The Company delivered a 51% year-over-year increase in adjusted net earnings, with margins increasing 25% to $1,031 per ounce sold, once again outpacing the increase in the average realized gold price.
“Our three largest producing mines – Paracatu, Kupol and Tasiast – delivered our lowest costs for the quarter, with Paracatu and Tasiast achieving record quarterly throughput.
This slight decrease was primarily due to lower production at Tasiast and at Round Mountain, partially offset by higher production at Bald Mountain.
Production cost of sales per Au oz.
sold increased by 25% to $1,031 for Q1 2021, compared with $827 in Q1 2020, which outpaced the 13% year-over-year increase in average realized gold price.
Free cash flow2: Free cash flow was $75.6 million in Q1 2021, compared with $108.2 million for Q1 2020 due to increases in income taxes paid and capital expenditures, partially offset by increased margins.
As of March 31, 2021, Kinross had cash and cash equivalents of $1,056.1 million, compared with $1,210.9 million at December 31, 2020.
Kinross announced on April 29, 2021 that it will redeem all the outstanding 5.125% Senior Notes due September 1, 2021, which have an aggregate principal amount of $500 million, on June 1, 2021.
Cost of sales per ounce sold was lower compared with Q1 2020 mainly due to favourable foreign exchange, and increased compared with Q4 2020 primarily due to lower production.
While production timing and mine sequencing are expected to be impacted, including potentially deferring access to higher grade Phase W ore for approximately two years, Kinross does not anticipate this issue to impact the Company’s 2021 production and cost of sales guidance and its longer-term production profile, or Round Mountain’s total life of mine production.
At Bald Mountain, production was in line with the previous quarter, and was higher year-over-year mainly due to timing of ounces recovered from the heap leach pads.
Cost of sales per ounce increased quarter-over-quarter primarily due to lower production and a higher proportion of production from the heap leach pads, and decreased year-over-year primarily due to lower operating waste mined.
At Kupol and Dvoinoye, production was lower than the previous quarter mainly as a result of a decrease in throughput and anticipated lower grade ore as the site transitioned to Dvoinoye stockpiles.
Compared with the previous quarter and year, production decreased primarily as result of lower mill grade, which was expected as the site processed more stockpile ore, largely offset by record mill throughput.
Cost of sales per ounce sold was higher compared with the previous quarter mainly as a result of an increase in operating waste mined, and higher maintenance, milling and power costs.
The Tasiast 24k project remains on budget and on schedule to increase throughput capacity to 21,000 tonnes per day by the end of 2021, and then to 24,000 t/d by mid-2023.
Kinross continues to make good progress at Udinsk, the first project that is expected to be developed on the Chulbatkan license.
The “Peak” project, which was formally re-named “Manh Choh,” continued to advance well during the quarter.
The project’s scoping study remains on schedule to be completed by the end of Q2 2021, with infill, metallurgical and geotechnical drilling now complete.
The Company has also commenced development of the Gil satellite pits, which are located approximately 13 kilometres east of Fort Knox.
The La Coipa Restart project is on schedule to commence production in mid-2022 and continues to progress well, with pre-stripping now ramped up after commencing in January 2021.
Kinross is targeting to commence production in 2027 subject to permitting and after the completion of mining at La Coipa, with construction potentially starting in 2025.
. Production is expected to increase quarter-over-quarter in 2021, largely driven by anticipated higher production at Paracatu, and expected higher production in the fourth quarter at Tasiast.
In 2022 and 2023, consistent with the three-year guidance the Company provided in October 2020, annual production is expected to increase to approximately 2.7 million Au eq.
In line with the Company’s core values and focus on responsible environmental stewardship, Kinross is committing to working toward the goals of the United Nations Framework Convention on Climate Change Paris Agreement, with the ultimate objective of being a net-zero GHG emissions company by 2050.
The strategy will also leverage the Company’s current position as one of the lowest GHG emitters among its peers, and build on its record of incorporating energy efficiencies into its projects and operations, such as the acquisition of two hydroelectric power plants in 2018 to increase renewable energy use at Paracatu.
In connection with this news release, Kinross will hold a conference call and audio webcast on Wednesday, May 12, 2021 at 7:45 a.m.
The Company has elected to hold a virtual meeting via a live audio webcast given the continued impact of the COVID-19 pandemic.
Kinross is a Canadian-based senior gold mining company with mines and projects in the United States, Brazil, Russia, Mauritania, Chile and Ghana.
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.
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.
The Company believes that this measure, which is used internally to evaluate the Company’s underlying cash generation performance and the ability to repay creditors and return cash to shareholders, provides investors with the ability to better evaluate the Company’s underlying performance.
Adjusted operating cash flow is a non-GAAP measure and 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.
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.
In November 2018, the World Gold Council published updates to its guidelines for reporting all-in sustaining costs and all-in costs to address how the costs associated with leases, after a company’s adoption of IFRS 16, should be treated.
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 of the forward-looking statements made in this news release are qualified by this cautionary statement and those made in our other filings with the securities regulators of Canada and the United States including, but not limited to, the cautionary statements made in the “Risk Analysis” section of our MD&A for the year ended December 31, 2020 and the Annual Information Form dated March 30, 2021.
The technical information about the Company’s mineral properties contained in this news release has been prepared under the supervision of Mr. John Sims who is a “qualified person” within the meaning of National Instrument 43-101.
5 The estimates for the Gil satellite pits are based on a feasibility study mine plan optimized using a $1,200 per ounce gold price.6 Refers to all of the currencies in the countries where the Company has mining operations, fluctuating simultaneously by 10% in the same direction, either appreciating or depreciating, taking into consideration the impact of hedging and the weighting of each currency within our consolidated cost structure.