Kinross Reports 2015 Second-Quarter Results

TORONTO, ON--(Marketwired - July 29, 2015) - Kinross Gold Corp. (TSX: K) (NYSE: KGC) today announced its results for the second quarter ended June 30, 2015.

(This news release contains forward-looking information about expected future events and financial and operating performance of the Company. We refer to the risks and assumptions set out in our Cautionary Statement on Forward-Looking Information located on page 18 of this release. All dollar amounts are expressed in U.S. dollars, unless otherwise noted.)

2015 second quarter highlights:

• Production¹: 660,898 gold equivalent ounces (Au eq. oz.), compared with 679,831 ounces in Q2 2014.

• Revenue: $755.2 million, compared with $911.9 million in Q2 2014.

• Production cost of sales²: $724 per Au eq. oz., compared with $742 in Q2 2014.

• All-in sustaining cost²: $1,011 per Au eq. oz. sold, compared with $976 in Q2 2014. All-in sustaining cost per gold ounce (Au oz.) sold on a by-product basis was $1,006 in Q2 2015, compared with $967 in Q2 2014.

• Adjusted operating cash flow²: $161.4 million, or $0.14 per share, compared with $240.3 million, or $0.21 per share, in Q2 2014.

• Adjusted net earnings/loss^2,3: Loss of $13.6 million, or $0.01 per share, compared with adjusted earnings of $32.9 million, or $0.03 per share, in Q2 2014.

• Reported net earnings/loss³: Loss of $83.2 million, or $0.07 per share, compared with earnings of $46.0 million, or $0.04 per share, in Q2 2014.

• Balance sheet strength: Increased cash and cash equivalents to $1,031.4 million, decreased net debt⁴ to $960.2 million, $250 million in senior notes due in 2016 only significant debt maturity until 2019.

• Average realized gold price: $1,194 per ounce, compared with $1,285 per ounce in Q2 2014.

• Outlook: Kinross is tracking at the high end of 2015 guidance for production (2.4 - 2.6 million Au eq. oz.), at the low end of guidance for production cost of sales ($720 - $780 per Au eq. oz.) and all-in sustaining cost ($1,000 - $1,100 per Au eq. oz.), and below total capital expenditure guidance ($725 million).

• Comprehensive spending review: Kinross is continuing its comprehensive review of its non-operating discretionary spending in order to further reduce costs. This is in addition to further measures being taken to strengthen the business, including plans to reduce costs and enhance performance at its Tasiast operation, and an agreement reached in July to extend Kinross €™ debt profile and amend its debt covenant.

CEO Commentary
J. Paul Rollinson, CEO, made the following comments in relation to 2015 second quarter results:

"Kinross continued to deliver on its targets, with production in the first half of 2015 tracking at the high-end of guidance for the year, and all-in sustaining cost tracking at the low-end of the full-year forecast. The Company achieved these results despite a temporary suspension of operations at Maricunga and fewer ounces sold due to timing of some gold sales, which, together with a decline in the gold price, impacted earnings. Kinross nonetheless continued to generate free cash flow in Q2, in large part as a result of its strong operational performance, benefits from foreign exchange and lower oil prices, and a company-wide effort to drive down procurement costs and reduce working capital.

With strong liquidity, including more than $1 billion in cash on the balance sheet, Kinross is well-positioned to weather the current market volatility. This is no coincidence -- over the past three years we have actively and prudently managed the balance sheet in a declining gold price environment -- and we will continue to do so, with a number of ongoing initiatives to further strengthen the Company €™s financial position and drive down costs. €

The following operating and financial results are based on second-quarter 2015 gold equivalent production from continuing operations. Production and cost measures are on an attributable basis:

Production: Kinross produced 660,898 attributable Au eq. oz. in Q2 2015, a 3% decrease compared with Q2 2014, due mainly to lower production at Maricunga as a result of heavy rains in March, which temporarily suspended operations, and at Paracatu, due to lower mill throughput and recoveries, partially offset by increased production at Fort Knox.

Production cost of sales: Production cost of sales per Au eq. oz.² decreased to $724 for Q2 2015, compared with $742 for Q2 2014, mainly as a result of lower energy costs and favourable foreign exchange rates.

Production cost of sales per Au oz. on a by-product basis² was $712 in Q2 2015, compared with $725 in Q2 2014, based on Q2 2015 attributable gold sales of 608,893 ounces and attributable silver sales of 1,262,492 ounces.

All-in sustaining cost: All-in sustaining cost per Au eq. oz. sold² was $1,011 in Q2 2015, compared with $976 in Q2 2014, primarily due to higher capital expenditures and fewer attributable gold ounces sold, partially offset by lower energy costs and favourable foreign exchange rates. All-in sustaining cost per Au oz. sold on a by-product basis² was $1,006 in Q2 2015, compared with $967 in Q2 2014.

Revenue: Revenue from metal sales was $755.2 million in Q2 2015, compared with $911.9 million during the same period in 2014, primarily due to a lower average realized gold price and lower gold equivalent ounces sold as a result of timing of sales.

Average realized gold price: The average realized gold price in Q2 2015 declined to $1,194 per ounce, compared with $1,285 per ounce in Q2 2014.

Margins: Kinross' attributable margin per Au eq. oz. sold(5) was $470 per Au eq. oz. for Q2 2015, compared with a Q2 2014 margin of $543 per Au eq. oz.

Operating cash flow: Adjusted operating cash flow² was $161.4 million for Q2 2015, or $0.14 per share, compared with $240.3 million, or $0.21 per share, for Q2 2014.

Earnings/loss: Adjusted net loss^2,3 was $13.6 million, or $0.01 per share, for Q2 2015, compared with adjusted net earnings of $32.9 million, or $0.03 per share, for Q2 2014.

Reported net loss³was $83.2 million, or $0.07 per share, compared with reported net earnings of $46.0 million, or $0.04 per share, for Q2 2014. Reported net loss was due mainly to a $24.5 million inventory write-down at Maricunga as a result of an extreme weather event in Chile, and lower revenue due to a lower average gold price and timing of gold sales from Russia.

Capital expenditures: Capital expenditures increased to $128.5 million for Q2 2015, compared with $120.0 million for the same period last year, primarily due to the Paracatu Santo Antonio tailings reprocessing initiative.

Balance sheet strength

Kinross continued to strengthen its financial position despite recent declines in the gold price, increasing its cash position, decreasing its net debt and optimizing its debt portfolio.

As of June 30, 2015, Kinross had cash and cash equivalents of $1,031.4 million, excluding restricted cash, adding $20.9 million during the quarter, and $47.9 million since December 31, 2014. The Company has available credit of $1,513.1 million.

As of June 30, 2015, Kinross' net debt⁴ was $960.2 million, a reduction of $17.3 million during the quarter and $73.1 million since December 31, 2014.

On July 24, 2015, the Company extended the maturity dates of its $500 million term loan and $1.5 billion revolving credit facility by one year, to 2019 and 2020 respectively. As part of this extension, the terms of Kinross' debt covenant were amended, resulting in an improvement in the net debt to EBITDA ratio⁶. Based on this amendment, the June 30, 2015 ratio would decrease by 24 basis points to 1.02, well below the maximum permitted level of 3.50.

Other than $250 million in senior notes and $50 million of the outstanding Kupol loan, both of which are scheduled to be repaid by September 2016, Kinross has no debt maturities until 2019.

Operating results
Mine-by-mine summaries for 2015 second-quarter operating results may be found on pages eight and 12 of this news release. Highlights include the following:

Americas

The region performed well in the quarter and is on track to meet its production and cost of sales forecast for the year. At Fort Knox, production increased compared with Q1 2015 due to higher grade mill material and the seasonal impact of warmer weather on heap leach performance. Cost of sales per ounce decreased compared with the previous quarter due to higher mill grades and an increase in gold ounces sold, and decreased year-over-year mainly as a result of lower fuel and power costs. At Kettle River-Buckhorn, production increased slightly compared with Q1 2015, but was down compared with Q2 2014 due to lower grades associated with the expected wind-down of the operation in 2016. Cost of sales per ounce was lower compared with Q1 2015 due to a decrease in fuel costs but increased year-over-year as a result of lower grades. At Round Mountain, cost of sales decreased compared with the previous year and quarter due to lower costs for fuel and supplies related to the heap. Round Mountain also benefited from a continuous improvement initiative, launched in Q4 2014, to improve heap leach performance, which has contributed to increased production and lower costs. The initiative includes optimizing the flow of loaded solution to the carbon columns and other leaching operational improvements.

Paracatu's production decreased year-over-year and compared with Q1 2015 due to reduced throughput and recovery, primarily as a result of the metallurgical characteristics of the ore mined in the open pit during the quarter. Recoveries improved in June, and better performance is expected for the remainder of the year, as mining moved to other areas of the pit. Paracatu's production cost of sales declined compared with Q2 2014 as a result of lower power costs and favourable foreign exchange rates, but increased on a per ounce basis compared with the previous quarter as result of lower production. Maricunga's production decreased year-over-year and compared with Q1 2015 primarily due to heavy rains in late March which suspended mining and crushing operations for nine weeks. While operations have resumed, third quarter production will be impacted by the lack of ore placed on the leach pad during the suspension. Production is expected to improve in Q4. Maricunga's production cost of sales increased compared with Q1 2015 and Q2 2014 due to the resulting reduction in production.

Russia

The region continues to perform well, and is on track to be at the higher end of production and the lower end of cost of sales guidance for the year. Second quarter production at the combined Kupol and Dvoinoye operation was slightly higher compared with the previous quarter as the region began to increase the proportion of higher grade Dvoinoye ore processed through the Kupol mill. The mill is now expected to process approximately 1,200 tonnes of Dvoinoye ore per day, representing approximately 25% of the total throughput, and thereby increasing overall mill grade. Approximately 87,500 Au eq. oz. were produced from processing Dvoinoye ore in Q2 2015. Production cost of sales per ounce for Q2 2015 decreased 8% to $490 per Au eq. oz. compared with the prior year, due mainly to productivity enhancements and favourable foreign exchange movements.

Revenue and production cost of sales per ounce would have benefited further, and overall Company earnings were impacted, by the timing of gold sales. The region produced 191,160 attributable Au eq. oz, but sold 159,950 attributable Au eq. oz. The outstanding ounces were sold in July and the region is expected to see the benefits of additional gold sales in Q3.

West Africa

The region is on track to be at the higher end of production and lower end of cost of sales guidance for the year. At Chirano, production was fairly consistent with the previous quarter, and higher year-over-year, mainly as a result of the mill repairs carried out in Q2 2014. Production cost of sales per ounce increased year-over-year due to higher underground mobile equipment maintenance costs and fuel consumption.

Tasiast's production increased compared with Q1 2015 as a result of higher mill grades and mill recoveries but decreased compared to Q2 2014 due to the wind-down of the dump leach. Production cost of sales per ounce increased year-over-year due mainly to higher maintenance and material supply costs.

Tasiast optimization update

Following the Q1 2015 decision to defer the 38,000 t/d mill expansion in order to preserve balance sheet strength, Kinross continues to focus on optimizing the Tasiast operation to enhance performance and reduce costs.

In addition to a number of continuous improvement initiatives, Kinross is exploring opportunities to optimize mill throughput to address the hardness of the higher grade ore. One concept, which is currently being analysed, involves enhancing the comminution circuit with the installation of additional grinding equipment to improve milling capacity. The objective is to optimize throughput in the near term, while preserving optionality for a possible future expansion at the appropriate time.

In July, Kinross also initiated discussions with the Government of Mauritania and employee representatives regarding cost saving measures; one option under consideration includes a potential workforce reduction.

Tasiast remains an attractive brownfield growth opportunity with a significant mineral resource base. In order to leverage Tasiast's future potential, the Company will continue to look for ways to reduce costs and advance growth opportunities in a financially disciplined way.

Organic production initiatives

La Coipa Phase 7 update: A pre-feasibility study (PFS), begun in Q2 2014 to explore potential re-start options at La Coipa, remains on track to be completed during the third quarter of 2015. The Company continues to believe in the project's potential to mine higher grade material and leverage existing infrastructure in an attractive jurisdiction. The PFS contemplates blending and processing material from the recently delineated Phase 7 mineralization and material from other already defined mineral deposits on the property. Metallurgical test work to understand optimal blend and throughput continues to be a major component of the PFS.

A decision on whether to continue advancing the project will be based on the gold price environment and the status of permit applications. Exploration continues at several district targets, including Catalina, with the assessment of some attractive opportunities to extend the mine life beyond what the PFS will contemplate.

Paracatu Santo Antonio tailings reprocessing: The new continuous improvement project to reprocess tailings from the Santo Antonio tailings facility continues on track for an expected launch in the fourth quarter. The project remains on budget, with an estimated capital cost of $20 million. The project expects to add 34,000 Au oz. per year at a production cost of sales of $400 per ounce. The tailings will be reprocessed through Plant 1, with an expected production of approximately 11,000 Au oz. in Q4 2015.

Chirano mine life extension: Development of the decline at the Akoti deposit commenced in the second quarter, as the Company continues to proceed with plans to extend Chirano's estimated mine life by one year to 2020. Kinross expects to mine additional ounces at two known mineral deposits, Paboase and Akoti, with Akoti being the third underground mine expected to open. The anticipated mine life extension will also provide additional time to realize the exploration potential at Chirano, which is one of Kinross' most cost competitive operations and is located in a highly prospective and low cost mining area.

Outlook
The following section of the news release represents forward-looking information and users are cautioned that actual results may vary. We refer to the risks and assumptions contained in the Cautionary Statement on Forward-Looking Information on page 18 of this news release.

Kinross is tracking at the high end of its 2015 production guidance of approximately 2.4 - 2.6 million Au eq. oz.

The Company is tracking at the low end of its production cost of sales guidance range of $720 - $780 per Au eq. oz. and all-in sustaining cost guidance range of $1,000 - $1,100 per Au eq. oz. sold, and below its capital expenditure forecast of approximately $725 million.

Other operating costs are now expected to be approximately $120 million, compared with the previously-stated guidance of $50 million, partly due to the impact of the extreme weather event in Chile, and changes to legal and tax-related accounting provisions.

Corporate Responsibility update

Kinross released its 2014 Corporate Responsibility Data Supplement, which provides updates on the Company's performance in the key areas of health and safety, environment, governance and community from its 2013 Corporate Responsibility Report. The Supplement also measures the Company's performance against the principles and standards of the UN Global Compact, which it joined in 2010.

Highlights from the 2014 report include: achieved best safety performance in Company history and among the best in the industry; reduced water usage by a net 25% compared with 2013; reduced non-mineral waste by 32% compared with 2013; 77% of total procurement spent in host countries; 98% of total workforce from host countries; contributed to 687 local community programs, initiatives and events that benefitted over 800,000 people; updated corporate Diversity Policy and achieved new gender diversity target of 33% female representation on Kinross' Board of Directors. Click here to read full report.

In June, Kinross was ranked as the top mining company on the list of Top 50 Most Socially Responsible Companies in Canada developed by Maclean's magazine in partnership with Sustainalytics, an independent sustainability investment research firm. Kinross was also recognized as one of Canada's Best 50 Corporate Citizens for the sixth consecutive year by Corporate Knights, a media and research firm that promotes social responsibility in the private sector.

Conference call details

In connection with the release, Kinross will hold a conference call and audio webcast on Thursday, July 30, 2015 at 8:00 a.m. ET to discuss the results, followed by a question-and-answer session. To access the call, please dial:

Canada & US toll-free -- 1-800-319-4610
Outside of Canada & US -- 1-604-638-5340

Replay (available up to 14 days after the call):

Canada & US toll-free -- 1-800-319-6413; Passcode - 3310 followed by #.
Outside of Canada & US -- 1-604-638-9010; Passcode - 3310 followed by #.

You may also access the conference call on a listen-only basis via webcast at our website www.kinross.com. The audio webcast will be archived on our website at www.kinross.com.

This release should be read in conjunction with Kinross' 2015 second-quarter unaudited Financial Statements and Management's Discussion and Analysis report at www.kinross.com. Kinross' 2015 second-quarter unaudited Financial Statements and Management's Discussion and Analysis have been filed with Canadian securities regulators (available at www.sedar.com) and furnished to the U.S. Securities and Exchange Commission (available at www.sec.gov). Kinross shareholders may obtain a copy of the financial statements free of charge upon request to the Company.

About Kinross Gold Corporation

Kinross is a Canadian-based senior gold mining company with mines and projects in the United States, Brazil, Russia, Mauritania, Chile and Ghana. Kinross maintains listings on the Toronto Stock Exchange (symbol: K) and the New York Stock Exchange (symbol: KGC).

Reconciliation of non-GAAP financial measures

The Company has included certain non-GAAP financial measures in this document. These measures are not defined under IFRS and should not be considered in isolation. The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. The inclusion of these measures is meant to provide additional information and should not be used as a substitute for performance measures prepared in accordance with IFRS. These measures are not necessarily standard and therefore may not be comparable to other issuers.

Adjusted net earnings attributable to common shareholders and adjusted net earnings per share are non-GAAP measures which determine the performance of the Company, excluding certain impacts which the Company believes are not reflective of the Company's underlying performance for the reporting period, such as the impact of foreign exchange gains and losses, reassessment of prior year taxes and/or taxes otherwise not related to the current period, impairment charges, gains and losses and other one-time costs related to acquisitions, dispositions and other transactions, and non-hedge derivative gains and losses. Although some of the items are recurring, the Company believes that they are not reflective of the underlying operating performance of its current business and are not necessarily indicative of future operating results. Management believes that these measures, which are used internally to assess performance and in planning and forecasting future operating results, provide investors with the ability to better evaluate underlying performance, particularly since the excluded items are typically not included in public guidance. However, adjusted net earnings and adjusted net earnings per share measures are not necessarily indicative of net earnings and earnings per share measures as determined under IFRS.

The following table provides a reconciliation of net earnings from continuing operations to adjusted net earnings from continuing operations for the periods presented:

The Company makes reference to a non-GAAP measure for adjusted operating cash flow and adjusted operating cash flow per share. Adjusted operating cash flow is defined as cash flow from operations excluding certain impacts which the Company believes are not reflective of the Company's regular operating cash flow, and excluding changes in working capital. Working capital can be volatile due to numerous factors, including the timing of tax payments, and in the case of Kupol, a build-up of inventory due to transportation logistics. The Company uses adjusted operating cash flow internally as a measure of the underlying operating cash flow performance and future operating cash flow-generating capability of the Company. However, adjusted operating cash flow and adjusted operating cash flow per share measures are not necessarily indicative of net cash flow from operations as determined under IFRS.

The following table provides a reconciliation of adjusted operating cash flow from continuing operations for the periods presented:

Consolidated production cost of sales per gold equivalent ounce sold is a non-GAAP measure and is defined as production cost of sales as per the consolidated financial statements divided by the total number of gold equivalent ounces sold. This measure converts the Company's non-gold production into gold equivalent ounces and credits it to total production.

Attributable production cost of sales per gold equivalent ounce sold is a non-GAAP measure and is defined as attributable production cost of sales divided by the attributable number of gold equivalent ounces sold. This measure converts the Company's non-gold production into gold equivalent ounces and credits it to total production.

Management uses these measures to monitor and evaluate the performance of its operating properties. The following table presents a reconciliation of consolidated and attributable production cost of sales per equivalent ounce sold for the periods presented:

Attributable production cost of sales per ounce sold on a by-product basis is a non-GAAP measure which calculates the Company's non-gold production as a credit against its per ounce production costs, rather than converting its non-gold production into gold equivalent ounces and crediting it to total production, as is the case in co-product accounting. Management believes that this measure provides investors with the ability to better evaluate Kinross' production cost of sales per ounce on a comparable basis with other major gold producers who routinely calculate their cost of sales per ounce using by-product accounting rather than co-product accounting.

The following table provides a reconciliation of attributable production cost of sales per ounce sold on a by-product basis for the periods presented:

In June 2013, the World Gold Council ("WGC") published its guidelines for reporting all-in sustaining costs and all-in costs. The WGC is a market development organization for the gold industry and is an association whose membership comprises leading gold mining companies including Kinross. Although the WGC is not a mining industry regulatory organization, it worked closely with its member companies to develop these non-GAAP measures. Adoption of the all-in sustaining cost and all-in cost metrics is voluntary and not necessarily standard, and therefore, these measures presented by the Company may not be comparable to similar measures presented by other issuers. The Company believes that the all-in sustaining cost and all-in cost measures complement existing measures reported by Kinross.

All-in sustaining cost includes both operating and capital costs required to sustain gold production on an ongoing basis. The value of silver sold is deducted from the total production cost of sales as it is considered residual production. Sustaining operating costs represent expenditures incurred at current operations that are considered necessary to maintain current production. Sustaining capital represents capital expenditures at existing operations comprising mine development costs and ongoing replacement of mine equipment and other capital facilities, and does not include capital expenditures for major growth projects or enhancement capital for significant infrastructure improvements at existing operations.

All-in cost is comprised of all-in sustaining cost as well as operating expenditures incurred at locations with no current operation, or costs related to other non-sustaining activities, and capital expenditures for major growth projects or enhancement capital for significant infrastructure improvements at existing operations.

Attributable all-in sustaining cost and all-in cost per ounce sold on a by-product basis are calculated by adjusting total production cost of sales, as reported on the consolidated statement of operations, as follows: