On February 10th, we released our 2020 Q4/full-year results and also provided an update on our development projects and exploration activities.
Our global operations performed well through what was a very challenging year, delivering strong performance despite the impacts of the pandemic. We met our public guidance for production, costs and capital expenditures for the ninth consecutive year, a record we should all be proud of, and generated more than $1 billion in free cash flow.
Across our portfolio, we continued to prioritize the health and safety of our teams by observing comprehensive safety measures at every site, and supported host communities, donating approximately $6 million towards local efforts to combat COVID-19 over the year.
First Priorities
We highlighted the importance of Putting People First through our COVID-19 response over the year, safeguarding our employees, their families and their communities.
- Delivered strong Total Reportable Injury Frequency Rates in line with three-year averages, remaining among the top industry performers.
- We reached over five million hours without a lost time incident (LTI) at Maricunga, and three million hours without an LTI at both La Coipa, and at Fort Knox.
- That success was overshadowed by a fatality at Round Mountain, our first mine site fatality since 2017, and the fatal road accident involving an employee at Tasiast, both in November 2020. We reduced our overall 4PP score by 5% to reflect the mine site fatality at Round Mountain. The same adjustment was not applied to the transit-related fatality at Tasiast, as this incident was outside site safety controls. As we shared during our global Safety Stand-down, we recognize both tragic incidents and their impact, and continue to prioritize keeping safety top of mind in everything we do.
- Our ESG performance ranked in the top quartile of our peer group, as measured by Sustainalytics, MSCI, ISS, Vigeo, Refinitiv and S&P’s Dow Jones Sustainability Index. Kinross was also recognized as the top mining company in The Globe and Mail’s annual corporate governance ranking.
- Kinross’ strong record of environmental performance was illustrated by our top rankings in World Wildlife Fund (WWF) Russia’s Environmental transparency rating, and through the successful reclamation of the True North mine in Alaska.
- Kinross continued to provide significant economic benefits through taxes, support of local suppliers and employment, with more than 98% of Kinross employees originating from its host countries.
- Social engagement remained strong, with approximately 105,000 stakeholder interactions conducted during 2020. Our community investments also supported over 938,000 beneficiaries during the year.
- Kinross’ 2019 Sustainability Report was published in August 2020, providing a transparent account of our sustainability performance, including Environmental, Social and Governance (ESG) activities.
Delivering Sustainable Cash Flow
We had record free cash flow in 2020, met market guidance for the ninth consecutive year, remained in excellent financial position, and also returned value to shareholders in the form of a sustainable dividend.
- Operational highlights: We produced approximately 624,000 Au eq. oz. during the fourth quarter, and approximately 2.4 million Au eq. oz. over the full year. Paracatu, Kupol and Tasiast accounted for over 60% of our total production and were the lowest cost mines in the portfolio in 2020 for the second year in a row.
- Financial performance: Cost of sales was $723, and all-in sustaining cost was $987 in 2020. Capital expenditures were $916 million for the year.
- Free cash flow more than tripled to $382.8 million compared with the fourth quarter last year, and we generated a record $1,041.5 million for full-year 2020.
- Adjusted operating cash flow increased by 59% to $1,912.7 million versus last year mainly due to an increase in margins.
- Adjusted net earnings more than doubled to $966.8 million, or $0.77 per share, in 2020 compared with last year.
- Our margins continued to outpace the increase in the realized gold price, increasing by 53% over the year-over-year to $1,051.
- We strengthened our investment grade balance sheet, with cash and cash equivalents of approximately $1.2 billion, and total liquidity to approximately $2.8 billion at December 31, 2020.
- We continued to return value to shareholders through a sustainable quarterly dividend of $0.03 per common share.
Deliver Future Value
Our long-term production outlook was bolstered by the advancement of our project pipeline, mine life extensions and strategic acquisitions in Alaska and Russia over the year. We also issued three-year guidance, and announced an expected 20% increase to production from 2021 to 2023, with production averaging 2.5 million gold equivalent ounces per year to 2029. In addition, we reached an agreement in principle with the Government of Mauritania, which enhances our partnership and positions Tasiast for long-term success.
- The Tasiast 24k project is advancing on schedule and on budget. The project is now 60% complete, with work on the processing plant and construction of the power plant both proceeding well.
- At Udinsk, drilling and study work advanced over the year, with the pre-feasibility study now started and expected to be completed in Q4 2021. Exploration work continues to see encouraging results on the larger Chulbatkan license.
- Pre-stripping started as scheduled in early January 2021 on the La Coipa Restart project and first production remains on-track for mid-2022. The Lobo-Marte feasibility study remains on track for completion in Q4 2021.
- First gold ounces were produced from the new heap leach pad at Fort Knox Gilmore in January 2021 as project construction was completed on schedule and on under budget. We also started a drilling program and initial permitting work on the Peak project.
- We added a net of 5.7 million Au oz. to mineral reserves in 2020, a 23% year-over-year increase, due to successful exploration and mine optimization programs. Kupol and Chirano extended mine life one and three years, respectively, to 2025, and Paracatu extended mine life by one year to 2032.
Continuous Improvement and Innovation
- In 2020, many of the typical Continuous Improvement activities pivoted towards responding to COVID-19, which demonstrated our flexibility to meet our operating goals. I am pleased that our operations have continued to maintain cost discipline and strong productivity.
- Special recognition goes to Bald Mountain and Fort Knox where major operational improvement programs yielded significant benefits in 2020, and positioned the sites for future success.
- In its third year, the Innovation Opportunity Fund funded nine projects throughout our operating regions. It was great to see that the focus of these initiatives centered on safety and shifting towards automating more of our processes to drive significant value creation.
To conclude, I want to thank all of you for your hard work, dedication and ongoing efforts.
It has certainly been challenging, but every positive action that you have taken in response to this pandemic has contributed to the success of our business.
In a tough environment, we were able to safely deliver on our financial and operational goals, advance our development projects and achieve exploration success, which is something we should all be very proud of.
As we move forward into 2021, I encourage you to continue to focus on safety, and to keep exploring opportunities to continuously improve our business.
Remain vigilant, and keep safe.
Paul
J. Paul Rollinson
President & CEO
