate.
- We published our Sustainability Report in August, detailing our progress over the past two years in delivering on our commitment to responsible mining. The Report provides a transparent account of Kinross’ strong ESG performance and an in-depth review of our relationships with host communities, our workforce and host governments.
Delivering Sustainable Cash Flow
- Operational highlights: Our portfolio performed well, with production of 603,312 Au eq. oz. over the quarter. Our three largest mines – Paracatu, Kupol-Dvoinoye and Tasiast – delivered over 60% of total production with costs among the lowest in the portfolio. Fort Knox also delivered a strong quarter, with higher production and lower costs both quarter-over-quarter and year-over-year.
- Financial performance: Cost of sales was $737 per Au eq. oz. sold and all-in sustaining cost was $958 per Au eq. oz. sold.
- Adjusted operating cash flow increased by 86% compared with Q3 2019 to $550 million, with another quarter of very strong free cash flow.
- Adjusted net earnings nearly tripled to $310 million, or $0.25 per share, compared with Q3 2019.
- Our margins grew by 60% year-over-year to $1,171 per gold ounce sold, which substantially outpaced the 30% increase in the average realized gold price.
- We continued to strengthen our investment grade balance sheet, and ended the quarter with approximately $935 million in cash and total liquidity of $2.5 billion.
- We declared a dividend on September 17, 2020 and declared a dividend for the third quarter, both in the amount of $0.03 per share. We are pleased to return value to shareholders through a reinstated regular dividend, which is indicative of our excellent performance and strong cash flow generation.
Deliver Future Value
- At the Fort Knox Gilmore project, work on infrastructure and processing facilities is now substantially complete. First ore was placed on the new Barnes Creek heap leach pad in early October, as construction of the pad was completed on time and under budget. At the end of September, we acquired a 70% interest in the Peak project in Alaska. Peak ore is expected to be processed at the Fort Knox mill – we are excited about the benefits and synergies this “bolt-on” acquisition will provide for our Company.
- The Tasiast 24k project continued to advance, and remains on schedule. The project is now approximately 45% complete.
- Project study work is advancing well at Udinsk, the first project we expect to develop on the larger Chulbatkan license. On the Chulbatkan license, exploration work continues to see positive results.
- Our projects in Chile continued to progress well, with the La Coipa Restart project advancing on schedule to begin pre-stripping in early 2021, with first production expected in mid-2022. Feasibility study work at the Lobo-Marte project is proceeding on schedule to be completed in Q4 2021.
The reinvestments in our portfolio, continuous improvement initiatives and successful exploration programs have enabled us to add lower cost and lower risk projects that leverage existing infrastructure and enhance our long-term production profile. In summary, we have attractive projects in every country where we operate and are excited about the future of Kinross.
Continuous Improvement and Innovation
- Continuous Improvement (CI) initiatives have continued to drive significant value at our operations, enabling us to exceed our budgets in certain operating parameters and drive long-term value improvement.
- The Innovation Opportunity Fund has approved funding for nine projects to date. Given the success and engagement from our teams, the Fund has secured additional budget to continue supporting projects that aim to de-risk and support innovation at our operations.
At Kinross, we’ve always believed that our values and culture are the foundation of everything we do. Over the past months, we have truly seen our Company living these values, a concept that is personified through our Living Our Values Awards (LOVA) awards. This year we received approximately 3,800 nominations across our global operations, and recognized 12 winners for their commitment to our four core values: Putting People First, Outstanding Corporate Citizenship, High Performance Culture and Rigorous Financial Discipline. While our LOVA celebrations may look different this year, we remain passionate about celebrating our 2020 award recipients and their significant accomplishments. Please join me in congratulating our LOVA winners!
I’d like to close off by thanking you all again for your commitment and dedication to our company. As we move through the fourth quarter, and approach the end of this year, let’s continue to safely deliver on our goals.
J. Paul Rollinson
President & CEO