UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 40-F
[Check one]
☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
☒ | ANNUAL REPORT PURSUANT TO SECTION 13(a) or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2020 | Commission File Number 001-13382 |
KINROSS GOLD CORPORATION
(Exact name of Registrant as specified in its charter)
N/A
(Translation of Registrant’s name into English (if applicable))
Province of Ontario, Canada
(Province or other jurisdiction of incorporation or organization)
1041
(Primary Standard Industrial Classification Code Number (if applicable))
650430083
(I.R.S. Employer Identification Number (if applicable))
25 York Street, 17th Floor, Toronto, Ontario, Canada M5J 2V5 (416) 365-5123
(Address and telephone number of Registrant’s principal executive offices)
Martin
D. Litt
Secretary
Kinross Gold U.S.A., Inc.
5075 S. Syracuse Street,
Suite 800,
Denver, Colorado,
80237
Telephone: (303) 802-1445
(Name, address (including zip code) and telephone number (including area code)
of agent for service in the United States)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common stock, no par value | KGC |
New York Stock Exchange |
||
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)
For annual reports, indicate by check mark the information filed with this Form:
☒ Annual information form | ☒ Audited annual financial statements |
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
As of December 31, 2020, there were 1,258,320,461 common shares and no preferred shares outstanding.
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 12b-2 of the Exchange Act.
Emerging Growth Company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. x
NOTE FOR U.S. READERS ON CANADA/U.S. REPORTING DIFFERENCES
We are permitted, under a multi-jurisdictional disclosure system adopted by the United States, to prepare this annual report on Form 40-F in accordance with Canadian disclosure requirements, which are different from those of the United States. We prepare our consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board, including the report of the independent registered public accounting firm with respect thereto. Consequently, our financial statements may not be comparable to those prepared by U.S. companies. Our Annual Information Form dated March 30, 2021 and Management’s Discussion and Analysis, together with our audited consolidated financial statements and notes thereto as at December 31, 2020 and 2019 and for the years then ended, are filed under cover of this form as exhibits 99.1, 99.2 and 99.3, respectively.
Our common shares are listed on the Toronto Stock Exchange and the New York Stock Exchange. There are certain differences between the corporate governance practices applicable to us and those applicable to U.S. companies under the New York Stock Exchange listing standards. A summary of the significant differences can be found at http://www.kinross.com/about/governance/default.aspx.
DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the U.S. Securities Exchange Act of 1934, as amended, (the “Exchange Act”) is recorded, processed, summarized and reported within the appropriate time periods and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely disclosures regarding required disclosure. In designing and evaluating the disclosure controls and procedures, we recognize that any disclosure controls and procedures, no matter how well conceived or operated, can only provide reasonable, not absolute, assurance that the objectives of the control system are met, and management is required to exercise its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As required by Rule 13a-15(b) under the Exchange Act, we conducted an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2020, the end of the period covered by this annual report on Form 40-F. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2020, the design and operation of the Company’s disclosure controls and procedures provide reasonable assurance that they are effective.
Management’s Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) of the Exchange Act. As of December 31, 2020, Kinross’ management evaluated the effectiveness of its internal control over financial reporting. In making this assessment, management used the criteria specified in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that Kinross’ internal control over financial reporting was effective as at December 31, 2020 and no material weaknesses in Kinross’s internal control over financial reporting were discovered.
The Company is required to provide an auditor's attestation report on its internal control over financial reporting for the fiscal year ended December 31, 2020. In this annual report on Form 40-F, the Company's independent registered public accounting firm, KPMG LLP, has provided its opinion as to the effectiveness of the Company's internal control over financial reporting as of December 31, 2020. KPMG has also audited the Company's financial statements included in this annual report on Form 40-F and issued a report thereon.
Attestation of Report of Independent Auditor
The attestation report of KPMG LLP is included in the Report of Independent Registered Public Accounting Firm that accompanies Kinross’ audited consolidated financial statements for the year ended December 31, 2020 included as exhibit 99.3 to this annual report on Form 40-F.
Changes in Internal Control over Financial Reporting
There have been no changes to our system of internal control over financial reporting for the year ended December 31, 2020 or since that time that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
AUDIT AND RISK COMMITTEE
The audit and risk committee of our Board of Directors is comprised of four directors: Glenn A. Ives, chairman, Kerry D. Dyte, Elizabeth D. McGregor and David A. Scott. Each of the members of the audit and risk committee is “independent” as that term is defined in the listing standards of the New York Stock Exchange. The board of directors has determined that Mr. Ives, and Ms. McGregor each qualify as an “audit committee financial expert” as such term is defined in paragraph 8(b) of General Instructions B to Form 40-F. Information concerning Mr. Ives’, Mr. Dyte’s, Ms. McGregor’s and Mr. Scott’s relevant education and experience is included in the biographical information contained in the Company’s Annual Information Form included as exhibit 99.1 to the annual report on Form 40-F. The Securities and Exchange Commission has indicated that the designation of a person as an audit committee financial expert does not make such person an “expert” for any purpose, impose any duties, obligations or liabilities on such person that are greater than those imposed generally on members of the audit and risk committee and the board of directors who do not carry this designation, or affect the duties, obligations or liability of any other member of the audit and risk committee or board of directors.
CODE OF ETHICS
The Code of Business Conduct and Ethics may be viewed at the Company’s website at www.kinross.com under “About – Corporate Governance” and is available in print to any shareholder upon written request to the Company’s Corporate Secretary. Any amendments to the Code of Business Conduct and Ethics, including a description of such amendment, will be posted to the Company’s website within five business days following the date of the amendment.
The Company did not grant any waivers under its Code of Business Conduct and Ethics during 2020.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
We paid the following fees to our independent registered public accounting firm during the last two fiscal years:
20201 | 20191 | |||||||
Audit Fees | CDN $ | 5,140,000 | CDN $ | 4,771,000 | ||||
Audit-Related Fees | CDN $ | 222,000 | CDN $ | 202,000 | ||||
Tax Fees | CDN $ | 85,000 | CDN $ | 13,000 | ||||
All Other Fees | CDN $ | 33,000 | CDN $ | 6,000 |
1 Fee information includes out-of-pocket costs (including reimbursed costs, technology and support charges or administrative charges) incurred in connection with providing the professional services. Fee information for 2019 has been recast to reflect this inclusion.
Audit-related fees include fees related primarily to translation services and pension plan audits. Tax fees were for tax compliance and advisory services. “All Other Fees” includes amounts for services related to other non-audit services.
The audit and risk committee is required to approve all services provided by our principal auditor. All audit services, audit-related services, tax services, and other services provided during the year ended December 31, 2020 were pre-approved by the audit and risk committee which concluded that the provision of such services by KPMG LLP was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions.
OFF-BALANCE SHEET ARRANGEMENTS
Our off-balance sheet arrangements are disclosed in Kinross’ Management’s Discussion and Analysis included as exhibit 99.2 under the captions “Liquidity and Capital Resources” and “Risk Analysis” and under Note 12, “Long-Term Debt and Credit Facilities”, under Note 14, “Provisions”, and under Note 20, “Commitments and Contingencies” to Kinross’ audited consolidated financial statements for the year ended December 31, 2020 included as exhibit 99.3 to this annual report on Form 40-F.
CONTRACTUAL OBLIGATIONS
The contractual obligations of the Company are disclosed in Kinross’ Management’s Discussion and Analysis included as exhibit 99.2 under the caption “Liquidity and Capital Resources – Contractual Obligations and Commitments”, and under Note 12, “Long-Term Debt and Credit Facilities” and under Note 20, “Commitments and Contingencies” to Kinross’ audited consolidated financial statements for the year ended December 31, 2020 included as exhibit 99.3 to this annual report on Form 40-F.
MINE SAFETY DISCLOSURE
Information concerning mine safety violations and other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and paragraph (16) of General Instruction B to Form 40-F is included in exhibit 99.5 of this annual report on Form 40-F.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
Cautionary Statement on Forward-Looking Information
All statements, other than statements of historical fact, contained or incorporated by reference in this annual report on Form 40-F including, but not limited to, any information as to the future financial or operating performance of Kinross, constitute “forward-looking information” or “forward-looking statements” within the meaning of certain securities laws, including the provisions of the Securities Act (Ontario) and the provisions for “safe harbor” under the United States Private Securities Litigation Reform Act of 1995 and are based on expectations, estimates and projections as of the date of this annual report on Form 40-F. Forward-looking statements contained in this annual report on Form 40-F, include, but are not limited to, statements with respect to our guidance for production, production costs of sales, all in sustaining cost, all in cost, cash flow, free cash flow and capital expenditures; the declaration, payment and sustainability of the Company’s dividends; optimization of mine plans; identification of additional resources and reserves; the schedules and budgets for the Company’s development projects; mine life and any potential extensions; the Company’s capital reinvestment program and continuous improvement initiatives and project performance or outperformance, as well as references to other possible events, the future price of gold and silver, the timing and amount of estimated future production, costs of production, operating costs; capital expenditures, costs and timing of the development of projects and new deposits, estimates and the realization of such estimates (such as mineral or gold reserves and resources or mine life), success of exploration, development and mining, currency fluctuations, capital requirements, project studies, government regulation permit applications and conversions, restarting suspended or disrupted operations; environmental risks and proceedings; and resolution of pending litigation. The words “advance”, “anticipate”, “assumption”, “believe”, “budget”, “consideration”, “continue”, “develop”, “enhancement”, “estimate”, “expand”, “expect”, “explore”, “extend”, “forecast”, “forward”, “goal”, “growth projects”, “focus”, “forward”, “future”, “guidance”, “indicate”, “initiative”, “intend”, “measures”, “opportunity”, “optimize”, “outlook”, “phase”, “plan”, “possible”, “potential”, “prioritize”, “proceeding”, “progress”, “project”, “prospective”, “schedule”, “seek”, “study”, “target”, or variations of or similar such words and phrases or statements that certain actions, events or results may, could, should or will be achieved, received or taken, or will occur or result and similar such expressions identify forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by Kinross as of the date of such statements, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The estimates, models and assumptions of Kinross referenced, contained or incorporated by reference in this annual report on Form 40-F, which may prove to be incorrect, include, but are not limited to, the various assumptions set forth herein: (1) there being no significant disruptions affecting the operations of the Company, whether due to extreme weather events (including, without limitation, excessive or lack of rainfall, in particular, the potential for further production curtailments at Paracatu resulting from insufficient rainfall and the operational challenges at Fort Knox and Bald Mountain resulting from excessive rainfall, which can impact costs and/or production) and other or related natural disasters, labour disruptions (including but not limited to strikes or workforce reductions), supply disruptions, power disruptions, damage to equipment, pit wall slides (in particular that the effects of the pit wall slides at Fort Knox and Round Mountain are consistent with the Company’s expectations) or otherwise; (2) permitting, development, operations and production from the Company’s operations and development projects being consistent with Kinross’ current expectations including, without limitation: the maintenance of existing permits and approvals and the timely receipt of all permits and authorizations necessary for the operation of Tasiast, and the development and operation of the 24k Project; operation of the SAG mill at Tasiast; land acquisitions and permitting for the construction and operation of the new tailings facility, water and power supply and continued operation of the tailings reprocessing facility at Paracatu; the Lobo-Marte project; commencement of production at the La Coipa project; approval of an enhanced mine plan at Fort Knox; in each case in a manner consistent with the Company’s expectations; and the successful completion of exploration consistent with the Company’s expectations at the Company’s projects; (3) political and legal developments in any jurisdiction in which the Company operates being consistent with its current expectations including, without limitation, the impact of any political tensions and uncertainty in the Russian Federation or any related sanctions and any other similar restrictions or penalties imposed, or actions taken, by any government, including but not limited to amendments to the mining laws, and potential power rationing and tailings facility regulations in Brazil, potential amendments to water laws and/or other water use restrictions and regulatory actions in Chile, new dam safety regulations, potential amendments to minerals and mining laws and energy levies laws, the enforcement of labour laws in Ghana, new regulations relating to work permits, potential amendments to customs and mining laws (including but not limited to amendments to the VAT) and the potential application of revisions to the tax code in Mauritania, the European Union’s General Data Protection Regulation or similar legislation in other jurisdictions and potential amendments to and enforcement of tax laws in Russia, Ghana and Mauritania (including, but not limited to, the interpretation, implementation, application and enforcement of any such laws and amendments thereto), and the impact of any trade tariffs being consistent with Kinross’ current expectations; (4) the completion of studies, including optimization studies, improvement studies; scoping studies and pre-feasibility and feasibility studies, on the timelines currently expected and the results of those studies being consistent with Kinross’ current expectations, including the completion of the Lobo-Marte and Manh Choh (formerly Peak Gold) feasibility studies and the Udinsk pre-feasibility study; (5) the exchange rate between the Canadian dollar, Brazilian real, Chilean peso, Russian rouble, Mauritanian ouguiya, Ghanaian cedi and the U.S. dollar being approximately consistent with current levels; (6) certain price assumptions for gold and silver; (7) prices for diesel, natural gas, fuel oil, electricity and other key supplies being approximately consistent with the Company’s expectations; (8) production and cost of sales forecasts for the Company meeting expectations; (9) the accuracy of: the current mineral reserve and mineral resource estimates of the Company including the accuracy and reliability of the pre-acquisition mineral resource estimates of the Manh Choh project (formerly the Peak project) and Kinross’ analysis thereof being consistent with expectations (including but not limited to ore tonnage and ore grade estimates), future mineral resource and mineral reserve estimates being consistent with preliminary work undertaken by the Company, mine plans for the Company’s current and future mining operations, and the Company’s internal models; (10) labour and materials costs increasing on a basis consistent with Kinross’ current expectations; (11) the terms and conditions of the legal and fiscal stability agreements for the Tasiast and Chirano operations being interpreted and applied in a manner consistent with their intent and Kinross’ expectations and without material amendment or formal dispute (including without limitation the application of tax, customs and duties exemptions and royalties); (12) goodwill and/or asset impairment potential; (13) the regulatory and legislative regime regarding mining, electricity production and transmission (including rules related to power tariffs) in Brazil being consistent with Kinross’ current expectations; (14) access to capital markets, including but not limited to maintaining our current credit ratings consistent with the Company’s current expectations; (15) that the Brazilian power plants will operate in a manner consistent with our expectations; (16) that drawdown of remaining funds under the Tasiast project financing will proceed in a manner consistent with our current expectations; (17) potential direct or indirect operational impacts resulting from infectious diseases or pandemics such as the ongoing COVID-19 pandemic; (18) the effectiveness of preventative actions and contingency plans put in place by the Company to respond to the COVID-19 pandemic, including, but not limited to, social distancing, travel restrictions, business continuity plans, and efforts to mitigate supply chain disruptions; (19) changes in national and local government legislation or other government actions, particularly in response to the COVID-19 outbreak; (20) litigation, regulatory proceedings and audits, and the potential ramifications thereof, being concluded in a manner consistent with the Company’s expectations (including without limitation the audit of mining companies in Ghana which includes the Company’s Ghanaian subsidiaries, litigation in Chile relating to the alleged damage of wetlands and the scope of any remediation plan or other environmental obligations arising therefrom, the ongoing litigation with the Russian tax authorities regarding dividend withholding tax and the ongoing Sunnyside litigation regarding potential liability under the U.S. Comprehensive Environmental Response, Compensation, and Liability Act); (21) that the Company will enter into definitive documentation with the Government of Mauritania substantially in accordance with the terms and conditions of the term sheet, on a basis consistent with our expectations and that the parties will perform their respective obligations thereunder on the timelines agreed; (22) that the exploitation permit for Tasiast Sud will be issued under the terms and on timelines consistent with our expectations; (23) that the benefits of the contemplated arrangements related to the agreement in principle will result in increased stability at the Company’s operations in Mauritania; and (24) the Company’s financial results, cash flows and future prospects being consistent with Company expectations in amounts sufficient to permit sustained dividend payments. Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements. Such factors include, but are not limited to: the inaccuracy of any of the foregoing assumptions; sanctions (any other similar restrictions or penalties) now or subsequently imposed, other actions taken, by, against, in respect of or otherwise impacting any jurisdiction in which the Company is domiciled or operates (including but not limited to the Russian Federation, Canada, the European Union and the United States), or any government or citizens of, persons or companies domiciled in, or the Company’s business, operations or other activities in, any such jurisdiction; reductions in the ability of the Company to transport and refine doré; fluctuations in the currency markets; fluctuations in the spot and forward price of gold or certain other commodities (such as fuel and electricity); changes in the discount rates applied to calculate the present value of net future cash flows based on country-specific real weighted average cost of capital; changes in the market valuations of peer group gold producers and the Company, and the resulting impact on market price to net asset value multiples; changes in various market variables, such as interest rates, foreign exchange rates, gold or silver prices and lease rates, or global fuel prices, that could impact the mark-to-market value of outstanding derivative instruments and ongoing payments/receipts under any financial obligations; risks arising from holding derivative instruments (such as credit risk, market liquidity risk and mark-to-market risk); changes in national and local government legislation, taxation (including but not limited to income tax, advance income tax, stamp tax, withholding tax, capital tax, tariffs, value-added or sales tax, capital outflow tax, capital gains tax, windfall or windfall profits tax, production royalties, excise tax, customs/import or export taxes/duties, asset taxes, asset transfer tax, property use or other real estate tax, together with any related fine, penalty, surcharge, or interest imposed in connection with such taxes), controls, policies and regulations; the security of personnel and assets; political or economic developments in Canada, the United States, Chile, Brazil, Russia, Mauritania, Ghana, or other countries in which Kinross does business or may carry on business; business opportunities that may be presented to, or pursued by, us; our ability to successfully integrate acquisitions and complete divestitures; operating or technical difficulties in connection with mining, development or refining activities; employee relations; litigation or other claims against, or regulatory investigations and/or any enforcement actions, administrative orders or sanctions in respect of the Company (and/or its directors, officers, or employees) including, but not limited to, securities class action litigation in Canada and/or the United States, environmental litigation or regulatory proceedings or any investigations, enforcement actions and/or sanctions under any applicable anti-corruption, international sanctions and/or anti-money laundering laws and regulations in Canada, the United States or any other applicable jurisdiction; the speculative nature of gold exploration and development including, but not limited to, the risks of obtaining necessary licenses and permits; diminishing quantities or grades of reserves; adverse changes in our credit ratings; and contests over title to properties, particularly title to undeveloped properties. In addition, there are risks and hazards associated with the business of gold exploration, development and mining, including environmental hazards, industrial accidents, unusual or unexpected formations, pressures, cave-ins, flooding and gold bullion losses (and the risk of inadequate insurance, or the inability to obtain insurance, to cover these risks). Many of these uncertainties and contingencies can directly or indirectly affect, and could cause, Kinross’ actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, Kinross, including but not limited to resulting in an impairment charge on goodwill and/or assets. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Forward-looking statements are provided for the purpose of providing information about management’s expectations and plans relating to the future. All of the forward-looking statements made or incorporated by reference in this annual report on Form 40-F, including but not limited to the “Risk Factors” section of our 2020 Annual Information Form and in the “Risk Analysis” section of our most recently filed Management’s Discussion and Analysis, 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 Factors” section of our 2020 Annual Information Form and the “Risk Analysis” section of our Management’s Discussion and Analysis for the year ended December 31, 2020. These factors are not intended to represent a complete list of the factors that could affect Kinross. Kinross disclaims any intention or obligation to update or revise any forward-looking statements or to explain any material difference between subsequent actual events and such forward-looking statements, except to the extent required by applicable law.
UNDERTAKING AND CONSENT TO SERVICE OF PROCESS
Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to: the securities registered pursuant to Form 40-F; the securities in relation to which the obligation to file an annual report on Form 40-F arises; or transactions in said securities.
ADDITIONAL INFORMATION
Additional information relating to our company, including our audited consolidated financial statements as at December 31, 2020 and 2019, and for each of the years then ended, together with the accompanying Management’s Discussion and Analysis and the Annual Information Form can be found on SEDAR (www.sedar.com), on EDGAR (www.sec.gov) or on our website at www.kinross.com. The information found on, or otherwise accessible through, our website is not incorporated by reference into, nor does it form a part of, this annual report on Form 40-F or any other document that we file with the SEC. Upon the written request of any shareholder, Kinross will provide a copy of this annual report on Form 40-F, including the audited financial statements, Management’s Discussion and Analysis, and the Annual Information Form included as exhibits hereto. Written requests for such information should be directed to Investor Relations, Kinross Gold Corporation, 25 York Street, 17th Floor, Toronto, Ontario, Canada M5J 2V5, toll free 1-866-561-3636 or info@kinross.com.
SIGNATURES
Pursuant to the requirements of the Exchange Act, the Registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereto duly authorized.
KINROSS GOLD CORPORATION | ||
March 30, 2021 | By | /s/ Andrea S. Freeborough |
Andrea S. Freeborough | ||
Senior Vice President and | ||
Chief Financial Officer |
EXHIBIT INDEX
Exhibit 99.1
KINROSS GOLD CORPORATION
ANNUAL INFORMATION FORM
FOR THE YEAR ENDED DECEMBER 31, 2020
Dated March 30, 2021
TABLE OF CONTENTS
Page | |
CAUTIONARY STATEMENT | 3 |
CORPORATE STRUCTURE | 4 |
GENERAL DEVELOPMENT OF THE BUSINESS | 8 |
OVERVIEW | 8 |
THREE YEAR HISTORY | 8 |
DESCRIPTION OF THE BUSINESS | 10 |
EMPLOYEES | 10 |
COMPETITIVE CONDITIONS | 11 |
ENVIRONMENTAL PROTECTION | 11 |
OPERATIONS | 13 |
GOLD EQUIVALENT PRODUCTION AND SALES | 14 |
MARKETING | 15 |
KINROSS MINERAL RESERVES AND MINERAL RESOURCES | 16 |
KINROSS MATERIAL PROPERTIES | 26 |
Paracatu, Brazil | 26 |
Kupol and Dvoinoye, Russian Federation | 34 |
Tasiast, Mauritania | 49 |
OTHER KINROSS PROPERTIES | 57 |
Fort Knox and Area, Alaska, United States | 57 |
Round Mountain, Nye County, Nevada, United States | 58 |
Bald Mountain, White Pine County, Nevada, United States | 59 |
La Coipa, Chile | 60 |
Lobo-Marte, Chile | 62 |
Maricunga, Chile | 63 |
Chirano, Ghana | 64 |
Chulbatkan, Russian Federation | 65 |
Manh Choh, Alaska, United States | 66 |
RISK FACTORS | 67 |
DIVIDEND PAYMENTS AND DIVIDEND POLICY | 85 |
LEGAL PROCEEDINGS AND REGULATORY ACTIONS | 86 |
DESCRIPTION OF CAPITAL STRUCTURE | 89 |
MARKET PRICE FOR KINROSS SECURITIES | 90 |
RATINGS | 91 |
DIRECTORS AND OFFICERS | 92 |
CEASE TRADE ORDERS, BANKRUPTCIES, PENALTIES OR SANCTIONS | 97 |
CONFLICT OF INTEREST | 97 |
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS | 98 |
TRANSFER AGENT AND REGISTRAR | 98 |
MATERIAL CONTRACTS | 98 |
INTERESTS OF EXPERTS | 98 |
AUDIT AND RISK COMMITTEE | 99 |
ADDITIONAL INFORMATION | 101 |
GLOSSARY OF TECHNICAL TERMS | 101 |
IMPORTANT NOTICE
ABOUT INFORMATION IN THIS ANNUAL INFORMATION FORM
Unless specifically stated otherwise in this Annual Information Form:
• | all dollar amounts are in U.S. dollars unless expressly stated otherwise; |
• | information is presented as of December 31, 2020, unless expressly stated otherwise; and |
• | references to “Kinross”, the “Company”, “its”, “our” and “we”, or related terms, refer to Kinross Gold Corporation or Kinross Gold Corporation and/or one or more or all of its subsidiaries, as may be applicable in the context. |
CAUTIONARY STATEMENT
All statements, other than statements of historical fact, contained or incorporated by reference in this Annual Information Form (“AIF”) including, but not limited to, any information as to the future financial or operating performance of Kinross, constitute “forward-looking information” or “forward-looking statements” within the meaning of certain securities laws, including the provisions of the Securities Act (Ontario) and the provisions for “safe harbor” under the United States Private Securities Litigation Reform Act of 1995 and are based on expectations, estimates and projections as of the date of this AIF. Forward-looking statements contained in this AIF, include, but are not limited to, statements with respect to our guidance for production, production costs of sales, all-in sustaining cost, all in cost, cash flow, free cash flow and capital expenditures; the declaration, payment and sustainability of the Company’s dividends; optimization of mine plans; identification of additional resources and reserves; the schedules and budgets for the Company’s development projects; mine life and any potential extensions; the Company’s capital reinvestment program and continuous improvement initiatives and project performance or outperformance; as well as references to other possible events such as, the future price of gold and silver, the timing and amount of estimated future production, costs of production, operating costs, capital expenditures, costs and timing of the development of projects and new deposits, estimates and the realization of such estimates (such as mineral or gold reserves and resources or mine life), success of exploration, development and mining activities, currency fluctuations, capital requirements, project studies, government regulation, permit applications and conversions, restarting suspended or disrupted operations; environmental risks and proceedings; and resolution of pending litigation. The words “advance”, “anticipate”, “assumption”, “believe”, “budget”, “consideration”, “continue”, “develop”, “enhancement”, “estimates”, “expand”, “expects”, “explore”, “extend”, “forecast”, “goal”, “focus”, “forward”, “future”, “guidance”, “indicate”, “initiative”, “intend”, “measures”, “opportunity”, “optimize”, “outlook”, “phase”, “plan”, “possible”, “potential”, “proceeding”, “progress”, “project”, “prospective”, “schedule”, “seek”, “study”, “target”, or variations of or similar such words and phrases or statements that certain actions, events or results may, could, should or will be achieved, received or taken, or will occur or result and similar such expressions identify forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by Kinross as of the date of such statements, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The estimates, models and assumptions of Kinross referenced, contained or incorporated by reference in this AIF, which may prove to be incorrect, include, but are not limited to, the various assumptions set forth herein and in our Management’s Discussion and Analysis (“MD&A”) for the year ended December 31, 2020 as well as: (1) there being no significant disruptions affecting the operations of the Company, whether due to extreme weather events (including, without limitation, excessive or lack of rainfall, in particular, the potential for further production curtailments at Paracatu resulting from insufficient rainfall and the operational challenges at Fort Knox and Bald Mountain resulting from excessive rainfall, which can impact costs and/or production) and other or related natural disasters, labour disruptions (including but not limited to strikes or workforce reductions), supply disruptions, power disruptions, damage to equipment, pit wall slides (in particular that the effects of the pit wall slides at Fort Knox and Round Mountain are consistent with the Company’s expectations) or otherwise; (2) permitting, development, operations and production from the Company’s operations and development projects being consistent with Kinross’ current expectations including, without limitation: the maintenance of existing permits and approvals and the timely receipt of all permits and authorizations necessary for the operation of Tasiast, and the development and operation of the 24k Project; operation of the SAG mill at Tasiast; land acquisitions and permitting for the construction and operation of the new tailings facility, water and power supply and continued operation of the tailings reprocessing facility at Paracatu; the Lobo-Marte project; commencement of production at the La Coipa project; approval of an enhanced mine plan at Fort Knox; in each case in a manner consistent with the Company’s expectations; and the successful completion of exploration consistent with the Company’s expectations at the Company’s projects; (3) political and legal developments in any jurisdiction in which the Company operates being consistent with its current expectations, including, without limitation, the impact of any political tensions and uncertainty in the Russian Federation or any related sanctions and any other similar restrictions or penalties imposed, or actions taken, by any government, including but not limited to amendments to the mining laws, and potential power rationing and tailings facility regulations in Brazil, potential amendments to water laws and/or other water use restrictions and regulatory actions in Chile, new dam safety regulations, potential amendments to minerals and mining laws and energy levies laws, the enforcement of labour laws in Ghana, new regulations relating to work permits, potential amendments to customs and mining laws (including but not limited to amendments to the VAT) and the potential application of revisions to the tax code in Mauritania, the European Union’s General Data Protection Regulation or similar legislation in other jurisdictions and potential amendments to and enforcement of tax laws in Russia, Ghana and Mauritania (including, but not limited to, the interpretation, implementation, application and enforcement of any such laws and amendments thereto), and the impact of any trade tariffs being consistent with Kinross’ current expectations; (4) the completion of studies, including optimization studies, improvement studies, scoping studies and Pre-Feasibility and Feasibility Studies, on the timelines currently expected and the results of those studies being consistent with Kinross’ current expectations including the completion of the Lobo-Marte and Manh Choh Feasibility Studies and the Udinsk Pre-Feasibility Study; (5) the exchange rate between the Canadian dollar, Brazilian real, Chilean peso, Russian rouble, Mauritanian ouguiya, Ghanaian cedi and the U.S. dollar being approximately consistent with current levels; (6) certain price assumptions for gold and silver; (7) prices for diesel, natural gas, fuel oil, electricity and other key supplies being approximately consistent with the Company’s expectations; (8) production and cost of sales forecasts for the Company meeting expectations; (9) the accuracy of: the current mineral reserve and mineral resource estimates of the Company including the accuracy and reliability of the pre-acquisition mineral resource estimates of the Manh Choh project (formerly the Peak Project) and Kinross’ analysis thereof being consistent with expectations (including but not limited to ore tonnage and ore grade estimates), future mineral resource and mineral reserve estimates being consistent with preliminary work undertaken by the Company, mine plans for the Company’s current and future mining operations, and the Company’s internal models; (10) labour and materials costs increasing on a basis consistent with Kinross’ current expectations; (11) the terms and conditions of the legal and fiscal stability agreements for the Tasiast and Chirano operations being interpreted and applied in a manner consistent with their intent and Kinross’ expectations and without material amendment or formal dispute (including without limitation the application of tax, customs and duties exemptions and royalties); (12) goodwill and/or asset impairment potential; (13) the regulatory and legislative regime regarding mining, electricity production and transmission (including rules related to power tariffs) in Brazil being consistent with Kinross’ current expectations; (14) access to capital markets, including but not limited to maintaining our current credit ratings consistent with the Company’s current expectations; (15) that the Brazilian power plants will operate in a manner consistent with our expectations; (16) that drawdown of remaining funds under the Tasiast project financing will proceed in a manner consistent with our current expectations; (17) potential direct or indirect operational impacts resulting from infectious diseases or pandemics such as the ongoing COVID-19 pandemic; (18) the effectiveness of preventative actions and contingency plans put in place by the Company to respond to the COVID-19 pandemic, including, but not limited to, social distancing, travel restrictions, business continuity plans, and efforts to mitigate supply chain disruptions; (19) changes in national and local government legislation or other government actions, particularly in response to the COVID-19 outbreak; (20) litigation, regulatory proceedings and audits, and the potential ramifications thereof, being concluded in a manner consistent with the Corporation’s expectations (including without limitation the audit of mining companies in Ghana which includes the Corporation’s Ghanaian subsidiaries, litigation in Chile relating to the alleged damage of wetlands and the scope of any remediation plan or other environmental obligations arising therefrom, the ongoing litigation with the Russian tax authorities regarding dividend withholding tax and the ongoing Sunnyside litigation regarding potential liability under the U.S. Comprehensive Environmental Response, Compensation, and Liability Act); (21) that the Company will enter into definitive documentation with the Government of Mauritania substantially in accordance with the terms and conditions of the term sheet, on a basis consistent with our expectations and that the parties will perform their respective obligations thereunder on the timelines agreed; (22) that the exploitation permit for Tasiast Sud will be issued under the terms and on timelines consistent with our expectations; (23) that the benefits of the contemplated arrangements related to the agreement in principle will result in increased stability at the Company’s operations in Mauritania; and (24) the Company’s financial results, cash flows and future prospects being consistent with Company expectations in amounts sufficient to permit sustained dividend payments. Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements. Such factors include, but are not limited to: the inaccuracy of any of the foregoing assumptions, sanctions (any other similar restrictions or penalties) now or subsequently imposed, other actions taken, by, against, in respect of or otherwise impacting any jurisdiction in which the Company is domiciled or operates (including but not limited to the Russian Federation, Canada, the European Union and the United States), or any government or citizens of, persons or companies domiciled in, or the Company’s business, operations or other activities in, any such jurisdiction; reductions in the ability of the Company to transport and refine doré; fluctuations in the currency markets; fluctuations in the spot and forward price of gold or certain other commodities (such as fuel and electricity); changes in the discount rates applied to calculate the present value of net future cash flows based on country-specific real weighted average cost of capital; changes in the market valuations of peer group gold producers and the Company, and the resulting impact on market price to net asset value multiples; changes in various market variables, such as interest rates, foreign exchange rates, gold or silver prices and lease rates, or global fuel prices, that could impact the mark-to-market value of outstanding derivative instruments and ongoing payments/receipts under any financial obligations; risks arising from holding derivative instruments (such as credit risk, market liquidity risk and mark-to-market risk); changes in national and local government legislation, taxation (including but not limited to income tax, advance income tax, stamp tax, withholding tax, capital tax, tariffs, value-added or sales tax, capital outflow tax, capital gains tax, windfall or windfall profits tax, production royalties, excise tax, customs/import or export taxes/duties, asset taxes, asset transfer tax, property use or other real estate tax, together with any related fine, penalty, surcharge, or interest imposed in connection with such taxes), controls, policies and regulations; the security of personnel and assets; political or economic developments in Canada, the United States, Chile, Brazil, Russia, Mauritania, Ghana, or other countries in which Kinross does business or may carry on business; business opportunities that may be presented to, or pursued by, us; our ability to successfully integrate acquisitions and complete divestitures; operating or technical difficulties in connection with mining, development or refining activities; employee relations; litigation or other claims against, or regulatory investigations and/or any enforcement actions, administrative orders or sanctions in respect of the Company (and/or its directors, officers, or employees) including, but not limited to, securities class action litigation in Canada and/or the United States, environmental litigation or regulatory proceedings or any investigations, enforcement actions and/or sanctions under any applicable anti-corruption, international sanctions and/or anti-money laundering laws and regulations in Canada, the United States or any other applicable jurisdiction; the speculative nature of gold exploration and development including, but not limited to, the risks of obtaining necessary licenses and permits; diminishing quantities or grades of reserves; adverse changes in our credit ratings; and contests over title to properties, particularly title to undeveloped properties. In addition, there are risks and hazards associated with the business of gold exploration, development and mining, including environmental hazards, industrial accidents, unusual or unexpected formations, pressures, cave-ins, flooding and gold bullion losses (and the risk of inadequate insurance, or the inability to obtain insurance, to cover these risks). Many of these uncertainties and contingencies can directly or indirectly affect, and could cause, Kinross’ actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, Kinross, including but not limited to resulting in an impairment charge on goodwill and/or assets. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Forward-looking statements are provided for the purpose of providing information about management’s expectations and plans relating to the future. All of the forward-looking statements made in this AIF, including but not limited to the “Risk Factors” section hereof, 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. These factors are not intended to represent a complete list of the factors that could affect Kinross. Kinross disclaims any intention or obligation to update or revise any forward-looking statements or to explain any material difference between subsequent actual events and such forward-looking statements, except to the extent required by applicable law.
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CORPORATE STRUCTURE
Kinross Gold Corporation was initially created in May 1993 by the amalgamation of CMP Resources Ltd., Plexus Resources Corporation, and 1021105 Ontario Corp. In December 2000, Kinross amalgamated with LT Acquisition Inc.; in January 2005, Kinross amalgamated with its wholly-owned subsidiary, TVX Gold Inc. (“TVX”); in January 2006, it amalgamated with its wholly-owned subsidiary, Echo Bay Mines Ltd. (“Echo Bay”); and in January 2011, it amalgamated with Underworld Resources Inc. Kinross is the continuing entity resulting from these amalgamations. Kinross is governed by the Business Corporations Act (Ontario) and its registered and principal offices are located at 25 York Street, 17th Floor, Toronto, Ontario, M5J 2V5.
Each of Kinross’ mining operations is a separate business unit. Operations are overseen by a regional Senior Vice-President employed by Kinross or the applicable foreign subsidiary, who reports to the Company’s Chief Technical Officer. Global exploration strategies, corporate financing, tax, additional technical support services, hedging and acquisition strategies are managed centrally. Execution of site/regional operations and exploration strategies is managed locally. Kinross’ enterprise risk management programs are subject to overview by its Audit and Risk Committee of the Board of Directors (as defined below).
A significant portion of Kinross’ business is carried on through subsidiaries. A chart showing the names of the significant subsidiaries of Kinross, as of December 31, 2020, is set out below. All subsidiaries are 100% owned (directly or indirectly) unless otherwise noted.
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Subsidiary Governance and Internal Controls
Kinross has systems of governance, internal control over financial consolidation and reporting, and disclosure controls and procedures
that apply at all levels of the Company and its subsidiaries, including those that operate in emerging markets. These systems
are overseen by the Company’s board of directors (the “Board of Directors”) and are implemented by the
Company’s senior management, and the senior management of its subsidiaries. The relevant features of these systems include:
Control over Subsidiaries. All of the Company’s subsidiaries are wholly-owned or controlled unless otherwise noted. Operations are overseen by a regional Senior Vice-President or by an equivalent senior officer employed by Kinross or the applicable foreign subsidiary, who reports to the Company’s Chief Technical Officer. Kinross’ subsidiaries, including those subsidiaries in emerging markets, are located in the applicable jurisdictions. Each of the subsidiaries legally owns or controls its operating assets, and the subsidiaries’ operational decisions are localized. Kinross, as the ultimate sole shareholder, has internal policies and systems in place which provide it with visibility into the operations of its subsidiaries, including its subsidiaries operating in emerging markets, and the Company’s management team is responsible for monitoring the activities of the subsidiaries.
Further, the board of directors (or similar governing body) of each subsidiary is appointed by the shareholders of such subsidiary. Directors (or those holding similar positions) may be replaced at any time by a written resolution of the shareholders (or equivalent corporate action under applicable law). Through its corporate structure, Kinross has the power to directly or indirectly appoint and replace the board members of each wholly owned subsidiary1, including those operating in emerging markets. The boards of directors (or similar governing bodies under applicable law) of Kinross’ subsidiaries (including those operating in emerging markets) act with regard to their respective fiduciary duties in the interests of the respective subsidiaries and in accordance with applicable corporate procedures, and are also accountable to Kinross and its Board of Directors and senior management.
With respect to the bank accounts of subsidiaries, Kinross has internal controls that require each of the Company’s subsidiaries to notify the Company’s treasury team before opening or closing any bank accounts. Kinross’ treasury team is also responsible for generally monitoring the activity within all such bank accounts on an ongoing basis via a web-based global treasury management system and/or web-based account access provided by the applicable financial institution to the extent available.
Strategic Direction. While the operations of each of the Company’s subsidiaries are managed locally, certain exploration strategies, external corporate financing, tax governance, additional technical support services, hedging and acquisition strategies are established centrally by the Company’s management, and, on consideration, implemented accordingly by senior management of applicable subsidiaries under the oversight of their respective boards of directors. Each operating subsidiary is responsible for the development and execution of its own risk management programs based on the enterprise risk management process established by the Company. The subsidiaries report a summary of their respective risk registers to the Company’s management on a quarterly basis which is then aggregated and summarized for reporting to the Audit and Risk Committee of the Board of Directors.
1 Kinross has the power to appoint and replace two of the three members of the Management Committee at Peak Gold, LLC. Our joint venture partner Contango ORE, Inc. has the power to appoint and replace the third member of the Management Committee.
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Financial Reporting. Kinross prepares its consolidated financial statements and the financial information presented in its Management’s Discussion & Analysis (“MD&A”) on a quarterly and annual basis in accordance with IFRS as issued by the International Accounting Standards Board, which includes financial information and disclosures from its subsidiaries. The Company has internal controls over the preparation of its financial statements and other financial disclosures to provide reasonable assurance that its financial reporting is reliable and that the quarterly and annual financial statements and the financial information presented in its MD&A are being prepared in accordance with IFRS and applicable securities laws. These internal controls include the following:
(a) | The Company receives quarterly reporting packages from its key operating subsidiaries including financial information and disclosures required to complete the Company’s consolidated financial statements and MD&A. Those responsible for the finance function of the Company’s subsidiaries report to the Company’s management, and the Company’s management has direct access to relevant financial information and finance personnel of the subsidiaries. |
(b) | All public disclosure documents and financial statements released by the Company relating to the Company and its subsidiaries containing material information are reviewed by senior management and approved by the Company’s disclosure committee before such material is disclosed. The disclosure committee is comprised of the Chief Financial Officer, the Chief Technical Officer and the Chief Legal Officer. With respect to quarterly reporting, including consolidated financial statements and MD&A, the disclosure committee meets to review and discuss all information prior to public disclosure. A summary of such meeting is provided to the Audit and Risk Committee by the Chief Financial Officer. The disclosure committee also receives a report on quarterly and annual sub-certifications received from senior management responsible for direct oversight of the operations of each operating subsidiary. |
(c) | The primary responsibility of the Audit and Risk Committee is to oversee the Company’s financial reporting process on behalf of the Board of Directors of Kinross and to report the results of its activities to the Board of Directors. |
(d) | The Audit and Risk Committee is also responsible for providing assistance to the Board of Directors in fulfilling its risk oversight responsibilities. The Audit and Risk Committee assesses the Company’s risk tolerance, the overall process for identifying the Company’s principal business and operational risks and the implementation of appropriate measures to manage and disclose such risks. |
(e) | The Audit and Risk Committee reviews the Company’s quarterly and annual consolidated financial statements and MD&A and meets with senior management to discuss quarterly results, including accounting, disclosure and internal control matters. The Audit and Risk Committee recommends the quarterly and annual consolidated financial statements and MD&A to the Company’s Board of Directors for approval. |
(f) | The Audit and Risk Committee receives confirmation from the Chief Executive Officer and Chief Financial Officer as to the matters addressed in the quarterly and annual certifications required under National Instrument 52-109 – Certification of Disclosure in Issuer’s Annual and Interim Filings. This confirmation is obtained from the quarterly CFO Report which provides a summary of management’s assessment and evaluation of internal control over financial reporting and disclosures control and procedures. |
(g) | The Audit and Risk Committee periodically assesses and evaluates the adequacy of the procedures in place for the review of the Company’s public disclosure of financial information extracted or derived from the Company’s financial statements, other than the annual and interim consolidated financial statements and related notes, MD&A, earnings releases and the AIF. |
Pursuant to regulations adopted by the U.S. Securities and Exchange Commission, under the Sarbanes-Oxley Act of 2002 and those of the Canadian Securities Administrators, Kinross’ management evaluates the effectiveness of the design and operation of the Company’s disclosure controls and procedures and internal control over financial reporting. This evaluation is done under the supervision of, and with the participation of, the Company’s Chief Executive Officer and Chief Financial Officer.
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These systems of corporate governance, internal control over financial reporting and disclosure controls and procedures are designed to enable, among other things, Kinross to have access to all material information about its subsidiaries, including those operating in emerging markets.
Fund Transfers from the Company’s Subsidiaries
Certain of the Company’s subsidiaries have a long history of operating in emerging markets and Kinross has not had any material issues with respect to transferring funds from, to or within emerging markets. Funds are transferred to, from or among Kinross’ subsidiaries pursuant to a variety of methods which include the following: chargeback of costs undertaken on behalf of the subsidiaries via intercompany invoices; advances and repayment of intercompany loans and related interest expenses; capital contributions; equity purchases; returns of capital and dividend declaration/payment by the subsidiaries. The method of transfer is dependent on the operational, financing or other arrangement established amongst Kinross and/or its applicable subsidiaries. All fund transfers from Kinross’ subsidiaries are in compliance with applicable law.
Records Management of the Company’s Subsidiaries
As required by applicable law, original copies of all corporate records are required to be maintained in the language of, and stored at the offices of, each subsidiary in the jurisdiction of incorporation. However, where practical, a duplicate set of corporate records for certain subsidiaries is maintained at Kinross’ head office in Toronto. Kinross also maintains a web-based global entity management system for recording such corporate information and documents which is regularly monitored and updated by Kinross’ corporate secretarial team and/or the regional legal teams.
GENERAL DEVELOPMENT OF THE BUSINESS
Overview
Kinross is principally engaged in the mining and processing of gold and, as a by-product, silver ore and the exploration for, and the acquisition of, gold bearing properties in the Americas, the Russian Federation, West Africa and worldwide. The principal products of Kinross are gold and silver produced in the form of doré that is shipped to refineries for final processing.
Kinross’ strategy is to increase shareholder value through increases in precious metal reserves, net asset value, production, long-term cash flow and earnings per share. Kinross’ strategy also consists of optimizing the performance, and therefore, the value, of existing operations, investing in quality exploration and development projects and acquiring new potentially accretive properties and projects.
Kinross’ operations and mineral reserves are impacted by, among other things, changes in metal prices. The average gold price per ounce during 2020 was approximately $1,770 ($1,393 during 2019). Kinross used a gold price of $1,200 per ounce at the end of 2020 to estimate mineral reserves.
Kinross’ attributable2 estimated proven and probable mineral reserves as at December 31, 2020, was 30.0 million ounces of gold and 59.2 million ounces of silver.
Three-Year History
On February 2, 2018, Compania Minera Mantos de Oro (“MDO”), a subsidiary of the Company, Minera La Coipa (“MLC”) and Salmones de Chile Alimentos S.A. (“SDCA”) agreed, among other things, to spin out the Phase 7 concessions surrounding Kinross’ La Coipa mine into a new company and MDO agreed to purchase SDCA’s 50% interest in such company in exchange for payments to SDCA totaling $65 million. Prior to completion of the transaction, MDO held a 50% ownership interest in the Phase 7 deposit through its 50% ownership of MLC, with the remaining 50% held by SDCA. Following completion of the transaction on March 19, 2018, MDO now holds a 100% ownership interest in the Phase 7 deposit.
2 “Attributable” includes Kinross’ share of Chirano (90%) production.
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On July 31, 2018, Kinross Brasil Mineração, a wholly-owned subsidiary of Kinross completed its transaction to acquire two hydroelectric power plants in Brazil from a subsidiary of Gerdau SA for $253.7 million.3
On October 2, 2018, Kinross acquired Barrick’s 50% interest in the Bald Mountain Exploration Joint Venture for consideration of $15.5 million in cash and a 1.25% net smelter royalty, giving Kinross 100% ownership of the entire Bald Mountain land package.
On July 25, 2019, Kinross extended the maturity date of its $1.5 billion revolving credit facility by one year to 2024, restoring a five-year term.
On July 31, 2019, Kinross announced that it had entered into an agreement to acquire the Chulbatkan license, containing Udinsk, an open-pit heap leach development project, located in the Khabarovsk region of Far East Russia from N-Mining Limited (“N-Mining”) for total fixed consideration of $283 million. In addition, N-Mining received a 1.5% net smelter return royalty on future production from Chulbatkan and contingent consideration of $50 per ounce of future proven and probable reserves beyond the first 3.25 million of declared proven and probable ounces. The transaction was completed on January 16, 2020.
On September 15, 2019, Kinross announced that it was proceeding with a project to incrementally increase throughput capacity at its Tasiast mine in Mauritania to 24,000 tonnes per day (“Tasiast 24k”).
On December 2, 2019, Kinross announced that it had entered into an agreement to sell a portfolio of precious metals royalties to Maverix Metals Inc. (“Maverix”) for total consideration of $73.9 million, which included $25 million in cash and approximately 11.2 million Maverix common shares, representing a 9.4% ownership interest in Maverix. As part of the transaction, Kinross entered into an investor rights agreement with Maverix, which among other customary terms and conditions, provided Kinross with pre-emptive rights to participate in any future equity financings to maintain its ownership position. The transaction closed on December 19, 2019.
On December 9, 2019, the Company sold its investment of 20,656,250 common shares of Lundin Gold Inc. to a syndicate of buyers for proceeds of $113.2 million.
On December 16, 2019, Tasiast Mauritanie Limited S.A. (“TMLSA”), a wholly-owned subsidiary of Kinross, announced it had entered into a definitive loan agreement for up to $300 million for its Tasiast mine in Mauritania with the IFC (a member of the World Bank Group), Export Development Canada (“EDC”), and with the participation of ING Bank and Société Générale (the “Tasiast Loan”). The eight-year loan, which is non-recourse to Kinross, matures in December 2027, with principal repayments beginning in 2022, and has a floating interest rate of LIBOR plus 4.38%. On April 9, 2020 the Company drew down $200 million from the $300 million Tasiast Loan, and the remaining $100 million is available to be drawn up to March 2022.
On March 20, 2020, the Company drew down $750 million from its $1.5 billion revolving credit facility as a precautionary measure to protect against economic and business uncertainties caused by the COVID-19 pandemic. The Company repaid $250 million of the drawn amount on July 24, 2020 and the remaining $500 million balance on September 18, 2020 (See “Risk Factors” – “Kinross may be negatively affected by an outbreak of infectious disease or pandemic”).
On June 15, 2020, the Company announced it had reached an agreement in principle with the Government of Mauritania (the “Government”) to enhance the parties’ partnership. The key terms of the agreement include the Government (i) providing the Company with a 30-year exploitation license for Tasiast Sud, (ii) reinstating the tax exemption on fuel duties, and (iii) repaying to the Company approximately $40 million in outstanding VAT refunds over the course of the next five years. The Company in return has agreed to (i) make payments totaling $25 million to resolve certain disputed matters, and (ii) update its existing 3% royalty payable to an escalating royalty approach tied to the price of gold that is comparable with other royalties being paid in the region. The terms of the agreement remain subject to finalization of definitive documentation between the parties.
3 Based on exchange rate of 3.29 Brazilian reais to the U.S. dollar.
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On September 30, 2020, Kinross announced that it had entered into an agreement to acquire a 70% interest in the Peak project in Alaska from Royal Gold, Inc. and Contango ORE, Inc. (“Contango”) for total cash consideration of $93.7 million. Going forward the Company, in consultation with the local community, has agreed to change the name to the Manh Choh project. Kinross has broad authority to construct and operate the Manh Choh project, with Contango retaining a 30% non-operating minority interest in the project.
DESCRIPTION OF THE BUSINESS
Kinross is principally engaged in the mining and processing of gold and, as a by-product, silver ore and the exploration for, and the acquisition of, gold bearing properties in the Americas, the Russian Federation, West Africa and worldwide. The material properties of Kinross as of December 31, 2020 were as follows:
Property | Location |
Property Ownership4
|
||
Paracatu | Brazil | 100% | ||
Kupol-Dvoinoye | Russian Federation | 100% | ||
Tasiast | Mauritania | 100% |
In addition, as of December 31, 2020, Kinross held a 100% interest in the Fort Knox mine in Alaska, United States, a 100% interest in the Round Mountain mine in Nevada, United States, a 100% interest in the Bald Mountain mine in Nevada, United States, a 100% interest in the La Coipa project in Chile, a 90% interest in the Chirano mine in Ghana, a 100% interest in the Lobo-Marte project in Chile, a 100% interest in the Maricunga property in Chile, a 100% interest in the Chulbatkan property, containing the Udinsk project in Russia, a 70% interest in the Manh Choh project (formerly the Peak project) in Alaska and other mining properties in various stages of exploration, development, reclamation, and closure. The Company’s principal product is gold and it also produces silver as a by-product.
Employees
At December 31, 2020, Kinross and its subsidiaries employed approximately 8,951 employees. In Brazil, a new collective agreement for Paracatu was signed on March 3, 2020 and expires January 31, 2022. In Chile, there is currently a collective agreement in place for Maricunga which expires February 28, 2023, while an agreement for La Coipa was signed on March 18, 2020 and expires on March 17, 2023. In Mauritania, the collective agreement signed in Q4 2019 is valid until December 31, 2022. In Ghana, there are agreements respecting both junior and senior staff, which are renewed annually. An agreement in respect of junior staff was reached in March 2021, while negotiations for senior staff are ongoing. In Russia, a union was registered at Kupol in February 2012, but there are currently no union members. At Dvoinoye, a union was registered in 2015, which currently has two members. Collective bargaining in Russia is not required until a majority of employees have joined the union. All of Kinross’ employees in the United States, Canada, Spain and the Netherlands are non-unionized.
4 The Paracatu and Tasiast properties are subject to various royalties (see “Kinross Material Properties” –“Paracatu, Brazil” and “Tasiast, Mauritania”)
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Competitive Conditions
The precious metal mineral exploration and mining business is a competitive business. Kinross competes with numerous other companies and individuals in the search for and the acquisition of attractive precious metal mineral properties. The ability of Kinross to replace or increase its mineral reserves and mineral resources in the future will depend not only on its ability to develop its present properties, but also on its ability to select and acquire suitable producing properties or prospects for precious metal development or mineral exploration.
Environmental Protection
Kinross’ exploration activities and mining and processing operations are subject to the federal, state, provincial, regional and local environmental laws and regulations of the jurisdictions in which Kinross’ activities and facilities are located. For example, in the United States, Kinross is subject to a number of such laws and regulations including, without limitation: the Clean Air Act; the Clean Water Act; the Comprehensive Environmental Response, Compensation and Liability Act; the Emergency Planning and Community Right to Know Act; the Endangered Species Act; the Federal Land Policy and Management Act; the National Environmental Policy Act; the Resource Conservation and Recovery Act; and related state laws.
Kinross is subject to similar laws in other jurisdictions in which it operates. In all jurisdictions in which Kinross operates, environmental licenses, permits and other regulatory approvals are required in order to engage in exploration, mining and processing, and mine closure activities. Regulatory approval of a detailed plan of operations and a comprehensive environmental impact assessment is required prior to initiating mining or processing activities or for any substantive change to previously approved plans. In all jurisdictions in which Kinross operates, specific statutory and regulatory requirements and standards must be met throughout the life of the mining or processing operations in regard to air quality, water quality, fisheries, wildlife and biodiversity protection, archaeological and cultural resources, solid and hazardous waste management and disposal, the management and transportation of hazardous chemicals, toxic substances, noise, community right-to-know, land use, and reclamation. Except as may be otherwise disclosed herein, Kinross is currently in compliance, in all material respects, with all material applicable environmental laws and regulations. Details and quantification of the Company’s reclamation and remediation obligations are set out in Note 14 of the audited consolidated financial statements of the Company for the year ended December 31, 2020.
As part of Kinross’ Corporate Responsibility Management System, Kinross has implemented corporate environmental governance programs including:
POLICY - The Corporate Safety & Sustainability Policy sets the overall expectations for maintaining environmental compliance, managing our environmental footprint, and systematic monitoring of our environmental performance. The policy assigns accountabilities to implement those expectations, which apply to all stages of exploration, development, operation and closure.
STANDARDS – Corporate environmental management standards provide a clear bottom line for all Kinross activities in all jurisdictions in which we carry on business. Where legal requirements are unclear, Kinross’ environmental management standards provide clear direction regarding performance expectations and minimum design and operating requirements.
An example of this is Kinross’ adoption of the standards outlined in the International Cyanide Management Code for the Manufacture, Transport and Use of Cyanide in the Production of Gold (the “Cyanide Code”). Kinross is a signatory to the Cyanide Code, which is administered by the International Cyanide Management Institute (the “ICMI”). The ICMI is an independent body that was established by a multi-stakeholder group under the guidance of the United Nations Environmental Program. The ICMI established operating standards for cyanide manufacturers, transporters and mines and provides for third party certification of facilities’ compliance with the Cyanide Code. All Kinross operations have either already been certified as compliant with the Cyanide Code or are in the process of being certified.
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AUDITS - Comprehensive safety & sustainability audits are conducted at all operations and at selected residual properties on a triennial basis. The audit program assesses compliance with applicable legal requirements, measures effectiveness of management systems, and includes procedures to ensure timely follow-up on audit findings. Audit topics for detailed review are based on site-specific risks.
METRICS - Kinross has identified operational parameters that are key indicators of environmental performance, and measures these indicators on a regular basis. The Company tracks an index of these key performance indicators and sets performance targets to encourage continuous environmental improvement.
ENGINEERING - To effectively manage environmental risk, programs are in place to assess the management and stability of tailings and other engineered facilities. They include detailed water balance accounting, to assure sufficient storage capacity, and effective operational procedures. Every Kinross operation has a tailings or heap management plan in place, and tailings facilities are the subject of periodic review by independent experts. In addition, Kinross performs periodic assessments of engineered systems to assure adequate systems are in place to minimize or eliminate environmental risks.
RECLAMATION - Kinross recognizes its responsibility to manage the environmental change associated with its operations, and requires all sites to develop and maintain reclamation and closure plans to address the Company’s reclamation and closure obligations in accordance with applicable local regulations and Kinross’ corporate environmental management standards.
The results of these programs have been recognized by others within and outside the mining industry. Examples of significant recognition of Kinross’ efforts are listed on Kinross’ website at www.kinross.com.
12
Operations
Kinross’ total attributable production in 2020 was derived from the mines in the Americas (55%), West Africa (23%) and the Russian Federation (22%). The following shows the location of Kinross’ properties as of the date hereof.
13
Gold Equivalent Production and Sales
The following table summarizes total attributable production and sales from continuing operations by Kinross in the last three years:
Years ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Gold equivalent production – ounces | 2,366,648 | 2,507,659 | 2,452,398 | |||||||||
Gold equivalent sales – ounces | 2,358,927 | 2,492,572 | 2,510,419 |
Included in gold equivalent production and sales is silver production and sales, as applicable, converted into gold production using a ratio of the average spot market prices of gold and silver for each of the three comparative years. The ratios were 86.32:1 in 2020, 85.99:1 in 2019 and 80.74:1 in 2018.
The following table sets forth the total attributable gold equivalent production (in ounces) reflective of Kinross’ interest in each of its operating assets during the last three years:
2020 | 2019 | 2018 | ||||||||||
Americas: | ||||||||||||
Fort Knox | 237,925 | 200,263 | 255,569 | |||||||||
Round Mountain | 324,277 | 361,664 | 385,601 | |||||||||
Bald Mountain | 191,282 | 187,961 | 284,646 | |||||||||
Paracatu | 542,435 | 619,563 | 521,575 | |||||||||
Maricunga | 3,546 | 38,601 | 60,066 | |||||||||
Total | 1,299,465 | 1,408,052 | 1,507,457 | |||||||||
West Africa: | ||||||||||||
Tasiast | 406,509 | 391,097 | 250,965 | |||||||||
Chirano5 | 149,931 | 181,167 | 204,029 | |||||||||
Total | 556,440 | 572,264 | 454,994 | |||||||||
Russian Federation: | ||||||||||||
Kupol-Dvoinoye | 510,743 | 527,343 | 489,947 |
5 Represents Kinross’ 90% ownership interest.
14
Marketing
Gold is a metal that is traded on world markets, with benchmark prices generally based on the London market. Gold has two principal uses: product fabrication and bullion investment. Fabricated gold has a wide variety of end uses, including jewelry manufacture (the largest fabrication component), electronics, dentistry, industrial and decorative uses, medals, medallions, and official coins. Gold bullion is held primarily as a store of value and a safeguard against devaluation of paper assets denominated in fiat currencies. Kinross sells all of its refined gold to banks, bullion dealers, and refiners. In 2020, sales from operations to its top three customers totaled $648.6 million, $498.5 million, and $428.5 million respectively, for an aggregate of $1,575.6 million. In 2019, sales from operations to its top three customers totaled $517.3 million, $397.8 million, and $355.0 million respectively, for an aggregate of $1,270.1 million. Due to the size of the bullion market and the above ground inventory of bullion, activities by Kinross will generally not influence gold prices. Kinross believes that the loss of any of these customers would have no material adverse impact on Kinross because of the active worldwide market for gold.
The following table sets forth for the years indicated the high and low London Bullion Market afternoon fix prices for gold:
Year | High | Low | Average | |||||||||||
2010 | $ | 1,421.00 | $ | 1,058.00 | $ | 1,224.52 | ||||||||
2011 | $ | 1,895.00 | $ | 1,319.00 | $ | 1,570.25 | ||||||||
2012 | $ | 1,791.75 | $ | 1,540.00 | $ | 1,668.98 | ||||||||
2013 | $ | 1,693.75 | $ | 1,192.00 | $ | 1,411.23 | ||||||||
2014 | $ | 1,385.00 | $ | 1,142.00 | $ | 1,266.40 | ||||||||
2015 | $ | 1,295.75 | $ | 1,049.40 | $ | 1,160.06 | ||||||||
2016 | $ | 1,366.25 | $ | 1,077.00 | $ | 1,250.80 | ||||||||
2017 | $ | 1,346.25 | $ | 1,151.00 | $ | 1,257.15 | ||||||||
2018 | $ | 1,354.95 | $ | 1,178.40 | $ | 1,268.49 | ||||||||
2019 | $ | 1,546.10 | $ | 1,269.50 | $ | 1,392.60 | ||||||||
2020 | $ | 2,067.15 | $ | 1,474.25 | $ | 1,769.59 |
15
Kinross Mineral Reserves and Mineral Resources
Throughout this AIF mineral resources are presented exclusive of mineral reserves.
Definitions
The estimated mineral reserves and mineral resources for Kinross’ properties have been calculated in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) – Definitions Adopted by CIM Council on May 10, 2014 (the “CIM Standards”) which are incorporated in the Canadian Securities Administrators’ National Instrument 43-101 Standards of Disclosure for Mineral Projects. The following definitions are reproduced from the CIM Standards:
A Mineral Resource is a concentration or occurrence of solid material of economic interest in or on the Earth’s crust in such form, grade or quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade or quality, continuity and other geological characteristics of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling.
An Inferred Mineral Resource is that part of a Mineral Resource for which quantity and grade or quality are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological and grade or quality continuity. An Inferred Mineral Resource has a lower level of confidence than that applying to an Indicated Mineral Resource and must not be converted to a Mineral Reserve. It is reasonably expected that the majority of Inferred Mineral Resources could be upgraded to Indicated Mineral Resources with continued exploration.
An Indicated Mineral Resource is that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics are estimated with sufficient confidence to allow the application of Modifying Factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit. Geological evidence is derived from adequately detailed and reliable exploration, sampling and testing and is sufficient to assume geological and grade or quality continuity between points of observation. An Indicated Mineral Resource has a lower level of confidence than that applying to a Measured Mineral Resource and may only be converted to a Probable Mineral Reserve.
A Measured Mineral Resource is that part of a Mineral Resource for which quantity, grade or quality, densities, shape, and physical characteristics are estimated with confidence sufficient to allow the application of Modifying Factors to support detailed mine planning and final evaluation of the economic viability of the deposit. Geological evidence is derived from detailed and reliable exploration, sampling and testing and is sufficient to confirm geological and grade or quality continuity between points of observation. A Measured Mineral Resource has a higher level of confidence than that applying to either an Indicated Mineral Resource or an Inferred Mineral Resource. It may be converted to a Proven Mineral Reserve or to a Probable Mineral Reserve.
A Mineral Reserve is the economically mineable part of a Measured and/or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined or extracted and is defined by studies at Pre-Feasibility or Feasibility level as appropriate that include application of Modifying Factors. Such studies demonstrate that, at the time of reporting, extraction could reasonably be justified. The reference point at which Mineral Reserves are defined, usually the point where the ore is delivered to the processing plant, must be stated. It is important that, in all situations where the reference point is different, such as for a saleable product, a clarifying statement is included to ensure that the reader is fully informed as to what is being reported. The public disclosure of a Mineral Reserve must be demonstrated by a Pre-Feasibility Study or Feasibility Study.
A Probable Mineral Reserve is the economically mineable part of an Indicated Mineral Reserve, and in some circumstances, a Measured Mineral Resource. The confidence in the Modifying Factors applying to a Probable Mineral Reserve is lower than that applying to a Proven Mineral Reserve. The qualified person(s) may elect, to convert Measured Mineral Resources to Probable Mineral Reserves if the confidence in the Modifying Factors is lower than that applied to a Proven Mineral Reserve. Probable Mineral Reserve estimates must be demonstrated to be economic, at the time of reporting, by at least a Pre-Feasibility Study.
16
A Proven Mineral Reserve is the economically mineable part of a Measured Mineral Resource. A Proven Mineral Reserve implies a high degree of confidence in the Modifying Factors. Application of the Proven Mineral Reserve category implies that the qualified person has the highest degree of confidence in the estimate with the consequent expectation in the minds of the readers of the report. The term should be restricted to that part of the deposit where production planning is taking place and for which any variation in the estimate would not significantly affect the potential economic viability of the deposit. Proven Mineral Reserve estimates must be demonstrated to be economic, at the time of reporting, by at least a Pre-Feasibility Study. Within the CIM Standards, the term Proved Mineral Reserve is an equivalent term to a Proven Mineral Reserve.
Modifying Factors are considerations used to convert Mineral Resources to Mineral Reserves. These include, but are not restricted to, mining, processing, metallurgical, infrastructure, economic, marketing, legal, environmental, social and governmental factors.
17
Mineral Reserve and Mineral Resource Estimates
The following tables set forth the estimated mineral reserves and mineral resources attributable to interests held by Kinross for each of its properties:
MINERAL RESERVE AND MINERAL RESOURCE STATEMENT | GOLD |
PROVEN AND PROBABLE MINERAL RESERVES (1,2,3,4,5,6) | |
Kinross Gold Corporation’s Share at December 31, 2020 |
Kinross | Proven | Probable | Proven and Probable | |||||||||||||||||||||||||||||||||||||||||
Interest | Tonnes | Grade | Ounces | Tonnes | Grade | Ounces | Tonnes | Grade | Ounces | |||||||||||||||||||||||||||||||||||
Property | Location | (%) | (kt) | (g/t) | (koz) | (kt) | (g/t) | (koz) | (kt) | (g/t) | (koz) | |||||||||||||||||||||||||||||||||
NORTH AMERICA | ||||||||||||||||||||||||||||||||||||||||||||
Bald Mountain | USA | 100.0 | % | - | - | - | 58,647 | 0.6 | 1,143 | 58,647 | 0.6 | 1,143 | ||||||||||||||||||||||||||||||||
Fort Knox | USA | 100.0 | % | 36,440 | 0.4 | 425 | 193,575 | 0.3 | 2,046 | 230,015 | 0.3 | 2,471 | ||||||||||||||||||||||||||||||||
Round Mountain 7 | USA | 100.0 | % | 4,979 | 0.5 | 81 | 84,189 | 0.8 | 2,164 | 89,168 | 0.8 | 2,245 | ||||||||||||||||||||||||||||||||
SUBTOTAL | 41,419 | 0.4 | 506 | 336,411 | 0.5 | 5,353 | 377,830 | 0.5 | 5,859 | |||||||||||||||||||||||||||||||||||
SOUTH AMERICA | ||||||||||||||||||||||||||||||||||||||||||||
La Coipa 8 | Chile | 100.0 | % | 370 | 0.5 | 5 | 16,969 | 1.6 | 866 | 17,339 | 1.6 | 871 | ||||||||||||||||||||||||||||||||
Lobo-Marte | Chile | 100.0 | % | - | - | - | 146,771 | 1.4 | 6,394 | 146,771 | 1.4 | 6,394 | ||||||||||||||||||||||||||||||||
Paracatu | Brazil | 100.0 | % | 519,250 | 0.4 | 7,221 | 72,309 | 0.3 | 802 | 591,559 | 0.4 | 8,023 | ||||||||||||||||||||||||||||||||
SUBTOTAL | 519,620 | 0.4 | 7,226 | 236,049 | 1.1 | 8,062 | 755,669 | 0.6 | 15,288 | |||||||||||||||||||||||||||||||||||
AFRICA | ||||||||||||||||||||||||||||||||||||||||||||
Chirano | Ghana | 90.0 | % | 5,775 | 1.7 | 314 | 9,926 | 2.1 | 660 | 15,701 | 1.9 | 974 | ||||||||||||||||||||||||||||||||
Tasiast | Mauritania | 100.0 | % | 44,810 | 1.2 | 1,797 | 66,664 | 2.1 | 4,533 | 111,474 | 1.8 | 6,330 | ||||||||||||||||||||||||||||||||
SUBTOTAL | 50,585 | 1.3 | 2,111 | 76,590 | 2.1 | 5,193 | 127,175 | 1.8 | 7,304 | |||||||||||||||||||||||||||||||||||
RUSSIA | ||||||||||||||||||||||||||||||||||||||||||||
Dvoinoye | Russia | 100.0 | % | 1,275 | 4.1 | 167 | 149 | 11.7 | 56 | 1,424 | 4.9 | 223 | ||||||||||||||||||||||||||||||||
Kupol | Russia | 100.0 | % | 794 | 10.1 | 257 | 4,938 | 6.7 | 1,057 | 5,732 | 7.1 | 1,314 | ||||||||||||||||||||||||||||||||
SUBTOTAL | 2,069 | 6.4 | 424 | 5,087 | 6.8 | 1,113 | 7,156 | 6.7 | 1,537 | |||||||||||||||||||||||||||||||||||
TOTAL GOLD | 613,693 | 0.5 | 10,267 | 654,137 | 0.9 | 19,721 | 1,267,830 | 0.7 | 29,988 |
MINERAL RESERVE AND MINERAL RESOURCE STATEMENT | SILVER |
PROVEN AND PROBABLE MINERAL RESERVES (1,2,3,4,5,6) | |
Kinross Gold Corporation’s Share at December 31, 2020 |
Kinross | Proven | Probable | Proven and Probable | |||||||||||||||||||||||||||||||||||||||||
Interest | Tonnes | Grade | Ounces | Tonnes | Grade | Ounces | Tonnes | Grade | Ounces | |||||||||||||||||||||||||||||||||||
Property | Location | (%) | (kt) | (g/t) | (koz) | (kt) | (g/t) | (koz) | (kt) | (g/t) | (koz) | |||||||||||||||||||||||||||||||||
NORTH AMERICA | ||||||||||||||||||||||||||||||||||||||||||||
Round Mountain 7 | USA | 100.0 | % | - | - | - | 6,945 | 6.3 | 1,414 | 6,945 | 6.3 | 1,414 | ||||||||||||||||||||||||||||||||
SUBTOTAL | - | - | - | 6,945 | 6.3 | 1,414 | 6,945 | 6.3 | 1,414 | |||||||||||||||||||||||||||||||||||
SOUTH AMERICA | ||||||||||||||||||||||||||||||||||||||||||||
La Coipa 8 | Chile | 100.0 | % | 370 | 56.7 | 675 | 16,969 | 73.7 | 40,196 | 17,339 | 73.3 | 40,871 | ||||||||||||||||||||||||||||||||
SUBTOTAL | 370 | 56.7 | 675 | 16,969 | 73.7 | 40,196 | 17,339 | 73.3 | 40,871 | |||||||||||||||||||||||||||||||||||
RUSSIA | ||||||||||||||||||||||||||||||||||||||||||||
Dvoinoye | Russia | 100.0 | % | 1,275 | 8.1 | 332 | 149 | 33.4 | 160 | 1,424 | 10.8 | 492 | ||||||||||||||||||||||||||||||||
Kupol | Russia | 100.0 | % | 794 | 101.5 | 2,590 | 4,938 | 87.1 | 13,835 | 5,732 | 89.1 | 16,425 | ||||||||||||||||||||||||||||||||
SUBTOTAL | 2,069 | 43.9 | 2,922 | 5,087 | 85.6 | 13,995 | 7,156 | 73.5 | 16,917 | |||||||||||||||||||||||||||||||||||
TOTAL SILVER | 2,439 | 45.9 | 3,597 | 29,001 | 59.6 | 55,605 | 31,440 | 58.6 | 59,202 |
18
Measured and Indicated Mineral Resources
MINERAL RESERVE AND MINERAL RESOURCE STATEMENT | GOLD |
MEASURED AND INDICATED MINERAL RESOURCES (EXCLUDES PROVEN AND PROBABLE MINERAL RESERVES) (2,3,4,5,6,9,10,11) | |
Kinross Gold Corporation’s Share at December 31, 2020 |
|
Kinross | Measured | Indicated | Measured and Indicated | ||||||||||||||||||||||||||||||||||||||||
Interest | Tonnes | Grade | Ounces | Tonnes | Grade | Ounces | Tonnes | Grade | Ounces | |||||||||||||||||||||||||||||||||||
Property | Location | (%) | (kt) | (g/t) | (koz) | (kt) | (g/t) | (koz) | (kt) | (g/t) | (koz) | |||||||||||||||||||||||||||||||||
NORTH AMERICA | ||||||||||||||||||||||||||||||||||||||||||||
Bald Mountain | USA | 100.0 | % | 9,150 | 0.8 | 233 | 197,315 | 0.5 | 3,359 | 206,465 | 0.5 | 3,592 | ||||||||||||||||||||||||||||||||
Fort Knox | USA | 100.0 | % | 13,496 | 0.2 | 103 | 253,524 | 0.3 | 2,486 | 267,020 | 0.3 | 2,589 | ||||||||||||||||||||||||||||||||
Kettle River | USA | 100.0 | % | - | - | - | 1,133 | 6.5 | 236 | 1,133 | 6.5 | 236 | ||||||||||||||||||||||||||||||||
Manh Choh (formerly Peak Gold) 12 | USA | 70.0 | % | 331 | 6.4 | 68 | 6,110 | 4.0 | 778 | 6,441 | 4.1 | 846 | ||||||||||||||||||||||||||||||||
Round Mountain 7 | USA | 100.0 | % | - | - | - | 173,376 | 0.7 | 3,734 | 173,376 | 0.7 | 3,734 | ||||||||||||||||||||||||||||||||
SUBTOTAL | 22,977 | 0.5 | 404 | 631,458 | 0.5 | 10,593 | 654,435 | 0.5 | 10,997 | |||||||||||||||||||||||||||||||||||
SOUTH AMERICA 8 | ||||||||||||||||||||||||||||||||||||||||||||
La Coipa | Chile | 100.0 | % | 4,030 | 1.8 | 235 | 18,205 | 1.6 | 926 | 22,235 | 1.6 | 1,161 | ||||||||||||||||||||||||||||||||
Lobo-Marte | Chile | 100.0 | % | - | - | - | 98,925 | 0.7 | 2,167 | 98,925 | 0.7 | 2,167 | ||||||||||||||||||||||||||||||||
Maricunga | Chile | 100.0 | % | 35,555 | 0.8 | 905 | 312,171 | 0.6 | 6,166 | 347,726 | 0.6 | 7,071 | ||||||||||||||||||||||||||||||||
Paracatu | Brazil | 100.0 | % | 138,606 | 0.3 | 1,225 | 170,464 | 0.3 | 1,749 | 309,070 | 0.3 | 2,974 | ||||||||||||||||||||||||||||||||
SUBTOTAL | 178,191 | 0.4 | 2,365 | 599,765 | 0.6 | 11,008 | 777,956 | 0.5 | 13,373 | |||||||||||||||||||||||||||||||||||
AFRICA | ||||||||||||||||||||||||||||||||||||||||||||
Chirano | Ghana | 90.0 | % | 4,667 | 1.8 | 269 | 7,171 | 1.6 | 359 | 11,838 | 1.7 | 628 | ||||||||||||||||||||||||||||||||
Tasiast | Mauritania | 100.0 | % | 4,826 | 0.7 | 109 | 70,445 | 1.2 | 2,644 | 75,271 | 1.1 | 2,753 | ||||||||||||||||||||||||||||||||
SUBTOTAL | 9,493 | 1.2 | 378 | 77,616 | 1.2 | 3,003 | 87,109 | 1.2 | 3,381 | |||||||||||||||||||||||||||||||||||
RUSSIA | ||||||||||||||||||||||||||||||||||||||||||||
Chulbatkan 13 | Russia | 100.0 | % | - | - | - | 105,708 | 1.2 | 4,167 | 105,708 | 1.2 | 4,167 | ||||||||||||||||||||||||||||||||
Dvoinoye | Russia | 100.0 | % | 3 | 5.9 | 1 | 57 | 10.4 | 19 | 60 | 10.1 | 20 | ||||||||||||||||||||||||||||||||
Kupol | Russia | 100.0 | % | 279 | 11.4 | 102 | 1,575 | 7.9 | 398 | 1,854 | 8.4 | 500 | ||||||||||||||||||||||||||||||||
SUBTOTAL | 282 | 11.4 | 103 | 107,340 | 1.3 | 4,584 | 107,622 | 1.4 | 4,687 | |||||||||||||||||||||||||||||||||||
TOTAL GOLD | 210,943 | 0.5 | 3,250 | 1,416,179 | 0.6 | 29,188 | 1,627,122 | 0.6 | 32,438 |
MINERAL RESERVE AND MINERAL RESOURCE STATEMENT | SILVER |
MEASURED AND INDICATED MINERAL RESOURCES (EXCLUDES PROVEN AND PROBABLE MINERAL RESERVES) (2,3,4,5,6,9,10,11) | |
Kinross Gold Corporation’s Share at December 31, 2020 |
Kinross | Measured | Indicated | Measured and Indicated | |||||||||||||||||||||||||||||||||||||||||
Interest | Tonnes | Grade | Ounces | Tonnes | Grade | Ounces | Tonnes | Grade | Ounces | |||||||||||||||||||||||||||||||||||
Property | Location | (%) | (kt) | (g/t) | (koz) | (kt) | (g/t) | (koz) | (kt) | (g/t) | (koz) | |||||||||||||||||||||||||||||||||
NORTH AMERICA | ||||||||||||||||||||||||||||||||||||||||||||
Manh Choh (formlerly Peak Gold) 12 | USA | 70.0 | % | 331 | 16.7 | 178 | 6,110 | 14.1 | 2,762 | 6,441 | 14.2 | 2,940 | ||||||||||||||||||||||||||||||||
Round Mountain 7 | USA | 100.0 | % | - | - | - | 4,707 | 8.3 | 1,254 | 4,707 | 8.3 | 1,254 | ||||||||||||||||||||||||||||||||
SUBTOTAL | 331 | 16.7 | 178 | 10,817 | 11.5 | 4,016 | 11,148 | 11.7 | 4,194 | |||||||||||||||||||||||||||||||||||
SOUTH AMERICA | ||||||||||||||||||||||||||||||||||||||||||||
La Coipa 8 | Chile | 100.0 | % | 4,030 | 29.9 | 3,880 | 18,205 | 42.4 | 24,824 | 22,235 | 40.2 | 28,704 | ||||||||||||||||||||||||||||||||
SUBTOTAL | 4,030 | 29.9 | 3,880 | 18,205 | 42.4 | 24,824 | 22,235 | 40.2 | 28,704 | |||||||||||||||||||||||||||||||||||
RUSSIA | ||||||||||||||||||||||||||||||||||||||||||||
Dvoinoye | Russia | 100.0 | % | 3 | 6.1 | 1 | 57 | 21.2 | 39 | 60 | 20.3 | 40 | ||||||||||||||||||||||||||||||||
Kupol | Russia | 100.0 | % | 279 | 139.9 | 1,255 | 1,575 | 97.9 | 4,959 | 1,854 | 104.2 | 6,214 | ||||||||||||||||||||||||||||||||
SUBTOTAL | 282 | 138.3 | 1,256 | 1,632 | 95.2 | 4,998 | 1,914 | 101.6 | 6,254 | |||||||||||||||||||||||||||||||||||
TOTAL SILVER | 4,643 | 35.6 | 5,314 | 30,654 | 34.3 | 33,838 | 35,297 | 34.5 | 39,152 |
19
Inferred Mineral Resources
MINERAL RESERVE AND MINERAL RESOURCE STATEMENT | GOLD |
INFERRED MINERAL RESOURCES (2,3,4,5,6,9,10,11) | |
Kinross Gold Corporation’s Share at December 31, 2020 |
Kinross | Inferred | |||||||||||||||||||
Interest | Tonnes | Grade | Ounces | |||||||||||||||||
Property | Location | (%) | (kt) | (g/t) | (koz) | |||||||||||||||
NORTH AMERICA | ||||||||||||||||||||
Bald Mountain | USA | 100.0 | % | 47,776 | 0.5 | 695 | ||||||||||||||
Fort Knox | USA | 100.0 | % | 128,115 | 0.3 | 1,057 | ||||||||||||||
Kettle River | USA | 100.0 | % | 1,816 | 6.5 | 378 | ||||||||||||||
Manh Choh (formlerly Peak Gold) 12 | USA | 70.0 | % | 941 | 2.7 | 81 | ||||||||||||||
Round Mountain 7 | USA | 100.0 | % | 96,437 | 0.5 | 1,563 | ||||||||||||||
SUBTOTAL | 275,085 | 0.4 | 3,774 | |||||||||||||||||
SOUTH AMERICA | ||||||||||||||||||||
La Coipa 8 | Chile | 100.0 | % | 2,668 | 1.3 | 108 | ||||||||||||||
Lobo-Marte | Chile | 100.0 | % | 13,974 | 0.6 | 269 | ||||||||||||||
Maricunga | Chile | 100.0 | % | 153,276 | 0.6 | 2,782 | ||||||||||||||
Paracatu | Brazil | 100.0 | % | 91,262 | 0.3 | 914 | ||||||||||||||
SUBTOTAL | 261,180 | 0.5 | 4,073 | |||||||||||||||||
AFRICA | ||||||||||||||||||||
Chirano | Ghana | 90.0 | % | 5,695 | 2.1 | 376 | ||||||||||||||
Tasiast | Mauritania | 100.0 | % | 4,392 | 1.9 | 267 | ||||||||||||||
SUBTOTAL | 10,087 | 2.0 | 643 | |||||||||||||||||
RUSSIA | ||||||||||||||||||||
Chulbatkan 13 | Russia | 100.0 | % | 6,022 | 0.9 | 173 | ||||||||||||||
Dvoinoye | Russia | 100.0 | % | 58 | 24.1 | 45 | ||||||||||||||
Kupol | Russia | 100.0 | % | 1,052 | 8.0 | 272 | ||||||||||||||
SUBTOTAL | 7,132 | 2.1 | 490 | |||||||||||||||||
TOTAL GOLD | 553,484 | 0.5 | 8,980 |
MINERAL RESERVE AND MINERAL RESOURCE STATEMENT | SILVER |
INFERRED MINERAL RESOURCES (2,3,4,5,6,9,10,11) | |
Kinross Gold Corporation’s Share at December 31, 2020 |
Kinross | Inferred | |||||||||||||||||||
Interest | Tonnes | Grade | Ounces | |||||||||||||||||
Property | Location | (%) | (kt) | (g/t) | (koz) | |||||||||||||||
NORTH AMERICA | ||||||||||||||||||||
Manh Choh (formlerly Peak Gold) 12 | USA | 70.0 | % | 941 | 16.1 | 486 | ||||||||||||||
Round Mountain 7 | USA | 100.0 | % | 490 | 3.6 | 57 | ||||||||||||||
SUBTOTAL | 1,431 | 11.8 | 543 | |||||||||||||||||
SOUTH AMERICA | ||||||||||||||||||||
La Coipa 8 | Chile | 100.0 | % | 2,668 | 35.4 | 3,036 | ||||||||||||||
SUBTOTAL | 2,668 | 35.4 | 3,036 | |||||||||||||||||
RUSSIA | ||||||||||||||||||||
Dvoinoye | Russia | 100.0 | % | 58 | 22.7 | 43 | ||||||||||||||
Kupol | Russia | 100.0 | % | 1,052 | 148.4 | 5,020 | ||||||||||||||
SUBTOTAL | 1,110 | 141.8 | 5,063 | |||||||||||||||||
TOTAL SILVER | 5,209 | 51.6 | 8,642 |
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Stockpiles
The following table reflects proven mineral reserves and measured resources attributable to Kinross’ ownership interest in stockpiles at the identified properties:
MINERAL RESERVE AND MINERAL RESOURCE STATEMENT |
STOCKPILE INVENTORY (INCLUDED IN PROVEN AND PROBABLE MINERAL RESERVES) |
Kinross Gold Corporation’s Share at December 31, 2020 |
Kinross | Proven | Probable | Proven and Probable | |||||||||||||||||||||||||||||||||||||||||
Interest | Tonnes | Grade | Ounces | Tonnes | Grade | Ounces | Tonnes | Grade | Ounces | |||||||||||||||||||||||||||||||||||
Property | Location | (%) | (kt) | (g/t) | (koz) | (kt) | (g/t) | (koz) | (kt) | (g/t) | (koz) | |||||||||||||||||||||||||||||||||
GOLD | ||||||||||||||||||||||||||||||||||||||||||||
Chirano Stockpile | Ghana | 90.0 | % | 938 | 1.0 | 31 | - | - | - | 938 | 1.0 | 31 | ||||||||||||||||||||||||||||||||
Dvoinoye Stockpile | Russia | 100.0 | % | 1,275 | 4.1 | 167 | - | - | - | 1,275 | 4.1 | 167 | ||||||||||||||||||||||||||||||||
Fort Knox Stockpile | USA | 100.0 | % | 775 | 0.3 | 8 | - | - | - | 775 | 0.3 | 8 | ||||||||||||||||||||||||||||||||
Kupol Stockpile | Russia | 100.0 | % | 248 | 8.8 | 70 | - | - | - | 248 | 8.8 | 70 | ||||||||||||||||||||||||||||||||
La Coipa Stockpile 8 | Chile | 100.0 | % | 327 | 0.3 | 4 | - | - | - | 327 | 0.3 | 4 | ||||||||||||||||||||||||||||||||
Paracatu Stockpile | Brazil | 100.0 | % | 36,124 | 0.3 | 320 | - | - | - | 36,124 | 0.3 | 320 | ||||||||||||||||||||||||||||||||
Round Mountain Stockpile 7 | USA | 100.0 | % | 4,979 | 0.5 | 81 | - | - | - | 4,979 | 0.5 | 81 | ||||||||||||||||||||||||||||||||
Tasiast Stockpile | Mauritania | 100.0 | % | 29,825 | 1.0 | 923 | - | - | - | 29,825 | 1.0 | 923 | ||||||||||||||||||||||||||||||||
TOTAL | 74,491 | 0.7 | 1,604 | - | - | - | 74,491 | 0.7 | 1,604 | |||||||||||||||||||||||||||||||||||
SILVER | ||||||||||||||||||||||||||||||||||||||||||||
Dvoinoye Stockpile | Russia | 100.0 | % | 1,275 | 8.1 | 332 | - | - | - | 1,275 | 8.1 | 332 | ||||||||||||||||||||||||||||||||
Kupol Stockpile | Russia | 100.0 | % | 248 | 83.4 | 664 | - | - | - | 248 | 83.4 | 664 | ||||||||||||||||||||||||||||||||
La Coipa Stockpile 8 | Chile | 100.0 | % | 327 | 25.5 | 268 | - | - | - | 327 | 25.5 | 268 | ||||||||||||||||||||||||||||||||
TOTAL | 1,850 | 21.3 | 1,264 | - | - | - | 1,850 | 21.3 | 1,264 |
MINERAL RESERVE AND MINERAL RESOURCE STATEMENT |
STOCKPILE INVENTORY (INCLUDED IN INFERRED MINERAL RESOURCES) |
Kinross Gold Corporation’s Share at December 31, 2020 |
Kinross | Inferred | ||||||||||||||||||
Interest | Tonnes | Grade | Ounces | ||||||||||||||||
Property | Location | (%) | (kt) | (g/t) | (koz) | ||||||||||||||
GOLD | |||||||||||||||||||
Maricunga Stockpile | Chile | 100.0 | % | 7,106 | 0.4 | 98 | |||||||||||||
Paracatu Stockpile | Brazil | 100.0 | % | 26,728 | 0.2 | 178 | |||||||||||||
TOTAL | 33,834 | 0.3 | 276 |
Notes – 2020 Kinross Mineral Reserve & Resource Statements
(1) Unless otherwise noted, the Company’s mineral reserves are estimated using appropriate cut-off grades based on an assumed gold price of $1,200 per ounce and a silver price of $17.00 per ounce. Mineral reserves are estimated using appropriate process recoveries, operating costs and mine plans that are unique to each property and include estimated allowances for dilution and mining recovery. Mineral reserve estimates are reported in contained units based on Kinross’ interest and are estimated based on the following foreign exchange rates:
Russian Roubles to United States Dollar: 60.00
Chilean Pesos to United States Dollar: 725.00
Brazilian Reais to United States Dollar: 3.75
Ghanaian Cedis to United States Dollar: 5.50
Mauritanian Ouguiyas to United States Dollar: 35.00
(2) The Company’s mineral reserve and mineral resource estimates as at December 31, 2020 are classified in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) “CIM Definition Standards - For Mineral Resources and Mineral Reserves” adopted by the CIM Council (as amended, the “CIM Definition Standards”) in accordance with the requirements of National Instrument 43-101 “Standards of Disclosure for Mineral Projects” (“NI 43-101”). Mineral reserve and mineral resource estimates reflect the Company’s reasonable expectation that all necessary permits and approvals will be obtained and maintained.
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(3) Cautionary note to U.S. investors concerning estimates of mineral reserves and mineral resources. These estimates have been prepared in accordance with the requirements of Canadian securities laws, which differ from the requirements of United States’ securities laws. The terms “mineral reserve”, “proven mineral reserve”, “probable mineral reserve”, “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” are Canadian mining terms as defined in accordance with NI 43-101 and the CIM Definition Standards. These definitions differ materially from the definitions in the United States Securities and Exchange Commission (“SEC”) SEC Industry Guide 7 under the United States Securities Act of 1933, as amended. Under SEC Industry Guide 7, a “final” or “bankable” feasibility study is required to report mineral reserves, the three-year historical average price is used in any mineral reserve or cash flow analysis to designate mineral reserves and the primary environmental analysis or report must be filed with the appropriate governmental authority. In addition, the terms “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” are defined in NI 43-101 and recognized by Canadian securities laws but are not defined terms under SEC Industry Guide 7. U.S. investors are cautioned not to assume that any part or all of mineral deposits in these categories will ever be upgraded to SEC Industry Guide 7 mineral reserves. “Inferred mineral resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an “inferred mineral resource” will ever be upgraded to a higher category. Under Canadian securities laws, estimates of “inferred mineral resources” may not form the basis of feasibility or pre-feasibility studies, except in rare cases. U.S. investors are cautioned not to assume that all or any part of an inferred mineral resource exists or is economically or legally mineable.
The SEC has adopted amendments to its disclosure rules to modernize the mineral property disclosure requirements for issuers whose securities are registered with the SEC under the Securities Exchange Act of 1934 (“Exchange Act”). These amendments became effective February 25, 2019 (“SEC S-K 1300”) and, commencing for registrants with their first fiscal year beginning on or after January 1, 2021, SEC S-K 1300 replaces the historical property disclosure requirements included in SEC Industry Guide 7. As a foreign private issuer that files its annual report on Form 40-F with the SEC pursuant to the multi-jurisdictional disclosure system, the Company is not required to provide disclosure on its mineral properties under SEC S-K 1300 and will continue to provide disclosure under NI 43-101 and the CIM Definition Standards. If the Company ceases to be a foreign private issuer or loses its eligibility to file its annual report on Form 40-F pursuant to the multi-jurisdictional disclosure system, then the Company will be subject to SEC S-K 1300 which differs from the requirements of NI 43-101 and the CIM Definition Standards. SEC S-K 1300 includes the adoption of terms describing mineral reserves and mineral resources that are “substantially similar” to the corresponding terms under the CIM Definition Standards. As a result of the adoption of SEC S-K 1300, the SEC now recognizes estimates of “measured mineral resources”, “indicated mineral resources” and “inferred mineral resources”. In addition, the SEC has amended its definitions of “proven mineral reserves” and “probable mineral reserves” to be “substantially similar” to the corresponding CIM Definitions. U.S. investors are cautioned that while the above terms are “substantially similar” to CIM Definitions, there are differences in the definitions under SEC S-K 1300 and the CIM Definition Standards. Accordingly, there is no assurance any mineral reserves or mineral resources that the Company may report as “proven mineral reserves”, “probable mineral reserves”, “measured mineral resources”, “indicated mineral resources” and “inferred mineral resources” under NI 43-101 would be the same had the Company prepared the mineral reserve or mineral resource estimates under the standards adopted under SEC S-K 1300. U.S. investors are also cautioned that while the SEC recognizes “measured mineral resources”, “indicated mineral resources” and “inferred mineral resources” under the Modernization Rules, investors should not assume that any part or all of the mineralization in these categories will ever be converted into a higher category of mineral resources or into mineral reserves. Mineralization described using these terms has a greater amount of uncertainty as to its existence and feasibility than mineralization that has been characterized as reserves. Accordingly, investors are cautioned not to assume that any measured mineral resources, indicated mineral resources, or inferred mineral resources that the Company reports are or will be economically or legally mineable. Further, “inferred mineral resources” have a greater amount of uncertainty as to their existence and as to whether they can be mined legally or economically. Therefore, U.S. investors are also cautioned not to assume that all or any part of the “inferred mineral resources” exist. Under Canadian securities laws, estimates of “inferred mineral resources” may not form the basis of feasibility or pre-feasibility studies, except in rare cases.
For the above reasons, the mineral reserve and mineral resource estimates and related information in this AIF may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements under the United States federal securities laws and the rules and regulations thereunder.
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(4) The Company's mineral resource and mineral reserve estimates were prepared under the supervision of and verified by Mr. John Sims, who is a qualified person as defined by NI 43-101. Mr. Sims was an officer of Kinross until December 31, 2020. Mr. Sims remains the Company’s qualified person as an external consultant.
(5) The Company’s normal data verification procedures have been used in collecting, compiling, interpreting and processing the data used to estimate mineral reserves and mineral resources. Independent data verification has not been performed.
(6) Rounding of values to the 000s may result in apparent discrepancies.
(7) Round Mountain refers to the Round Mountain project, which includes the Round Mountain deposit and the Gold Hill deposit. The Round Mountain deposit does not contain silver and all silver resources at Round Mountain are contained exclusively within the Gold Hill deposit. Disclosure of gold mineral reserves and mineral resources reflect both the Round Mountain deposit and the Gold Hill deposit. Disclosure of silver mineral reserves and mineral resources reflect only Gold Hill deposit.
(8) Includes mineral resources and mineral reserves from the Puren deposit in which the Company holds a 65% interest, as well as mineral resources from the Catalina deposit, in which the Company holds a 75% interest.
(9) Mineral resources are exclusive of mineral reserves.
(10) Unless otherwise noted, the Company’s mineral resources are estimated using appropriate cut-off grades based on a gold price of $1,600 per ounce and a silver price of $20.00 per ounce. Foreign exchange rates for estimating mineral resources were the same as for mineral reserves. The mineral resource estimates for the Gil deposit at Fort Knox assume a $1,400 per ounce gold price. The mineral resource estimates for Manh Choh (formerly Peak Gold) assume a $1,400 per ounce gold price and are based on the 2018 preliminary economic assessment.
(11) Mineral resources that are not mineral reserves do not have to demonstrate economic viability. Mineral resources are subject to infill drilling, permitting, mine planning, mining dilution and recovery losses, among other things, to be converted into mineral reserves. Due to the uncertainty associated with inferred mineral resources, it cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to indicated or measured mineral resources, including as a result of continued exploration.
(12) Peak Gold, now referred to as Manh Choh, was acquired by Kinross effective September 30, 2020.
(13)
Chulbatkan was acquired by Kinross effective January 16, 2020.
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The following table summarizes the average process recovery and cut-off grade assumptions used in estimating mineral reserves.
Property | Average | 2020 | ||
Process | Cutoff Grade(s) | |||
Recovery (%) | (g/t Au) | |||
GOLD | ||||
Bald Mountain | 36% to 83% | 0.14 to 0.24 | ||
Fort Knox and Area | 68% to 87% | 0.10 to 0.36 | ||
La Coipa | 73% | 1.0 g/t AuEq* | ||
Lobo-Marte | 71% | 0.34 to 0.48 | ||
Round Mountain and Area | 46% to 76% | 0.16 to 0.51 | ||
Paracatu | 78% | 0.20 | ||
Chirano | 88% to 92% | 0.29 to 1.89 | ||
Tasiast | 93% | 0.70 | ||
Dvoinoye | 95% | 2.5 to 4.9 g/t AuEq* | ||
Kupol | 91% | 4.9 g/t AuEq* | ||
SILVER | (g/t Ag) | |||
Round Mountain and Area (Gold Hill) | 7 to 50% | Included as AuEq* | ||
La Coipa | 58% | Included as AuEq* | ||
Dvoinoye | 81% | Included as AuEq* | ||
Kupol | 83% | Included as AuEq* |
*Equivalent gold values are calculated using a simplistic ratio between $1200/oz gold price and $17/oz silver price assumptions. The cut-off grades are the lowest cut-off grades calculated. The actual cut-off grades vary due to variable recovery, and other variables and are calculated for each model individually. |
24
Reserve reconciliation is shown in the following tables:
2019 - 2020 Reserve Reconciliation
Gold Reserves (Proven and Probable)
Kinross
Interest (%) |
2019
Gold
Reserves (koz) |
Production
Depletion (koz) |
Exploration
Change (koz) |
Engineering
Change (koz) |
M&A/Divestiture
Change
(koz) |
Reserve
Growth
or Depletion |
2020
Gold
Reserves (koz) |
|||||||||||||||||
NORTH AMERICA | ||||||||||||||||||||||||
Bald Mountain | 100.0 | % | 1,277 | (269 | ) | (26 | ) | 161 | 0 | (134 | ) | 1,143 | ||||||||||||
Fort Knox | 100.0 | % | 2,801 | (321 | ) | 4 | (14 | ) | 0 | (330 | ) | 2,471 | ||||||||||||
Round Mountain | 100.0 | % | 2,421 | (288 | ) | 29 | 83 | 0 | (176 | ) | 2,245 | |||||||||||||
SUBTOTAL | 6,499 | (878 | ) | 7 | 230 | 0 | (640 | ) | 5,859 | |||||||||||||||
SOUTH AMERICA | ||||||||||||||||||||||||
La Coipa | 100.0 | % | 768 | 0 | 0 | 103 | 0 | 103 | 871 | |||||||||||||||
Lobo-Marte | 100.0 | % | 0 | 0 | 0 | 6,394 | 0 | 6,394 | 6,394 | |||||||||||||||
Paracatu | 100.0 | % | 8,060 | (948 | ) | 0 | 910 | 0 | (37 | ) | 8,023 | |||||||||||||
SUBTOTAL | 8,828 | (948 | ) | 0 | 7,407 | 0 | 6,460 | 15,288 | ||||||||||||||||
AFRICA | ||||||||||||||||||||||||
Chirano | 90.0 | % | 528 | (215 | ) | 313 | 347 | 0 | 446 | 974 | ||||||||||||||
Tasiast | 100.0 | % | 6,783 | (457 | ) | 0 | 4 | 0 | (453 | ) | 6,330 | |||||||||||||
SUBTOTAL | 7,311 | (672 | ) | 313 | 351 | 0 | (7 | ) | 7,304 | |||||||||||||||
RUSSIA | ||||||||||||||||||||||||
Dvoinoye | 100.0 | % | 336 | (178 | ) | 56 | 8 | 0 | (113 | ) | 223 | |||||||||||||
Kupol | 100.0 | % | 1,353 | (383 | ) | 330 | 15 | 0 | (39 | ) | 1,314 | |||||||||||||
SUBTOTAL | 1,689 | (561 | ) | 386 | 23 | 0 | (152 | ) | 1,537 | |||||||||||||||
TOTAL GOLD | 24,327 | (3,059 | ) | 706 | 8,011 | 0 | 5,661 | 29,988 |
Silver Reserves
Kinross Interest
(%) |
2019 Silver Reserves
(koz) |
Production Depletion
(koz) |
Exploration Change
(koz) |
Engineering Change
(koz) |
M&A/Divestiture Change
(koz) |
Reserve Growth
or Depletion |
2020 Silver Reserves
(koz) |
|||||||||||||||||
NORTH AMERICA | ||||||||||||||||||||||||
Round Mountain | 100.0 | % | 1,622 | (208 | ) | 0 | 0 | 0 | (208 | ) | 1,414 | |||||||||||||
SUBTOTAL | 1,622 | (208 | ) | 0 | 0 | 0 | (208 | ) | 1,414 | |||||||||||||||
SOUTH AMERICA | ||||||||||||||||||||||||
La Coipa | 100.0 | % | 37,605 | 0 | 0 | 3,266 | 0 | 3,266 | 40,871 | |||||||||||||||
SUBTOTAL | 37,605 | 0 | 0 | 3,266 | 0 | 3,266 | 40,871 | |||||||||||||||||
RUSSIA | ||||||||||||||||||||||||
Dvoinoye | 100.0 | % | 588 | (271 | ) | 160 | 15 | 0 | (96 | ) | 492 | |||||||||||||
Kupol | 100.0 | % | 15,838 | (3,422 | ) | 3,939 | 69 | 0 | 587 | 16,425 | ||||||||||||||
SUBTOTAL | 16,426 | (3,693 | ) | 4,099 | 84 | 0 | 491 | 16,917 | ||||||||||||||||
TOTAL SILVER | 55,653 | (3,901 | ) | 4,099 | 3,350 | 0 | 3,549 | 59,202 |
Note:
Mineral reserves are inclusive of stockpile material.
Footnotes from Reserve statement apply.
25
Kinross Material Properties
The technical information in this AIF has been prepared under the supervision of, or reviewed by, Mr. John Sims, a qualified person under NI 43-101. Mr. Sims was an officer of Kinross until December 31, 2020. Mr. Sims remains the Company’s qualified person as an external consultant.
Paracatu, Brazil
General
Kinross is the owner of the Paracatu mine located in the northwestern portion of the Minas Gerais State in Brazil. The Paracatu mine includes an open pit mine, two process plants (“Plant I” and “Plant II”), two tailings facilities areas, Santo Antônio and Eustáquio, and related surface infrastructure.
The Paracatu mine is 100% owned and operated by Kinross’ wholly-owned subsidiary, Kinross Brasil Mineração S.A. (“KBM”). The site is known locally as “Morro do Ouro”.
Technical Report
Please see the Company’s National Instrument 43-101 Technical Report dated March 10, 2020 in respect of Paracatu, prepared by John Sims, available at www.kinross.com and under the Company’s profile on SEDAR (www.sedar.com). Detailed financial, production and operational information for the Paracatu mine are available in Kinross’ MD&A for the year ended December 31, 2020.
26
Property Description, Location and Access
The Paracatu mine is a large-scale open pit mine located adjacent to the city of Paracatu, situated in the northwestern portion of Minas Gerais State, 230 kilometres southeast of the national capital Brasília and 480 kilometres northwest of the state capital Belo Horizonte.
In Brazil, mining licenses (known as decrees) are issued by the Agência Nacional de Mineração (“ANM”). Once certain obligations have been satisfied, the ANM issues a mining decree that is automatically renewable annually, and has no set expiry date. KBM currently holds its title by way of five mining licenses (Grupamento Mineiro) totalling 1,916 hectares. The mine and most of the surface infrastructure lie within the mining licenses and the new tailings facility is situated over a mining easement. The remaining infrastructure is built on surface lands controlled by KBM. KBM holds title to thirty-five (35) exploration permits totalling approximately 49,043 hectares and has applications before the ANM for an additional sixty-eight (68) applications (exploration and mining applications) totalling approximately 103,643 hectares. These exploration permits and applications for exploration permits comprise a significant land package around Paracatu.
Effective January 1, 2018, KBM must pay to ANM a royalty equivalent to 1.5% of gross revenues for gold and 2.0% of gross revenues for silver. Another 0.5% has to be paid to the holders of surface rights in the mine area not already owned by KBM.
Kinross is in compliance with the Paracatu permits in all material respects.
Access from Paracatu is by vehicle via a four lane paved mine access road. A small paved airstrip that can accommodate small, charter aircraft also services Paracatu.
History
Gold mining has been associated with the Paracatu area since 1722 when placer gold was discovered in the creeks and rivers of the Paracatu region. Alluvial mining peaked in the mid-1800s and until the 1980s, was largely restricted to “garimpeiros” (artisanal) miners. In 1984, Rio Tinto Zinc (“Rio Tinto”) explored the property using modern exploration methods, and by 1987, the Rio Paracatu Mineração (now known as KBM) joint venture was formed between Rio Tinto and Autram Mineração e Participações (the latter being part of the TVX group of companies). Production commenced in 1987 and the mine has operated continuously since then.
In 2003, TVX’s 49% share in KBM was acquired by Kinross as part of the business combination between Kinross, TVX and Echo Bay. Kinross purchased the remaining 51% from Rio Tinto in December 2004.
In January 2005, Kinross and KBM commenced the exploration drill program west of Rico Creek and became aware of the potential for a significant reserve increase. A Plant Capacity Scope Study was completed in June 2005, which evaluated several alternatives to increase plant throughput. All options considered in this study assumed the installation of an in-pit crushing and conveying system and a 38-foot diameter SAG mill, which were the cornerstone assumptions in the original Feasibility Study carried out at the property.
In 2006, an expansion project (Plant II) was approved by Kinross’ Board of Directors, and in 2007, construction of a new 41 million tonnes per year plant began. The new plant began operations in September 2008 and completion of ramp-up was achieved in the fourth quarter of 2009, stabilizing plant operation and increasing recovery to an average of 77.5% in 2010.
In 2009, the Company approved plans to undertake a new expansion project at Paracatu, which consisted of the implementation of a third ball mill to increase the grinding capacity needed to process harder ore from the Paracatu orebody. That 15 megawatt ball mill was delivered in 2010, and installation and commissioning was completed in the third quarter of 2011.
27
With a view to adding processing and grinding capacity, in 2010 the Company approved the addition of a fourth ball mill. Start-up of the fourth ball mill occurred in the third quarter of 2012.
Since 2014, Plant I has been processing sulphide ore (type B2) which has reduced throughput as it has a higher resistance to grinding. In 2015, Plant II implemented a gravity circuit to improve gold recovery. A similar system was installed at Plant I in 2018.
In 2015, KBM began reprocessing tailings from the Santo Antônio Dam. Originally, tailings were transported by truck, but a pumping system was added in 2017. Tailings processing at the Eustáquio Dam began in 2016 and a pumping system was added in 2020.
In 2018 Kinross acquired the Barra dos Coqueiros (“BCO”) and Caçu hydroelectric power plants located on the Claro River in the neighbouring state of Goias, approximately 660 kilometres west of Paracatu. Additional infrastructure is not required for BCO and Caçu to provide power to Paracatu given Brazil’s well-developed infrastructure and existing market mechanisms for the transmission and utilization of power.
Geological Setting, Mineralization and Deposit Types
The Paracatu property is located within the Brasília Belt, a north-south trending Neoproterozoic belt that extends along the western side of the São Francisco-Congo Craton. Sedimentary units are mostly preserved in the northern part of the belt, whereas in the southern part where Paracatu is located, there is intense deformation and metamorphism. The contacts between metasedimentary units are primarily tectonic. A series of NS strike thrust faults are developed extensively along the belt. The timing of deformation is estimated at 800 to 600 million years ago, which coincides with the Brasiliano orogenic cycle.
The host phyllites of the Paracatu Formation exhibit well-developed quartz boudins and associated sulfide mineralization. Sericite minerals are common, as a result of extensive metamorphic alteration of the host rocks. Bedding planes were transposed by the foliation developed during the thrusting deformation. Sigmoidal foliation and boudinage structures are often observed in outcrops.
The mineralization at Paracatu exhibits distinct mineralogical zoning with the arsenopyrite content increasing in the zones of intense deformation. Gold grade increases with increasing arsenopyrite content. Pyrrhotite occurs in the western part of the deposit and gold grades are also elevated where higher pyrrhotite content is observed. The deposit formation model proposed for Paracatu suggests that gold and arsenopyrite were introduced by hydrothermal fluids concurrently with a deformative event. Gold occurs either as free gold or electrum. The boudins are disseminated in the deposit.
The deposit has extraordinary lateral and longitudinal continuity. The majority of exploration efforts have sought to better define the continuous longitudinal continuity of mineralized phyllites at depth west of Rico Creek and the lateral limits of the economic mineralization.
Exploration
Since Kinross acquired Paracatu in 2003, exploration efforts have been focused primarily on the main mining area. Exploration outside of the immediate mine area was initiated in 2006 and discontinued in 2008. Regional exploration efforts were re-started in 2020.
In the licensed exploration areas immediately bordering the mine leases, exploration activities were concentrated on soil and termite-mound geochemical sampling and interpretation of airborne magnetic survey data to look for nearby features similar to Paracatu. Some target areas were generated.
Drilling
At the start of mining at Paracatu, exploration campaigns focused on the upper levels of the orebody, within 25 to 30 metres of surface. As mining advanced, deeper drilling campaigns were required to better model the orebody. Currently, a 70 metre x 70 metre diamond drill hole infill campaign is in progress.
28
Drilling programs were completed primarily by Rio Tinto until 2004. Since 2005, all campaigns have been carried out by KBM or under ownership supervision. The drilling activities were conducted by various drilling contractors and supervised by geological staff. In 2013, Kinross purchased two drill rigs and, since 2013 all infill drilling has been carried out by the KBM team.
The dominant sample collection method used to delineate the Paracatu resource and reserve model is by diamond core drilling. All drill hole data are stored in acQuire database software. The database contains 4,543 diamond drill holes collected between 1984 and 2018. The hole spacing varies from 25 to 200 metres. Core diameters for holes drilled by Kinross include HX (76.2 mm), HQ (63.5 mm), HTW (70.9 mm), and NQ (47.6 mm). Substantially all of this drilling has been completed on the mining leases.
Core was collected continuously from the collar. Wooden tags were placed in the core trays and labelled according to the drill run. All core boxes were clearly labelled with the hole number and drilled interval. Lids were nailed on each core box at the drill site to facilitate transport to the core shed logging facility.
Drill reports identified all zones of broken ground, fault zones and water gain or loss. Water gain or loss was almost non-existent. Rusty water seams in the mineralized zone horizon were extremely rare, suggesting that active water flow occurs almost exclusively in the weathered zone, near to the surface.
Sampling, Analysis and Data Verification
Drill core is transported by KBM personnel from the drill site to the core logging facility for logging and sampling. Technicians check depth markers and box numbers, reconstruct the core, and calculate core recovery. The core is logged descriptively and marked for sampling by Kinross geologists. Logging and sampling data are recorded in digital logs in acQuire software. Core is photographed prior to sampling.
Upon completion of geological and geotechnical core logging of a diamond drill hole, a core logging geologist identifies the sections of core to be sampled and analyzed for gold and other variables (sulfur, density, acid neutralising capacity, multi-element, base metals, etc.). After core is logged, samples are collected and then delivered to the preparation laboratory for sample preparation. The sample dispatch and batch number is sent in digital format. The greatest areas of core loss were from the collar to 15 metres down the hole in laterite (or weathered) zones. Kinross employs a systematic sampling approach where drill core is sampled using standard one metre sample lengths. This standard was used for 83% of the assays. Starting in 2018, sample lengths increased to 3 metres.
Reference pieces of 8-10 centimetres are collected and used for density testing. These pieces are labelled and stored at the core logging facility. This practice is acceptable for deposits with a low average grade and good grade continuity. Kinross does not consider the sampling of whole core to be a concern considering its production history.
Usually only mineralized zones are sampled for gold. The samples vary from 1 to 3 metres for gold, whereas bond work index (“BWI”) and acid neutralizing capacity sampling uses 12 metre composites as per the procedure for those tests.
Core samples for analysis are stored in a secure warehouse (core shed) at site prior to sample preparation. The core shed is either locked or under direct supervision of the geological staff. Prior to shipping, drill core samples are placed in large plastic bags, tagged and sealed. A sample transmittal form that identifies each batch of samples is prepared. The samples are transported directly to the laboratory for sample preparation and analysis.
All core boxes are covered with wooden lids and nailed shut before being transported by Kinross personnel from Kinross drill rigs to the logging facility located inside the fenced mine gates. The sample tag number is also written in permanent marker on the outside of each sample bag.
Samples are loaded onto pickup trucks and transported to the Kinross Paracatu preparation lab for preparation. The samples are crushed to 95% passing in 8 mesh (2.36 mm) and homogenized. Approximately 6 kg of coarse reject is retained and stored at the core shed for 18 months and 4.5 kg is discarded. The remaining 2.5 kg is split and pulverized to 95% passing 100 mesh (150 µm).
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This sample is homogenized and three 50 gram aliquots are selected for screen-fire assaying with an Atomic Absorption (AA) finish. The remaining pulverized sample is discarded. These processes are performed in on-site laboratories. Until 2005, Kinross reduced the nugget effect by combining results from six separate fire assays of 50 gram sample aliquots. Each sub-sample was fire assayed followed by an AA finish. In June 2005, Kinross commissioned Agoratek International to conduct a review of exploration sampling procedures and to assess the requirements for six 50 gram aliquot assays per sample (Bongarcon, 2005). Agoratek, led by Dominique Francois-Bongarcon, a recognized expert in sampling, reviewed the sampling procedures and concluded that only three 50 gram aliquots would be sufficient for the purpose of reducing the variability of the results. Since then, three sub-samples have been used.
Analytical results are received electronically and managed using a laboratory information management system and imported into the acQuire database. Assay batches are reviewed for acceptance by the database administrator.
Kinross has completed a significant amount of drilling since 2012. A total of 3,097 drill holes, varying from 25 to 70 metre spacing to 100 metre infill spacing were drilled, with a total length of 148,451 metres. From 2012 to 2018 a total of 9,588 coarse blanks of crushed limestone and quartz (silica) and 10,865 standards were analyzed at the Kinross, ALS and SGS laboratories, This represents an insertion rate of 13.2% for coarse blanks and 14.3% for the standards.
KBM independently verified 10% of the data collected between 1999 and 2004 against original source documents. The holes were chosen at random and any errors against original sources were documented. No significant or material errors were identified. The Kinross geology department verified 5% of the data collected between 2010 and 2012 against original source documents. This verification activity also did not identify any concerns regarding the quality or accuracy of the data or database.
As part of external auditing in 2006, 2009, and 2012, Roscoe Postle Associates (RPA, 2012) verified the gold values in the database with the assay certificates for a total of 1,192 assays from 13 drill holes. No significant errors were identified. RPA also checked the downhole survey values and found no significant errors.
Paracatu has been improving the quality assurance and quality control methods and systems since 2014. These improvements provide confidence in the integrity of the geological/geochemical database.
Mineral Processing and Metallurgical Testing
In May 2018, a characterization program was completed by SGS Minerals Service in Canada. For this work, four different samples, as described below (C1 to C4) were composited, and prepared for bulk mineralogy and gold deportment studies. The four composites represent key groupings of ore characteristics, which are expected to be encountered over the remaining life of mine: C1 – Sulfur Rich - Zone of more intense alteration based on sulfur content and base metal content, high sulfur grade and enriched in base metals.; C2 – Upper Oxide - Zone of higher oxidation and low sulfur grade; C3 – Lower Alkali - Halo zone or more distal mineralization based on sulfur content and base metal content and increased alkali content; and C4 – Life of mine – composition based on the proportion of the ore types in the mine remaining to be processed over life of mine.
The mineralogical characterization of Paracatu Run of Mine (“ROM”) ore indicates that gold grains are generally fine, F50~14µm and shows that there is a significant difference in the gold grain sizes in the tailings and concentrate products, which shows that the gold with smaller grain size ends up in the tailings.
In April 2018, a sample from Plant II rougher tails was sent to São Paulo University and characterization was completed to determine the gold association and liberation. Only 37% of gold is exposed and the main association is with sulfide minerals. No liberated gold particles were noted in the sample.
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Mineral Resource and Mineral Reserve Estimates
Refer to the “Kinross Mineral Reserves and Mineral Resources” section for quantity, grades and category. Assumptions are outlined in the Notes – 2020 Kinross Mineral Reserve and Mineral Resource Statements in the “Kinross Mineral Reserves and Mineral Resources” section.
Mining Operations
The Paracatu operation consists of an open pit mine, two process plants, two tailings facilities, and related surface infrastructure and support buildings.
At Paracatu, ore hardness increases with depth and, as a result, modelling the hardness of the Paracatu deposit is important for costing and process throughput parameters. Kinross modeled ore hardness based on BWI analyses from diamond drill samples. KBM estimated that blasting of the Paracatu ore would be necessary for blocks with a BWI greater than 8.5 kWh/t.
As mining progresses to the southwest area of the pit, it is necessary to increase hauling capacity because of waste stripping. In 2020, the truck fleet consisted of 29 CAT 793 and the life of mine peak is planned to be 35 trucks in 2023.
Processing and Recovery Operations
Plant I has operated continuously since 1987 and underwent expansion upgrades in 1997 and 1999. In 2018, the plant processed 8.25 Mt at a BWI of approximately 13.9 kWh/t.
The Plant I crushing circuit consists of four independent parallel operating lines (A; B; C and D), each consisting of a primary screen (Metso – 8’ x 20’), a primary crusher (APSM Hazemag), a secondary screen (Metso – 6’ x 16’) and a secondary crusher (HP300). The lines are fed with front end loaders with material from the Plant II stockpile and pebbles from Plant II.
The Plant I grinding circuit consists of four primary ball mills with 4.5 metre diameter by 5.7 metre long Effective Grinding Length (“EGL”) and 1.8 MW gearless drives, one secondary ball mill with 5 metre diameter by 7.6 metre long EGL and 3 MW drives and one rod mill used to regrind the primary ball mill’s oversize.
The grinding circuit product, cyclone overflow, feeds the rougher flotation circuit consisting of Wemco (10 cells of 42.5 m3 each); Outokumpu (4 cells of 16.5 m3 each); and Smartcells (4 cells of 127 m3 each). A portion of the rougher concentrate is fed to a Knelson Concentrator (QS48).
Plant II was developed as part of the Paracatu Expansion III Project and consists of one in-pit crusher (MMD toothed roll type), a 1.8 kilometres conveyor to a covered stockpile area, one 20 MW semi-autogenous grinding (“SAG”) mill and two 13 MW ball mills. Subsequently, a 15 MW third ball mill was installed in June 2011 and a fourth 15 MW ball mill was installed in August 2012. In 2018, the plant processed 35.4 Mt of ROM at a BWI of approximately 13.9 kWh/t.
The Plant II grinding circuit consists of one 11.6 metre diameter by 6.7 metre long EGL SAG mill with a 20 MW gearless drive, two 7.3 metres diameter by 12.0 metres long EGL with 13 MW drive and two 8 metres diameter by 12.8 metres long EGL ball mills with 15 MW drive. The ball mills are equipped with dual pinion gear drives. The SAG mill operates in open/closed circuit with a trommel screen and vibrating screen, and the pebbles have the option to be fed to Plant I (open circuit) or back to the SAG (closed circuit). Oversize rejects from the SAG mill are transferred to the SAG mill feed conveyor by three pebble conveyors in series when operated in closed circuit. When it operates in open circuit, the oversize rejects are transferred by a conveyor to the Plant I crushing circuit.
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Infrastructure, Permitting and Compliance Activities
Paracatu infrastructure and services have been designed to support an operation of 61 Mt/a.
The mine site consists of two processing plants, related mine services facilities (truck shop, truck wash facility, warehouse, fuel storage and distribution facilities, reagent storage and distribution facilities), and other facilities to support operations (safety/security/first aid/emergency response building, assay laboratory, plant guard house, dining facilities, offices etc.).
The mine draws its power from the Brazilian national power grid which is largely based on hydroelectric power generation. Kinross is connected to the 500 kV national grid via a 500 kV/230 kV substation owned by the mine. A 230 kV transmission line, approximately 34 kilometres long, feeds the mine from this substation. This transmission line is connected to substation 43-SE-501 located at the mine site which subsequently feeds the Plant II distribution system at 13.8 kV and Plant I transmission line at 138 kV. The 138 kV Plant I transmission line feeds a 138 kV/13.8 kV substation located at Plant I, which subsequently feeds the Plant I distribution system.
In 2018 Kinross acquired the BCO and Caçu hydroelectric power plants located on the Claro River in the neighbouring state of Goias, approximately 660 kilometres west of Paracatu. The Claro River is a tributary of the Paranaiba River which is a major river in the country. The power is “wheeled” from these generating plants to Paracatu using existing transmission infrastructure and market mechanisms.
The operating permit for Paracatu was renewed in March 2018. This permit covers all site facilities associated with the Eustáquio dam and Santo Antônio dam.
Since 2009, Kinross has maintained an independent review process for all of its tailings facilities. The review process includes on-site visits once every three years, as well as a review of new construction or new expansions at the design stage. The review is conducted by an independent expert. Given the risk profile at Paracatu, on-site independent reviews are conducted on an annual basis.
The main water sources for KBM operations are run-off water collected in the mine sumps, run-off water collected in the tailings dam catchment watersheds, recirculated effluent from processing activities, and make-up water from streams and wells. The majority of process water is captured and maintained in the mine sumps and tailings catchment basins during the rainy season for use during the dry season. To maintain the plant’s water supply, KBM uses Eustaquio as the main storage facility and Santo Antônio dam and mine sumps as a complementary structure.
Kinross estimates the net present value of future cash outflows for site reclamation and remediation costs at Paracatu under IFRS as at December 31, 2020, at approximately $78.6 million.
Capital and Operating Costs
The capital cost estimate for Paracatu is summarized in the table below.
Estimated Sustaining Capital for Life of Mine
Area | Sustaining Capital | |||
Mine Mobile Equipment | ($M) | 445.6 | ||
Mine Other | ($M) | 35.7 | ||
Processing Facilities | ($M) | 142.0 | ||
Tailings Facilities | ($M) | 582.5 | ||
Site Infrastructure | ($M) | 8.3 | ||
Information Technology | ($M) | 7.4 | ||
Salvage Value | ($M) | -39.7 | ||
Total | ($M) | 1,181.8 |
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Estimated Operating Costs for Life of Mine
Area | Unit | Cost | ||
Mining | ($/t mined) | 1.75 | ||
Rehandle | ($/t rehandled) | 1.22 | ||
Processing | ($/t processed) | 3.46 | ||
Processing Santo Antônio Tailings | ($/t processed) | 1.73 | ||
Site Admin | ($M/ year) | 43.9 |
Exploration, Development and Production
In 2021, KBM expects to continue a diamond drilling program on the Paracatu deposit that began in 2018.
The Company has continued the optimization and analysis work focused on determining the optimal mine plan, which includes lower realized recoveries in certain zones of the ore body, water mitigation projects, local cost inflation, and changes to the fiscal regime in Brazil. The technical work resulted in an increase of 910,455 ounces to the site’s mineral reserves estimates before 2020 depletion and extended Paracatu’s mine life to the middle of 2032.
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Kupol and Dvoinoye, Russian Federation
General
Kupol
Development and construction of the Kupol mine commenced in 2005 by Bema Gold Corporation (“Bema”), which was acquired by Kinross in 2007. As part of the Bema acquisition, Kinross acquired a 75% interest in Chukotka Mining & Geological Company (“CMGC”).
On April 27, 2011, Kinross completed its acquisition of the remaining 25% of CMGC from the State Unitary Enterprise of the Chukotka Autonomous Okrug, which is owned by the Government of Chukotka Autonomous District, an autonomous Okrug (region) in the northeast region of the Russian Federation (“Chukotka A.O.”). This transaction gave Kinross 100% ownership of the Kupol mine and the Kupol East and Kupol West exploration licenses.
Dvoinoye
In 2010, Kinross acquired a 100% interest in the Dvoinoye underground gold mine through the acquisition of Northern Gold LLC (“Northern Gold”) and Regionruda LLC (“Regionruda”). The Dvoinoye mine is owned and operated by Northern Gold, a wholly-owned subsidiary of Kinross. On October 1, 2013, Kinross began commercial production at the Dvoinoye underground gold mine. Ore from Dvoinoye is processed at the Kupol mill, which is owned by CMGC. Underground production was completed at Dvoinoye in November 2020. Stockpiled ore is still processed at the Kupol Mill.
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Technical Report
Please see the Company’s National Instrument 43-101 Technical Report dated March 31, 2015, in respect of Kupol and Dvoinoye, prepared by John Sims, available at www.kinross.com and under the Company’s profile on SEDAR (www.sedar.com). Detailed financial, production and operational information for the Kupol and Dvoinoye mines are available in Kinross’ MD&A for the year ended December 31, 2020.
Property Description, Location, and Access
Kupol
The Kupol mine is located in the Far East of Russia within the Chukotka A.O. The mine is approximately 330 kilometres (by air) south-southwest of Pevek and 1,230 kilometres northeast of the town of Magadan.
The Kupol site is isolated and can only be accessed by air, winter roads, and seasonal summer roads. By winter road, there is a network of roads that are passable between mid-December and mid-April. A paved road travels 35 kilometres from Bilibino south to Keperveem. From Keperveem, a government-maintained winter road travels 140 kilometres along the Anui River to Ilirney. From Ilirney, the winter road travels 160 kilometres southeast to the site. Russian tank vehicles can access the property along these roads from midsummer to fall. The main access road from port facilities is from Pevek to the Kupol site. Pevek and Kupol connect with a combined all-season and winter road for a total distance of approximately 450 kilometres. As of 2013, an all-season road has been constructed from Kupol to Dvoinoye. This section of road connects to the road to Pevek and permits winter and seasonal summer road access from Pevek to Kupol. A further network of 1,500 kilometres of winter roads and all-season roads connects the site to the southern centre of Magadan. The Kupol area is accessible by aircraft and helicopter which land on a 1,800-metre airstrip north of the camp.
The Kupol property comprises a 17.4 square kilometre license for subsoil use for geological study and production of gold and silver. This license was issued by the Ministry of Natural Resource of the Russian Federation on October 4, 2002, and is held by CMGC.
In 2006, CMGC acquired two exploration licenses surrounding, and adjacent to, the Kupol project. With the acquisition of these two licenses, known as Kupol West and Kupol East, CMGC increased its overall land position in the Kupol project area from approximately 17.5 square kilometres to a combined total of approximately 443 square kilometres. On August 27, 2010, Kinross, certain subsidiaries, and B2Gold Corporation (“B2Gold”) completed an Assignment, Settlement and Release Agreement pursuant to which B2Gold released Kinross and the applicable subsidiaries from certain joint venture obligations that had existed among Kinross, the applicable subsidiaries and B2Gold pursuant to a purchase and sale agreement with respect to the Kupol West and Kupol East licenses. In 2014, in accordance with the terms of the Kupol East license, a final report was submitted that concluded that no potential economic resources had been found after five years of exploration work. On December 8, 2017, CMGC therefore informed the sub-soil authorities about the return of the Kupol East license after completion of the environmental requirements stated in the license agreement.
In December 2014, following an application by CMGC, the Company obtained two new licenses in the Kupol region at auction, Kupol North and Leva Mechkereva, totalling together 1,458 square kilometres thus substantially increasing the overall land position of Kinross in the Chukotka A.O. In the first half of 2015, another two licenses (Shumnaya and Kitepvaamskaya), totalling together approximately 200 square kilometres were acquired pursuant to new Russian legislation. The duration of both the Shumnaya and Kitepvaamskaya licenses is seven years.
In 2018, CMGC was granted a new exploration license “Lipchikveemskaya”, located west-northwest of Kupol, comprising 98.8 square kilometres. The license is due to expire in November 2026.
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In 2020, CMGC was granted two new exploration licenses “Kavral’yanskaya” and “Cheneyveemskaya”. Kavral’yanskaya is located south of Kupol, comprising 99.3 square kilometres. The license is due to expire in June 2027. Cheneyveemskaya is located east-south of Kupol, comprising 99.16 square kilometres. The license is due to expire in November 2027.
The Kupol West license is subject to a 1.5% net smelter return royalty payable to B2Gold. The license does not include the Kupol operation. CMGC is also subject to a mineral extraction tax at a rate of 6% for gold and 6.5% for silver, which is calculated as the average price per gram of gold and silver sales multiplied by the quantities of precious metals contained in the produced doré.
Dvoinoye
The Dvoinoye mine is located approximately 100 kilometres north of the Kupol operation within the remote, undeveloped, mountainous area of the Chukotka A.O.
The Dvoinoye site is isolated and can only be accessed by air (helicopter), by winter roads, or by an all-season road from Kupol. There is a network of winter roads that is passable between mid-December and mid-April. An all-season road connecting the Dvoinoye site and Kupol was completed in 2013. The road is a two-lane gravel road with a camp located at the approximate mid-point. The road includes a 110-metre long bridge across the Anui River. The road is used for the movement of ore to Kupol and for the transportation of crews and materials between Kupol and Dvoinoye. By air, the Dvoinoye site can be accessed by helicopter from Pevek airport (about 1.5 hours), from the Kupol mine (about 40 minutes), or Bilibino airport (about 45 minutes). Personnel access to the site is by air to the Kupol airport and then by vehicle to Dvoinoye.
The Dvoinoye exploration and mining license, which covers an area of 5.76 square kilometres including mine operations and associated facilities, is located within the Vodorazdelnaya license. The Vodorazdelnaya license is a combined reconnaissance and mining claim. It was issued in 2008 and covers a total area of 916.4 square kilometres. The Dvoinoye subsoil license was first issued in 2007 and was renewed in 2013. The license is valid until January 1, 2023. Both the Dvoinoye and Vodorazdelnaya licenses were acquired by Kinross in 2010 when it completed its acquisition of Northern Gold and Regionruda, owners of the Dvoinoye license and the Vodorazdelnaya license, respectively. Due to the merger of Regionruda with Northern Gold in 2015, Northern Gold is now the owner of both licenses.
In 2018 Northern Gold was granted two new exploration licenses “Imreveemskaya” and “Tytylvaamskaya”, located southeast of Dvoinoye, comprising 196.9 square kilometres. The licenses are due to expire in November 2026.
In 2020, Northern Gold was granted a new exploration license “Enmyvaaskaya”, located south-east of Dvoinoye, comprising 98.3 square kilometres. The license is due to expire in November 2027.
There are reduced royalties payable in respect of the Dvoinoye mine – Zone 37. Northern Gold is subject to a mineral extraction tax at a rate of 6% for gold and 6.5% for silver, which is calculated as the average price per gram of gold and silver sales multiplied by the quantities of precious metals contained in the primarily prepared ore.
In February 2017, Northern Gold became eligible for mineral extraction tax incentives, which reduce the extraction tax rate to 0% on ore extracted from the Dvoinoye deposit. Fees associated with the Dvoinoye subsoil license, for the purpose of prospecting, exploration, and mining, are paid on a regular basis to the authorities. An environmental impact assessment was completed for the Dvoinoye mine in 2013.
Mining operations were completed in November 2020. Project documents for closure of underground mine headings were approved, and a Reclamation Project has been prepared and forwarded to the authorities for approval.
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History
Kupol
Quartz veins were originally located in the Kupol area in 1966 during a Soviet government 1:200,000 regional mapping program. The main Kupol deposit was discovered by the Bilibino-based, state-funded Anyusk Geological Expedition (the “Expedition”) in 1995. Gold, silver, arsenic, and antimony anomalies were identified through a 1:200,000 stream sediment geochemical sampling program. During 1996 and 1997, the Expedition completed mapping, prospecting, magnetic and resistivity surveys, and lithogeochemical and soil surveys.
During 1998, two drillholes were drilled and four trenches were excavated. In 1999, Metall LLC (“Metall”), a Chukotka-based, Russian mining cartel, acquired the rights to the deposit and contracted Anyusk to conduct the exploration work. From 1999 through 2001, an additional 31 trenches and 24 drillholes were completed. In 2000 and 2001, 450 metres of the central portion of the vein system was stripped, mapped and channel sampled in detail. By the end of 2001, the work completed included 3,004 metres of drilling in 26 drillholes, 5,034.1 metres of trenching and 3,110.8 metres of channel sampling. Additionally, the majority of the license area was surveyed, and a frame for a small mill was constructed immediately south of Bolotnoye Lake, where the 2004-2006 camp was located.
The original Kupol license was issued to Metall on March 16, 1999. On October 4, 2002, this Kupol license was re-issued to CMGC, a newly established subsidiary of Metall. In December 2002, Bema entered into an agreement to acquire up to a 75% interest in the property. Beginning in 2003, Bema conducted several years of exploration and development activities.
In 2008, mining in the open pit progressed mainly on the south side and north side of the pit. Open pit mining continued through 2009 and 2010 and the open pit was completed in 2011. The underground mine began producing ore in May 2007. Process facilities and other infrastructure construction continued throughout spring 2008. The mill was commissioned in May 2008 and first gold production occurred at that same time.
Dvoinoye
The Dvoinoye deposit was discovered in 1984 through a program of regional soil sampling, geophysical surveys, and geological mapping. The Dvoinoye site includes an inactive open pit mine which previously operated six months per year, with a throughput of approximately 250 tonnes per day. Open pit operations were initiated in 1996 by Northern Gold, which was originally a subsidiary of Anyusk. Operations continued under the ownership of the deposit by Millhouse Capital and were terminated before acquisition by Kinross.
On August 27, 2010, Kinross completed the acquisition of 100% of the participatory interests in Northern Gold and Regionruda. Prior to the acquisition, the Russian Federation Government approved of Kinross’ 100% ownership of Dvoinoye as a strategic deposit. Kinross completed construction of a temporary camp in 2010 and submitted a five-year exploration program which was approved by government authorities. Exploration activities under the direction of Kinross started in late June 2010 and comprised primarily diamond drilling and validation of Northern Gold’s previously completed analyses. A scoping study for Dvoinoye was completed by Hatch in January 2011, and mining of the decline started after regulatory approval of the exploration program. A Feasibility Study by Hatch was started in February 2011, and construction of site infrastructure facilities began in March 2011. The Hatch Feasibility Study was completed in March 2012.
Commercial production by Kinross began on October 1, 2013. All ore is processed at the Kupol mill. Mining operations were completed in November 2020, however, ore haulage for processing at the Kupol Mill will continue.
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Geological Setting, Mineralization, and Deposit Types
Kupol
The Kupol deposit is located in the 3,000 kilometre long Cretaceous Okhotsk-Chukotka volcanogenic belt. This belt is interpreted to be an Andean volcanic arc type tectonic setting, with the Mesozoic Anui sedimentary fold belt in a back-arc setting to the northwest of the Kupol region. Russian 1:200,000 scale mapping indicates that the Kupol deposit area is centred within a 10 kilometre wide caldera, along the northwestern margins of the 100 kilometre wide Mechkerevskaya volcano-tectonic “depression”, an Upper Cretaceous bimodal nested volcanic complex. The volcanic succession in the area is 1,300 metres thick and consists of a lower sequence of felsic tuffs and ignimbrites, a middle sequence of andesite to andesite-basalt flows and fragmentals capped by felsic tuffs and flows. These sequences are cut and discordantly overlain by basalts of reported Paleogene age. The volcanic rocks unconformably overlie and intrude folded Jurassic sediments.
The north-south oriented Sredniy-Kaiemraveem River valley to the south and the Stranichniya valley to the north are both inferred to reflect a major deep-seated regional structure. The Kupol structure is inferred to be a splay off this regional structure.
The property is underlain by shallow eastward dipping andesite lithic tuffs, feldspar-hornblende porphyry andesite, and andesite-basalt (trachytic andesite) flows. The andesitic volcanic units are intruded by massive to weakly banded rhyolite dykes, rhyolite and dacite flow-dome complexes, and basalt dykes. The main deposit strikes north-south and has been divided into six contiguous zones. From north to south these are North Extension, North, Central, Big Bend, South, and South Extension.
The Kupol deposit is considered to be an example of a low-sulphidation epithermal deposit. Low-sulphidation epithermal deposits are high-level hydrothermal systems, which vary in crustal depths from depths of about 1 kilometre to surficial hot spring settings. Host rocks are extremely variable, ranging from volcanic rocks to sediments. Calc-alkaline andesitic compositions predominate as volcanic rock hosts, but deposits can also occur in areas with bimodal volcanism and extensive subaerial ashflow deposits. A third, less common association is with alkalic intrusive rocks and shoshonitic volcanics. Clastic and epiclastic sediments in intra-volcanic basins and structural depressions are the primary non-volcanic host rocks.
Mineralization in the near-surface environment takes place in hot spring systems or the slightly deeper underlying hydrothermal conduits. At greater crustal depth, mineralization can occur above, or peripheral to, porphyry (and possibly skarn) mineralization. Normal faults, margins of grabens, coarse clastic caldera moat-fill units, radial and ring dyke fracture sets, and hydrothermal and tectonic breccias can act as mineralized-fluid channelling structures. Through-going, branching, bifurcating, anastomosing and intersecting fracture systems are commonly mineralized. Mineralization forms where dilatational openings and cymoid loops develop, typically where the strike or dip of veins change. Hanging wall fractures in mineralized structures are particularly favourable for high-grade mineralization.
The mineralization typically includes pyrite, electrum, gold, silver, and argentite. Other minerals can include chalcopyrite, sphalerite, galena, tetrahedrite, and silver sulphosalt and/or selenide minerals. In alkalic host rocks, tellurides, roscoelite and fluorite may be abundant, with lesser molybdenite as an accessory mineral.
Dvoinoye
The Dvoinoye gold-silver deposit is located within the Okhotsk–Chukotka Volcanic Belt (“OCVB”), an Andean-type continental margin magmatic arc that extends southwest from the Chukotka Peninsula along the East Asian coastline. The OCVB has four distinct segments: two roughly northwest trending segments separated by a longer northeast trending zone and a shorter northeast zone at the far southwest end.
The OCVB is divided into six sectors based on basement lithologies and on compositional differences in the volcanic sequences. The central sectors of the belt are further divided into a plutonic-dominated interior zone and a volcanic-hypabyssal dominated exterior zone. The axial boundary corresponds to a gravity boundary (crustal thinning). Dvoinoye and the Kupol deposit located 98 kilometres to the south are both located in the exterior zone, at the boundary of the Anadyr and Central Chukotka sectors.
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Host rocks at Dvoinoye are Late Cretaceous intermediate-felsic volcanics of the Tytylveyem Suite, which is divided into three units. At Zone 37, the host rock is assigned to the lower unit of the Tytylveyem Suite. The main host rock here is porphyritic dacite lava, containing 20% to 30% phenocrysts (plagioclase, pyroxene and potassium feldspar), in a siliceous aphanitic matrix. Other components of the local geology include crosscutting pyritic hydrothermal breccias that may mainly affect the tuff units. Their distribution and geometry are unclear but at least part of the Zone 37 vein is hosted by narrow siliceous pyritic milled breccias that may be related to larger volume hydrothermal breccias.
The Dvoinoye veins are close to the northern margin of the Ilirney granitic massif. As a result, there is substantial development of dykes, sills, and plugs of generally granitic composition.
Dvoinoye is a low sulphidation epithermal gold-silver vein deposit. The principal vein at Dvoinoye strikes at 040° over a length of at least 800 metres. Ore zone width ranges from a few metres to more than 30 metres in the central shoot. The vein has been drilled over a vertical extent of about 350 metres (including sills). The vein system has a steep to subvertical dip to the southeast. There is evidence that at depth the vein system may shallow in dip, from subvertical to about 70°. There are two main thick quartz veins, within a variably, wide envelope of narrower veins and veinlets (stockwork zone). The central shoot represents a blowout in width where the shoot may have a pipe-like form. The bulk of the gold is in the central shoot. At depth and at the southwestern end, the mineralization forms a series of sub-parallel veins, rather than one or two wide veins. Late to post vein block faults probably disrupt vein continuity along strike, especially to the northeast where the fault-bounded granite intrusion is developed.
Mineralization is characterized by low total sulphide content, generally less than one percent, by variable but low gold: silver ratios (average 1:1), and by the presence of considerable free gold in parts of the deposit. The main ore minerals and related sulphides in the vein are native gold, freibergite, pyrite, chalcopyrite, galena, and sphalerite, with minor acanthite. Ore minerals are generally fine-grained. Gold occurs inter-grown with sulphides, free in quartz-illite aggregates, and in places as rare dendritic growth bands.
A wide variety of vein and mineralization textures are recognized, including massive vein, colloform-crustiform banded vein, breccia, and veinlet/stockwork zones. The vein mineralogy consists of quartz-chalcedony (80% to 90%), adularia (5% to 7%), carbonate (up to 5%), illite, and chlorite. The main vein displays a lateral and vertical zonation in mineralization and alteration assemblages, reflecting the evolution of the system spatially and over time. Four styles of gold mineralization have been identified: pink quartz gold; carbonate-base metal gold; chalcedony-ginguro gold-silver; and green quartz breccia.
Exploration
Kupol
Exploration in the Kupol area began in 1996 and has been continuous since that year. Exploration has primarily been undertaken by Bema or Kinross, or by contractors (e.g. airborne geophysical surveys).
An area of 8 square kilometres around the Kupol deposit was surveyed in detail to create a 1:2,000 scale map with 2 metres contour spacing. A survey control net, laid out in local grid coordinates with a classified origin, is tied to the regional survey control points. Most control points were shot in 2000; additional survey control points were added in 2003. These points are used by exploration and engineering/construction for survey control. The topography map is constantly revised to reflect the actual topographic surface as defined by data such as topographic surveys, drill hole collar, and trench locations.
Geological and structural mapping have been completed at regional scale (1:50,000 scale), to prospect scale (1:4,000 and 1:5,000 scale) and, to detailed scale (1:50 scale). Map results were used to identify areas of quartz veining, silicification, and alteration in outcrop that warranted additional work.
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Geochemical surveying at 1:10,000, covering 7.8 square kilometres, and completed over the Kupol vein area prior to 2003, defined the deposit area as a gold, silver, arsenic anomaly with locally anomalous areas of mercury, lead, zinc and antimony.
Magnetic and resistivity surveys were also completed over a similar area to that tested with geochemical surveying, with initial 100x20-metre grids followed by detailed 25x5-metre and 20x5-metre grids, respectively. Magnetic surveying was performed using a Geometries Proton G858 magnetometer. This work defined the deposit as an area of magnetic low response and higher apparent resistivity.
To expose the vein systems prior to generating drill targets, large areas of the Kupol vein were stripped, mapped, and channel sampled. Stripping comprised removal of surface debris, either manually, or by mechanical methods, and the resulting surfaces were pressure washed for maximum outcrop exposure. A total of 52 trenches (5,306 m) were excavated in the period 1998-2003 by Russian teams. In the same period, 97 channels were sampled (2,694 m).
During 2004, exposures were channel sampled along east-west lines at 5-10-metre spacing over an area of 4,680 square metres. Channels were cut using a diamond rock saw, and samples were chiselled from the cut and collected into plastic sample bags. The start and end of each sample were surveyed. A total of 87 channels were taken (699 metres), and two trenches (226 metres) were excavated. In 2005, a total of 18 trenches (1,872 metres) were excavated, and 96 channel samples (1,813 metres) were taken. Results were used to identify areas of grade and vein continuity and target drill holes.
During 2006, surface stripping of the Kupol vein outcrop was completed in the South zone. All veining that was feasibly accessible from the surface was at that stage stripped and channel sampled, generally on a spacing of 5 metres between sample lines. The stripping extended to a southern limit of 90,300 N. A similar sampling methodology to 2004 was employed, and the start and end points of each channel were surveyed.
In June 2009, an aeromagnetic survey was performed by the Geological-Geophysical Company LLC of Moscow. The survey consisted of 3,140 linear kilometres of towed bird total magnetic intensity measurements using an MI-8 helicopter with the sensor towed at a nominal 200 metres AGL. Line spacing was 100 metres with 1,000-metre tie lines. Preliminary results verified the major features seen in previous ground magnetic surveys, including the pronounced north-south magnetite destructive zone that hosts the Kupol deposit. Numerous, often multiple caldera structures are seen as well as several episodes of faulting.
Dvoinoye
The Dvoinoye area was identified through regional aeromagnetic, gravimetric, and geochemical exploration programs in the 1960s. Geochemical and geophysical surveys continued in the 1980s, and the Dvoinoye deposit was discovered in 1984 through soil sampling, geophysical surveys and geological mapping, and drilling programmes were conducted in the late 1980s and into the 1990s. Trench sampling was conducted on the open pit mining that began in 1996.
Detailed information on these historical exploration results is not available and Kinross has not relied on information from these early exploration programmes for resource estimation.
Drilling
Kupol
In 2012, underground definition drilling totalled 25,118 metres (N- and B-sized core). In 2010 and 2011, underground definition drilling totalled 28,430 metres and 30,116 metres, respectively (NQ- and BQ-sized core). Termite core drilling was conducted to test the limits of mineralization in the development headings and to optimize slashing operations and panel extraction, and 2,559.5 metres were drilled in 2012, 4,148 metres were drilled in 2011, and 3,200 metres were drilled in 2010.
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In 2013, underground definition drilling totalled 22,538 metres (NQ- and BQ-sized core). The Termite core drilling totalled 641 metres.
In 2014, underground definition drilling totalled 23,426 metres (NQ- and BQ-sized core). The Termite core drill was replaced by an on-site Solo drill to test the limits of mineralization in the development headings and to optimize slashing operations and panel extraction, and 6,059 metres were drilled.
The underground definition drilling totalled 24,437 metres and 26,417 metres (NQ- and BQ-sized core) in 2015 and 2016 respectively. The average sample length was one metre. An additional 8,470 metres and 10,170 metres were drilled in 2015 and 2016 respectively with Sandvik Solo in order to define the horizontal extension of mineralization.
In 2017 a further 263 diamond drill holes, comprising 31,851 metres were drilled. In addition to operational drilling a further 190 exploration drill holes were completed during 2017, comprising 80,613 metres of diamond drilling.
In 2018, 100,186 metres of surface exploration drilling was completed on multiple targets in the Kupol District, bringing the total exploration drilling database to 661,022 metres. Additionally, in 2018, 52,484 metres of underground grade control drilling was completed on multiple targets within the Kupol orebody, bringing the total grade control drilling database to 340,461 metres.
During 2019, 88,585 metres of surface exploration drilling was completed on multiple targets in the Kupol District, bringing the total exploration drilling database to 749,607 metres. Additionally, during 2019, 72,852 metres of underground grade control drilling was completed on multiple targets within the Kupol orebody, bringing the total grade control drilling database to 413,313 metres.
In 2020, 78,618 metres of surface exploration drilling was completed on multiple targets in the Kupol District, bringing the total exploration drilling database to 828,225 metres. Additionally, in 2020, 98,684 metres of underground grade control drilling was completed on multiple targets within the Kupol orebody, bringing the total grade control drilling database to 511,997 metres.
Dvoinoye
In 2016, a total of 26 diamond drill holes were completed for 13,016 metres on the Dvoinoye mining license at Zone 37. Drill campaigns on Zone 37 completed between 2000 and 2016 included 442 surface and underground core drill holes, totalling 121,403 metres.
In 2017 a further 815 drill holes, comprising 32,448 metres were drilled. This brings the total in-mine and resource development drilling programme to 2,783 drill holes, comprising 145,923 metres up to the end of 2017. In addition to operational drilling a further 90 exploration drill holes were completed during 2017, comprising 23,434 metres of diamond drilling.
In 2018, 42,383 metres of surface exploration drilling was completed on multiple targets in the Dvoinoye District, bringing the total exploration drilling database to 315,146 metres. Additionally, during 2018, 9,351 metres of underground grade control drilling was completed on multiple targets within the Dvoinoye orebody, bringing the total grade control drilling database to 66,572 metres.
In 2019, 71,867 metres of surface exploration drilling was completed on multiple targets in the Dvoinoye District, bringing the total exploration drilling database to 387,013 metres. Additionally, during 2019, 14,200 metres of underground grade control drilling was completed on multiple targets within the Dvoinoye orebody, bringing the total grade control drilling database to 80,772 metres.
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In 2020, 4,110 metres of surface exploration drilling was completed on multiple targets in the Dvoinoye District, bringing the total exploration drilling database to 391,123 metres. In 2020, no underground grade control drilling was carried out in the Dvoinoye orebody, keeping the total grade control drilling database at 80,772 metres.
Sampling, Analysis and Data Verification
Kupol
Drill core was delivered from the drills in covered wooden boxes to a logging and sampling facility. The core was two-thirds split using a diamond saw; the remaining third was returned to the core box as a permanent record.
The minimum sample length was 0.25 metres for HQ diameter core and 0.30 metres for NQ diameter core. The average sample length is generally 1 metre. Mineralized zones were bracketed by a minimum of 1-3 metres of sampling into the footwall and hanging wall. All vein zones and alteration types of interest were sampled and each major zone was continuously sampled.
Sampling intervals were determined, marked up, and tagged by the geologists. The intervals were based on geology (lithology, mineralogy, texture, and structure). Sampling across contacts was only permitted if the vein width was less than the minimum sample width. The core was manually oriented to ensure that the core was consistently split and that there was no sample bias.
Samples containing visible gold or abundant sulphosalt mineralization were indicated by a white sample bag at the start of the sample interval, so sampling technicians would employ contamination minimization protocols during cutting and laboratory preparation. Field duplicate samples were marked with flagging tape. Field duplicate samples were created by cutting the two-thirds split into two one-third sections; both samples were sent for analysis. Definition drill holes are whole-core sampled with no sawing or splitting.
Sampling always occurs from the footwall to the hanging wall. The geologist paints a level sample line on the face at 1 metre above the ground and the objective is to make the line disappear during sampling. This methodology approximates a 5x5 centimetres channel sample. Geologists break samples on the same criteria as the core sampling, and at the same maximum and minimum lengths.
Due to the remote location of the Kupol project and the difficulties with shipments of samples within and from Russia, a containerized field laboratory was set up at the Kupol site and was responsible for all assays between 2003 and 2008. The facility was set up and run as an independent laboratory that operated as a Russian certificated Anyusk Geological Expedition field laboratory (Kupol laboratory).
In 2008, the site analytical laboratory was moved to new premises within the Kupol mill building and has continued in use as the primary analytical laboratory for Kupol. The 2008-2009 bi-annual programs included an external check at an outside laboratory for samples by the geology department. Approximately 400 pulps were collected and shipped to an external laboratory in Magadan. All other sampling and assaying are done at the Kupol laboratory.
A program to determine the in-situ bulk density (specific gravity) of the major vein and nonvein rock types was conducted at the Kupol site during 2013-2014. Bulk density testing was conducted on 390 samples from the Kupol Mine and 618 samples from the Moroshka Project. Collected data confirmed the existing parameters with few minor deviations.
Laboratory preparation and analytical protocols have Russian translations and represent a compromise to meet or exceed Russian regulatory requirements and North American accepted practices.
All sample preparation and assaying were completed at the Kupol laboratory. The mine has established sample preparation and assay procedures for all sample types (drill core, RC, and termite core). Sample batch prefixes identify the sample type and a unique number identifies the sample batch. Sampling crews submit samples daily accompanied by an electronic submittal file. After initial assaying, the laboratory moves samples to temporary storage. Geology is responsible for long-term storage which consists of shipping containers. Once samples exceed the required retention time they are disposed of at the crusher stockpile on the low-grade stockpile.
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Samples were received at the laboratory as follows: samples were delivered to the laboratory by the sampling technician accompanied by a submission form signed by the geologist and the sampling technician; the submission form and samples were checked for accuracy and completeness; the samples were logged into the laboratory system; a laboratory technician signed the submission form, made a copy of the submission form and returned the original to the sampling technician; and the samples were placed in a secure container prior to processing.
The sample preparation and assay procedure was as follows: all samples were dried in a locked, heated container, either within the sample bag or on a steel tray; dried samples were transferred to the sample preparation area; each sample was crushed in a jaw crusher to 95% of -10 mesh (<2 mm); the sample was pulverized to 90% passing -150 mesh (0.005 mm) in a LM2 bowl and puck pulverizer and split into four 250 gram samples; one pulp sample went for fire assay, one was kept as a laboratory reject, and two were retained as geology duplicates. All pulps are stored in locked containers.
For every 20 samples, one additional sample was split from both the crusher and pulverizer splits to ensure compliance with laboratory quality control specifications. All equipment was air-washed between samples. A blank silica sample was run as a cleaning medium every twenty samples, and after samples with visible gold or strong mineralization.
The accepted assay procedure for all Kupol samples is fire assay with a gravimetric finish. Exploration charges are 50 grams with stated detection limits of 0.1 g/t Au and 0.5 g/t Ag. Production and definition sample charges are 25 grams with stated detection limits of 0.5 g/t.
The Bema QA/QC program for the exploration drilling included the regular insertion of blanks, commercial reference standards, and field duplicates. The Kupol laboratory also inserted blanks, standards, pulp replicates, and reject duplicates. In addition, external pulp duplicates were sent to Assayers Canada (“Assayers”) in 2004 and 2005, and the vein samples with assays greater than 3.0 g/t Au at Assayers in 2004 were forwarded to ALS Chemex for the second round of external check assaying. The 2006 QA/QC work is not documented and no external check assaying was done in 2007. From 2008 onwards, Kupol has sent a few hundred samples each year for external assaying confirmation.
Barren rhyolite rock, collected from a pit near the Kupol airport, is used for blank material. Blank insertions are made on a regular basis. Geologists try to position the blanks after high-grade samples to help monitor and control potential contamination problems that can arise during sample crushing and pulverizing. The blank failure rates have generally been very low.
Geologists collect field duplicates from each trench and from each face. The geologist may select any sample as the duplicate as long as it is coded as a vein. The duplicate is offset approximately 30 to 50 centimetres along the dip of the vein stratigraphy underground, and in the trenches, approximately 10 to 30 centimetres horizontally along strike. Field duplicates receive a pre-printed tag in the same number series as the other samples and they remain blind to the laboratory.
All of the QA/QC data are monitored by the database manager and Kupol has well-defined rejection criteria. No data are uploaded to the final database until the database manager examines and accepts the associated QA/QC results. Kupol has developed a graphical monitoring system in Geobank that allows the database manager to rapidly extract data over any desired time period and view it on various types of graphs and control charts. The gravimetric fire assay detection limit for exploration samples (50 gram aliquots) is 0.1 g/t for Au and 0.5 g/t for Ag. The blank failure threshold for gold is set at 2.5 times the detection limit, which is reasonable although slightly lower than the industry standard threshold of three times the detection limit.
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Assays are stored in a Fusion database on site on the Kupol main server under password protection and are accessible only to the database administrator and the IT department. All data included in the resource estimation databases has been validated and is of sufficient quality to be appropriate for use in Mineral Resource estimations.
Each drill hole (or trench/channel) has its own hard-copy file folder and all documents pertaining to that drill hole are stored in that folder. The types of records stored include collar survey certificates, downhole survey slips, geological and geotechnical logs, point load and density test forms, assay certificates, shift reports, timesheets, and database reports.
All original documents are located at the Kupol site and in the Magadan office. Digital data are regularly backed up.
The resource database was reviewed and verified during site visits, a series of verification exercises during internal and external audits and a review of QA/QC results. In particular, detailed data verification was completed by Garagan (2005), who manually verified essentially all of the drillhole collar and survey records, and approximately 10% of the assays, from 2003 and 2004. A significant portion of the database has subsequently been verified by site personnel on a regular basis.
Dvoinoye
Sampling intervals were determined, marked up, and tagged by the geologists. The intervals were based on geology (lithology, mineralogy, texture, and structure). Sampling across contacts was only permitted if the vein width was less than the minimum sample width. The core was manually oriented to ensure that the core was consistently split and that there was no sample bias. The minimum sample length was approximately 0.2 metres. Most of the drill holes were HQ diameter core and some drill holes were NQ diameter core. Generally, the maximum sample length was one metre in mineralization and up to three metres in waste. Mineralized zones were bracketed by a minimum of 1-3 metres of sampling into the footwall and hanging wall. All vein zones and alteration types of interest were sampled and each major zone was continuously sampled. The whole core was sampled in the oldest drill holes and split at an undefined point in time using a hammer and chisel. The core has been split using a diamond saw since 2008. Freshwater is used as protection against re-circulation contamination. Specific gravity measurements have been taken from 673 samples from exploration drill core.
Due to the remote location of the project and the difficulties with shipments of samples within and from Russia, a mining laboratory was set up on the site at the old processing plant. The laboratory procedures and internal laboratory protocols were audited in 2008 by Micromine personnel and no significant issues were reported.
In May 2008, 120 samples were sent to Alex Stewart Group Laboratories (“Alex Stewart”) in Moscow for external check assays. The samples averaged 45.84 g/t Au at Alex Stewart versus 46.68 g/t Au at the mine laboratory, which is less than a 2% difference. Overall, the results indicate that the mine laboratory gold and silver assays were reliable and accurate with no significant biases evident.
Core samples up until mid-2010 were analyzed by fire assay at the Northern Gold assay laboratory located at the Dvoinoye mine site. Until June 2009, no blanks or standards were used in Northern Gold’s mine laboratory at Dvoinoye. The laboratory was certified in June 2009 and blanks and standards were subsequently used.
Most of the split core samples from the 2010 and 2011 drilling program were shipped in secure containers to the SGS Vostok Laboratory (“SGS Russia”) in Chita Oblast, Russia. On October 9, 2008, SGS Russia was accredited by the Russian Federal Agency on Technical Regulation and Metrology for gold and silver, among others, for assaying under International Standards Organization/International Electrotechnical Commission (ISO/IEC) Guideline 17025. A smaller proportion of samples were submitted to the Kupol mine laboratory owned and operated by Kinross. Kinross also used ALS Chemex in Chita (“ALS Chita”), accredited under ISO/IEC Guidelines 17025, for umpire laboratory monitoring of the reliability of assaying results delivered by SGS Russia.
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Beginning in late June 2010 when Kinross took control of work on the property, but before ownership changed hands, all samples were prepared and analyzed off-site. For the 2010 and 2011 drilling programs, Kinross relied partly on the internal analytical quality control measures implemented by both the SGS Russia and Kupol laboratory. In addition, Kinross implemented external analytical quality control measures on all sampling consisting of using control samples in all sample batches submitted for assaying including field blanks, certified standards, and field duplicates.
In 2011, SRK Consulting (“SRK”) recommended the use of blind coarse reject and blind pulp duplicate samples at the primary laboratory, SGS Russia. At the request of Kinross, SRK randomly selected 5% of coarse reject material and another 5% of pulp duplicates. Samples were carefully re-numbered and re-bagged as necessary to conceal the identity of the original samples from the laboratory.
The overall quality control sample insertion rate averages 23.7%. In addition, approximately 10% of the 2010 samples and 5% of the 2011 samples sent to SGS Russia were check assayed at ALS Chita. Seventy-two samples assayed at Kupol in 2010 were also check assayed at ALS Chita.
In 2012 and 2013, most samples were sent to the Kupol laboratory and fire assayed for gold and silver using similar methods to SGS Russia. An on-site sample preparation facility was commissioned in 2014.
Exploration drill hole data are stored in a DataMine Fusion database. SRK conducted a series of routine verifications to ensure the reliability of the electronic data provided by Kinross. This included auditing the electronic data against original records in the form of Adobe PDF assay certificates. Approximately 10% of the assay data were audited for accuracy against assay certificates.
Mineral Processing and Metallurgical Testing
Kupol
For the 2005 Feasibility Study, the metallurgical sampling program consisted of 11 composite samples made from 27 samples from 2004 and 2005 drill core reject, and one trench bulk sample. These samples were submitted for the following tests: Canadian Centre for Mineral and Energy Technology (“CANMET”) Enhanced Leach Process (“CELP”), Agitated Leach Vessel Testing (“ALV”), Acidification Volatization Recovery pilot test (“AVR”), ore characterization bottle rolls tests and AMEC clay studies. The AVR, ALV, and bottle roll testing were conducted at SGS Lakefield Research Ltd, the CELP studies at CANMET, Mineral Technology Branch, and the clay studies at AMEC Americas. The goal of the 2005 metallurgical sampling program was fourfold: 1) to provide preliminary metallurgical characterization of new zones of mineralization; 2) to obtain additional metallurgical characterization information in areas of inferred and indicated resources; 3) to provide samples for determination of the cost-benefit analyses of the application of the CELP process; and, 4) to provide samples for further clay speciation and thickening/filtration characterization.
The cyanide concentration for the economic optimum leach conditions was found to be silver grade dependent, with higher grade supporting higher cyanide leach concentrations. The economic optimum leach conditions were used to evaluate the metallurgical response of more than 50 ore variability samples composed of single and multiple hole composites from the core drilling program. Gold recoveries were mostly consistent across the zones in the Kupol deposit, but silver recovery was significantly more variable. Final recovery estimates based on the combined Phase I and II test results were 93.8% for gold and 78.8% for silver.
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Dvoinoye
Metallurgical testing of the High Grade (“HG”) and Low Grade (“LG”) Dvoinoye ores and Kupol underground samples were carried out both at the Kupol laboratory and at SGS Chita. An HG composite sample, the Special High Grade (“SHG”) sample, was sent directly to Kupol from the Dvoinoye site for gravity and leach testing as per the Kupol flow sheet. Further metallurgical testing was conducted at SGS Chita on HQ (63.5 millimetre diameter) drill core that was drilled between August and October of 2010. Exploration assaying and comminution, gravity recovery, leaching, and cyanide destruction metallurgical testing were performed by SGS Chita on the HQ core samples.
A grinding circuit survey, followed by JKSimMet modelling and simulation studies were completed under the direction of SGS Lakefield.
Gravity test work was also conducted on one HG and one LG Dvoinoye composite sample at the NTL TOMS group laboratory in Irkutsk with follow up modelling and simulations by Knelson in Langley, British Columbia. The HG and LG Dvoinoye composite samples were prepared by SGS Chita and then shipped to the NTL TOMS laboratory.
A thickener test program was conducted at the Kupol mine site by FLSmidth early in 2011. The testing was performed on the two Dvoinoye HG composites, an LG Dvoinoye composite, a Kupol underground sample and various blends of the Dvoinoye composites with the Kupol underground sample. FLSmidth also tested plant samples to evaluate the capacity of the Kupol process thickeners and for comparison with the other laboratory results.
Mineral Resource and Mineral Reserve Estimates
Refer to the “Kinross Mineral Reserves and Mineral Resources” section for quantity, grades, and category. Assumptions are outlined in the Notes – 2020 Kinross Mineral Reserve and Mineral Resource Statements in the “Kinross Mineral Reserves and Mineral Resources” section.
Mining Operations
Kupol
The Kupol deposit is mined by an underground mining method, long hole longitudinal retreat sub-level open stoping, also known as the Avoca method. Sills are driven on 15 metre (sublevel) spacing approximately 4.5 metres high. Longhole stopes (panels) are drilled using parallel or fan drill holes between the sublevels (approximately 11 metres). Backfill is an integral part of the production cycle of the mining method. Mill production at Kupol is scheduled to continue into 2025.
Dvoinoye
Dvoinoye underground mining operations have used two different mining methods, transverse longhole stoping and longitudinal longhole stoping. Transverse longhole stoping has accounted for more than 90% of the historical production, but the remaining reserves will predominantly be extracted using longitudinal longhole stoping. Mining of Zone 37 and Zone 1 at Dvoinoye finished in November 2020. Currently no mining activities are in progress.
Processing and Recovery Operations
Kupol
The milling process consists of primary crushing and a SAG mill/ball mill grinding circuit and includes conventional gravity technology followed by whole ore leaching. Merrill-Crowe precipitation is used to produce gold and silver doré bars. Counter-current decantation wash thickeners recover soluble gold and silver, and a cyanide destruction system is used to reduce cyanide concentrations to an acceptable level for disposal. The tailings flow by gravity through a pipeline to a conventional tailings impoundment. Doré bars are shipped to the nonferrous metals plant in Krasnoyarsk. Average mill recovery, based on both Kupol and Dvoinoye ore, is 95% for gold and 85% for silver. The mill availability is 94%.
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The mill is designed to process ore on a two shift per day, 365 days per year schedule, at a rate of approximately 4,500 tonnes per day or 1,642,500 tonnes per year. This capacity was achieved through modifications in 2013 to provide capacity for Dvoinoye ore as well as from Kupol.
The Kupol mill is expected to process stockpiled ore from Kupol and Dvoinoye until 2025.
Dvoinoye
All ore from Dvoinoye is transported and processed at the Kupol mill.
Infrastructure, Permitting and Compliance Activities
Kupol
The Kupol mine is served by a permanent modular camp with a capacity of more than 650 people. Camp components consist of overflow housing in tents adjacent to the main facility, camp security, medical clinic, kitchen and cafeteria, laundry, recreational, and meeting facilities. Power is provided by a primary diesel generation station with a capacity of approximately 25 MW, as well as a 3 MW auxiliary power station. Approximately 30,000 m³ of diesel is transported from Pevek over the winter road and stored on site. Additional infrastructure includes a 1,800 metres long gravel airstrip and airport facilities, three ventilation portals with primary fans, shops for underground equipment located at each portal, tailings storage facility, offices, and freight storage and handling facilities at Pevek.
All permits required to operate under local, Provincial/State and Federal legislation are in place, and in good standing. The exploration program was fully permitted in accordance with Russian requirements. Additionally, permits have been received for exploration air and water usage, earthworks, site preparation, mill foundation, airstrip, explosive storage and usage, site roads and fuel tank construction. In September 2005 the State Commission on Mineral Resources, a branch of the Ministry of Natural Resources and Russian Federation Federal Agency of Subsoil Use, approved the Russian reserves for the Kupol deposit.
Kinross estimates the net present value of future cash outflows for site reclamation and remediation costs at Kupol under IFRS as at December 31, 2020, at approximately $59.0 million.
Dvoinoye
The Dvoinoye mine is served by a camp of lesser capacity (approximately 400 people) similar to Kupol. Camp components consist of administration offices, truck shop, warehouse, explosives storage, satellite communications, fuel tank farm, water treatment and sewage plant, freshwater wells and reservoir, fixed and portable crushing plants, container laydowns, ore and backfill waste stockpiles and waste dump. Road systems connect all facilities and provide access to Kupol by way of the Pevek road.
All permits required to operate under local, Provincial/State and Federal legislation are in place, and in good standing. Permits have been received for exploration air and water usage, earthworks, site preparation, explosive storage and usage, site roads and fuel tank construction.
Kinross estimates the net present value of future cash outflows for site reclamation and remediation costs at Dvoinoye under IFRS as at December 31, 2020, at approximately $15.3 million.
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Capital and Operating Costs
Kupol
Capital costs at Kupol consist of mine infrastructure and access development, as well as other sustaining capital, which includes mine equipment replacement and tailings facility expansions. Total estimated life of mine sustaining capital costs are approximately $71.3 million and is summarized in the table below.
Estimated Sustaining Capital for Life of Mine
Area | Sustaining Capital | |||
Capitalized Development | ($M) | 37.54 | ||
Mine Mobile Equipment | ($M) | 25.74 | ||
Tailings Facilities | ($M) | 3.98 | ||
Other | ($M) | 2.81 | ||
Site Infrastructure | ($M) | 0.80 | ||
Information Technology | ($M) | 0.39 | ||
Total | ($M) | 71.26 |
Estimated Operating Costs for Life of Mine
Area | Unit | Cost | ||
Mining | ($/t mined) | 57.8 | ||
Processing | ($/t processed) | 46.4 | ||
Site Admin | ($/t processed) | 54.1 |
Dvoinoye
Dvoinoye capital expenditures are estimated to total $3.5 million over its remaining operations and are summarized in the table below.
Estimated Sustaining Capital for Life of Mine
Area | Sustaining Capital | |||
Mine Mobile Equipment | ($M) | 3.40 | ||
Site Infrastructure | ($M) | 0.06 | ||
Total | ($M) | 3.46 |
Estimated Operating Costs for Life of Mine
Area | Unit | Cost | ||
Mining | ($/t mined) | - | ||
Processing | (included in Kupol) | - | ||
Site Admin | ($/t processed) | 47.9 |
Exploration, Development, and Production
The 2020 Kupol and Dvoinoye exploration programs tested multiple priority targets generated through previous technical reviews and subsequent exploration programs conducted in 2019. The 2020 exploration campaigns focused on the rapid evaluation of the existing project pipeline as well as the development of both new extensional and regional targets.
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The 2021 exploration program for the Northern Gold licenses will follow-up on high-potential targets that were identified during 2020 in addition to testing new targets. Approximately 25,000 metres of exploration drilling are planned to be completed within licenses during 2021.
Additionally, the 2021 exploration program for the rest of the region will continue follow-up works on high-potential target areas along with the testing of newly delineated regional targets. Approximately 100,000 metres of drilling has been planned for completion in the Kupol, Dvoinoye and prospective regional target areas during the 2021 exploration campaign.
Tasiast, Mauritania
General
The Tasiast mine and the primary exploitation permit are owned by Tasiast Mauritanie Limited S.A. (“TMLSA”), a wholly owned subsidiary of Kinross. An affiliate of TMLSA currently holds two exploitation permits whose underlying lands are contiguous to the Tasiast mining exploitation lands (collectively, the “Tasiast Lands”). The two exploitation permits were received in December 2014, as a result of the conversion of two exploration permits, and expire in December 2044.
As part of the December 2014 conversion process of two exploration permits, Kinross has undertaken to transfer to the Government of Mauritania a 10% carried interest in Société d’Extraction du Nord de l’Inchiri S.A. (“SENISA”), the Kinross affiliate holding the two exploitation permits. Other than the 10% carried interest in SENISA that Kinross has undertaken to transfer to the Government of Mauritania, all permit-holding affiliates of Kinross, including TMLSA, are wholly-owned indirect subsidiaries of Kinross. Kinross acquired TMLSA, including the Tasiast operation and exploitation and exploration permits and lands, through its acquisition of Red Back Mining Inc. (“Red Back”) in September 2010.
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In September 2019, Kinross completed a Feasibility Study to incrementally increase throughput capacity at Tasiast from approximately 15,000 t/d throughput to 24,000 t/d. The project is expected to ramp up to 21,000 t/d by the end of 2021, and then to 24,000 t/d by mid-2023. Throughput increases are expected to be achieved through minor upgrades and debottlenecking initiatives in the plant. The project includes modifications to the existing grinding circuit, adding new leaching and thickening capacity, as well as incremental additions to onsite power generation and water supply.
Technical Report
Please see the Company’s National Instrument 43-101 Technical Report dated October 31, 2019 in respect of Tasiast, prepared by John Sims, available at www.kinross.com and under the Company’s profile on SEDAR (www.sedar.com). Detailed financial, production and operational information for the Tasiast mine is available in Kinross’ MD&A for the year ended December 31, 2020.
Property Description, Location and Access
The Tasiast Lands are located in northwestern Mauritania, approximately 300 kilometres north of the capital Nouakchott and 250 kilometres southeast of the major city of Nouadhibou. The Tasiast Lands fall within the Inchiri and Dakhlet Nouadhibou Districts.
The Tasiast Lands are accessed from Nouakchott by using the paved Nouakchott to Nouadhibou highway for 370 kilometres and then via 66 kilometres of graded mine access road which is maintained by TMLSA. An airstrip at the mine site is used for light aircraft primarily travelling to and from Nouakchott. The principal ports of entry for goods and consumables are either Nouakchott or Nouadhibou. Materials are transported by road to the mine site. Routine access within the country is provided by an 11,000 kilometres long road network, comprising approximately 3,000 kilometres of paved highways and approximately 8,000 kilometres of unpaved highways as well as numerous desert tracks. A paved 470 kilometre long, two-lane highway runs between the cities of Nouakchott and Nouadhibou.
The Tasiast mine is owned and operated by TMLSA under exploitation Permit No. 229C2 (“PE No. 229”). The mining operations and infrastructure (as contemplated in the 43-101 Technical Report dated October 31, 2019) lie entirely within the lands subject to PE No. 229.
The mining operations and infrastructure are located entirely within the 312 square kilometre “Guelb El Ghaîcha” exploitation permit (PE No. 229). PE No. 229 is located centrally within two bordering exploitation permits, totalling 1,597 square kilometres. The Guelb El Ghaîcha permit is owned by TMLSA. The adjacent permits (known as Tmeimichat and Imkebdene) are held by SENISA. These permits are all in good standing.
Surface rights are granted along with PE No. 229, and applicable fees are paid annually, as determined by decree under the Mining Code. Surface rights for the permit are in good standing, and there are no competing mining rights in the area.
Exploration permits grant exclusive exploration rights over a specific block (maximum of 1,000 square kilometres) and are granted for a three-year period, renewable twice for up to three years at each renewal. Exploitation permits are granted for 30 years, and are renewable for periods of 10 years each. A condition of each permit is that the holder is required to hire Mauritanian tradespersons to provide services, and to contract with national suppliers and businesses in preference to foreign service providers, where the national suppliers and businesses can offer at least the same terms, quality and pricing.
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A royalty equal to 3% of the selling price of the product resulting from the final ore processing stage in Mauritania is payable to the Mauritanian government in accordance with the applicable Mining Convention. On June 15, 2020, TMLSA signed an agreement in principle with the Government of Mauritania, which, among other things, introduced an additional sliding scale royalty that ranges from 2.5% (at a gold price between $1,400 to $1,599 per ounce) up to 3.5% (at a gold price of $1,800 per ounce or more)6. This amount is in addition to the 3% royalty payable under the Mining Convention and TMLSA began paying the royalty upon signing the agreement in principle. Tasiast is also subject to a 2% royalty payable to a subsidiary of Franco-Nevada Corporation on life of mine gold production. This 2% royalty will also apply to any eventual production from SENISA from its first ounce produced.
History
In 1996, the Office Mauritanien de Recherches Géologiques completed a regional reconnaissance exploration program within and around the Tasiast area. The results of this program were made available to third parties. As a result, Normandy LaSource Development Ltd. (“NLSD”), a subsidiary of Normandy Mining Ltd. of Australia, acquired the Tasiast area.
In 2001, NLSD was acquired by Newmont Mining Corporation creating Newmont LaSource. Midas Gold plc (“Midas”) was incorporated in England and Wales in 2002 for the purpose of acquiring Newmont LaSource’s assets in Mauritania, including exploration permits over lands hosting the Tasiast deposit, as well as various other permit areas. Midas completed its acquisition of the Tasiast deposit from Newmont LaSource on April 1, 2003, and in April 2003, Geomaque Explorations Inc. (“Geomaque”) announced the acquisition of Midas. The merger of Geomaque and Midas ultimately created a new entity; Defiance Mining Corporation (“Defiance”). In June 2004, Rio Narcea Gold Mines Ltd. (“Rio Narcea”) acquired Defiance and took ownership of the Tasiast deposit.
Red Back acquired the Tasiast project from Lundin Mining Corporation (“Lundin”) in August 2007, following Lundin’s acquisition of Rio Narcea.
Kinross acquired the Tasiast gold mine on September 17, 2010 through its acquisition of Red Back. As required by Mauritanian law, the operation is carried out by TMLSA, which is incorporated under the laws of Mauritania.
Mining at Tasiast commenced in April 2007 and the mine was officially opened by the President of Mauritania on July 18, 2007. Commissioning of the Tasiast plant continued through 2007 with commercial production declared in January 2008.
Geological Setting, Mineralization and Deposit Types
The Tasiast district is situated in the south-western corner of the Reguibat Shield, which is a north-east trending crustal block of the West African Craton. The Reguibat Shield contains the oldest rocks in Mauritania and consists of two major subdivisions separated by a crustal-scale shear zone representing a major accretionary boundary. The southwestern part (which hosts the Tasiast deposits) consists of Mesoarchean to Paleoproterozoic rocks that include high-grade granite-gneiss and greenstone belt assemblages. The north-eastern part of the shield consists of younger Paleoproterozoic to Neoproterozoic successions, which hosts many orogenic gold occurrences in the West African Craton. This region is characterized by a series of volcanosedimentary belts and associated batholithic-scale granitic intrusive suites of different ages cut by major shear zones.
The district scale geology is characterized by basement rocks, largely composed of orthogneiss, overlain by deformed north-striking metavolcanic and metasedimentary successions intruded by stocks and plutons of mafic to intermediate composition (granite-greenstone belts). All of the rock units are cut by unfoliated and post-mineral mafic (gabbroic) dikes.
The Tasiast Mine consists of two deposits hosted within distinctly different rock types, both situated within the hanging wall of the Tasiast thrust. The Piment deposits are hosted within metasedimentary rocks including metaturbidites and banded iron formation. The West Branch geology succession comprises mafic to felsic volcanic sequences, iron-rich formations and clastic units that have undergone mid greenschist to lower amphibolite facies metamorphism and multiple deformation events.
6 See the Company’s press release date June 15, 2020 for full details of the royalty.
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The Tasiast gold deposits fall into the broad category of orogenic gold deposits. The regional geological setting and deposit features at Tasiast are similar to other well known Archaean lode gold deposits hosted along greenstone belts in granitoid greenstone terranes.
Exploration
Exploration activities have been undertaken by TMLSA and its precursor companies.
Numerous phases of geological and regolith mapping have been undertaken during the life of the project, and range from regional (1:100,000) to prospect (1:1,000) scale. Mapping was facilitated by good outcrop, RC, and DD drilling, high resolution satellite imagery and detailed airborne geophysical data. Results were used to identify areas of alteration, structural complexity, quartz-carbonate veining, and sulphide outcrop that warranted additional work.
A total of 20,524 surface samples have been collected by Kinross since it started operating the project, including soil samples (40%) and rock samples (60%) that cover a surface area of approximately 1000 square kilometers. In addition, 299 auger drill samples were collected during 2016. Soil samples were collected by a contractor and supervised by Kinross staff. The sample grid was generally west-east with lines spacing at 800 metres and sample spacing at 200 metres. The geochemical sampling includes exposed geology as well as areas covered by sand; in which the bedrock was sampled with auger drilling. Accordingly, the geochemical dataset has the potential to identify areas of prospective mineralization, otherwise blind from surface mapping. Surface exploration geochemistry samples were analyzed for gold and multi-element geochemistry.
To complement the surface exploration geochemistry, a geochemical study is being conducted to characterize the geochemical footprint of proven economic mineralization. The study so far indicates that the dominant gold pathfinders are As, S, Ag, and Te. In addition, the lithogeochemical footprint of the known deposits is being characterized to detect the chemical attributes of rocks that are better chemical traps to gold mineralization. Collectively, the geochemistry of the known deposits is used to evaluate mineralization potential and to delineate areas with target and pathfinder metal anomalies for follow-up exploration such as infill surface geochemistry, geophysics, and ultimately drilling.
Airborne magnetic-radiometric surveys were completed by NLSD (2000-2001) and Red Back (2007). These surveys were mainly used to map out lithological formations and major structures. In 2008-2009, Red Back completed a helicopter-borne electromagnetic (VTEM) survey. In 2011, Kinross completed airborne magnetic and radiometric surveys over the complete license package. This survey overlapped the previous survey and generated a higher resolution version. In 2013, Kinross completed ground based gravimetric and induced polarization (PDIP/IP) surveys. The gravity survey covered the complete license package while the IP surveys covered only specific prospect areas; South West Branch South, Fennec, C67, C68 and Morris. In 2014, a comprehensive review was completed by a consulting geophysicist, along with some reprocessing of the magnetic data.
Excavation of trenches as an exploration technique has been very successful at Tasiast. In total, 445 trenches for 100,527 metres have been completed across the Tasiast lands. Historically, trenches were completed manually, and more recently, trenches are completed using an excavator. The standard, excavated trench dimension is approximately 2 metres wide and not more than 1.5 metres deep and typically sampled every 2 metres along the full length of the trench.
Drilling
To date, 15,422 drill holes (14,348 RC, 840 diamond core and 234 RC-DD) for an aggregate total of 1,687,765 metres have been completed within the three mining licenses that constitute the Tasiast project area; Guelb El Ghaîcha, Imkebdene and Tmeimichat. Drilling activities were conducted by various drilling contractors and supervised by geological staff of TMLSA. Where programs are referred to by company name, that company was the project manager at the time of drilling and was responsible for the collection of data.
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Drill programs were completed primarily by contract drill crews, supervised by geological staff of the Project operator. Where programs are referred to by company name, that company was the Project manager at the time of drilling and was responsible for the collection of data.
In 1999 and 2000 NLSD completed approximately 385 holes totalling 33,435 metres. In 2003 and 2004, Defiance completed approximately 225 holes for 19,121 metres. Rio Narcea completed 246 holes for 24,024 metres between 2004 and 2007. Red Back completed 5,857 drill holes for 522,844 metres from August 2007 up until the completion of the acquisition by Kinross in September 2010.
Upon closing of the Red Back acquisition in 2010, Kinross further accelerated drilling activities and by 2011, a total of 23 drill rigs were operating on site. From 2010 to 2012, drilling was primarily aimed at resource and reserve growth of the West Branch deposit. In addition, drilling activities to support mining studies were completed such as geotechnical, hydrogeological and metallurgical. From 2013 to 2015 drilling shifted focus to the northern licenses; Tmeimichat and Imkebdene licenses with an aim to define resources that could be used in a study to support the conversion of both licenses from prospecting to exploitation. From 2016 to 2020 drilling refocused back on the Guelb El Ghaîcha license and continued to test near-mine exploration targets. In total, Kinross has completed 8,592 drill holes for 1,076,115 metres (71% reverse circulation, 17% diamond core and 12% combination RC-DC).
Sampling, Analysis and Data Verification
Laboratory analysis of drill samples has been completed in accordance with standard industry practices. Samples from the exploration and resource drilling programs at Tasiast have been analyzed at both the onsite “Mine lab” managed first by SGS Mineral Services (“SGS”), later by ALS Global (“ALS”) and presently by MSA Labs. In addition, numerous external analytical labs were used during the West Branch Resource drilling program (approximately 2008 – 2012).
TMLSA exploration and resource drill sample pulps have been consistently analyzed for gold using a 50 gram fire assay with an AAS finish and using minimum detection limit of 0.01 parts per million or grams per tonne and gravimetric finish on samples > 5 g/t Au.
As part of the construction phase of the Tasiast mining operation by Red Back an on-site analytical facility was also built and commissioned in 2007. The lab was managed under contract by SGS from commissioning through September 2012. Between September 2012 and May 2019 the lab was managed by ALS but since then it has been managed by MSA Labs.
Samples are collected, prepared and delivered to the analytical laboratory facilities under the supervision of the TMLSA geological staff. Sample job orders or batches include duplicates, blanks and certified reference materials. In the case that samples were sent to off-site external laboratories for analysis, chain of custody procedures were followed and included sample submittal forms that are sent to the laboratory, along with the sample shipments, to ensure that all the same samples are received by the laboratory.
QA/QC procedures consisted of inclusion of blanks, duplicates and certified reference material (standards) with each batch. The QA/QC samples typically amount to approximately 10% of all samples shipped. QA/QC results are reviewed prior to inclusion of sample results in the project database. QA/QC failures were dealt with immediately and typically involve a re-analysis of the batch of samples with QA/QC failures.
An independent, external consultant completed an audit of the QA/QC and sample data in 2013 for inclusion in prior Tasiast mineral resource estimates (applicable to the 2016 Technical Report). The audit also reviewed the sampling process, and on-site laboratory. The audit concluded that the analytical data are within the industry accepted standards and suitable for use in mineral resource and reserve reporting.
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Mineral Processing and Metallurgical Testing
The Tasiast mineralization is free-milling and amenable to gold extraction by simple cyanide leaching. The existing mill has been operating since 2008, initially treating oxide banded iron hosted mineralization yielding a typical gold recovery of 93%. Gold recovery from fresh ore, which forms an increasing portion of the mill feed since 2010, varies between 91% and 93%. A proportion of the gold is coarse and responds well to gravity concentration. Gold mineralization is associated with structurally controlled faults and shears, quartz-veining and silica-flooding. Gold grains observed in the exploration core holes are seen in isolated grains in quartz veins and are closely associated with pyrrhotite. The mineralization has relatively low levels of sulphides of approximately 1% to 5%, predominantly represented by pyrrhotite and to lesser extents pyrite, arsenopyrite, and chalcopyrite. Other metal contents are low such as silver approximately 1 ppm to 2 ppm, copper approximately 100 ppm, arsenic approximately 10 ppm and very low levels of mercury, less than 0.3 ppm Hg.
The bulk of the metallurgical test work has been done to evaluate the optimum process for the West Branch ore which has become the major source to the processing plant. Major metallurgical sampling campaigns were conducted on the West branch mineralized zone and test work to optimize the cyanide addition rate and grinding tests were completed.
Extensive metallurgical testing was completed on West Branch samples, twinned hole samples and deeper level variability samples. In general, test work indicated that the ore was amenable to gravity recovery and cyanide leaching, resulting in selection of a flow sheet similar to that of the existing plant.
Mineral Resource and Mineral Reserve Estimates
Refer to the “Kinross Mineral Reserves and Mineral Resources” section for quantity, grades and category. Assumptions are outlined in the Notes – 2020 Kinross Mineral Reserve and Mineral Resource Statements in the “Kinross Mineral Reserves and Mineral Resources” section.
Mining Operations
Ore and waste rock is mined in 10 metre benches by conventional open pit methods primarily from the West Branch pit. Tasiast currently operates a load and haul fleet of 46 CAT 793D (220 ton) trucks, five Komatsu 785 (92 t) and five CAT 6060 shovels plus two RH340B excavators. Blasting techniques, including presplit and buffer hole blasting, are employed to protect the pit walls. The grinding circuit produces a product size of 80% passing 90 microns which is processed in a conventional carbon-in leach (“CIL”) circuit to produce gold bullion. Gold recovery averages 93%. Tailings slurry from the CIL process is currently pumped to the tailings storage facility 4 (TSF4).
Commercial production of gold at Tasiast began in January 2008. Approximately 3,063 k oz has been produced up to the end of 2020.
Ore and waste rock is mined by conventional open pit methods from two pits (West Branch and Piment). Prior mining has taken place in West Branch, Piment and several other smaller pits at Tasiast. From September 2010 when Kinross acquired the property to the end of 2020, a total of 695 million tonnes of material have been mined from various pits, including 53 million tonnes in 2016, 75 million tonnes in 2017, 87 million tonnes in 2018, 85 million tonnes in 2019 and 58 million tonnes in 2020.
The current mill operates at approximately 15,000 t/d. Ore is fed directly from the mine and stockpile to the primary crusher. Sub-grade material is stockpiled adjacent to the ROM pad for later treatment.
The existing shovel and haul truck fleets will be used for the duration of mining and no replacement of this equipment is anticipated. Equipment life has been projected from actual operating hours, with estimates of future usage based on the mine plan.
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Waste rock is used for haul road and tailings dam construction as needed. The existing road network is well developed, and requires continued maintenance. Additional roads will also be required throughout the life of the mine. These roads will be constructed using the current mining and support mining fleets.
Processing and Recovery Operations
Upon the completion of the Phase One expansion in 2018, a new front end gyratory crusher and a 40ft x 25ft, 26.5 MW Gearless Mill Drive SAG mill were commissioned and have proven capable of processing approximately 15,000 t/d.
Tasiast 24k is planned to further build upon Phase One and is designed to increase the existing CIL plant capacity in stages through a debottlenecking exercise which includes modifications to the existing grinding circuit, adding new leaching and thickening capacity, as well as incremental additions to onsite power generation and water supply. The project schedule is designed to incrementally alleviate each bottleneck in order of priority to first achieve 21,000 t/d by the end of 2021, and then advance to 24,000 t/d by mid-2023.
Infrastructure, Permitting and Compliance Activities
Raw water for the Tasiast site is from a water supply bore field, which is located 64 kilometres west of the mine, and draws from a brackish aquifer using a system of 43 wells. Individual well yields range from 340 to 1,000 cubic metres per day (m3/d) as determined during pump testing completed in June 2015. Individual wells within three separate well areas are combined in a manifold for each area and fed to a primary pumping station located at a facility referred as the Sondage. Water from the Sondage is transported to site via pipelines with booster stations downstream. Currently, the bore field is capable of supplying up to 22,000 m3/d of raw water. However, the existing pipelines are limited to approximately 16,000 m3/d of raw water to the site based on the capacity of the pumping system.
Electric power is provided by the following installed generation equipment: the Phase 1B plant consisting of four Heavy Fuel Oil (“HFO”) fired (with Light Fuel Oil (“LFO”) back-up) Wärtsilä 12V32 medium speed generator sets, with a total capacity of approximately 19 MW; the Phase 1 plant consisting of seven LFO CAT 3512 MUI high-speed generator sets and three HFO CAT MaK 6CM32C medium-speed generator sets, with a total capacity of approximately 14 MW; and a 13 MW HFO plant, which is rented from Aggreko plc.
Waste from plant and equipment maintenance, construction, offices, kitchens and accommodation is processed at the waste management facility where materials are sorted for reuse, recycling, or incineration. Composters are also used in the camp to process food waste into compost for use in tree planting initiatives. Sewage is collected and pumped to the wastewater treatment plant with treated effluent recycled back into the process or reused in road watering or vegetation projects. In remote locations septic tanks and leach beds are used.
All necessary exploitation permits for Phase One and the Tasiast 24k have been granted by the relevant Mauritanian authorities. Following discussion with the Government, an addendum to the Phase Two EIA was submitted and approved that described the project optimization through incremental increases in production and relocation of certain infrastructure. This addendum was approved by the Ministry of Environment in February 2016 and the Ministry of Mines in March 2016. An application is pending with Mauritanian authorities for the installation of additional wells at the Sondage.
Kinross
estimates the net present value of future cash outflows for site reclamation and remediation costs at Tasiast under IFRS as at
December 31, 2020, at approximately $10.2 million.
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Capital and Operating Costs
The Tasiast 24k debottlenecking project total capital cost estimate remains at $150 million, of which approximately $100 million will be spent in the 2020-2023 time period.
The Tasiast “life of mine” operating costs are split into four primary categories: Mining, Processing, Site Administration, and Other. See “Operating Cost Estimates” for a summary of the basis of estimate for these categories. Processing consists of the CIL Mill and existing Dump Leach operations. Note that no new ore is being placed on the dump leach pads, and rinsing has begun.
Capital Cost Estimates
Category |
Total
Cost
($M) |
|
Mill expansion project capital | 104 | |
Non-sustaining capitalized mine development | 781 | |
Planned Component Replacement | 145 | |
Subtotal – non-sustaining capital | 1,030 | |
Sustaining capitalized mine development | - | |
General sustaining capital | 254 | |
Subtotal – sustaining capital | 254 | |
Total capital cost | 1,284 |
Operating Cost Estimates
Operating Cost | Unit | 2022-20287 | 2029-2033 |
2020-2033
(Life-of-Mine) |
||||
Mining | ($/t mined)8 | 2.40 | 2.65 | 2.45 | ||||
Processing (Mill) | ($/t processed) | 14.20 | 14.20 | 14.479 | ||||
Processing (Dump Leach) | ($/t processed)10 | N/A | N/A | N/A | ||||
Site Admin | ($M/a) | 48 | 46 | 49 | ||||
Other | ($/oz sold) | 80.3 | 81.1 | 81.1 |
Exploration
Exploration efforts to date have discovered additional prospects, gold deposits and mineral resources along strike to the North and to the South of the main Tasiast mine area (West Branch and Piment-Prolongation), and generally along the Aouéouat (Tasiast) belt. The deformed greenstone rocks to the west (Imkebdene-Kneiffissat) of the Aouéouat belt are notable in that they host quartz-carbonate veins with anomalous gold values, however to date no significant deposits or mineral resource have been defined. To the immediate north of the Tasiast operation (5-12 kilometers) and within the Guelb El Ghaîcha license, a cluster of deposits referred to as “North Mine Satellites” have been outlined, these are Fennec, C67 and C68. These gold deposits currently host approximately 0.5 Moz Au and are part of the near-mine resource growth strategy. Further north of the Tasiast operation (12-25 kilometers) and within the Imkebdene and Tmeimichat licenses are another cluster of gold deposits referred to simply as “Morris”, these are Tef, Askaf, Central, NE, N1 and N2. This large area saw extensive exploration drilling from 2012 to 2014, which resulted in the discovery of several small deposits best described as narrow, high grade vein systems. Most of these deposits are open to depth down plunge.
7 Ramp-up to 21,000 t/d by end of 2021 and 24,000 t/d by mid-2023.
8 Excludes capitalized maintenance.
9 CIL only, excludes dump leach.
10 No additional tonnes placed on dump leach 2020+. Decommissioning of the dump leach is planned to be completed by 2022.
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Beyond 25 kilometres from the Tasiast operation, within the northern extents of the Imkebdene and Tmeimichat licenses, are several gold exploration prospects that are pending follow up exploration and drilling, of note are C23, Kneiffissat and Grindstone. These prospects have significant surface geochemical footprints and are considered highly prospective.
Other Kinross Properties
Fort Knox and Area, Alaska, United States
The Fort Knox mine is owned and operated by Kinross’ wholly-owned subsidiary Fairbanks Gold Mining Inc. (“FGMI”). The Fort Knox property is located in Fairbanks North Star Borough, Alaska and includes the main Fort Knox open pit mine, mill, tailings storage facility, heap leach facilities, the Gil-Sourdough Exploration project, and the former True North mine site (was successfully returned to the State of Alaska in 2020). Detailed financial production and operational information for the Fort Knox mine is available in Kinross’ MD&A for the year ended December 31, 2020.
Fort Knox is located 42 kilometres by road northeast of the city of Fairbanks, Alaska. The Fort Knox property encompasses 31,204 hectares. FGMI controls a large and diverse group of properties that comprise its mineral holdings in the Fairbanks Mining District. These properties include State of Alaska mining claims, patented claims, and private land. Some of the claims are owned outright, while others are controlled through leases. The Fort Knox mine and facilities are situated on approximately 3,517 hectares of land, owned by the State of Alaska. The project area is predominantly covered by the Amended and Restated Millsite Lease, which covers approximately 2,640 hectares. The Fort Knox ore body is predominantly located within the Fort Knox Upland Mining Lease, entered into with the Alaska Mental Health Trust Land Authority. The portion of the ore body that extends to the west was converted to a State Upland Mining Lease in 2019.
The State of Alaska Upland Lease carries a 3% production royalty, based on net income and recovery of initial capital investment. Mineral production from State mining claims is subject to a mine license tax, following a three and a half year grace period after production commences. There has been no production from State claims situated outside the boundaries of the Upland Mining Leases at the Fort Knox Mine. The final royalty calculation is expected to be prepared in Q2 2021.
All requisite permits have been obtained for mining of the Fort Knox ore reserves and are in good standing in all material respects. The current expansion project for waste rock was approved by the applicable agencies in 2019.
Mining at the True North open pit is complete. Reclamation started in 2012 and reached full completion is 2020. FGMI was released from the Millsite lease in 2020 and the property was successfully returned to the State of Alaska.
Power is provided to the mine by Golden Valley Electric Association’s power grid, serving the area over a distribution line paid for by Kinross.
Access to the Fort Knox mine from Fairbanks is by 34 kilometres of paved highway and eight kilometres of unpaved road. The area has a subarctic climate, with long, cold winters and short summers.
Kinross estimates the net present value of future cash outflows for site reclamation and remediation costs at Fort Knox under IFRS as at December 31, 2020, at approximately $111.3 million.
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The Fort Knox deposit is mined by conventional open pit methods. Higher grade ore from the Fort Knox mine is processed at Kinross’ carbon-in-pulp mill located near the Fort Knox mine. The mill generally processes ore 24 hours per day, year-round and has a daily capacity of between 20,000 and 45,000 tonnes. Lower grade ore is processed on a dedicated leach pad that was commissioned in 2009. An additional dedicated leach pad was commissioned in Q4 2020.
The first Fort Knox heap leach facility is located in the upper end of the Walter Creek drainage, immediately upstream of the tailings storage facility. Construction began in 2008 and is separated into a total of seven stages covering approximately 196 hectares with a total capacity of 278 million tonnes. The first stage of the heap leach facility went into operation in the fall of 2009. The second Fort Knox heap leach facility is located in the Barnes Creek drainage. Construction began in 2018 and is separated into a total of six stages covering 117 hectares with a total capacity of 191 million tonnes. The facility includes two carbon-in-column (“CIC”) plants with a capacity of 61,000 litres per minute. ROM ore is hauled from the pit and from existing stockpiles and loaded onto the leach pads in 15 metre lifts. Leach solution flows through the loaded ore into two in-heap storage reservoirs. The pregnant solution is pumped to the CIC plants located adjacent to the existing mill. After the pregnant solution has been processed through the CIC plants, barren solution is pumped back to the heap leaches to recirculate.
The final year for ore processed through the Fort Knox mill, which includes ore from the Manh Choh project, is currently expected to be 2028. Fort Knox pit production is expected to continue through 2027. The heap leach facilities are expected to continue production through 2030.
Fort Knox continues to evaluate the potential to expand the existing operation within the available land package through exploration evaluation of projected gold mineralization.
Round Mountain, Nye County, Nevada, United States
The Round Mountain mine is owned and operated by Kinross’ wholly-owned subsidiaries Round Mountain Gold Corporation and KG Mining (Round Mountain) Inc. On January 11, 2016, Kinross acquired the remaining 50% interest from two affiliates of Barrick. Prior to this acquisition, Kinross owned an undivided 50% interest in the joint venture common operation known as the Smoky Valley Common Operation (“SVCO”). Kinross acquired its initial interest in Round Mountain in January 2003. Detailed financial, production and operations information for Round Mountain is available in Kinross’ MD&A for the year ended December 31, 2020.
The Round Mountain mine is located approximately 90 kilometres north of Tonopah in Nye County, Nevada. The Company controls the mineral and surface rights covering approximately 22,907 hectares through ownership or lease of patented and unpatented mining claims.
Mine production at the Round Mountain pit was subject to a 6.35% net smelter return royalty; however, the terms of this royalty agreement were amended in August 2017. This amended royalty agreement consists of a sliding scale royalty, that ranges from 4% (at a gold price of $1,200 per ounce or less) up to 7.15% (at a gold price of $1,400 per ounce or more). The 2020 royalty expense was $34.0 million. Round Mountain is also currently subject to the state of Nevada Net Proceeds Tax at a 5% rate payable on gross proceeds from the sale of minerals (adjusted for certain allowable deductions). The 2020 Net Proceeds Tax is estimated at $8.4 million. This amount remains subject to state regulations.
The first gold production from the Round Mountain district occurred in 1906. The original SVCO was formed in 1975 to operate the mine and commercial production commenced in 1977. The site has produced approximately 15.4 million ounces of gold since inception. A total of 535,974 ounces was produced prior to the SVCO partnership. A series of ownership changes occurred which eventually led to the 50-50 ownership by Barrick and Kinross that was in place until the acquisition that closed in early 2016.
The Round Mountain mine currently operates a conventional open pit that is approximately 11,000 feet long in the north-west, south-east direction and 8,800 feet wide. The operation uses conventional open-pit mining methods and recovers gold using three independent processing operations. These include crushed ore heap leaching (reusable pad), run-of-mine ore heap leaching (dedicated pad) and a mill equipped with gravity/flotation circuits. Lower grade oxidized ores are placed on dedicated pad which is typically leached for 120 days, while the higher grade oxidized ores are crushed and placed on the reusable pad leached for 60 days and then relocated to the dedicated pad.
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Kinross estimates the net present value of future cash outflows for site restoration and reclamation costs at Round Mountain under IFRS as at December 31, 2020, at approximately $185.1 million.
The Gold Hill mine is a small deposit located near the Round Mountain mine. Gold Hill is approximately 3,000 feet long in the east-west direction and up to 2,600 feet in the north-south direction. The mine is operated as an independent operation also using conventional open-pit mining methods. The ore consists of oxide material that is placed directly on a dedicated heap leach pad. Gold Hill is currently expected to end in 2022. Exploration around the mine area will continue looking for targets to the west and south of the current Round Mountain deposit.
Construction and commissioning of the Phase W project at Round Mountain was completed in 2019, which included the construction of major infrastructure such as the heap leach pad, vertical carbon-in-column plant (“VCIC”), truck shop, wash bay, warehouse and fueling areas. The project was fully transferred to the operations team and production started in 2019, with the first gold bar from the completed VCIC poured in May 2019. Stripping and dewatering activities progressed well and are expected to continue until mid 2021.
Bald Mountain, White Pine County, Nevada, United States
The Bald Mountain mine is owned and operated by Kinross’ wholly-owned subsidiary KG Mining (Bald Mountain) Inc. (“KGBMI”). Kinross acquired 100% of the Bald Mountain mine and an associated land package from an affiliate of Barrick on January 11, 2016.
The Bald Mountain mining district is located at the southern end of the Ruby Mountains in east-central Nevada, White Pine County, at the southeastern end of the Carlin Gold Trend.
Pursuant to the terms of the acquisition, Barrick obtained a right to receive a 2% net smelter returns royalty on future gold production from Kinross’ 100% owned Bald Mountain lands following the post-closing production of 10 million ounces from such lands. In addition, portions of the Bald Mountain lands are subject to royalty agreements with third parties. As part of the acquisition arrangement with Barrick, Kinross and Barrick entered into a 50/50 exploration joint venture on approximately 52,000 contiguous acres. In late 2018, Kinross purchased Barrick’s 50% interest in the joint venture for cash and a 1.25% net smelter returns royalty on that property. Ten royalty areas now exist with several of the areas subject to more than one royalty. Some of these royalty areas affect current as well as future production from the Bald Mountain lands, depending upon the actual mining location. Both fixed and sliding scale royalties exist. At gold prices above $1,000 per ounce, all of the sliding scale royalty agreements have topped-out. Royalties range from one percent of gross sales to as high as nine percent of gross sales. In addition, Bald Mountain is subject to the state of Nevada Net Proceeds Tax at a 5% rate, whereby gross proceeds from the sale of minerals will be adjusted for certain allowable deductions.
Placer gold (with minor copper, silver, and antimony) was initially mined in the Bald Mountain area from the 1870s to 1890s. Modern exploration for bulk disseminated gold deposits commenced in the late 1970s. Since 1977, gold exploration has mainly focused on defining the outcropping, oxide gold deposits. In 1981, Amselco Minerals began modern open pit mining and cyanide gold recovery via a mill in the Alligator Ridge-Vantage area in the southern portion of the district. Numerous small ore bodies were mined and heap leached by USMX Inc. from 1988 to 1993 in the southern and eastern areas of the district. Placer Dome Inc. mined several pits in the northwest area from 1983 to 2005. Placer Dome Inc. acquired the USMX properties in 1993 and consolidated the district into one claim block. Barrick acquired Placer Dome in January 2006 to become 100% owner and operator of Bald Mountain, until the 2016 acquisition by KGBMI. Both the North and South areas are 100% Kinross-owned.
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The Bald Mountain operation is an open pit mining operation with production from a number of different pits. The three main deposits (Top, Saga and Vantage) represent approximately 74% of the known reserves. Bald Mountain includes several other deposits scattered over the property, and three ROM heap leach pads (Bald Mountain, Mooney and Vantage).
Bald Mountain recovers gold using multiple ROM heap leach pads. Gold is extracted from the ore with a cyanide solution and collected on activated carbon in column plants. Loaded carbon is shipped off-site for further processing and ultimate gold refining. The mining recovery is high because the ore blocks are large compared to the selective mining unit, and nearly all of the material outlined as ore in the grade control process is mined. Whenever possible, ore blocks are oriented square to the dig direction – minimizing ore loss and dilution.
Based on the 2020 mineral reserves, Bald Mountain is expecting to continue mining through 2023 with several years of post-mining gold production from the heap leach pads. Kinross estimates the net present value of future cash outflows for site reclamation and remediation costs at Bald Mountain under IFRS as at December 31, 2020, at approximately $110.9 million.
Kinross spent $6.5 million on continued exploration efforts at Bald Mountain during 2020. Exploration consisted of drilling near-mine targets that are proximal to its current operations, as well as target delineation and early-stage drill testing of high-potential targets throughout the enormous land position (532 square kilometers). Six near-mine targets were drilled, resulting in the addition on 154,000 ounces of gold to the mineral inventory at a cost of about $1.6 million. A total of $3.5 million was spent on generative exploration with 14 targets drilled in 2020. The generative program included early-stage evaluation work consisting of examination of previous work, geologic mapping, sampling, and target definition that advanced an additional 5 targets on the property for 2021 drill testing.
La Coipa, Chile
Kinross acquired its initial 50% interest in the La Coipa mine in January 2003. Following the completion of an asset swap transaction with Goldcorp on December 21, 2007, Kinross acquired the remaining 50% interest previously owned by Goldcorp. The mine and plant suspended activities in October 2013, while evaluation of several nearby mineralized zones was pursued. In February 2020, Kinross approved the La Coipa Restart project which expects production from the Phase 7 deposit to commence in mid-2022.
The La Coipa mine, located approximately 1,000 kilometres north of Santiago in Chile’s Region 3 (Atacama), consists of eight deposits (notable deposits being Phase 7, Puren, Coipa Norte, Can Can, and Catalina), which are owned by MDO, a Chilean subsidiary of Kinross, except for (i) Puren, which is owned through a joint venture between MDO and Codelco-Chile, with participation interests of 65% and 35%, respectively, and (ii) Catalina, with participating interests of 75% and 25%, held by MDO and Minera del Norte, respectively.
The La Coipa mine consists of approximately 44,912 hectares of exploitation concessions (including Puren, which consists of approximately 4,423 hectares). In addition, and as described above, Kinross currently holds a 100% interest in the Phase 7 deposit which includes claims covering approximately 136.5 hectares next to La Coipa mine.
No royalties are payable on gold and silver produced from the La Coipa mine properties. A 35% withholding tax is applicable on all dividends disbursed to foreign shareholders, less the corporate income tax already paid. In addition, a mining tax is applicable, the specific applicable tax rate being based on a progressive scale that ranges from 0.5% to 4.5% based on the volume of sales made converted into metric tonnes of copper.
The La Coipa area was identified as a potential precious metals prospect almost a century ago, but did not receive much attention until the 1970s, when several companies began to actively explore the area. MDO began drilling in the La Coipa area in 1989 and has completed 668,505 metres of drilling since then, consisting of 2,736 diamond drill holes by the end of 2019. Approximately 35% of total metres drilled were diamond drill holes and the remainder were reverse circulation.
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The La Coipa mine received an ISO 14001 certification in July 2002. The last recertification was made in 2013. In 2012, La Coipa received a certification of full compliance under the Cyanide Code.
Although MDO suspended operations at the La Coipa mine in the fourth quarter of 2013, in accordance with the mine’s permit MDO continued its water treatment program (“WTP”) to remediate levels of mercury in the ground water due to seepage from its tailing facility. La Coipa’s WTP, related facilities and monitoring program, including 50 downstream monitoring wells, have been in place since 2000. The mine’s groundwater treatment permit establishes an environmental standard of compliance for mercury of less than 1 part per billion. The La Coipa mine has four monitor wells at or near its downstream property boundary.
In 2015, Chile’s Superintendencia del Medio Ambiente (“SMA”), the national environmental regulatory agency, conducted an inspection of the WTP and monitoring wells and requested various information regarding those facilities and their performance, with which MDO fully cooperated. On March 16, 2016, the SMA issued a resolution alleging violations under La Coipa’s water treatment permit. The resolution specified a total of seven charges, alleging permit violations at the WTP and/or failure to properly permit certain related activities, including capturing water at an undesignated reservoir, deficiencies in the mercury capture system, deficiencies in the monitoring system, and four WTP effluent samples from 2013 above the permitted standard and various monitoring well samples taken in 2013 and 2014. On April 15, 2016, MDO submitted a compliance plan to remediate the alleged permit violations which, following further submissions to the SMA, was ultimately accepted on July 7, 2016. As a result, the sanctioning process has been suspended without any fine or other penalty to MDO provided the plan is implemented and maintained per its terms. Failure to comply with the plan would re-initiate the sanction process and could result in doubled fines of up to $7.7 million per alleged minor violation (five in total) and $15.4 million per alleged serious violation (two in total).
A final compliance report was delivered to the SMA in November 2018. In August 2019, the compliance plan was approved by SMA and the sanctioning process was successfully closed.
In February 2020, Kinross completed and approved a Feasibility Study to restart operations at La Coipa by mining the Phase 7 deposit. The project plan includes refurbishing the existing process plant, camp and other infrastructure, as well as the mine fleet from the Maricunga operation, which was placed on care and maintenance in 2018. Pre-stripping began in January 2021 with production expected to start in Q1 2022. Kinross received approval on the project Declaration of Impact to Environment (“DIA”) permit in 2016 and, to date, has received all sectoral permits.
La Coipa’s estimated mineral reserve is approximately 619,471 ounces of gold and 36,798,553 ounces of silver. These reserves are inclusive of both the Phase 7 and Puren deposits, and are an update to the resource to reserve conversation that was made in 2017 as a result of the Pre-Feasibility Study contemplating a restart by mining both the Phase 7 and Puren deposits. The Puren deposit was not incorporated into the Feasibility Study completed in February 2020 and is not included in the currently approved business case as a joint venture agreement has not been finalized with Codelco-Chile who holds a 35% participation interest in the deposit.
Kinross will continue to explore opportunities to incorporate adjacent deposits with existing mineral reserves and resources, particularly Puren, Coipa Norte and Can Can into the La Coipa mine plan with the goal of extending mine life. This includes conducting further technical studies, assessing permitting requirements, and continuing commercial discussions.
Kinross estimates the net present value of future cash outflows for site restoration costs at La Coipa under IFRS as at December 31, 2020, at approximately $144.0 million.
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Lobo-Marte, Chile
The Lobo-Marte project is owned by Compania Minera Maricunga (“CMM”), a Chilean company that is 100%-owned by Kinross. Kinross holds a 100% interest in the Lobo-Marte project, having acquired a 40% interest in the project from Anglo American Plc (“Anglo”) in 2008, and the remaining 60% interest from Teck Cominco Limited (“Teck”) in early 2009.
Kinross completed a Pre-Feasibility Study at the Lobo-Marte project in 2009 and updated the Pre-Feasibility Study in 2010. In 2011, Kinross submitted the environmental and social impact study (“ESIA”) for the project to the Chilean authorities. In 2012, Kinross decided to extend the project timeline as part of its capital optimization process. In 2013, the permitting process was suspended pending further assessment of the project. On November 17, 2014, the Company withdrew its permit application and stopped the permitting process at Lobo-Marte due to substantial changes in the plan of operations, the footprint of the project, project economics, and stringent requirements associated with the permit application. As a result of the permit withdrawal, approximately 6 million gold ounces at Lobo-Marte were reclassified as measured and indicated mineral resources. Any future development or operations at Lobo-Marte would require the re-initiation of the permitting process.
The Lobo-Marte project currently comprises two open-pit minable gold ore deposits, located approximately seven kilometres apart, in the Atacama Region of Northern Chile, approximately 650 kilometres north of Santiago and 100 kilometres east of Copiapó. The project lies approximately 65 kilometres south of Kinross’ La Coipa operation and 60 kilometres north of the Maricunga mine.
The Lobo-Marte project includes 71 granted exploitation concessions covering 37,410 hectares, 41 granted exploration concessions covering 10,000 hectares, and also has 26 exploitation concessions in the process of receiving final registered grant, covering 3,310 hectares and 8 exploration concessions in the process of receiving a final registered grant covering 2,600 hectares. Concessions are held in the name of CMM. Kinross has three established easements for the construction of roads, stockpiles, process facilities, camp, support facilities and associated pipelines. Additional rights will be required to support project development. Additional easements will be required to support project development.
The project has a 1.75% net smelter return royalty on 60% of future production, payable when the gold price is $760 per ounce or more. Kinross’ obligation to make royalty payments will cease when an aggregate amount of $40 million has been paid.
The Lobo deposit was discovered through regional geochemical surveys in 1981-1982. The Marte deposit was discovered in 1982 through a program of regional soil sampling, geophysical surveys and geological mapping. The Marte deposit was mined by a joint venture of Anglo American and Cominco from 1988 to 1992; a total of 3.78 million tonnes of ore grading 1.51 grams per tonne of gold, 0.3 million tonnes of low-grade mineralization and 4.7 million tonnes of waste were mined.
Prior to 2009, a total of 153 core and reverse circulation drill holes (34,649 metres) were completed at Lobo, with an additional 211 Core and reverse circulation drill holes (26,658 metres) at Marte. During 2010 a total of 24,148 metres of Core drilling and 4,614 metres of reverse circulation drilling were completed at Lobo and Marte. During 2011 a total of 9,289 metres of Core drilling and 4,909 metres of reverse circulation drilling were completed at Lobo and Marte. In 2012, approximately 5,274 metres of Core drilling was completed at Lobo. The 2013 exploration plan consisted of surface exploration works including: rock chip samples, soil samples, trenching and mapping. Prior to 2019, no exploration work had been carried out since 2015. During 2019, 3,555 meters of core drilling was completed and in the period between January 2020 and February 2021, 9,588 meters were drilled for core extraction and reverse circulation. On July 15, 2020, Kinross announced the completion and results of a second Pre-Feasibility Study at the Lobo-Marte project. The Pre-Feasibility Study estimate includes total life of mine production of approximately 4.5 million Au oz. during a 15 year mine life, which includes 12 years of mining followed by three years of residual processing. The study contemplates an open pit, heap leach and SART (Sulphidization, Acidification, Recycling and Thickening) plant operation using rope conveyors and mining the Marte and Lobo deposits in succession. Subject to a positive development decision, the study estimates Lobo-Marte project construction beginning in 2025, with first production expected in 2027.
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The project is located close to a biological corridor and Ramsar site established between two sectors of the Nevado Tres Cruces National Park, created to preserve and protect the vegetation of the desert steppes and the Andean salars (salt lakes). Kinross is developing the biophysical and socioeconomic baseline study to support the preparation of an ESIA. Because of the recognized environmental importance of these areas, the baseline study for the ESIA is critical to the development of the project. Areas which were addressed include proper management of water extraction, disposition of waste material, heap leach facilities and other installations that interact with the environment.
Maricunga, Chile
The Maricunga heap leach mine, formerly known as the Refugio mine, is owned and operated by CMM. Previously, each of Kinross and Bema held a 50% interest in the Maricunga property and Kinross acquired the remaining 50% when it acquired Bema in 2007. Select financial, production and operations information for Maricunga is available in Kinross’ MD&A for the year ended December 31, 2020.
The Maricunga property is located in the Maricunga District of the Atacama Region of Chile, 160 kilometres east of the town of Copiapó.
All surface and mineral claims, surface rights and water rights are maintained in good standing. The CMM mining claims include 108 granted exploitation concessions covering 19,371 hectares, 46 granted exploration concessions covering 12,400 hectares and 22 exploitation concessions in the process of receiving a final registered grant covering 6,507 hectares. In addition to the mineral claim rights, CMM also holds title to surface rights at Maricunga, providing the land required for the leach pads, waste dumps, camp and other facilities.
Maricunga is subject to a royalty payable to Compañía Minera Refugio on the Pancho and Verde pits. The royalty varies from 1.25% to 2.5% of net smelter returns (depending on the applicable net operating margin), which will be paid until December 31, 2040.
The Verde and Pancho gold deposits at Maricunga occur in the Maricunga Gold Belt of the high Andes in northern Chile. Since 1980, a total of 40 million ounces of gold have been defined in the belt.
Gold mineralization at Maricunga is hosted in the Refugio volcanic-intrusive complex of Early Miocene age. These rocks are largely of intermediate composition. The Refugio volcanic-intrusive complex is exposed over an area of 12 square kilometres and consists of andesitic to dacitic domes, flows, and breccias that are intruded by subvolcanic porphyries and breccias.
Most of the structural trends affecting the Verde and Pancho deposits are related to fracture systems rather than fault zones. One of the main structural features influencing the Pancho deposit is the Falla Guatita fault zone. Field mapping suggests that there may be significant vertical displacement on this structure. Another major fault affecting the Pancho deposit is the Falla Moreno. This structure trends roughly east–west and forms an approximate northern boundary for the mineralization at Pancho.
Production at Maricunga reopened in October 2005 and achieved its targeted rate of 14 Mt/a (40,000 tonnes per day) in late 2005. Due to water restrictions imposed by the SMA, mining and crushing at Maricunga were suspended in 2016 (see below). Rinsing of the heap leach is still ongoing.
The Maricunga gold recovery process consists of a single-line primary crushing, fine crushing (secondary and tertiary), heap leaching using cyanide solution, followed by carbon adsorption and regeneration plant operation. The plant can process 48,000 tonnes per day of dry Maricunga ore. The crushing plant product is approximately 80% passing 12 millimetres. Crushed ore is hauled to the heap leach pads by haul trucks. Based on the recovery estimates by ore type, gold recovery over the mine life is expected to average 56.3% of contained gold in the plant feed.
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Construction of a sulfidization, acidification, recycling and thickening (“SART”) plant was completed in late 2012 and commissioned during 2013.
Since May 2016 the ore stacked in the heap has been rinsed with the objective to reduce cyanide concentration through natural processes, such as photo-degradation, oxidative processes and volatilization.
CMM currently maintains the following areas: wet area (SART plant, absorption-desorption-regeneration plant, leach pad and ponds), Pantanillo water wells, administration facilities, camp, high voltage and medium voltage power lines, auxiliary service plants and auxiliary support.
To date, this condition of partial suspension requires the maintenance of the water balance of the pile through the recirculation of solutions.
No exploration activities were performed in 2020.
In August 2015, the Company obtained an Approval Resolution for the CMM Closure Plan under the transitory regime before the Servicio Nacional de Geologia y Mineria (“Sernageomin”). An updated closure plan is being developed in order to modify the approved closure measures in the environmental permits. In November 2016, CMM submitted materials to Sernageomin in respect of a temporary partial closure plan, which was approved by the authority in September 2018. In 2020, a new and final extension of the closure plan until 2023 was approved. Kinross estimates the net present value of future cash outflows for site reclamation and remediation costs at Maricunga under IFRS as at December 31, 2020, at approximately $70.6 million.
Chirano, Ghana
Kinross acquired the Chirano gold mine as part of the September 17, 2010 acquisition of Red Back. Chirano Gold Mines Limited (“CGML”) is 90% owned by Kinross with the remaining 10% owned as a carried interest by the Government of Ghana. Detailed financial, production and operations information for Chirano is available in Kinross’ MD&A for the year ended December 31, 2020.
The project is located in southwest Ghana primarily in the Bibiani-Anhwiaso-Bekwai District with the remainder located in the Sefwi Wiawso District of the Western Region of Ghana. The mine is located approximately 100 kilometres southwest of Kumasi, which is Ghana’s second largest city. Access to the gold mine from the capital Accra is via a paved highway to Kumasi and then running southwest towards Bibiani and onwards to Sefwi-Bekwai.
Geologically, the project area lies within the Paleoproterozoic terrain of south-west Ghana, located within the Sefwi Gold Belt, very close to its margin against the Kumasi Basin to the east. Both the belt and basin consist of rocks of Birimian age, with the belt dominated by mafic volcanic and the basin typified by fine-grained, deep-water sediments. Both are intruded by granites. Gold mineralization of economic importance at Chirano is located along a 10 kilometre shear zone known as the Chirano Shear, which hosts the majority of the gold mineralization, although additional splay shears can host gold mineralization of economic importance.
The Chirano gold mine started production in October 2005 with a surface mining operation from three open pits. Surface operations stopped at the end of the second quarter of 2017. Since then, gold production has been primarily from three underground mining operations, until the second quarter of 2019 when surface operations re-commenced.
Processing capacity is 3.5 Mt/a using a conventional three-stage crushing circuit, followed by primary and secondary ball mills for fine grinding. After grinding and 24 hours of cyanide leaching, a carbon-in-leach circuit extracts gold in solution to activated carbon. A conventional carbon elution and electrowinning circuit recovers gold which is then smelted to gold doré for shipment to international gold refiners. Gold recovery using the above-described process is typically 88% to 92%. Attributable annual gold production was 149,648 ounces in 2020.
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Based on the 2020 mineral reserves, Chirano is expected to continue production into 2025. In 2020, the mining lease was extended for another 15 years, expiring on December 22, 2034.
CGML employs approximately 870 permanent employees and 60 trainees and short-term employees. In addition, there are approximately 1,100 contract employees, many of whom are associated with the mining services, camp services, employee transport, and exploration and site security services. CGML and the Company are committed to a health and safety program that protects the safety and well-being of staff, clients, contractors and the general public in all aspects of its business operations.
During 2020, exploration activities continued to advance the mine’s potential for a significant mine life extension on the known lode horizon and other promising west splay structures and on several district targets, including the completion of 52,552 metres of drilling in 211 drill holes. Drill programs beneath the existing pits and within the existing underground operations continued to extend the limits of the known mineralization. In 2021, planned exploration activities include approximately 37,000 metres of drilling to continue testing resources on the mining lease and adjacent prospecting licenses in support of engineering scoping studies.
The operations are in compliance to the Guidelines for Mining in Productive Forest Reserves in Ghana. In alignment with Kinross’ environmental policy, the site proactively manages potential environmental risks associated with all operations, part of which are within the forest reserves. There is a closure plan in place to return disturbed areas to a functional, viable and self-sustaining ecosystem where feasible. Kinross estimates the net present value of future cash outflows for site reclamation and remediation costs at Chirano under IFRS as at December 31, 2020, at approximately $36.0 million.
Chulbatkan, Russian Federation
Kinross acquired its initial 120 square kilometre interest in the Chulbatkan license area in January 2020 and, subsequently, in Q4 2020, Kinross acquired the land package surrounding Chulbatkan increasing total overall license area to approximately 450 square kilometres. Chulbatkan is located in the Khabarovsk region of Far East Russia, approximately the same straight line distance from the Company’s regional office in Magadan as its existing Kupol and Dvoinoye operations in the Chukotka region to the north.
The initial deposit within the Chulbatkan license area is called the Udinsk deposit, which is a relatively well disseminated Au/Ag orebody with pockets of high-grade zones. Udinsk is expected to be the first deposit to be developed within the Chulbatkan license area. The footprint of the current Udinsk resource represents less than <0.5% of the total 450 square kilometre license area.
The Udinsk Pre-Feasibility Study commenced in partnership with a global engineering, procurement and construction management firm with in-country experience and is expected to be completed in Q4 2021. The Pre-Feasibility Study will focus on an initial three-stage crush heap leach process flow and potential early works related to infrastructure, with the goal of fast tracking construction. The Company is also studying the viability of a power line connecting the project into the regional grid. First production at Udinsk is anticipated in 2025.
On the larger Chulbatkan license, surface exploration activities such as soil geochemical sampling and induced polarization, magnetic and gravity geophysical surveys were carried out during 2020. These programs resulted in encouraging results and confirmed known targets and the discovery of new target areas, with new anomalies identified near the Udinsk resource pit to the northeast and southwest. As a result, the 2021 drilling program will prioritize these anomalous soil and geophysics points as part of the first phase of the drill testing program and is planned to be subsequently drilled for strike and depth extensions.
As part of the acquisition, N-Mining received a 1.5% net smelter return royalty on future production from Udinsk and contingent consideration of $50 per ounce of future proven and probable reserves beyond the first 3.25 million of declared proven and probable ounces of gold. The Company has the right to purchase 0.5% of the net smelter return royalty from N-Mining, reducing the total royalty from 1.5% to 1.0%, for $10 million or more depending on the price of gold at such time.
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Manh Choh (formerly Peak Gold), Alaska, United States
Kinross acquired its 70% interest in the Manh Choh project (formerly the Peak project) on September 30, 2020 from Royal Gold, Inc. and Contango. Kinross will have broad authority to construct and operate the Manh Choh project, with Contango retaining a 30% non-operating minority interest in the project. Kinross’ 70% interest in the project is owned by KG Mining (Alaska), Inc., which is 100% owned by Kinross. The Manh Choh project is located near Tok, Alaska and is approximately 400 kilometers (250 miles) southeast of the Company’s Fort Knox mine. The project is accessible by road and is near the Alaska Highway. The project is situated within the 675,000-acre (2,732 km2) mineral lease with the local Upper Tanana Athabascan Village of Tetlin and is a high-grade skarn deposit that extends to the surface.
The Manh Choh project is a relatively high-grade deposit with a large estimated resource base that is expected to commence production in 2024 as a low-cost, open-pit mine. The project is set to be a low-risk supplement to Kinross’ existing Alaska operation. Kinross plans to truck ore to Fort Knox for processing utilizing Fort Knox’s existing mill and infrastructure to benefit both the project and the mine. By utilizing Fort Knox’s existing infrastructure and processing facilities, the mine plan does not require the construction of a mill or tailings facilities at the project site. Initial capital expenditures for the project are expected to be approximately $110 million.
The
Company has commenced an infill, geotechnical and metallurgical drilling program to further develop the existing resource base.
Kinross is also planning to focus on targets across the larger land package identified by previous sampling, mapping and geophysics.
Initial permitting activities are expected to commence in parallel with the drilling program. A scoping study is in progress and
Kinross expects to complete permitting and a Feasibility Study by the end of 2022. Production is planned to commence in 2024.
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RISK FACTORS
The business and operations of Kinross are subject to risks. In addition to considering the other information in this AIF, you should consider carefully the following factors in deciding whether to invest in securities of Kinross. If any of these risks occur, or if other risks not currently anticipated or fully appreciated occur, the business and prospects of Kinross could be materially adversely affected, which could have a material adverse effect on Kinross’ valuation and the trading price for its shares.
The financial and operational performance of Kinross is dependent on gold and silver prices.
The profitability of Kinross’ operations is significantly affected by changes in the market price of gold and silver. Gold and silver prices fluctuate on a daily basis and are affected by numerous factors beyond the control of Kinross. The price of gold and/or silver can be subject to volatile price movements and future serious price declines could cause continued commercial production to be impractical. Depending on the prices of gold and silver, cash flow from mining operations may not be sufficient to cover costs of production and capital expenditures. If, as a result of a decline in gold and/or silver prices, revenues from metal sales were to fall below cash operating costs, production may be discontinued. The factors that may affect the price of gold and silver include industry factors such as: industrial and jewelry demand; the level of demand for the metal as an investment; central bank lending, sales and purchases of the metal; speculative trading; and costs of and levels of global production by producers of the metal. Gold and silver prices may also be affected by macroeconomic factors, including: expectations of the future rate of inflation; the strength of, and confidence in, the US dollar, the currency in which the price of the metal is generally quoted, and other currencies; interest rates; and global or regional political or economic uncertainties.
In 2020, the Company’s average realized gold price increased to $1,774 per ounce from $1,392 per ounce in 2019. If the world market price of gold and/or silver were to drop and the prices realized by Kinross on gold and/or silver sales were to decrease substantially and remain at such a level for any substantial period, Kinross’ profitability and cash flow would be negatively affected. In such circumstances, Kinross may determine that it is not economically feasible to continue commercial production at some or all of its operations or the development of some or all of its current projects, which could have an adverse impact on Kinross’ financial performance and results of operations, possibly material. Kinross may curtail or suspend some or all of its exploration activities, with the result that depleted mineral reserves are not replaced. In addition, the market value of Kinross’ gold and/or silver inventory may be reduced and existing mineral reserves and resource estimates may be reduced to the extent that ore cannot be mined and processed economically at the prevailing prices.
Kinross’ operations and profitability are affected by shortages and price volatility of other commodities and equipment.
The Company is dependent on various input commodities (such as diesel fuel, electricity, natural gas, steel, concrete and cyanide), labour, and equipment (including parts) to conduct its mining operations and development projects. A shortage of such input commodities, labour, or equipment or a significant increase in their costs could have a material adverse effect on the Company’s ability to carry out its operations and therefore limit, or increase the cost of, production. The Company is also dependent on access to and supply of water and electricity to carry out its mining operations, and such access and supply may not be readily available, especially at the Company’s operations in Chile, Brazil and Ghana. Market prices of input commodities can be subject to volatile price movements which can be material, occur over short periods of time and are affected by factors that are beyond the Company’s control. An increase in the cost, or decrease in the availability, of input commodities, labour, or equipment, due to factors beyond the Company’s control such as a pandemic or a similar public health threat, may affect the timely conduct and cost of Kinross’ operations and development projects. If the costs of certain input commodities consumed or otherwise used in connection with Kinross’ operations and development projects were to increase significantly, and remain at such levels for a substantial period, the Company may determine that it is not economically feasible to continue commercial production at some or all of its operations or the development of some or all of its current projects, which could have an adverse impact on the Company’s financial performance and results of operations. From time to time, Kinross transacts in energy hedging to reduce the risk associated with fuel price fluctuations.
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Changes to the extensive regulatory and environmental rules and regulations to which Kinross is subject could have a material adverse effect on Kinross’ future operations.
Kinross’ operations and exploration activities are subject to various laws and regulations governing the protection of the environment, exploration, development, production, imports/exports, taxes, labour standards, occupational health, waste disposal, toxic substances, mine closure, mine safety, public health and other matters. The legal and political circumstances outside of North America cause these risks to be different from, and in many cases, greater than, comparable risks associated with operations within North America. New laws and regulations, amendments to existing laws and regulations, interpretations by Governments, or more stringent enforcement of existing laws and regulations could have a material adverse impact on Kinross, increase costs, cause a reduction in levels of production and/or delay or prevent the development of new mining properties. Compliance with these laws and regulations is part of the business and requires significant expenditures. Changes in laws and regulations, interpretations or enforcement including those pertaining to taxes, the rights of leaseholders or the payment of royalties, net profit interest or similar obligations, could adversely affect Kinross’ operations or substantially increase the costs associated with those operations. Kinross is unable to predict what new legislation or revisions may be proposed that might affect its business or when any such proposals, if enacted, might become effective.
In light of tailings dam incidents in Brazil in 2015 and 2019, federal lawmakers have proposed legislation aimed at addressing risks of future tailings dam failures. While there are a variety of measures under consideration, recently approved legislation at the federal and state level includes the potential increase of financial assurance requirements, increased fines and penalties for environmental damages and/or require the Company to further address risks to residents downstream. While regulations are pending on these issues, these laws and regulations may adversely affect Kinross’ operations in Brazil or increase the costs associated with those operations.
Certain operations of the Company are the subject of ongoing regulatory review and evaluation by governmental authorities. These may result in additional regulatory actions against the affected operating subsidiaries, and may have an adverse effect on the Company’s future operations and/or financial condition. For further details, refer to the “Legal Proceedings and Regulatory Actions” section.
Kinross’ future plans rely on mine development projects, which involve significant uncertainties.
Kinross must continually replace and expand its mineral reserves in order to maintain or grow its total mineral reserve base as they are depleted by production at its operations. Similarly, the Company’s ability to increase or maintain present gold and silver production levels is dependent in part on the successful development of new mines and/or expansion of existing mining operations. Kinross is dependent on future growth from development projects. Development projects rely on the accuracy of predicted factors including: capital and operating costs; metallurgical recoveries; mineral reserve estimates; and future metal prices. Once a site with mineralization is discovered, it may take several years from the initial phases of drilling until production is possible. Development projects are subject to accurate Feasibility Studies, the acquisition of surface or land rights and the issuance of necessary governmental permits and approvals. Unforeseen circumstances, including those related to the amount and nature of the mineralization at the development site, technological impediments to extraction and processing, legal requirements, governmental intervention, infrastructure limitations, environmental issues, disputes with local communities or other events, could result in one or more of our planned developments becoming impractical or uneconomic. Any such occurrence could have an adverse impact on Kinross’ financial condition and results of operations.
In addition, as a result of the substantial expenditures involved, developments projects are at significant risk of material cost overruns versus budget. The capital expenditures and time required to develop new mines are considerable and changes in cost or construction schedules can significantly increase both the time and capital required to build the project. The project development schedules are also dependent on obtaining the governmental permits and approvals necessary for the operation of a project. The timeline to obtain these government permits and approvals is often beyond the control of Kinross. It is not unusual in the mining industry for new mining operations to experience unexpected problems during the start-up phase, resulting in delays and requiring more capital than anticipated.
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Kinross may be negatively affected by an outbreak of infectious disease or pandemic.
An outbreak of infectious disease, pandemic or a similar public health threat, such as the COVID-19 pandemic, and the response thereto, could adversely impact the Company, both operationally and financially. The global response to the COVID-19 outbreak has resulted in, among other things, border closures, severe travel restrictions and fluctuations in financial and commodity markets. Additional measures may be implemented by one or more governments around the world in jurisdictions where the Company operates. Labour shortages due to illness, Company or government imposed isolation programs, or restrictions on the movement of personnel or possible supply chain disruptions could result in a reduction or interruption of the Company’s operations, including mine shutdowns or suspensions. The inability to transport or refine and process the Company’s products could have a material adverse effect on the Company’s future cash flows, earnings, results of operations and financial condition. While the Company’s operations have not been materially impacted to date, there can be no assurance that Kinross will remain unaffected by the current COVID-19 crisis or potential future health crises. The extent to which COVID-19 and any other pandemic or public health crisis impacts our business, affairs, operations, financial condition, liquidity, availability of credit and results of operations will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information which may emerge concerning the severity of and the actions required to contain the COVID-19 or remedy its impact, among others.
Actual production and cost outcomes may differ significantly from production and cost estimates.
The Company prepares estimates of future production, operating costs and capital costs for its operations. Despite the Company’s best efforts to budget and estimate such costs, as a result of the substantial expenditures involved in the development of mineral projects and the fluctuation and increase of costs over time, development projects may be prone to material cost overruns. Kinross’ actual production and costs may vary from estimates for a variety of reasons, including: increased competition for resources and development inputs; cost inflation affecting the mining industry in general; actual ore mined varying from estimates of grade, tonnage, dilution and metallurgical and other characteristics; short term operating factors including relating to the ore mineral reserves, such as the need for sequential development of ore bodies and the processing of new or different ore grades; revisions to mine plans; difficulties with supply chain management, including the implementation and management of enterprise resource planning software; risks and hazards associated with development, mining and processing; natural phenomena, such as inclement weather conditions, water availability (such as in Chile), floods, earthquakes and pandemics; and unexpected labour shortages, strikes or other disruptions. Costs of production may also be affected by a variety of factors, including: ore grade, ore hardness, metallurgy, changing waste-to-ore ratios, labour costs, cost of services, commodities (such as power and fuel) and other inputs, general inflationary pressures and currency exchange rates. Many of these factors are beyond Kinross’ control. No assurance can be given that Kinross’ cost estimates will be achieved. Failure to achieve production or cost estimates or material increases in costs could have an adverse impact on Kinross’ future cash flows, profitability, results of operations and financial condition.
The mineral reserve and mineral resource figures of Kinross are only estimates and are subject to revision based on developing information.
The figures for mineral reserves and mineral resources presented herein, including the anticipated tonnages and grades that will be achieved or the indicated level of recovery that will be realized, are estimates and no assurances can be given as to their accuracy. Such estimates are, in large part, based on interpretations of geological data obtained from drill holes and other sampling techniques. Actual mineralization or formations may be different from those predicted. It may also take many years from the initial phase of drilling before production is possible, and during that time the economic feasibility of exploiting a deposit may change. Reserve and resource estimates are materially dependent on prevailing gold and silver prices and price assumptions used in those estimates, and the cost of recovering and processing minerals at the individual mine sites. Market fluctuations in metal prices may render the mining of mineral reserves and mineral resources uneconomical and require Kinross to take a write-down of an asset or to discontinue development or production. Moreover, short-term operating factors relating to the mineral reserves, such as the need for orderly development of the ore body or the processing of new or different ore grades, may cause a mining operation to be unprofitable in any particular accounting period.
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Prolonged declines in the market price of gold and/or silver may render mineral reserves containing relatively lower grades of gold and/or silver mineralization uneconomic to exploit and could materially reduce Kinross’ mineral reserve estimates. In addition, changes in legislation, permitting or title over land or mineral interests may result in mineral reserves or mineral resources being reclassified or ceasing to meet the definition of mineral reserve or mineral resource. Should such reductions occur, material write-downs of Kinross’ investments in mining properties or the discontinuation of development or production might be required, and there could be material delays in the development of new projects, increased net losses and reduced cash flow. There is no assurance that Kinross will achieve indicated levels of gold or silver recovery or obtain the prices assumed in determining the mineral reserves. The estimates of mineral reserves and mineral resources attributable to a specific property are based on accepted engineering and evaluation principles. The estimated amount of contained gold and silver in proven and probable mineral reserves does not necessarily represent an estimate of a fair market value of the evaluated properties.
There are numerous uncertainties inherent in estimating quantities of mineral reserves and mineral resources. The estimates in this AIF are based on various assumptions relating to metal prices and exchange rates during the expected life of production, mineralization of the area to be mined, the projected cost of mining, and the results of additional planned development work. Actual future production rates and amounts, revenues, taxes, operating expenses, environmental and regulatory compliance expenditures, development expenditures, and recovery rates may vary substantially from those assumed in the estimates. Any significant change in these assumptions, including changes that result from variances between projected and actual results, could result in a material downward or upward revision of current estimates.
Kinross’ operations may be adversely affected by changing political, legal and economic conditions.
The Company has mining and exploration operations in various regions of the world, including the United States, Brazil, Chile, the Russian Federation, Mauritania, Ghana, and Canada and such operations are exposed to various levels of political, security, legal, economic, health and safety and other risks and uncertainties. These risks and uncertainties vary from country to country and include, but are not limited to: terrorism; hostage taking; crime, including organized criminal enterprise; thefts, armed robberies and illegal incursions on property (as may occur at Paracatu and Tasiast from time to time) which illegal incursions could result in serious security and operational issues, including the endangerment of life and property; criminal or regulatory investigations, extreme fluctuations in currency exchange rates; high rates of inflation; labour unrest; the risks of civil unrest; unstable governments or political systems; expropriation and nationalization; renegotiation or nullification of existing concessions, conventions, licenses, permits and contracts (including work permits for non-nationals at Tasiast); illegal mining (including at Tasiast and Chirano) could result in serious environmental, social, political, security and operational issues, including the endangerment of life and property; adequacy, response and training of local law enforcement; political regime change or instability; changes to policies and regulations impacting the mining sector; restrictions on foreign exchange and repatriation of funds; restrictions on the movement of personnel or importation of goods and equipment, global health crises or pandemics; and changing political conditions, currency controls, and governmental regulations that favour or require the awarding of contracts to local contractors or require foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction.
Changes in political leadership or other future political and economic conditions in these countries may result in these governments adopting different policies with respect to foreign investment, taxation and development and ownership of mineral resources. Any changes in such policies may result in changes in laws affecting ownership of assets, foreign investment, mining exploration and development, taxation (including value added and withholding taxes), royalties, currency exchange rates, gold sales, environmental protection, labour relations, price controls, repatriation of income, and return of capital, which may have a material adverse affect on the financial performance of the Company. Such changes may also affect both the ability of Kinross to undertake exploration and development activities in respect of future properties in the manner currently contemplated, as well as its ability to continue to explore, develop, and operate those properties to which it has rights relating to exploration, development, and operation. Future governments in these countries may adopt substantially different policies from those currently in effect, which might extend to, as an example, expropriation of assets.
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The tax regimes in these countries may be subject to differing interpretations or levels of enforcement and are subject to change from time to time. Kinross’ interpretation of taxation law as applied to its transactions and activities may not coincide with that of the tax authorities in a given country. As a result, transactions may be challenged by tax authorities and Kinross’ operations may be assessed, which could result in significant additional taxes, penalties and interest. In addition, in certain jurisdictions (such as Brazil and Mauritania) Kinross may be required to pay refundable value added tax (“VAT”) on certain purchases. There can be no assurance that the Company will be able to collect all, or part, of the amount of VAT refunds which are owed to the Company.
Governmental efforts to increase revenue from taxes and royalties have escalated in recent years. Brazil increased production royalties in 2018 and the State of Nevada is currently contemplating an increase in state mining taxes. The government of Ghana recently undertook an industry-wide audit of mining operations. There can be no assurance that current government royalty and mining tax rates will remain static in future periods. The increasing intensity of government efforts to increase revenues may result in future audits, tax reassessment and claims for increased payments of royalties, income tax, withholding taxes or additional forms of revenue. The results of such audits or reassessments may result in claims, fines or penalties that are material to the Company.
Anti-bribery Legislation
The Foreign Corrupt Practices Act (United States) and the Corruption of Foreign Public Officials Act (Canada), anti-bribery provisions of the Dutch Criminal Code and similar anti-bribery legislation prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business or other commercial advantage. Company policies mandate strict compliance with applicable anti-bribery legislation. Kinross operates in jurisdictions that have experienced governmental and private sector corruption to some degree. There can be no assurance that Kinross’ internal control policies and procedures will always protect it from reckless or other inappropriate acts committed by the Company’s affiliates, employees or agents. Allegations of any violations of anti-bribery legislation may result in costly and time consuming investigations. Violations of such legislation could result in fines or penalties and have a material adverse effect on Kinross’ reputation and social license to operate.
Kinross’ operations may be adversely affected if its licenses and permits are challenged, revoked, amended, not issued or not renewed.
The development projects and operations of Kinross require licenses and permits from various governmental authorities. However, such licenses and permits are subject to challenge and change in various circumstances. Applicable governmental authorities may revoke or refuse to issue, amend or renew necessary permits. The loss of such permits may hinder Kinross’ ability to operate and could have a material effect on Kinross’ financial performance and results of operations. There can be no guarantee that Kinross will be able to obtain or maintain or comply with all necessary licenses and permits that may be required to explore and develop its properties, commence construction of or operation of mining facilities, or to maintain continued operations that economically justify the cost. Kinross endeavors to be in compliance with these licenses and permits, and underlying laws and regulations, at all times.
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Kinross is subject to hazards and risks associated with exploration and mining activities and insurance may be insufficient to cover these risks.
The operations of Kinross are subject to the hazards and risks normally incidental to exploration, development and production activities of precious metals mining properties, any of which could result in damage to life or property, or environmental damage, and possible legal liability for such damage. The activities of Kinross may be subject to prolonged disruptions due to weather conditions depending on the location of operations in which it has interests. Hazards and risks, such as unusual or unexpected formations, faults and other geologic structures, rock bursts, pressures, cave-ins, flooding, pit wall failures, tailings dam failures, ground and slope failures and inventory theft, could have an adverse impact on Kinross’ operations. While Kinross may obtain insurance against certain risks, potential claims could exceed policy limits or could be excluded from coverage. There are also risks against which Kinross cannot or may elect not to insure. The potential costs which could be associated with any liabilities not covered by insurance or in excess of insurance coverage or compliance with applicable laws and regulations may cause substantial delays and require significant capital outlays, adversely affecting the future earnings and competitive position of Kinross and, potentially, its financial viability.
Further, few mining properties that are explored are ultimately developed into producing mines. Major expenditures are required to establish reserves by drilling and to construct mining and processing facilities. Large amounts of capital are frequently required to purchase necessary equipment. Delays due to equipment malfunction or inadequacy may adversely affect Kinross’ results of operations. It is impossible to ensure that the current or proposed exploration programs on properties in which Kinross has an interest will result in profitable commercial mining operations.
Mining, processing, development, and exploration activities depend, to one degree or another, on adequate infrastructure. Reliable roads, bridges, power sources, and water supply are important determinants which affect capital and operating costs. Lack of such infrastructure or unusual or infrequent weather phenomena, sabotage, terrorism, government, or other interference in the maintenance or provision of such infrastructure could adversely affect Kinross’ operations, financial condition, and results of operations.
Available insurance does not cover all the potential risks associated with a mining company’s operations. Kinross may also be unable to maintain insurance to cover insurable risks at economically feasible premiums, and insurance coverage may not be available in the future or may not be adequate to cover any resulting loss. The Company’s existing insurance policies contain certain exceptions where coverage may not be available (including bullion losses not attributable to theft).
Moreover, insurance against risks such as the validity and ownership of unpatented mining claims and mill sites and environmental pollution or other hazards as a result of exploration and production is not generally available to Kinross or to other companies in the mining industry on acceptable terms. As a result, Kinross might become subject to liability for environmental damage or other hazards for which it is completely or partially uninsured or for which it elects not to insure because of premium costs or other reasons. Losses from these events may cause Kinross to incur significant costs that could have a material adverse effect upon its financial condition and results of operations.
If Kinross does not develop additional mineral reserves, it may not be able to sustain future operations.
Because mines have limited lives, Kinross must continually replace and expand its mineral reserves in order to maintain or grow its total mineral reserve base as they are depleted by production at its operations. The life of mine estimates included in this AIF for each of Kinross’ material properties are based on a number of factors and assumptions and may prove to be incorrect. Kinross’ ability to maintain or increase its annual production of gold and silver will significantly depend on its ability to bring new mines into production and to expand mineral reserves at existing mines. Once a site with mineralization is discovered, it may take several years from the initial phases of drilling until production is possible, during which time the economic feasibility of production may change. Substantial expenditures are required to establish mineral reserves and to construct mining and processing facilities. As a result of these uncertainties, there is no assurance that current or future exploration programs will be successful. There is a risk that depletion of reserves will not be offset by discoveries. As a result, the reserve base of Kinross may decline if reserves are mined without adequate replacement and Kinross may not be able to sustain production beyond the current mine lives, based on current production rates.
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The mineral resources of Kinross may not be economically developable, in which case Kinross may never recover its expenditures for exploration and/or development.
Mineral resources that are not mineral reserves do not have demonstrated economic viability. Due to the uncertainty of measured, indicated or inferred mineral resources, these mineral resources may never be upgraded to proven and probable mineral reserves. Kinross’s mineral reserve and resource estimates have been prepared in accordance with the requirements of Canadian securities laws, which differ from the requirements of United States’ securities laws and other jurisdictions.
The exploration and development of mineral deposits involves significant financial and other risks over an extended period of time which may not be eliminated even with careful evaluation, experience and knowledge. While discovery of gold-bearing geological structures may result in substantial rewards, few properties explored are ultimately developed into producing mines. Major expenditures are required to establish reserves by drilling and to construct mining and processing facilities at a site. It is impossible to ensure that the current or proposed exploration programs on properties in which Kinross has an interest will result in profitable commercial mining operations.
Kinross is subject to risks related to environmental liability, including liability for environmental damages caused by mining activities prior to ownership by Kinross and reclamation costs and related liabilities.
Mining, like many other extractive natural resource industries, is subject to potential risks and liabilities associated with the effects on the environment resulting from mineral exploration and production. The Company may be held responsible for the costs of addressing contamination at, or arising from, current or former activities. Environmental liability may result from activities conducted by others prior to the ownership of a property by Kinross. In addition, Kinross may be liable to third parties for exposure to hazardous materials or substances, or may otherwise be involved in civil litigation related to environmental claims. The costs associated with such responsibilities and liabilities may be substantial. The payment of such liabilities would reduce funds otherwise available and could have a material adverse effect on Kinross. Should Kinross be unable to fully fund the cost of remedying an environmental problem, Kinross might be required to suspend operations or enter into interim compliance measures pending completion of the required remedy, which could have a material adverse effect on the operations and business of Kinross.
In the United States, certain mining wastes from extraction and processing of ores that would otherwise be considered hazardous waste under the U.S. Resource Conservation and Recovery Act (“RCRA”) and state law equivalents, are currently exempt from certain U.S. Environmental Protection Agency (“EPA”) regulations governing hazardous waste. If mine wastes from the Company’s U.S. mining operations, including those at the Sunnyside Mine (see “Legal Proceedings and Regulatory Actions” section), are not exempt, and are treated as hazardous waste under the RCRA, material expenditures could be required for waste management and/or the construction of additional waste disposal facilities. In addition, the Company’s activities and ownership interests potentially expose the Company to liability under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) and its state law equivalents. Under CERCLA and its state law equivalents, subject to certain defenses, any present or past owners or operators of a facility, and any parties that disposed or arranged for the disposal of hazardous substances at such a facility, could be held jointly and severally liable for cleanup costs and may be forced to undertake remedial cleanup actions or to pay for the cleanup efforts in response to unpermitted releases of hazardous substances. Such parties may also be liable to governmental entities for the cost of damages to natural resources, which may be substantial. Additional regulations or requirements may also be imposed upon the Company’s operations, tailings, and waste disposal areas as well as upon mine closure under federal and state environmental laws and regulations, including, without limitation, the U.S. Clean Water Act and state law equivalents. Air emissions in the U.S. are subject to the Clean Air Act and its state equivalents as well. The Company has received notices of violation related to alleged breaches of the waste discharge permit at its Kettle River-Buckhorn site. There can be no assurance that the Company will not receive further notices, fines or penalties in the future related to its waste discharge permit at Kettle River-Buckhorn. Additionally, the Company is subject to other federal and state environmental laws, and potential claims existing under common law, relating to the operation and closure of the Company’s U.S. mine sites.
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Kinross is generally required to submit for government approval a reclamation plan and to pay for the reclamation of its mine sites upon the completion of mining activities. Kinross estimates the net present value of future cash outflows for reclamation and remediation costs under IFRS at $896.1 million as at December 31, 2020 based on information available as of that date. Any significant increases over the current estimates of these costs could have a material adverse effect on Kinross.
In certain jurisdictions, the Company is required, or may be required in the future, to provide financial assurances covering reclamation costs, cleanup costs or other actual or potential liabilities arising out of its activities or ownership. These costs and liabilities may be significant and may exceed the provisions the Company has made in respect of these costs and liabilities. In some jurisdictions bonds, letters of credit or other forms of financial assurance are required, or may be required in the future, as security for these costs and liabilities, such as the financial assurances contemplated in Brazil under recently approved legislation. The amount and nature of financial assurance are dependent upon a number of factors, including the Company’s financial condition, cost estimates and thresholds set by applicable governments or legislation. Kinross may be required to replace or supplement existing financial assurances, or source new financial assurances with more expensive forms, which might include cash deposits, which would reduce its cash available for operations and financing activities. There can be no guarantee that Kinross will be able to maintain or add to its current level of financial assurance or meet the requirements set by regulatory authorities in the future. These new requirements may include, but are not limited to, financial assurances intended to cover potential environmental cleanup costs or potential liabilities associated with the Company’s mine sites, including its tailings facilities and other infrastructure. To the extent that Kinross is or becomes unable to post and maintain sufficient financial assurance covering these requirements, where required it could potentially result in closure of one or more of the Company’s operations, which could have a material adverse effect on the financial condition of the Company.
As of December 31, 2020, letters of credit totalling $379.9 million had been issued to various regulatory agencies to satisfy financial assurance requirements for this purpose. The letters of credit were issued against the Company’s letter of credit guarantee facility with EDC, the corporate revolving credit facility, and pursuant to arrangements with certain international banks. The Company is in compliance with all applicable requirements under these facilities. In addition, at December 31, 2020, the Company had $289.3 million in surety bonds outstanding for this purpose with respect to its operations in the United States. The surety bonds were issued pursuant to arrangements with international insurance companies.
Developments in Russia may have adverse effects on Kinross’ operations in Russia.
On May 7, 2008, the Russian federal laws “On the Procedure for Foreign Investment in Companies of Strategic Significance for State Defence and Security” (as amended, the “Strategic Investments Law”) and “On Amendments to the Subsoil Law” (as amended, the “Subsoil Law”) came into effect. A number of important amendments to the Strategic Investments Law became effective on December 6, 2014, July 30, 2017, June 12, 2018 and August 11, 2020.
The Strategic Investments Law sets forth the criteria whereby certain transactions entered into by a foreign investor require prior approval from the Russian Governmental Commission chaired by the Russian Prime Minister (the “Strategic Commission”). Such approval will be required if: (a) a Russian company (“RusCo”) is engaged in activities which are defined as strategic for the purposes of national security and defence, and (b) a RusCo holds rights to a “strategic deposit” (such as Kupol and Dvoinoye) and a potential foreign investor directly or indirectly obtains 25% (formerly 10%) or more of the voting shares of the RusCo, or there exists some other mechanism for control over (such as a management agreement, trust management agreement, pledge agreement, repo agreement, etc) the RusCo including any actions as a result of which a foreign investor or group of persons acquires the right to determine the decisions of the management of the RusCo (such as terms of its business activities). This approval requirement applies in respect of number of transactions, including direct or indirect acquisitions of equity interests, such that a third party, non-Russian purchaser of 25% or more of Kinross’ ownership interest, will be required to obtain applicable governmental approvals. Any transactions involving the acquisition of ownership, possession or use of basic production assets, the value of which is 25% or more of the balance value, shall also be subject to the prior approval of the competent state bodies.
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On July 1, 2017, amendments made to the Strategic Investments Law by Federal Law No. 155-FZ included a new regime and thresholds for the approval of transactions for foreign sovereign investors (i.e., foreign states and international organizations and any of their subsidiaries). Offshore companies were those companies from the jurisdictions listed in the Ministry of Finance Order No. 108n dated November 13, 2007.
On May 31, 2018, Federal Law No. 122-FZ came into effect amending the Strategic Investments Law and introducing a new category of a “non-disclosing foreign investor” instead of the previous “offshore company” introduced into the Strategic Investments Law in July 2017.
The latest amendments have replaced the category of an “offshore company” with the category of a “non-disclosing foreign investor”. A non-disclosing foreign investor is defined as a company, regardless of jurisdiction of its incorporation, which does not provide information to the Federal Antimonopoly Service on its beneficiaries, beneficial owners and controlling persons. More stringent requirements (in particular, lower thresholds for approval) apply to investments made by the non-disclosing foreign investor, such as:
1. | The requirement to obtain prior approval from the Strategic Commission if an acquisition includes more than 25% of the voting shares in the RusCo and more than 5% of the voting shares in the RusCo holding rights to a “strategic deposit”; |
2. | A prohibition from acquiring, directly or indirectly, more than 50% of the voting shares in the RusCo (and may not otherwise control the RusCo) and 25% or more of the voting shares in the RusCo holding rights to a “strategic deposit”; and |
3. | A prohibition from acquiring fixed assets amounting to 25% or more of the book value of the assets of the RusCo as at the last accounting date. |
The Strategic Investments Law also provides for cases when no prior approval is required in respect of the companies holding the rights to a “strategic deposit”.
The Strategic Investments Law designates geological study and/or mining work in subsoil areas of federal significance as strategic activity. According to the Subsoil Law, subsoil areas of federal significance, among other things, include those that contain according to the records of the state balance of mineral reserves as of January 1, 2006, gold reserves of 50 tonnes (or 1,763,698 ounces) or more and/or 500,000 tonnes or more of copper.
Kinross has successfully obtained Strategic Investments Law approval from the Strategic Commission with respect to the acquisition of Dvoinoye and the acquisition of the remaining 25% of Kupol.
Under a new regime introduced in July 2017 by Federal Law No.160-FZ dated July 9, 1999 (as amended) “On Foreign Investments in the Russian Federation” (the “Foreign Investment Law”), the chairman of the Strategic Commission may decide at his own discretion that any transaction (irrespective of amount of stakes/participation interests to be acquired or the nature of business) made by a foreign investor in respect of any Russian legal entity (irrespective of whether or not such Russian entity is a strategic company) is subject to approval pursuant to the Strategic Investments Law. Legal consequences for failure to obtain such prior approval are the same as consequences for failure to obtain prior approval pursuant to the Strategic Investments Law (transactions made in violation of the Strategic Investments Law are void and therefore dual restitution is generally applied, or if it is not possible to apply legal consequences of a void transaction, then the foreign investor is stripped of its voting rights). There are no explicit provisions in the Strategic Investments Law that would prevent the Strategic Commission from reviewing a transaction and potentially blocking it even after it had been closed. In this regard we believe that certain supplement legislation and/or official guidance will follow.
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Under the Subsoil Law and RF Government Resolution no. 697 dated September 16, 2008, combined license holders controlled by a foreign investor (such as CMGC with respect to the Kupol East and Kupol West licenses) are required to seek approval from the RF government prior to the commencement of mining operations on a strategic deposit under a combined license. The RF government has the right to terminate the combined license after completion of geological surveys, if a strategic deposit is discovered during the exploration stage with respect to these deposits. If such approval is not obtained and the license is terminated, the Company will not be able to mine under the Kupol West combined exploration and mining licenses or the Vodorazdelnaya property after completion of geological surveys. Although the RF Government has granted such approval to other applicable parties, there can be no assurance that such approval to mine will be granted to the license holder by the RF Government or what the terms of such approval might be. In the case of a withdrawal of a license, the RF Government is required to reimburse the expenses (including finance expenses, but subject to a cap on interest) incurred in respect of the geological study of the subsoil plot and any tender fee amount paid by the license holder plus a termination fee (in the case of a gold deposit, the termination fee is equal to 30% of the amount of reimbursable expenses). In addition, the license holder may be paid a finder’s fee by the RF Government in its discretion.
The Company is subject to the considerations and risks of operating in the Russian Federation. Ongoing political tensions and uncertainties with respect to the Russian Federation (including as a result of the Russian Federation’s foreign policy decisions, allegations of cyberattacks, and allegations of interference with foreign elections) have resulted in the imposition of sectoral and other economic sanctions, and increased the risk that the U.S. and certain other governments may impose further economic, or other, sanctions or penalties on, or may take other actions against, the Russian Federation or on persons and/or companies conducting business in the Russian Federation. There can be no assurance that sanctions or other penalties will not be imposed, or other actions will not be taken, by the Russian Federation, including in response to existing or threatened sanctions or other penalties or actions by the United States, Canada or the European Union and/or other governments against the Russian Federation or persons and/or companies conducting business in the Russian Federation. The imposition of such economic sanctions or other penalties, or such other actions by the Russian Federation and/or other governments, could have a material adverse effect on the Company’s assets and operations.
New laws or regulations, or amendments to current laws and regulations, including the renegotiation or removal of international tax treaties could have a material adverse effect on the Company, increase costs and result in a substantially higher tax burden for the Company’s operations in the Russian Federation. Certain currency conversion risks exist in the Russian economy. Russian legislation currently permits the conversion of rouble revenues into foreign currency. Any delay or other difficulty in converting roubles into a foreign currency to make a payment or delay in or restriction on the transfer of foreign currency could limit our ability to meet our payment and debt obligations, which could result in the loss of suppliers, acceleration of debt obligations, etc.
Developments in Mauritania may have adverse effects on Kinross’ operations and development projects in Mauritania.
Kinross is subject to political, economic and security risks which, should they materialize, may adversely affect the Company’s ability to operate its Tasiast mine in Mauritania. These risks include but are not limited to the following: (1) the potential that the government may attempt to renegotiate current mining conventions, revoke existing stability provisions in those conventions or breach those conventions; (2) political instability ; (3) the security situation in the country may deteriorate; (4) a lack of transparency in the operation of the government and development of new laws; (5) the potential for laws and regulations to be inconsistently applied; (6) disputes under the application of the mining convention; (7) potential legal and practical difficulties with enforcement of the mining convention; and (8) inconsistent interpretation and application of tax laws including potential re-assessments of historical tax filings. These issues include, but are not limited to, a process and timetable for payment or offset of VAT refunds owed by the government to the Company, production royalties payable by the Company, the long-term stability in the Company’s relationship with the workers’ union, the availability of duty exonerations for fuel, the application of a clear, comprehensive, legally certain and enforceable VAT exemption for the mining industry, labour force management and flexible labour practices and the timely issuance of work permits for the non-national workforce.
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The Company announced an Agreement in Principle with the Government of Mauritania in June 2020 which affords benefits and stability to both the Company and the Government. The Agreement in Principle remains subject to finalizing and executing definitive agreements. There can be no assurance that the Company will be able to conclude final and binding agreements with the Government of Mauritania or that further disputes will not arise between the parties including disputes with respect to the matters addressed by Agreement in Principle, any resulting definitive agreement, or the Company’s mining convention.
Title and access to Kinross’ properties may be uncertain and subject to risks.
The validity of mining rights, including mining claims which constitute most of Kinross’ property holdings, may, in certain cases, be uncertain and subject to being contested. Kinross’ mining rights, claims and other land titles, particularly title to undeveloped properties, may be defective and open to being challenged by governmental authorities and local communities.
Certain of Kinross’ United States mineral rights consist of unpatented mining claims. Unpatented mining claims present unique title risks due to the rules for validity and the opportunities for third-party challenge. These claims are also subject to legal uncertainty as reflected in the action titled Earthworks, et al. vs. Department of the Interior, et al., which is pending in the Court of Appeals for the D.C. Circuit, and in which a Kinross subsidiary has intervened. In that case, appellants contend that the Bureau of Land Management (“BLM”) issued rules that unlawfully allow mining companies to permit too much acreage for millsites and further contend that the BLM must perform formal mining claim validity determinations and require payment of “fair market value” for the claims rather than annual claims maintenance payments.
Certain of Kinross’ mining properties are subject to various royalty and land payment agreements. Failure by Kinross to meet its payment obligations under these agreements could result in the loss of related property interests.
Certain of Kinross’ properties may be subject to the rights or the asserted rights of various community stakeholders, including indigenous people. The presence of community stakeholders may also impact on the Company’s ability to explore, develop or operate its mining properties. In certain circumstances, consultation with such stakeholders may be required and the outcome may affect the Company’s ability to explore, develop or operate its mining properties.
For example, in Brazil, there is legislation requiring the government to grant title to the Quilombola people who either still occupy their traditional lands or who are found, through a process administered by the Instituto Nacional de Colonizacao e Reforma Agraria (“INCRA”), to have rights to certain lands. There are three Quilombola communities which have been registered and certified in the Paracatu area. An INCRA report issued on March 6, 2009 indicated that the Machadinho Quilombola community has rights to 2,217.52 hectares of land in the area, a portion of which (900 hectares) would be affected by the operation of the Eustáquio tailings facility at Paracatu. INCRA has not concluded the land demarcation process.
The Federal Public Attorney (“FPA”) in Brazil filed a lawsuit relating to the alleged rights of the Quilombola people in connection with certain lands being used to construct the Eustáquio tailings facility at Paracatu. As part of the lawsuit, the FPA had applied for an injunction seeking to enjoin the issuance by the state authority of the permit to operate the Eustáquio tailings facility. The FPA’s injunction was denied, the permit to operate was issued and the Eustáquio tailings facility has been operating since July 2012. In December, 2013 and January of 2014, the trial court judge issued decisions denying the FPA’s claim. In the fourth quarter of 2014, the FPA filed appeals challenging the decisions of the trial court. All requests on FPA’s appeal were denied and the decision became final in the first quarter of 2018.
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Numerous other companies compete in the mining industry, some of which may have greater resources and technical capacity than Kinross and, as a result, Kinross may be unable to effectively compete, which could have a material adverse effect on Kinross’ future operations.
The mineral exploration and mining business is competitive in all of its phases. In the search for and the acquisition of attractive mineral properties, Kinross competes with numerous other companies and individuals, including competitors with greater financial, technical and other resources than Kinross. The ability of the Company to operate successfully in the future will depend not only on its ability to develop its present properties, but also on its ability to select and acquire suitable new producing properties or prospects for mineral exploration. Kinross may be unable to compete successfully with its competitors in acquiring such properties or prospects on terms it considers acceptable, if at all.
Internal controls provide no absolute assurances as to reliability of financial reporting and financial statement preparation, and ongoing evaluation may identify areas in need of improvement.
Kinross has invested resources to document and assess its system of internal control over financial reporting and undertakes continuous evaluation of such internal controls. Internal control over financial reporting are procedures designed to provide reasonable assurance that transactions are properly authorized, assets are safeguarded against unauthorized or improper use, and transactions are properly recorded and reported. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, safeguards with respect to the reliability of financial reporting and financial statement preparation.
Kinross is required to satisfy the requirement of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), which requires an annual assessment by management of the effectiveness of Kinross’ internal control over financial reporting and an attestation report by Kinross’ independent auditors addressing the effectiveness of Kinross’ internal control over financial reporting.
If Kinross fails to maintain the adequacy of its internal control over financial reporting, as such standards are modified, supplemented, or amended from time to time, Kinross may not be able to ensure that it can conclude on an ongoing basis that it has effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Kinross’ failure to satisfy the requirement of the Sarbanes-Oxley Act on an ongoing, timely basis could result in the loss of investor confidence in the reliability of its consolidated financial statements, which in turn could harm Kinross’ business and negatively impact the trading price of its common shares. In addition, any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm Kinross’ operating results or cause it to fail to meet its reporting obligations.
Although Kinross is committed to ensure ongoing compliance, Kinross cannot be certain that it will be successful in complying with Section 404 of the Sarbanes-Oxley Act.
To operate successfully, Kinross is reliant on finding and retaining qualified personnel, including key executives.
In order to operate successfully, Kinross must find and retain qualified employees. Kinross and other companies in the mining industry compete for personnel and Kinross is not always able to fill positions in a timely manner. One factor that has contributed to an increased turnover rate is the aging workforce and it is expected that this factor will further increase the turnover rate in upcoming years. If Kinross is unable to attract and retain qualified personnel or fails to establish adequate succession planning strategies, Kinross’ operations could be adversely affected.
In addition, Kinross has a relatively small executive management team and in the event that the services of a number of these executives are no longer available, Kinross and its business could be adversely affected. Kinross does not carry key-person life insurance with respect to its executives.
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To operate successfully, Kinross uses an internally generated financial forecast although this cannot account for all market risks.
To determine its market risk sensitivities, Kinross uses an internally generated financial forecast model that is sensitized to, among other things, various gold prices, currency exchange rates, interest rates and energy prices. The variable with the greatest impact is the gold price, and Kinross prepares a base case scenario and then sensitizes it by a 10% increase and decrease in the gold price. For 2021, sensitivity to a 10% change in the gold price is estimated to have an approximate $340 million impact on pre-tax earnings. Kinross' financial forecast covers the projected life of its mines. In each year, gold is produced according to the mine plan. Additionally, for 2021, sensitivity to a 10% change in the silver price is estimated to have an approximate $15 million impact on pre-tax earnings. Costs are estimated based on current production costs plus the impact of any major changes to the operation during its life.
Kinross may require additional capital that may not be available.
The mining, processing, development, and exploration of Kinross’ properties may require substantial additional financing. Failure to obtain sufficient financing may result in the delay or indefinite postponement of exploration, development or production on any or all of Kinross’ properties, or even a loss of property interest. Additional capital or other types of financing may not be available if needed or, if available, the terms of such financing may be unfavourable to Kinross.
The Company’s ability to access investment grade debt markets and the related cost of debt financing is dependent upon maintaining investment grade credit ratings. The Company has investment grade credit ratings from Fitch Ratings, Moody’s, and Standard and Poor’s as set out in the “Ratings” section of this AIF. There is no assurance that these credit ratings will remain in effect for any given period of time or that such ratings will not be revised or withdrawn entirely by the rating agencies. Real or anticipated changes in credit ratings can affect the price of the Company’s existing debt as well as the Company’s ability to access the capital markets and the cost of such debt financing.
If the Company is unable to maintain its indebtedness and financial ratios at levels acceptable to its credit rating agencies, or should the Company’s business prospects deteriorate, the ratings currently assigned to the Company by the rating agencies could be downgraded, which could adversely affect the value of the Company’s outstanding securities and existing debt, its ability to obtain new financing on favourable terms, and increase the Company’s borrowing costs.
Kinross’ level of indebtedness and an inability to satisfy repayment obligations could have a significant impact on its operations and financial performance.
Although Kinross has been successful in repaying debt historically, there can be no assurance that it can continue to do so. Kinross’ level of indebtedness could have important and potentially adverse consequences for its operations and the value of its common shares including: (a) limiting Kinross’ ability to borrow additional amounts for working capital, capital expenditures, debt service requirements, execution of Kinross’ growth strategy or other purposes; (b) limiting Kinross’ ability to use operating cash flow in other areas because of its obligations to service debt; (c) increasing Kinross’ vulnerability to general adverse economic and industry conditions, including increases in interest rates; (d) limiting Kinross’ ability to capitalize on business opportunities and to react to competitive pressures and adverse changes in government regulation; and (e) limiting Kinross’ ability or increasing the costs to refinance indebtedness.
Kinross expects to obtain the funds to pay its expenses and to pay principal and interest on its debt by utilizing cash flow from operations. Kinross’ ability to meet these payment obligations will depend on its future financial performance, which will be affected by financial, business, economic, legal and other factors. Kinross will not be able to control many of these factors, such as economic conditions in the markets in which it operates. Kinross cannot be certain that its future cash flow from operations will be sufficient to allow it to pay principal and interest on Kinross’ debt and meet its other obligations. If cash flow from operations is insufficient or if there is a contravention of its debt covenant, Kinross may be required to refinance all or part of its existing debt, sell assets, borrow more money or issue additional equity. There can be no assurance that Kinross will be able to refinance all or part of its existing debt on terms that are commercially reasonable.
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The operations of Kinross in various countries are subject to currency risk.
Currency fluctuations may affect the revenues which the Company will realize from its operations since gold and silver are sold in the world market in United States dollars. The costs of Kinross are incurred principally in Canadian dollars, United States dollars, Chilean pesos, Brazilian reais, Russian roubles, Mauritanian ouguiya and Ghanaian cedis. The appreciation of non-U.S. dollar currencies against the U.S. dollar increases the cost of gold and silver production in U.S. dollar terms. Kinross’ results are positively affected when the U.S. dollar strengthens against these foreign currencies and are adversely affected when the U.S. dollar weakens against these foreign currencies. Where possible, Kinross’ cash and cash equivalents balances are primarily held in U.S. dollars. From time to time, Kinross transacts currency hedging to reduce the risk associated with currency fluctuations. While the Chilean peso, Brazilian real, and Russian rouble are currently convertible into Canadian and United States dollars, they may not always be convertible in the future. The Mauritanian ouguiya and Ghanaian cedis are convertible into Canadian and U.S. dollars, but conversion may be subject to regulatory and/or central bank approval.
Interest rates are subject to fluctuation risk.
Fluctuations in interest rates can affect the Company’s results of operations and cash flow. The Company’s cash and cash equivalents, as well as some of its long-term debt and credit facilities are subject to variable interest rates.
Kinross has a practice of no long-term gold hedging, although the Company may from time to time acquire gold and/or silver hedge (or derivative product) obligations through acquisitions and/or employ hedge/derivative products in respect of other commodities, interest rates and/or currencies.
The Company’s earnings can vary significantly with fluctuations in the market price of gold and silver. Kinross’ practice is not to hedge long-term metal sales’ exposures. However, the Company may assume or enter into forward sales contracts or similar instruments if hedges are acquired in a business acquisition, if hedges are required under project financing requirements, or when deemed advantageous by management. As at December 31, 2020, there were no metal derivative financial instruments outstanding. In addition, Kinross is not subject to margin requirements on any of its hedging lines.
The business of Kinross is dependent on good labour and employment relations.
Production at Kinross’ mines is dependent upon the efforts of, and maintaining good relationships with, employees of Kinross. Relations between Kinross and its employees may be impacted by changes in labour relations which may be introduced by, among others, employee groups, unions, and the relevant governmental authorities in whose jurisdictions Kinross carries on business. Adverse changes in such legislation or in the relationship between Kinross and its employees may have a material adverse effect on Kinross’ business, results of operations, and financial condition.
The results of Kinross’ operations could be adversely affected by its acquisition strategy and Kinross may not realize the anticipated benefits of recent acquisitions.
As part of Kinross’ business strategy, it has sought, and may continue to seek, to acquire new mining and development opportunities in the mining industry, along with assets to support its business operations. Any acquisition that Kinross may choose to complete which may be of a significant size, may change the scale of Kinross’ business and operations, and may expose Kinross to new geographical, political, operational, financial and geological risks. Kinross’ success depends on its ability to identify appropriate acquisition candidates, negotiate acceptable arrangements, including arrangements to finance acquisitions, and to integrate the acquired businesses and their personnel. Kinross may be unable to complete any acquisition or business arrangement that it pursues on favourable terms. Any acquisitions or business arrangements completed may not ultimately benefit Kinross’ business and could impair its results of operations, profitability and financial results. Acquisitions and business arrangements are accompanied by risks including, without limitation: a significant change in commodity prices after Kinross has committed to complete the transaction and established the purchase price or exchange ratio; an acquired material ore body may prove to be below expectations; Kinross may have difficulty integrating and assimilating the operations, technologies and personnel of any acquired companies, realizing anticipated synergies and maximizing the financial and strategic position of the combined enterprise, and maintaining uniform standards, policies and controls across the organization to support the expansion of Kinross’ operations resulting from these acquisitions; the integration of the acquired business or assets may divert management’s attention and disrupt Kinross’ ongoing business and its relationships with employees, customers, suppliers and contractors; and the acquired business or assets may have unknown liabilities which may be significant. Should these or other risks develop, Kinross may suffer significant financial losses or be required to write-down the value of the assets acquired (See Risk Factors related to impairment, below).
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In addition, in the event that Kinross chooses to raise debt capital to finance any such acquisition, Kinross’ leverage will be increased. If Kinross chooses to use equity as consideration for such acquisition, existing shareholders may suffer dilution. Alternatively, Kinross may choose to finance any such acquisition with its existing resources.
There can be no assurance that Kinross would be successful in overcoming these risks or any other problems encountered in connection with such acquisitions.
Kinross is subject to credit, liquidity and counterparty risks of third parties with which it contracts.
Credit risk relates to cash and cash equivalents, accounts receivable, and derivative contracts and arises from the possibility that a counterparty to an instrument fails to perform. Counterparty risk is the risk that a third party might fail to fulfill its performance obligations under the terms of a financial instrument. The Company is subject to counterparty risk and may be affected in the event that a counterparty becomes insolvent. To manage both counterparty and credit risk, the Company proactively manages its exposure to individual counterparties. The Company only transacts with highly-rated counterparties. A limit on contingent exposure has been established for each counterparty based on the counterparty’s credit rating, and the Company monitors the financial condition of each counterparty.
Liquidity risk is the risk that the Company may not have sufficient cash resources available to meet its payment obligations. To manage liquidity risk, the Company maintains cash positions and has financing in place that the Company expects will be sufficient to meet its operating and capital expenditure requirements. Potential sources for liquidity could include, but are not limited to: the Company’s current cash position, existing credit facilities, future operating cash flow, and potential private and public financing. Additionally, the Company reviews its short-term operational forecasts regularly and long-term budgets to determine its cash requirements.
Kinross may be adversely affected by global financial conditions.
The volatility and challenges that economies continue to experience around the world continues to affect the profitability and liquidity of businesses in many industries, which in turn has resulted in the following conditions that may have an effect on the profitability and cash flows of the Company:
• | Volatility in commodity prices and foreign exchange rates; |
• | Tightening of credit markets; |
• | Counterparty risk; and |
• | Volatility in the prices of publicly traded entities. |
The volatility in commodity prices and foreign exchange rates directly impact the Company’s revenues, earnings and cash flows, as noted above in the Risk Factors related to the gold price and foreign currency exchange risk.
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Although tighter credit markets could restrict the ability of certain companies to access capital, to date this has not affected the Company’s liquidity.
As at December 31, 2020, the Company had $1,563.6 million available under its credit facility arrangements. However, tightening of credit markets may affect the ability of the Company to obtain equity or debt financing in the future on terms favourable to the Company.
The Company has not experienced any difficulties to date relating to the counterparties it transacts with. The counterparties continue to be highly rated, and as noted above, the Company has employed measures to reduce the impact of counterparty risk.
Continued volatility in equity markets may affect the value of publicly listed companies in Kinross’ equity portfolio. Should declines in the equity values continue and are deemed to be other than temporary, impairment losses may result.
Kinross is subject to certain legal proceedings and may be subject to additional litigation in the future.
Legal proceedings may be brought against Kinross, for example, litigation based on its business activities, environmental laws, tax matters, volatility in its stock price or failure to comply with its disclosure obligations, which could have a material adverse effect on Kinross’ financial condition or prospects. Regulatory and government agencies may bring legal proceedings in connection with the enforcement of applicable laws and regulations, and as a result Kinross may be subject to expenses of investigations and defense, fines or penalties for violations if proven, and potentially cost and expense to remediate, increased operating costs or changes to operations, and cessation of operations if ordered to do so or required in order to resolve such proceedings. The Company may become party to disputes governed by the rules of international arbitration. Kinross may also be the subject of legal claims in Canada in respect of its activities in a foreign jurisdiction.
In the event of a dispute arising at Kinross’ foreign operations, Kinross may be subject to the exclusive jurisdiction of foreign courts or may not be successful in subjecting foreign persons to the jurisdiction of courts in Canada. Kinross’ inability to enforce its rights could have an adverse effect on its future cash flows, earnings, results of operations and financial condition.
Kinross may not be able to control the decisions and strategy of joint arrangements to which it is a party.
Certain of the operations in which Kinross has an interest are operated through joint arrangements with other mining companies and are subject to the risks normally associated with the conduct of joint arrangements. The existence or occurrence of one or more of the following circumstances and events could have a material adverse impact on Kinross’ profitability or the viability of its interests held through joint arrangements, which could have a material adverse impact on Kinross’ results of operations and financial condition: (a) inability to exert influence over certain strategic decisions made in respect of joint arrangement properties; (b) disagreement with partners on how to develop and operate mines efficiently; (c) inability of partners to meet their obligations to the joint arrangements or third parties; and (d) litigation between partners regarding joint arrangement matters.
Kinross may be negatively affected by market price volatility.
Kinross’ common shares are listed on the Toronto Stock Exchange (“TSX”) and the New York Stock Exchange (“NYSE”). The price of Kinross’ common shares is likely to be significantly affected by short-term changes in the gold price or in its financial condition or results of operations as reflected in its quarterly earnings reports. Other factors unrelated to the performance of Kinross that may have an effect on the price of the Kinross common shares include the following: a reduction in analytical coverage of Kinross by investment banks with research capabilities; increased political risk or actions by governments in countries where the Company operates; a drop in trading volume and general market interest in the securities of Kinross may adversely affect an investor’s ability to liquidate an investment and consequently an investor’s interest in acquiring a significant stake in Kinross; a failure of Kinross to meet the reporting and other obligations under Canadian and U.S. securities laws or imposed by the exchanges could result in a delisting of the Kinross common shares; and a substantial decline in the price of the Kinross common shares that persists for a significant period of time could cause the Kinross common shares to be delisted from the TSX or NYSE further reducing market liquidity.
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As a result of any of these factors, the market price of Kinross’ common shares at any given point in time may not accurately reflect Kinross’ long-term value. Securities class action litigation has been commenced against companies, including Kinross, following periods of volatility or significant decline in the market price of their securities. Securities litigation could result in substantial costs and damages and divert management’s attention and resources. Any decision resulting from any such litigation that is adverse to the Company could have a negative impact on the Company’s financial position.
Kinross may record impairment charges which may adversely affect financial results.
Goodwill is tested for impairment on an annual basis as at December 31, and at any other time if events or changes in circumstances indicate that the recoverable amount of a cash generating unit (“CGU”) containing goodwill has been reduced below its carrying amount. The carrying value of property, plant and equipment is reviewed at each reporting period end to determine whether there is any indication of impairment or reversal of impairment. If any such indication exists, then the CGU or asset’s recoverable amount is estimated. If the carrying amount of the CGU or asset exceeds its recoverable amount, an impairment is considered to exist and an impairment loss is recognized to reduce the CGU or asset’s carrying value to its recoverable amount. For property, plant and equipment and other long-lived assets, a previously recognized impairment loss may be reversed if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. The recoverable amounts, or fair values, of the Company’s CGUs are based, in part, on certain factors that may be partially or totally outside of Kinross’ control. Kinross’ fair value estimates are based on numerous assumptions, some of which may be subjective, and it is possible that actual fair value could be significantly different than those estimates.
A significant delay or disruption in sales of doré as a result of the unexpected discontinuation of services provided by refineries or a failure by refineries to meet outstanding delivery obligations could have a material adverse effect on operations.
The Company engages third-party refineries to refine doré into good delivery gold and silver bars, which are in turn sold into open markets. The refineries are located in Canada, Switzerland, Russia, India, and the United States. The loss of any one refiner could have a material adverse effect on the Company if alternative refineries are unavailable. There can be no guarantee that alternative refineries would be available if the need for them were to arise or that it would not experience delays or disruptions in sales that would materially and adversely affect results of operations. In addition, the Company has doré inventory at refineries and could incur a loss arising from the refineries’ failure to fulfill their contractual obligations. The Company has legally binding agreements in place for such refining services and also purchases bullion insurance, but there is a risk that a refinery will not satisfy its delivery obligations. In such a case, the Company may pursue all remedies available, as appropriate, to enforce any outstanding delivery obligations. If such delivery obligations are not fulfilled by the refinery, remedied by a court in a specific performance or damages judgment or insurance proceeds are not received, the Company will incur a one-time non-cash charge related to the carrying value of the inventory.
Kinross may be negatively affected by cybersecurity incidents or other IT systems disruption as well as evolving data privacy laws and regulations.
The Company relies heavily on its information technology systems including, without limitation, its networks, equipment, hardware, software, telecommunications, and other information technology (collectively, “IT systems”), and the IT systems of its vendors and third-party service providers, to operate its business as a whole including mining operations and development projects. IT systems are subject to an increasing threat of continually evolving cybersecurity risks including, without limitation, computer viruses, security breaches, and cyberattacks. In addition, the Company is subject to the risk of unauthorized access to its IT systems or its information through fraud or other means. Kinross’ operations also depend on the timely maintenance, upgrade and replacement of its IT systems, as well as pre-emptive expenses to mitigate cybersecurity risks and other IT systems disruptions.
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Although Kinross has not experienced any material losses to date relating to cybersecurity, or other IT systems disruptions, there can be no assurance that Kinross will not incur such losses in the future. Despite the Company’s mitigation efforts including implementing an IT systems security risk management framework, the risk and exposure to these threats cannot be fully mitigated because of, among other things, the evolving nature of cybersecurity threats. As a result, cybersecurity and the continued development and enhancement of controls, processes and practices designed to protect IT systems from cybersecurity threats remain a priority. As these threats continue to evolve, the Company, its vendors and third-party service providers, including IT service providers, may be required to expend additional resources to continue to modify or enhance protective measures or to investigate and remediate any cybersecurity vulnerabilities.
Any cybersecurity incidents or other IT systems disruption could result in production downtimes, operational delays, destruction or corruption of data, security breaches, financial losses from remedial actions, the theft or other compromising of confidential or otherwise protected information, fines and lawsuits, or damage to the Company’s reputation. Any such occurrence could have an adverse impact on Kinross’ financial condition and results of operations.
The Company is subject to privacy and data security regulations in several of the jurisdictions that it operates in, such as Canada, Brazil, the United States and the European Union (“EU”). Compliance with such laws, including General Data Protection Regulation in the EU, will affect business conducted in the EU and may also be enforced against entities established outside the EU but processing data of European data subjects. The Company could incur substantial costs in complying with these various national regulations as a result of having to make changes to prior business practices in a manner adverse to our business. Such developments may also require the Company to make system changes and develop new processes, further affecting our compliance costs. In addition, violations of privacy-related regulations can result in significant penalties and reputational harm, which in turn could adversely impact the Company’s business and results of operations.
Changes in climate conditions and regulatory regime could adversely affect our business and operations.
A number of governments or governmental bodies have introduced or are contemplating regulatory changes in response to the potential impacts of climate change. Where legislation already exists, regulation relating to emission levels and energy efficiency is becoming more stringent. The changes in legislation and regulation will likely increase the Company’s compliance costs.
In addition, the physical risks of climate change may also have an adverse effect at some of Kinross’ operations. These may include extreme weather events, changes in rainfall patterns, water shortages, and changing temperatures. These physical impacts could require the Company to curtail or close mining production and could prevent the Company from pursuing expansion opportunities. These effects may adversely impact the cost, production and financial performance of the Company’s operations.
Operations at Paracatu are dependent on rainfall and river water capture as the primary source of process water. During the rainy season, the mine channels surface runoff water to temporary storage ponds from where it is pumped to the process plants. Similarly, surface runoff and rain water and water captured from the river is stored in the tailings impoundment, which constitutes the main water reservoir for the process plants. The objective is to capture and store as much water as possible during the rainy season to ensure adequate water supply during the dry season.
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Accordingly, prolonged periods without adequate rainfall may adversely impact the Company’s operations. As a result, production may fall below historic or forecast levels and Kinross may incur significant costs or experience significant delays that could have a material effect on Kinross’ financial performance, liquidity and results of operations.
Excessive rainfall or flooding may also adversely affect operations. Excess rainfall can result in operational difficulties including geotechnical instability, increased dewatering demands, and additional water management requirements. Extended periods of above average rainfall at a site may result in increased costs or production disruptions that could have a material effect on Kinross’ financial performance, liquidity and results of operations.
We can provide no assurance that efforts to mitigate the risks of climate changes will be effective and that the physical risks of climate change will not have an adverse effect on the Company’s operations and profitability.
Brazilian Power Plants
The ownership and operation of our Brazilian power plants carry an inherent risk of liability related to public safety, health, safety, security and the environment, including the risk of government imposed orders to remedy unsafe conditions and/or to remediate or otherwise address environmental contamination or damage. We may also be exposed to potential penalties for contravention of health, safety, security and environmental laws and potential civil liability. We may become subject to government orders, investigations, inquiries or other proceedings (including civil claims) relating to health, safety, security and environmental matters as a result of which our operations may be limited or suspended. The occurrence of any of these events or any changes, additions to or more rigorous enforcement of health, safety, security and environmental laws could impact the operation of the power plants and result in additional expenditures. Additional environmental, health and safety issues relating to presently known or unknown matters may require unanticipated expenditures, or result in fines, penalties or other consequences (including changes to operations) that may be adverse to our business and results of operations.
Illegal Mining
Illegal mining activities occur near, and occasionally on some of the Company’s properties in Africa and Brazil. Illegal mining is associated with a number of negative impacts, including environmental degradation, human rights abuse, child labour and funding of conflict. In addition, substantial illegal mining activities on the Company’s properties or properties that the Company may seek to acquire in the future may deplete mineral reserves or mineral resources and the economic benefits of those properties. It is difficult for the Company to control illegal mining activities on and around its properties. The Company relies on government support and enforcement to manage illegal mining activities near its operations; however, enforcement is often lacking or inconsistent.
DIVIDEND PAYMENTS AND DIVIDEND POLICY
On July 31, 2013, the Board of Directors suspended the payment of semi-annual dividends.
On September 17, 2020, the Company announced that its Board of Directors had approved a plan to pay quarterly dividends of $0.03 per common share. In 2020, the Company paid an aggregate cash dividend of $0.06 per common share: $0.03 on October 22 and $0.03 on December 10. On February 10, 2021 the Company declared a quarterly dividend of $0.03 per common share, which was paid on March 18.
Although the Company expects to continue paying a cash dividend, Kinross is under no obligation to declare or pay dividends on its common shares. Payment of any future dividends will be at the discretion of Kinross’ Board of Directors, after taking into account many factors, including Kinross’ operating results, financial condition, and current and anticipated cash requirements. Further, pursuant to Kinross’ syndicated credit facility, Kinross may be required to obtain consent from the lenders prior to declaring any common share dividend.
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LEGAL PROCEEDINGS AND REGULATORY ACTIONS
Legal Proceedings
The Sunnyside Mine is an inactive mine situated in the so-called Bonita Peak Mining District (“District”) near Silverton, Colorado. A subsidiary of Kinross, Sunnyside Gold Corporation (“SGC”), was involved in operations at the mine from 1985 through 1991 and subsequently conducted various reclamation and closure activities at the mine and in the surrounding area. On August 5, 2015, while working in another mine in the District known as the Gold King, the Environmental Protection Agency (the “EPA”) caused a release of approximately three million gallons of contaminated water into a tributary of the Animas River. In the third quarter of 2016, the EPA listed the District, including areas impacted by SGC’s operations and closure activities, on the National Priorities List pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”). SGC challenged portions of the CERCLA listing in the United States Court of Appeals for District of Columbia Circuit, but SGC’s petition for review was denied, as was its subsequent petition for rehearing. The EPA has notified SGC that SGC is a potentially responsible party under CERCLA and may be jointly and severally liable for cleanup of the District or cleanup costs incurred by the EPA in the District. The EPA may in the future provide similar notification to Kinross, as the EPA contends that Kinross has liability in the District under CERCLA and other statutes. In the second quarter of 2018, the EPA issued to SGC a modified Unilateral Administrative Order for Remedial Investigation (the “Order”). In the second quarter of 2019, pursuant to the original Order, the EPA issued to SGC a Modified Statement of Work, Work Plan and Field Sampling Plan (together with the Order, the “Modified Order”). The Modified Order significantly altered and expanded upon the work set out under the original Order. In the third quarter of 2019, after consulting with external legal counsel, SGC provided notice to the EPA that the Modified Order is legally indefensible, does not address any imminent hazard and SGC does not intend to comply with the Modified Order. On July 26, 2019, the EPA acknowledged receipt of SGC’s notice of its intention not to comply with the Modified Order. The EPA indicated that it would undertake to complete the work ordered under the Modified Order, and has subsequently completed some of that work. While SGC believes that it has good cause not to comply with the Modified Order, failure to comply with the Modified Order may subject SGC to significant penalties, damages and/or potential reimbursement of the cost of remediation work undertaken by the EPA.
In the second quarter of 2016, the State of New Mexico filed a complaint naming the EPA, SGC, Kinross and others alleging violations of CERCLA, the Resource Conservation and Recovery Act (“RCRA”), and the Clean Water Act (“CWA”) and claiming negligence, gross negligence, public nuisance and trespass. New Mexico subsequently dropped the RCRA claim. The New Mexico complaint seeks cost recovery, damages, injunctive relief, and attorney’s fees. In the third quarter of 2016, the Navajo Nation initiated litigation against the EPA, SGC and Kinross, alleging entitlement to cost recovery under CERCLA for past and future costs incurred, negligence, gross negligence, trespass, and public and private nuisance, and seeking reimbursement of past and future costs, compensatory, consequential and punitive damages, injunctive relief and attorneys’ fees. In the third quarter of 2017, the State of Utah filed a complaint, which has been amended to name the EPA, SGC, Kinross and others, alleging negligence, gross negligence, public nuisance, trespass, and violation of the Utah Water Quality Act and the Utah Solid and Hazardous Waste Act.
The Utah complaint seeks cost recovery, compensatory, consequential and punitive damages, penalties, disgorgement of profits, declaratory, injunctive and other relief under CERCLA, attorney’s fees, and costs. In the third quarter of 2018, numerous members of the Navajo Nation initiated litigation against the EPA, SGC and Kinross, alleging negligence, gross negligence and injury, including great spiritual and emotional distress. The complaint of the Navajo members seeks compensatory and consequential damages, interest, punitive damages, attorneys’ fees and expenses. The New Mexico, Navajo Nation, Utah and Navajo member cases have been centralized for coordinated or consolidated pretrial proceedings in the United States District Court for the District of New Mexico. In the third quarter of 2019 (i) the EPA filed a cross claim against SGC and Kinross seeking contribution, including contribution under CERCLA, for any damages awarded to New Mexico, the Navajo Nation, or Utah as well as cost-recovery for the EPA’s response costs and remedial expenses incurred by the EPA in the District pursuant to CERCLA or other laws; (ii) Environmental Restoration, LLC, an EPA contractor, filed a cross claim against SGC seeking contribution under CERCLA and attorneys’ fees and expenses; and (iii) SGC filed a cross claim against the United States and certain contractors of the United States seeking contribution and equitable indemnity and making a due process claim against the United States. In the first quarter of 2020, the Court granted the United States judgment on SGC’s due process cross claim and dismissed it.
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In the fourth quarter of 2020 and the first quarter of 2021, SGC and Kinross reached settlements with the Navajo Nation, the State of New Mexico and the State of Utah, which settlements will result in a dismissal with prejudice of all claims by these parties against SGC and Kinross. Although these settlements are not subject to entry of a Consent Decree approving the settlements, a Consent Decree approving the settlements will be lodged with the United States District Court for the District of New Mexico for public notice and comment. Upon expiration of the comment period, the parties will move the Court for entry of the Consent Decree.
Taxes
The Company operates in numerous countries around the world and accordingly is subject to, and pays taxes under the various regimes in countries in which it operates. These tax regimes are determined under tax laws of the country. The Company has historically filed, and continues to file, all required tax returns and filings and to pay the taxes reasonably determined to be due. The tax rules and regulations in many countries are complex and subject to interpretation. From time to time the Company will undergo a review of its historic tax returns and in connection with such reviews, disputes can arise with the taxing authorities over the Company’s interpretation of the country’s tax rules.
Regulatory Actions
Maricunga
In May 2015, Chilean environmental enforcement authority (“EEA”) commenced an administrative proceeding against CMM alleging that pumping of groundwater to support the Maricunga operation had impacted area wetlands and, on March 18, 2016, issued a resolution alleging that CMM’s pumping was impacting the “Valle Ancho” wetland. Beginning in May 2016, the EEA issued a series of resolutions ordering CMM to temporarily curtail pumping from its wells.
In response, CMM suspended mining and crushing activities and reduced water consumption to minimal levels. CMM contested these resolutions, but its efforts were unsuccessful and, except for a short period of time in July 2016, CMM’s operations have remained suspended. On June 24, 2016, the EEA amended its initial sanction (the “Amended Sanction”) and effectively required CMM to cease operations and close the mine, with water use from its wells curtailed to minimal levels. On July 9, 2016, CMM appealed the sanctions and, on August 30, 2016, submitted a request to the Environmental Tribunal that it issue an injunction suspending the effectiveness of the Amended Sanction pending a final decision on the merits of CMM’s appeal. On September 16, 2016, the Environmental Tribunal rejected CMM’s injunction request and on August 7, 2017, upheld the SMA’s Amended Sanction and curtailment orders on procedural grounds. On October 9, 2018, the Supreme Court affirmed the Environmental Tribunal’s ruling on procedural grounds and dismissed CMM’s appeal.
On June 2, 2016, CMM was served with two separate lawsuits filed by the Chilean State Defense Counsel (“CDE”). Both lawsuits, filed with the Environmental Tribunal, alleged that pumping from the Maricunga groundwater wells caused environmental damage to area wetlands. One action relates to the “Pantanillo” wetland and the other action relates to the Valle Ancho wetland (described above). Hearings on the CDE lawsuits took place in 2016 and 2017, and on November 23, 2018, the Tribunal ruled in favor of CMM in the Pantanillo case and against CMM in the Valle Ancho case. In the Valle Ancho case, the Tribunal is requiring CMM to, among other things, submit a restoration plan to the EEA for approval. CMM has appealed the Valle Ancho ruling to the Supreme Court. The CDE has appealed to the Supreme Court in both cases and is asserting in the Valle Ancho matter that the Environmental Tribunal erred by not ordering a complete shutdown of Maricunga’s groundwater wells. The timing of any rulings by the Supreme Court on the parties’ respective appeals remains uncertain.
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Kettle River – Buckhorn
Crown Resources Corporation (“Crown”) is the holder of a waste discharge permit (the “Permit”) in respect of the Buckhorn Mine, which authorizes and regulates mine-related discharges from the mine and its water treatment plant. On February 27, 2014, the Washington Department of Ecology (the “WDOE”) renewed Buckhorn Mine’s National Pollution Discharge Elimination System Permit (the “Renewed Permit”), with an effective date of March 1, 2014. The Renewed Permit contained conditions that were more restrictive than the original discharge permit. In addition, Crown felt that the Renewed Permit was internally inconsistent, technically unworkable and inconsistent with existing agreements in place with the WDOE, including a settlement agreement previously entered into by Crown and the WDOE in June 2013 (the “Settlement Agreement”). On February 28, 2014, Crown filed an appeal of the Renewed Permit with the Washington Pollution Control Hearings Board (“PCHB”). In addition, on January 15, 2015, Crown filed a lawsuit against the WDOE in Ferry County Superior Court, Washington, claiming that the WDOE breached the Settlement Agreement by including various unworkable compliance terms in the Renewed Permit (the “Crown Action”). On July 30, 2015, the PCHB upheld the Renewed Permit. Crown filed a Petition for Review in Ferry County Superior Court, Washington, on August 27, 2015, seeking to have the PCHB decision overturned. On March 13, 2017, the Ferry County Superior Court upheld the PCHB’s decision. On April 12, 2017, Crown appealed the Ferry County Superior Court’s ruling to the State of Washington Court of Appeals. On October 8, 2019, the Court of Appeals affirmed the Superior Court’s decision and the PCHB’s decision. On December 31, 2019, the Court of Appeals denied Crown’s Motion for Reconsideration and to Supplement the Record. Crown did not petition the Washington Supreme Court for review and, as a result, appeal of this matter has been exhausted.
On July 19, 2016, the WDOE issued an Administrative Order (“AO”) to Crown and Kinross Gold Corporation asserting that the companies had exceeded the discharge limits in the Renewed Permit a total of 931 times and has also failed to maintain the capture zone required under the Renewed Permit. The AO orders the companies to develop an action plan to capture and treat water escaping the capture zone, undertake various investigations and studies, revise its Adaptive Management Plan, and report findings by various deadlines in the fourth quarter 2016. The companies timely made the required submittals. On August 17, 2016, the companies filed an appeal of the AO with the PCHB (the “AO Appeal”). Because the AO Appeal raises many of the same issues that have been raised in the Appeal and Crown Action, the companies and the WDOE agreed to stay the AO Appeal indefinitely to allow these matters to be resolved. The PCHB granted the request for stay on August 26, 2016, which stay has been subsequently extended. On June 2, 2020, the PCHB dismissed the appeal based on a Joint Stipulation of Voluntary Dismissal filed by the parties. The basis for the dismissal was the exhaustion of appeals as to the Renewed Permit and Crown’s satisfaction of the AO.
On November 30, 2017, the WDOE issued a Notice of Violation (“NOV”) to Crown and Kinross asserting that the companies had exceeded the discharge limits in the Permit a total of 113 times during the third quarter of 2017 and also failed to maintain the capture zone as required under the Permit. The NOV ordered the companies to file a report with the WDOE identifying the steps which have been and are being taken to “control such waste or pollution or otherwise comply with this determination,” which report was timely filed. Following its review of this report, the WDOE may issue an AO or other directives to the Company. The NOV is not immediately appealable, but any subsequent AO or other directive relating to the NOV may be appealed, as appropriate.
Each calendar quarter beginning April 2018, the WDOE has issued a NOV to Crown and, on one occasion, also to Kinross, asserting that the companies had exceeded the discharge limits in the Permit and have failed to maintain the capture zone as required under the Permit. The most recent NOV, dated January 29, 2021, asserted 144 alleged violations had occurred in the fourth quarter of 2020.
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The NOVs order the companies to file a report with WDOE within 30 days identifying the steps which have been and are being taken to “control such waste or pollution or otherwise comply with this determination,” which reports have been, or will be, timely filed. Following its review of these reports, WDOE may issue an AO or other directives to the Company. The NOV is not immediately appealable, but any subsequent AO or other directive relating to the NOV may be appealed, as appropriate.
On April 10, 2020, the Okanogan Highlands Alliance (“OHA”) filed a citizen’s suit against Crown and Kinross Gold U.S.A., Inc. (“KGUSA”) under the Clean Water Act (“CWA”) for alleged failure adequately to capture and treat mine-impacted groundwater and surface water at the site in violation of the Permit and renewed Permit. The suit seeks injunctive relief and civil penalties in the amount of up to $55,800 per day per violation. On May 7, 2020, the Attorney General for the State of Washington filed suit against Crown and KGUSA under the CWA and the state Water Pollution Control Act alleging the same alleged permit violations and seeking similar relief as OHA. These lawsuits have been consolidated and remain pending.
DESCRIPTION OF CAPITAL STRUCTURE
KINROSS COMMON SHARES
Kinross has an unlimited number of common shares authorized and 1,261,073,345 common shares issued and outstanding as of March 26, 2021. There are no limitations contained in the articles or bylaws of Kinross on the ability of a person who is not a Canadian resident to hold Kinross common shares or exercise the voting rights associated with Kinross common shares. A summary of the rights of the Kinross common shares is set forth below.
Dividends
Holders of Kinross common shares are entitled to receive dividends when, as and if declared by the Board of Directors of Kinross out of funds legally available therefor, provided that if any Kinross preferred shares are at the time outstanding, the payment of dividends on common shares or other distributions (including repurchases of common shares by Kinross) will be subject to the declaration and payment of all cumulative dividends on outstanding Kinross preferred shares and any other preferred shares which are then outstanding.
Liquidation
In the event of the dissolution, liquidation, or winding up of Kinross, holders of Kinross common shares are entitled to share rateably in any assets remaining after the satisfaction in full of the prior rights of creditors, including holders of Kinross’ indebtedness, and the payment of the aggregate liquidation preference of the Kinross preferred shares, and any other preferred shares then outstanding.
Voting
Holders of Kinross common shares are entitled to one vote for each share on all matters voted on by shareholders, including the election of directors.
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MARKET PRICE FOR KINROSS SECURITIES
In Canada, the Kinross common shares trade on the TSX under the symbol “K.” In the United States, the Kinross common shares trade on the NYSE under the symbol “KGC.” The Kinross common shares began trading on the NYSE on February 3, 2003. The following table sets forth, for the periods indicated, the high and low sales prices of the Kinross common shares traded on all Canadian exchanges, including primarily the TSX, as well as all United States’ exchanges, including primarily the NYSE, and their respective trading volumes.11
Kinross Common Shares on the TSX and
other Canadian exchanges |
Kinross Common Shares on the NYSE
and other United States’ exchanges |
|||||||||||||||||||||||||
High | Low |
Trading
Volume (in millions of shares) |
High | Low |
Trading
Volume (in millions of shares) |
|||||||||||||||||||||
(CAD Dollars) | (CAD Dollars) | (US Dollars) | (US Dollars) | |||||||||||||||||||||||
Fiscal Year Ended December 31, 2020 | ||||||||||||||||||||||||||
January | 6.79 | 5.62 | 100.7 | 5.15 | 4.30 | 264.3 | ||||||||||||||||||||
February | 8.30 | 6.38 | 161.6 | 6.27 | 4.74 | 400.1 | ||||||||||||||||||||
March | 7.75 | 4.00 | 387.4 | 5.79 | 2.72 | 678.6 | ||||||||||||||||||||
April | 10.19 | 5.67 | 256.3 | 7.25 | 4.00 | 452.2 | ||||||||||||||||||||
May | 10.64 | 8.74 | 218.5 | 7.67 | 6.34 | 371.8 | ||||||||||||||||||||
June | 9.96 | 8.02 | 224.1 | 7.33 | 5.88 | 414.7 | ||||||||||||||||||||
July | 12.55 | 9.47 | 219.8 | 9.38 | 7.00 | 366.0 | ||||||||||||||||||||
August | 13.50 | 10.96 | 174.4 | 10.21 | 8.31 | 384.4 | ||||||||||||||||||||
September | 13.59 | 10.80 | 204.3 | 10.32 | 8.05 | 335.2 | ||||||||||||||||||||
October | 12.38 | 10.28 | 139.8 | 9.42 | 7.71 | 240.3 | ||||||||||||||||||||
November | 11.70 | 9.00 | 168.2 | 8.97 | 6.88 | 269.6 | ||||||||||||||||||||
December | 10.03 | 8.75 | 167.1 | 7.84 | 6.85 | 461.0 |
Kinross Common Shares on the TSX and
other Canadian exchanges |
Kinross Common Shares on the NYSE
and other United States’ exchanges |
|||||||||||||||||||||||||
High | Low |
Trading
Volume (in millions of shares) |
High | Low |
Trading
Volume (in millions of shares) |
|||||||||||||||||||||
(CAD Dollars) | (CAD Dollars) | (US Dollars) | (US Dollars) | |||||||||||||||||||||||
Fiscal Year Ended December 31, 2019 | ||||||||||||||||||||||||||
January | 4.49 | 4.05 | 167.2 | 3.43 | 3.08 | 253.9 | ||||||||||||||||||||
February | 5.04 | 4.18 | 133.3 | 3.83 | 3.16 | 274.8 | ||||||||||||||||||||
March | 4.88 | 4.16 | 136.0 | 3.64 | 3.12 | 229.4 | ||||||||||||||||||||
April | 4.83 | 4.16 | 101.7 | 3.62 | 3.10 | 178.7 | ||||||||||||||||||||
May | 4.47 | 4.04 | 137.8 | 3.31 | 3.00 | 172.7 | ||||||||||||||||||||
June | 5.28 | 4.36 | 173.6 | 4.01 | 3.22 | 275.1 | ||||||||||||||||||||
July | 5.72 | 4.85 | 143.2 | 4.38 | 3.64 | 256.8 | ||||||||||||||||||||
August | 6.96 | 5.22 | 214.1 | 5.24 | 3.94 | 388.5 | ||||||||||||||||||||
September | 7.24 | 6.04 | 189.4 | 5.47 | 4.55 | 366.7 | ||||||||||||||||||||
October | 6.65 | 5.85 | 132.9 | 5.00 | 4.46 | 262.5 | ||||||||||||||||||||
November | 6.41 | 5.36 | 157.6 | 4.87 | 4.07 | 262.3 | ||||||||||||||||||||
December | 6.27 | 5.47 | 115.3 | 4.82 | 4.17 | 232.5 |
11 Figures sourced from Bloomberg and FactSet.
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RATINGS
The following table sets out the investment grade ratings of Kinross’ corporate debt by each of the three major rating agencies, as well as outlooks, indicated as at March 30, 2021:
Standard & Poor’s Rating Services | Moody’s Investors Service | Fitch Ratings Ltd. | ||||
US $500 million, 4.500% notes due 2027 | BBB- (Stable) | Baa3 (Positive) | BBB- (Positive) | |||
US $500 million, 5.125% notes due 2021 | BBB- (Stable) | Baa3 (Positive) | BBB- (Positive) | |||
US $250 million, 6.875% notes due 2041 | BBB- (Stable) | Baa3 (Positive) | BBB- (Positive) | |||
US $500 million, 5.95% notes due 2024 | BBB- (Stable) | Baa3 (Positive) | BBB- (Positive) |
Standard & Poor’s Ratings Services (“S&P”) credit ratings for long-term debt are on a rating scale that ranges from AAA to D, which represents the range from highest to lowest quality of such securities rated. The BBB rating category is the fourth highest of the ten major categories. The ratings from AA to CCC may be modified by the addition of a plus (+) or minus (–) sign to show relative standing within the major rating categories. If S&P anticipates that a credit rating may change in the next six to 24 months, it may issue an updated ratings outlook indicating whether the possible change is likely to be “positive,” “negative,” “stable,” or “developing.” However, a rating outlook does not mean that a rating change is inevitable.
Moody’s Investors Service (“Moody’s”) credit ratings for long-term debt are on a rating scale that ranges from Aaa to C, which represents the range from highest to lowest quality of such securities rated. The Baa rating category is the fourth highest of nine major categories. For ratings of Aa through Caa, Moody’s may apply numerical modifiers of 1, 2 or 3 in each generic rating classification to indicate relatively higher, middle or lower ranking. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. A Moody’s rating outlook is an opinion regarding the likely rating direction over the medium-term. Ratings outlooks fall into four categories: positive, negative, stable, and developing. A stable outlook indicates a low likelihood of a rating change over the medium term. A negative, positive or developing outlook indicates a higher likelihood of a rating change over the medium term. The time between the assignment of a new rating outlook and a subsequent rating action has historically varied widely.
Fitch Ratings Ltd. credit ratings are on a rating scale that ranges from AAA to D, which represents the range from highest to lowest quality. The BBB rating category is the fourth highest of the major categories. The ratings from AA to CCC may be modified by the addition of a plus (+) or minus (–) sign to show relative standing within the major rating categories. According to Fitch Ratings Ltd.’s system, BBB ratings indicate good credit quality and that the expectations of default risk are currently low. The capacity for payment of financial commitments is considered adequate, but adverse business or economic conditions are more likely to impair this capacity. An outlook indicates the direction a rating is likely to move over a one- to two-year period. They reflect financial or other trends that have not yet reached the level that would cause a rating action, but which may do so if such trends continue. Positive or negative rating outlooks do not imply that a rating change is inevitable and, similarly, ratings with stable outlooks can be raised or lowered without a prior revision to the outlook.
A definition and description of the categories of the credit ratings described above which have been assigned to the Company’s debt are publicly available from the website of each of the individual rating agencies.
Kinross understands that the ratings are based on, among other things, information furnished to the above rating agencies by Kinross and information obtained by the rating agencies from publicly available sources. The credit ratings given to Kinross’ debt instruments by the rating agencies are not recommendations to buy, hold or sell such debt instruments since such ratings do not comment as to market price or suitability for a particular investor. There is no assurance that any rating will remain in effect for any given period of time or that any rating will not be revised or withdrawn entirely by a rating agency in the future if, in its judgment, circumstances so warrant. Credit ratings accorded to Kinross’ debt instruments may not reflect the potential impact of all risks on the value of such instruments, including risks related to market or other factors discussed in this AIF (See “Risk Factors”, above).
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DIRECTORS AND OFFICERS
DIRECTORS
Set forth below is information regarding the directors of Kinross as of March 30, 2021.
Name and Place of Residence |
Principal Occupation |
Director Since | Current Committees12 | |||
Ian Atkinson The Woodlands, Texas United States |
Corporate Director | February 10, 2016 | CGN, CR, H | |||
Kerry D. Dyte Calgary, Alberta Canada |
Corporate Director | November 8, 2017 | A, CGN | |||
Glenn A. Ives Vancouver, British Columbia Canada |
Corporate Director | May 6, 2020 | A, H | |||
Ave G. Lethbridge Toronto, Ontario Canada |
EVP and Chief Human Resources and Safety Officer, Toronto Hydro Corporation | May 6, 2015 | CGN, H | |||
Elizabeth D. McGregor Vancouver, British Columbia Canada |
Corporate Director | November 6, 2019 | A, CR | |||
Catherine McLeod-Seltzer Vancouver, British Columbia Canada |
Non-Executive Chairman and Director, Bear Creek Mining | October 26, 2005 | CR, H | |||
Kelly J. Osborne Minneapolis, Minnesota United States |
Chief Executive Officer of Twin Metals Minnesota | May 6, 2015 | CGN, CR | |||
David A. Scott
Canada |
Corporate Director | May 8, 2019 | A, CR | |||
J. Paul Rollinson Toronto, Ontario Canada |
President and Chief Executive Officer of Kinross | August 1, 2012 | None |
Each of the directors has held the principal occupation set forth opposite his or her name, or other executive offices with the same firm or its affiliates, for the past five years, with the exception of Mr. Ian Atkinson, Mr. Kerry D. Dyte, Mr. Glenn A. Ives, Ms. Elizabeth D. McGregor, Mr. Kelly J. Osborne and Mr. David A. Scott.
12 Committees: A-Audit and Risk, CGN-Corporate Governance and Nominating, CR-Corporate Responsibility and Technical, H-Human Resources and Compensation,
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Below is a biography of each of the directors of Kinross:
Ian Atkinson
Mr. Atkinson is a corporate director and was most recently the President & Chief Executive Officer and a Director of Centerra Gold Inc., a gold mining company, a position he held from May 2012 until his retirement at the end of 2015. Prior to that, he was Senior Vice President, Global Exploration from July 2010 to April 2012 and Vice President, Exploration from October 2005 to June 2010 of Centerra Gold Inc. From September 2004 to October 2005, he was Vice President, Exploration & Strategy of Hecla Mining Company, an international gold and silver mining company in Idaho, USA. During the years 2001 2004, he was an independent management consultant based out of Houston, Texas, USA. From July 1996 to June 1999 he was Senior Vice President, Exploration and from June 1999 to January 2001 he held the position of Senior Vice President, Operations & Exploration with Battle Mountain Gold Company in Houston, Texas, USA. He was Senior Vice President with Hemlo Gold Mines, Inc., Toronto, from September 1991 to July 1996. From 1973 to 1991, he held various progressive leadership positions with mining companies in the United States and Canada. Mr. Atkinson served on the board of the Prospectors and Developers Association of Canada and the World Gold Council. He was President of the Porcupine Prospectors and Developers Association. Mr. Atkinson holds a Bachelor of Science in Geology and a Master of Science in Geophysics from the University of London, England and a Diploma in surveying from the Imperial College, London, England.
Kerry D. Dyte
Mr. Dyte is a corporate director and was most recently Executive Transition Advisor at Cenovus Energy Inc. (“Cenovus”), an integrated Canadian oil company headquartered in Calgary, a position he held from December 2015 until his retirement in March 2016. Prior to that, he was the Executive Vice-President, General Counsel and Corporate Secretary at Cenovus from December 2009 to December 2015. From December 2002 to December 2009 he was the Vice-President, General Counsel and Corporate Secretary of EnCana Corporation (“EnCana”), a leading north American energy producer. Prior to that, he held the position of Assistant General Counsel and Corporate Secretary from April 2002 to December 2002 at EnCana. From June 2001 to April 2002, he held the position of Assistant General Counsel at Alberta Energy Company Ltd., prior to its merger with PanCanadian Energy Corporation to form EnCana. He was the Treasurer of Mobil Oil Canada Ltd. from August 1997 to December 2000. From March 1991 to August 1997 he was the Senior Counsel and Assistant Corporate Secretary of Mobil Oil Canada Ltd. In 1996 he was also posted to Mobil Oil Australia where he was Senior Counsel. Mr. Dyte served on the Financial Review Advisory Committee of the Alberta Securities Commission from 2010 to 2015. He was the president (2013 to 2014) and member of the executive committee (2004 to 2008; 2011 to 2015) of the Association of Canadian General Counsels. In November 2019, Mr. Dyte became a director of Hull Child and Family Foundation, a charity providing funding to Hull Services, a not for profit organization that provides integrated behavioural and mental health services for children and families. Mr. Dyte holds a Bachelor of Law degree from the University of Alberta, Canada. He has also completed the Directors Education Program from the Institute of Corporate Directors, Calgary and currently holds the ICD.D designation.
Glenn A. Ives
Mr. Ives is an audit specialist in the mining and financial sectors and held various leadership positions with Deloitte Canada during his tenure with them from 1999 to 2020. He served as Deloitte’s mining leader for North and South America from 2007 to March 2020. He was Executive Chair from 2010 to 2018 and Vice Chair from 2006 to 2010. He served as an Audit Partner from 1999 to 2010. Prior to joining Deloitte, from 1993 to 1999, Mr. Ives was CFO and Director of Vengold Inc.; from 1988 to 1999 he was with TVX Gold Inc. as Vice President of Finance. Mr. Ives also served as a Director of Lihir Gold Inc. from 1997 to 1999. Mr. Ives was an audit manager with Coopers & Lybrand from 1985 to 1988. Mr. Ives is currently the Chair of University of Waterloo’s School of Accounting and Finance Advisory Board, a director and Finance Committee Chair of the St. Paul’s Hospital Foundation (Vancouver) and a director and Finance Committee Chair of the Canadian Nature Museum Foundation. Mr. Ives is also a Board member, Treasurer and Finance Committee Chair with West Vancouver United Church and serves as Board member for Bard on the Beach, a professional Shakespeare festival in Western Canada. He also served as a Board member on the Princess Margaret Cancer Foundation from 2010 to 2019 (Chair from 2016 to 2018). Mr. Ives holds a Bachelor of Mathematics (Honours) from the University of Waterloo and is a Fellow of the Chartered Professional Accountants and a member of Chartered Professional Accountants of British Columbia and Ontario.
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Ave G. Lethbridge
Ms. Lethbridge is currently Executive Vice President and Chief Human Resources and Safety Officer of Toronto Hydro Corporation, an electric and energy service company, a position that she has held since November 2013. During her career spanning 21 years, from 1998 to the present, she has held various progressive senior executive leadership positions with Toronto Hydro encompassing human resources, environment, health and safety, corporate social responsibility and sustainability, mergers and restructuring, executive succession, enterprise risk, regulatory compliance, strategy, technology change, government relations and governance. From 2002 to 2004 she was Vice President, Organizational Development and Performance & Corporate Ethics Officer; from 2004 to 2007 she was Vice President, Human Resources and Organizational Effectiveness; and from 2008 to 2013 she was Vice President, Organizational Effectiveness and Environment Health and Safety. Her experience also includes the gas, utility and telecom industry. Ms. Lethbridge holds a Master of Science degree in Organizational Development from Pepperdine University in California, with international consulting in the US, China and Mexico. She has completed the Directors’ Education Program from the Institute of Corporate Directors at the University of Toronto’s Rotman School of Management and currently holds the ICD.D designation. She is a Certified Human Resources Executive and a former Board Governor for Georgian College.
Elizabeth D. McGregor
Ms. McGregor is a corporate director and was most recently the Executive Vice-President and Chief Financial Officer of Tahoe Resources Inc., a position she held from August 2016 until her retirement in February 2019. Prior to that, she held the position of Vice-President and Treasurer from October 2013 to August 2016. From April 2007 to October 2013, Ms. McGregor held progressively senior positions in Goldcorp Inc.; from April 2007 to December 2008 as Director of Risk, from January 2009 to October 2010 as Administration Manager at the Peñasquito mine providing financial and management oversight to the $1.6 billion construction project in Mexico. From November 2010 to October 2013, as Director, Project Finance and Cost Control, she provided financial oversight for construction projects totaling $7 billion. Ms. McGregor started her career as an Audit Manager with KPMG LLP during years 2001 to 2006. Ms. McGregor holds a Bachelor of Arts degree in Sociology from Queen’s University in Canada and is a Chartered Professional Accountant, Chartered Accountant from the Chartered Professional Accountants of British Columbia.
Catherine McLeod-Seltzer
Ms. McLeod-Seltzer is a corporate director and a recognized leader in the minerals industry for her ability to create growth-focused companies and generate significant shareholder value. She was appointed the Independent Chair of the Company effective January 1, 2019. She has been the Non Executive Chair, founder and a director of Bear Creek Mining, a silver mining company, since 2003 and from 1997 through 2013 was the Non-Executive/Independent Chair and a director of Pacific Rim Mining Corp. From 1994 to 1996, she was the President, Chief Executive Officer and a director of Arequipa Resources Ltd., a publicly traded company which she co founded in 1992. From 1985 to 1993, she was employed by Yorkton Securities Inc. as an institutional trader and broker, and also as Operations Manager in Santiago, Chile (1991-92). She has a Bachelor’s degree in Business Administration from Trinity Western University.
Kelly J. Osborne
Mr. Osborne is currently the CEO of Twin Metals Minnesota, a wholly owned subsidiary of Antofagasta plc. Previously, he was the President and Chief Executive Officer and a Director of Duluth Metals where he also held the position of Chief Operating Officer from July 2012 to April 2014 and the position of Chief Executive Officer of Twin Metal Minnesota, a wholly owned subsidiary of Duluth Metals, from July 2014 to January 2015. From 2004 to 2012, he held various progressive leadership positions with Freeport McMoRan Copper & Gold, Indonesia, starting as Manager, Underground Development, from 2004 to 2006; Vice President, Underground Operations, from 2006 to 2010 and finally as Senior Vice President, Underground Mines, from 2010 to 2012. From October 2002 to August 2004, he served as the area manager for Vulcan Materials Company, a leading producer of construction materials in the United States. From 1998 to 2002, he was a Mine Superintendent with Stillwater Mining Company. From 1992 to 1998, he was Plant Manager with J.M. Huber Corporation, a Texas based multinational supplier of engineered materials. From 1984 to 1992, he was with Homestake Mining Company (“Homestake”) which later merged into Barrick Gold Corporation in 2002. At Homestake, he started as a Corporate Management Trainee, a position he held from 1984 to 1986, he progressed to the position of a Mine Planning Engineer, a position he held from 1986 to 1988 and was a Mine Captain from 1988 to 1992. Mr. Osborne holds a Bachelor of Science Degree in Mine Engineering from the University of Arizona, Tucson, Arizona.
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David A. Scott
Mr. Scott is a corporate director and was most recently Vice Chair and Managing Director, Mining Global Investment Banking at CIBC Capital Markets, a position he held from 2009 until his retirement in May 2019. Mr. Scott joined CIBC in 1999 and held progressively senior positions playing an active role in the majority of significant M&A and equity financing transactions completed in Canada in the last two decades. Prior to joining CIBC, Mr. Scott was Managing Director of the Global Mining Group at RBC Dominion Securities Inc. from 1996 to 1999, Managing Director and Head of the Mining Group at Richardson Greenshields of Canada Ltd. from 1992 to 1996, held progressive positions ending with Head of the Mining Group at Levesque Beaubien Geoffrion Inc. and prior to that, worked as a geologist with the Noranda Group. Mr. Scott was a member of the Mining Association of Canada’s Task Force on Sustainable Mining, helped to develop the CIM Valuation Standards for mineral properties, was a former multi-term director of the Prospectors and Developers Association of Canada and assisted with the development of the world’s first Mining MBA Program at the Schulich School of Business. Mr. Scott holds a BASc in Geology from the University of Western Ontario.
J. Paul Rollinson
Mr. Rollinson was appointed to the Kinross board and as Chief Executive Officer on August 1, 2012 and is currently President and Chief Executive Officer. He was appointed Executive Vice President, Corporate Development in September 2009 after having joined Kinross as Executive Vice President, New Investments, in September 2008. Prior to joining Kinross, Mr. Rollinson had a long career in investment banking spanning 17 years. From June 2001 to September 2008, he worked at Scotia Capital (Scotia) where his final position was Deputy Head of Investment Banking. During his time with Scotia, he was responsible for the mining, power/utilities, forestry and industrial sectors. From April 1998 to June 2001 he worked for Deutsche Bank AG, where his final position was Managing Director/Head of Americas for the mining group, and before that, from 1994 to April 1998 he was a senior member of the mining team at BMO Nesbitt Burns. Mr. Rollinson has an Honours Bachelor of Science Degree in Geology from Laurentian University and a Master of Engineering in Mining from McGill University.
CORPORATE GOVERNANCE
The corporate governance practices established by Kinross’ Board of Directors are described in Kinross’ latest management information circular for its annual meeting of shareholders available at www.sedar.com. Details of Kinross’ corporate governance practices compared to the corporate governance listing standards of the New York Stock Exchange are available for review on Kinross’ website at www.kinross.com under the corporate governance section of the website.
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OFFICERS
The following table sets forth the names of each of the executive and certain other officers of Kinross and all offices held by each of them as of March 30, 2021.
Name |
Office Held |
|
Andrea S. Freeborough Toronto, Ontario, Canada |
Senior Vice-President and Chief Financial Officer | |
Geoffrey P. Gold Toronto, Ontario, Canada |
Executive Vice-President, Corporate Development, External Relations and Chief Legal Officer | |
Catherine McLeod-Seltzer Vancouver, British Columbia Canada |
Independent Chair | |
J. Paul Rollinson
|
President and Chief Executive Officer | |
Paul Tomory
|
Executive Vice-President and Chief Technical Officer |
The following sets forth biographical information for each of the above officers of Kinross who is not also a director of Kinross:
Andrea S. Freeborough was appointed to the role of Chief Financial Officer on May 1, 2019. Since joining Kinross in 2009, she has held several positions within the Finance function, and was most recently Vice-President, Investor Relations and Corporate Development. Andrea is a recognized finance mining executive with a strong background in financial reporting, business processes, M&A, and investor relations. In 2016, she was named one of the “100 Global Inspirational Women in Mining” by Women in Mining (UK). From 1998-2009, she was at KPMG in increasingly senior roles, working at the firm’s Toronto, London (UK) and New Jersey/New York offices, and most recently held the position Associate Partner. Ms. Freeborough is a Chartered Professional Accountant, Chartered Accountant and has a Bachelor of Business Administration from Wilfrid Laurier University.
Geoffrey P. Gold was appointed Executive Vice-President and Chief Legal Officer in February of 2008. Effective August of 2012, he assumed the role of Executive Vice-President, Corporate Development and from October of 2013 to April of 2015 he assumed the role of Executive Vice-President, Human Resources. He assumed the role of Executive Vice-President, Corporate Development, External Relations and Chief Legal Officer on January 1, 2016. Prior to February 2008, he had been Senior Vice-President and Chief Legal Officer since May 2006. Prior to that, he was Vice-President, Assistant Secretary and Associate General Counsel for Placer Dome Inc. from 2001 until 2006; Assistant Secretary and Associate General Counsel for Placer Dome Inc. from 1999 to 2001; General Counsel and Secretary for Placer Dome North America from 1998 to 1999; and held other legal positions with Placer Dome from 1994 to 1998. Mr. Gold holds a Bachelor of Commerce (Honours) and a Bachelor of Laws from the University of British Columbia.
Catherine McLeod-Seltzer see biographical information on page 94.
J. Paul Rollinson see biographical information on page 95.
Paul Tomory was appointed Chief Technical Officer effective January 1, 2017. He has been with Kinross since 2008 and was most recently Senior Vice-President, Operations Strategy and Project Development. He was previously at Bain & Company, focusing on mining and heavy industry, and at Golder Associates, where he worked on numerous mining and heavy civil works projects as a geotechnical engineer. He has a B.A.Sc. and a M.A.Sc. in Civil Engineering (Mining) from the University of Toronto, and an MBA from the Rotman School of Management, University of Toronto. He is a licensed Professional Engineer in the Province of Ontario.
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As at March 26, 2021, the directors and executive officers of Kinross as a group owned, directly or indirectly, or exercised control or direction over 4,686,619 common shares of Kinross, representing less than one percent of the total number of common shares outstanding before giving effect to the exercise of options or other convertible securities held by such directors and officers. The statement as to the number of common shares beneficially owned directly or indirectly or over which control or direction is exercised by the directors and officers of Kinross as a group is based upon information provided by the directors and officers.
CEASE TRADE ORDERS, BANKRUPTCIES, PENALTIES OR SANCTIONS
No director or executive officer of Kinross or a shareholder holding a sufficient number of securities to affect materially the control of Kinross is, or within the ten years prior to the date hereof has been, a director or executive officer of any company (including Kinross) that, while that person was acting in that capacity: (i) was the subject of a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days; (ii) was subject to an event that resulted, after the director or executive officer ceased to be a director or executive officer, in the company being the subject of a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation for a period of more than 30 consecutive days; or (iii) within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets.
No director or executive officer of Kinross or a shareholder holding a sufficient number of securities of Kinross to affect materially the control of Kinross has, within the ten years prior to the date hereof, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director, officer or shareholder.
CONFLICT OF INTEREST
To the best of Kinross’ knowledge, and other than as disclosed in this AIF, in the notes to Kinross’ consolidated financial statements and its MD&A, there are no known existing or potential conflicts of interest between Kinross and any director or officer of Kinross, except as disclosed below and that certain of the directors and officers serve as directors and officers of other public companies and therefore it is possible that a conflict may arise between their duties as a director or officer of Kinross and their duties as a director or officer of such other companies.
The directors and officers of Kinross are aware of the existence of laws governing accountability of directors and officers for corporate opportunity and requiring disclosure by directors of conflicts of interest and Kinross will rely upon such laws in respect of any directors’ and officers’ conflicts of interest or in respect of any breaches of duty by any of its directors or officers. All such conflicts will be disclosed by such directors or officers in accordance with the OBCA and they will govern themselves in respect thereof to the best of their ability in accordance with the obligations imposed upon them by law.
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INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
Other than as described elsewhere in this AIF, the notes to the Company’s consolidated financial statements and its MD&A, since January 1, 2013, no director, executive officer or 10% shareholder of Kinross or any associate or affiliate of any such person or company, has or had any material interest, direct or indirect, in any transaction that has materially affected or will materially affect the Company or any of its subsidiaries.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for Kinross’ common shares is Computershare Investor Services Inc. at its principal office at 100 University Avenue, Toronto, Ontario, Canada M5J 2Y1, telephone 1-800-564-6253.
MATERIAL CONTRACTS
Kinross Material Contracts
No material contracts were entered into by the Corporation within the financial year ended December 31, 2020 or before such time that are still in effect, other than in the ordinary course of business.
INTERESTS OF EXPERTS
The Company’s independent auditors for fiscal 2020, KPMG LLP, have audited the consolidated financial statements of Kinross for the two years ended December 31, 2020. In connection with their audit, KPMG LLP has confirmed that they are independent within the meaning of the relevant rules and related interpretations prescribed by the relevant professional bodies in Canada and any applicable legislation or regulations and under all relevant US professional and regulatory standards.
Mr. John Sims is the qualified person who supervised the preparation of the property descriptions contained herein and the Company’s mineral reserve and mineral resource estimates as at December 31, 2020. Mr. Sims was an officer of Kinross until December 31, 2020. Mr. Sims remains the Company’s qualified person as an external consultant.
The qualified person named in this section beneficially owned, directly or indirectly, less than 1% of any class of shares of the Company’s outstanding shares at the time of the preparation of the reserve and resource estimates and the technical reports.
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AUDIT AND RISK COMMITTEE
The Audit and Risk Committee’s charter sets out its responsibilities and duties, qualifications for membership and reporting to the Company’s Board of Directors. A copy of the charter is attached hereto as Schedule “A”.
As of the date of this AIF, the members of the Company’s Audit and Risk Committee are Glenn A. Ives (Chairman), Kerry D. Dyte, Elizabeth D. McGregor and David A. Scott. Each of Messrs. Dyte, Ives and Scott and Ms. McGregor are independent and financially literate within the meaning of National Instrument 52-110 Audit Committees (“NI 52-110”). In addition to being independent directors as described above, all members of the Company’s Audit and Risk Committee must meet an additional “independence” test under NI 52-110 in that their directors’ fees are the only compensation they, or their firms, receive from the Company and that they are not affiliated with the Company. Each of Mr. Ives and Ms. McGregor is a “financial expert” in accordance with SEC requirements.
Relevant Education and Experience
Set out below is a description of the education and experience of each Audit and Risk Committee member that is relevant to the performance of his responsibilities as an Audit and Risk Committee member.
Kerry D. Dyte | Mr. Dyte holds a Bachelor of Laws degree from the University of Alberta, Edmonton. He has completed the Director’s Education Program from the Institute of Corporate Directors, Calgary. He practiced law from 1985 to 2015 with a particular focus on securities laws, including a secondment as legal counsel to the Ontario Securities Commission from 1987 to 1988, where he spent time in the Corporate Finance branch. Mr. Dyte was most recently Executive Vice-President, General Counsel and Corporate Secretary of Cenovus Energy Inc., and was responsible for the internal audit function at Cenovus Energy Inc. Prior thereto, Mr. Dyte was treasurer at Mobil Oil Canada Ltd. from 1997 to 2000. |
Glenn A. Ives | Mr. Ives is an audit specialist in the mining and financial sectors. He holds a Bachelor of Mathematics (Honours) from the University of Waterloo and is a Fellow of the Chartered Professional Accountants and a member of Chartered Professional Accountants of British Columbia and Ontario. Mr. Ives was previously a Partner at Deloitte Canada where he held various leadership positions during his tenure from 1999 to 2020. He served as Deloitte’s mining leader for North and South America from 2007 to March 2020, and was Executive Chair from 2010 to 2018. From 1999 to 2010 he served as an Audit Partner. Prior to his time at Deloitte he was the Chief Financial Officer and a Director of Vengold Inc. from 1993 to 1999. From 1988 to 1993 he was Vice-President of Finance for TVX Gold Inc. Mr. Ives is also currently the Chair of University of Waterloo’s School of Accounting and Finance Advisory Board, a director and Finance Committee Chair of the St. Paul’s Hospital Foundation (Vancouver) and a director and Finance Committee Chair of the Canadian Nature Museum Foundation. |
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Elizabeth D. McGregor |
Ms. McGregor has a B.A. (Hons) from Queen’s University and is a Canadian Chartered Professional Accountant. She has almost 20 years of financial experience and over 10 years of experience in the mining sector. She was most recently the Executive Vice-President and Chief Financial Officer of Tahoe Resources Inc. and was previously at Goldcorp and KPMG earlier in her career. Ms. McGregor has a wide variety of executive financial experience, including debt financing, stakeholder management, board reporting, and corporate, mine site and project management experience.
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David A. Scott |
Mr. Scott holds a BASc in Geology from the University of Western Ontario. Mr. Scott had been Vice Chair and Managing Director, Mining Global Investment Banking at CIBC Capital Markets from 2009 until his retirement in May 2019. Mr. Scott joined CIBC in 1999 and held progressively senior positions playing an active role in the majority of significant M&A and equity financing transactions completed in Canada in the last two decades. Prior to joining CIBC, he was Managing Director of the Global Mining Group at RBC Dominion Securities Inc. from 1996 to 1999, Managing Director and Head of the Mining Group at Richardson Greenshields of Canada Ltd. from 1992 to 1996, held progressive positions ending with Head of the Mining Group at Levesque Beaubien Geoffrion Inc. Mr. Scott was a member of the Mining Association of Canada’s Task Force on Sustainable Mining, helped to develop the CIM Valuation Standards for mineral properties, was a former multi-term director of the Prospectors and Developers Association of Canada and assisted with the development of the world’s first Mining MBA Program at the Schulich School of Business.
|
Pre-Approval Policies and Procedures
The Audit and Risk Committee has formalized its approach to non-audit services by the external auditors in its charter, a copy of which is attached hereto as Schedule “A”.
External Auditor Service Fees13
Audit Fees
The audit fees billed by the Company’s external auditors for the financial year ended December 31, 2020 were CAD$5,140,000 (December 31, 2019 – CAD$4,771,000).
Audit-Related Fees
The audit-related fees billed by the Company’s external auditors for the financial year ended December 31, 2020 were CAD$222,000 (December 31, 2019 – CAD$202,000), relating to translation services and pension plan audits.
Tax Fees
The tax fees in respect of tax compliance and tax advice billed by the Company’s external auditors for the financial year ended December 31, 2020 were CAD$85,000 (December 31, 2019 – CAD$13,000).
13 Fee information includes out-of-pocket costs (including reimbursed costs, technology and support charges or administrative charges) incurred in connection with providing the professional services. Fee information for 2019 has been recast to reflect this inclusion.
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All Other Fees
CAD$33,000 was paid to the Company’s external auditors in the financial year ended December 31, 2020 under this caption (December 31, 2019 – CAD$6,000).
ADDITIONAL INFORMATION
Additional information relating to the Company can be found on SEDAR at www.sedar.com. Additional information, including directors’ and officers’ remuneration and indebtedness, principal holders of the Company’s securities and securities authorized for issuance under equity compensation plans is contained in the management information circular of the Company filed for its most recent annual meeting of shareholders. Additional financial information is provided in the Company’s audited consolidated financial statements and the MD&A for the financial year ended December 31, 2020.
GLOSSARY OF TECHNICAL TERMS
adularia
A variety of orthoclase, in the feldspar group of minerals. A common mineral in granitic rocks.
alluvial mining
A method of extracting minerals by dredging alluvial (placer) deposits.
arsenopyrite
The most common arsenic mineral and principal ore of arsenic; occurs in many sulfide ore deposits, particularly those containing lead, silver and gold.
assay
To determine the value of various elements within an ore sample, streambed sample, or valuable metal sample.
ball mill
A steel cylinder filled with steel balls into which crushed ore is fed. The ball mill is rotated, causing the balls to cascade and grind the ore.
bedding planes
Beds are layers of sedimentary rocks that are distinctly different from overlying and underlying layers of sedimentary rocks which formed by deposition of sediments on the Earth's surface over long periods of time. Bedding planes are the contact surfaces between these rock layers.
belt
A series of mineral deposits occurring in close proximity to each other, often with a common origin.
boudins
Sausage-shaped segments of rock occurring in a boudinage structure. Boudinage occurs when tensional (stretching) forces act on layers of relatively hard rock surrounded by softer rock. The overall resulting appearance is that of a string of linked sausages when observed in section.
breccia
A coarse-grained clastic rock, composed of angular broken rock fragments held together by a mineral cement or in a fine-grained matrix; it differs from conglomerate in that the fragments have sharp edges and unworn corners.
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carbon-in-column or CIC
A process step wherein cyanide leaching solution passes through columns filled with ore.
carbon-in-pulp
A process step wherein granular activated particles much larger than the ground ore particles are introduced into the ore pulp after primary leaching in cyanide. Precious metals adsorption occurs onto the activated carbon from the pregnant cyanide solution.
chalcopyrite
A copper mineral composed of copper, iron and sulphur. This mineral is very similar to marcasite in its characteristics; it tarnishes easily; going from bronze or brassy yellow to yellowish or grayish brown, has a dark streak, and is lighter in weight and harder than gold.
chlorite
A group of minerals with a flaky or scaly structure, green in colour and relatively soft.
core
A long cylindrical piece of rock, about an inch in diameter, brought to surface by diamond drilling.
cyanidation
A method of extracting exposed gold or silver grains from crushed or ground ore by dissolving the contained gold and silver in a weak cyanide solution. May be carried out in tanks inside a mill or in heaps of ore out of doors.
dedicated pad
An area of topography where gold ore will be placed in order to be leached. The ore will remain permanently upon this pad upon the completion of the gold extraction.
dilution
The effect of waste or low-grade ore being included unavoidably in the mine ore, lowering the recovered grade.
disseminated orebody
Small particles of valuable minerals, spread relatively uniformly throughout a host rock. The disseminated orebody mostly consists of metallic ore minerals present in low concentrations.
doré
Unrefined gold and silver bullion bars, which will be further refined to almost pure metal.
electrowinning
Recovery of a metal from a solution by means of electro-chemical processes.
epithermal
A hydrothermal mineral deposit formed within about 1 kilometre of the Earth’s surface and in the temperature range of 50 to 200 degrees Celsius, occurring mainly as veins.
fault
A fracture in the earth’s crust accompanied by a displacement of one side of the fracture with respect to the other and in a direction parallel to the fracture. Normal faults are formed by tensile stress, and have the hanging wall on the downthrown side of the fault. Reverse faults are formed by compressive stress, and have the hanging wall on the upthrown side of the fault.
felsic
A term applied to igneous rocks that contain a large proportion of light-coloured minerals such as quartz and feldspar.
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flotation
A separation process in which valuable mineral particles are induced to become attached to bubbles and float, while the non-valuable minerals sink.
fold
Any bending or wrinkling of rock layers.
foliation
Parallel orientation of play minerals or mineral banding in rocks.
formation
Unit of sedimentary rock of characteristic composition or genesis.
galena
A lead mineral, which occurs with sphalerite in hydrothermal veins, also in sedimentary rocks as replacement deposits; an important source of lead and silver.
gold equivalent production
Gold equivalent production represents gold production plus silver production computed into gold ounces using a market price ratio.
graben
A downthrown block of rock between two parallel faults.
grade
The amount of valuable metal in each tonne of material, expressed as grams per tonne for precious metals.
Cut-off grade – is the minimum metal grade at which a tonne of rock can be processed on an economic basis.
Recovered grade – is actual metal grade realized by the metallurgical process and treatment of ore, based on actual experience or laboratory testing.
granite
A light coloured, coarse grained, igneous rock.
gravity concentration circuit
Equipment used within a plant to recover gold from the ore using the difference in specific gravity between the gold and the host rock. Typically used are shaking tables, spirals, etc.
greenschist
A metamorphosed basic igneous rock, which owes its colour and foliation to abundant chlorite.
hanging wall
The fault block that lies above an inclined fault surface.
heap leaching
A process whereby gold is extracted by “heaping” broken ore on sloping impermeable pads and repeatedly spraying the heaps with a weak cyanide solution which dissolves the gold content. The gold-laden solution is collected for gold recovery.
hedging
Taking a buy or sell position in a futures market opposite to a position held in the cash market to minimize the risk of financial loss from an adverse price change.
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HQ
A diamond drill core measuring 2.500 inches in diameter (6.35 centimetres).
HTW
A diamond drill core measuring 2.791 inches in diameter (7.09 centimetres).
HX
A diamond drill core measuring 3.000 inches in diameter (7.62 centimetres).
hydrothermal fluids
Hot fluids that are associated with metamorphism, igneous activity, and sedimentary diagenesis. They contain an abundance of ions and alter the surrounding rocks. They can deposit economic mineralization and other vein-fillings.
igneous
A term applied to rock that formed by crystallizing from molten rock
intrusive
Rock which while molten, penetrated into or between other rocks but solidified before reaching the surface.
leach
A method of extracting gold from ore by a chemical solution usually containing cyanide.
lode
Vein of metal ore.
low-grade
A term applied to ores relatively poor in the metal they are mined for; lean ore.
mafic
A term applied to igneous rocks that contain a large proportion of dark-coloured minerals such as olivine and pyroxene.
Mesozoic
Era of geologic time from approximately 65 to 250 million years before present.
metamorphism
The process by which the form or structure of rocks is changed by heat and pressure. Metasedimentary, meta-igneous and metavolcanic refer to sedimentary, igneous and volcanic rocks that have undergone metamorphism.
mica
A group of minerals formed of elastic flakes and sheets, which can be colourless, white, yellow, green, brown, or black. Micas are common rock-forming minerals in igneous, metamorphic, and sedimentary rocks.
mill
A plant where ore is ground fine and undergoes physical or chemical treatment to extract the valuable metals.
mineral claim
A mineral claim usually authorizes the holder to prospect and mine for minerals and to carry out works in connection with prospecting and mining.
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mineralization
The process or processes by which a mineral or minerals are introduced into a rock, resulting in a valuable or potentially valuable deposit. It is a general term, incorporating various types; e.g., fissure filling, impregnation, and replacement.
net smelter return
A type of royalty payment where the royalty owner receives a fixed percentage of the revenues of a property or operation.
NQ
A diamond drill core measuring 1.875 inches in diameter (4.76 centimetres).
olivine
A rock-forming mineral composed of silicon, oxygen and varying amounts of magnesium and iron.
open pit
A mine that is entirely on surface. Also referred to as open-cut or open-cast mine.
outcrop
A visible exposure of bedrock on the surface of the Earth.
oxidation
A reaction where a material is reacted with an oxidizer such as pure oxygen or air in order to alter the state of the material.
placer
A place where gold is obtained by the washing of materials: rocks, boulders, sand, clay, etc. containing gold or other valuable minerals. These are deposits of valuable minerals that are found in the form of dust, flakes, grains, and nuggets.
porphyry
An igneous rock in which relatively large crystals, called phenocrysts, are surrounded by fine mineral grains.
pyrite
A yellow iron sulphide mineral, normally of little value. It is sometimes referred to as “fool’s gold.”
pyroxene
A group of rock-forming minerals consisting of silicon, oxygen and varying amounts of other elements such as iron, magnesium, calcium and sodium.
qualified person
An individual who is an engineer or geoscientist with at least five years of experience in mineral exploration, mine development or operation or mineral project assessment, or any combination of these; has experience relevant to the subject matter of the mineral project and the technical report; and is a member or licensee in good standing of a professional association recognized under National Instrument 43-101.
quartz
Common rock-forming mineral consisting of silicon and oxygen.
quartzite
A metamorphic rock composed mainly of quartz and typically formed from sandstone, a type of sedimentary rock.
reclamation
The restoration of a site after mining or exploration activity is completed.
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recovery
A term used in process metallurgy to indicate the proportion of valuable material obtained in the processing of an ore. It is generally stated as a percentage of valuable metal in the ore that is recovered compared to the total valuable metal present in the ore.
run-of-mine
Ore in its unprocessed state after it is mined.
reusable pad
An area where heap leaching takes place on ore material temporarily placed onto it. Upon completion of leaching, the ore is removed from the pad and sent to disposal. New material is then placed on the pad.
sample
A small portion of rock or a mineral deposit taken so that the metal content can be determined by assaying.
schist
A foliated metamorphic rock the grains of which have a roughly parallel arrangement; generally developed by shearing.
screen fire assay
If a sample is identified to contain ‘coarse’ gold, a screen fire assay is the best way to obtain a definitive result. This procedure is equivalent to assaying a large sample to extinction and averaging the results.
sedimentary rocks
Secondary rocks formed from material derived from other rocks and laid down under water. Examples are limestone, shale and sandstone.
semi-autogenous (SAG) mill
A steel cylinder with steel balls into which run-of-mine material is fed. The ore is ground in the action of large lumps of rock and steel balls.
sericite
A white, fine-grained potassium mica occurring in small scales as an alteration product of various minerals, having a silky luster, and found in various metamorphic rocks (especially in schists and phyllites) or in the wall rocks, fault gouge, and vein fillings of many ore deposits.
shear zone
A geological term used to describe a geological area in which shearing has occurred on a large scale.
sigmoidal foliation
A foliation which is shaped like parallel lines that bulge toward the center and taper at the ends. They originate due to tension created between the two opposing forces acting on the rock and the rock tears to alleviate the tension. If the shearing continues long enough, these openings in the rock begin to rotate.
sphalerite
A zinc mineral which is composed of zinc and sulphur. It has a specific gravity of 3.9 to 4.1.
stockpile
Broken ore heaped on surface, pending treatment or shipment.
stockwork
A mineral deposit consisting of a three-dimensional network of planar to irregular veinlets closely enough spaced that the whole mass can be mined.
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strike
The direction of the line formed by the intersection of a fault, bed, or other planar feature and a horizontal plane. Strike indicates the attitude or position of linear structural features such as faults, beds, joints, and folds.
tailings
The material that remains after all metals considered economic have been removed from ore during milling.
thrust
A contractional fault that accommodates horizontal shortening of a datum surface, typically bedding in upper crustal rocks or a regional foliation surface in more highly metamorphosed rocks. Generally, a thrust places older strata over younger strata so that the stratigraphic sequence is generally duplicated.
vein
A fissure, fault or crack in a rock filled by minerals that have traveled upwards from some deep source.
volcanic
A collective term for igneous rocks that formed from eruptions of liquid rock onto the surface or from particles of rock that were ejected into the atmosphere.
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SCHEDULE “A”
KINROSS
GOLD CORPORATION
(“Kinross”)
CHARTER OF THE
AUDIT AND RISK COMMITTEE
I. | Purpose |
The Audit and Risk Committee shall provide assistance to the Board of Directors in fulfilling its financial reporting and risk oversight responsibilities to the shareholders of Kinross and the investment community. The Audit and Risk Committee’s primary duties and responsibilities are to:
♦ | Oversee (i) the integrity of Kinross’ financial statements; (ii) Kinross’ compliance with legal and regulatory requirements regarding financial disclosure; (iii) the independent auditors’ qualifications and independence; and (iv) the performance of Kinross’ internal audit function. |
♦ | Serve as an independent and objective party to monitor Kinross’ financial reporting processes and internal control systems. |
♦ | Review and appraise the audit activities of Kinross’ independent auditors and the internal auditing functions. |
♦ | Annually evaluate the performance of the Audit and Risk Committee in light of the requirements of its Charter. |
♦ | Provide open lines of communication among the independent auditors, financial and senior management, and the Board of Directors for financial reporting and control matters. The Audit and Risk Committee will meet, periodically, with management, with the members of the internal audit function and with the independent auditors. |
♦ | Oversee Kinross’ process for identifying and managing business risks. |
♦ | Review the use of derivative and hedging programs to manage operational, financial and currency risk. |
♦ | Review and approval of the Internal Audit Charter. |
♦ | Review Kinross’ overall tax plan and any material tax planning initiatives. |
♦ | Review, evaluate and oversee the periodic replacement of the lead audit partner of the independent auditors. |
The primary responsibility of the Committee is to oversee Kinross’ financial reporting process on behalf of the Board of Directors and to report the results of its activities to the Board of Directors. While the Committee has the responsibilities and powers provided in this Charter, it is the responsibility of management and the external auditors, not the responsibility of the Committee, to plan and conduct audits and to prepare and determine that Kinross’ financial statements are complete and accurate and are in accordance with generally accepted accounting principles. It is also the responsibility of management to establish, document, maintain and review systems of internal control and maintain the appropriate accounting and financial reporting principles and policies designed to assure compliance with accounting standards and applicable laws. Absent knowledge to the contrary (the details of which shall be promptly reported to the Board of Directors), each member of the Committee is entitled to rely on the accuracy of the financial and other information provided to the Committee by management and the external auditors and any representations made by management or the external auditors as to any non-audit services provided to Kinross or any of its subsidiaries.
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II. | Composition |
The Audit and Risk Committee shall be comprised of at least three directors. Each Committee member shall be an “independent director” as determined in accordance with applicable legal requirements for audit committee service, including the requirements of National Instrument 52-110 of the Canadian Securities Administrators (“NI 52-110”) and the Corporate Governance Rules of the New York Stock Exchange (“NYSE Rules”), as such rules are revised, updated or replaced from time to time. A copy of such requirements is reproduced in Appendix 1 attached hereto.
All members shall, to the satisfaction of the Board of Directors, be “financially literate”, and at least one member shall have accounting or related financial management expertise to qualify as a “financial expert” in accordance with applicable legal requirements, including the requirements of NI 52-110 and the rules adopted by the United States Securities and Exchange Commission, as revised, updated or replaced from time to time. A copy of such requirements reproduced in Appendix 1 attached hereto.
No director may serve as a member of the Committee if such director serves on the audit committee of more than two other public companies unless the Board of Directors determines that such simultaneous service would not impair the ability of such director to effectively serve on the Audit and Risk Committee, and this determination is disclosed in the annual management information circular.
The Committee members will be appointed by the Board of Directors annually at the meeting of the Board of Directors held closest to the annual general meeting of shareholders.
The Board of Directors may remove a member of the Committee at any time in its sole discretion by resolution of the Board of Directors. Unless a Chair of the Committee is appointed by the full Board of Directors, the members of the Committee may designate a Chair of the Committee by majority vote of the full membership of the Committee.
III. | Responsibilities and Powers |
Responsibilities and powers of the Audit and Risk Committee include:
♦ | Annually reviewing and recommending revisions to the Charter, as necessary, for consideration by the Board of Directors. |
♦ | Reviewing disclosure respecting the activities of the Audit and Risk Committee included in Kinross’ annual filings. |
♦ | Subject to the powers of the Board of Directors and the shareholders under Kinross’ articles and by-laws and under the Business Corporations Act (Ontario), the Audit and Risk Committee is responsible for the selection, appointment, oversight, evaluation, compensation, retention and, if necessary, the replacement of the independent auditors who prepare or issue an auditors’ report or perform other audit, review or attest services for Kinross. |
♦ | Overseeing procedures relating to the receipt, retention and treatment of complaints received by Kinross regarding accounting, internal accounting controls or auditing matters and the confidential anonymous submission by employees of the listed issuer of concerns regarding questionable accounting of auditing matters, pursuant to Kinross’ whistleblower policy, or otherwise. |
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♦ | Approving the appropriate audit engagement fees and the funding for payment of the independent auditors’ compensation and any advisors retained by the Audit and Risk Committee. |
♦ | Requiring that the auditors report directly to the Audit and Risk Committee and be accountable to the Board and the Audit and Risk Committee, as representatives of the shareholders to whom the auditors are ultimately responsible. |
♦ | Reviewing the independence of the auditors, which will require receipt from the auditors of a formal written statement delineating all relationships between the auditors and Kinross and any other factors that might affect the independence of the auditors and reviewing and discussing with the auditors any significant relationships and other factors identified in the statement. Reporting to the Board of Directors its conclusions on the independence of the auditors and the basis for these conclusions. |
♦ | Reviewing the objectivity and professional skepticism of the independent auditors, the sufficiency of resources provided by the independent auditors and the integrity and candour of communications with the independent auditors. |
♦ | Reviewing the performance of the independent auditors, including assessing their effectiveness and quality of service, annually and, every 5 years, performing a comprehensive review of the performance of the independent auditors over multiple years to provide further insight on the audit firm, its independence and application of professional skepticism. |
♦ | Requiring the external auditors to provide the Committee with all reports: (i) which the external auditors are required to provide to the Committee or the Board of Directors under rules, policies or practices of professional or regulatory bodies applicable to external auditors; or (ii) are otherwise issued by such bodies which contain material findings respecting the quality of audits conducted by the independent auditors. |
♦ | Prohibiting the independent auditors from providing the following non-audit services and determining which other non-audit services the independent auditors are prohibited from providing: |
• | bookkeeping or other services related to the accounting records or financial statements of Kinross; |
• | financial information systems design and implementation; |
• | appraisal or valuation services, fairness opinions, or contribution-in-kind reports; |
• | actuarial services; |
• | internal audit outsourcing services; |
• | management functions or human resources; |
• | broker or dealer, investment adviser or investment banking services; |
• | legal services and expert services unrelated to the audit; |
• | tax services to any person in a financial reporting oversight role, or an immediate family member of any such person, unless the person is in that role solely because he or she is a Kinross director; |
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• | services related to marketing, planning or opinions in favour of the tax treatment of transactions that are confidential transactions under the United States or Canadian tax laws or transactions that would be considered aggressive tax position transactions; and |
• | any other services which the Public Company Accounting Oversight Board determines to be impermissible. |
♦ | Approving any permissible non-audit engagements of the independent auditors in accordance with applicable laws. |
♦ | Obtaining from the independent auditors in connection with any audit a timely report relating to the Kinross’ annual audited financial statements describing all critical accounting policies and practices used, all alternative treatments within generally accepted accounting principles for policies and practices related to material items that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditors, and any material written communications between the independent auditors and management, such as any “management” letter or schedule of unadjusted differences. |
♦ | Meeting with the auditors and financial management of Kinross to review the scope of the proposed audit for the current year, and the audit procedures to be used. |
♦ | Reviewing with management and the independent auditors: |
- | Kinross’ annual and interim financial statements and related notes, management’s discussion and analysis, earnings releases and the annual information form, for the purpose of recommending approval by the Board of Directors prior to being released or filed with regulators, and: |
• | reviewing with management, significant judgments affecting the financial statements, including any disagreements between the external auditors and management |
• | discussing among the members of the Committee, without management or the independent auditors present, the information disclosed to the Committee |
• | receiving the assurance of both financial management and the independent auditors that Kinross’ financial statements are fairly presented in conformity with IFRS in all material respects |
• | discussing with management the use of “pro forma” or “non GAAP information” in Kinross’ continuous disclosure documents. |
• | discussing with management and counsel any matter, including any litigation, claim or other contingency (including tax assessments) that could have a material effect on the financial position or operating results of Kinross and the manner in which any such matter has been described in the financial statements. |
• | reviewing the effect of any regulatory and accounting initiatives, including any off balance sheet structures, on Kinross’ financial statements. |
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- | The financial reporting of any transactions between Kinross and any officer, director or other “related party” (including any significant shareholder) or any entity in which any person has a financial interest and any potential conflicts of interest. |
- | Any significant changes in the independent auditors’ audit plan. |
- | Other matters related to the conduct of the audit that are to be communicated to the Committee under generally accepted auditing standards. |
♦ | Review and approve in advance any proposed related-party transactions and required disclosures of such in accordance with applicable securities laws and regulations, and report to the Board on any approved transactions. |
♦ | Reviewing the effects of regulatory and accounting initiatives, as well as off-balance sheet structures, on Kinross’ financial statements. |
♦ | With respect to the internal auditing department, |
(i) | reviewing the appointment and replacement of the head of the internal auditing department; |
(ii) | advising the head of the internal auditing department that he or she is expected to provide to the Audit and Risk Committee copies of significant reports to management prepared by the internal auditing department and management’s responses thereto; and |
(iii) | considering if the internal auditing department has the resources needed to carry out its responsibilities. |
♦ | With respect to accounting principles and policies, financial reporting and internal control over financial reporting, |
(i) | to advise management, the internal auditing department and the independent auditors that they are expected to provide to the Audit and Risk Committee a timely analysis of significant issues and practices relating to accounting principles and policies, financial reporting and internal control over financial reporting; |
(ii) | to consider any reports or communications (and management’s and/or the internal audit department’s responses thereto) submitted to the Audit and Risk Committee by the independent auditors required by or referred to in AS 1301 (Communications with Audit Committees) and AS 1305 (Communications About Control Deficiencies in an Audit of Financial Statements), as it may be modified or supplemented or other professional standards, including reports and communications related to: |
• | deficiencies, including significant deficiencies or material weaknesses, in internal control identified during the audit or other matters relating to internal control over financial reporting; |
• | consideration of fraud in a financial statement audit; |
• | detection of illegal acts; |
• | the independent auditors’ responsibility under generally accepted auditing standards; |
• | any restriction on audit scope; |
• | significant accounting policies; |
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• | significant issues discussed with the national office respecting auditing or accounting issues presented by the engagement; |
• | management judgments and accounting estimates; |
• | any accounting adjustments arising from the audit that were noted or proposed by the auditors but were passed (as immaterial or otherwise); |
• | the responsibility of the independent auditors for other information in documents containing audited financial statements; |
• | disagreements with management; |
• | consultation by management with other accountants; |
• | major issues discussed with management prior to retention of the independent auditors; |
• | difficulties encountered with management in performing the audit; |
• | the independent auditors’ judgments about the quality of the entity’s accounting principles; |
• | reviews of interim financial information conducted by the independent auditors; and |
• | the responsibilities, budget and staffing of the Company’s internal audit function. |
♦ | Satisfying itself that adequate procedures are in place for the review of Kinross’ public disclosure of financial information extracted or derived from Kinross’ financial statements, other than the annual and interim financial statements and related notes, management’s discussion and analysis, earnings releases and the annual information form and assessing the adequacy of such procedures periodically. |
♦ | Reviewing with the independent auditors and management the adequacy and effectiveness of the financial and accounting controls of Kinross. |
♦ | Reviewing the quality and appropriateness of Kinross’ accounting policies and the clarity of financial information and disclosure practices adopted by Kinross and considering the independent auditors’ judgments about the quality and appropriateness of Kinross’ accounting principles and financial disclosure practices as applied in its financial reporting and whether the accounting principles and underlying estimates are common or minority practices. |
♦ | Establishing procedures: (i) for receiving, handling and retaining of complaints received by Kinross regarding accounting, internal controls, or auditing matters, and (ii) for employees to submit confidential anonymous concerns regarding questionable accounting or auditing matters. |
♦ | Reviewing with the independent auditors any audit problems or difficulties and management’s response and resolving disagreements between management and the auditors. |
♦ | Making inquiries of management and the independent auditors to identify significant, financial and control risks and exposures and assess the steps management has taken to minimize such risk to Kinross. |
♦ | Reviewing the adequacy of Kinross’ disaster recovery plan to consider if operations can be resumed as quickly and efficiently as possible following the occurrence of any disaster. |
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♦ | Reviewing reports of compliance with Kinross’ policies on internal controls. |
♦ | Discussing any earnings guidance provided to analysts and rating agencies. |
♦ | Reviewing any significant tax exposures and tax planning initiatives intended to promote compliance with applicable laws while minimizing tax costs. |
♦ | At least annually obtaining and reviewing a report prepared by the independent auditors describing (i) the independent auditors’ internal quality-control procedures; (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the auditors, or by any inquiry of investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the auditors, and any steps taken to deal with any such issues; (iii) (to assess the auditors’ independence) all relationships between the independent auditors and Kinross, including each non-audit service provided to the Company and at least the matters set forth in Ethics and Independence Rule 3526 (Communication with Audit Committees Concerning Independence); and (iv) the independent auditors’ responsiveness and service levels. |
♦ | Setting clear hiring policies for partners, employees or former partners and former employees of the independent auditors. |
♦ | Engaging and compensating (for which Kinross will provide appropriate funding) independent counsel and other advisors if the Committee determines such advisors are necessary to assist the Committee in carrying out its duties. |
♦ | Reporting disclosure respecting the mandate of the Committee and the Committee’s activities included in Kinross’ Management Information Circular prepared for the annual and general meeting of shareholders and Kinross’ Annual Information Form. |
IV. | Risk Identification and Oversight |
♦ | Reviewing the principal risks of Kinross’ business and operations, and any other circumstances and events that could have a significant impact on Kinross’ assets and stakeholders. Discussing with management potential risks to Kinross’ business and operations, their likelihood and magnitude and the interrelationships and potential compounding effects of such risks. Assessing the steps management has taken to minimize such risks in light of Kinross’ risk tolerance. |
♦ | Assessing Kinross’ risk tolerance, the overall process for identifying Kinross’ principal business and operational risks and the implementation of appropriate measures to manage and disclose such risks. |
♦ | Monitoring reporting trends on emerging risks (whether mandated by legislation or voluntary) and making recommendations to management on implementation of appropriate measures to manage and disclose such risks. |
♦ | Reviewing with senior management annually, Kinross’ general liability, property and casualty insurance policies and considering the extent of any uninsured exposure and the adequacy of coverage. |
♦ | Reviewing disclosure respecting the oversight of management of Kinross’ principal business and operational risks. |
♦ | Review Kinross’ privacy and data security risk exposures and measures taken to protect the confidentiality, integrity and availability of its management information systems and Company data. |
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V. | Meetings and Other Matters |
The Audit and Risk Committee will meet regularly at times necessary to perform the duties described above in a timely manner, but not less than four times a year. Meetings may be held at any time deemed appropriate by the Committee.
The Audit and Risk Committee will meet periodically with representatives of the independent auditors, appropriate members of management and personnel responsible for the internal audit function, all either individually or collectively as may be required by the Committee.
The Audit and Risk Committee will also meet periodically without management present.
The independent auditors will have direct access to the Committee at their own initiative.
The Chair of the Committee will report periodically the Committee’s findings and recommendations to the Board of Directors.
The Audit and Risk Committee shall have the resources and authority appropriate to discharge its duties and responsibilities, including the authority to select, retain, terminate, and approve the fees and other retention terms of special or independent counsel, accountants or other experts and advisors, as it deems necessary or appropriate, without seeking approval of the Board or management.
Kinross shall provide for appropriate funding, as determined by the Audit and Risk Committee, in its capacity as a committee of the Board, for payment of:
1. Compensation to the independent auditors and any other public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attestation services for the Company;
2. Compensation of any advisers employed by the Audit and Risk Committee; and
3. Ordinary administrative expenses of the Audit and Risk Committee that are necessary or appropriate in carrying out its duties.
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Appendix 1
Independence Requirement of National Instrument 52-110
A member of the Audit and Risk Committee shall be considered “independent”, in accordance with National Instrument 52-110 - Audit Committees (“NI 52-110”), subject to the additional requirements or exceptions provided in NI 52-110, if that member has no direct or indirect relationship with the Company, which could reasonably interfere with the exercise of the member’s independent judgment. The following persons are considered to have a material relationship with the Company and, as such, can not be a member of the Audit and Risk Committee:
(a) | an individual who is, or has been within the last three years, an employee or executive officer of the Company; |
(b) | an individual whose immediate family member is, or has been within the last three years, an executive officer of the Company; |
(c) | an individual who: |
(i) | is a partner of a firm that is the Company’s internal or external auditor; |
(ii) | is an employee of that firm; or |
(iii) | was within the last three years a partner or employee of that firm and personally worked on the Company’s audit within that time; |
(d) | an individual whose spouse, minor child or stepchild, or child or stepchild who shares a home with the individual: |
(i) | is a partner of a firm that is the Company’s internal or external auditor; |
(ii) | is an employee of that firm and participates in its audit, assurance or tax compliance (but not tax planning) practice, or |
(iii) | was within the last three years a partner or employee of that firm and personally worked on the Company’s audit within that time; |
(e) | an individual who, or whose immediate family member, is or has been within the last three years, an executive officer of an entity if any of the Company’s current executive officers serves or served at the same time on the entity’s compensation committee; and |
(f) | an individual who received, or whose immediate family member who is employed as an executive officer of the Company received, more than $75,000 in direct compensation from the Company during any 12 month period within the last three years, other than as remuneration for acting in his or her capacity as a member of the Board of Directors or any Board committee, or the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service for the Company if the compensation is not contingent in any way on continued service. |
In addition to the independence criteria discussed above, for Audit and Risk Committee purposes, any individual who:
(a) | has a relationship with the Company pursuant to which the individual may accept, directly or indirectly, any consulting, advisory or other compensatory fee from the Company or any subsidiary entity of the Company, other than as remuneration for acting in his or her capacity as a member of the Board of Directors or any board committee; or as a part-time chair or vice-chair of the board or any board or committee, or |
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(b) | is an affiliated entity of the Company or any of its subsidiary entities, |
is deemed to have a material relationship with the Company, and therefore, is deemed not to be independent. |
The indirect acceptance by an individual of any consulting, advisory or other compensatory fee includes acceptance of a fee by:
(a) | an individual’s spouse, minor child or stepchild, or a child or stepchild who shares the individual’s home; or |
(b) | an entity in which such individual is a partner, member, an officer such as a managing director occupying a comparable position or executive officer, or occupies a similar position (except limited partners, non-managing members and those occupying similar positions who, in each case, have no active role in providing services to the entity) and which provides accounting, consulting, legal, investment banking or financial advisory services to the Company or any subsidiary entity of the Company. |
Independence Requirement of NYSE Rules
A director shall be considered “independent” in accordance with NYSE Rules if that director has no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company) that may interfere with the exercise of his/her independence from management and the Company.
In addition:
(a) | A director who is an employee, or whose immediate family member is an executive officer, of the Company is not independent until three years after the end of such employment relationships. |
(b) | A director who receives, or whose immediate family member receives, more than $120,000 per year in direct compensation from the Company, other than director or committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service), is not independent until three years after he or she ceases to receive more than $120,000 per year in such compensation. |
(c) | A director who is (i) a current partner or employee of the Company’s internal or external auditor, (ii) was within the last three years a partner or employee of the auditor and personally worked on the Company’s audit during that time or (iii) whose immediate family member is a current partner of the Company’s auditor, a current employee of the auditor and personally works on the Company’s audit or was within the last three years a partner or employee of the auditor and personally worked on the Company’s audit during that time is not “independent”. |
(d) | A director who is employed, or whose immediate family member is employed, as an executive officer of another company where any of the Company’s present executives serve on that company’s compensation committee is not “independent” until three years after the end of such service or the employment relationship. |
(e) | A director who is an employee, or whose immediate family member is an executive officer, of a company that makes payments to, or receives payments from, the Company for property or services in an amount which, in any single fiscal year, exceeds the greater of $1 million, or 2% of such other company’s consolidated gross revenues, is not “independent” until three years after falling below such threshold. |
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A member of the Audit and Risk Committee must also satisfy the independence requirements of Rule 10A-3(b)(1) adopted under the Securities Exchange Act of 1934 as set out below:
In order to be considered to be independent, a member of an Audit and Risk Committee of a listed issuer that is not an investment company may not, other than in his or her capacity as a member of the Audit and Risk Committee, the Board of Directors, or any other board committee:
(a) | Accept directly or indirectly any consulting, advisory, or other compensatory fee from the issuer or any subsidiary thereof, provided that, unless the rules of the national securities exchange or national securities association provide otherwise, compensatory fees do not include the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the listed issuer (provided that such compensation is not contingent in any way on continued service); or |
(b) | Be an affiliated person of the issuer or any subsidiary thereof. |
An “affiliated person” means a person who directly or indirectly controls Kinross or a director who is an employee, executive officer, general partner or managing member of an entity that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, Kinross.
Financial Literacy Under National Instrument 52-110
“Financially literate”, in accordance with NI 52-110, means that the director has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Company’s financial statements.
Financial Expert under SEC Rules
An Audit and Risk Committee financial expert is defined as a person who has the following attributes:
(a) | an understanding of generally accepted accounting principles and financial statements; |
(b) | the ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves; |
(c) | experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues which are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the registrant’s financial statements, or experience actively supervising one or more persons engaged in such activities; |
(d) | an understanding of internal controls and procedures for financial reporting; and |
(e) | an understanding of Audit and Risk Committee functions. |
An individual will be required to possess all of the attributes listed in the above definition to qualify as an Audit and Risk Committee financial expert and must have acquired such attributes through one or more of the following means:
(a) | education and experience as a principal financial officer, principal accounting officer, controller, public accountant or auditor, or experience in one or more positions that involve the performance of similar function; |
(b) | experience actively supervising a principal financial officer, principal accounting officer, controller, public accountant, auditor or person performing similar functions; |
(c) | experience overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing or evaluation of financial statements; or |
(d) | other relevant experience. |
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Exceptions to Independence Requirements of NI 52-110 for Audit and Risk Committee Members
Every Audit and Risk Committee member must be independent, subject to certain exceptions relating to (i) controlled companies; (ii) events outside the control of the member; (iii) the death, disability or resignation of the member; and (iv) the occurrence of certain exceptional circumstances.
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Exhibit 99.2
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
This management’s discussion and analysis (“MD&A”), prepared as of February 10, 2021, relates to the financial condition and results of operations of Kinross Gold Corporation together with its wholly owned subsidiaries, as at December 31, 2020 and for the year then ended, and is intended to supplement and complement Kinross Gold Corporation’s audited annual consolidated financial statements for the year ended December 31, 2020 and the notes thereto (the “financial statements”). Readers are cautioned that the MD&A contains forward-looking statements about expected future events and financial and operating performance of the Company, and that actual events may vary from management’s expectations. Readers are encouraged to read the Cautionary Statement on Forward Looking Information included with this MD&A and to consult Kinross Gold Corporation’s financial statements for 2020 and corresponding notes to the financial statements which are available on the Company’s web site at www.kinross.com and on www.sedar.com. The financial statements and MD&A are presented in U.S. dollars. The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). This discussion addresses matters we consider important for an understanding of our financial condition and results of operations as at and for the year ended December 31, 2020, as well as our outlook.
This MD&A contains forward-looking statements and should be read in conjunction with the risk factors described in “Risk Analysis” and in the “Cautionary Statement on Forward-Looking Information” on pages 55 – 56 of this MD&A. For additional discussion of risk factors, please refer to the Company’s Annual Information Form for the year ended December 31, 2019, which is available on the Company’s website www.kinross.com and on www.sedar.com. In certain instances, references are made to relevant notes in the financial statements for additional information.
Where we say “we”, “us”, “our”, the “Company” or “Kinross”, we mean Kinross Gold Corporation or Kinross Gold Corporation and/or one or more or all of its subsidiaries, as it may apply. Where we refer to the “industry”, we mean the gold mining industry.
1. | DESCRIPTION OF THE BUSINESS |
Kinross is engaged in gold mining and related activities, including exploration and acquisition of gold-bearing properties, the extraction and processing of gold-containing ore, and reclamation of gold mining properties. Kinross’ gold production and exploration activities are carried out principally in Canada, the United States, the Russian Federation, Brazil, Chile, Ghana and Mauritania. Gold is produced in the form of doré, which is shipped to refineries for final processing. Kinross also produces and sells a quantity of silver.
The profitability and operating cash flow of Kinross are affected by various factors, including the amount of gold and silver produced, the market prices of gold and silver, operating costs, interest rates, regulatory and environmental compliance, the level of exploration activity and capital expenditures, general and administrative costs, and other discretionary costs and activities. Kinross is also exposed to fluctuations in currency exchange rates, political risks, and varying levels of taxation that can impact profitability and cash flow. Many of these factors have been or may be influenced by the continued economic and business uncertainties caused by the COVID-19 pandemic. Kinross seeks to manage the risks associated with its business operations; however, many of the factors affecting these risks are beyond the Company’s control.
Commodity prices continue to be volatile as economies around the world continue to experience economic challenges along with political changes and uncertainties, including as a result of the impacts of the COVID-19 pandemic. Volatility in the price of gold and silver impacts the Company’s revenue, while volatility in the price of input costs, such as oil and foreign exchange rates, particularly the Brazilian real, Chilean peso, Russian rouble, Mauritanian ouguiya, Ghanaian cedi, and Canadian dollar, may have an impact on the Company’s operating costs and capital expenditures.
Segment Profile
Each of the Company’s significant operating mines is generally considered to be a separate segment. The reportable segments are those operations whose operating results are reviewed by the chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance.
Ownership percentage at December 31, | ||||
Operating Segments | Operator | Location | 2020 | 2019 |
Fort Knox | Kinross | USA | 100% | 100% |
Round Mountain | Kinross | USA | 100% | 100% |
Bald Mountain | Kinross | USA | 100% | 100% |
Paracatu | Kinross | Brazil | 100% | 100% |
Kupol(a) | Kinross | Russian Federation | 100% | 100% |
Tasiast | Kinross | Mauritania | 100% | 100% |
Chirano | Kinross | Ghana | 90% | 90% |
(a) | The Kupol segment includes the Kupol and Dvoinoye mines. |
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Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Consolidated Financial and Operating Highlights
Years ended December 31, | 2020 vs. 2019 | 2019 vs. 2018 | ||||||||||||||||||||||||
(in millions, except ounces, per share amounts and per ounce amounts) | 2020 | 2019 | 2018 | Change | % Change(e) | Change | % Change(e) | |||||||||||||||||||
Operating Highlights | ||||||||||||||||||||||||||
Total gold equivalent ounces(a) | ||||||||||||||||||||||||||
Produced(c) | 2,383,307 | 2,527,788 | 2,475,068 | (144,481 | ) | (6 | %) | 52,720 | 2 | % | ||||||||||||||||
Sold(c) | 2,375,548 | 2,512,758 | 2,532,912 | (137,210 | ) | (5 | %) | (20,154 | ) | (1 | %) | |||||||||||||||
Attributable gold equivalent ounces(a) | ||||||||||||||||||||||||||
Produced(c) | 2,366,648 | 2,507,659 | 2,452,398 | (141,011 | ) | (6 | %) | 55,261 | 2 | % | ||||||||||||||||
Sold(c) | 2,358,927 | 2,492,572 | 2,510,419 | (133,645 | ) | (5 | %) | (17,847 | ) | (1 | %) | |||||||||||||||
Financial Highlights | ||||||||||||||||||||||||||
Metal sales | $ | 4,213.4 | $ | 3,497.3 | $ | 3,212.6 | $ | 716.1 | 20 | % | $ | 284.7 | 9 | % | ||||||||||||
Production cost of sales | $ | 1,725.7 | $ | 1,778.9 | $ | 1,860.5 | $ | (53.2 | ) | (3 | %) | $ | (81.6 | ) | (4 | %) | ||||||||||
Depreciation, depletion and amortization | $ | 842.3 | $ | 731.3 | $ | 772.4 | $ | 111.0 | 15 | % | $ | (41.1 | ) | (5 | %) | |||||||||||
Reversals of impairment charges - net | $ | (650.9 | ) | $ | (361.8 | ) | $ | - | $ | (289.1 | ) | nm | $ | (361.8 | ) | nm | ||||||||||
Operating earnings | $ | 1,899.4 | $ | 991.1 | $ | 200.5 | $ | 908.3 | 92 | % | $ | 790.6 | nm | |||||||||||||
Net earnings (loss) attributable to common shareholders | $ | 1,342.4 | $ | 718.6 | $ | (23.6 | ) | $ | 623.8 | 87 | % | $ | 742.2 | nm | ||||||||||||
Basic earnings (loss) per share attributable to common shareholders | $ | 1.07 | $ | 0.57 | $ | (0.02 | ) | $ | 0.50 | 88 | % | $ | 0.59 | nm | ||||||||||||
Diluted earnings (loss) per share attributable to common shareholders | $ | 1.06 | $ | 0.57 | $ | (0.02 | ) | $ | 0.49 | 86 | % | $ | 0.59 | nm | ||||||||||||
Adjusted net earnings attributable to common shareholders(b) | $ | 966.8 | $ | 422.9 | $ | 128.1 | $ | 543.9 | 129 | % | $ | 294.8 | nm | |||||||||||||
Adjusted net earnings per share(b) | $ | 0.77 | $ | 0.34 | $ | 0.10 | $ | 0.43 | 126 | % | $ | 0.24 | nm | |||||||||||||
Net cash flow provided from operating activities | $ | 1,957.6 | $ | 1,224.9 | $ | 788.7 | $ | 732.7 | 60 | % | $ | 436.2 | 55 | % | ||||||||||||
Adjusted operating cash flow(b) | $ | 1,912.7 | $ | 1,201.5 | $ | 874.2 | $ | 711.2 | 59 | % | $ | 327.3 | 37 | % | ||||||||||||
Capital expenditures(d) | $ | 916.1 | $ | 1,060.2 | $ | 1,005.2 | $ | (144.1 | ) | (14 | %) | $ | 55.0 | 5 | % | |||||||||||
Free cash flow(b) | $ | 1,041.5 | $ | 164.7 | $ | (216.5 | ) | $ | 876.8 | nm | $ | 381.2 | (176 | %) | ||||||||||||
Average realized gold price per ounce(b) | $ | 1,774 | $ | 1,392 | $ | 1,268 | $ | 382 | 27 | % | $ | 124 | 10 | % | ||||||||||||
Consolidated production cost of sales per equivalent ounce(c) sold(b) | $ | 726 | $ | 708 | $ | 735 | $ | 18 | 3 | % | $ | (27 | ) | (4 | %) | |||||||||||
Attributable(a) production cost of sales per equivalent ounce(c) sold(b) | $ | 723 | $ | 706 | $ | 734 | $ | 17 | 2 | % | $ | (28 | ) | (4 | %) | |||||||||||
Attributable(a) production cost of sales per ounce sold on a by-product basis(b) | $ | 700 | $ | 691 | $ | 723 | $ | 9 | 1 | % | $ | (32 | ) | (4 | %) | |||||||||||
Attributable(a) all-in sustaining cost per ounce sold on a by-product basis(b) | $ | 970 | $ | 974 | $ | 959 | $ | (4 | ) | (0 | %) | $ | 15 | 2 | % | |||||||||||
Attributable(a) all-in sustaining cost per equivalent ounce(c) sold(b) | $ | 987 | $ | 983 | $ | 965 | $ | 4 | 0 | % | $ | 18 | 2 | % | ||||||||||||
Attributable(a) all-in cost per ounce sold on a by-product basis(b) | $ | 1,248 | $ | 1,282 | $ | 1,275 | $ | (34 | ) | (3 | %) | $ | 7 | 1 | % | |||||||||||
Attributable(a) all-in cost per equivalent ounce(c) sold(b) | $ | 1,260 | $ | 1,284 | $ | 1,274 | $ | (24 | ) | (2 | %) | $ | 10 | 1 | % |
(a) | “Total” includes 100% of Chirano production. “Attributable” includes Kinross’ share of Chirano (90%) production and costs, and Peak (70%) costs. |
(b) | The definition and reconciliation of these non-GAAP financial measures is included in Section 11. |
(c) | “Gold equivalent ounces” include silver ounces produced and sold converted to a gold equivalent based on a ratio of the average spot market prices for the commodities for each period. The ratio for 2020 was 86.32:1 (2019 - 85.99:1 and 2018 - 80.74:1). |
(d) | “Capital expenditures” for the years ended December 31, 2020 and 2019 are as reported as “Additions to property, plant and equipment” on the consolidated statements of cash flows and exclude “Interest paid capitalized to property, plant and equipment”. “Capital expenditures” for the year ended December 31, 2018 is calculated as $1,043.4 million of “Additions to property, plant and equipment”, as reported on the consolidated statement of cash flows for the year ended December 31, 2018, less $38.2 million of capitalized interest paid, as reported. |
(e) | “nm” means not meaningful. |
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Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Consolidated Financial Performance
2020 vs. 2019
Although the Company was impacted by the COVID-19 pandemic, in particular at Tasiast where the mining rate was impacted, production remained consistent with plan, with a 6% decrease compared to 2019. The reduction compared to 2019 was as a result of lower production at Paracatu and Chirano due to decreases in mill recoveries and throughput, Round Mountain primarily due to lower mill grade and at Maricunga as production activities transitioned to care and maintenance in the fourth quarter of 2019. These decreases were partially offset by higher production at Fort Knox and Tasiast due to increases in mill grades and throughput.
Metal sales increased by 20% in 2020 compared to 2019, due to an increase in average realized gold price, partially offset by a decrease in gold equivalent ounces sold. The average realized gold price increased to $1,774 per ounce in 2020 from $1,392 per ounce in 2019. Total gold equivalent ounces sold in 2020 decreased to 2,375,548 ounces from 2,512,758 ounces in 2019, primarily due to the decrease in production as described above.
Production cost of sales decreased by 3% in 2020 compared to 2019, primarily due to decreases at Paracatu, Round Mountain, and Maricunga due to lower gold equivalent ounces sold. These decreases were partially offset by increases in production cost of sales at Fort Knox and Bald Mountain as a result of increased gold equivalent ounces sold.
In 2020, attributable production cost of sales per equivalent ounce sold and per equivalent ounce sold on a by-product basis increased slightly, compared to 2019, mainly due to increases in costs per ounce at Chirano and Bald Mountain.
Depreciation, depletion and amortization increased by 15% in 2020 compared to 2019, primarily due to increases in depreciable asset bases and higher gold equivalent ounces sold at Bald Mountain and Tasiast. These increases were partially offset by a decrease at Chirano due to an increase in mineral reserves at the end of 2019 and a decrease in gold equivalent ounces sold.
During the year ended December 31, 2020, the Company recorded after-tax impairment reversals of $612.8 million, related entirely to property, plant and equipment at Tasiast ($299.5 million), Chirano ($132.9 million) and Lobo-Marte ($180.4 million, which included $48.3 million for the impairment reversal recorded at June 30, 2020). These impairment reversals were mainly due to increases in the Company’s long-term gold price estimate, the mine life extension at Chirano and the increase in mineral reserves at Lobo-Marte. The tax impacts of the impairment reversals at Chirano and Lobo-Marte were income tax expenses of $71.6 million and $4.6 million, respectively. There was no tax impact on the impairment reversal at Tasiast. At December 31, 2019, the Company recorded after-tax impairment reversals of $293.6 million, related entirely to property, plant and equipment at Tasiast ($161.1 million) and Paracatu ($132.5 million), and were mainly due to an increase in the Company’s long-term gold price estimate. The impairment reversal at Paracatu was net of a tax expense of $68.2 million. There was no tax impact on the impairment reversal at Tasiast.
Operating earnings were $1,899.4 million in 2020 compared to $991.1 million in 2019. The increase was primarily due to the increase in margins (metal sales less production cost of sales) and higher impairment reversals, partially offset by the increase in depreciation, depletion and amortization as described above.
In 2020, the Company recorded income tax expense of $439.8 million, compared to income tax expense of $246.7 million in 2019. The $439.8 million of income tax expense in 2020 was the result of higher operating mine profitability compared to 2019, an additional deferred tax expense of $76.2 million related to the reversal of impairment charges at Chirano and Lobo-Marte, as well as $101.2 million of deferred tax expense resulting from the net foreign currency translation of the tax deductions related to the Company’s operations in Brazil and the Russian Federation. In 2020, the Company also recorded a $25.4 million net tax benefit from U.S. tax law changes legislated through the U.S. Cares Act, partially offsetting these increases. The $246.7 million income tax expense recognized in 2019 included an additional deferred tax expense of $68.2 million related to the reversal of impairment charges at Paracatu, as well as $1.6 million of deferred tax expense resulting from the net foreign currency translation of tax deductions related to the Company’s operations in Brazil and the Russian Federation. Kinross’ combined federal and provincial statutory tax rate for both 2020 and 2019 was 26.5%.
Net earnings attributable to common shareholders in 2020 were $1,342.4 million, or $1.07 per share, compared to $718.6 million, or $0.57 per share, in 2019. The increase is primarily as a result of the increase in operating earnings, including the increase in net impairment reversals, partially offset by the increase in income tax expense, as described above.
Adjusted net earnings attributable to common shareholders in 2020 were $966.8 million, or $0.77 per share, compared to $422.9 million, or $0.34 per share, in 2019. The increase is primarily as a result of the increase in margins, partially offset by the increase in depreciation, depletion and amortization and income tax expense, as described above.
3
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
In 2020, net cash flow provided from operating activities increased to $1,957.6 million, from $1,224.9 million in 2019, mainly due to the increase in margins as described above and favourable working capital changes. Adjusted operating cash flow in 2020 increased to $1,912.7 million, from $1,201.5 million in 2019, primarily due to the increase in margins as described above.
Capital expenditures decreased to $916.1 million in 2020, compared with $1,060.2 million in 2019, primarily due to the completion of projects at Bald Mountain and Round Mountain and less capital stripping at Tasiast in 2020, which was lower than planned as a result of the impacts of COVID-19 and the strike in the second quarter of 2020.
Free cash flow increased to $1,041.5 million in 2020, compared with $164.7 million in 2019, due to the increase in net cash flow provided from operating activities and the decrease in capital expenditures, as described above.
Attributable all-in sustaining cost per equivalent ounce sold and per ounce sold on a by-product basis in 2020 were both comparable to 2019. Attributable all-in cost per equivalent ounce sold and per ounce sold on a by-product basis in 2020 decreased by 2% and 3%, respectively, compared to 2019, primarily due to decreases in non-sustaining capital expenditures.
2019 vs. 2018
Kinross’ attributable production in 2019 increased by 2%, compared to 2018. Higher production at Tasiast and Paracatu due to increases in mill throughput, grade and recoveries was partially offset by lower production at Bald Mountain due to the timing of ounces recovered from the heap leach pads, at Fort Knox due to a decrease in mill throughput, at Round Mountain due to a decrease in mill grade, and at Maricunga as activities continued to ramp down.
Metal sales increased by 9% in 2019 compared to 2018, due to an increase in average realized gold price. The average realized gold price increased to $1,392 per ounce in 2019 from $1,268 per ounce in 2018. Total gold equivalent ounces sold in 2019 decreased to 2,512,758 ounces from 2,532,912 ounces in 2018, primarily due to the timing of sales.
Production cost of sales decreased by 4% in 2019 compared to 2018, primarily due to decreases at Bald Mountain, Maricunga and Round Mountain due to lower gold equivalent ounces sold. These decreases were partially offset by an increase in production cost of sales at Kupol, as a result of increased gold equivalent ounces sold, and at Chirano, related to the restart of open pit mining during 2019.
In 2019, both attributable production cost of sales per equivalent ounce sold and per ounce sold on a by-product basis decreased by 4%, compared to 2018, mainly due to decreases in costs per ounce at Tasiast, due to higher mill throughput, and a decrease in operating waste mined, and at Paracatu, primarily due to higher mill throughput and grade, as well as favourable foreign exchange movements and a decrease in power costs.
Depreciation, depletion and amortization decreased by 5% in 2019 compared to 2018, primarily due to decreases at Chirano, Bald Mountain and Fort Knox due to lower gold equivalent ounces sold. These decreases were partially offset by an increase at Tasiast as a result of an increase in depreciable asset base, mainly related to the completion of the Phase One project in the third quarter of 2018, and the increase in gold equivalent ounces sold, and at Paracatu, mainly due to the increase in gold equivalent ounces sold and an increase in depreciable asset base.
At December 31, 2019, upon completion of the Company’s assessment of the carrying values of its Cash Generating Units (“CGUs”), the Company recorded after-tax impairment reversals of $293.6 million. The impairment reversals were entirely related to property, plant and equipment and included after-tax impairment reversals at Tasiast and Paracatu of $161.1 million and $132.5 million, respectively, and were mainly due to an increase in the Company’s long-term gold price estimates. The impairment reversal at Paracatu was net of a tax expense of $68.2 million. There was no tax impact on the impairment reversal at Tasiast. No impairment charges or reversals were recorded as a result of the assessment of the carrying value of the Company’s CGUs at December 31, 2018.
Operating earnings were $991.1 million in 2019 compared to $200.5 million in 2018. The increase was primarily due to the increase in margins, the reversals of impairment charges, and the decrease in depreciation, depletion and amortization.
In 2019, the Company recorded income tax expense of $246.7 million, compared to income tax expense of $138.8 million in 2018. The $246.7 million income tax expense recognized in 2019 was largely as a result of higher operating mine profitability, compared to the same period in 2018, and included an additional deferred tax expense of $68.2 million related to the reversal of impairment charges at Paracatu, as well as $1.6 million of deferred tax expense resulting from the net foreign currency translation of the tax deductions of the Company’s operations in Brazil and Russia. The $138.8 million income tax expense recorded in 2018 included $62.0 million of deferred tax expense resulting from the devaluation in U.S. dollar terms of the tax deductions of the Company’s operations in Brazil and Russia. Kinross’ combined federal and provincial statutory tax rate for both 2019 and 2018 was 26.5%.
4
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Net earnings attributable to common shareholders in 2019 were $718.6 million, or $0.57 per share, compared to net loss attributable to common shareholders of $23.6 million, or $0.02 per share, in 2018. The increase was primarily as a result of the increase in operating earnings as described above.
Adjusted net earnings attributable to common shareholders in 2019 were $422.9 million, or $0.34 per share, compared to $128.1 million, or $0.10 per share, in 2018. The increase was primarily as a result of the increase in margins and the decrease in depreciation, depletion and amortization, as described above.
In 2019, net cash flow provided from operating activities increased to $1,224.9 million, from $788.7 million in 2018, mainly due to the increase in margins as described above and favourable working capital changes. Adjusted operating cash flow in 2019 increased to $1,201.5 million, from $874.2 million in 2018, primarily due to the increase in margins as described above.
Capital expenditures increased to $1,060.2 million in 2019, compared with $1,005.2 million in 2018, primarily due to increased spending on projects at Bald Mountain, Fort Knox and Round Mountain, partially offset by lower spending at Tasiast.
Free cash flow increased to $164.7 million in 2019, compared with an outflow of $216.5 million in 2018, due to an increase in net cash flow provided from operating activities as a result of increased margins, partially offset by the increase in capital expenditures.
Attributable all-in sustaining cost per equivalent ounce sold and per ounce sold on a by-product basis in 2019 both increased by 2%, respectively, compared to 2018. The slight increases were primarily due to the decrease in production cost of sales, partially offset by the decrease in gold equivalent ounces sold. Attributable all-in cost per equivalent ounce sold and per ounce sold on a by-product basis in 2019 were comparable to 2018.
Mineral Reserves1
Kinross’ total estimated proven and probable gold reserves at December 31, 2020 were approximately 30.0 million ounces. The increase of 5.7 million ounces in estimated gold reserves compared to December 31, 2019 was mainly a result of the conversion of 6.4 million ounces of resources to probable reserves at Lobo-Marte. Amongst the operating sites, 2.2 million ounces were also added to proven and probable reserves to partially offset production depletion.
Proven and probable silver reserves at year-end 2020 were estimated at approximately 59.2 million ounces, an increase of 3.5 million ounces compared with year-end 2019, primarily due to reserve additions at Kupol and La Coipa.
1 For details concerning mineral reserve and mineral resource estimates, refer to the Mineral Reserves and Mineral Resources tables and notes in the Company’s news release filed with Canadian and U.S. regulators on February 10, 2021.
5
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
2. | IMPACT OF KEY ECONOMIC TRENDS AND THE COVID-19 PANDEMIC |
COVID-19 Pandemic
In anticipation of and response to the global COVID-19 pandemic, Kinross’ protocols and contingency plans, which the Company began implementing in late January 2020, have mitigated impacts of the pandemic to its global portfolio. All of Kinross’ mines continued production during the year, as the Company’s ongoing response to the COVID-19 pandemic continued to maintain the safety of its global workforce and host communities while mitigating operational impacts. However, COVID-19 did partially affect overall performance, productivity rates and costs, mainly as a result of global travel constraints and the implementation of rigorous safety protocols and measures at all mines and projects.
Price of Gold
Source: Bloomberg – based on daily closing prices
The price of gold is the largest single factor in determining profitability and cash flow from operations, therefore, the financial performance of the Company has been, and is expected to be, closely linked to the price of gold. Historically, the price of gold has been subject to volatile price movements over short periods of time and is affected by numerous macroeconomic and industry factors that are beyond the Company’s control. Major influences on the gold price include currency exchange rate fluctuations and the relative strength of the U.S. dollar, the supply of and demand for gold and macroeconomic factors such as the level of interest rates and inflation expectations. During 2020, the price of gold fluctuated between a low of $1,471 per ounce in March to a high of $2,064 per ounce in August, based on daily closing prices. The average price for the year based on the London Bullion Market Association PM Fix was $1,770 per ounce, a $377 per ounce increase over the 2019 average price of $1,393 per ounce. In 2020, gold prices benefited from the financial and economic uncertainties generated by the COVID-19 pandemic together with the trend of lower real interest rates.
6
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Source: London Bullion Marketing Association London PM Fix
1 Average realized gold price per ounce is a non-GAAP financial measure and is defined in Section 11.
In 2020, the Company realized an average gold price of $1,774 per ounce compared to the average PM Fix of $1,770 per ounce.
7
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Gold Supply and Demand Fundamentals
Source: World Gold Council 2020 Gold Demand Trends report
According to the World Gold Council, total gold supply in 2020 decreased by approximately 4% compared to 2019, largely due to a decrease in global mine production, slightly offset by higher recycling. Mine production and recycled gold remain the dominant sources of gold supply, and in 2020 they represented approximately 73% and 27% of total supply, respectively.
8
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Source: World Gold Council 2020 Gold Demand Trends report
According
to the World Gold Council, total demand for gold in 2020 decreased by 14%, compared to 2019. Jewelry demand decreased by approximately
33%, largely due to economic weakness caused by the COVD-19 pandemic and high gold prices. Central bank net buying continued in
2020, but buying slowed during the year and decreased by approximately 59%. The decrease in demand was partially offset by an
increase in gold exchange traded funds by approximately 120%.
9
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Cost Sensitivity
The Company’s profitability is subject to industry wide cost pressures on development and operating costs with respect to labour, energy, capital expenditures and consumables in general. Since mining is generally an energy intensive activity, especially in open pit mining, energy prices can have a significant impact on operations. The cost of fuel as a percentage of operating costs varies amongst the Company’s mines, and overall, operations experienced fuel price decreases in 2020, compared to 2019, as global fuel demand weakened due to the ongoing effects of the COVID-19 pandemic. Kinross manages its exposure to energy costs by entering, from time to time, into various hedge positions – refer to Section 6 - Liquidity and Capital Resources for details.
Source: Bloomberg
In order to mitigate the impact of higher consumable prices, the Company continues to focus on continuous improvement, both by promoting more efficient use of materials and supplies, and by pursuing more advantageous pricing, whilst increasing performance and without compromising operational integrity.
10
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Currency Fluctuations
Source: Bloomberg
At the Company’s non-U.S. mining operations and exploration activities, which are primarily located in Brazil, Chile, the Russian Federation, Ghana, Mauritania, and Canada, a portion of operating costs and capital expenditures are denominated in their respective local currencies. Generally, as the U.S. dollar strengthens, these currencies weaken, and as the U.S. dollar weakens, these foreign currencies strengthen. These currencies were subject to high market volatility over the course of the year. Approximately 65% of the Company’s expected attributable production in 2021 is forecast to come from operations outside the U.S. and costs will continue to be exposed to foreign exchange rate movements. In order to manage this risk, the Company uses currency hedges for certain foreign currency exposures – refer to Section 6 - Liquidity and Capital Resources for details.
11
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
3. | OUTLOOK |
The forward-looking information contained in this section is subject to the risk factors and assumptions contained in the Cautionary Statement on Forward-Looking Information included with this MD&A and the risk factors set out in Section 10 - Risk Analysis.
Unless otherwise stated, production, production cost of sales per equivalent ounce sold, and all-in sustaining costs in this Outlook section include only Kinross’ share of Chirano (90%) production and costs, and Peak (70%) costs. The definitions of these non-GAAP measures are included in Section 11 of this MD&A.
Production Guidance
In 2021, the Company expects to produce 2.4 million gold equivalent ounces (+/- 5%) from its operations, which is consistent with 2020 production. In 2022 and 2023, annual production is expected to increase to approximately 2.7 million gold equivalent ounces and 2.9 million gold equivalent ounces, respectively.
In 2021, production is expected to progressively increase quarter-over-quarter, largely driven by higher expected production in the second half of the year at Tasiast. The Company’s three largest mines – Paracatu, Kupol and Tasiast – are expected to account for approximately 60% of the total production in 2021 and are expected to be the lowest cost mines in the portfolio.
The expected production growth in 2022 and 2023 represents additional ounces enabled by planned life of mine extensions and projects resulting from the Company’s previous three-year major capital reinvestment phase, which established a low-risk and timely platform for growth in the current gold price environment. Kinross’ comprehensive continuous improvement programs, which have enhanced productivity and operational efficiencies, and its exploration strategy focused on promising prospects around existing operations, also contributed to the anticipated production increase.
Cost of Sales Guidance
Production cost of sales per gold equivalent ounce sold is expected to be $790 (+/- 5%) for 2021. The increase from 2020 is mainly due to higher operating waste mined as a result of planned mine sequencing, particularly at the U.S. mines and at Tasiast in the second half of the year. The delayed access to higher grade ore at Tasiast as a result of COVID-19 impacts and a decrease in low-cost ounces from Dvoinoye, which completed mining in November 2020 as planned, also affected 2021 production cost of sales per equivalent ounce sold guidance. Production cost of sales per equivalent ounce sold is expected to increase quarter-over-quarter during the year, largely driven by anticipated increases in operating waste mined. Production cost of sales per equivalent ounce sold is expected to decrease in 2022 and return to levels that are largely in line with 2020. The decrease is expected to be driven by lower-cost ounces from Tasiast and La Coipa in 2022 and higher total production.
The Company expects all-in sustaining cost to be $1,025 (+/- 5%) per ounce sold on both a gold equivalent and by-product basis for 2021, which is higher than 2020, mainly due to the expected higher production cost of sales per equivalent ounce sold.
Material assumptions used to forecast 2021 production costs are: a gold price of $1,500 per ounce, a silver price of $20 per ounce, an oil price of $55 per barrel, and foreign exchange rates of 5.0 Brazilian reais to the U.S. dollar, 1.30 Canadian dollars to the U.S. dollar, 70 Russian roubles to the U.S. dollar, 725 Chilean pesos to the U.S. dollar, 5.50 Ghanaian cedis to the U.S. dollar, 35 Mauritanian ouguiyas to the U.S. dollar, and 0.90 U.S. dollars to the Euro.
Taking into account existing currency and oil hedges, a 10% change in foreign currency exchange rates would be expected to result in an approximate $14 impact on our production cost of sales per equivalent ounce sold, and specific to the Russian rouble and Brazilian real, a 10% change in these exchange rates would be expected to result in impacts of approximately $15 and $25 on Russian and Brazilian production cost of sales per equivalent ounce sold, respectively. A $10 per barrel change in the price of oil would be expected to result in an approximate $3 impact on our production cost of sales per equivalent ounce sold, and a $100 change in the price of gold would be expected to result in an approximate $5 impact on our production cost of sales per equivalent ounce sold as a result of a change in royalties owing.
12
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Capital Expenditures Guidance
Total capital expenditures for 2021 are forecast to be approximately $900 million (+/- 5%). Of this amount, sustaining capital expenditures are expected to be approximately $340 million, with non-sustaining capital expenditures of approximately $560 million for the La Coipa Restart project, Tasiast’s West Branch stripping and 24k expansion project, the Round Mountain Phase W project, Fort Knox Gilmore stripping, and other development and growth projects and studies. Kinross’ capital expenditures outlook for 2022 and 2023 are $800 million and $700 million, respectively, and is based on Kinross’ current baseline production guidance. However, as previously indicated, capital expenditures for 2022 and 2023 exclude additional opportunities in the Company’s pipeline and is therefore expected to increase to approximate 2021 levels if additional projects are approved, including Round Mountain Phase S, Peak, Lobo-Marte and other projects.
Other Guidance
The 2021 forecast for exploration is approximately $120 million, all of which is expected to be expensed. The increase compared to 2020 will facilitate an enhanced program to follow-up on 2020’s exploration success and exploration projects acquired in 2020, such as the Kayenmyvaam and Kavralyanskaya projects near Kupol, Chulbatkan, and the Peak development project in Alaska.
The 2021 forecast for overhead (general and administrative and business development expenses) is approximately $155 million, in line with 2020, primarily as a result of Kinross’ cost improvements over recent years, with 2021 annual overhead guidance down $50 million over the past five years.
Other operating costs expected to be incurred in 2021 are approximately $150 million, which are principally due to $70 million in pandemic-related mitigation measures.
Based on an assumed gold price of $1,500 per ounce and other budget assumptions, tax expense is expected to be $140 million and taxes paid is expected to be $200 million. Adjusting the Brazilian real and Russian rouble to the respective exchange rates of 5.20 and 74 to the U.S. dollar in effect at December 31, 2020, tax expense would be expected to be $160 million. Tax expense is expected to increase by 26% of any profit resulting from higher gold prices. Taxes paid is expected to increase by a range of $20 million to $26 million for every $100 increase in the realized gold price.
Depreciation, depletion and amortization is forecast to be approximately $390 (+/- 5%) per gold equivalent ounce sold.
Interest
paid is forecast to be approximately $110 million, which includes $55 million of capitalized interest.
13
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
4. | PROJECT UPDATES AND NEW DEVELOPMENTS |
Tasiast 24k
The Tasiast 24k project remains on budget and on schedule with Tasiast expected to increase throughput capacity to 21,000 tonnes per day (“t/d”) by the end of 2021, and then to 24,000 t/d by mid-2023. The project is now approximately 60% complete, with mechanical work on the processing plant and construction of the power plant both proceeding well.
The Company drew down $200 million from the $300 million Tasiast project financing facility on April 9, 2020. The financing, which was signed on December 16, 2019, is an asset recourse loan with the International Finance Corporation (“IFC”) (a member of the World Bank Group), Export Development Canada (“EDC”), ING Bank and Société Générale.
Chulbatkan – Udinsk project
On July 31, 2019, the Company announced an agreement to acquire the Chulbatkan license, containing the Udinsk development project, located in Khabarovsk Krai, Far East Russia, from N-Mining Limited (“N-Mining”), for total fixed consideration of $283.0 million. In addition, N-Mining will be entitled to receive an economic participation equivalent to a 1.5% Net Smelter Return (“NSR”) royalty on future production from this Chulbatkan license, as well as $50 per ounce of future proven and probable reserves beyond the first 3.25 million of declared proven and probable ounces. Kinross will retain the right to buy-back one third of the 1.5% NSR royalty for $10.0 million, subject to certain gold price related adjustments, at any time within 24 months of closing.
On January 16, 2020, the Company closed the acquisition. In accordance with an amended acquisition agreement, the first installment of $141.5 million, representing 50% of the $283.0 million fixed purchase, plus ordinary course net working capital adjustments of $3.1 million, were paid in cash. On January 15, 2021, in accordance with a further amended acquisition agreement to settle 100% of the final installment in cash instead of 60-100% in Kinross shares, the Company paid the remaining $141.5 million in cash.
In 2020, drilling at the Chulbatkan license was focused within the Udinsk resource pit – the first project the Company expects to develop on the Chulbatkan license – with a total of more than 60,000 metres of infill drilling completed. The drilling program supported advancement of the Udinsk pre-feasibility study (“PFS”) and confirmed the layout of the Udinsk deposit within the larger Chulbatkan area. As a result of 2020 optimization and engineering work using a $1,600 per ounce gold price, approximately 259,0001 gold ounces were added to measured and indicated resources and 94,0001 gold ounces to inferred resources in 2020.
The Udinsk PFS commenced in partnership with a global engineering, procurement and construction management firm with in-country experience and is expected to be completed in the fourth quarter of 2021. The PFS will focus on an initial three-stage crush heap leach process flow and potential early works related to infrastructure, with the goal of fast tracking construction. Kinross is targeting a declaration of mineral reserves at year-end following the expected completion of the PFS. The Company is also studying the viability of a power line connecting the project into the regional grid. First production at Udinsk is anticipated in 2025.
On the larger Chulbatkan license, surface exploration activities such as soil geochemical sampling, induced polarization and magnetic and gravity geophysical surveys were carried out during 2020. These programs resulted in encouraging results which confirmed known targets and led to the discovery of new target areas, with new anomalies identified near the Udinsk resource pit to the northeast and southwest. As a result, the 2021 drilling program will prioritize the soil and geophysics anomalies as part of the first phase of the drilling program and is planned to be subsequently drilled for strike and depth extensions.
Kinross also acquired the land package surrounding the Chulbatkan license in 2020, which increased the total Chulbatkan license area from 120 km2 to approximately 450 km2. The Company is planning to commence greenfields exploration activities in 2021 in these new areas.
La Coipa Restart and Lobo-Marte
The La Coipa Restart project is progressing well, with pre-stripping starting in early January 2021 as scheduled, and first production remaining on-track for mid-2022. Camp refurbishments were completed in December 2020 and fleet refurbishments are more than half complete. The mobilization of the project management team and of the first major contractors for plant refurbishments have started on schedule.
Kinross added approximately 103,0001 gold ounces and 3,266,0001 silver ounces in estimated mineral reserves at La Coipa primarily as a result of optimization of the Phase 7 mine plan. The Company also added approximately 206,0001 gold ounces and 1,702,0001 silver ounces in estimated measured and indicated resources, mainly as a result of the change in gold price assumption for resources. Kinross continues to study opportunities to incorporate adjacent deposits with existing mineral reserves and resources into the La Coipa mine plan and potentially extend mine life.
1 For details concerning mineral reserve and mineral resource estimates, refer to the Mineral Reserves and Mineral Resources tables and notes in the Company’s news release filed with Canadian and U.S. regulators on February 10, 2021.
14
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
At the Lobo-Marte project, the feasibility study continues to advance on schedule and is expected to be completed in the fourth quarter of 2021. The Company is targeting production at Lobo-Marte to commence in 2027 following permitting and after the completion of mining at La Coipa, with construction potentially starting in 2025. Kinross continues to believe that Lobo-Marte has the potential to be a long-life, cornerstone asset with attractive costs.
Alaska projects
At the Fort Knox Gilmore project, the first gold ounces from the new Barnes Creek heap leach pad were poured in January 2021. Infrastructure and processing facilities for the project were completed on schedule and under budget, and the project was fully transferred to the Operations team.
On September 30, 2020, the Company acquired a 70% interest in the open pit Peak project in Alaska, which was 40% owned by Royal Alaska, LLC (“Royal Alaska”), a subsidiary of Royal Gold, Inc. (“Royal Gold”) and 60% owned by CORE Alaska, LLC (“CORE Alaska”), a subsidiary of Contango ORE, Inc. (“Contango”), for total cash consideration of $93.7 million. Kinross purchased 40% of Peak by acquiring Royal Alaska from Royal Gold for total cash consideration of $49.2 million, and purchased an additional 30% of Peak from CORE Alaska for total consideration of $44.5 million. The cash consideration paid to Contango includes a $1.2 million reimbursement prepayment for a new royalty on Peak’s silver revenues. As the project operator, Kinross expects to process Peak ore at its Fort Knox mill. Processing ore at Fort Knox avoids mill construction at Peak and is expected to decrease execution risk, lower capital expenditures, drive attractive returns, and reduce the project’s environmental footprint and permitting requirements. Blending the higher grade ore from Peak with Fort Knox ore is expected to extend mill operation at Fort Knox, reduce overall costs and increase cash flow. The project is expected to benefit the state and local communities, in particular, the Upper Tanana Athabascan Village of Tetlin.
Kinross has made good progress advancing the Peak project since its acquisition. A metallurgical and geotechnical drilling program has commenced, along with engineering and environmental studies for permitting. A close working relationship has also been established with the local Upper Tanana Athabascan Village of Tetlin. A scoping study is expected to be completed in the second quarter of 2021 and a feasibility study is expected to be completed by the end of 2022, with a target for first production in 2024.
Agreement in principle with Government of Mauritania
On June 15, 2020, Kinross reached an agreement in principle with the Government of Mauritania to resolve outstanding matters between the parties. The terms are subject to finalizing definitive agreements and provide Kinross with a 30-year exploitation license for Tasiast Sud, with expedited permitting and the possibility of early mining. The terms also provide for the reinstatement of a tax exemption on fuel duties and repayment by the Government of Mauritania to Kinross of outstanding value added tax (“VAT”) refunds. Kinross also volunteered to update the royalty structure for Tasiast so it is tied to the gold price, is in line with Mauritania’s current mining conventions and codes, and further aligns interests by ensuring the country receives an appropriate share of economic benefits from the Tasiast mine. Preparation of the definitive documentation is ongoing.
Other Recent Transactions
Disposition of royalty portfolio
On December 2, 2019, the Company entered into an agreement with Maverix Metals Inc. (“Maverix”) to sell a royalty portfolio of precious metals royalties.
On December 19, 2019, the Company completed the sale for total consideration of $73.9 million, including $25.0 million in cash and approximately 11.2 million common shares, representing 9.4% of the issued and outstanding common shares, of Maverix. The Company recognized a gain on disposition of $72.7 million in other income in connection with the sale.
Sale of Lundin Gold shares
On December 9, 2019, as part of its portfolio management strategy and to further strengthen its liquidity, the Company sold its investment in common shares of Lundin Gold Inc. to a syndicate of buyers for proceeds of $113.2 million.
Other Developments
Board of Directors update
Mr.
Glenn Ives was appointed to Kinross’ Board of Directors, and assumed the role of Chair of the Audit and Risk Committee,
in May 2020.
15
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
5. | CONSOLIDATED RESULTS OF OPERATIONS |
Operating Highlights
Years ended December 31, | 2020 vs. 2019 | 2019 vs. 2018 | |||||||||||||||||||||||||
(in millions, except ounces and per ounce amounts) | 2020 | 2019 | 2018 | Change | % Change | Change | % Change(d) | ||||||||||||||||||||
Operating Statistics | |||||||||||||||||||||||||||
Total gold equivalent ounces(a) | |||||||||||||||||||||||||||
Produced(b) | 2,383,307 | 2,527,788 | 2,475,068 | (144,481 | ) | (6 | %) | 52,720 | 2 | % | |||||||||||||||||
Sold(b) | 2,375,548 | 2,512,758 | 2,532,912 | (137,210 | ) | (5 | %) | (20,154 | ) | (1 | %) | ||||||||||||||||
Attributable gold equivalent ounces(a) | |||||||||||||||||||||||||||
Produced(b) | 2,366,648 | 2,507,659 | 2,452,398 | (141,011 | ) | (6 | %) | 55,261 | 2 | % | |||||||||||||||||
Sold(b) | 2,358,927 | 2,492,572 | 2,510,419 | (133,645 | ) | (5 | %) | (17,847 | ) | (1 | %) | ||||||||||||||||
Gold ounces - sold | 2,324,324 | 2,458,839 | 2,480,529 | (134,515 | ) | (5 | %) | (21,690 | ) | (1 | %) | ||||||||||||||||
Silver ounces - sold (000’s) | 4,429 | 4,636 | 4,232 | (207 | ) | (4 | %) | 404 | 10 | % | |||||||||||||||||
Average realized gold price per ounce(c) | $ | 1,774 | $ | 1,392 | $ | 1,268 | $ | 382 | 27 | % | $ | 124 | 10 | % | |||||||||||||
Financial data | |||||||||||||||||||||||||||
Metal sales | $ | 4,213.4 | $ | 3,497.3 | $ | 3,212.6 | $ | 716.1 | 20 | % | $ | 284.7 | 9 | % | |||||||||||||
Production cost of sales | $ | 1,725.7 | $ | 1,778.9 | $ | 1,860.5 | $ | (53.2 | ) | (3 | %) | $ | (81.6 | ) | (4 | %) | |||||||||||
Depreciation, depletion and amortization | $ | 842.3 | $ | 731.3 | $ | 772.4 | $ | 111.0 | 15 | % | $ | (41.1 | ) | (5 | %) | ||||||||||||
Reversals of impairment charges - net | $ | (650.9 | ) | $ | (361.8 | ) | $ | - | $ | (289.1 | ) | (80 | %) | $ | (361.8 | ) | nm | ||||||||||
Operating earnings | $ | 1,899.4 | $ | 991.1 | $ | 200.5 | $ | 908.3 | 92 | % | $ | 790.6 | nm | ||||||||||||||
Net earnings (loss) attributable to common shareholders | $ | 1,342.4 | $ | 718.6 | $ | (23.6 | ) | $ | 623.8 | 87 | % | $ | 742.2 | nm |
(a) | “Total” includes 100% of Chirano production. “Attributable” includes Kinross’ share of Chirano (90%) production. |
(b) | “Gold equivalent ounces” include silver ounces produced and sold converted to a gold equivalent based on a ratio of the average spot market prices for the commodities for each period. The ratio for 2020 was 86.32:1 (2019 - 85.99:1 and 2018 - 80.74:1). |
(c) | “Average realized gold price per ounce” is a non-GAAP financial measure and is defined in Section 11. |
(d) | “nm” means not meaningful. |
Operating Earnings (Loss) by Segment
Years ended December 31, | 2020 vs. 2019 | 2019 vs. 2018 | ||||||||||||||||||||||||||
(in millions) | 2020 | 2019 | 2018 | Change | % Change(d) | Change | % Change(d) | |||||||||||||||||||||
Operating segments | ||||||||||||||||||||||||||||
Fort Knox | $ | 67.0 | $ | (52.9 | ) | $ | (41.5 | ) | $ | 119.9 | nm | (11.4 | ) | (27 | %) | |||||||||||||
Round Mountain | 286.8 | 207.3 | 154.1 | 79.5 | 38 | % | 53.2 | 35 | % | |||||||||||||||||||
Bald Mountain | 34.6 | 12.7 | 110.7 | 21.9 | 172 | % | (98.0 | ) | (89 | %) | ||||||||||||||||||
Paracatu | 407.0 | 492.2 | 69.9 | (85.2 | ) | (17 | %) | 422.3 | nm | |||||||||||||||||||
Kupol(a) | 410.5 | 281.1 | 187.2 | 129.4 | 46 | % | 93.9 | 50 | % | |||||||||||||||||||
Tasiast | 504.3 | 285.1 | (85.9 | ) | 219.2 | 77 | % | 371.0 | nm | |||||||||||||||||||
Chirano | 238.1 | (7.8 | ) | (6.2 | ) | 245.9 | nm | (1.6 | ) | (26 | %) | |||||||||||||||||
Non-operating segment | ||||||||||||||||||||||||||||
Corporate and other(b)(c) | (48.9 | ) | (226.6 | ) | (187.8 | ) | 177.7 | 78 | % | (38.8 | ) | (21 | %) | |||||||||||||||
Total | $ | 1,899.4 | $ | 991.1 | $ | 200.5 | $ | 908.3 | 92 | % | $ | 790.6 | nm |
(a) | The Kupol segment includes the Kupol and Dvoinoye mines. |
(b) | “Corporate and other” includes operating costs which are not directly related to individual mining properties such as overhead expenses, gains and losses on disposal of assets and investments, and other costs relating to corporate, shutdown, and other non-operating assets (including Chulbatkan, Kettle River-Buckhorn, La Coipa, Lobo-Marte, Maricunga and Peak). |
(c) | The Company suspended mining and crushing activities at Maricunga in the third quarter of 2016, however there was continued production through 2019 as ounces continued to be recovered from heap leach pads until the fourth quarter of 2019 when all processing activities transitioned to care and maintenance. As such the Maricunga segment was reclassified as non-operating within the Corporate and other segment in 2020. |
(d) | “nm” means not meaningful. |
16
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Mining Operations
Fort Knox (100% ownership and operator) – USA
Years ended December 31, | ||||||||||||||||
2020 | 2019 | Change | % Change(c) | |||||||||||||
Operating Statistics | ||||||||||||||||
Tonnes ore mined (000’s) | 28,568 | 25,367 | 3,201 | 13 | % | |||||||||||
Tonnes processed (000’s)(a) | 32,150 | 26,562 | 5,588 | 21 | % | |||||||||||
Grade (grams/tonne)(b) | 0.65 | 0.55 | 0.10 | 18 | % | |||||||||||
Recovery(b) | 81.4 | % | 82.2 | % | (0.8 | %) | (1 | %) | ||||||||
Gold equivalent ounces: | ||||||||||||||||
Produced | 237,925 | 200,263 | 37,662 | 19 | % | |||||||||||
Sold | 238,349 | 200,323 | 38,026 | 19 | % | |||||||||||
Financial Data (in millions) | ||||||||||||||||
Metal sales | $ | 422.9 | $ | 279.6 | $ | 143.3 | 51 | % | ||||||||
Production cost of sales | 251.3 | 213.7 | 37.6 | 18 | % | |||||||||||
Depreciation, depletion and amortization | 97.2 | 90.3 | 6.9 | 8 | % | |||||||||||
74.4 | (24.4 | ) | 98.8 | nm | ||||||||||||
Other operating expense | 2.6 | 25.1 | (22.5 | ) | (90 | %) | ||||||||||
Exploration and business development | 4.8 | 3.4 | 1.4 | 41 | % | |||||||||||
Segment operating earnings (loss) | $ | 67.0 | $ | (52.9 | ) | $ | 119.9 | nm |
(a) | Includes 22,994,000 tonnes placed on the heap leach pads during 2020 (2019 - 18,482,000 tonnes). |
(b) | Amount represents mill grade and recovery only. Ore placed on the heap leach pads had an average grade of 0.21 grams per tonne during 2020 (2019 - 0.21 grams per tonne). Due to the nature of heap leach operations, point-in-time recovery rates are not meaningful. |
(c) | “nm” means not meaningful. |
The Company has been operating the Fort Knox mine, located near Fairbanks, Alaska, since it was acquired in 1998.
2020 vs. 2019
Tonnes of ore mined in 2020 increased by 13%, compared to 2019, largely due to planned mine sequencing and completion of capital development activity related to Phase 8 East at the end of 2019. Tonnes of ore processed in 2020 increased by 21%, compared to 2019, primarily due to the increase in tonnes of ore mined and placed on the heap leach pads, and higher mill throughput. During the fourth quarter of 2020, the first ore was placed on the new Barnes Creek heap leach facility, which was constructed as part of the Gilmore project. In 2020, mill grade increased by 18% compared to 2019, due to mine sequencing. Gold equivalent ounces produced and sold in 2020 each increased by 19%, compared to 2019, largely due to the increase in mill grades and higher mill throughput. Gold equivalent ounces sold exceeded production due to timing of sales.
Metal sales in 2020 increased by 51%, compared to 2019, due to the increase in gold equivalent ounces sold and the increase in average metal prices realized. Production cost of sales in 2020 increased by 18%, compared to 2019, primarily due to the increase in gold equivalent ounces sold. Depreciation, depletion, and amortization in 2020 increased by 8%, compared to 2019, primarily due to the increase in gold equivalent ounces sold. Other operating expenses in 2019 included costs associated with the impact of the pit wall slide that occurred in 2018.
17
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Round Mountain (100% ownership and operator) – USA
Years ended December 31, | ||||||||||||||||
2020 | 2019 | Change | % Change(c) | |||||||||||||
Operating Statistics | ||||||||||||||||
Tonnes ore mined (000’s) | 20,758 | 22,514 | (1,756 | ) | (8 | %) | ||||||||||
Tonnes processed (000’s)(a) | 23,975 | 25,804 | (1,829 | ) | (7 | %) | ||||||||||
Grade (grams/tonne)(b) | 0.83 | 1.13 | (0.30 | ) | (27 | %) | ||||||||||
Recovery(b) | 83.3 | % | 84.9 | % | (1.6 | %) | (2 | %) | ||||||||
Gold equivalent ounces: | ||||||||||||||||
Produced | 324,277 | 361,664 | (37,387 | ) | (10 | %) | ||||||||||
Sold | 319,228 | 360,739 | (41,511 | ) | (12 | %) | ||||||||||
Financial Data (in millions) | ||||||||||||||||
Metal sales | $ | 565.5 | $ | 502.2 | $ | 63.3 | 13 | % | ||||||||
Production cost of sales | 219.6 | 250.6 | (31.0 | ) | (12 | %) | ||||||||||
Depreciation, depletion and amortization | 49.6 | 39.8 | 9.8 | 25 | % | |||||||||||
296.3 | 211.8 | 84.5 | 40 | % | ||||||||||||
Other operating expense (income) | 3.9 | (0.3 | ) | 4.2 | nm | |||||||||||
Exploration and business development | 5.6 | 4.8 | 0.8 | 17 | % | |||||||||||
Segment operating earnings | $ | 286.8 | $ | 207.3 | $ | 79.5 | 38 | % |
(a) | Includes 20,151,000 tonnes placed on the heap leach pads during 2020 (2019 - 22,164,000 tonnes). |
(b) | Amounts represent mill grade and recovery only. Ore placed on the heap leach pads had an average grade of 0.42 grams per tonne during 2020 (2019 - 0.34 grams per tonne). Due to the nature of heap leach operations, point-in-time recovery rates are not meaningful. |
(c) | “nm” means not meaningful. |
The Company acquired its 50% ownership interest in the Round Mountain open pit mine, located in Nye County, Nevada, with the acquisition of Echo Bay Mines Ltd. on January 31, 2003. On January 11, 2016, the Company acquired the remaining 50% interest in Round Mountain, along with the Bald Mountain gold mine, from Barrick.
2020 vs. 2019
Tonnes of ore mined and processed in 2020 decreased by 8% and 7%, respectively, compared to 2019, primarily due to an increase in capital development activity related to the Phase W project and planned mine sequencing. Mill grade in 2020 decreased by 27%, compared to 2019, due to mine sequencing. Gold equivalent ounces produced and sold in 2020 decreased by 10% and 12%, respectively, compared to 2019, primarily due to lower mill grade.
In 2020, metal sales increased by 13%, compared to 2019, due to the increase in average metal prices realized, partially offset by the decrease in gold equivalent ounces sold. Production cost of sales decreased by 12%, compared to 2019, largely due to lower gold equivalent ounces sold and lower operating waste mined, partially offset by increases in labour, maintenance costs and royalties due to higher average metal prices. Depreciation, depletion and amortization in 2020 increased by 25%, compared to 2019, mainly due to an increase in the depreciable asset base relating to the completion of Phase W construction, which was partially offset by a decrease in gold equivalent ounces sold.
18
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Bald Mountain (100% ownership and operator) – USA
Years ended December 31, | ||||||||||||||||
2020 | 2019 | Change | % Change | |||||||||||||
Operating Statistics(a) | ||||||||||||||||
Tonnes ore mined (000’s) | 18,303 | 15,806 | 2,497 | 16 | % | |||||||||||
Tonnes processed (000’s) | 18,303 | 16,475 | 1,828 | 11 | % | |||||||||||
Grade (grams/tonne) | 0.51 | 0.42 | 0.09 | 21 | % | |||||||||||
Gold equivalent ounces: | ||||||||||||||||
Produced | 191,282 | 187,961 | 3,321 | 2 | % | |||||||||||
Sold | 186,549 | 177,802 | 8,747 | 5 | % | |||||||||||
Financial Data (in millions) | ||||||||||||||||
Metal sales | $ | 330.5 | $ | 249.2 | $ | 81.3 | 33 | % | ||||||||
Production cost of sales | 155.9 | 136.6 | 19.3 | 14 | % | |||||||||||
Depreciation, depletion and amortization | 128.3 | 79.5 | 48.8 | 61 | % | |||||||||||
46.3 | 33.1 | 13.2 | 40 | % | ||||||||||||
Other operating expense | 5.2 | 7.8 | (2.6 | ) | (33 | %) | ||||||||||
Exploration and business development | 6.5 | 12.6 | (6.1 | ) | (48 | %) | ||||||||||
Segment operating earnings | $ | 34.6 | $ | 12.7 | $ | 21.9 | 172 | % |
(a) | Due to the nature of heap leach operations, point-in-time recovery rates are not meaningful. |
The Company completed the acquisition of 100% of the Bald Mountain open pit mine on January 11, 2016 from Barrick, which includes a large associated land package. On October 2, 2018, the Company acquired the remaining 50% interest in the Bald Mountain exploration joint venture that it did not already own from Barrick, giving Kinross 100% ownership of the Bald Mountain land package.
2020 vs. 2019
Tonnes of ore mined and processed in 2020 increased by 16% and 11%, respectively, compared to 2019, primarily due to a decrease in capital development activity in 2020 related to the Vantage project and planned mine sequencing, as mining activities were increased at the North Area in the third and fourth quarters of 2020. Grades in 2020 increased by 21%, compared to 2019, due to mine sequencing. Gold equivalent ounces produced and sold in 2020 increased by 2% and 5%, respectively, compared to 2019, largely due to the increase in grades and tonnes processed.
Metal sales in 2020 increased by 33%, compared to 2019, due to the increases in average metal prices realized and gold equivalent ounces sold. Production cost of sales in 2020 increased by 14% compared to 2019, primarily due to the increase in gold equivalent ounces sold, higher operating waste mined, and increases in maintenance costs and royalties due to higher average metal prices. In 2020, depreciation, depletion and amortization increased by 61%, compared to 2019, due to the increase in the depreciable asset base, primarily related to the completion of the Vantage project, and an increase in gold equivalent ounces sold.
19
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Paracatu (100% ownership and operator) – Brazil
Years ended December 31, | ||||||||||||||||
2020 | 2019 | Change | % Change(a) | |||||||||||||
Operating Statistics | ||||||||||||||||
Tonnes ore mined (000’s) | 52,653 | 49,535 | 3,118 | 6 | % | |||||||||||
Tonnes processed (000’s) | 54,255 | 57,621 | (3,366 | ) | (6 | %) | ||||||||||
Grade (grams/tonne) | 0.42 | 0.40 | 0.02 | 5 | % | |||||||||||
Recovery | 75.1 | % | 78.7 | % | (3.6 | %) | (5 | %) | ||||||||
Gold equivalent ounces: | ||||||||||||||||
Produced | 542,435 | 619,563 | (77,128 | ) | (12 | %) | ||||||||||
Sold | 541,506 | 619,009 | (77,503 | ) | (13 | %) | ||||||||||
Financial Data (in millions) | ||||||||||||||||
Metal sales | $ | 960.7 | $ | 856.3 | $ | 104.4 | 12 | % | ||||||||
Production cost of sales | 358.9 | 412.3 | (53.4 | ) | (13 | %) | ||||||||||
Depreciation, depletion and amortization | 183.5 | 163.4 | 20.1 | 12 | % | |||||||||||
Reversal of impairment charges | - | (200.7 | ) | 200.7 | nm | |||||||||||
418.3 | 481.3 | (63.0 | ) | (13 | %) | |||||||||||
Other operating expense (income) | 11.3 | (10.9 | ) | 22.2 | nm | |||||||||||
Segment operating earnings | $ | 407.0 | $ | 492.2 | $ | (85.2 | ) | (17 | %) |
(a) | “nm” means not meaningful. |
The Company acquired a 49% ownership interest in the Paracatu open pit mine, located in the State of Minas Gerais, Brazil, upon the acquisition of TVX Gold Inc. on January 31, 2003. On December 31, 2004, the Company purchased the remaining 51% of Paracatu from Rio Tinto Plc.
2020 vs. 2019
Tonnes of ore mined in 2020 increased by 6%, compared to 2019, largely due to planned mine sequencing. Tonnes of ore processed decreased by 6% compared to 2019, mainly due to decreases in mill throughput in the first quarter of 2020 as a result of temporary downtime at the crusher, planned mill maintenance in the third quarter and hardness of the ore in the fourth quarter of 2020. Grades increased by 5% in 2020, compared to 2019, largely due to planned mine sequencing. Recoveries decreased by 5% in 2020, compared to 2019, largely due to the characteristics of the ore mined. Gold equivalent ounces produced and sold in 2020 decreased by 12% and 13%, respectively, compared to 2019, largely due to the decreases in mill recoveries and throughput, partially offset by the increase in grades.
Metal sales in 2020 increased by 12%, compared to 2019, due to the increase in average metal prices realized, partially offset by the decrease in gold equivalent ounces sold. In 2020, production cost of sales decreased by 13%, compared to 2019, largely due to the decrease in gold equivalent ounces sold and favourable foreign exchange movements, partially offset by higher contractor costs and maintenance supplies. Depreciation, depletion and amortization in 2020 increased by 12%, compared to 2019, primarily due to the increase in the depreciable asset base, mainly related to the impairment reversal of property, plant and equipment at the end of 2019, partially offset by the decrease in gold equivalent ounces sold.
At December 31, 2019, the Company recognized a reversal of previously recorded impairment charges of $200.7 million. The non-cash impairment reversal related to property, plant and equipment was primarily due to an increase in the Company’s estimates of future metal prices. The tax impact on the impairment reversal was an expense of $68.2 million recorded within income tax expense.
In 2020, other operating expense of $11.3 included $7.5 million of labour, health and safety and other support program costs associated with the COVID-19 pandemic. In 2019, other operating income of $10.9 million primarily included $17.5 million of additional federal VAT credits as a result of changes in Brazil’s tax regulations related to prior period expenditures.
20
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Kupol (100% ownership and operator) – Russian Federation(a)
Years ended December 31, | ||||||||||||||||
2020 | 2019 | Change | % Change(d) | |||||||||||||
Operating Statistics | ||||||||||||||||
Tonnes ore mined (000’s)(b) | 1,544 | 1,599 | (55 | ) | (3 | %) | ||||||||||
Tonnes processed (000’s) | 1,704 | 1,723 | (19 | ) | (1 | %) | ||||||||||
Grade (grams/tonne): | ||||||||||||||||
Gold | 9.17 | 9.41 | (0.24 | ) | (3 | %) | ||||||||||
Silver | 68.07 | 69.49 | (1.42 | ) | (2 | %) | ||||||||||
Recovery: | ||||||||||||||||
Gold | 94.8 | % | 94.1 | % | 0.7 | % | 1 | % | ||||||||
Silver | 85.7 | % | 84.9 | % | 0.8 | % | 1 | % | ||||||||
Gold equivalent ounces:(c) | ||||||||||||||||
Produced | 510,743 | 527,343 | (16,600 | ) | (3 | %) | ||||||||||
Sold | 510,973 | 526,458 | (15,485 | ) | (3 | %) | ||||||||||
Silver ounces: | ||||||||||||||||
Produced (000’s) | 3,169 | 3,296 | (127 | ) | (4 | %) | ||||||||||
Sold (000’s) | 3,177 | 3,368 | (191 | ) | (6 | %) | ||||||||||
Financial Data (in millions) | ||||||||||||||||
Metal sales | $ | 904.6 | $ | 734.4 | $ | 170.2 | 23 | % | ||||||||
Production cost of sales | 304.5 | 314.1 | (9.6 | ) | (3 | %) | ||||||||||
Depreciation, depletion and amortization | 123.5 | 125.1 | (1.6 | ) | (1 | %) | ||||||||||
Impairment charges | 27.8 | - | 27.8 | nm | ||||||||||||
448.8 | 295.2 | 153.6 | 52 | % | ||||||||||||
Other operating expense (income) | 32.5 | (8.9 | ) | 41.4 | nm | |||||||||||
Exploration and business development | 5.8 | 23.0 | (17.2 | ) | (75 | %) | ||||||||||
Segment operating earnings | $ | 410.5 | $ | 281.1 | $ | 129.4 | 46 | % |
(a) | The Kupol segment includes the Kupol and Dvoinoye mines. |
(b) | Includes 326,000 tonnes of ore mined from Dvoinoye during 2020 (2019 - 435,000). |
(c) | “Gold equivalent ounces” include silver ounces produced and sold converted to a gold equivalent based on a ratio of the average spot market prices for the commodities for each period. The ratio for 2020 was 86.32:1 (2019 - 85.99:1). |
(d) | “nm” means not meaningful. |
The Company acquired a 75% interest in the Kupol project in Far Eastern Russia on February 27, 2007. The remaining 25% interest was acquired from the State Unitary Enterprise of the Chukotka Autonomous Okrug on April 27, 2011.
2020 vs. 2019
Tonnes of ore mined in 2020 decreased by 3%, compared to 2019, primarily due to reduced mining activity at Dvoinoye, as per the mine plan. Tonnes processed in 2020 decreased slightly compared to 2019, primarily due to planned mill maintenance in the second quarter of 2020. Mill grade in 2020 decreased by 3% compared to 2019, primarily due to lower grades at Kupol, consistent with the mine plan. Gold equivalent ounces produced and sold in 2020 each decreased by 3%, compared to 2019, largely due to the lower grades.
Metal sales in 2020 increased by 23%, compared to 2019, due to the increase in average metal prices, partially offset by the decrease in gold equivalent ounces sold. In 2020, production cost of sales decreased by 3%, compared to 2019, largely due to a decrease in gold equivalent ounces sold and favourable foreign exchange movements, partially offset by higher royalty expenses resulting from the increase in average metal prices realized. Depreciation, depletion and amortization in 2020 decreased slightly, compared to 2019, primarily due to the decrease in gold equivalent ounces sold. The Company recorded impairment charges of $27.8 million to reduce the carrying value of certain supplies inventories to their net realizable value.
In 2020, other operating expense included $31.0 million of labour, health and safety, donations and other support program costs associated with the COVID-19 pandemic. Exploration and business development costs decreased by 75% in 2020 compared to 2019, primarily due to reduced regional exploration activity as a result of the COVID-19 pandemic.
21
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Tasiast (100% ownership and operator) – Mauritania
Years ended December 31, | ||||||||||||||||
2020 | 2019 | Change | % Change(b) | |||||||||||||
Operating Statistics | ||||||||||||||||
Tonnes ore mined (000’s) | 4,838 | 4,920 | (82 | ) | (2 | %) | ||||||||||
Tonnes processed (000’s) | 5,349 | 5,226 | 123 | 2 | % | |||||||||||
Grade (grams/tonne)(a) | 2.49 | 2.33 | 0.16 | 7 | % | |||||||||||
Recovery(a) | 94.4 | % | 96.6 | % | (2.2 | %) | (2 | %) | ||||||||
Gold equivalent ounces: | ||||||||||||||||
Produced | 406,509 | 391,097 | 15,412 | 4 | % | |||||||||||
Sold | 403,789 | 382,803 | 20,986 | 5 | % | |||||||||||
Financial Data (in millions) | ||||||||||||||||
Metal sales | $ | 718.0 | $ | 532.8 | $ | 185.2 | 35 | % | ||||||||
Production cost of sales | 235.7 | 230.4 | 5.3 | 2 | % | |||||||||||
Depreciation, depletion and amortization | 191.8 | 130.2 | 61.6 | 47 | % | |||||||||||
Reversals of impairment charges - net | (289.2 | ) | (161.1 | ) | (128.1 | ) | nm | |||||||||
579.7 | 333.3 | 246.4 | 74 | % | ||||||||||||
Other operating expense | 73.4 | 46.4 | 27.0 | 58 | % | |||||||||||
Exploration and business development | 2.0 | 1.8 | 0.2 | 11 | % | |||||||||||
Segment operating earnings | $ | 504.3 | $ | 285.1 | $ | 219.2 | 77 | % |
(a) | Amount represents mill grade and recovery only. |
(b) | “nm” means not meaningful. |
Kinross acquired its 100% interest in the Tasiast mine on September 17, 2010 upon completing its acquisition of Red Back Mining Inc. (“Red Back”). The Tasiast mine is an open pit operation located in north-western Mauritania and is approximately 300 kilometres north of the capital, Nouakchott.
2020 vs. 2019
Although ramping back up during the second half of the year, the overall mining rate in 2020 was affected by the COVID-19 pandemic and the temporary suspension of site activities as a result of the strike in the second quarter of 2020. Tonnes of ore mined were therefore lower than planned in 2020 and also 2% lower than in 2019. In 2020, tonnes of ore processed increased by 2%, compared to 2019, mainly due to an increase in mill throughout in the first quarter of 2020 as a result of better availability of the SAG mill. Mill grade in 2020 increased by 7%, compared to 2019, mainly due to mine sequencing related to higher grade ore processed from West Branch 3. Gold equivalent ounces produced and sold increased by 4% and 5%, respectively, in 2020, compared to 2019, due to the increases in mill throughput and grade, partially offset by lower ounces recovered from the dump leach pad and lower mill recovery.
Metal sales in 2020 increased by 35%, compared to 2019, due to the increases in average metal prices realized and gold equivalent ounces sold. In 2020, production cost of sales increased by 2%, compared to 2019, primarily due to increases in gold equivalent ounces sold and royalty expenses, partially offset by lower fuel, contractor and site overhead costs. Depreciation, depletion and amortization in 2020 increased by 47%, compared to 2019, primarily due to the increase in the depreciable asset base largely related to the impairment reversal recognized at the end of 2019, the increase in gold equivalent ounces sold, and reduced capitalized stripping activities in 2020. At December 31, 2020, the Company recognized a non-cash reversal of previously recorded impairment charges of $299.5 million related to property, plant and equipment, primarily due to an increase in the Company’s estimates of future metal prices, partially offset by impairment charges of $10.3 million to reduce the carrying value of certain supplies inventories to their net realizable value. At December 31, 2019, the Company recognized a reversal of previously recorded impairment charges of $161.1 million. The non-cash impairment reversal related to property, plant and equipment was primarily due to an increase in the Company’s estimates of future metal prices.
In 2020, Other operating expenses included $16.2 million of labour, health and safety, donations and other support program costs associated with the COVID-19 pandemic and $8.3 million of costs relating to the temporary suspension of site activities as a result of the strike in the second quarter of 2020.
22
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Chirano (90% ownership and operator) – Ghana(a)
Years ended December 31, | ||||||||||||||||
2020 | 2019 | Change | % Change(b) | |||||||||||||
Operating Statistics | ||||||||||||||||
Tonnes ore mined (000’s) | 3,053 | 2,569 | 484 | 19 | % | |||||||||||
Tonnes processed (000’s) | 3,275 | 3,457 | (182 | ) | (5 | %) | ||||||||||
Grade (grams/tonne) | 1.80 | 1.98 | (0.18 | ) | (9 | %) | ||||||||||
Recovery | 87.9 | % | 91.6 | % | (3.7 | %) | (4 | %) | ||||||||
Gold equivalent ounces: | ||||||||||||||||
Produced | 166,590 | 201,296 | (34,706 | ) | (17 | %) | ||||||||||
Sold | 166,207 | 201,868 | (35,661 | ) | (18 | %) | ||||||||||
Financial Data (in millions) | ||||||||||||||||
Metal sales | $ | 295.1 | $ | 281.6 | $ | 13.5 | 5 | % | ||||||||
Production cost of sales | 196.1 | 189.7 | 6.4 | 3 | % | |||||||||||
Depreciation, depletion and amortization | 58.2 | 92.6 | (34.4 | ) | (37 | %) | ||||||||||
Reversals of impairment charges - net | (204.5 | ) | - | (204.5 | ) | nm | ||||||||||
245.3 | (0.7 | ) | 246.0 | nm | ||||||||||||
Other operating income | (2.2 | ) | (0.9 | ) | (1.3 | ) | (144 | %) | ||||||||
Exploration and business development | 9.4 | 8.0 | 1.4 | 18 | % | |||||||||||
Segment operating earnings (loss) | $ | 238.1 | $ | (7.8 | ) | $ | 245.9 | nm |
(a) | Operating statistics and financial data are at 100% for all periods. |
(b) | “nm” means not meaningful. |
Kinross acquired its 90% interest in the Chirano mine on September 17, 2010 upon completing its acquisition of Red Back. Chirano is located in southwestern Ghana, approximately 100 kilometres southwest of Kumasi, Ghana’s second largest city. A 10% carried interest is held by the government of Ghana.
2020 vs. 2019
Tonnes of ore mined in 2020 increased by 19%, compared to 2019, mainly due to the restart of open pit mining late in the first quarter of 2019, partially offset by lower tonnes of ore mined from the Paboase and Akwaaba underground deposits. Tonnes of ore processed decreased by 5% in 2020, compared to 2019, largely due to reduced availability of the processing plant in 2020 and the characteristics of the ore mined. Mill grade and recoveries in 2020 decreased by 9% and 4%, respectively, compared to 2019, mainly due to lower grade ore mined at the Paboase and Akoti underground deposits. Gold equivalent ounces produced and sold in 2020 decreased by 17% and 18%, respectively, compared to 2019, largely due to the decreases in mill grade, throughput and recovery.
Metal sales in 2020 increased by 5%, compared to 2019, due to the increase in average metal prices realized, partially offset by the decrease in gold equivalent ounces sold. Production cost of sales in 2020 increased by 3%, compared to 2019, mainly due to an increase in milling and maintenance supplies, largely offset by the decrease in gold equivalent ounces sold. Depreciation, depletion and amortization in 2020 decreased by 37%, compared to 2019, largely due to an increase in mineral reserves at the end of 2019 and the decrease in gold equivalent ounces sold.
At December 31, 2020, the Company recognized a reversal of previously recorded impairment charges of $204.5 million. The non-cash impairment reversal related to property, plant and equipment was primarily due to the extension of Chirano’s life of mine to 2025 and an increase in the Company’s estimates of future metal prices. No such impairment reversal was recognized in 2019.
As previously reported, Kinross’ operating subsidiary Chirano Gold Mines Ltd. (“CGML”), was recently audited by Ghana’s Ministry of Lands and Natural Resources and the Ghana Mineral Commission pursuant to a country-wide audit of mining activities, including historical mineral sales, exports and related taxes. In connection with this process, CGML received an audit report and provided a comprehensive response clarifying various issues addressed in the report. Following ongoing communications among the parties respecting the audit, the Government appointed an ombudsman to analyze the audit report and provide an independent assessment of the issues addressed in the report. CGML is fully cooperating with the Government in connection with this ongoing process.
23
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Maricunga (100% ownership and operator) – Chile
Kinross acquired its original 50% interest in the Maricunga open pit mine (formerly known as the Refugio mine), located 120 kilometres northeast of Copiapó, Chile in 1998. On February 27, 2007, Kinross acquired the remaining 50% interest in Maricunga through the acquisition of Bema Gold Corporation. During 2016, mining activities at Maricunga were suspended as a result of the imposition of a water curtailment order by Chile’s environmental enforcement authority.
As a result of the suspension of mining and crushing activities at Maricunga, there was no new ore mined and processed in both 2020 and 2019. Production continued through 2019 as ounces continued to be recovered from the heap leach pads until the fourth quarter of 2019 when production activities transitioned to care and maintenance.
In 2020, gold equivalent ounces sold of 8,947 decreased by 80% compared to gold equivalent ounces sold of 43,756 in 2019. No further production is expected while Maricunga continues to sell its remaining finished metals inventories. Metal sales and operating losses were $16.1 million and $12.5 million, respectively, in 2020, compared to metal sales and operating earnings of $61.2 million and $10.9 million, respectively, in 2019.
Reversals of impairment charges - net
Years ended December 31, | ||||||||||||||||
(in millions) | 2020 | 2019 | Change | % Change(a) | ||||||||||||
Property, plant and equipment (i) | $ | (689.0 | ) | $ | (361.8 | ) | $ | (327.2 | ) | nm | ||||||
Inventories (ii) | 38.1 | - | 38.1 | nm | ||||||||||||
Reversals of impairment charges - net | $ | (650.9 | ) | $ | (361.8 | ) | $ | (289.1 | ) | nm |
(a) | “nm” means not meaningful. |
i. | Property, plant and equipment |
During the year ended December 31, 2020, the Company recorded reversals of previous impairment charges of $689.0 million, related entirely to property, plant and equipment at Tasiast ($299.5 million), Chirano ($204.5 million) and Lobo-Marte ($185.0 million, which includes $48.3 million for the impairment reversal recorded at June 30, 2020). These impairment reversals were mainly a result of increases in the Company’s long-term gold price estimate, the mine life extension at Chirano and the increase in mineral reserves at Lobo-Marte. For Tasiast and Chirano, the reversals were limited to a full reversal of the remaining impairment charges previously recorded. For Lobo-Marte, the reversal represents a partial reversal of the total impairment charges previously recorded. The tax impacts of the impairment reversals at Chirano and Lobo-Marte were income tax expenses of $71.6 million and $4.6 million, respectively. There was no tax impact on the impairment reversal at Tasiast.
At December 31, 2019, the Company recorded reversals of impairment charges totaling $361.8 million, related entirely to property, plant and equipment at Paracatu ($200.7 million) and Tasiast ($161.1 million), and were mainly due to an increase in the Company’s long-term gold price estimate. For Paracatu, the reversal was limited to a full reversal of the remaining impairment charge recorded in 2017. For Tasiast, the reversal represents a partial reversal of impairment charges previously recorded. The tax impact on the impairment reversal at Paracatu was an expense of $68.2 million recorded within income tax expense. There was no tax impact related to the impairment reversal at Tasiast.
Impairment charges recognized against property, plant and equipment may be reversed if there are changes in the assumptions or estimates used in determining the recoverable amount of a CGU which indicate that a previously recognized impairment loss may no longer exist or may have decreased.
ii. | Inventories |
During 2020, the Company recognized impairment charges of $38.1 million related to inventories. The inventory impairment charges were recorded to reduce the carrying value of certain materials and supplies inventories to net realizable value.
24
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Other Operating Expense
Years ended December 31, | ||||||||||||||||
(in millions) | 2020 | 2019 | Change | % Change | ||||||||||||
Other operating expense | $ | 186.5 | $ | 108.5 | $ | 78.0 | 72 | % |
In 2020, other operating expense included $64.1 million of labour, health and safety, donations and other support program costs associated with the COVID-19 pandemic, $8.3 million of costs relating to the temporary suspension of site activities as a result of the Tasiast strike in the second quarter of 2020, as well as environmental and other operating expenses for non-operating mining sites of $46.0 million. The increase in other operating expense, compared to 2019 and 2020 expectation, is primarily a result of the above noted impact of the pandemic.
In 2019, other operating expense included $25.1 million of costs as a result of production issues associated with the pit wall slide at Fort Knox, and environmental and other operating expenses for non-operating mining sites of $35.6 million, and was reduced by $17.5 million as a result of additional federal VAT credits at Paracatu due to changes in Brazil’s tax regulations.
Exploration and Business Development
Years ended December 31, | ||||||||||||||||
(in millions) | 2020 | 2019 | Change | % Change | ||||||||||||
Exploration and business development | $ | 92.5 | $ | 113.5 | $ | (21.0 | ) | (19 | %) |
Of the total Exploration and Business Development expense, expenditures on exploration totaled $64.5 million in 2020, a decrease compared to $80.0 million in 2019, and compared to 2020 expectation, primarily as a result of impacts of the global COVID-19 pandemic. Capitalized exploration expenses, including capitalized evaluation expenditures, totaled $35.9 million in 2020, compared to $20.7 million in 2019.
Kinross was active on more than 19 mine sites, near-mine and greenfield initiatives in 2020, with a total of 170,963 metres drilled. In 2019, Kinross was active on more than 16 mine sites, near-mine and greenfield initiatives, with a total 300,460 metres drilled.
General and Administrative
Years ended December 31, | ||||||||||||||||
(in millions) | 2020 | 2019 | Change | % Change | ||||||||||||
General and administrative | $ | 117.9 | $ | 135.8 | $ | (17.9 | ) | (13 | %) |
General and administrative costs include expenses related to the overall management of the business which are not part of direct mine operating costs. These are costs that are incurred at corporate offices located in Canada, the United States, Brazil, the Russian Federation, Chile, the Netherlands, and the Canary Islands.
In 2020, general and administrative costs decreased compared to 2019, primarily as a result of impacts of the global COVID-19 pandemic and restructuring costs incurred in 2019.
Other Income – Net
Years ended December 31, | ||||||||||||||||
(in millions) | 2020 | 2019 | Change | % Change(a) | ||||||||||||
Net gains on dispositions of assets | 1.2 | 70.4 | (69.2 | ) | (98 | %) | ||||||||||
Foreign exchange (losses) gains - net | (7.3 | ) | 0.6 | (7.9 | ) | nm | ||||||||||
Net non-hedge derivative gains | 1.0 | 1.4 | (0.4 | ) | (29 | %) | ||||||||||
Equity in (losses) earnings of joint venture | (0.1 | ) | 0.1 | (0.2 | ) | nm | ||||||||||
Other - net | 12.6 | 0.2 | 12.4 | nm | ||||||||||||
Other income - net | $ | 7.4 | $ | 72.7 | $ | (65.3 | ) | (90 | %) |
(a) | “nm” means not meaningful. |
Other income – net decreased to $7.4 million in 2020 from $72.7 million in 2019. In 2019, the Company sold a portfolio of precious metals royalties, recognizing a gain on disposition of $72.7 million.
25
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Finance Expense
Years ended December 31, | ||||||||||||||||
(in millions) | 2020 | 2019 | Change | % Change | ||||||||||||
Accretion of reclamation and remediation obligations | $ | 23.0 | $ | 31.0 | $ | (8.0 | ) | (26 | %) | |||||||
Interest expense, including accretion of debt and lease liabilities | 89.6 | 76.9 | 12.7 | 17 | % | |||||||||||
Finance expense | $ | 112.6 | $ | 107.9 | $ | 4.7 | 4 | % |
Interest expense in 2020 increased to $89.6 million, compared to $76.9 million in 2019, primarily as a result of an increase in interest incurred from the Tasiast loan and revolving credit facility. Interest expense capitalized in 2020 was $49.1 million, compared to $47.4 million in 2019.
Income and Mining Taxes
Kinross is subject to tax in various jurisdictions including Canada, the United States, Brazil, Chile, the Russian Federation, Mauritania, and Ghana.
In 2020, the Company recorded income tax expense of $439.8 million, compared to income tax expense of $246.7 million in 2019. The $439.8 million of income tax expense in 2020 was the result of higher operating mine profitability compared to 2019, an additional deferred tax expense of $76.2 million related to the reversal of impairment charges at Chirano and Lobo-Marte, as well as $101.2 million of deferred tax expense resulting from the net foreign currency translation of tax deductions related to the Company’s operations in Brazil and the Russian Federation. This increase was partially offset by a net tax benefit of $25.4 million resulting from the enactment of the U.S. CARES Act. The $246.7 million income tax expense recognized in 2019 included an additional deferred tax expense of $68.2 million related to the reversal of impairment charges at Paracatu, as well as $1.6 million of deferred tax expense resulting from the net foreign currency translation of tax deductions with respect to the Company’s operations in Brazil and the Russian Federation. Kinross’ combined federal and provincial statutory tax rate for both 2020 and 2019 was 26.5%.
There are a number of factors that can significantly impact the Company’s effective tax rate, including geographical distribution of income, varying rates in different jurisdictions, the non-recognition of tax assets, mining allowance, mining specific taxes, foreign currency exchange movements, changes in tax laws, and the impact of specific transactions and assessments.
The Company benefitted from two significant changes in U.S. tax law included in the U.S. CARES Act. First, $33.1 million of federal Alternative Minimum Tax (“AMT”) credits that were previously expected to be received after 2020, were refunded in 2020. Second, the amendment to U.S. tax law provided for new tax loss carry-back opportunities that created additional federal AMT credits of $73.7 million, which were also refunded in 2020. The carry-back of the U.S. net operating losses also resulted in a net tax benefit of $25.4 million to 2020 tax expense, as a result of the higher federal corporate tax rates applicable in the carry-back period.
On January 1, 2020, the New Tax Code in Mauritania, previously approved and promulgated in April 2019, became effective. In the fourth quarter of 2019, the Mauritanian Tax Agency released draft administrative guidance for comment and held consultative sessions with taxpayers for feedback. Final administrative guidance on the application of the new tax law has not yet been released. On January 10, 2020, the Mauritanian Legislature passed the Financial Law for the Year 2020, amending the 2019 New Tax Code. Based on draft administrative guidance available to date and other analysis, the Company does not expect the New Tax Code to have a material impact on the Company’s ongoing operations in Mauritania. The Company notes that its Mining Convention with the State of Mauritania contains tax stability provisions applicable to its current operations and mining concessions.
Kinross’ tax records, transactions and filing positions may be subject to examination by the tax authorities in the countries in which the Company has operations. The tax authorities may review the Company’s transactions in respect of the year, or multiple years, which they have chosen for examination. The tax authorities may interpret the tax implications of a transaction, in form or in fact, differently from the interpretation reached by the Company.
In circumstances where the Company and the tax authority cannot reach a consensus on the tax impact, there are processes and procedures which both parties may undertake in order to reach a resolution, which may span many years in the future. The Company assesses the expected outcome of examination of transactions by the tax authorities, and accrues the expected outcome in accordance with IFRS.
Uncertainty in the interpretation and application of applicable tax laws, regulations or the relevant sections of Mining Conventions by the tax authorities, or the failure of relevant Governments or tax authorities to honour tax laws, regulations or the relevant sections of Mining Conventions could adversely affect Kinross.
Due to the number of factors that can potentially impact the effective tax rate and the sensitivity of the tax provision to these factors, as discussed above, it is expected that the Company’s effective tax rate will fluctuate in future periods.
26
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
6. | LIQUIDITY AND CAPITAL RESOURCES |
The following table summarizes Kinross’ cash flow activity:
Years ended December 31, | ||||||||||||||||
(in millions) | 2020 | 2019 | Change | % Change(a) | ||||||||||||
Cash Flow: | ||||||||||||||||
Provided from operating activities | $ | 1,957.6 | $ | 1,224.9 | $ | 732.7 | 60 | % | ||||||||
Used in investing activities | (1,249.1 | ) | (1,026.6 | ) | (222.5 | ) | (22 | %) | ||||||||
(Used in) provided from financing activities | (67.7 | ) | 25.1 | (92.8 | ) | nm | ||||||||||
Effect of exchange rate changes on cash and cash equivalents | (5.0 | ) | 2.7 | (7.7 | ) | nm | ||||||||||
Increase in cash and cash equivalents | 635.8 | 226.1 | 409.7 | 181 | % | |||||||||||
Cash and cash equivalents, beginning of period | 575.1 | 349.0 | 226.1 | 65 | % | |||||||||||
Cash and cash equivalents, end of period | $ | 1,210.9 | $ | 575.1 | $ | 635.8 | 111 | % |
(a) | “nm” means not meaningful. |
Cash and cash equivalents balances increased by $635.8 million in 2020 compared to an increase of $226.1 million in 2019. Detailed discussions regarding cash flow movements are noted below.
Operating Activities
2020 vs. 2019
Net cash flow provided from operating activities increased by $732.7 million in 2020 compared to 2019, mainly due to an increase in margins and favourable working capital changes.
Investing Activities
2020 vs. 2019
Net cash flow used in investing activities was $1,249.1 million in 2020, compared to $1,026.6 million in 2019. The primary use of cash in 2020 was for capital expenditures of $916.1 million and payments for acquisitions of $267.0 million, primarily related to the acquisitions of the Chulbatkan license area and a 70% interest in the Peak development project.
The primary use of cash in 2019 was for capital expenditures of $1,060.2 million, partially offset by net proceeds from the sale of long-term investments and other assets.
27
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
The following table presents a breakdown of capital expenditures(a) on a cash basis:
Years ended December 31, | ||||||||||||||||
(in millions) | 2020 | 2019 | Change | % Change(d) | ||||||||||||
Operating segments | ||||||||||||||||
Fort Knox | $ | 138.7 | $ | 135.4 | $ | 3.3 | 2 | % | ||||||||
Round Mountain | 159.1 | 221.4 | (62.3 | ) | (28 | %) | ||||||||||
Bald Mountain | 103.8 | 211.1 | (107.3 | ) | (51 | %) | ||||||||||
Paracatu | 152.3 | 107.7 | 44.6 | 41 | % | |||||||||||
Kupol(b) | 32.7 | 39.3 | (6.6 | ) | (17 | %) | ||||||||||
Tasiast | 224.8 | 301.1 | (76.3 | ) | (25 | %) | ||||||||||
Chirano | 27.2 | 18.7 | 8.5 | 45 | % | |||||||||||
Non-operating segment | ||||||||||||||||
Corporate and other(c) | 77.5 | 25.5 | 52.0 | nm | ||||||||||||
Total | $ | 916.1 | $ | 1,060.2 | $ | (144.1 | ) | (14 | %) |
(a) | “Capital expenditures” is as reported as “Additions to property, plant and equipment” on the condensed consolidated statement of cash flows which, starting in 2020 excludes, “Interest paid capitalized to property, plant and equipment”, now reported as a separate item on the consolidated statement of cash flows. |
(b) | Includes $2.3 million of capital expenditures at Dvoinoye during 2020 (2019 - $8.9 million). |
(c) | “Corporate and other” includes corporate and other non-operating assets (including Chulbatkan, Kettle River-Buckhorn, La Coipa, Lobo-Marte, Maricunga and Peak). |
(d) | “nm” means not meaningful. |
In 2020, capital expenditures decreased by $144.1 million, compared 2019, primarily a result of the completion of the Vantage Complex project at Bald Mountain and Phase W construction at Round Mountain in 2019 and less capital stripping at Tasiast in 2020 as a result of impacts of the global COVID-19 pandemic, partially offset by additional mining equipment purchased at Paracatu in 2020.
Financing Activities
2020 vs. 2019
Net cash flow used in financing activities was $67.7 million in 2020, compared to the net cash flow provided from financing activities of $25.1 million in 2019. The $100.0 million outstanding on the revolving credit facility as at December 31, 2019 was repaid in early February 2020. On March 20, 2020, the Company drew down $750.0 million from the $1.5 billion revolving credit facility as a precautionary measure to protect against economic and business uncertainties caused by the COVID-19 pandemic and repaid $250.0 million of the drawn amount on July 24, 2020 and the remaining $500.0 million balance on September 18, 2020. On April 9, 2020 the Company drew down $200.0 million from the $300.0 million Tasiast loan. Total interest paid was $111.0 million in 2020, of which $63.1 million was included in financing activities. The Company reinstated and declared dividends in September and November 2020, resulting in payments of $75.5 million in the fourth quarter of 2020.
In 2019, net cash flow provided from financing activities included a net drawdown of $100.0 million on the revolving credit facility. Total interest paid was $100.6 million in 2019, of which $55.6 million was included in financing activities. No dividends were paid in 2019.
28
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Balance Sheet
As at December 31, | ||||||||||||
(in millions) | 2020 | 2019 | 2018 | |||||||||
Cash and cash equivalents | $ | 1,210.9 | $ | 575.1 | $ | 349.0 | ||||||
Current assets | $ | 2,449.7 | $ | 1,824.7 | $ | 1,597.9 | ||||||
Total assets | $ | 10,933.2 | $ | 9,076.0 | $ | 8,063.8 | ||||||
Current liabilities, including current portion of long-term debt | $ | 1,348.4 | $ | 615.5 | $ | 612.4 | ||||||
Total long-term financial liabilities(a) | $ | 2,331.6 | $ | 2,714.9 | $ | 2,551.4 | ||||||
Total debt and credit facilities, including current portion | $ | 1,923.9 | $ | 1,837.4 | $ | 1,735.0 | ||||||
Total liabilities | $ | 4,270.2 | $ | 3,743.4 | $ | 3,536.5 | ||||||
Common shareholders’ equity | $ | 6,596.5 | $ | 5,318.5 | $ | 4,506.7 | ||||||
Non-controlling interests | $ | 66.5 | $ | 14.1 | $ | 20.6 | ||||||
Statistics | ||||||||||||
Working capital(b) | $ | 1,101.3 | $ | 1,209.2 | $ | 985.5 | ||||||
Working capital ratio(c) | 1.82:1 | 2.96:1 | 2.61:1 |
(a) | Includes long-term debt and credit facilities, provisions, and long-term lease liabilities. |
(b) | Calculated as current assets less current liabilities. |
(c) | Calculated as current assets divided by current liabilities. |
At December 31, 2020, Kinross had cash and cash equivalents of $1,210.9 million, an increase of $635.8 million from the balance as at December 31, 2019, primarily due to net operating cash inflows of $1,957.6 million and a $200.0 million drawdown on the Tasiast loan. These increases were partially offset by $267.0 million of payments for acquisitions made in 2020, primarily for the acquisitions of the Chulbatkan license area and a 70% interest in the Peak development project, total interest payments of $111.0 million, net repayments of $100.0 million on the revolving credit facility, and dividends paid of $75.5 million. Current assets increased to $2,449.7 million, from $1,824.7 million mainly due to the increase in cash and cash equivalents. Total assets increased by $1,857.2 million to $10,933.2 million, primarily due to increases in current assets, and in property, plant and equipment, primarily as a result of additions of $1,077.9 million, reversals of impairment charges of $689.0 million, acquisitions of $465.4 million, mainly related to the Chulbatkan license area and a 70% interest in the Peak development project, partially offset by depreciation, depletion and amortization of $970.2 million. Current liabilities increased by $732.9 million to $1,348.4 million, mainly due to the $499.7 million increase in the current portion of long-term debt reflecting the reclassification of the senior notes due in September 2021 and the $141.5 million deferred payment obligation related to the final installment of the purchase price of the Chulbatkan license area that was paid on January 15, 2021. Total liabilities increased by $526.8 million, mainly due to the $200.0 million drawdown on the Tasiast loan, increases in deferred tax liabilities, and the increase in deferred payment obligation, as noted above.
At December 31, 2019, Kinross had cash and cash equivalents of $575.1 million, an increase of $226.1 million from the balance as at December 31, 2018, primarily due to net operating cash inflows of $1,224.9 million and a net drawdown on the revolving credit facility of $100.0 million, partially offset by capital expenditures of $1,105.2 million. Current assets increased to $1,824.7 million, mainly due to the increase in cash and cash equivalents, partially offset by a decrease in current income tax recoverable. Total assets increased by $1,012.2 million to $9,076.0 million, due to the increases in property, plant and equipment and cash and cash equivalents, partially offset by the decreases in long-term investments and current income tax recoverable. Total liabilities were higher by $206.9 million, primarily due to an increase in long-term debt and credit facilities, primarily as a result of $100.0 million net drawdown on the revolving credit facility, as well as increases in deferred tax liabilities and the recognition of lease liabilities upon the Company’s adoption of IFRS 16 “Leases”.
As of February 9, 2021, there were 1,258.4 million common shares of the Company issued and outstanding. In addition, at the same date, the Company had 5.6 million share purchase options outstanding under its share option plan.
On February 10, 2021, the Board of Directors declared a dividend of $0.03 per common share payable on March 18, 2021 to shareholders of record on March 3, 2021.
29
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Financings and Credit Facilities
Senior notes
The Company’s $1,750.0 million of senior notes consist of $500.0 million principal amount of 5.125% notes due in September 2021, $500.0 million principal amount of 5.950% notes due 2024, $500.0 million principal amount of 4.50% notes due 2027 and $250.0 million principal amount of 6.875% notes due 2041.
The senior notes (collectively, the “notes”) pay interest semi-annually. Except as noted below, the notes are redeemable by the Company, in whole or part, for cash at any time prior to maturity, at a redemption price equal to the greater of 100% of the principal amount or the sum of the present value of the remaining scheduled principal and interest payments on the notes discounted at the applicable treasury rate, as defined in the indentures, plus a premium of between 45 and 50 basis points, plus accrued interest, if any. Within three months of maturity of the notes due in 2021, 2024 and 2027, and within six months of maturity of the notes due in 2041, the Company can only redeem the notes in whole at 100% of the principal amount plus accrued interest, if any. In addition, the Company is required to make an offer to repurchase the notes prior to maturity upon certain fundamental changes at a repurchase price equal to 101% of the principal amount of the notes plus accrued and unpaid interest to the repurchase date, if any.
Revolving credit facility
As at December 31, 2020, the Company had utilized $7.5 million (December 31, 2019 - $119.1 million) of its $1,500.0 million revolving credit facility, entirely for letters of credit.
In February 2020, the Company repaid the previously outstanding $100.0 million balance on the revolving credit facility. The Company drew down $750.0 million on March 20, 2020 as a precautionary measure to protect against economic and business uncertainties caused by the COVID-19 pandemic. The Company repaid $250.0 million of this drawn amount on July 24, 2020 and repaid the remaining $500.0 million balance on September 18, 2020.
On July 25, 2019, the Company amended its $1,500.0 million revolving credit facility to extend the maturity date by one year from August 10, 2023 to August 10, 2024.
Loan interest on the revolving credit facility is variable, set at LIBOR plus an interest rate margin which is dependent on the Company’s credit rating. Based on the Company’s credit rating at December 31, 2020, interest charges and fees are as follows:
Type of credit | |
Revolving credit facility | LIBOR plus 1.625% |
Letters of credit | 1.0833-1.625% |
Standby fee applicable to unused availability | 0.325% |
The revolving credit facility’s credit agreement contains various covenants including limits on indebtedness, asset sales and liens. The Company is in compliance with its financial covenant in the credit agreement at December 31, 2020.
The Company is monitoring the announced future LIBOR reference rate phase out and replacement, and will engage in discussions with applicable financial institutions to ensure a comparable replacement pricing mechanism is agreed to where LIBOR is required as a reference rate.
Tasiast loan
On December 16, 2019, the Company completed a definitive loan agreement for up to $300.0 million for Tasiast, with the first drawdown of $200.0 million received on April 9, 2020, and the remaining $100.0 million is available to be drawn up to March 2022.
The asset recourse loan has a term of eight years, maturing in December 2027, a floating interest rate of LIBOR plus a weighted average margin of 4.38% and a standby fee applicable to unused availability of 1.60%, with semi-annual interest payments to be made in June and December for the term of the loan, and first principal repayments due in June 2022.
As at December 31, 2020, the Company held $25.0 million in a separate bank account as required under the Tasiast loan agreement. This cash, which is subject to fluctuations over time depending on the next scheduled principal and interest payments, is required to remain in the bank account for the duration of the loan and is therefore recorded as restricted cash in other long-term assets.
30
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Other
The maturity date for the Company’s $300.0 million Letter of Credit guarantee facility with EDC was extended to June 30, 2022, effective July 1, 2020. As part of the EDC renewal, the facility was expanded to allow for use for other obligations beyond reclamation liabilities. Total fees related to letters of credit under this facility were 0.75% of the utilized amount. As at December 31, 2020, $228.9 million (December 31, 2019 - $227.8 million) was utilized under this facility.
In addition, at December 31, 2020, the Company had $175.6 million (December 31, 2019 - $184.7 million) in letters of credit and surety bonds outstanding in respect of its operations in Brazil, Mauritania, Ghana and Chile. These have been issued pursuant to arrangements with certain international banks and incur average fees of 0.74%.
As at December 31, 2020, $290.1 million (December 31, 2019 - $276.5 million) of surety bonds were outstanding with respect to Kinross’ assets in the United States. These surety bonds were issued pursuant to arrangements with international insurance companies and incur fees of 0.50%.
The following table outlines the credit facilities’ utilization and availability:
As at December 31, | ||||||||
(in millions) | 2020 | 2019 | ||||||
Utilization of revolving credit facility | $ | (7.5 | ) | $ | (119.1 | ) | ||
Utilization of EDC facility | (228.9 | ) | (227.8 | ) | ||||
Borrowings | $ | (236.4 | ) | $ | (346.9 | ) | ||
Available under revolving credit facility | $ | 1,492.5 | $ | 1,380.9 | ||||
Available under EDC credit facility | 71.1 | 72.2 | ||||||
Available credit | $ | 1,563.6 | $ | 1,453.1 |
Total debt of $1,923.9 million as at December 31, 2020 consists of $1,739.8 million related to the senior notes, and $184.1 million related to the Tasiast loan. The current portion of this debt as at December 31, 2020 is $499.7 million and relates to the Company’s 5.125% senior notes due in September 2021.
Liquidity Outlook
As at December 31, 2020, the Company has $500.0 million in scheduled debt repayments due in September 2021.
We believe that the Company’s existing cash and cash equivalents balance of $1,210.9 million, available credit of $1,563.6 million, and expected operating cash flows based on current assumptions (noted in Section 3 - Outlook) will be sufficient to fund operations, our forecasted exploration and capital expenditures (noted in Section 3 - Outlook), debt repayments noted above, reclamation and remediation obligations, and lease liabilities, currently estimated for the next 12 months. All of Kinross’ mines continued production during 2020, as the Company’s ongoing response to the COVID-19 pandemic continued to maintain the safety of its global workforce and host communities while mitigating operational impacts. However, COVID-19 did partially affect overall performance, productivity rates and costs, mainly as a result of global travel constraints and the implementation of rigorous safety protocols and measures at all mines and projects. Prior to any capital investments, consideration is given to the cost and availability of various sources of capital resources.
With respect to longer term capital expenditure funding requirements, the Company continues to have discussions with lending institutions that have been active in the jurisdictions in which the Company’s development projects are located. Some of the jurisdictions in which the Company operates have seen the participation of additional lenders that include export credit agencies, development banks and multi-lateral agencies. The Company believes the capital from these institutions combined with traditional bank loans and capital available through debt capital market transactions may fund a portion of the Company’s longer term capital expenditure requirements. Another possible source of capital could be proceeds from the sale of non-core assets. These capital sources together with operating cash flow and the Company’s active management of its operations and development activities will enable the Company to maintain an appropriate overall liquidity position.
31
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Contractual Obligations and Commitments
The
following table summarizes our long-term financial liabilities and off-balance sheet contractual obligations as at December 31,
2020:
(in millions) | Total | 2021 | 2022-2025 | 2026 & thereafter | ||||||||||||
Long-term debt and credit facilities(a) | $ | 1,950.0 | $ | 500.0 | $ | 612.0 | $ | 838.0 | ||||||||
Lease liability obligations | 88.7 | 28.6 | 45.8 | 14.3 | ||||||||||||
Operating lease obligations | 46.7 | 5.4 | 19.5 | 21.8 | ||||||||||||
Purchase obligations(b) | 992.6 | 719.2 | 261.8 | 11.6 | ||||||||||||
Reclamation and remediation obligations | 1,071.4 | 59.4 | 298.8 | 713.2 | ||||||||||||
Interest and other fees | 726.9 | 115.5 | 283.1 | 328.3 | ||||||||||||
Total | $ | 4,876.3 | $ | 1,428.1 | $ | 1,521.0 | $ | 1,927.2 |
(a) | Debt repayments are based on amounts due pursuant to the terms of existing indebtedness. |
(b) | Includes both capital and operating commitments, of which $153.1 million relates to commitments for capital expenditures. |
The Company manages its exposure to fluctuations in input commodity prices, currency exchange rates and interest rates, by entering into derivative financial instruments from time to time, in accordance with the Company’s risk management policy.
The following table provides a summary of derivative contracts outstanding at December 31, 2020 and their respective maturities:
Foreign currency | 2021 | 2022 | 2023 | |||||||||
Brazilian real zero cost collars (in millions of U.S. dollars) | $ | 103.6 | $ | 64.8 | $ | 43.2 | ||||||
Average put strike (Brazilian real) | 4.35 | 4.62 | 5.00 | |||||||||
Average call strike (Brazilian real) | 5.39 | 6.56 | 7.26 | |||||||||
Canadian dollar forward buy contracts (in millions of U.S. dollars) | $ | 25.2 | $ | 12.0 | $ | - | ||||||
Average rate (Canadian dollar) | 1.37 | 1.40 | - | |||||||||
Russian rouble zero cost collars (in millions of U.S. dollars) | $ | 51.6 | $ | 36.0 | $ | 20.4 | ||||||
Average put strike (Russian rouble) | 70.3 | 75.0 | 77.0 | |||||||||
Average call strike (Russian rouble) | 87.8 | 100.6 | 97.8 | |||||||||
Energy | ||||||||||||
WTI oil swap contracts (barrels) | 1,054,400 | 822,600 | 565,200 | |||||||||
Average price | $ | 47.52 | $ | 42.14 | $ | 39.58 |
The Company enters into total return swaps (“TRS”) as economic hedges of the Company’s deferred share units and cash-settled restricted share units. Hedge accounting was not applied to the TRSs. At December 31, 2020, 5,695,000 TRS units were outstanding.
In order to manage short-term metal price risk, the Company may enter into derivative contracts in relation to metal sales that it believes are highly likely to occur within a given quarter. No such contracts were outstanding at December 31, 2020 or December 31, 2019.
Fair values of derivative instruments
The fair values of derivative instruments are noted in the table below:
As at December 31, | ||||||||
(in millions) | 2020 | 2019 | ||||||
Asset (liability) | ||||||||
Foreign currency forward and collar contracts | $ | (4.3 | ) | $ | 3.9 | |||
Energy swap contracts | 7.6 | 4.0 | ||||||
Total return swap contracts | (11.0 | ) | (1.3 | ) | ||||
$ | (7.7 | ) | $ | 6.6 |
32
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Other legal matters
The Company is from time to time involved in legal proceedings, arising in the ordinary course of its business. Typically, the amount of ultimate liability with respect to these actions will not, in the opinion of management, materially affect Kinross’ financial position, results of operations or cash flows.
Maricunga regulatory proceedings
In May 2015, the Chile environmental enforcement authority (the “SMA”) commenced an administrative proceeding against Compania Minera Maricunga (“CMM”) alleging that pumping of groundwater to support the Maricunga operation had impacted area wetlands and, on March 18, 2016, issued a resolution alleging that CMM’s pumping was impacting the “Valle Ancho” wetland. Beginning in May 2016, the SMA issued a series of resolutions ordering CMM to temporarily curtail pumping from its wells.
In response, CMM suspended mining and crushing activities and reduced water consumption to minimal levels. CMM contested these resolutions, but its efforts were unsuccessful and, except for a short period of time in July 2016, CMM’s operations have remained suspended. On June 24, 2016, the SMA amended its initial sanction (the “Amended Sanction”) and effectively required CMM to cease operations and close the mine, with water use from its wells curtailed to minimal levels. On July 9, 2016, CMM appealed the sanctions and, on August 30, 2016, submitted a request to the Environmental Tribunal that it issue an injunction suspending the effectiveness of the Amended Sanction pending a final decision on the merits of CMM’s appeal. On September 16, 2016, the Environmental Tribunal rejected CMM’s injunction request and on August 7, 2017, upheld the SMA’s Amended Sanction and curtailment orders on procedural grounds. On October 9, 2018, the Supreme Court affirmed the Environmental Tribunal’s ruling on procedural grounds and dismissed CMM’s appeal.
On June 2, 2016, CMM was served with two separate lawsuits filed by the Chilean State Defense Counsel (“CDE”). Both lawsuits, filed with the Environmental Tribunal, alleged that pumping from the Maricunga groundwater wells caused environmental damage to area wetlands. One action relates to the “Pantanillo” wetland and the other action relates to the Valle Ancho wetland (described above). Hearings on the CDE lawsuits took place in 2016 and 2017, and on November 23, 2018, the Tribunal ruled in favor of CMM in the Pantanillo case and against CMM in the Valle Ancho case. In the Valle Ancho case, the Tribunal is requiring CMM to, among other things, submit a restoration plan to the SMA for approval. CMM has appealed the Valle Ancho ruling to the Supreme Court. The CDE has appealed to the Supreme Court in both cases and is asserting in the Valle Ancho matter that the Environmental Tribunal erred by not ordering a complete shutdown of Maricunga’s groundwater wells. The timing of any rulings by the Supreme Court on the parties’ respective appeals remains uncertain.
Sunnyside litigation
The Sunnyside Mine is an inactive mine situated in the so-called Bonita Peak Mining District (“District”) near Silverton, Colorado. A subsidiary of Kinross, Sunnyside Gold Corporation (“SGC”), was involved in operations at the mine from 1985 through 1991 and subsequently conducted various reclamation and closure activities at the mine and in the surrounding area. On August 5, 2015, while working in another mine in the District known as the Gold King, the Environmental Protection Agency (the “EPA”) caused a release of approximately three million gallons of contaminated water into a tributary of the Animas River. In the third quarter of 2016, the EPA listed the District, including areas impacted by SGC’s operations and closure activities, on the National Priorities List pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”). SGC challenged portions of the CERCLA listing in the United States Court of Appeals for District of Columbia Circuit, but SGC’s petition for review was denied, as was its subsequent petition for rehearing. The EPA has notified SGC that SGC is a potentially responsible party under CERCLA and may be jointly and severally liable for cleanup of the District or cleanup costs incurred by the EPA in the District. The EPA may in the future provide similar notification to Kinross, as the EPA contends that Kinross has liability in the District under CERCLA and other statutes. In the second quarter of 2018, the EPA issued to SGC a modified Unilateral Administrative Order for Remedial Investigation (“the Order”). In the second quarter of 2019, pursuant to the original Order, the EPA issued to SGC a Modified Statement of Work, Work Plan and Field Sampling Plan (together with the Order, the “Modified Order”). The Modified Order significantly altered and expanded upon the work set out under the original Order. In the third quarter of 2019, after consulting with external legal counsel, SGC provided notice to the EPA that the Modified Order is legally indefensible, does not address any imminent hazard and SGC does not intend to comply with the Modified Order. On July 26, 2019, the EPA acknowledged receipt of SGC’s notice of its intention not to comply with the Modified Order. The EPA indicated that it would undertake to complete the work ordered under the Modified Order, and has subsequently completed some of that work. While SGC believes that it has good cause not to comply with the Modified Order, failure to comply with the Modified Order may subject SGC to significant penalties, damages and/or potential reimbursement of the cost of remediation work undertaken by the EPA.
In the second quarter of 2016, the State of New Mexico filed a complaint naming the EPA, SGC, Kinross and others alleging violations of CERCLA, the Resource Conservation and Recovery Act (“RCRA”), and the Clean Water Act (“CWA”) and claiming negligence, gross negligence, public nuisance and trespass. New Mexico subsequently dropped the RCRA claim. The New Mexico complaint seeks cost recovery, damages, injunctive relief, and attorney’s fees. In the third quarter of 2016, the Navajo Nation initiated litigation against the EPA, SGC and Kinross, alleging entitlement to cost recovery under CERCLA for past and future costs incurred, negligence, gross negligence, trespass, and public and private nuisance, and seeking reimbursement of past and future costs, compensatory, consequential and punitive damages, injunctive relief and attorneys’ fees. In the third quarter of 2017, the State of Utah filed a complaint, which has been amended to name the EPA, SGC, Kinross and others, alleging negligence, gross negligence, public nuisance, trespass, and violation of the Utah Water Quality Act and the Utah Solid and Hazardous Waste Act.
33
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
The Utah complaint seeks cost recovery, compensatory, consequential and punitive damages, penalties, disgorgement of profits, declaratory, injunctive and other relief under CERCLA, attorney’s fees, and costs. In the third quarter of 2018, numerous members of the Navajo Nation initiated litigation against the EPA, SGC and Kinross, alleging negligence, gross negligence and injury, including great spiritual and emotional distress. The complaint of the Navajo members seeks compensatory and consequential damages, interest, punitive damages, attorneys’ fees and expenses. The New Mexico, Navajo Nation, Utah and Navajo member cases have been centralized for coordinated or consolidated pretrial proceedings in the United States District Court for the District of New Mexico. In the third quarter of 2019 (i) the EPA filed a cross claim against SGC and Kinross seeking contribution, including contribution under CERCLA, for any damages awarded to New Mexico, the Navajo Nation, or Utah as well as cost-recovery for the EPA’s response costs and remedial expenses incurred by the EPA in the District pursuant to CERCLA or other laws; (ii) Environmental Restoration, LLC, an EPA contractor, filed a cross claim against SGC seeking contribution under CERCLA and attorneys’ fees and expenses; and (iii) SGC filed a cross claim against the United States and certain contractors of the United States seeking contribution and equitable indemnity and making a due process claim against the United States. In the first quarter of 2020, the Court granted the United States judgment on SGC’s due process cross claim and dismissed it.
In the fourth quarter of 2020, SGC and Kinross reached settlements with the Navajo Nation and the State of New Mexico, which settlements will result in a dismissal with prejudice of all claims by these parties against SGC and Kinross. Although these settlements are not subject to entry of a Consent Decree approving the settlements, a Consent Decree approving the settlements will be lodged with the United States District Court for the District of New Mexico for public notice and comment. Upon expiration of the comment period, the parties will move the Court for entry of the Consent Decree.
Kettle River-Buckhorn regulatory proceedings
Crown Resources Corporation (“Crown”) is the holder of a waste discharge permit (the “Permit”) in respect of the Buckhorn Mine, which authorizes and regulates mine-related discharges from the mine and its water treatment plant. On February 27, 2014, the Washington Department of Ecology (the “WDOE”) renewed the Buckhorn Mine’s National Pollution Discharge Elimination System Permit (the “Renewed Permit”), with an effective date of March 1, 2014. The Renewed Permit contained conditions that were more restrictive than the original discharge permit. In addition, the Crown felt that the Renewed Permit was internally inconsistent, technically unworkable and inconsistent with existing agreements in place with the WDOE, including a settlement agreement previously entered into by Crown and the WDOE in June 2013 (the “Settlement Agreement”). On February 28, 2014, Crown filed an appeal of the Renewed Permit with the Washington Pollution Control Hearings Board (“PCHB”). In addition, on January 15, 2015, Crown filed a lawsuit against the WDOE in Ferry County Superior Court, Washington, claiming that the WDOE breached the Settlement Agreement by including various unworkable compliance terms in the Renewed Permit (the “Crown Action”). On July 30, 2015, the PCHB upheld the Renewed Permit. Crown filed a Petition for Review in Ferry County Superior Court, Washington, on August 27, 2015, seeking to have the PCHB decision overturned. On March 13, 2017, the Ferry County Superior Court upheld the PCHB’s decision. On April 12, 2017, Crown appealed the Ferry County Superior Court’s ruling to the State of Washington Court of Appeals. On October 8, 2019, the Court of Appeals affirmed the Superior Court’s decision and the PCHB’s decision. On December 31, 2019, the Court of Appeals denied Crown’s Motion for Reconsideration and to Supplement the Record. Crown did not petition the Washington Supreme Court for review and, as a result, appeal of this matter has been exhausted.
On July 19, 2016, the WDOE issued an Administrative Order (“AO”) to Crown and Kinross Gold Corporation asserting that the companies had exceeded the discharge limits in the Renewed Permit a total of 931 times and has also failed to maintain the capture zone required under the Renewed Permit. The AO orders the companies to develop an action plan to capture and treat water escaping the capture zone, undertake various investigations and studies, revise its Adaptive Management Plan, and report findings by various deadlines in the fourth quarter 2016. The companies timely made the required submittals. On August 17, 2016, the companies filed an appeal of the AO with the PCHB (the “AO Appeal”). Because the AO Appeal raises many of the same issues that have been raised in the Appeal and Crown Action, the companies and WDOE agreed to stay the AO Appeal indefinitely to allow these matters to be resolved. The PCHB granted the request for stay on August 26, 2016, which stay has been subsequently extended. On June 2, 2020, the PCHB dismissed the appeal based on a Joint Stipulation of Voluntary Dismissal filed by the parties. The basis for the dismissal was the exhaustion of appeals as to the Renewed Permit and Crown’s satisfaction of the AO.
34
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
On November 30, 2017, the WDOE issued a Notice of Violation (“NOV”) to Crown and Kinross asserting that the companies had exceeded the discharge limits in the Permit a total of 113 times during the third quarter of 2017 and also failed to maintain the capture zone as required under the Permit. The NOV ordered the companies to file a report with WDOE identifying the steps which have been and are being taken to “control such waste or pollution or otherwise comply with this determination,” which report was timely filed. Following its review of this report, WDOE may issue an AO or other directives to the Company. The NOV is not immediately appealable, but any subsequent AO or other directive relating to the NOV may be appealed, as appropriate.
Each calendar quarter beginning April 2018, the WDOE has issued a NOV to Crown and, on one occasion, also to Kinross, asserting that the companies had exceeded the discharge limits in the Permit and have failed to maintain the capture zone as required under the Permit. The most recent NOV, dated January 29, 2021, asserted 144 alleged violations had occurred in the fourth quarter of 2020.
The NOVs order the companies to file a report with WDOE within 30 days identifying the steps which have been and are being taken to “control such waste or pollution or otherwise comply with this determination,” which reports have been, or will be, timely filed. Following its review of these reports, WDOE may issue an AO or other directives to the Company. The NOV is not immediately appealable, but any subsequent AO or other directive relating to the NOV may be appealed, as appropriate.
On April 10, 2020, the Okanogan Highlands Alliance (“OHA”) filed a citizen’s suit against Crown and Kinross Gold U.S.A., Inc. (“KGUSA”) under the Clean Water Act (“CWA”) for alleged failure adequately to capture and treat mine-impacted groundwater and surface water at the site in violation of the Permit and renewed Permit. The suit seeks injunctive relief and civil penalties in the amount of up to $55,800 per day per violation. On May 7, 2020, the Attorney General for the State of Washington filed suit against Crown and KGUSA under the CWA and the state Water Pollution Control Act alleging the same alleged permit violations and seeking similar relief as OHA. These lawsuits have been consolidated and remain pending.
7. | SUMMARY OF QUARTERLY INFORMATION |
2020 | 2019 | |||||||||||||||||||||||||||||||
(in millions, except per share amounts) | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||||||||
Metal sales | $ | 1,195.1 | $ | 1,131.3 | $ | 1,007.2 | $ | 879.8 | $ | 996.2 | $ | 877.1 | $ | 837.8 | $ | 786.2 | ||||||||||||||||
Net earnings attributable to common shareholders | $ | 783.3 | $ | 240.7 | $ | 195.7 | $ | 122.7 | $ | 521.5 | $ | 60.9 | $ | 71.5 | $ | 64.7 | ||||||||||||||||
Basic earnings per share attributable to common shareholders | $ | 0.62 | $ | 0.19 | $ | 0.16 | $ | 0.10 | $ | 0.41 | $ | 0.05 | $ | 0.06 | $ | 0.05 | ||||||||||||||||
Diluted earnings per share attributable to common shareholders | $ | 0.62 | $ | 0.19 | $ | 0.15 | $ | 0.10 | $ | 0.41 | $ | 0.05 | $ | 0.06 | $ | 0.05 | ||||||||||||||||
Net cash flow provided from operating activities | $ | 681.1 | $ | 544.1 | $ | 432.8 | $ | 299.6 | $ | 408.6 | $ | 231.7 | $ | 333.0 | $ | 251.6 |
The Company’s results over the past several quarters have been driven primarily by fluctuations in the gold price, input costs and changes in gold equivalent ounces sold. Fluctuations in the silver price and foreign exchange rates have also affected results.
During the fourth quarter of 2020, revenue increased to $1,195.1 million on total gold equivalent ounces sold of 637,169, compared to $996.2 million on sales of 670,917 total gold equivalent ounces during the fourth quarter of 2019. The average gold price realized in the fourth quarter of 2020 was $1,875 per ounce compared to $1,485 per ounce in 2019.
Production cost of sales in the fourth quarter of 2020 decreased by 13% compared to the same period in 2019. Lower costs at Paracatu mainly due to favourable foreign exchange movements and at Round Mountain due to lower gold equivalent ounces sold. This decrease was partially offset by higher costs at Tasiast due to an increase in gold equivalent ounces sold.
Depreciation, depletion and amortization varied between each of the above quarters largely due to changes in gold equivalent ounces sold and depreciable asset bases. In addition, changes in mineral reserves as well as reversals of impairment charges during some of these periods affected depreciation, depletion and amortization for quarters in subsequent periods.
In the fourth quarter of 2020, the Company recorded net, after-tax, impairment reversals of $564.5 million related to property, plant and equipment at Tasiast, Chirano and Lobo-Marte, and net, after-tax, impairment charges of $32.5 million relating to certain supplies inventories at Kupol and Tasiast. In the second quarter of 2020, the Company recorded an impairment reversal of $48.3 million related to property, plant and equipment at Lobo-Marte. In the fourth quarter of 2019, the Company recorded net, after-tax, impairment reversals of $293.6 million related to impairment reversals of property, plant and equipment at Paracatu and Tasiast.
35
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Net operating cash flows increased to $681.1 million in the fourth quarter of 2020, compared to $408.6 million in the same period in 2019, primarily due to an increase in margins.
On December 2, 2019, the Company entered into an agreement with Maverix to sell a royalty portfolio of precious metals royalties. On December 19, 2019, the Company completed the sale for total consideration of $73.9 million, including $25.0 million in cash and approximately 11.2 million common shares, representing 9.4% of the issued and outstanding common shares, of Maverix.
On July 31, 2019, the Company announced an agreement to acquire the Chulbatkan license located in Khabarovsk Krai, Far East Russia, from N-Mining, for total fixed consideration of $283.0 million. On January 16, 2020, the Company closed the acquisition of this Chulbatkan license area. In accordance with an amended acquisition agreement, the first installment of $141.5 million, representing 50% of the $283.0 million fixed purchase price, plus ordinary course net working capital adjustments of $3.1 million, were paid in cash. On January 15, 2021, in accordance with a further amended acquisition agreement, the Company paid the final installment of $141.5 million in cash.
On September 30, 2020, the Company acquired a 70% interest in the Peak development project in Alaska from Royal Gold and CORE Alaska for a total cash consideration of $93.7 million.
8. | DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL REPORTING |
Pursuant to regulations adopted by the U.S. Securities and Exchange Commission, under the U.S. Sarbanes-Oxley Act of 2002 (“SOX”) and those of the Canadian Securities Administrators, Kinross’ management evaluates the effectiveness of the design and operation of the Company’s disclosure controls and procedures, and internal control over financial reporting. This evaluation is done under the supervision of, and with the participation of, the Chief Executive Officer and the Chief Financial Officer.
As of the end of the period covered by this MD&A and the accompanying financial statements, Kinross’ management evaluated the effectiveness of its internal control over financial reporting. In making this assessment, management used the criteria specified in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that Kinross’ internal control over financial reporting was effective as at December 31, 2020.
Limitations of Controls and Procedures
Kinross’ management, including the Chief Executive Officer and the Chief Financial Officer, believes that any disclosure controls and procedures and internal control over financial reporting, no matter how well designed and operated, can have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance that the objectives of the control system are met.
9. | CRITICAL ACCOUNTING POLICIES, ESTIMATES AND ACCOUNTING CHANGES |
Critical Accounting Policies and Estimates
Critical accounting policies and estimates are disclosed in Note 5 of the audited consolidated financial statements.
Accounting Changes
Effective
January 1, 2020, the Company adopted amendments to IFRS 3 “Business Combinations”, which amended the definition of
a business. Details of this accounting change are disclosed in Note 4 of the audited consolidated financial statements.
36
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
10. | RISK ANALYSIS |
The business of Kinross contains significant risk due to the nature of mining, exploration, and development activities. Certain risk factors, including but not limited to those listed below, are similar across the mining industry while others are specific to Kinross. The risk factors below may include details of how Kinross seeks to mitigate these risks where possible. For additional discussion of risk factors please refer to the Company’s Annual Information Form for the year ended December 31, 2019, which is available on the Company’s website www.kinross.com and on www.sedar.com or is available upon request from the Company, and to the Company’s Annual Information Form for the year ended December 31, 2020, which will be filed on SEDAR on or about March 31, 2021.
Gold Price and Silver Price
The profitability of Kinross’ operations is significantly affected by changes in the market price of gold and silver. Gold and silver prices fluctuate on a daily basis and are affected by numerous factors beyond the control of Kinross. The price of gold and/or silver can be subject to volatile price movements and future serious price declines could cause continued commercial production to be impractical. Depending on the prices of gold and silver, cash flow from mining operations may not be sufficient to cover costs of production and capital expenditures. If, as a result of a decline in gold and/or silver prices, revenues from metal sales were to fall below cash operating costs, production may be discontinued. The factors that may affect the price of gold and silver include industry factors such as: industrial and jewelry demand; the level of demand for the metal as an investment; central bank lending, sales and purchases of the metal; speculative trading; and costs of and levels of global production by producers of the metal. Gold and silver prices may also be affected by macroeconomic factors, including: expectations of the future rate of inflation; the strength of, and confidence in, the U.S. dollar, the currency in which the price of the metal is generally quoted, and other currencies; interest rates; and global or regional political or economic uncertainties.
In 2020, the Company’s average realized gold price increased to $1,774 per ounce from $1,392 per ounce in 2019. If the world market price of gold and/or silver were to drop and the prices realized by Kinross on gold and/or silver sales were to decrease substantially and remain at such a level for any substantial period, Kinross’ profitability and cash flow would be negatively affected. In such circumstances, Kinross may determine that it is not economically feasible to continue commercial production at some or all of its operations or the development of some or all of its current projects, which could have an adverse impact on Kinross’ financial performance and results of operations, possibly material. Kinross may curtail or suspend some or all of its exploration activities, with the result that depleted mineral reserves are not replaced. In addition, the market value of Kinross’ gold and/or silver inventory may be reduced and existing mineral reserves and resource estimates may be reduced to the extent that ore cannot be mined and processed economically at the prevailing prices.
Nature of Mineral Exploration and Mining
The exploration and development of mineral deposits involves significant financial and other risks over an extended period of time which may not be eliminated even with careful evaluation, experience and knowledge. While discovery of gold-bearing geological structures may result in substantial rewards, few properties explored are ultimately developed into producing mines. Major expenditures are required to establish reserves by drilling and to construct mining and processing facilities at a site. It is impossible to ensure that the current or proposed exploration programs on properties in which Kinross has an interest will result in profitable commercial mining operations.
The operations of Kinross are subject to the hazards and risks normally incidental to exploration, development and production activities of precious metals mining properties, any of which could result in damage to life or property, or environmental damage, and possible legal liability for such damage. The activities of Kinross may be subject to prolonged disruptions due to weather conditions depending on the location of operations in which it has interests. Hazards and risks, such as unusual or unexpected formations, faults and other geologic structures, rock bursts, pressures, cave-ins, flooding, pit wall failures, tailings dam failures, ground and slope failures or other conditions, may be encountered in the drilling, processing and removal of material. While Kinross may obtain insurance against certain risks, potential claims could exceed policy limits or could be excluded from coverage. There are also risks against which Kinross cannot or may elect not to insure. The potential costs which could be associated with any liabilities not covered by insurance or in excess of insurance coverage or compliance with applicable laws and regulations may cause substantial delays and require significant capital outlays, adversely affecting the future earnings and competitive position of Kinross and, potentially, its financial viability.
Whether a mineral deposit will be commercially viable depends on a number of factors, some of which include the particular attributes of the deposit, such as its size and grade, costs and efficiency of the recovery methods that can be employed, proximity to infrastructure, financing costs and governmental regulations, including regulations relating to prices, taxes, royalties, infrastructure, land and water use, importing and exporting of gold and environmental protection. The effect of these factors cannot be accurately predicted, but the combination of these factors may result in Kinross not receiving an adequate return on its invested capital.
37
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Kinross mitigates the likelihood and potential severity of these mining risks in its day-to-day operations through the application of high operating standards. In addition, Kinross reviews its insurance coverage at least annually to ensure that appropriate and cost-effective coverage is obtained.
Environmental Impact and Related Regulatory Risk
Mining, like many other extractive natural resource industries, is subject to potential risks and liabilities associated with the effects on the environment resulting from mineral exploration and production. The Company may be held responsible for the costs of addressing contamination at, or arising from, current or former activities. Environmental liability may result from activities conducted by others prior to the ownership of a property by Kinross. In addition, Kinross may be liable to third parties for exposure to hazardous materials or substances, or may otherwise be involved in civil litigation related to environmental claims. The costs associated with such responsibilities and liabilities may be substantial. The payment of such liabilities would reduce funds otherwise available and could have a material adverse effect on Kinross. Should Kinross be unable to fully fund the cost of remedying an environmental problem, Kinross might be required to suspend operations or enter into interim compliance measures pending completion of the required remedy, which could have a material adverse effect on the operations and business of Kinross.
Kinross’ operations and exploration activities are subject to various laws and regulations governing the protection of the environment, exploration, development, production, imports/exports, taxes, labour standards, occupational health, waste disposal, toxic substances, mine closure, mine safety, public health and other matters. The legal and political circumstances outside of North America cause these risks to be different from, and in many cases, greater than, comparable risks associated with operations within North America. New laws and regulations, amendments to existing laws and regulations, interpretations by Governments, or more stringent enforcement of existing laws and regulations could have a material adverse impact on Kinross, increase costs, cause a reduction in levels of production and/or delay or prevent the development of new mining properties. Compliance with these laws and regulations is part of the business and requires significant expenditures. Changes in laws and regulations, interpretations or enforcement including those pertaining to taxes, the rights of leaseholders or the payment of royalties, net profit interest or similar obligations, could adversely affect Kinross’ operations or substantially increase the costs associated with those operations. Kinross is unable to predict what new legislation or revisions may be proposed that might affect its business or when any such proposals, if enacted, might become effective.
In light of tailings dam incidents in Brazil in 2015 and 2019, federal lawmakers have proposed legislation aimed at addressing risks of future tailings dam failures. While there are a variety of measures under consideration, recently approved legislation at the federal and state level includes the potential increase of financial assurance requirements, increased fines and penalties for environmental damages and/or require the Company to further address risks to residents downstream. While regulations are pending on these issues, these laws and regulations may adversely affect Kinross’ operations in Brazil or increase the costs associated with those operations.
Certain of the Company’s operations are the subject of ongoing regulatory review and evaluation by governmental authorities. These may result in additional regulatory actions against the affected operating subsidiaries, and may have an adverse effect on the Company’s future operations and/or financial condition. For further details refer to Section 6 - Other legal matters.
Reclamation Costs and Financial Assurance
In certain jurisdictions, the Company is required, or may be required in the future, to provide financial assurances covering reclamation costs, cleanup costs or other actual or potential liabilities arising out of its activities or ownership. These costs and liabilities may be significant and may exceed the provisions the Company has made in respect of these costs and liabilities. In some jurisdictions bonds, letters of credit or other forms of financial assurance are required, or may be required in the future, as security for these costs and liabilities, such as the financial assurances contemplated in Brazil under proposed tailing dam legislation. The amount and nature of financial assurance are dependent upon a number of factors, including the Company’s financial condition, cost estimates and thresholds set by applicable governments or legislation. Kinross may be required to replace or supplement existing financial assurances, or source new financial assurances with more expensive forms, which might include cash deposits, which would reduce its cash available for operations and financing activities. There can be no guarantee that Kinross will be able to maintain or add to its current level of financial assurance or meet the requirements set by regulatory authorities in the future. These new requirements may include, but are not limited to, financial assurances intended to cover potential environmental cleanup costs or potential liabilities associated with the Company’s mine sites, including its tailings facilities and other infrastructure. To the extent that Kinross is or becomes unable to post and maintain sufficient financial assurance covering these requirements, it could potentially result in closure of one or more of the Company’s operations, which could have a material adverse effect on the financial condition of the Company.
38
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Outbreak of Infectious Disease or Pandemic
An outbreak of infectious disease, pandemic or a similar public health threat, such as the COVID-19 pandemic, and the response thereto, could adversely impact the Company, both operationally and financially. The global response to the COVID-19 outbreak has resulted in, among other things, border closures, severe travel restrictions and fluctuations in financial and commodity markets. Additional measures may be implemented by one or more governments around the world in jurisdictions where the Company operates. Labour shortages due to illness, Company or government imposed isolation programs, or restrictions on the movement of personnel or possible supply chain disruptions could result in a reduction or interruption of the Company’s operations, including mine shutdowns or suspensions. The inability to transport or refine and process the Company’s products could have a material adverse effect on the Company’s future cash flows, earnings, results of operations and financial condition. While the Company’s operations have not been materially impacted to date, there can be no assurance that Kinross will remain unaffected by the current COVID-19 crisis or potential future health crises. The extent to which COVID-19 and any other pandemic or public health crisis impacts our business, affairs, operations, financial condition, liquidity, availability of credit and results of operations will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information which may emerge concerning the severity of and the actions required to contain the COVID-19 or remedy its impact, among others.
Internal Controls
Kinross has invested resources to document and assess its system of internal control over financial reporting and undertakes continuous evaluation of such internal controls. Internal control over financial reporting are procedures designed to provide reasonable assurance that transactions are properly authorized, assets are safeguarded against unauthorized or improper use, and transactions are properly recorded and reported. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, safeguards with respect to the reliability of financial reporting and financial statement preparation.
Kinross is required to satisfy the requirement of Section 404 of SOX, which requires an annual assessment by management of the effectiveness of Kinross’ internal control over financial reporting and an attestation report by Kinross’ independent auditors addressing the operating effectiveness of Kinross’ internal control over financial reporting.
If Kinross fails to maintain the adequacy of its internal control over financial reporting, as such standards are modified, supplemented, or amended from time to time, Kinross may not be able to ensure that it can conclude on an ongoing basis that it has effective internal control over financial reporting in accordance with SOX. Kinross’ failure to satisfy SOX requirements on an ongoing, timely basis could result in the loss of investor confidence in the reliability of its financial statements, which in turn could harm Kinross’ business and negatively impact the trading price of its common shares. In addition, any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm Kinross’ operating results or cause it to fail to meet its reporting obligations.
Although Kinross is committed to ensure ongoing compliance, Kinross cannot be certain that it will be successful in complying with SOX.
Indebtedness and an Inability to Satisfy Repayment Obligations
Although Kinross has been successful in repaying debt historically, there can be no assurance that it can continue to do so. Kinross’ level of indebtedness could have important and potentially adverse consequences for its operations and the value of its common shares including: (a) limiting Kinross’ ability to borrow additional amounts for working capital, capital expenditures, debt service requirements, execution of Kinross’ growth strategy or other purposes; (b) limiting Kinross’ ability to use operating cash flow in other areas because of its obligations to service debt; (c) increasing Kinross’ vulnerability to general adverse economic and industry conditions, including increases in interest rates; (d) limiting Kinross’ ability to capitalize on business opportunities and to react to competitive pressures and adverse changes in government regulation; and (e) limiting Kinross’ ability or increasing the costs to refinance indebtedness.
Kinross expects to obtain the funds to pay its expenses and to pay principal and interest on its debt by utilizing cash flow from operations. Kinross’ ability to meet these payment obligations will depend on its future financial performance, which will be affected by financial, business, economic, legal and other factors. Kinross will not be able to control many of these factors, such as economic conditions in the markets in which it operates. Kinross cannot be certain that its future cash flow from operations will be sufficient to allow it to pay principal and interest on Kinross’ debt and meet its other obligations. If cash flow from operations is insufficient or if there is a contravention of its debt covenant(s), Kinross may be required to refinance all or part of its existing debt, sell assets, borrow more money or issue additional equity. There can be no assurance that Kinross will be able to refinance all or part of its existing debt on terms that are commercially reasonable.
39
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Mineral Reserve and Mineral Resource Estimates
Mineral reserve and mineral resource figures are estimates, and no assurance can be given that the anticipated tonnages and grades will be achieved or that the indicated level of recovery will be realized. Market fluctuations in metal prices may render the mining of mineral reserves and mineral resources uneconomical and require Kinross to take a write-down of an asset or to discontinue development or production. Moreover, short-term operating factors relating to the mineral reserves, such as the need for orderly development of the ore body or the processing of new or different ore grades, may cause a mining operation to be unprofitable in any particular accounting period.
Proven and probable mineral reserves at Kinross’ mines and development projects were estimated as of December 31, 2020, based upon an assumed gold price of $1,200 per ounce.
Prolonged declines in the market price of gold below this level may render mineral reserves containing relatively lower grades of gold mineralization uneconomic to exploit and could materially reduce Kinross’ mineral reserve estimates. In addition, changes in legislation, permitting or title over land or mineral interests may result in mineral reserves or mineral resources being reclassified or ceasing to meet the definition of mineral reserve or mineral resource. Should such reductions occur, material write-downs of Kinross’ investments in mining properties or the discontinuation of development or production might be required, and there could be material delays in the development of new projects and reduced income and cash flow.
Mineral resources that are not mineral reserves do not have demonstrated economic viability. Due to the uncertainty of measured, indicated or inferred mineral resources, these mineral resources may never be upgraded to proven and probable mineral reserves. Kinross’s mineral reserve and resource estimates have been prepared in accordance with the requirements of Canadian securities laws, which differ from the requirements of United States’ securities laws and other jurisdictions.
There are numerous uncertainties inherent in estimating proven and probable mineral reserves. The estimates in this document are based on various assumptions relating to metal prices and exchange rates during the expected life of production and the results of additional planned development work. Actual future production rates and amounts, revenues, taxes, operating expenses, environmental and regulatory compliance expenditures, development expenditures and recovery rates may vary substantially from those assumed in the estimates. Any significant change in these assumptions, including changes that result from variances between projected and actual results, could result in a material downward or upward revision of current estimates.
Development Projects
Kinross must continually replace and expand its mineral reserves in order to maintain or grow its total mineral reserve base as they are depleted by production at its operations. Similarly, the Company’s ability to increase or maintain present gold and silver production levels is dependent in part on the successful development of new mines and/or expansion of existing mining operations. Kinross is dependent on future growth from development projects. Development projects rely on the accuracy of predicted factors including: capital and operating costs; metallurgical recoveries; mineral reserve estimates; and future metal prices. Once a site with mineralization is discovered, it may take several years from the initial phases of drilling until production is possible. Development projects are subject to accurate feasibility studies, the acquisition of surface or land rights and the issuance of necessary governmental permits and approval. Unforeseen circumstances, including those related to the amount and nature of the mineralization at the development site, technological impediments to extraction and processing, legal requirements, governmental intervention, infrastructure limitations, environmental issues, disputes with local communities or other events, could result in one or more of our planned developments becoming impractical or uneconomic. Any such occurrence could have an adverse impact on Kinross’ financial condition and results of operations.
In addition, as a result of the substantial expenditures involved, development projects are at significant risk of material cost overruns versus budget. The capital expenditures and time required to develop new mines are considerable and changes in cost or construction schedules can significantly increase both the time and capital required to build the project. The project development schedules are also dependent on obtaining the governmental permits and approvals necessary for the operation of a project. The timeline to obtain these government permits or approvals is often beyond the control of Kinross. It is not unusual in the mining industry for new mining operations to experience unexpected problems during the start-up phase, resulting in delays and requiring more capital than anticipated.
Production and Cost Estimates
The Company prepares estimates of future production, operating costs and capital costs for its operations. Despite the Company’s best efforts to budget and estimate such costs, as a result of the substantial expenditures involved in the development of mineral projects and the fluctuation and increase of costs over time, development projects may be prone to material cost overruns. Kinross’ actual production and costs may vary from estimates for a variety of reasons, including: increased competition for resources and development inputs; cost inflation affecting the mining industry in general; actual ore mined varying from estimates of grade, tonnage, dilution and metallurgical and other characteristics; short term operating factors including relating to the ore mineral reserves, such as the need for sequential development of ore bodies and the processing of new or different ore grades; revisions to mine plans; difficulties with supply chain management, including the implementation and management of enterprise resource planning software; risks and hazards associated with development, mining and processing; natural phenomena, such as inclement weather conditions, water availability (such as in Chile), floods, earthquakes, and pandemics; and unexpected labour shortages, strikes or other disruptions. Costs of production may also be affected by a variety of factors, including: ore grade, ore hardness, metallurgy, changing waste-to-ore ratios, labour costs, cost of services, commodities (such as power and fuel) and other inputs, general inflationary pressures and currency exchange rates. Many of these factors are beyond Kinross’ control. No assurance can be given that Kinross’ cost estimates will be achieved. Failure to achieve production or cost estimates or material increases in costs could have an adverse impact on Kinross’ future cash flows, profitability, results of operations and financial condition.
40
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Shortages and Price Volatility of Input Commodities, Services and Other Inputs
The Company is dependent on various input commodities (such as diesel fuel, electricity, natural gas, steel, concrete and cyanide), labour, and equipment (including parts) to conduct its mining operations and development projects. A shortage of such input commodities, labour, or equipment or a significant increase in their costs could have a material adverse effect on the Company’s ability to carry out its operations and therefore limit, or increase the cost of, production. The Company is also dependent on access to and supply of water and electricity to carry out its mining operations, and such access and supply may not be readily available, especially at the Company’s operations in Chile, Brazil and Ghana. Market prices of input commodities can be subject to volatile price movements which can be material, occur over short periods of time and are affected by factors that are beyond the Company’s control. An increase in the cost, or decrease in the availability, of input commodities, labour, or equipment due to factors beyond the Company’s control such as a pandemic or a similar public health threat, may affect the timely conduct and cost of Kinross’ operations and development projects. If the costs of certain input commodities consumed or otherwise used in connection with Kinross’ operations and development projects were to increase significantly, and remain at such levels for a substantial period, the Company may determine that it is not economically feasible to continue commercial production at some or all of its operations or the development of some or all of its current projects, which could have an adverse impact on the Company’s financial performance and results of operations. From time to time, Kinross transacts in energy hedging to reduce the risk associated with fuel price fluctuations.
Uncertainty in the Russian Federation
The Company is subject to the considerations and risks of operating in the Russian Federation. Ongoing political tensions and uncertainties with respect to the Russian Federation (including as a result of the Russian Federation’s foreign policy decisions, allegations of cyberattacks, and allegations of interference with foreign elections) have resulted in the imposition of sectoral and other economic sanctions, and increased the risk that the U.S. and certain other governments may impose further economic, or other, sanctions or penalties on, or may take other actions against, the Russian Federation or on persons and/or companies conducting business in the Russian Federation. There can be no assurance that sanctions or other penalties will not be imposed, or other actions will not be taken, by the Russian Federation, including in response to existing or threatened sanctions or other penalties or actions by the United States, Canada or the European Union and/or other governments against the Russian Federation or persons and/or companies conducting business in the Russian Federation. The imposition of such economic sanctions or other penalties, or such other actions by the Russian Federation and/or other governments, could have a material adverse effect on the Company’s assets and operations.
New laws or regulations, or amendments to current laws and regulations, including the renegotiation or removal of international tax treaties could have a material adverse effect on the Company, increase costs and result in a substantially higher tax burden for the Company’s operations in the Russian Federation. Certain currency conversion risks exist in the Russian economy. Russian legislation currently permits the conversion of rouble revenues into foreign currency. Any delay or other difficulty in converting roubles into a foreign currency to make a payment or delay in or restriction on the transfer of foreign currency could limit our ability to meet our payment and debt obligations, which could result in the loss of suppliers, acceleration of debt obligations, etc.
Uncertainty in Mauritania
Kinross is subject to political, economic and security risks which, should they materialize, may adversely affect the Company’s ability to operate its Tasiast mine in Mauritania. These risks include but are not limited to the following: (1) the potential that the government may attempt to renegotiate current mining conventions, revoke existing stability provisions in those conventions or breach those conventions; (2) political instability ; (3) the security situation in the country may deteriorate; (4) a lack of transparency in the operation of the government and development of new laws; (5) the potential for laws and regulations to be inconsistently applied; (6) disputes under the application of the mining convention; (7) potential legal and practical difficulties with enforcement of the mining convention; and (8) inconsistent interpretation and application of tax laws including potential re-assessments of historical tax filings. These issues include, but are not limited to, a process and timetable for payment or offset of VAT refunds owed by the government to the Company, production royalties payable by the Company, the long-term stability in the Company’s relationship with the workers’ union, the availability of duty exonerations for fuel, the application of a clear, comprehensive, legally certain and enforceable VAT exemption for the mining industry, labour force management and flexible labour practices and the timely issuance of work permits for the non-national workforce.
41
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
The Company announced an Agreement in Principle with the Government of Mauritania in June 2020 which affords benefits and stability to both the Company and the Government. The Agreement in Principle remains subject to finalizing and executing definitive agreements. There can be no assurance that the Company will be able to conclude final and binding agreements with the Government of Mauritania or that further disputes will not arise between the parties including disputes with respect to the matters addressed by Agreement in Principle, any resulting definitive agreement, or the Company’s mining convention.
U.S. Environmental Liability Risk
In the United States, certain mining wastes from extraction and processing of ores that would otherwise be considered hazardous waste under U.S. and state laws, are currently exempt from certain U.S. Environmental Protection Agency regulations governing hazardous waste. If mine wastes from the Company’s U.S. mining operations, including those at the Sunnyside Mine (see Section 6 - Other legal matters), are not exempt, and are treated as hazardous waste under the RCRA, material expenditures could be required for waste management and/or the construction of additional waste disposal facilities. In addition, the Company’s activities and ownership interests potentially expose the Company to liability under CERCLA and its state law equivalents. Under CERCLA and its state law equivalents, subject to certain defenses, any present or past owners or operators of a facility, and any parties that disposed or arranged for the disposal of hazardous substances at such a facility, could be held jointly and severally liable for cleanup costs and may be forced to undertake remedial cleanup actions or to pay for the cleanup efforts in response to unpermitted releases of hazardous substances. Such parties may also be liable to governmental entities for the cost of damages to natural resources, which may be substantial. Additional regulations or requirements may also be imposed upon the Company’s operations, tailings, and waste disposal areas as well as upon mine closure under federal and state environmental laws and regulations, including, without limitation, the U.S. Clean Water Act and state law equivalents. Air emissions in the U.S. are subject to the Clean Air Act and its state equivalents as well. The Company has received notices of violation related to alleged breaches of the waste discharge permit at its Kettle River-Buckhorn site. There can be no assurance that the Company will not receive further notices, fines or penalties in the future related to its waste discharge permit at Kettle River-Buckhorn. Additionally, the Company is subject to other federal and state environmental laws, and potential claims existing under common law, relating to the operation and closure of the Company’s U.S. mine sites.
Political, Security, Legal and Economic Risk
The Company has mining and exploration operations in various regions of the world, including the United States, Brazil, Chile, the Russian Federation, Mauritania, Ghana, and Canada and such operations are exposed to various levels of political, security, legal, economic, health and safety and other risks and uncertainties. These risks and uncertainties vary from country to country and include, but are not limited to: terrorism; hostage taking; crime, including organized criminal enterprise; thefts, armed robberies and illegal incursions on property (as may occur at Paracatu and Tasiast from time to time) which illegal incursions could result in serious security and operational issues, including the endangerment of life and property; criminal or regulatory investigations, extreme fluctuations in currency exchange rates; high rates of inflation; labour unrest; the risks of civil unrest; unstable governments or political systems; expropriation and nationalization; renegotiation or nullification of existing concessions, conventions, licenses, permits and contracts (including work permits for non-nationals at Tasiast); illegal mining (including at Tasiast and Chirano) could result in serious environmental, social, political, security and operational issues, including the endangerment of life and property; adequacy, response and training of local law enforcement; political regime change or instability; changes to policies and regulations impacting the mining sector; restrictions on foreign exchange and repatriation of funds; restrictions on the movement of personnel or importation of goods and equipment, global health crises or pandemics; and changing political conditions, currency controls, and governmental regulations that favour or require the awarding of contracts to local contractors or require foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction.
Changes in political leadership or other future political and economic conditions in these countries may result in these governments adopting different policies with respect to foreign investment, taxation and development and ownership of mineral resources. Any changes in such policies may result in changes in laws affecting ownership of assets, foreign investment, mining exploration and development, taxation (including value added and withholding taxes), royalties, currency exchange rates, gold sales, environmental protection, labour relations, price controls, repatriation of income, and return of capital, which may have a material adverse affect on the financial performance of the Company. Such changes may also affect both the ability of Kinross to undertake exploration and development activities in respect of future properties in the manner currently contemplated, as well as its ability to continue to explore, develop, and operate those properties to which it has rights relating to exploration, development, and operation. Future governments in these countries may adopt substantially different policies from those currently in effect, which might extend to, as an example, expropriation of assets.
42
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
The tax regimes in these countries may be subject to differing interpretations or levels of enforcement and are subject to change from time to time. Kinross’ interpretation of taxation law as applied to its transactions and activities may not coincide with that of the tax authorities in a given country. As a result, transactions may be challenged by tax authorities and Kinross’ operations may be assessed, which could result in significant additional taxes, penalties and interest. In addition, in certain jurisdictions (such as Brazil and Mauritania) Kinross may be required to pay refundable VAT on certain purchases. There can be no assurance that the Company will be able to collect all, or part, of the amount of VAT refunds which are owed to the Company.
Governmental efforts to increase revenue from taxes and royalties have escalated in recent years. Brazil increased production royalties in 2018 and the State of Nevada is currently contemplating an increase in state mining taxes. The government of Ghana recently undertook an industry-wide audit of mining operations. There can be no assurance that current government royalty and mining tax rates will remain static in future periods. The increasing intensity of government efforts to increase revenues may result in future audits, tax reassessment and claims for increased payments of royalties, income tax, withholding taxes or additional forms of revenue. The results of such audits or reassessments may result in claims, fines or penalties that are material to the Company.
Anti-bribery Legislation
The Foreign Corrupt Practices Act (United States) and the Corruption of Foreign Public Officials Act (Canada), anti-bribery provisions of the Dutch Criminal Code and similar anti-bribery legislation prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business or other commercial advantage. Company policies mandate strict compliance with applicable anti-bribery legislation. Kinross operates in jurisdictions that have experienced governmental and private sector corruption to some degree. There can be no assurance that Kinross’ internal control policies and procedures will always protect it from reckless or other inappropriate acts committed by the Company’s affiliates, employees or agents. Allegations of any violations of anti-bribery legislation may result in costly and time consuming investigations. Violations of such legislation could result in fines or penalties and have a material adverse effect on Kinross’ reputation and social license to operate.
Licenses and Permits
The development projects and operations of Kinross require licenses and permits from various governmental authorities. However, such licenses and permits are subject to challenge and change in various circumstances. Applicable governmental authorities may revoke or refuse to issue, amend or renew necessary permits. The loss of such permits may hinder Kinross’ ability to operate and could have a material effect on Kinross’ financial performance and results of operations. There can be no guarantee that Kinross will be able to obtain or maintain or comply with all necessary licenses and permits that may be required to explore and develop its properties, commence construction of or operation of mining facilities, or to maintain continued operations that economically justify the cost. Kinross endeavors to be in compliance with these licenses and permits, and underlying laws and regulations, at all times.
Title to Properties and Community Relations
The validity of mining rights, including mining claims which constitute most of Kinross’ property holdings, may, in certain cases, be uncertain and subject to being contested. Kinross’ mining rights, claims and other land titles, particularly title to undeveloped properties, may be defective and open to being challenged by governmental authorities and local communities.
Certain of Kinross’ properties may be subject to the rights or the asserted rights of various community stakeholders, including indigenous people. The presence of community stakeholders may also impact on the Company’s ability to explore, develop or operate its mining properties. In certain circumstances, consultation with such stakeholders may be required and the outcome may affect the Company’s ability to explore, develop or operate its mining properties.
Certain of Kinross’ United States mineral rights consist of unpatented mining claims. Unpatented mining claims present unique title risks due to the rules for validity and the opportunities for third-party challenge. These claims are also subject to legal uncertainty as reflected in the action titled Earthworks, et al. vs. Department of the Interior, et al., which is pending in the Court of Appeals for the D.C. Circuit, and in which a Kinross subsidiary has intervened. In that case, appellants contend that the Bureau of Land Management (“BLM”) issued rules that unlawfully allow mining companies to permit too much acreage for millsites and further contend that the BLM must perform formal mining claim validity determinations and require payment of “fair market value” for the claims rather than annual claims maintenance payments.
43
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Competition
The mineral exploration and mining business is competitive in all of its phases. In the search for and the acquisition of attractive mineral properties, Kinross competes with numerous other companies and individuals, including competitors with greater financial, technical and other resources than Kinross. The ability of the Company to operate successfully in the future will depend not only on its ability to develop its present properties, but also on its ability to select and acquire suitable new producing properties or prospects for mineral exploration. Kinross may be unable to compete successfully with its competitors in acquiring such properties or prospects on terms it considers acceptable, if at all.
Joint Arrangements
Certain of the operations in which the Company has an interest are operated through joint arrangements with other mining companies. Any failure of such other companies to meet their obligations to Kinross or to third parties could have a material adverse effect on the joint arrangement. In addition, Kinross may be unable to exert control over strategic decisions made in respect of such properties.
Disclosures about Market Risks
To determine its market risk sensitivities, Kinross uses an internally generated financial forecast model that is sensitized to, among other things, various gold prices, currency exchange rates, interest rates and energy prices. The variable with the greatest impact is the gold price, and Kinross prepares a base case scenario and then sensitizes it by a 10% increase and decrease in the gold price. For 2021, sensitivity to a 10% change in the gold price is estimated to have an approximate $340 million impact on pre-tax earnings. Kinross’ financial forecast covers the projected life of its mines. In each year, gold is produced according to the mine plan. Additionally, for 2021, sensitivity to a 10% change in the silver price is estimated to have an approximate $15 million impact on pre-tax earnings. Costs are estimated based on current production costs plus the impact of any major changes to the operation during its life.
Interest Rate Fluctuations
Fluctuations in interest rates can affect the Company’s results of operations and cash flow. The Company’s cash and cash equivalents, as well as some of its long-term debt and credit facilities are subject to variable interest rates.
Hedging Risks
The Company’s earnings can vary significantly with fluctuations in the market price of gold and silver. Kinross’ practice is not to hedge long-term metal sales’ exposures. However, the Company may assume or enter into forward sales contracts or similar instruments if hedges are acquired in a business acquisition, if hedges are required under project financing requirements, or when deemed advantageous by management. As at December 31, 2020, there were no metal derivative financial instruments outstanding. In addition, Kinross is not subject to margin requirements on any of its hedging lines.
Foreign Currency Exchange Risk
Currency fluctuations may affect the revenues which the Company will realize from its operations since gold and silver are sold in the world market in United States dollars. The costs of Kinross are incurred principally in Canadian dollars, United States dollars, Chilean pesos, Brazilian reais, Russian roubles, Mauritanian ouguiyas and Ghanaian cedis. The appreciation of non-U.S. dollar currencies against the U.S. dollar increases the cost of gold and silver production in U.S. dollar terms. Kinross’ results are positively affected when the U.S. dollar strengthens against these foreign currencies and are adversely affected when the U.S. dollar weakens against these foreign currencies. Where possible, Kinross’ cash and cash equivalents balances are primarily held in U.S. dollars. From time to time, Kinross transacts currency hedging to reduce the risk associated with currency fluctuations. While the Chilean peso, Brazilian real, and Russian rouble are currently convertible into Canadian and United States dollars, they may not always be convertible in the future. The Mauritanian ouguiya and Ghanaian cedis are convertible into Canadian and U.S. dollars, but conversion may be subject to regulatory and/or central bank approval.
The sensitivity of the Company’s pre-tax earnings to changes in the U.S. dollar is disclosed in Note 11 of the Company’s financial statements for the year ended December 31, 2020.
44
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Litigation Risk
Legal proceedings may be brought against Kinross, for example, litigation based on its business activities, environmental laws, tax matters, volatility in its stock price or failure to comply with its disclosure obligations, which could have a material adverse effect on Kinross’ financial condition or prospects. Regulatory and government agencies may bring legal proceedings in connection with the enforcement of applicable laws and regulations, and as a result Kinross may be subject to expenses of investigations and defense, fines or penalties for violations if proven, and potentially cost and expense to remediate, increased operating costs or changes to operations, and cessation of operations if ordered to do so or required in order to resolve such proceedings. The Company may become party to disputes governed by the rules of international arbitration. Kinross may also be the subject of legal claims in Canada in respect of its activities in a foreign jurisdiction. In the event of a dispute arising at Kinross’ foreign operations, Kinross may be subject to the exclusive jurisdiction of foreign courts or may not be successful in subjecting foreign persons to the jurisdiction of courts in Canada. Kinross’ inability to enforce its rights could have an adverse effect on its future cash flows, earnings, results of operations and financial condition.
Counterparty and Liquidity Risk
Credit risk relates to cash and cash equivalents, accounts receivable, and derivative contracts and arises from the possibility that a counterparty to an instrument fails to perform. Counterparty risk is the risk that a third party might fail to fulfill its performance obligations under the terms of a financial instrument. The Company is subject to counterparty risk and may be affected, in the event that a counterparty becomes insolvent. To manage both counterparty and credit risk, the Company proactively manages its exposure to individual counterparties. The Company only transacts with highly-rated counterparties. A limit on contingent exposure has been established for each counterparty based on the counterparty’s credit rating, and the Company monitors the financial condition of each counterparty.
As at December 31, 2020, the Company’s gross credit exposure, including cash and cash equivalents, was $1,401.5 million and at December 31, 2019, the gross credit exposure, including cash and cash equivalents, was $831.8 million.
Liquidity risk is the risk that the Company may not have sufficient cash resources available to meet its payment obligations. To manage liquidity risk, the Company maintains cash positions and has financing in place that the Company expects will be sufficient to meet its operating and capital expenditure requirements. Potential sources for liquidity could include, but are not limited to: the Company’s current cash position, existing credit facilities, future operating cash flow, and potential private and public financing. Additionally, the Company reviews its short-term operational forecasts regularly and long-term budgets to determine its cash requirements.
Credit Ratings and Debt Markets
The mining, processing, development, and exploration of Kinross’ properties may require substantial additional financing. Failure to obtain sufficient financing may result in the delay or indefinite postponement of exploration, development or production on any or all of Kinross’ properties, or even a loss of property interest. Additional capital or other types of financing may not be available if needed or, if available, the terms of such financing may be unfavourable to Kinross. The Company’s ability to access debt markets and the related cost of debt financing is dependent upon its credit ratings. The Company has investment grade credit ratings from Fitch Ratings, Moody’s and Standard Poor’s. There is no assurance that these credit ratings will remain in effect for any given period of time or that such ratings will not be revised or withdrawn entirely by the rating agencies. Real or anticipated changes in credit ratings can affect the price of the Company’s existing debt as well as the Company’s ability to access the capital markets and the cost of such debt financing. If the Company is unable to maintain its indebtedness and financial ratios at levels acceptable to its credit rating agencies, or should the Company’s business prospects deteriorate, the ratings currently assigned to the Company by the rating agencies could be downgraded, which could adversely affect the value of the Company’s outstanding securities and existing debt, its ability to obtain new financing on favourable terms, and increase the Company’s borrowing costs.
Potential for Incurring Unexpected Costs or Liabilities as a Result of Acquisitions
Although the Company conducts investigations in connection with acquisitions, risks remain regarding any undisclosed or unknown liabilities associated with any such acquisitions, and the Company may discover that it has acquired substantial undisclosed liabilities. The Company may have little recourse against the seller if any of the representations or warranties provided in connection with an acquisition proves to be inaccurate. Such liabilities could have an adverse impact on the Company’s business, financial condition, results of operations and cash flows.
45
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Global Financial Condition
The volatility and challenges that economies continue to experience around the world continues to affect the profitability and liquidity of businesses in many industries, which in turn has resulted in the following conditions that may have an effect on the profitability and cash flows of the Company:
• | Volatility in commodity prices and foreign exchange rates; |
• | Tightening of credit markets; |
• | Counterparty risk; and |
• | Volatility in the prices of publicly traded entities. |
The volatility in commodity prices and foreign exchange rates directly impact the Company’s revenues, earnings and cash flows, as noted above in the sections titled “Gold Price and Silver Price” and “Foreign Currency Exchange Risk”.
Although tighter credit markets could restrict the ability of certain companies to access capital, to date this has not affected the Company’s liquidity.
As at December 31, 2020, the Company had $1,563.6 million available under its credit facility arrangements. However, tightening of credit markets may affect the ability of the Company to obtain equity or debt financing in the future on terms favourable to the Company.
The Company has not experienced any difficulties to date relating to the counterparties it transacts with. The counterparties continue to be highly rated, and as noted above, the Company has employed measures to reduce the impact of counterparty risk.
Continued volatility in equity markets may affect the value of publicly listed companies in Kinross’ equity portfolio. Should declines in the equity values continue and are deemed to be other than temporary, impairment losses may result.
Market Price Risk
Kinross’ common shares are listed on the Toronto Stock Exchange (“TSX”) and the New York Stock Exchange (“NYSE”). The price of Kinross’ common shares is likely to be significantly affected by short-term changes in the gold price or in its financial condition or results of operations as reflected in its quarterly earnings reports. Other factors unrelated to the performance of Kinross that may have an effect on the price of the Kinross common shares include the following: a reduction in analytical coverage of Kinross by investment banks with research capabilities; increased political risk or actions by governments in countries where the Company operates; a drop in trading volume and general market interest in the securities of Kinross may adversely affect an investor’s ability to liquidate an investment and consequently an investor’s interest in acquiring a significant stake in Kinross; a failure of Kinross to meet the reporting and other obligations under Canadian and U.S. securities laws or imposed by the exchanges could result in a delisting of the Kinross common shares; and a substantial decline in the price of the Kinross common shares that persists for a significant period of time could cause the Kinross common shares to be delisted from the TSX or NYSE further reducing market liquidity.
As a result of any of these factors, the market price of Kinross’ common shares at any given point in time may not accurately reflect Kinross’ long-term value. Securities class action litigation has been commenced against companies, including Kinross, following periods of volatility or significant decline in the market price of their securities. Securities litigation could result in substantial costs and damages and divert management’s attention and resources. Any decision resulting from any such litigation that is adverse to the Company could have a negative impact on the Company’s financial position.
Impairment
Goodwill is tested for impairment on an annual basis as at December 31, and at any other time if events or changes in circumstances indicate that the recoverable amount of a CGU containing goodwill has been reduced below its carrying amount. The carrying value of property, plant and equipment is reviewed at each reporting period end to determine whether there is any indication of impairment or reversal of impairment. If any such indication exists, then the CGU or asset’s recoverable amount is estimated. If the carrying amount of the CGU or asset exceeds its recoverable amount, an impairment is considered to exist and an impairment loss is recognized to reduce the CGU or asset’s carrying value to its recoverable amount. For property, plant and equipment and other long-lived assets, a previously recognized impairment loss may be reversed if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. The recoverable amounts, or fair values, of the Company’s CGUs are based, in part, on certain factors that may be partially or totally outside of Kinross’ control. Kinross’ fair value estimates are based on numerous assumptions, some of which may be subjective, and it is possible that actual fair value could be significantly different than those estimates.
46
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Climate Risks
A number of governments or governmental bodies have introduced or are contemplating regulatory changes in response to the potential impacts of climate change. Where legislation already exists, regulation relating to emission levels and energy efficiency is becoming more stringent. The changes in legislation and regulation will likely increase the Company’s compliance costs.
In addition, the physical risks of climate change may also have an adverse effect at some of Kinross’ operations. These may include extreme weather events, changes in rainfall patterns, water shortages, and changing temperatures. These physical impacts could require the Company to curtail or close mining production and could prevent the Company from pursuing expansion opportunities. These effects may adversely impact the cost, production and financial performance of the Company’s operations.
Operations at Paracatu are dependent on rainfall and river water capture as the primary source of process water. During the rainy season, the mine channels surface runoff water to temporary storage ponds from where it is pumped to the process plants. Similarly, surface runoff and rain water and water captured from the river is stored in the tailings impoundment, which constitutes the main water reservoir for the process plants. The objective is to capture and store as much water as possible during the rainy season to ensure adequate water supply during the dry season.
Accordingly, prolonged periods without adequate rainfall may adversely impact the Company’s operations. As a result, production may fall below historic or forecast levels and Kinross may incur significant costs or experience significant delays that could have a material effect on Kinross’ financial performance, liquidity and results of operations.
Excessive rainfall or flooding may also adversely affect operations. Excess rainfall can result in operational difficulties including geotechnical instability, increased dewatering demands, and additional water management requirements. Extended periods of above average rainfall at a site may result in increased costs or production disruptions that could have a material effect on Kinross’ financial performance, liquidity and results of operations.
We can provide no assurance that efforts to mitigate the risks of climate changes will be effective and that the physical risks of climate change will not have an adverse effect on the Company’s operations and profitability.
Human Resources
Production at Kinross’ mines is dependent upon the efforts of, and maintaining good relationships with, employees of Kinross. Relations between Kinross and its employees may be impacted by changes in labour relations which may be introduced by, among others, employee groups, unions, and the relevant governmental authorities in whose jurisdictions Kinross carries on business. Adverse changes in such legislation or in the relationship between Kinross and its employees may have a material adverse effect on Kinross’ business, results of operations, and financial condition.
In order to operate successfully, Kinross must find and retain qualified employees. Kinross and other companies in the mining industry compete for personnel and Kinross is not always able to fill positions in a timely manner. One factor that has contributed to an increased turnover rate is the aging workforce and it is expected that this factor will further increase the turnover rate in upcoming years. If Kinross is unable to attract and retain qualified personnel or fails to establish adequate succession planning strategies, Kinross’ operations could be adversely affected.
In addition, Kinross has a relatively small executive management team and in the event that the services of a number of these executives are no longer available, Kinross and its business could be adversely affected. Kinross does not carry key-person life insurance with respect to its executives.
Cybersecurity and Data Privacy Risks
The Company relies heavily on its information technology systems including, without limitation, its networks, equipment, hardware, software, telecommunications, and other information technology (collectively, “IT systems”), and the IT systems of its vendors and third-party service providers, to operate its business as a whole including mining operations and development projects. IT systems are subject to an increasing threat of continually evolving cybersecurity risks including, without limitation, computer viruses, security breaches, and cyberattacks. In addition, the Company is subject to the risk of unauthorized access to its IT systems or its information through fraud or other means. Kinross’ operations also depend on the timely maintenance, upgrade and replacement of its IT systems, as well as pre-emptive expenses to mitigate cybersecurity risks and other IT systems disruptions.
47
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Although Kinross has not experienced any material losses to date relating to cybersecurity, or other IT systems disruptions, there can be no assurance that Kinross will not incur such losses in the future. Despite the Company’s mitigation efforts including implementing an IT systems security risk management framework, the risk and exposure to these threats cannot be fully mitigated because of, among other things, the evolving nature of cybersecurity threats. As a result, cybersecurity and the continued development and enhancement of controls, processes and practices designed to protect IT systems from cybersecurity threats remain a priority. As these threats continue to evolve, the Company, its vendors and third-party service providers, including IT service providers, may be required to expend additional resources to continue to modify or enhance protective measures or to investigate and remediate any cybersecurity vulnerabilities.
Any cybersecurity incidents or other IT systems disruption could result in production downtimes, operational delays, destruction or corruption of data, security breaches, financial losses from remedial actions, the theft or other compromising of confidential or otherwise protected information, fines and lawsuits, or damage to the Company’s reputation. Any such occurrence could have an adverse impact on Kinross’ financial condition and results of operations.
The Company is subject to privacy and data security regulations in several of the jurisdictions that it operates in, such as Canada, Brazil, the United States and the European Union (“EU”). Compliance with such laws, including General Data Protection Regulation in the EU, will affect business conducted in the EU and may also be enforced against entities established outside the EU but processing data of European data subjects. The Company could incur substantial costs in complying with these various national regulations as a result of having to make changes to prior business practices in a manner adverse to our business. Such developments may also require the Company to make system changes and develop new processes, further affecting our compliance costs. In addition, violations of privacy-related regulations can result in significant penalties and reputational harm, which in turn could adversely impact the Company’s business and results of operations.
Refining Capacity
The Company engages third-party refineries to refine doré into good delivery gold and silver bars, which are in turn sold into open markets. The refineries are located in Canada, Switzerland, Russia, India, and the United States. The loss of any one refiner could have a material adverse effect on the Company if alternative refineries are unavailable. There can be no guarantee that alternative refineries would be available if the need for them were to arise or that it would not experience delays or disruptions in sales that would materially and adversely affect results of operations. In addition, the Company has doré inventory at refineries and could incur a loss arising from the refineries’ failure to fulfill their contractual obligations. The Company has legally binding agreements in place for such refining services and also purchases bullion insurance, but there is a risk that a refinery will not satisfy its delivery obligations. In such a case, the Company may pursue all remedies available, as appropriate, to enforce any outstanding delivery obligations. If such delivery obligations are not fulfilled by the refinery, remedied by a court in a specific performance or damages judgment or insurance proceeds are not received, the Company will incur a one-time non-cash charge related to the carrying value of the inventory.
Brazilian Power Plants
The ownership and operation of our Brazilian power plants carry an inherent risk of liability related to public safety, health, safety, security and the environment, including the risk of government imposed orders to remedy unsafe conditions and/or to remediate or otherwise address environmental contamination or damage. We may also be exposed to potential penalties for contravention of health, safety, security and environmental laws and potential civil liability. We may become subject to government orders, investigations, inquiries or other proceedings (including civil claims) relating to health, safety, security and environmental matters as a result of which our operations may be limited or suspended. The occurrence of any of these events or any changes, additions to or more rigorous enforcement of health, safety, security and environmental laws could impact the operation of the power plants and result in additional expenditures. Additional environmental, health and safety issues relating to presently known or unknown matters may require unanticipated expenditures, or result in fines, penalties or other consequences (including changes to operations) that may be adverse to our business and results of operations.
Illegal Mining
Illegal mining activities occur near, and occasionally on some of the Company’s properties in Africa and Brazil. Illegal mining is associated with a number of negative impacts, including environmental degradation, human rights abuse, child labour and funding of conflict. In addition, substantial illegal mining activities on the Company’s properties or properties that the Company may seek to acquire in the future may deplete mineral reserves or mineral resources and the economic benefits of those properties. It is difficult for the Company to control illegal mining activities on and around its properties. The Company relies on government support and enforcement to manage illegal mining activities near its operations; however, enforcement is often lacking or inconsistent.
48
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
11. | SUPPLEMENTAL INFORMATION |
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
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 (reversals), 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 (loss) to adjusted net earnings for the periods presented:
Years ended December 31, | ||||||||||||
(in millions, except per share amounts) | 2020 | 2019 | 2018 | |||||||||
Net earnings (loss) attributable to common shareholders - as reported | $ | 1,342.4 | $ | 718.6 | $ | (23.6 | ) | |||||
Adjusting items: | ||||||||||||
Foreign exchange losses (gains) | 7.3 | (0.6 | ) | 4.3 | ||||||||
Foreign exchange losses on translation of tax basis and foreign exchange on deferred income taxes within income tax expense | 101.2 | 1.6 | 62.0 | |||||||||
Taxes in respect of prior periods | 51.3 | 33.3 | 59.9 | |||||||||
Reclamation and remediation expenses (recoveries) | 6.6 | (11.9 | ) | (3.5 | ) | |||||||
Reversals of impairment charges - net(a) | (650.9 | ) | (361.8 | ) | - | |||||||
COVID-19 and Tasiast strike costs(b) | 72.4 | - | - | |||||||||
U.S. CARES Act net benefit | (25.4 | ) | - | - | ||||||||
Gain on disposition of royalty portfolio | - | (72.7 | ) | - | ||||||||
Fort Knox pit wall slide related costs | - | 25.1 | 37.9 | |||||||||
Restructuring costs | - | 12.2 | - | |||||||||
U.S. Tax Reform impact | - | - | (8.7 | ) | ||||||||
Tasiast Phase One commissioning costs | - | - | 6.4 | |||||||||
Other | 0.2 | 7.6 | 5.1 | |||||||||
Tax effects of the above adjustments | 61.7 | 71.5 | (11.7 | ) | ||||||||
(375.6 | ) | (295.7 | ) | 151.7 | ||||||||
Adjusted net earnings attributable to common shareholders | $ | 966.8 | $ | 422.9 | $ | 128.1 | ||||||
Weighted average number of common shares outstanding - Basic | 1,257.2 | 1,252.3 | 1,249.5 | |||||||||
Adjusted net earnings per share | $ | 0.77 | $ | 0.34 | $ | 0.10 |
(a) | During the year ended December 31, 2020, the Company recorded non-cash reversals of impairment charges of $689.0 million related to property, plant and equipment at Tasiast, Chirano and Lobo-Marte. The tax impacts on the impairment reversals at Chirano and Lobo-Marte were expenses of $71.6 million and $4.6 million, respectively. In addition, the Company recorded impairment charges of $38.1 million related to certain supplies inventories. During the year ended December 31, 2019, the Company recorded non-cash reversals of impairment charges of $361.8 million related to property, plant and equipment at Paracatu and Tasiast. The tax impact on the impairment reversal at Paracatu was an expense of $68.2 million. There were no tax impacts on the impairment reversals at Tasiast in 2020 and 2019. |
(b) | Includes $64.1 million of COVID-19 related labour, health and safety, donations and other support program costs, as well as $8.3 million of Tasiast strike costs for the year ended December 31, 2020. |
49
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Free Cash Flow
Free cash flow is a non-GAAP measure and is defined as net cash flow provided from operating activities less capital expenditures. The Company believes that 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. However, the free cash flow measure is not necessarily indicative of operating earnings or net cash flow from operations as determined under IFRS.
The following table provides a reconciliation of free cash flow for the periods presented:
Years ended December 31, | ||||||||||||
(in millions) | 2020 | 2019 | 2018 | |||||||||
Net cash flow provided from operating activities - as reported | $ | 1,957.6 | $ | 1,224.9 | $ | 788.7 | ||||||
Less: Additions to property, plant and equipment(a) | (916.1 | ) | (1,060.2 | ) | (1,005.2 | ) | ||||||
Free cash flow | $ | 1,041.5 | $ | 164.7 | $ | (216.5 | ) |
(a) | “Additions to property, plant and equipment” for the year ended December 31, 2018 is calculated as $1,043.4 million, as reported, less $38.2 million of capitalized interest paid, as reported. |
Adjusted Operating Cash Flow
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. 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, the adjusted operating cash flow measure is not necessarily indicative of net cash flow from operations as determined under IFRS.
The following table provides a reconciliation of adjusted operating cash flow for the periods presented:
Years ended December 31, | ||||||||||||
(in millions) | 2020 | 2019 | 2018 | |||||||||
Net cash flow provided from operating activities - as reported | $ | 1,957.6 | $ | 1,224.9 | $ | 788.7 | ||||||
Adjusting items: | ||||||||||||
Tax payments in respect of prior years | - | 16.7 | - | |||||||||
Working capital changes: | ||||||||||||
Accounts receivable and other assets | 120.9 | 64.5 | 22.7 | |||||||||
Inventories | 6.8 | (53.8 | ) | 5.7 | ||||||||
Accounts payable and other liabilities, including income taxes paid | (172.6 | ) | (50.8 | ) | 57.1 | |||||||
(44.9 | ) | (23.4 | ) | 85.5 | ||||||||
Adjusted operating cash flow | $ | 1,912.7 | $ | 1,201.5 | $ | 874.2 |
50
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Consolidated and Attributable Production Cost of Sales per Equivalent Ounce Sold
Consolidated production cost of sales per gold equivalent ounce sold is a non-GAAP measure and is defined as production cost of sales as reported on the consolidated statement of operations 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 provides a reconciliation of consolidated and attributable production cost of sales per equivalent ounce sold for the periods presented:
Years ended December 31, | ||||||||||||
(in millions, except ounces and production cost of sales per equivalent ounce) | 2020 | 2019 | 2018 | |||||||||
Production cost of sales - as reported | $ | 1,725.7 | $ | 1,778.9 | $ | 1,860.5 | ||||||
Less: portion attributable to Chirano non-controlling interest(a) | (19.6 | ) | (19.0 | ) | (17.3 | ) | ||||||
Attributable(b) production cost of sales | $ | 1,706.1 | $ | 1,759.9 | $ | 1,843.2 | ||||||
Gold equivalent ounces sold | 2,375,548 | 2,512,758 | 2,532,912 | |||||||||
Less: portion attributable to Chirano non-controlling interest(j) | (16,621 | ) | (20,186 | ) | (22,493 | ) | ||||||
Attributable(b) gold equivalent ounces sold | 2,358,927 | 2,492,572 | 2,510,419 | |||||||||
Consolidated production cost of sales per equivalent ounce sold | $ | 726 | $ | 708 | $ | 735 | ||||||
Attributable(b) production cost of sales per equivalent ounce sold | $ | 723 | $ | 706 | $ | 734 |
See page 54 of this MD&A for details of the footnotes referenced within the table above.
Attributable Production Cost of Sales per Ounce Sold on a By-Product Basis
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:
Years ended December 31, | ||||||||||||
(in millions, except ounces and production cost of sales per ounce) | 2020 | 2019 | 2018 | |||||||||
Production cost of sales - as reported | $ | 1,725.7 | $ | 1,778.9 | $ | 1,860.5 | ||||||
Less: portion attributable to Chirano non-controlling interest(a) | (19.6 | ) | (19.0 | ) | (17.3 | ) | ||||||
Less: attributable(b) silver revenue(c) | (91.0 | ) | (75.1 | ) | (66.4 | ) | ||||||
Attributable(b) production cost of sales net of silver by-product revenue | $ | 1,615.1 | $ | 1,684.8 | $ | 1,776.8 | ||||||
Gold ounces sold | 2,324,324 | 2,458,839 | 2,480,529 | |||||||||
Less: portion attributable to Chirano non-controlling interest(j) | (16,589 | ) | (20,161 | ) | (22,460 | ) | ||||||
Attributable(b) gold ounces sold | 2,307,735 | 2,438,678 | 2,458,069 | |||||||||
Attributable(b) production cost of sales per ounce sold on a by-product basis | $ | 700 | $ | 691 | $ | 723 |
See page 54 of this MD&A for details of the footnotes referenced within the table above.
51
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Attributable All-In Sustaining Cost and All-In Cost per Ounce Sold on a By-Product Basis
In November 2018, the World Gold Council (“WGC”) 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. 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:
Years ended December 31, | ||||||||||||
(in millions, except ounces and costs per ounce) | 2020 | 2019 | 2018 | |||||||||
Production cost of sales - as reported | $ | 1,725.7 | $ | 1,778.9 | $ | 1,860.5 | ||||||
Less: portion attributable to Chirano non-controlling interest(a) | (19.6 | ) | (19.0 | ) | (17.3 | ) | ||||||
Less: attributable(b) silver revenue(c) | (91.0 | ) | (75.1 | ) | (66.4 | ) | ||||||
Attributable(b) production cost of sales net of silver by-product revenue | $ | 1,615.1 | $ | 1,684.8 | $ | 1,776.8 | ||||||
Adjusting items on an attributable(b) basis: | ||||||||||||
General and administrative(d) | 117.9 | 123.6 | 133.0 | |||||||||
Other operating expense - sustaining(e) | 9.6 | 24.7 | 6.2 | |||||||||
Reclamation and remediation - sustaining(f) | 54.0 | 48.2 | 52.2 | |||||||||
Exploration and business development - sustaining(g) | 48.3 | 66.0 | 53.2 | |||||||||
Additions to property, plant and equipment - sustaining(h) | 373.5 | 415.1 | 335.0 | |||||||||
Lease payments - sustaining(i) | 19.7 | 12.7 | - | |||||||||
All-in Sustaining Cost on a by-product basis - attributable(b) | $ | 2,238.1 | $ | 2,375.1 | $ | 2,356.4 | ||||||
Other operating expense - non-sustaining(e) | 56.0 | 57.0 | 48.7 | |||||||||
Reclamation and remediation - non-sustaining(f) | 5.0 | 6.9 | 7.5 | |||||||||
Exploration - non-sustaining(g) | 43.3 | 46.7 | 55.4 | |||||||||
Additions to property, plant and equipment - non-sustaining(h) | 536.9 | 637.9 | 665.0 | |||||||||
Lease payments - non-sustaining(i) | 1.0 | 1.6 | - | |||||||||
All-in Cost on a by-product basis - attributable(b) | $ | 2,880.3 | $ | 3,125.2 | $ | 3,133.0 | ||||||
Gold ounces sold | 2,324,324 | 2,458,839 | 2,480,529 | |||||||||
Less: portion attributable to Chirano non-controlling interest(j) | (16,589 | ) | (20,161 | ) | (22,460 | ) | ||||||
Attributable(b) gold ounces sold | 2,307,735 | 2,438,678 | 2,458,069 | |||||||||
Attributable(b) all-in sustaining cost per ounce sold on a by-product basis | $ | 970 | $ | 974 | $ | 959 | ||||||
Attributable(b) all-in cost per ounce sold on a by-product basis | $ | 1,248 | $ | 1,282 | $ | 1,275 |
See page 54 of this MD&A for details of the footnotes referenced within the table above.
52
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Attributable All-In Sustaining Cost and All-In Cost per Equivalent Ounce Sold
The Company also assesses its all-in sustaining cost and all-in cost on a gold equivalent ounce basis. Under these non-GAAP measures, the Company’s production of silver is converted into gold equivalent ounces and credited to total production.
Attributable all-in sustaining cost and all-in cost per equivalent ounce sold are calculated by adjusting total production cost of sales, as reported on the consolidated statement of operations, as follows:
Years ended December 31, | ||||||||||||
(in millions, except ounces and costs per equivalent ounce) | 2020 | 2019 | 2018 | |||||||||
Production cost of sales - as reported | $ | 1,725.7 | $ | 1,778.9 | $ | 1,860.5 | ||||||
Less: portion attributable to Chirano non-controlling interest(a) | (19.6 | ) | (19.0 | ) | (17.3 | ) | ||||||
Attributable(b) production cost of sales | $ | 1,706.1 | $ | 1,759.9 | $ | 1,843.2 | ||||||
Adjusting items on an attributable(b) basis: | ||||||||||||
General and administrative (d) | 117.9 | 123.6 | 133.0 | |||||||||
Other operating expense - sustaining(e) | 9.6 | 24.7 | 6.2 | |||||||||
Reclamation and remediation - sustaining(f) | 54.0 | 48.2 | 52.2 | |||||||||
Exploration and business development - sustaining(g) | 48.3 | 66.0 | 53.2 | |||||||||
Additions to property, plant and equipment - sustaining(h) | 373.5 | 415.1 | 335.0 | |||||||||
Lease payments - sustaining(i) | 19.7 | 12.7 | - | |||||||||
All-in Sustaining Cost - attributable(b) | $ | 2,329.1 | $ | 2,450.2 | $ | 2,422.8 | ||||||
Other operating expense - non-sustaining(e) | 56.0 | 57.0 | 48.7 | |||||||||
Reclamation and remediation - non-sustaining(f) | 5.0 | 6.9 | 7.5 | |||||||||
Exploration - non-sustaining(g) | 43.3 | 46.7 | 55.4 | |||||||||
Additions to property, plant and equipment - non-sustaining(h) | 536.9 | 637.9 | 665.0 | |||||||||
Lease payments - non-sustaining(i) | 1.0 | 1.6 | - | |||||||||
All-in Cost - attributable(b) | $ | 2,971.3 | $ | 3,200.3 | $ | 3,199.4 | ||||||
Gold equivalent ounces sold | 2,375,548 | 2,512,758 | 2,532,912 | |||||||||
Less: portion attributable to Chirano non-controlling interest(j) | (16,621 | ) | (20,186 | ) | (22,493 | ) | ||||||
Attributable(b) gold equivalent ounces sold | 2,358,927 | 2,492,572 | 2,510,419 | |||||||||
Attributable(b) all-in sustaining cost per equivalent ounce sold | $ | 987 | $ | 983 | $ | 965 | ||||||
Attributable(b) all-in cost per equivalent ounce sold | $ | 1,260 | $ | 1,284 | $ | 1,274 |
See page 54 of this MD&A for details of the footnotes referenced within the table above.
53
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
(a) | The portion attributable to Chirano non-controlling interest represents the non-controlling interest (10%) in the production cost of sales for the Chirano mine. |
(b) | “Attributable” includes Kinross’ share of Chirano (90%) production and costs, and Peak (70%) costs. |
(c) | “Attributable silver revenues” represents the attributable portion of metal sales realized from the production of the secondary or by-product metal (i.e. silver). Revenue from the sale of silver, which is produced as a by-product of the process used to produce gold, effectively reduces the cost of gold production. |
(d) | “General and administrative” expenses is as reported on the consolidated statement of operations, net of certain restructuring expenses. General and administrative expenses are considered sustaining costs as they are required to be absorbed on a continuing basis for the effective operation and governance of the Company. |
(e) | “Other operating expense – sustaining” is calculated as “Other operating expense” as reported on the consolidated statement of operations, less other operating and reclamation and remediation expenses related to non-sustaining activities as well as other items not reflective of the underlying operating performance of our business. Other operating expenses are classified as either sustaining or non-sustaining based on the type and location of the expenditure incurred. The majority of other operating expenses that are incurred at existing operations are considered costs necessary to sustain operations, and are therefore classified as sustaining. Other operating expenses incurred at locations where there is no current operation or related to other non-sustaining activities are classified as non-sustaining. |
(f) | “Reclamation and remediation - sustaining” is calculated as current period accretion related to reclamation and remediation obligations plus current period amortization of the corresponding reclamation and remediation assets, and is intended to reflect the periodic cost of reclamation and remediation for currently operating mines. Reclamation and remediation costs for development projects or closed mines are excluded from this amount and classified as non-sustaining. |
(g) | “Exploration and business development – sustaining” is calculated as “Exploration and business development” expenses as reported on the consolidated statement of operations, less non-sustaining exploration expenses. Exploration expenses are classified as either sustaining or non-sustaining based on a determination of the type and location of the exploration expenditure. Exploration expenditures within the footprint of operating mines are considered costs required to sustain current operations and so are included in sustaining costs. Exploration expenditures focused on new ore bodies near existing mines (i.e. brownfield), new exploration projects (i.e. greenfield) or for other generative exploration activity not linked to existing mining operations are classified as non-sustaining. Business development expenses are considered sustaining costs as they are required for general operations. |
(h) | “Additions to property, plant and equipment – sustaining” represents the majority of capital expenditures at existing operations including capitalized exploration costs, periodic capitalized stripping and underground mine development costs, ongoing replacement of mine equipment and other capital facilities and other capital expenditures and is calculated as total additions to property, plant and equipment (as reported on the consolidated statements of cash flows), less capitalized interest and non-sustaining capital. Non-sustaining capital represents capital expenditures for major projects, including major capital stripping projects at existing operations that are expected to materially benefit the operation, as well as enhancement capital for significant infrastructure improvements at existing operations. Non-sustaining capital expenditures during the year ended December 31, 2020, primarily related to major projects at Tasiast, Fort Knox and Round Mountain. Non-sustaining capital expenditures during the year ended December 31, 2019, primarily related to major projects at Tasiast, Round Mountain, Bald Mountain and Fort Knox. Non-sustaining capital expenditures during the year ended December 31, 2018, primarily related to major projects at Tasiast, Round Mountain, and Bald Mountain. |
(i) | “Lease payments – sustaining” represents the majority of lease payments as reported on the consolidated statements of cash flows and is made up of the principal and financing components of such cash payments, less non-sustaining lease payments. Lease payments for development projects or closed mines are classified as non-sustaining. |
(j) | “Portion attributable to Chirano non-controlling interest” represents the non-controlling interest (10%) in the ounces sold from the Chirano mine. |
(k) | “Average realized gold price per ounce” is a non-GAAP financial measure and is defined as gold metal sales divided by the total number of gold ounces sold. This measure is intended to enable Management to better understand the price realized in each reporting period. The realized price measure does not have any standardized definition under IFRS and should not be considered a substitute for measure of performance prepared in accordance with IFRS. |
54
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Cautionary Statement on Forward-Looking Information
All statements, other than statements of historical fact, contained or incorporated by reference in this MD&A including, but not limited to, any information as to the future financial or operating performance of Kinross, constitute ‘‘forward-looking information’’ or ‘‘forward-looking statements’’ within the meaning of certain securities laws, including the provisions of the Securities Act (Ontario) and the provisions for ‘‘safe harbor’’ under the United States Private Securities Litigation Reform Act of 1995 and are based on expectations, estimates and projections as of the date of this MD&A. Forward-looking statements contained in this MD&A, include, but are not limited to, those under the headings (or headings that include) “Operational Outlook”, “Project Updates and New Development”, and “Liquidity Outlook” and include, without limitation, statements with respect to our guidance for production, production costs of sales, all in sustaining cost, all in cost, cash flow, free cash flow and capital expenditures; the declaration, payment and sustainability of the Company’s dividends; optimization of mine plans; identification of additional resources and reserves; the schedules and budgets for the Company’s development projects; mine life and any potential extensions; the Company’s capital reinvestment program and continuous improvement initiatives and project performance or outperformance, as well as references to other possible events, the future price of gold and silver, the timing and amount of estimated future production, costs of production, operating costs; capital expenditures, costs and timing of the development of projects and new deposits, estimates and the realization of such estimates (such as mineral or gold reserves and resources or mine life), success of exploration, development and mining, currency fluctuations, capital requirements, project studies, government regulation permit applications and conversions, restarting suspended or disrupted operations; environmental risks and proceedings; and resolution of pending litigation. The words “anticipate”, “believe”, “estimate”, “expect”, “forecast”, “forward”, “growth projects”, “guidance” “on track”, “on schedule”, “opportunity”, “outlook”, “plan”, “potential”, “prioritize”, “target”, or variations of or similar such words and phrases or statements that certain actions, events or results may, could, should or will be achieved, received or taken, or will occur or result and similar such expressions identify forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by Kinross as of the date of such statements, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The estimates, models and assumptions of Kinross referenced, contained or incorporated by reference in this MD&A, which may prove to be incorrect, include, but are not limited to, the various assumptions set forth herein and in our Annual Information Form dated March 30, 2020 as well as: (1) there being no significant disruptions affecting the operations of the Company, whether due to extreme weather events (including, without limitation, excessive or lack of rainfall, in particular, the potential for further production curtailments at Paracatu resulting from insufficient rainfall and the operational challenges at Fort Knox and Bald Mountain resulting from excessive rainfall, which can impact costs and/or production) and other or related natural disasters, labour disruptions (including but not limited to strikes or workforce reductions), supply disruptions, power disruptions, damage to equipment, pit wall slides (in particular that the effects of the pit wall slides at Fort Knox and Round Mountain are consistent with the Company’s expectations) or otherwise; (2) permitting, development, operations and production from the Company’s operations and development projects being consistent with Kinross’ current expectations including, without limitation: the maintenance of existing permits and approvals and the timely receipt of all permits and authorizations necessary for the operation of Tasiast, and the development and operation of the 24k Project; operation of the SAG mill at Tasiast; land acquisitions and permitting for the construction and operation of the new tailings facility, water and power supply and continued operation of the tailings reprocessing facility at Paracatu; the Lobo-Marte project; commencement of production at the La Coipa project; approval of an enhanced mine plan at Fort Knox; in each case in a manner consistent with the Company’s expectations; and the successful completion of exploration consistent with the Company’s expectations at the Company’s projects; (3) political and legal developments in any jurisdiction in which the Company operates being consistent with its current expectations including, without limitation, the impact of any political tensions and uncertainty in the Russian Federation or any related sanctions and any other similar restrictions or penalties imposed, or actions taken, by any government, including but not limited to amendments to the mining laws, and potential power rationing and tailings facility regulations in Brazil, potential amendments to water laws and/or other water use restrictions and regulatory actions in Chile, new dam safety regulations, potential amendments to minerals and mining laws and energy levies laws, the enforcement of labour laws in Ghana, new regulations relating to work permits, potential amendments to customs and mining laws (including but not limited to amendments to the VAT) and the potential application of revisions to the tax code in Mauritania, the European Union’s General Data Protection Regulation or similar legislation in other jurisdictions and potential amendments to and enforcement of tax laws in Russia, Ghana and Mauritania (including, but not limited to, the interpretation, implementation, application and enforcement of any such laws and amendments thereto), and the impact of any trade tariffs being consistent with Kinross’ current expectations; (4) the completion of studies, including optimization studies, improvement studies; scoping studies and pre-feasibility and feasibility studies, on the timelines currently expected and the results of those studies being consistent with Kinross’ current expectations, including the completion of the Lobo-Marte and Peak feasibility studies and the Udinsk pre-feasibility study; (5) the exchange rate between the Canadian dollar, Brazilian real, Chilean peso, Russian rouble, Mauritanian ouguiya, Ghanaian cedi and the U.S. dollar being approximately consistent with current levels; (6) certain price assumptions for gold and silver; (7) prices for diesel, natural gas, fuel oil, electricity and other key supplies being approximately consistent with the Company’s expectations; (8) production and cost of sales forecasts for the Company meeting expectations; (9) the accuracy of: the current mineral reserve and mineral resource estimates of the Company including the accuracy and reliability of the pre-acquisition mineral resource estimates of the Peak project and Kinross’ analysis thereof being consistent with expectations (including but not limited to ore tonnage and ore grade estimates), future mineral resource and mineral reserve estimates being consistent with preliminary work undertaken by the Company, mine plans for the Company’s current and future mining operations, and the Company’s internal models; (10) labour and materials costs increasing on a basis consistent with Kinross’ current expectations; (11) the terms and conditions of the legal and fiscal stability agreements for the Tasiast and Chirano operations being interpreted and applied in a manner consistent with their intent and Kinross’ expectations and without material amendment or formal dispute (including without limitation the application of tax, customs and duties exemptions and royalties); (12) goodwill and/or asset impairment potential; (13) the regulatory and legislative regime regarding mining, electricity production and transmission (including rules related to power tariffs) in Brazil being consistent with Kinross’ current expectations; (14) access to capital markets, including but not limited to maintaining our current credit ratings consistent with the Company’s current expectations; (15) that the Brazilian power plants will operate in a manner consistent with our expectations; (16) that drawdown of remaining funds under the Tasiast project financing will proceed in a manner consistent with our current expectations; (17) potential direct or indirect operational impacts resulting from infectious diseases or pandemics such as the ongoing COVID-19 pandemic; (18) the effectiveness of preventative actions and contingency plans put in place by the Company to respond to the COVID-19 pandemic, including, but not limited to, social distancing, travel restrictions, business continuity plans, and efforts to mitigate supply chain disruptions; (19) changes in national and local government legislation or other government actions, particularly in response to the COVID-19 outbreak; (20) litigation, regulatory proceedings and audits, and the potential ramifications thereof, being concluded in a manner consistent with the Corporation’s expectations (including without limitation the audit of mining companies in Ghana which includes the Corporation’s Ghanaian subsidiaries, litigation in Chile relating to the alleged damage of wetlands and the scope of any remediation plan or other environmental obligations arising therefrom, the ongoing litigation with the Russian tax authorities regarding dividend withholding tax and the ongoing Sunnyside litigation regarding potential liability under the U.S. Comprehensive Environmental Response, Compensation, and Liability Act); (21) that the Company will enter into definitive documentation with the Government of Mauritania substantially in accordance with the terms and conditions of the term sheet, on a basis consistent with our expectations and that the parties will perform their respective obligations thereunder on the timelines agreed; (22) that the exploitation permit for Tasiast Sud will be issued under the terms and on timelines consistent with our expectations; (23) that the benefits of the contemplated arrangements related to the agreement in principle will result in increased stability at the Company’s operations in Mauritania; and (24) the Company’s financial results, cash flows and future prospects being consistent with Company expectations in amounts sufficient to permit sustained dividend payments. Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements. Such factors include, but are not limited to: the inaccuracy of any of the foregoing assumption, sanctions (any other similar restrictions or penalties) now or subsequently imposed, other actions taken, by, against, in respect of or otherwise impacting any jurisdiction in which the Company is domiciled or operates (including but not limited to the Russian Federation, Canada, the European Union and the United States), or any government or citizens of, persons or companies domiciled in, or the Company’s business, operations or other activities in, any such jurisdiction; reductions in the ability of the Company to transport and refine doré; fluctuations in the currency markets; fluctuations in the spot and forward price of gold or certain other commodities (such as fuel and electricity); changes in the discount rates applied to calculate the present value of net future cash flows based on country-specific real weighted average cost of capital; changes in the market valuations of peer group gold producers and the Company, and the resulting impact on market price to net asset value multiples; changes in various market variables, such as interest rates, foreign exchange rates, gold or silver prices and lease rates, or global fuel prices, that could impact the mark-to-market value of outstanding derivative instruments and ongoing payments/receipts under any financial obligations; risks arising from holding derivative instruments (such as credit risk, market liquidity risk and mark-to-market risk); changes in national and local government legislation, taxation (including but not limited to income tax, advance income tax, stamp tax, withholding tax, capital tax, tariffs, value-added or sales tax, capital outflow tax, capital gains tax, windfall or windfall profits tax, production royalties, excise tax, customs/import or export taxes/duties, asset taxes, asset transfer tax, property use or other real estate tax, together with any related fine, penalty, surcharge, or interest imposed in connection with such taxes), controls, policies and regulations; the security of personnel and assets; political or economic developments in Canada, the United States, Chile, Brazil, Russia, Mauritania, Ghana, or other countries in which Kinross does business or may carry on business; business opportunities that may be presented to, or pursued by, us; our ability to successfully integrate acquisitions and complete divestitures; operating or technical difficulties in connection with mining, development or refining activities; employee relations; litigation or other claims against, or regulatory investigations and/or any enforcement actions, administrative orders or sanctions in respect of the Company (and/or its directors, officers, or employees) including, but not limited to, securities class action litigation in Canada and/or the United States, environmental litigation or regulatory proceedings or any investigations, enforcement actions and/or sanctions under any applicable anti-corruption, international sanctions and/or anti-money laundering laws and regulations in Canada, the United States or any other applicable jurisdiction; the speculative nature of gold exploration and development including, but not limited to, the risks of obtaining necessary licenses and permits; diminishing quantities or grades of reserves; adverse changes in our credit ratings; and contests over title to properties, particularly title to undeveloped properties. In addition, there are risks and hazards associated with the business of gold exploration, development and mining, including environmental hazards, industrial accidents, unusual or unexpected formations, pressures, cave-ins, flooding and gold bullion losses (and the risk of inadequate insurance, or the inability to obtain insurance, to cover these risks). Many of these uncertainties and contingencies can directly or indirectly affect, and could cause, Kinross’ actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, Kinross, including but not limited to resulting in an impairment charge on goodwill and/or assets. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Forward-looking statements are provided for the purpose of providing information about management’s expectations and plans relating to the future. All of the forward-looking statements made in this MD&A 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 Factors” section of our most recently filed Annual Information Form dated March 30, 2020. These factors are not intended to represent a complete list of the factors that could affect Kinross. Kinross disclaims any intention or obligation to update or revise any forward-looking statements or to explain any material difference between subsequent actual events and such forward-looking statements, except to the extent required by applicable law.
55
Kinross Gold Corporation
management’s discussion and analysis
For the year ended December 31, 2020
Key Sensitivities
Approximately 70%-80% of the Company’s costs are denominated in U.S. dollars.
A 10% change in foreign currency exchange rates would be expected to result in an approximate $14 impact on production cost of sales per equivalent ounce sold2.
Specific to the Russian rouble, a 10% change in the exchange rate would be expected to result in an approximate $15 impact on Russian production cost of sales per equivalent ounce sold.
Specific to the Brazilian real, a 10% change in the exchange rate would be expected to result in an approximate $25 impact on Brazilian production cost of sales per equivalent ounce sold.
A $10 per barrel change in the price of oil would be expected to result in an approximate $3 impact on production cost of sales per equivalent ounce sold.
A $100 change in the price of gold would be expected to result in an approximate $5 impact on production cost of sales per equivalent ounce sold as a result of a change in royalties.
Other information
Where we say “we”, “us”, “our”, the ‘“Company”, or “Kinross” in this MD&A, we mean Kinross Gold Corporation and/or one or more or all of its subsidiaries, as may be applicable.
The technical information about the Company’s mineral properties contained in this MD&A has been prepared under the supervision of Mr. John Sims who is a “qualified person” within the meaning of National Instrument 43-101. Mr. Sims was an officer of Kinross until December 31, 2020. Mr. Sims remains the Company’s qualified person as an external consultant.
2 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.
56
Exhibit 99.3
Management’s
Responsibility for
Financial Statements
The consolidated financial statements, the notes thereto, and other financial information contained in the Management’s Discussion and Analysis have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and are the responsibility of the management of Kinross Gold Corporation (the “Company”). The financial information presented elsewhere in the Management’s Discussion and Analysis is consistent with the data that is contained in the consolidated financial statements. The consolidated financial statements, where necessary, include amounts which are based on the best estimates and judgment of management.
In order to discharge management’s responsibility for the integrity of the financial statements, the Company maintains a system of internal accounting controls. These controls are designed to provide reasonable assurance that the Company’s assets are safeguarded, transactions are executed and recorded in accordance with management’s authorization, proper records are maintained and relevant and reliable financial information is produced. These controls include maintaining quality standards in hiring and training of employees, policies and procedures manuals, a corporate code of conduct and ensuring that there is proper accountability for performance within appropriate and well-defined areas of responsibility. The system of internal controls is further supported by a compliance function, which is designed to ensure that we and our employees comply with securities legislation and conflict of interest rules.
The Board of Directors is responsible for overseeing management’s performance of its responsibilities for financial reporting and internal control. The Audit Committee, which is composed of non-executive directors, meets with management as well as the external auditors to ensure that management is properly fulfilling its financial reporting responsibilities to the Directors who approve the consolidated financial statements. The external auditors have full and unrestricted access to the Audit Committee to discuss the scope of their audits, the adequacy of the system of internal controls and review financial reporting issues.
The consolidated financial statements have been audited by KPMG LLP, independent registered public accounting firm, in accordance with the standards of the Public Company Accounting Oversight Board (United States).
/s/ J. Paul Rollinson | /s/ Andrea S. Freeborough | |
J. Paul Rollinson | ANDREA S. FREEBOROUGH | |
President and Chief Executive Officer Toronto, Canada February 10, 2021 |
Senior Vice-President and Chief Financial Officer Toronto, Canada February 10, 2021 |
1
Management’s Report on
Internal Control over Financial Reporting
The management of Kinross Gold Corporation (“Kinross”) is responsible for establishing and maintaining adequate internal control over financial reporting, and have designed such internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.
Management has used the Internal Control—Integrated Framework (2013) to evaluate the effectiveness of internal control over financial reporting, which is a recognized and suitable framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management has evaluated the design and operation of Kinross’ internal control over financial reporting as of December 31, 2020, and has concluded that such internal control over financial reporting is effective.
The effectiveness of Kinross’ internal control over financial reporting as of December 31, 2020 has been audited by KPMG LLP, independent registered public accounting firm, as stated in their report that appears herein.
/s/ J. Paul Rollinson | /s/ Andrea S. Freeborough | |
J. Paul Rollinson | ANDREA S. FREEBOROUGH | |
President and Chief Executive Officer Toronto, Canada February 10, 2021 |
Senior Vice-President and Chief Financial Officer Toronto, Canada February 10, 2021 |
2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of Kinross Gold Corporation
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Kinross Gold Corporation (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income, cash flows and equity for each of the years then ended and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and its financial performance and its cash flows for each of the years then ended, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 10, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Recoverable amount of property, plant and equipment of the Tasiast, Chirano and Lobo-Marte cash generating units
As discussed in Note 7v to the consolidated financial statements, the carrying value of the Company’s property, plant and equipment was $7,653.5 million as of December 31, 2020. As discussed in Note 8 to the consolidated financial statements, as a result of increases in the Company’s long-term gold price estimate, the mine life extension at Chirano and the increase in mineral reserves at Lobo-Marte, during the year ended December 31, 2020 the Company recorded reversals of previously recorded impairment charges of $689.0 million, related entirely to property, plant and equipment at Tasiast ($299.5 million), Chirano ($204.5 million) and Lobo-Marte ($185.0 million, which included $48.3 million for the impairment reversal recorded at June 30, 2020). The Company estimated the recoverable amounts of the Tasiast, Chirano and Lobo-Marte cash generating units using the Company’s life of mine plans, future and long-term commodity prices, discount rates, NAV multiples, and foreign exchange rates relevant to these cash generating units.
We identified the assessment of the recoverable amount of property, plant and equipment of the Tasiast, Chirano and Lobo-Marte cash generating units as a critical audit matter. A high degree of auditor judgment was required to evaluate the estimated future cash flows used to estimate the recoverable amounts. Significant assumptions were the estimated future gold prices, discount rates, production levels, and costs used to determine the future cash flows. Minor changes in any of these assumptions could have had a significant effect on the determination of the estimated recoverable amounts. In addition, auditor judgment was required to assess the mineral reserves and resources which form the basis of the life of mine plans.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s process to determine recoverable amounts of the cash generating units. This included controls over the determination of future cash flows in the life-of-mine models used to estimate the recoverable amounts of the cash generating units and the development of the significant assumptions. We assessed the estimates of production levels and cost assumptions used in the life of mine plans by comparing them to historical results. We evaluated the Company’s estimate of mineral reserves and resources by comparing the Company’s historical estimates to actual production results. We assessed the competence, capabilities and objectivity of the Company’s personnel who prepared the mineral reserve and resource estimates, including the industry and regulatory standards they applied. We involved valuation professionals with specialized skills and knowledge, who assisted in:
• | evaluating the future gold prices by comparing to third party estimates |
• | evaluating the discount rate assumptions by comparing to estimates that were independently developed using publicly available third party sources and data for comparable entities. |
Uncertain income tax positions
As discussed in Notes 18 and 20 to the consolidated financial statements, the Company operates in multiple taxation jurisdictions. International income tax matters involve significant judgment due to the complexity of varying income tax legislation in these jurisdictions and regulatory requirements. Income tax legislation is subject to interpretation and it may be uncertain that an income tax filing position taken by the Company will be sustained upon review by the taxation authorities.
We identified the evaluation of uncertain income tax positions as a critical audit matter. Complex auditor judgment was required to evaluate the Company’s interpretation of, and compliance with, income tax law in the relevant jurisdictions and the estimate of the ultimate resolution of its income tax filing positions.
3
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM – (CONTINUED)
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the critical audit matter. This included controls over the Company’s review of uncertain income tax positions and determination of the accounting for uncertain income tax positions. We involved taxation professionals with specialized skills and knowledge, who assisted in:
• | evaluating the Company’s interpretation of tax laws |
• | assessing the Company’s tax positions |
• | obtaining and reading opinions provided by independent tax and legal experts related to the Company’s assessment of the income tax positions recorded in certain jurisdictions. |
/s/ KPMG LLP
Chartered Professional Accountants, Licensed Public Accountants
We have served as the Company’s auditor since 2005.
Toronto, Canada
February 10, 2021
4
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of Kinross Gold Corporation:
Opinion on Internal Control Over Financial Reporting
We have audited Kinross Gold Corporation’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income, cash flows and equity for each of the years then ended, and the related notes (collectively, the consolidated financial statements), and our report dated February 10, 2021 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
Chartered Professional Accountants, Licensed Public Accountants
Toronto, Canada
February 10, 2021
5
KINROSS GOLD CORPORATION
CONSOLIDATED BALANCE SHEETS
(expressed in millions of United States dollars, except share amounts)
As at | ||||||||||
December 31, | December 31, | |||||||||
2020 | 2019 | |||||||||
Assets | ||||||||||
Current assets | ||||||||||
Cash and cash equivalents | Note 7 | $ | 1,210.9 | $ | 575.1 | |||||
Restricted cash | Note 7 | 13.7 | 15.2 | |||||||
Accounts receivable and other assets | Note 7 | 122.3 | 137.4 | |||||||
Current income tax recoverable | 29.9 | 43.2 | ||||||||
Inventories | Note 7 | 1,072.9 | 1,053.8 | |||||||
2,449.7 | 1,824.7 | |||||||||
Non-current assets | ||||||||||
Property, plant and equipment | Note 7 | 7,653.5 | 6,340.0 | |||||||
Goodwill | Note 7 | 158.8 | 158.8 | |||||||
Long-term investments | Note 7 | 113.0 | 126.2 | |||||||
Investment in joint venture | Note 9 | 18.3 | 18.4 | |||||||
Other long-term assets | Note 7 | 537.2 | 572.7 | |||||||
Deferred tax assets | Note 18 | 2.7 | 35.2 | |||||||
Total assets | $ | 10,933.2 | $ | 9,076.0 | ||||||
Liabilities | ||||||||||
Current liabilities | ||||||||||
Accounts payable and accrued liabilities | Note 7 | $ | 479.2 | $ | 469.3 | |||||
Current income tax payable | 114.5 | 68.0 | ||||||||
Current portion of long-term debt and credit facilities | Note 12 | 499.7 | - | |||||||
Current portion of provisions | Note 14 | 63.8 | 57.9 | |||||||
Other current liabilities | Note 7 | 49.7 | 20.3 | |||||||
Deferred payment obligation | Note 6 | 141.5 | - | |||||||
1,348.4 | 615.5 | |||||||||
Non-current liabilities | ||||||||||
Long-term debt and credit facilities | Note 12 | 1,424.2 | 1,837.4 | |||||||
Provisions | Note 14 | 861.1 | 838.6 | |||||||
Long-term lease liabilities | Note 13 | 46.3 | 38.9 | |||||||
Other long-term liabilities | 102.4 | 108.5 | ||||||||
Deferred tax liabilities | Note 18 | 487.8 | 304.5 | |||||||
Total liabilities | $ | 4,270.2 | $ | 3,743.4 | ||||||
Equity | ||||||||||
Common shareholders’ equity | ||||||||||
Common share capital | Note 15 | $ | 4,473.7 | $ | 14,926.2 | |||||
Contributed surplus | 10,709.0 | 242.1 | ||||||||
Accumulated deficit | (8,562.5 | ) | (9,829.4 | ) | ||||||
Accumulated other comprehensive income (loss) | Note 7 | (23.7 | ) | (20.4 | ) | |||||
Total common shareholders’ equity | 6,596.5 | 5,318.5 | ||||||||
Non-controlling interests | 66.5 | 14.1 | ||||||||
Total equity | $ | 6,663.0 | $ | 5,332.6 | ||||||
Commitments and contingencies | Note 20 | |||||||||
Subsequent events | Note 6 and 15 | |||||||||
Total liabilities and equity | $ | 10,933.2 | $ | 9,076.0 | ||||||
Common shares | ||||||||||
Authorized | Unlimited | Unlimited | ||||||||
Issued and outstanding | Note 15 | 1,258,320,461 | 1,253,765,724 |
The accompanying notes are an integral part of these consolidated financial statements.
Signed on behalf of the Board:
/s/ Glenn A. Ives | /s/ Kerry D. Dyte | |
Glenn A. Ives | Kerry D. Dyte | |
Director | Director |
6
KINROSS GOLD CORPORATION
Consolidated Statements of Operations
(expressed in millions of United States dollars, except share and per share amounts)
Years ended | ||||||||||||
December 31, | December 31, | |||||||||||
2020 | 2019 | |||||||||||
Revenue | ||||||||||||
Metal sales | $ | 4,213.4 | $ | 3,497.3 | ||||||||
Cost of sales | ||||||||||||
Production cost of sales | 1,725.7 | 1,778.9 | ||||||||||
Depreciation, depletion and amortization | 842.3 | 731.3 | ||||||||||
Reversals of impairment charges - net | Note 8 | (650.9 | ) | (361.8 | ) | |||||||
Total cost of sales | 1,917.1 | 2,148.4 | ||||||||||
Gross profit | 2,296.3 | 1,348.9 | ||||||||||
Other operating expense | Note 7 | 186.5 | 108.5 | |||||||||
Exploration and business development | 92.5 | 113.5 | ||||||||||
General and administrative | 117.9 | 135.8 | ||||||||||
Operating earnings | 1,899.4 | 991.1 | ||||||||||
Other income - net | Note 7 | 7.4 | 72.7 | |||||||||
Finance income | 4.3 | 7.9 | ||||||||||
Finance expense | Note 7 | (112.6 | ) | (107.9 | ) | |||||||
Earnings before tax | 1,798.5 | 963.8 | ||||||||||
Income tax expense - net | Note 18 | (439.8 | ) | (246.7 | ) | |||||||
Net earnings | $ | 1,358.7 | $ | 717.1 | ||||||||
Net earnings (loss) attributable to: | ||||||||||||
Non-controlling interests | $ | 16.3 | $ | (1.5 | ) | |||||||
Common shareholders | $ | 1,342.4 | $ | 718.6 | ||||||||
Earnings per share attributable to common shareholders | ||||||||||||
Basic | $ | 1.07 | $ | 0.57 | ||||||||
Diluted | $ | 1.06 | $ | 0.57 | ||||||||
Weighted average number of common shares outstanding
(millions) |
Note 17 | |||||||||||
Basic | 1,257.2 | 1,252.3 | ||||||||||
Diluted | 1,268.0 | 1,262.3 |
The accompanying notes are an integral part of these consolidated financial statements.
7
KINROSS GOLD CORPORATION
Consolidated Statements of Comprehensive INCOME
(expressed in millions of United States dollars)
Years ended | ||||||||||||
December 31, | December 31, | |||||||||||
2020 | 2019 | |||||||||||
Net earnings | $ | 1,358.7 | $ | 717.1 | ||||||||
Other comprehensive (loss) income, net of tax: | Note 7 | |||||||||||
Items that will not be reclassified to profit or loss: | ||||||||||||
Equity investments at fair value through other comprehensive income (“FVOCI”) - net change in fair value(a) | 0.3 | 49.0 | ||||||||||
Items that are or may be reclassified to profit or loss in subsequent periods: | ||||||||||||
Cash flow hedges - effective portion of changes in fair value(b) | (27.7 | ) | 23.6 | |||||||||
Cash flow hedges - reclassified out of accumulated other comprehensive income (“AOCI”)(c) | 24.1 | 5.5 | ||||||||||
(3.3 | ) | 78.1 | ||||||||||
Total comprehensive income | $ | 1,355.4 | $ | 795.2 | ||||||||
Attributable to non-controlling interest | $ | 16.3 | $ | (1.5 | ) | |||||||
Attributable to common shareholders | $ | 1,339.1 | $ | 796.7 | ||||||||
(a) | Net of tax expense of $nil (2019 - $0.3 million). |
(b) | Net of tax (recovery) expense of $(12.5) million (2019 - $4.5 million). |
(c) | Net of tax expense of $10.4 million (2019 - $3.2 million). |
The accompanying notes are an integral part of these consolidated financial statements.
8
KINROSS GOLD CORPORATION
Consolidated Statements of Cash Flows
(expressed in millions of United States dollars)
Years ended | ||||||||||||
December 31, | December 31, | |||||||||||
2020 | 2019 | |||||||||||
Net inflow (outflow) of cash related to the following activities: | ||||||||||||
Operating: | ||||||||||||
Net earnings | $ | 1,358.7 | $ | 717.1 | ||||||||
Adjustments to reconcile net earnings to net cash provided from operating activities: | ||||||||||||
Depreciation, depletion and amortization | 842.3 | 731.3 | ||||||||||
Reversals of impairment charges - net | Note 8 | (650.9 | ) | (361.8 | ) | |||||||
Share-based compensation expense | 13.7 | 14.3 | ||||||||||
Finance expense | 112.6 | 107.9 | ||||||||||
Deferred tax expense | 217.9 | 41.1 | ||||||||||
Foreign exchange losses (gains) and other | 11.8 | (53.2 | ) | |||||||||
Reclamation expense (recovery) | 6.6 | (11.9 | ) | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable and other assets | (120.9 | ) | (64.5 | ) | ||||||||
Inventories | (6.8 | ) | 53.8 | |||||||||
Accounts payable and accrued liabilities | 279.0 | 165.9 | ||||||||||
Cash flow provided from operating activities | 2,064.0 | 1,340.0 | ||||||||||
Income taxes paid | (106.4 | ) | (115.1 | ) | ||||||||
Net cash flow provided from operating activities | 1,957.6 | 1,224.9 | ||||||||||
Investing: | ||||||||||||
Additions to property, plant and equipment | (916.1 | ) | (1,060.2 | ) | ||||||||
Interest paid capitalized to property, plant and equipment | Note 12 | (47.9 | ) | (45.0 | ) | |||||||
Acquisitions | Note 6 | (267.0 | ) | (30.0 | ) | |||||||
Net (additions to) proceeds from the sale of long-term investments and other assets | (5.9 | ) | 71.6 | |||||||||
Net proceeds from the sale of property, plant and equipment | 8.4 | 31.9 | ||||||||||
Increase in restricted cash - net | Note 12 | (23.5 | ) | (2.5 | ) | |||||||
Interest received and other - net | 2.9 | 7.6 | ||||||||||
Net cash flow used in investing activities | (1,249.1 | ) | (1,026.6 | ) | ||||||||
Financing: | ||||||||||||
Proceeds from drawdown of debt | Note 12 | 950.0 | 300.0 | |||||||||
Repayment of debt | Note 12 | (850.0 | ) | (200.0 | ) | |||||||
Interest paid | (63.1 | ) | (55.6 | ) | ||||||||
Payment of lease liabilities | (20.7 | ) | (14.3 | ) | ||||||||
Dividends paid to common shareholders | Note 15 | (75.5 | ) | - | ||||||||
Dividends paid to non-controlling interest | (6.0 | ) | (5.0 | ) | ||||||||
Other - net | (2.4 | ) | - | |||||||||
Net cash flow (used in) provided from financing activities | (67.7 | ) | 25.1 | |||||||||
Effect of exchange rate changes on cash and cash equivalents | (5.0 | ) | 2.7 | |||||||||
Increase in cash and cash equivalents | 635.8 | 226.1 | ||||||||||
Cash and cash equivalents, beginning of period | 575.1 | 349.0 | ||||||||||
Cash and cash equivalents, end of period | $ | 1,210.9 | $ | 575.1 | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
9
KINROSS GOLD CORPORATION
Consolidated Statements of Equity
(expressed in millions of United States dollars)
Years ended | ||||||||||||
December 31, | December 31, | |||||||||||
2020 | 2019 | |||||||||||
Common share capital | ||||||||||||
Balance at the beginning of the period | $ | 14,926.2 | $ | 14,913.4 | ||||||||
Transfer to contributed surplus on reduction of stated capital | Note 15 | (10,473.4 | ) | - | ||||||||
Transfer from contributed surplus on exercise of restricted shares | 7.8 | 5.3 | ||||||||||
Options exercised, including cash | 13.1 | 7.5 | ||||||||||
Balance at the end of the period | $ | 4,473.7 | $ | 14,926.2 | ||||||||
Contributed surplus | ||||||||||||
Balance at the beginning of the period | $ | 242.1 | $ | 239.8 | ||||||||
Transfer from common share capital on reduction of stated capital | Note 15 | 10,473.4 | - | |||||||||
Share-based compensation | 13.7 | 14.3 | ||||||||||
Transfer of fair value of exercised options and restricted shares | (20.2 | ) | (12.0 | ) | ||||||||
Balance at the end of the period | $ | 10,709.0 | $ | 242.1 | ||||||||
Accumulated deficit | ||||||||||||
Balance at the beginning of the period | $ | (9,829.4 | ) | $ | (10,548.0 | ) | ||||||
Dividends paid | Note 15 | (75.5 | ) | - | ||||||||
Net earnings attributable to common shareholders | 1,342.4 | 718.6 | ||||||||||
Balance at the end of the period | $ | (8,562.5 | ) | $ | (9,829.4 | ) | ||||||
Accumulated other comprehensive income (loss) | ||||||||||||
Balance at the beginning of the period | $ | (20.4 | ) | $ | (98.5 | ) | ||||||
Other comprehensive (loss) income, net of tax | (3.3 | ) | 78.1 | |||||||||
Balance at the end of the period | $ | (23.7 | ) | $ | (20.4 | ) | ||||||
Total accumulated deficit and accumulated other comprehensive income (loss) | $ | (8,586.2 | ) | $ | (9,849.8 | ) | ||||||
Total common shareholders’ equity | $ | 6,596.5 | $ | 5,318.5 | ||||||||
Non-controlling interests | ||||||||||||
Balance at the beginning of the period | $ | 14.1 | $ | 20.6 | ||||||||
Net earnings (loss) attributable to non-controlling interest | 16.3 | (1.5 | ) | |||||||||
Non-controlling interest resulting from Peak acquisition | Note 6 | 41.0 | - | |||||||||
Funding from non-controlling interest | 1.1 | - | ||||||||||
Dividends paid to non-controlling interest | (6.0 | ) | (5.0 | ) | ||||||||
Balance at the end of the period | $ | 66.5 | $ | 14.1 | ||||||||
Total equity | $ | 6,663.0 | $ | 5,332.6 | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
10
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
1. | DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS |
Kinross Gold Corporation and its subsidiaries and joint arrangements (collectively, “Kinross” or the “Company”) are engaged in gold mining and related activities, including exploration and acquisition of gold-bearing properties, extraction and processing of gold-containing ore and reclamation of gold mining properties. Kinross Gold Corporation, the ultimate parent, is a public company incorporated and domiciled in Canada with its registered office at 25 York Street, 17th floor, Toronto, Ontario, Canada, M5J 2V5. Kinross’ gold production and exploration activities are carried out principally in Canada, the United States, the Russian Federation, Brazil, Chile, Ghana and Mauritania. Gold is produced in the form of doré, which is shipped to refineries for final processing. Kinross also produces and sells a quantity of silver. The Company is listed on the Toronto Stock Exchange and the New York Stock Exchange.
In anticipation of and in response to the global COVID-19 pandemic, Kinross’ protocols and contingency plans, which the Company began implementing in late January 2020, have mitigated impacts of the pandemic to its global portfolio. All of Kinross’ mines continued production during the year ended December 31, 2020, as the Company’s ongoing response to the COVID-19 pandemic continued to maintain the safety of its global workforce and host communities while mitigating operational impacts. However, COVID-19 did partially affect overall performance, productivity rates and costs, mainly as a result of global travel constraints and the implementation of enhanced safety protocols and measures at all mines and projects.
The consolidated financial statements of the Company for the year ended December 31, 2020 were authorized for issue in accordance with a resolution of the Board of Directors on February 10, 2021.
2. | BASIS OF PRESENTATION |
These consolidated financial statements for the year ended December 31, 2020 (“financial statements”) have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.
These financial statements were prepared on a going concern basis under the historical cost method except for certain financial assets and liabilities which are measured at fair value. The Company’s significant accounting policies are presented in Note 3 and have been consistently applied in each of the periods presented other than as noted in Note 4. Significant accounting estimates, judgments and assumptions used or exercised by management in the preparation of these financial statements are presented in Note 5.
11
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
i. Principles of consolidation
The significant mining properties and entities of Kinross are listed below. All operating activities involve gold mining and exploration. Each of the significant entities has a December 31 year-end.
As at | ||||||
December 31, | December 31, | |||||
Entity | Property/ Segment | Location | 2020 | 2019 | ||
Subsidiaries: | ||||||
(Consolidated) | ||||||
Fairbanks Gold Mining, Inc. | Fort Knox | USA | 100% | 100% | ||
Kinross Brasil Mineração S.A. (“KBM”) | Paracatu | Brazil | 100% | 100% | ||
Compania Minera Maricunga (“CMM”) | Maricunga and Lobo-Marte / Corporate and Other | Chile | 100% | 100% | ||
Compania Minera Mantos de Oro (“MDO”) | La Coipa / Corporate and Other | Chile | 100% | 100% | ||
Echo Bay Minerals Company | Kettle River - Buckhorn / Corporate and Other | USA | 100% | 100% | ||
Chukotka Mining and Geological Company | Kupol | Russian Federation | 100% | 100% | ||
Northern Gold LLC | Dvoinoye/ Kupol | Russian Federation | 100% | 100% | ||
Tasiast Mauritanie Ltd. S.A. | Tasiast | Mauritania | 100% | 100% | ||
Chirano Gold Mines Ltd.(a) | Chirano | Ghana | 90% | 90% | ||
KG Mining (Bald Mountain) Inc. (“KGBM”) | Bald Mountain | USA | 100% | 100% | ||
Round Mountain Gold Corporation / | Round Mountain | USA | 100% | 100% | ||
KG Mining (Round Mountain) Inc. | ||||||
Udinsk Gold LLC(b) | Chulbatkan / Corporate and Other | Russian Federation | 100% | - | ||
Peak Gold, LLC(c) (“Peak”) | Peak / Corporate and Other | USA | 70% | - | ||
Interest in joint venture: | ||||||
(Equity accounted) | ||||||
Sociedad Contractual Minera Puren | Puren / Corporate and Other | Chile | 65% | 65% |
(a) | The Company holds a 90% interest in Chirano Gold Mines Ltd. with the Government of Ghana having the right to the remaining 10% interest. |
(b) | On January 16, 2020, the Company acquired the Chulbatkan license, containing the Udinsk development project, in Russia. See Note 6i. |
(c) | On September 30, 2020, the Company acquired a 70% interest in the Peak project in Alaska. See Note 6ii. |
12
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
(a) | Subsidiaries |
Subsidiaries are entities controlled by the Company. Control exists when an investor is exposed, or has rights, to variable returns from its involvement with an investee and has the ability to affect those returns through its power over the investee. Subsidiaries are included in the consolidated financial statements from the date control is obtained until the date control ceases. Where the Company’s interest in a subsidiary is less than 100%, the Company recognizes non-controlling interests. All intercompany balances, transactions, income, expenses, profits and losses, including unrealized gains and losses have been eliminated on consolidation.
(b) | Joint Arrangements |
The Company conducts a portion of its business through joint arrangements where the parties are bound by contractual arrangements establishing joint control and requiring unanimous consent of each of the parties regarding those activities that significantly affect the returns of the arrangement. The Company’s interest in a joint arrangement is classified as either a joint operation or a joint venture depending on its rights and obligations in the arrangement. In a joint operation, the Company has rights to its share of the assets, and obligations for its share of the liabilities, of the joint arrangement, while in a joint venture, the Company has rights to its share of the net assets of the joint arrangement. For a joint operation, the Company recognizes in the consolidated financial statements, its share of the assets, liabilities, revenue, and expenses of the joint arrangement, while for a joint venture, the Company recognizes its investment in the joint arrangement using the equity method of accounting.
(c) | Associates |
Associates are entities, including unincorporated entities such as partnerships, over which the Company has significant influence and that are neither subsidiaries nor interests in joint arrangements. Significant influence is the ability to participate in the financial and operating policy decisions of the investee without having control or joint control over those policies. In general, significant influence is presumed to exist when the Company has between 20% and 50% of voting power. Significant influence may also be evidenced by factors such as the Company’s representation on the board of directors, participation in policy-making of the investee, material transactions with the investee, interchange of managerial personnel, or the provision of essential technical information. Associates are equity accounted for from the effective date of commencement of significant influence to the date that the Company ceases to have significant influence.
Results of associates are equity accounted for using the results of their most recent annual financial statements or interim financial statements, as applicable. Losses from associates are recognized in the consolidated financial statements until the interest in the associate is written down to nil. Thereafter, losses are recognized only to the extent that the Company is committed to providing financial support to such associates.
The carrying value of the investment in an associate represents the cost of the investment, including goodwill, a share of the post-acquisition retained earnings and losses, AOCI and any impairment losses. At the end of each reporting period, the Company assesses whether there is any objective evidence that its investments in associates are impaired.
ii. Functional and presentation currency
The functional and presentation currency of the Company is the United States dollar.
Transactions denominated in foreign currencies are translated into the United States dollar as follows:
• | Monetary assets and liabilities are translated at the rates of exchange on the consolidated balance sheet date; |
• | Non-monetary assets and liabilities are translated at historical exchange rates prevailing at each transaction date; |
• | Revenue and expenses are translated at the exchange rate at the date of the transaction, except depreciation, depletion and amortization, which are translated at the rates of exchange applicable to the related assets, and share-based compensation expense, which is translated at the rates of exchange applicable on the date of grant of the share-based compensation; and |
• | Exchange gains and losses on translation are included in earnings. |
When the gain or loss on certain non-monetary items, such as long-term investments classified as and measured at FVOCI, is recognized in other comprehensive income (“OCI”), the related translation differences are also recognized in OCI.
13
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
iii. Cash and cash equivalents
Cash and cash equivalents include cash and highly liquid investments with a maturity of three months or less at the date of acquisition. Restricted cash is cash held in banks or in escrow that is not available for general corporate use. Cash and cash equivalents, and restricted cash are classified as and measured at amortized cost.
iv. Short-term investments
Short-term investments include short-term money market instruments with terms to maturity at the date of acquisition of between three and twelve months. The carrying value of short-term investments is equal to cost and accrued interest. Short-term investments are classified as and measured at amortized cost.
v. Long-term investments
Investments in entities that are not subsidiaries, joint operations, joint ventures or investments in associates are designated as financial assets at FVOCI. These equity investments are measured at fair value on acquisition and at each reporting date, with all realized and unrealized gains and losses recorded permanently in AOCI.
vi. Inventories
Inventories consisting of metal in circuit ore, metal in-process and finished metal are valued at the lower of cost or net realizable value (“NRV”). NRV is calculated as the difference between the prevailing and long-term metal price estimates, and estimated costs to complete production into a saleable form and estimated costs to sell.
Metal in circuit is comprised of ore in stockpiles and ore on heap leach pads. Ore in stockpiles is coarse ore that has been extracted from the mine and is available for further processing. Costs are added to stockpiles based on the current mining cost per tonne and removed at the average cost per tonne. Costs are added to ore on the heap leach pads based on current mining costs and removed from the heap leach pads as ounces are recovered, based on the average cost per recoverable ounce of gold on the leach pad. Ore in stockpiles not expected to be processed in the next twelve months is classified as long-term.
The quantities of recoverable gold placed on the leach pads are reconciled by comparing the grades of ore placed on the leach pads to the quantities of gold actually recovered (metallurgical balancing); however, the nature of the leaching process inherently limits the ability to precisely monitor inventory levels. As a result, the metallurgical balancing process is constantly monitored and the engineering estimates are refined based on actual results over time. Variances between actual and estimated quantities resulting from changes in assumptions and estimates that do not result in write downs to NRV are accounted for on a prospective basis. The ultimate actual recovery of gold from a leach pad will not be known until the leaching process has concluded. In the event that the Company determines, based on engineering estimates, that a quantity of gold contained in ore on leach pads is to be recovered over a period exceeding twelve months, that portion is classified as long-term.
In-process inventories represent materials that are in the process of being converted to a saleable product.
Materials and supplies are valued at the lower of average cost and NRV.
Write-downs of inventory are recognized in the consolidated statement of operations in the current period. The Company reverses inventory write downs in the event that there is a subsequent increase in NRV.
vii. Borrowing costs
Borrowing costs are generally expensed as incurred except where they relate to the financing of qualifying assets that require a substantial period of time to get ready for their intended use. Qualifying assets include the cost of developing mining properties and constructing new facilities. Borrowing costs related to qualifying assets are capitalized up to the date when the asset is ready for its intended use.
Where funds are borrowed specifically to finance a project, the amount capitalized represents the actual borrowing costs incurred net of any investment income earned on the investment of those borrowings. Where the funds used to finance a project form part of general borrowings, the amount capitalized is calculated using a weighted average of rates applicable to relevant general borrowings of the Company during the period.
14
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
viii. Business combinations
A business combination is a transaction or other event in which control over one or more businesses is obtained.
For the year ended December 31, 2019, a business was defined as an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs or other economic benefits. A business consisted of inputs and processes applied to those inputs that have the ability to create outputs that provided a return to the Company and its shareholders. A business did not need to include all of the inputs and processes that were used by the acquiree to produce outputs if the business could be integrated with the inputs and processes of the Company to continue to produce outputs.
Effective January 1, 2020, a business is defined as an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing goods and services to customers, generating investment income (such as dividends or interest) or generating other income from ordinary activities. In determining whether a particular set of activities and assets is a business, the Company assesses whether the set of assets and activities acquired includes, at a minimum, an input and substantive process and whether the acquired set has the ability to contribute to the creation of outputs. If the integrated set of activities and assets is in the exploration and development stage, and thus, may not have outputs, the Company considers other factors to determine whether the set of activities and assets is a business. Those factors include, but are not limited to, whether the set of activities and assets:
• | has begun planned principal activities; |
• | has employees, intellectual property and other inputs and processes that could be applied to those inputs to create outputs or have the ability to contribute to the creation of outputs; |
• | is pursuing a plan to produce outputs; and |
• | will be able to obtain access to customers that will purchase the outputs. |
Not all of the above factors need to be present for a particular integrated set of activities and assets in the development stage to qualify as a business.
The Company also has an option to apply a ‘concentration test’ that permits a simplified assessment of whether an acquired set of activities and assets is not a business. If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the concentration test is met, and the transaction is determined not to be a business combination.
Business acquisitions are accounted for using the acquisition method whereby acquired assets and liabilities are recorded at fair value as of the date of acquisition with the excess of the purchase consideration over such fair value being recorded as goodwill and allocated to cash generating units (“CGUs”). Non-controlling interest in an acquisition may be measured at either fair value or at the non-controlling interest’s proportionate share of the fair value of the acquiree’s net identifiable assets.
If the fair value of the net assets acquired exceeds the purchase consideration, the difference is recognized immediately as a gain in the consolidated statement of operations.
Where a business combination is achieved in stages, previously held equity interests in the acquiree are re-measured at their acquisition-date fair value and any resulting gain or loss is recognized in the consolidated statement of operations.
Acquisition related costs are expensed during the period in which they are incurred, except for the cost of debt or equity instruments issued in relation to the acquisition which is included in the carrying amount of the related instrument.
Certain fair values may be estimated at the acquisition date pending confirmation or completion of the valuation process. Where provisional values are used in accounting for a business combination, they are adjusted retrospectively in subsequent periods. However, the measurement period will not exceed one year from the acquisition date.
If the assets acquired are not a business, the transaction is accounted for as an asset acquisition.
ix. Goodwill
Business acquisitions are accounted for using the acquisition method whereby acquired assets and liabilities are recorded at fair value as of the date of acquisition with the excess of any acquisition amount over such fair value being recorded as goodwill and allocated to CGUs. CGUs are the smallest identifiable group of assets, liabilities and associated goodwill that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Each individual mineral property that is an operating or development stage mine is typically a CGU.
15
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Goodwill arises principally because of the following factors: (1) the going concern value of the Company’s capacity to sustain and grow by replacing and augmenting mineral reserves through completely new discoveries; (2) the ability to capture buyer-specific synergies arising upon a transaction; (3) the optionality (real option value associated with the portfolio of acquired mines as well as each individual mine) to develop additional higher-cost mineral reserves, to intensify efforts to develop the more promising acquired properties and to reduce efforts at developing the less promising acquired properties in the future (this optionality may result from changes in the overall economics of an individual mine or a portfolio of mines, largely driven by changes in the gold price); and (4) the requirement to record a deferred tax liability for the difference between the assigned values and the tax bases of the assets acquired and liabilities assumed in a business combination.
x. Exploration and evaluation (“E&E”) costs
E&E costs are those costs required to find a mineral property and determine its commercial viability. E&E costs include costs to establish an initial mineral resource and determine whether inferred mineral resources can be upgraded to measured and indicated mineral resources and whether measured and indicated mineral resources can be converted to proven and probable reserves.
E&E costs consist of:
• | gathering exploration data through topographical and geological studies; |
• | exploratory drilling, trenching and sampling; |
• | determining the volume and grade of the resource; |
• | test work on geology, metallurgy, mining, geotechnical and environmental; and |
• | conducting engineering, marketing and financial studies. |
Project costs in relation to these activities are expensed as incurred until such time as the Company expects that mineral resources will be converted to mineral reserves within a reasonable period. Thereafter, costs for the project are capitalized prospectively as capitalized E&E costs in property, plant and equipment.
The Company also recognizes E&E costs as assets when acquired as part of a business combination, or asset purchase. These assets are recognized at fair value. Acquired E&E costs consist of the fair value of:
• | estimated potential ounces, and |
• | exploration properties. |
Acquired or capitalized E&E costs for a project are classified as such until the project demonstrates technical feasibility and commercial viability. Upon demonstrating technical feasibility and commercial viability, and subject to an impairment analysis, capitalized E&E costs are transferred to capitalized development costs within property, plant and equipment. Technical feasibility and commercial viability generally coincides with the establishment of proven and probable mineral reserves; however, this determination may be impacted by management’s assessment of certain modifying factors including: legal, environmental, social and governmental factors.
xi. Property, plant and equipment
Property, plant and equipment are recorded at cost and carried net of accumulated depreciation, depletion and amortization and accumulated impairment losses. The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into operation, the estimate of reclamation and remediation costs, and, for qualifying assets, capitalized borrowing costs.
Costs to acquire mineral properties are capitalized and represent the property’s fair value at the time it was acquired, either as an individual asset purchase or as part of a business combination.
Interest expense attributable to the cost of developing mining properties and to constructing new facilities is capitalized until assets are ready for their intended use.
Acquired or capitalized E&E costs may be included within mineral interests in development and operating properties or pre-development properties depending upon the nature of the property to which the costs relate.
16
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Repairs and maintenance costs are expensed as incurred. However, expenditures on major maintenance rebuilds or overhauls are capitalized when it is probable that the expenditures will extend the productive capacity or useful life of an asset.
(a) | Asset categories |
The Company categorizes property, plant and equipment based on the type of asset and/or the stage of operation or development of the property.
Land, plant and equipment includes land, mobile and stationary equipment, and refining and processing facilities for all properties regardless of their stage of development or operation.
Mineral interests consist of:
• | Development and operating properties, which include capitalized development and stripping costs, cost of assets under construction, E&E costs and mineral interests for those properties currently in operation, for which development has commenced, or for which proven and probable reserves have been declared; and |
• | Pre-development properties, which include E&E costs and mineral interests for those properties for which development has not commenced. |
(b) | Depreciation, depletion and amortization |
For plant and other facilities, stripping costs, reclamation and remediation costs, production stage mineral interests and plant expansion costs, the Company uses the units-of-production (“UOP”) method for determining depreciation, depletion and amortization, net of residual value. The expected useful lives used in the UOP calculations are determined based on the facts and circumstances associated with the mineral interest. The Company evaluates the proven and probable reserves at least on an annual basis and adjusts the UOP calculation to correspond with the changes in reserves. The expected useful life used in determining UOP does not exceed the estimated life of the ore body based on recoverable ounces to be mined from estimated proven and probable reserves. Any changes in estimates of useful lives are accounted for prospectively from the date of the change.
Stripping and other costs incurred in a pit expansion are capitalized and amortized using the UOP method based on recoverable ounces to be mined from estimated proven and probable reserves contained in the pit expansion.
Land is not depreciated.
Mobile and other equipment are generally depreciated, net of residual value, using the straight-line method, over the estimated useful life of the asset. Useful lives for mobile and other equipment range from 2 to 10 years, but do not exceed the related estimated mine life based on proven and probable reserves.
The Company reviews useful lives and estimated residual values of its property, plant and equipment annually.
Acquired or capitalized E&E costs and assets under construction are not depreciated. These assets are depreciated when they are ready for their intended use.
(c) | Derecognition |
The carrying amount of an item of property, plant and equipment is derecognized on disposal of the asset or when no future economic benefits are expected to accrue to the Company from its continued use. Any gain or loss arising on derecognition is included in the consolidated statement of operations in the period in which the asset is derecognized. The gain or loss is determined as the difference between the carrying value and the net proceeds on the sale of the assets, if any, at the time of disposal.
xii. Valuation of Goodwill and Long-lived Assets
Goodwill is tested for impairment on an annual basis as at December 31, and at any other time if events or changes in circumstances indicate that the recoverable amount of a CGU containing goodwill has been reduced below its carrying amount.
The carrying value of property, plant and equipment is reviewed each reporting period to determine whether there is any indication of impairment or reversal of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. In addition, capitalized E&E costs are assessed for impairment upon demonstrating the technical feasibility and commercial viability of a project. For such non-current assets, the recoverable amount is determined for an individual asset unless the asset does not generate cash inflows that are independent of those generated from other assets or groups of assets, in which case, the individual assets are grouped together into CGUs for impairment testing purposes.
17
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
If the carrying amount of the CGU or asset exceeds its recoverable amount, an impairment is considered to exist and an impairment loss is recognized in the consolidated statement of operations to reduce the CGU or asset’s carrying value to its recoverable amount.
For property, plant and equipment and other long-lived assets, a previously recognized impairment loss is reversed if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited to the carrying value that would have been determined, net of any applicable depreciation, had no impairment charge been recognized previously.
The recoverable amount of a CGU or asset is the higher of its fair value less cost of disposal and its value in use.
Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties. Fair value for mineral assets is generally determined as the present value of the estimated future cash flows expected to arise from the continued use of the asset, including any expansion prospects, and its eventual disposal, using assumptions that an independent market participant may take into account. These cash flows are discounted by an appropriate discount rate to arrive at a net present value or net asset value (“NAV”) of the asset.
Value in use is determined as the present value of the estimated future cash flows expected to arise from the continued use of the asset in its present form and its eventual disposal. Value in use is determined by applying assumptions specific to the Company’s continued use of the asset and does not take into account assumptions of significant future enhancements of an asset’s performance or capacity to which the Company is not committed.
Estimates of expected future cash flows reflect estimates of future revenues, cash costs of production and capital expenditures contained in the Company’s long-term life of mine (“LOM”) plans, which are updated for each CGU on an annual basis.
xiii. Leases
Right-of-use assets and lease liabilities are recognized at the commencement date of a lease. Lease liabilities are initially measured at the present value of lease payments to be paid after the lease’s commencement date, discounted using the interest rate implicit in the lease, or if not readily determinable, the Company’s incremental borrowing rate.
Right-of-use assets are initially measured at cost, which consists of the initial amount of the lease liability adjusted for any lease payments made on or before the lease’s commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle or restore the leased asset, less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the useful life of the asset or the term of the lease. If a purchase option is expected to be exercised, the asset is amortized over its useful life.
Lease liabilities are subsequently measured at amortized cost using the effective interest method and are re-measured if and when there is a change in future lease payments arising from a change in an index or rate, or if and when there is a change in the assessment of whether a purchase, extension or termination option is likely to be exercised.
Lease payments for short-term leases, which have a lease term of 12 months or less, leases of low-value assets, which have an underlying asset value, when new, of $5,000 or less, as well as leases with variable lease payments are recognized as an expense over the term of such leases.
xiv. Financial instruments and hedging activity
(a) | Financial instrument classification and measurement |
Financial assets are classified according to their contractual cash flow characteristics and the business models under which they are held. On initial recognition, a financial asset is classified as: amortized cost, fair value through profit and loss (“FVPL”) or FVOCI.
A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as FVPL:
• | it is held with the objective of collecting contractual cash flows; and |
• | its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. |
18
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to measure the investment at FVOCI whereby changes in the investment’s fair value (realized and unrealized) will be recognized permanently in OCI with no reclassification to profit or loss. The election is made on an investment-by-investment basis.
All financial assets not classified as amortized cost or FVOCI are classified as and measured at FVPL. This includes all derivative assets. On initial recognition, a financial asset that otherwise meets the requirements to be measured at amortized cost or FVOCI may be irrevocably designated as FVPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
Financial instruments are measured on initial recognition at fair value, plus, in the case of financial instruments other than those classified as FVPL, directly attributable transaction costs. Measurement of financial assets in subsequent periods depends on whether the financial asset has been classified as amortized cost, FVPL or FVOCI. Measurement of financial liabilities subsequent to initial recognition depends on whether they are classified as amortized cost or FVPL. Financial assets and financial liabilities classified as amortized cost are measured subsequent to initial recognition using the effective interest method.
Loss allowances for ‘expected credit losses’ are recognized on financial assets measured at amortized cost, contract assets and investments in debt instruments measured at FVOCI, but not to equity investments. A loss event is not required to have occurred before a credit loss is recognized.
The Company has classified and measured its financial instruments as described below:
• | Cash and cash equivalents, restricted cash and short-term investments are classified as and measured at amortized cost. |
• | Trade receivables and certain other assets are classified as and measured at amortized cost. |
• | Long-term investments in equity securities, where the Company cannot exert significant influence, are classified as and measured at FVOCI. |
• | Accounts payable and accrued liabilities and long-term debt are classified as and measured at amortized cost. |
• | Derivative assets and liabilities including derivative financial instruments that do not qualify as hedges, or are not designated as hedges, and are classified as and measured at FVPL. |
(b) | Hedges |
The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objectives and strategies for undertaking hedge transactions. This process includes linking all derivatives to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. Hedge effectiveness is assessed based on the degree to which the cash flows from the derivative contracts are expected to offset the cash flows of the underlying position or transaction being hedged. At the time of inception of the hedge and on an ongoing basis, the Company assesses whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.
Derivative contracts that have been designated as cash flow hedges have been entered into in order to effectively establish prices for future production of metals, to hedge exposure to exchange rate fluctuations of foreign currency denominated settlement of capital and operating expenditures, to establish prices for future purchases of energy or to hedge exposure to interest rate fluctuations. Unrealized gains or losses arising from changes in the fair value of these contracts are recorded in OCI, net of tax, and are included in earnings when the underlying hedged transaction, identified at the contract inception, is completed, unless such hedged transaction results in the recognition of a non-financial asset. Any ineffective portion of a hedge relationship is recognized immediately in earnings. The Company matches the realized gains or losses on contracts designated as cash flow hedges with the hedged expenditures at the maturity of the contracts.
When derivative contracts designated as cash flow hedges have been terminated or cease to be effective prior to maturity and no longer qualify for hedge accounting, any gains or losses recorded in OCI up until the time the contracts do not qualify for hedge accounting, remain in OCI. These amounts recorded in OCI are recognized in earnings in the period in which the underlying hedged transaction is completed. Gains or losses arising subsequent to the derivative contracts not qualifying for hedge accounting are recognized in earnings in the period in which they occur.
For hedges that do not qualify for hedge accounting, gains or losses are recognized in earnings in the current period.
19
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
xv. Share-based payments
The Company has a number of equity-settled and cash-settled share-based compensation plans under which the Company issues either equity instruments or makes cash payments based on the value of the underlying equity instrument of the Company. The Company’s share-based compensation plans are comprised of the following:
Share Option Plan: Stock options are generally equity-settled. The fair value of stock options at the grant date is estimated using the Black-Scholes option pricing model. Compensation expense is recognized over the stock option vesting period based on the number of options estimated to vest. Management estimates the number of awards likely to vest at the time of a grant and at each reporting date up to the vesting date. Annually, the estimated forfeiture rate is adjusted for actual forfeitures in the period. On exercise of the vested options, either shares are issued from treasury, or the options are cancelled and a cash payment equal to the ‘in-the-money’ value of the options is made.
Restricted Share Plan: Restricted share units (“RSUs”) and Restricted performance share units (“RPSUs”) are granted under the Restricted Share Plan.
Restricted Share Unit Plan (Cash-Settled): Cash-settled RPSUs are granted under the Restricted Share Unit Plan (Cash-Settled).
Both RSUs and RPSUs are awarded to certain employees as a percentage of long-term incentive awards.
(a) | RSUs may be equity or cash-settled and are recorded at fair value based on the market value of the shares at the grant date. The Company’s compensation expense is recognized over the vesting period based on the number of units estimated to vest. Management estimates the number of awards likely to vest on grant and at each reporting date up to the vesting date. The estimated forfeiture rate is adjusted for actual forfeitures in each reporting period. On vesting of equity-settled RSUs, shares are generally issued from treasury. Cash-settled RSUs are accounted for as a liability at fair value and re-measured each period based on the current market value of the underlying stock at period end, with changes in the liability recorded as compensation expense each period. |
(b) | RPSUs are equity-settled and are subject to certain vesting requirements based on performance criteria over the vesting period established by the Company. RPSUs are recorded at fair value as follows: The portion of the RPSUs related to market conditions are recorded at fair value based on the application of a Monte Carlo pricing model at the date of grant and the portion related to non-market conditions is fair valued based on the market value of the shares at the date of grant. The Company’s compensation expense is recognized over the vesting period based on the number of units estimated to vest. Management estimates the number of awards likely to vest on grant and at each reporting date up to the vesting date. The estimated forfeiture rate is adjusted for actual forfeitures in each reporting period. On vesting of RPSUs, shares are generally issued from treasury. |
Deferred Share Unit Plan: Deferred share units (“DSUs”) are cash-settled and accounted for as a liability at fair value which is based on the market value of the shares at the grant date. The fair value of the liability is re-measured each period based on the current market value of the underlying stock at period end and any changes in the liability are recorded as compensation expense each period.
Employee Share Purchase Plan: The Company’s contribution to the employee Share Purchase Plan (“SPP”) is recorded as compensation expense on a payroll cycle basis as the employer’s obligation to contribute is incurred. The cost of the common shares purchased under the SPP are either based on the weighted average closing price of the last twenty trading sessions prior to the end of the period for shares issued from treasury, or are based on the price paid for common shares purchased in the open market.
xvi. Metal sales
Metal sales includes sales of refined gold and silver and doré, which are generally physically delivered to customers in the period in which they are produced, with their sales price based on prevailing spot market metal prices. In order to manage short-term metal price risk, the Company may enter into derivative contracts in relation to metal sales that it believes are highly likely to occur within a given quarter. No such contracts were outstanding at December 31, 2020 or December 31, 2019.
Revenue from metal sales is recognized when control over the metal is transferred to the customer. Transfer of control generally occurs when the refined gold, silver or doré has been accepted by the customer. Once the customer has accepted the metals, the significant risks and rewards of ownership have typically been transferred and the customer is able to direct the use of and obtain substantially all of the remaining benefits from the metals. On transfer of control, revenue and related costs can be measured reliably and it is probable that the economic benefits associated with the transaction will flow to the Company as payment is received on the date of or within a few days of transfer of control.
20
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
The Company manages and reviews its operations by geographical location and managerial structure. For detailed information about reportable segments and disaggregated revenue, see Note 19. All reportable segments principally generate revenue from metal sales.
xvii. Provision for reclamation and remediation
The Company records a liability and corresponding asset for the present value of the estimated costs of legal and constructive obligations for future site reclamation and closure activities where the liability is more likely than not to exist and a reasonable estimate can be made of the obligation. The estimated present value of the obligation is reassessed on an annual basis or when new material information becomes available. Increases or decreases to the obligation usually arise due to changes in legal or regulatory requirements, the extent of environmental remediation required, methods of reclamation, cost estimates, or discount rates. Changes to the provision for reclamation and remediation obligations related to operating mines, which are not the result of current production of inventory, are recorded with an offsetting change to the related asset. For properties where mining activities have ceased or are in reclamation, changes are charged directly to earnings. The present value is determined based on current market assessments of the time value of money using discount rates specific to the country in which the asset or reclamation site is located and is determined as the risk-free rate of borrowing approximated by the yield on sovereign debt for that country, with a maturity approximating the timing of cash flows. The periodic unwinding of the discounted obligation is recognized in the consolidated statement of operations as a finance expense.
xviii. Income tax
The income tax expense or benefit for the period consists of two components: current and deferred. Income tax expense is recognized in the consolidated statement of operations except to the extent it relates to a business combination or items recognized directly in equity.
Current tax is the expected tax payable or receivable on the taxable profit or loss for the year. Current tax is calculated using tax rates and laws that were enacted or substantively enacted at the balance sheet date in each of the jurisdictions and includes any adjustments for taxes payable or recovery in respect of prior periods.
Deferred tax is recognized in respect of temporary differences between the carrying amount of assets and liabilities in the consolidated balance sheet and the corresponding tax bases used in the computation of taxable profit. Deferred tax is calculated based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates that are expected to apply in the year of realization or settlement based on tax rates and laws enacted or substantively enacted at the balance sheet date.
Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax liabilities are recognized for taxable temporary differences arising on investments in subsidiaries, associates and joint ventures except where the reversal of the temporary difference can be controlled and it is probable that the difference will not reverse in the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences, carryforward of unused tax credits and unused tax losses to the extent it is probable future taxable profits will be available against which they can be utilized. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax liabilities are not recognized on temporary differences that arise from goodwill which is not deductible for tax purposes. Deferred tax assets and liabilities are not recognized in respect of temporary differences that arise on initial recognition of assets and liabilities acquired other than in a business combination.
Deferred tax assets and liabilities are offset where they relate to income taxes levied by the same taxation authority and the Company has the legal right and intent to offset.
xix. Earnings (loss) per share
Earnings (loss) per share calculations are based on the weighted average number of common shares and common share equivalents issued and outstanding during the period. Basic earnings (loss) per share amounts are calculated by dividing net earnings (loss) attributable to common shareholders for the period by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share amounts are calculated by dividing net earnings (loss) attributable to common shareholders for the period by the diluted weighted average shares outstanding during the period.
21
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Diluted earnings per share is calculated using the treasury method. The treasury method, which assumes that outstanding stock options, warrants, RSUs and RPSUs with an average exercise price below the market price of the underlying shares, are exercised and the assumed proceeds are used to repurchase common shares of the Company at the average market price of the common shares for the period.
4. | CHANGES IN SIGNIFICANT ACCOUNTING POLICIES |
Effective January 1, 2020, the Company adopted amendments to IFRS 3, which amended the definition of a business. This amended definition requires a business to include an input and a substantive process that together significantly contribute to the ability to create outputs. The definition of ‘outputs’ was amended to focus on goods and services provided to customers, generating investment income and other income, and it excludes returns in the form of lower costs and economic benefits. See Note 3viii for details of the accounting policy. These amendments were applied to the acquisitions of the Chulbatkan license and 70% interest in the Peak project. See Note 6.
5. | SIGNIFICANT JUDGMENTS, ESTIMATES AND ASSUMPTIONS |
The preparation of the Company’s financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are continually evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results could differ from these estimates.
i. | Significant Judgments in Applying Accounting Policies |
The areas which require management to make significant judgments in applying the Company’s accounting policies in determining carrying values include, but are not limited to:
(a) | Mineral Reserves and Mineral Resources |
The information relating to the geological data on the size, depth and shape of the ore body requires complex geological judgments to interpret the data. Changes in the proven and probable mineral reserves or measured and indicated and inferred mineral resources estimates may impact the carrying value of property, plant and equipment, goodwill, reclamation and remediation obligations, recognition of deferred tax amounts and depreciation, depletion and amortization.
(b) | Depreciation, depletion and amortization |
Significant judgment is involved in the determination of useful lives and residual values for the computation of depreciation, depletion and amortization and no assurance can be given that actual useful lives and residual values will not differ significantly from current assumptions.
(c) | Taxes |
The Company is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the provision for income taxes, due to the complexity of legislation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business.
ii. | Significant Accounting Estimates and Assumptions |
The areas which require management to make significant estimates and assumptions in determining carrying values include, but are not limited to:
(a) | Mineral Reserves and Mineral Resources |
Proven and probable mineral reserves are the economically mineable parts of the Company’s measured and indicated mineral resources demonstrated by at least a preliminary feasibility study. The Company estimates its proven and probable mineral reserves and measured and indicated and inferred mineral resources based on information compiled by appropriately qualified persons. The estimation of future cash flows related to proven and probable mineral reserves is based upon factors such as estimates of commodity prices, foreign exchange rates, future capital requirements and production costs along with geological assumptions and judgments made in estimating the size and grade of the ore body. Changes in the proven and probable mineral reserves or measured and indicated and inferred mineral resources estimates may impact the carrying value of property, plant and equipment, goodwill, reclamation and remediation obligations, recognition of deferred tax amounts and depreciation, depletion and amortization.
22
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
(b) | Purchase Price Allocation |
Applying the acquisition method to business combinations requires each identifiable asset and liability to be measured at its acquisition-date fair value. The excess, if any, of the fair value of consideration over the fair value of the net identifiable assets acquired is recognized as goodwill. The determination of the acquisition-date fair values often requires management to make assumptions and estimates about future events. The assumptions and estimates relating to determining the fair value of property, plant and equipment acquired generally require a high degree of judgment, and include estimates of mineral reserves acquired, future metal prices and discount rates. Changes in any of the assumptions or estimates used in determining the fair value of acquired assets and liabilities could affect the amounts assigned to assets, liabilities and goodwill in the purchase price allocation.
(c) | Depreciation, depletion and amortization |
Plants and other facilities used directly in mining activities are depreciated using the UOP method over a period not to exceed the estimated life of the ore body based on recoverable ounces to be mined from proven and probable reserves. Mobile and other equipment is generally depreciated, net of residual value, on a straight-line basis, over the useful life of the equipment but does not exceed the related estimated life of the mine based on proven and probable reserves.
The calculation of the UOP rate, and therefore the annual depreciation, depletion and amortization expense, could be materially affected by changes in the underlying estimates. Changes in estimates can be the result of actual future production differing from current forecasts of future production, expansion of mineral reserves through exploration activities, differences between estimated and actual costs of mining and differences in gold price used in the estimation of mineral reserves.
(d) | Valuation of goodwill and long-lived assets |
The assessment of fair values, including those of the CGUs for purposes of testing goodwill for potential impairment and long-lived assets for potential impairment or reversal of impairment, require the use of estimates and assumptions for recoverable production, future capital requirements and operating performance, as contained in the Company’s LOM plans, as well as future and long-term commodity prices, discount rates, NAV multiples, and foreign exchange rates. Changes in any of the assumptions or estimates used in determining the fair value of goodwill or other long-lived assets could impact the impairment analysis.
The Company’s LOM plans are based on detailed research, analysis and modeling to maximize the NAV of each CGU. As such, these plans consider the optimal level of investment, overall production levels and sequence of extraction taking into account all relevant characteristics of the ore body, including waste to ore ratios, ore grades, haul distances, chemical and metallurgical properties impacting process recoveries, capacities of available extraction, haulage and processing equipment, and other factors. Therefore, the LOM plan is an appropriate basis for forecasting production output in each future year and the related production costs and capital expenditures. The LOM plans have been determined using cash flow projections from financial budgets approved by senior management covering a 4 year to 17 year period.
Projected future revenues reflect the forecast future production levels at each of the Company’s CGUs as detailed in the LOM plans. These forecasts may include the production of mineralized material that does not currently qualify for inclusion in mineral reserve or mineral resource classification. This is consistent with the methodology used to measure value beyond proven and probable reserves when allocating the purchase price of a business combination to acquired mining assets. The fair value arrived at as described above, is the Company’s estimate of fair value for accounting purposes and is not a “preliminary assessment” as defined in Canadian Securities Administrators’ National Instrument 43-101 “Standards of Disclosure for Mineral Projects”.
23
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Projected future revenues also reflect the Company’s estimates of future metals prices, which are determined based on current prices, forward prices and forecasts of future prices prepared by industry analysts. These estimates often differ from current price levels, but the methodology used is consistent with how a market participant would assess future metals prices. For the 2020 annual analysis, estimated 2021, 2022 and long-term gold prices of $1,700, $1,700, and $1,500 per ounce, respectively, and short-term and long-term silver prices of $20 were used. For the 2019 annual analysis, estimated short-term and long-term prices of gold and silver of $1,400 per ounce and $17.50 per ounce, respectively, were used.
The Company’s estimates of future cash costs of production and capital expenditures are based on the LOM plans for each CGU. Costs incurred in currencies other than the U.S. dollar are translated to U.S. dollar equivalents based on long-term forecasts of foreign exchange rates, on a currency by currency basis, obtained from independent sources of economic data. Oil prices are a significant component of cash costs of production and are estimated based on the current price, forward prices, and forecasts of future prices from third party sources. For the 2020 annual analysis, estimated short-term and long-term oil prices of $55 per barrel were used. For the 2019 annual analysis, estimated short-term and long-term oil prices of $60 per barrel were used.
The discount rate applied to present value the net future cash flows is based on a real weighted average cost of capital by country to account for geopolitical risk. For the 2020 annual analysis, real discount rates of between 3.61% and 6.82% were used for the CGUs tested. For the CGUs tested in the 2019 annual analysis, real discount rates of between 3.33% and 6.97% were used.
Since public gold companies typically trade at a market capitalization that is based on a multiple of their underlying NAV, a market participant would generally apply a NAV multiple when estimating the fair value of a gold mining property. Consequently, where applicable, the Company estimates the fair value of each CGU by applying a market NAV multiple to the NAV of each CGU.
When selecting NAV multiples to arrive at fair value, the Company considered the trading prices and NAV estimates of comparable gold mining companies as at December 31, 2020 in respect of the fair value determinations at that date, which ranged from 0.4 to 1.5. NAV multiples observed at December 31, 2019 were in the range of 0.8 to 1.7. The selected ranges of multiples applied to each CGU, which may be different from the ranges noted above, took into consideration, among other factors: expected production growth in the near term; average cash costs over the life of the mine; potential remaining mine life; and stage of development of the asset.
(e) | Inventories |
Expenditures incurred, and depreciation, depletion and amortization of assets used in mining and processing activities are deferred and accumulated as the cost of ore in stockpiles, ore on leach pads, in-process and finished metal inventories. These deferred amounts are carried at the lower of average cost or NRV. Write-downs, and subsequent reversals thereof, of ore in stockpiles, ore on leach pads, in-process and finished metal inventories resulting from NRV impairments are reported as a component of current period costs. The primary factors that influence the need to record write-downs and related reversals include prevailing and long-term metal prices and prevailing costs for production inputs such as labour, fuel and energy, materials and supplies, as well as realized ore grades and actual production levels.
Costs are attributed to the leach pads based on current mining costs, including applicable depreciation, depletion and amortization relating to mining operations incurred up to the point of placing the ore on the pad. Costs are removed from the leach pad based on the average cost per recoverable ounce of gold on the leach pad as the gold is recovered. Estimates of recoverable gold on the leach pads are calculated from the quantities of ore placed on the pads, the grade of ore placed on the leach pads and an estimated percentage of recovery. Timing and ultimate actual recovery of gold contained on leach pads can vary significantly from the estimates. The quantities of recoverable gold placed on the leach pads are reconciled to the quantities of gold actually recovered (metallurgical balancing), by comparing the grades of ore placed on the leach pads to actual ounces recovered. The nature of the leaching process inherently limits the ability to precisely monitor inventory levels. As a result, the metallurgical balancing process is constantly monitored and the engineering estimates are refined based on actual results over time. The ultimate actual recovery of gold from a pad will not be known until the leaching process is completed.
The allocation of costs to ore in stockpiles, ore on leach pads and in-process inventories and the determination of NRV involve the use of estimates. There is a high degree of judgment in estimating future costs, future production levels, forecasted usage of supplies inventory, proven and probable reserves estimates, gold and silver prices, and the ultimate estimated recovery for ore on leach pads. There can be no assurance that actual results will not differ significantly from estimates used in the determination of the carrying value of inventories.
24
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
(f) | Provision for reclamation and remediation |
The Company assesses its provision for reclamation and remediation on an annual basis or when new material information becomes available. Mining and exploration activities are subject to various laws and regulations governing the protection of the environment. In general, these laws and regulations are continually changing and the Company has made, and intends to make in the future, expenditures to comply with such laws and regulations. Accounting for reclamation and remediation obligations requires management to make estimates of the future costs the Company will incur to complete the reclamation and remediation work required to comply with existing laws and regulations at each mining operation. Actual costs incurred may differ from those amounts estimated. Also, future changes to environmental laws and regulations could increase the extent of reclamation and remediation work required to be performed by the Company. Increases in future costs could materially impact the amounts charged to operations for reclamation and remediation. The provision represents management’s best estimate of the present value of the future reclamation and remediation obligation. The actual future expenditures may differ from the amounts currently provided.
(g) | Deferred taxes |
The Company recognizes the deferred tax benefit related to deferred income and resource tax assets to the extent recovery is probable. Assessing the recoverability of deferred income tax assets requires management to make estimates of future taxable profit. To the extent that future cash flows and taxable profit differ significantly from estimates, the ability of the Company to realize the net deferred tax assets recorded at the balance sheet date could be impacted. In addition, future changes in tax laws could limit the ability of the Company to obtain tax deductions in future periods from deferred income and resource tax assets.
(h) | Contingencies |
Due to the size, complexity and nature of the Company’s operations, various legal and tax matters are outstanding from time to time. Contingencies can be possible assets or liabilities arising from past events which, by their nature, will only be resolved when one or more future events not wholly within our control occur or fail to occur. The assessment of such contingencies involves the use of significant judgment and estimates. In the event that management’s estimate of the future resolution of these matters changes, the Company will recognize the effects of the changes in its consolidated financial statements on the date such changes occur.
25
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
6. | ACQUISITIONS AND DISPOSITIONS |
i. | Acquisition of Chulbatkan license |
On July 31, 2019, the Company announced an agreement to acquire the Chulbatkan license, containing the Udinsk development project, located in Khabarovsk Krai, Far East Russia, from N-Mining Limited (“N-Mining”), for total fixed consideration of $283.0 million. In addition, N-Mining is entitled to receive an economic participation equivalent to a 1.5% Net Smelter Return (“NSR”) royalty on future production from this Chulbatkan license, as well as $50 per ounce of future proven and probable reserves beyond the first 3.25 million of declared proven and probable ounces. Kinross will retain the right to buy-back one-third of the 1.5% NSR royalty for $10 million, subject to certain gold price related adjustments, at any time within 24 months of closing.
On January 16, 2020, the Company closed the acquisition. In accordance with an amended acquisition agreement, the first installment of $141.5 million, representing 50% of the $283.0 million fixed purchase price, plus ordinary course net working capital adjustments of $3.1 million, were paid in cash. The remaining 50% was recorded as a deferred payment obligation on the consolidated balance sheet. On January 15, 2021, in accordance with a further amended acquisition agreement to settle 100% of the final installment in cash instead of 60-100% in Kinross shares, the Company paid the remaining $141.5 million in cash.
The acquisition was accounted for as an asset acquisition, with the total purchase price of $290.5 million comprised of the $283.0 million fixed purchase price, plus $3.1 million of net working capital adjustments and transaction costs of $4.4 million, allocated as follows:
Purchase price allocation | ||||
Mineral interests - pre-development properties | $ | 278.9 | ||
Land, plant and equipment | 8.0 | |||
Total property, plant and equipment | 286.9 | |||
Net working capital | 3.6 | |||
Total net assets acquired | $ | 290.5 |
ii. | Acquisition of 70% interest in the Peak development project |
On September 30, 2020, the Company acquired a 70% interest in the Peak project in Alaska, which was 40% owned by Royal Alaska, LLC (“Royal Alaska”), a subsidiary of Royal Gold, Inc. (“Royal Gold”) and 60% owned by CORE Alaska, LLC (“CORE Alaska”), a subsidiary of Contango ORE, Inc. (“Contango”), for total cash consideration of $93.7 million. Kinross purchased 40% of Peak by acquiring Royal Alaska from Royal Gold for total cash consideration of $49.2 million, and purchased an additional 30% of Peak from CORE Alaska for total consideration of $44.5 million. The cash consideration paid to Contango includes a $1.2 million reimbursement prepayment for a new royalty on Peak silver revenues.
The acquisition was accounted for as an asset acquisition with the total purchase price of $96.9 million, comprised of cash payments of $93.7 million and total transaction costs of $3.2 million, allocated as follows:
Purchase price allocation | ||||
Mineral interests - pre-development properties | $ | 136.5 | ||
Land, plant and equipment | 0.2 | |||
Total property, plant and equipment | 136.7 | |||
Other assets - net | 1.2 | |||
Non-controlling interest(a) | (41.0 | ) | ||
Total net assets acquired | $ | 96.9 |
(a) | Non-controlling interest has been recorded related to the 30% interest of Peak Gold, LLC that the Company did not acquire. |
iii. | Disposition of royalty portfolio |
On December 2, 2019, the Company entered into an agreement with Maverix Metals Inc. (“Maverix”) to sell a royalty portfolio of precious metals royalties.
On December 19, 2019, the Company completed the sale for total consideration of $73.9 million, including $25.0 million in cash and approximately 11.2 million common shares, representing 9.4% of the issued and outstanding common shares, of Maverix. The Company recognized a gain on disposition of $72.7 million in other income in connection with the sale. See Note 7xiii.
26
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
7. | CONSOLIDATED FINANCIAL STATEMENT DETAILS |
Consolidated Balance Sheets
i. | Cash and cash equivalents: |
December 31, | December 31, | |||||||
2020 | 2019 | |||||||
Cash on hand and balances with banks | $ | 562.0 | $ | 305.6 | ||||
Short-term deposits | 648.9 | 269.5 | ||||||
$ | 1,210.9 | $ | 575.1 |
ii. | Restricted cash: |
December 31, | December 31, | |||||||
2020 | 2019 | |||||||
Restricted cash(a) | $ | 13.7 | $ | 15.2 |
(a) | Restricted cash relates to loan escrow judicial deposits and environmental indemnity deposits. |
iii. | Accounts receivable and other assets: |
December 31, | December 31, | |||||||
2020 | 2019 | |||||||
Trade receivables | $ | 8.1 | $ | 6.9 | ||||
Prepaid expenses | 21.6 | 25.2 | ||||||
VAT receivable | 46.6 | 69.6 | ||||||
Deposits | 28.9 | 10.5 | ||||||
Unrealized fair value of derivative assets(a) | 6.5 | 7.2 | ||||||
Other | 10.6 | 18.0 | ||||||
$ | 122.3 | $ | 137.4 |
(a) | See Note 10 for details of the current portion of unrealized fair value of derivative assets. |
iv. | Inventories: |
December 31, | December 31, | |||||||
2020 | 2019 | |||||||
Ore in stockpiles(a) | $ | 277.4 | $ | 300.3 | ||||
Ore on leach pads(b) | 498.8 | 384.7 | ||||||
In-process | 108.0 | 99.2 | ||||||
Finished metal | 50.3 | 52.3 | ||||||
Materials and supplies | 448.2 | 520.6 | ||||||
1,382.7 | 1,357.1 | |||||||
Long-term portion of ore in stockpiles and ore on leach pads(a),(b) | (309.8 | ) | (303.3 | ) | ||||
$ | 1,072.9 | $ | 1,053.8 |
(a) | Ore in stockpiles relates to the Company’s operating mines. Low-grade material not scheduled for processing within the next 12 months is included in other long-term assets. See Note 7viii. |
(b) | Ore on leach pads relates to the Company’s Tasiast, Fort Knox, Round Mountain and Bald Mountain mines. Based on current mine plans, the Company expects to place the last tonne of ore on its leach pads at Bald Mountain in 2023, Round Mountain in 2026 and Fort Knox in 2028. The last tonne of ore was placed on the Tasiast leach pads during 2020. Material not scheduled for processing within the next 12 months is included in other long-term assets. See Note 7viii. |
27
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
v. | Property, plant and equipment: |
Mineral Interests | ||||||||||||||||
Land, plant and
equipment(a) |
Development and
operating properties(b) |
Pre-development
properties |
Total | |||||||||||||
Cost | ||||||||||||||||
Balance at January 1, 2020 | $ | 9,715.0 | $ | 9,540.6 | $ | 13.4 | $ | 19,269.0 | ||||||||
Additions | 535.5 | 539.9 | 15.5 | 1,090.9 | ||||||||||||
Acquisitions(c) | 8.2 | 15.4 | 441.8 | 465.4 | ||||||||||||
Capitalized interest | 22.8 | 25.5 | 0.8 | 49.1 | ||||||||||||
Disposals | (82.9 | ) | - | (0.1 | ) | (83.0 | ) | |||||||||
Other | (8.6 | ) | 14.8 | (6.1 | ) | 0.1 | ||||||||||
Balance at December 31, 2020 | 10,190.0 | 10,136.2 | 465.3 | 20,791.5 | ||||||||||||
Accumulated depreciation, depletion, amortization and reversals of impairment charges | ||||||||||||||||
Balance at January 1, 2020 | $ | (6,114.1 | ) | $ | (6,814.9 | ) | $ | - | $ | (12,929.0 | ) | |||||
Depreciation, depletion and amortization | (589.9 | ) | (380.3 | ) | - | (970.2 | ) | |||||||||
Reversals of impairment charges(d) | 160.5 | 528.5 | - | 689.0 | ||||||||||||
Disposals | 73.8 | - | - | 73.8 | ||||||||||||
Other | (1.6 | ) | - | - | (1.6 | ) | ||||||||||
Balance at December 31, 2020 | (6,471.3 | ) | (6,666.7 | ) | - | (13,138.0 | ) | |||||||||
Net book value | $ | 3,718.7 | $ | 3,469.5 | $ | 465.3 | $ | 7,653.5 | ||||||||
Amount included above as at December 31, 2020: | ||||||||||||||||
Assets under construction | $ | 540.8 | $ | 189.1 | $ | 19.1 | $ | 749.0 | ||||||||
Assets not being depreciated(e) | $ | 769.9 | $ | 607.0 | $ | 465.3 | $ | 1,842.2 |
(a) | Additions includes $38.2 million of right-of-use assets for lease arrangements entered into during the year ended December 31, 2020. Depreciation, depletion and amortization includes depreciation for leased right-of-use assets of $16.1 million during the year ended December 31, 2020. The net book value of property, plant and equipment includes leased right-of use assets with an aggregate net book value of $76.2 million as at December 31, 2020. |
(b) | At December 31, 2020, the significant development and operating properties are Fort Knox, Round Mountain, Bald Mountain, Paracatu, Kupol, Tasiast, Chirano, La Coipa, and Lobo-Marte. |
(c) | During the year ended December 31, 2020, the Company acquired the Chulbatkan license area and a 70% interest in the Peak development project, with both respective mineral interests classified in pre-development properties. See Note 6. |
(d) | At December 31, 2020, impairment reversals of property, plant and equipment were recorded at Tasiast, Chirano, and Lobo-Marte. At June 30, 2020, an impairment reversal was recorded at Lobo-Marte, entirely related to property, plant and equipment. See Note 8. |
(e) | Assets not being depreciated relate to land, capitalized E&E costs, assets under construction, which relate to expansion projects, and other assets that are in various stages of being readied for use. |
28
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Mineral Interests | ||||||||||||||||
Land, plant and
equipment(a) |
Development and
operating properties(b) |
Pre-development
properties |
Total | |||||||||||||
Cost | ||||||||||||||||
Balance at January 1, 2019 | $ | 9,184.2 | $ | 8,816.6 | $ | 13.4 | $ | 18,014.2 | ||||||||
Additions | 607.5 | 666.5 | - | 1,274.0 | ||||||||||||
Capitalized interest | 14.7 | 32.7 | - | 47.4 | ||||||||||||
Disposals | (69.9 | ) | - | - | (69.9 | ) | ||||||||||
Other | (21.5 | ) | 24.8 | - | 3.3 | |||||||||||
Balance at December 31, 2019 | 9,715.0 | 9,540.6 | 13.4 | 19,269.0 | ||||||||||||
Accumulated depreciation, depletion, amortization and reversal of impairment charges | ||||||||||||||||
Balance at January 1, 2019 | $ | (5,702.1 | ) | $ | (6,793.0 | ) | $ | - | $ | (12,495.1 | ) | |||||
Depreciation, depletion and amortization | (572.9 | ) | (280.6 | ) | - | (853.5 | ) | |||||||||
Reversals of impairment charges(c) | 102.4 | 259.4 | - | 361.8 | ||||||||||||
Disposals | 60.5 | - | - | 60.5 | ||||||||||||
Other | (2.0 | ) | (0.7 | ) | - | (2.7 | ) | |||||||||
Balance at December 31, 2019 | (6,114.1 | ) | (6,814.9 | ) | - | (12,929.0 | ) | |||||||||
Net book value | $ | 3,600.9 | $ | 2,725.7 | $ | 13.4 | $ | 6,340.0 | ||||||||
Amount included above as at December 31, 2019: | ||||||||||||||||
Assets under construction | $ | 308.8 | $ | 438.2 | $ | - | $ | 747.0 | ||||||||
Assets not being depreciated(d) | $ | 538.3 | $ | 735.9 | $ | 13.4 | $ | 1,287.6 |
(a) | Additions includes $42.9 million of transitional adjustments for the recognition of leased right-of-use assets upon the Company’s adoption of IFRS 16 on January 1, 2019, as well as $22.7 million of right-of-use assets for lease arrangements entered into during the year ended December 31, 2019. Depreciation, depletion and amortization includes depreciation for leased right-of-use assets of $11.5 million during the year ended December 31, 2019. The net book value of property, plant and equipment includes leased right-of-use assets with an aggregate net book value of $54.1 million as at December 31, 2019. |
(b) | At December 31, 2019, the significant development and operating properties were Fort Knox, Round Mountain, Bald Mountain, Paracatu, Kupol, Tasiast, Chirano, La Coipa and Lobo-Marte. |
(c) | At December 31, 2019, impairment reversals were recorded at Paracatu and Tasiast, entirely related to property, plant and equipment. See Note 8. |
(d) | Assets not being depreciated relate to land, capitalized E&E costs, assets under construction, which relate to expansion projects, and other assets that are in various stages of being readied for use. |
Capitalized interest primarily relates to qualifying capital expenditures at Tasiast, Round Mountain, Fort Knox, Bald Mountain and Paracatu and had a weighted average borrowing rate of 5.20% and 5.49% during the years ended December 31, 2020 and 2019, respectively.
At December 31, 2020, $526.1 million of E&E assets were included in mineral interests (December 31, 2019 - $251.4 million). During the year ended December 31, 2020, the Company had additions of $457.3 million, primarily related to the purchases of the Chulbatkan license area and a 70% interest in the Peak project, recognized $90.9 million of impairment reversals related to Chirano E&E assets, and transferred $311.9 million of E&E assets to capitalized development, primarily related to La Coipa and Chirano. During the year ended December 31, 2019, the Company did not have any acquisitions, dispositions or reversals of impairments of E&E assets, or transfers of E&E assets to capitalized development.
During the year ended December 31, 2020, the Company capitalized $38.4 million and expensed $19.1 million of E&E costs (year ended December 31, 2019 - $20.7 million and $17.4 million, respectively). Capitalized E&E costs are included as investing cash flows while expensed E&E costs are included as operating cash flows.
vi. | Goodwill: |
As at December 31, 2020 and 2019, goodwill of $158.8 million related entirely to Kupol.
29
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
vii. | Long-term investments: |
Gains and losses on equity investments at FVOCI are recorded in AOCI as follows:
December 31, 2020 | December 31, 2019 | |||||||||||||||
Fair value | Gains (losses) in AOCI(a) | Fair value | Gains (losses) in AOCI(a) | |||||||||||||
Investments in an accumulated gain position | $ | 80.9 | $ | 18.2 | $ | 79.8 | $ | 10.3 | ||||||||
Investments in an accumulated loss position | 32.1 | (47.0 | ) | 46.4 | (36.5 | ) | ||||||||||
Net realized gains (losses) | - | 2.9 | - | - | ||||||||||||
$ | 113.0 | $ | (25.9 | ) | $ | 126.2 | $ | (26.2 | ) |
(a) | See the consolidated statements of comprehensive income and Note 7xi for details of changes in fair value recognized in OCI during the years ended December 31, 2020 and 2019. |
viii. | Other long-term assets: |
December 31, | December 31, | |||||||
2020 | 2019 | |||||||
Long-term portion of ore in stockpiles and ore on leach pads(a) | $ | 309.8 | $ | 303.3 | ||||
Deferred charges, net of amortization | 6.0 | 32.5 | ||||||
Long-term receivables | 124.1 | 171.0 | ||||||
Advances for the purchase of capital equipment | 9.1 | 15.1 | ||||||
Restricted cash(b) | 25.0 | - | ||||||
Unrealized fair value of derivative assets(c) | 10.5 | 4.5 | ||||||
Other | 52.7 | 46.3 | ||||||
$ | 537.2 | $ | 572.7 |
(a) | Long-term portion of ore in stockpiles and ore on leach pads represents low-grade material not scheduled for processing within the next 12 months. As at December 31, 2020, long-term ore in stockpiles was at the Company’s Fort Knox, Kupol, Tasiast and Paracatu mines, and long-term ore on leach pads was at the Company’s Fort Knox and Round Mountain mines. |
(b) | See Note 12iii for details of the Tasiast loan and cash restricted for future loan payments as at December 31, 2020. |
(c) | See Note 10 for details of the non-current portion of unrealized fair value of derivative assets. |
ix. | Accounts payable and accrued liabilities: |
December 31, | December 31, | |||||||
2020 | 2019 | |||||||
Trade payables | $ | 89.1 | $ | 89.3 | ||||
Accrued liabilities | 242.8 | 246.7 | ||||||
Employee related accrued liabilities | 147.3 | 133.3 | ||||||
$ | 479.2 | $ | 469.3 |
x. | Other current liabilities: |
December 31, | December 31, | |||||||
2020 | 2019 | |||||||
Current portion of lease liabilities(a) | $ | 28.4 | $ | 16.0 | ||||
Current portion of unrealized fair value of derivative liabilities(b) | 21.3 | 4.3 | ||||||
$ | 49.7 | $ | 20.3 |
(a) | See Note 13 for details of the current portion of lease liabilities. |
(b) | See Note 10 for details of the current portion of unrealized fair value of derivative liabilities. |
xi. | Accumulated other comprehensive income (loss): |
Long-term
Investments |
Derivative
Contracts |
Total | ||||||||||
Balance at December 31, 2018 | $ | (75.2 | ) | $ | (23.3 | ) | $ | (98.5 | ) | |||
Other comprehensive income before tax | 49.3 | 36.8 | 86.1 | |||||||||
Tax | (0.3 | ) | (7.7 | ) | (8.0 | ) | ||||||
Balance at December 31, 2019 | $ | (26.2 | ) | $ | 5.8 | $ | (20.4 | ) | ||||
Other comprehensive income (loss) before tax | 0.3 | (5.7 | ) | (5.4 | ) | |||||||
Tax | - | 2.1 | 2.1 | |||||||||
Balance at December 31, 2020 | $ | (25.9 | ) | $ | 2.2 | $ | (23.7 | ) |
30
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Consolidated Statements of Operations
xii. | Other operating expense: |
Years ended December 31, | ||||||||
2020 | 2019 | |||||||
Other operating expense | $ | 186.5 | $ | 108.5 | ||||
$ | 186.5 | $ | 108.5 |
In 2020, other operating expense of $186.5 million for the year ended December 31, 2020 includes $64.1 million of labour, health and safety, donations and other support program costs associated with the COVID-19 pandemic, $8.3 million of costs relating to the temporary suspension of site activities as a result of the Tasiast strike in the second quarter of 2020, and environmental and other operating expenses for non-operating mining sites of $46.0 million.
Other operating expense of $108.5 million for the year ended December 31, 2019 includes $25.1 million of costs as a result of production issues associated with the pit wall slide at Fort Knox, and environmental and other operating expenses for closed mining sites of $35.6 million, and was reduced by $17.5 million as a result of additional federal VAT credits at Paracatu due to changes in Brazil’s tax regulations.
xiii. | Other income – net: |
Years ended December 31, | ||||||||
2020 | 2019 | |||||||
Net gains on dispositions of assets(a) | $ | 1.2 | $ | 70.4 | ||||
Foreign exchange (losses) gains - net | (7.3 | ) | 0.6 | |||||
Net non-hedge derivative gains | 1.0 | 1.4 | ||||||
Equity in (losses) earnings of joint venture(b) | (0.1 | ) | 0.1 | |||||
Other - net(c) | 12.6 | 0.2 | ||||||
$ | 7.4 | $ | 72.7 |
(a) | During the year ended December 31, 2019, the Company recognized a gain of $72.7 million on disposition of a portfolio of precious metals royalties. See Note 6iii. |
(b) | Represents Kinross’ equity in net (losses) earnings, and other comprehensive income (losses) of which there was $nil for the years ended December 31, 2020 and 2019, of its Puren joint venture investment. |
(c) | During the year ended December 31, 2020, the Company recognized $10.8 million of insurance recoveries. |
xiv. | Finance expense: |
Years ended December 31, | ||||||||
2020 | 2019 | |||||||
Accretion of reclamation and remediation obligations | $ | (23.0 | ) | $ | (31.0 | ) | ||
Interest expense, including accretion of debt and lease liabilities(a), (b) | (89.6 | ) | (76.9 | ) | ||||
$ | (112.6 | ) | $ | (107.9 | ) |
(a) | During the years ended December 31, 2020 and 2019, $49.1 million and $47.4 million, respectively, of interest was capitalized to property, plant and equipment. See Note 7v. |
(b) | During the years ended December 31, 2020 and 2019, accretion of lease liabilities was $3.0 million and $2.9 million, respectively. |
Total interest paid, including interest capitalized, during the year ended December 31, 2020 was $111.0 million (year ended December 31, 2019 - $100.6 million). See Note 12v.
xv. | Employee benefits expenses: |
The following employee benefits expenses are included in production cost of sales, general and administrative, and exploration and business development expenses:
Years ended December 31, | ||||||||
2020 | 2019 | |||||||
Salaries, short-term incentives, and other benefits | $ | 707.9 | $ | 680.8 | ||||
Share-based payments | 30.7 | 27.0 | ||||||
Other | 16.3 | 26.4 | ||||||
$ | 754.9 | $ | 734.2 |
31
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
8. | REVERSALS OF IMPAIRMENT CHARGES - NET |
Years ended December 31, | ||||||||
2020 | 2019 | |||||||
Property, plant and equipment (i) | $ | (689.0 | ) | $ | (361.8 | ) | ||
Inventories (ii) | 38.1 | - | ||||||
$ | (650.9 | ) | $ | (361.8 | ) |
i. | Property, plant and equipment |
During the year ended December 31, 2020, the Company recorded reversals of previous impairment charges of $689.0 million, related entirely to property, plant and equipment at Tasiast ($299.5 million), Chirano ($204.5 million) and Lobo-Marte ($185.0 million, which included $48.3 million for the impairment reversal recorded at June 30, 2020). These impairment reversals were mainly a result of increases in the Company’s long-term gold price estimate, the mine life extension at Chirano and the increase in mineral reserves at Lobo-Marte. For Tasiast and Chirano, the reversals were limited to a full reversal of the remaining impairment charges previously recorded. For Lobo-Marte, the reversal represents a partial reversal of the total impairment charges previously recorded. The tax impacts of the impairment reversals at Chirano and Lobo-Marte were income tax expenses of $71.6 million and $4.6 million, respectively. There was no tax impact on the impairment reversal at Tasiast. After giving effect to the impairment reversals, the carrying values of Tasiast, Chirano and Lobo-Marte were $2,455.7 million, $240.3 million and $319.2 million, respectively, as at December 31, 2020.
At December 31, 2019, the Company recorded reversals of previous impairment charges of $361.8 million, related entirely to property, plant and equipment at Paracatu ($200.7 million) and Tasiast ($161.1 million), and were mainly due to an increase in the Company’s long-term gold price estimate. For Paracatu, the reversal was limited to a full reversal of the remaining impairment charge recorded in 2017. For Tasiast, the reversal represents a partial reversal of the total impairment charges previously recorded. The tax impact on the impairment reversal at Paracatu was an expense of $68.2 million and was recorded within income tax expense. There was no tax impact on the impairment reversal at Tasiast. After giving effect to the impairment reversals, the carrying values of Paracatu and Tasiast were $1,461.0 million and $2,123.6 million, respectively, as at December 31, 2019.
The significant estimates and assumptions used in the Company’s impairment assessments are disclosed in Note 5 to the financial statements. The Company performed a sensitivity analysis on all key assumptions and determined that no reasonably possible change in any of the key assumptions would cause the carrying value of any CGU with recorded goodwill to exceed its recoverable amount.
ii. | Inventories |
During 2020, the Company recognized impairment charges of $38.1 million related to inventories. The inventory impairment charges were recorded to reduce the carrying value of certain materials and supplies inventories to net realizable value.
9. | INVESTMENT IN JOINT VENTURE |
The Company’s Puren joint venture investment is accounted for under the equity method and had the following carrying values:
December 31, | December 31, | |||||||
2020 | 2019 | |||||||
Investment in joint venture - Puren | $ | 18.3 | $ | 18.4 | ||||
$ | 18.3 | $ | 18.4 |
There are no publicly quoted market prices for Puren.
32
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
10. | FAIR VALUE MEASUREMENT |
(a) | Recurring fair value measurement: |
Carrying values for financial instruments carried at amortized cost, including cash and cash equivalents, restricted cash, short-term investments, accounts receivable, and accounts payable and accrued liabilities, approximate fair values due to their short-term maturities.
Fair value estimates for derivative contracts are based on quoted market prices for comparable contracts and represent the amount the Company would have received from, or paid to, a counterparty to unwind the contract at the market rates in effect at the consolidated balance sheet date.
The Company categorizes each of its fair value measurements in accordance with a fair value hierarchy. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability (for example, interest rate and yield curves observable at commonly quoted intervals, forward pricing curves used to value currency and commodity contracts and volatility measurements used to value option contracts), or inputs that are derived principally from or corroborated by observable market data or other means. Level 3 inputs are unobservable (supported by little or no market activity). The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.
For financial instruments that are recognized at fair value on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing their classification (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
Assets (liabilities) measured at fair value on a recurring basis as at December 31, 2020 include:
Level 1 | Level 2 | Level 3 |
Aggregate
Fair Value |
|||||||||||||
Equity investments at FVOCI | $ | 113.0 | $ | - | $ | - | $ | 113.0 | ||||||||
Derivative contracts: | ||||||||||||||||
Foreign currency forward and collar contracts | - | (4.3 | ) | - | (4.3 | ) | ||||||||||
Energy swap contracts | - | 7.6 | - | 7.6 | ||||||||||||
Total return swap contracts | - | (11.0 | ) | - | (11.0 | ) | ||||||||||
$ | 113.0 | $ | (7.7 | ) | $ | - | $ | 105.3 |
During the year ended December 31, 2020, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into or out of Level 3 fair value measurements.
The valuation techniques that are used to measure fair value are as follows:
Equity investments at FVOCI:
Equity investments at FVOCI include shares in publicly traded companies listed on a stock exchange. The fair value of equity investments at FVOCI is determined based on a market approach reflecting the closing price of each particular security at the consolidated balance sheet date. The closing price is a quoted market price obtained from the exchange that is the principal active market for the particular security, and therefore equity investments at FVOCI are classified within Level 1 of the fair value hierarchy.
Derivative contracts:
The Company’s derivative contracts are valued using pricing models and the Company generally uses similar models to value similar instruments. Such pricing models require a variety of inputs, including contractual cash flows, quoted market prices, applicable yield curves and credit spreads. The fair value of derivative contracts is based on quoted market prices for comparable contracts and represents the amount the Company would have received from, or paid to, a counterparty to unwind the contract at the quoted market rates in effect at the consolidated balance sheet date and therefore derivative contracts are classified within Level 2 of the fair value hierarchy.
33
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
The following table summarizes information about derivative contracts outstanding at December 31, 2020 and 2019:
December 31, 2020 | December 31, 2019 | |||||||||||||||
Asset / (Liability)
Fair Value |
AOCI |
Asset / (Liability)
Fair Value |
AOCI | |||||||||||||
Currency contracts | ||||||||||||||||
Foreign currency forward and collar contracts(a) (i) | $ | (4.3 | ) | $ | (2.5 | ) | $ | 3.9 | $ | 2.6 | ||||||
Commodity contracts | ||||||||||||||||
Energy swap contracts(b) (ii) | 7.6 | 4.7 | 4.0 | 3.2 | ||||||||||||
Other contracts | ||||||||||||||||
Total return swap contracts (iii) | (11.0 | ) | - | (1.3 | ) | - | ||||||||||
Total all contracts | $ | (7.7 | ) | $ | 2.2 | $ | 6.6 | $ | 5.8 | |||||||
Unrealized fair value of derivative assets | ||||||||||||||||
Current | $ | 6.5 | $ | 7.2 | ||||||||||||
Non-current | 10.5 | 4.5 | ||||||||||||||
$ | 17.0 | $ | 11.7 | |||||||||||||
Unrealized fair value of derivative liabilities | ||||||||||||||||
Current | $ | (21.3 | ) | $ | (4.3 | ) | ||||||||||
Non-current | (3.4 | ) | (0.8 | ) | ||||||||||||
$ | (24.7 | ) | $ | (5.1 | ) | |||||||||||
Total net fair value | $ | (7.7 | ) | $ | 6.6 |
(a) | Of the total amount recorded in AOCI at December 31, 2020, $(4.1) million will be reclassified out of AOCI within the next 12 months as a result of settling the contracts. |
(b) | Of the total amount recorded in AOCI at December 31, 2020, $(0.5) million will be reclassified out of AOCI within the next 12 months as a result of settling the contracts. |
(i) | Foreign currency forward and collar contracts |
The following table provides a summary of foreign currency forward and collar contracts outstanding at December 31, 2020 and their respective maturities:
Foreign currency | 2021 | 2022 | 2023 | |||||||||
Brazilian real zero cost collars (in millions of U.S. dollars) | $ | 103.6 | $ | 64.8 | $ | 43.2 | ||||||
Average put strike (Brazilian real) | 4.35 | 4.62 | 5.00 | |||||||||
Average call strike (Brazilian real) | 5.39 | 6.56 | 7.26 | |||||||||
Canadian dollar forward buy contracts (in millions of U.S. dollars) | $ | 25.2 | $ | 12.0 | $ | - | ||||||
Average rate (Canadian dollar) | 1.37 | 1.40 | - | |||||||||
Russian rouble zero cost collars (in millions of U.S. dollars) | $ | 51.6 | $ | 36.0 | $ | 20.4 | ||||||
Average put strike (Russian rouble) | 70.3 | 75.0 | 77.0 | |||||||||
Average call strike (Russian rouble) | 87.8 | 100.6 | 97.8 |
34
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
The following new foreign currency forward and collar contracts were entered into during the year ended December 31, 2020:
• | $134.4 million of Brazilian real zero cost collars, maturing from 2021 to 2023, with average put and call strikes of 4.81 and 6.94, respectively; |
• | $25.2 million of Canadian dollar forward buy contracts, maturing from 2021 to 2022, at an average rate of 1.40; and |
• | $82.8 million of Russian rouble zero cost collars, maturing from 2021 to 2023, with average put and call strikes of 75.35 and 96.93, respectively. |
At December 31, 2020, the unrealized gain or loss on foreign currency forward and collar contracts recorded in AOCI is as follows:
• | Brazilian real zero cost collar contracts – unrealized loss of $5.8 million (December 31, 2019 - $0.1 million loss); |
• | Canadian dollar forward buy contracts – unrealized gain of $2.2 million (December 31, 2019 - $0.5 million gain); and |
• | Russian rouble zero cost collar contracts – unrealized gain of $1.1 million (December 31, 2019 - $2.2 million gain). |
(ii) | Energy swap contracts |
The Company is exposed to changes in energy prices through its consumption of diesel and other fuels, and the price of electricity in some electricity supply contracts. The Company enters into energy swap contracts that protect against the risk of fuel price increases. Fuel is consumed in the operation of mobile equipment and electricity generation.
The following table provides a summary of energy swap contracts outstanding at December 31, 2020 and their respective maturities:
Energy | 2021 | 2022 | 2023 | |||||||||
WTI oil swap contracts (barrels) | 1,054,400 | 822,600 | 565,200 | |||||||||
Average price | $ | 47.52 | $ | 42.14 | $ | 39.58 |
During 2020, the following new energy swap contracts were entered into:
• | 1,759,100 barrels of WTI oil swap contracts at an average rate of $40.52 per barrel maturing from 2021 to 2023. |
At December 31, 2020, the unrealized gain on energy swap contracts recorded in AOCI is as follows:
• | WTI oil swap contracts – unrealized gain of $4.7 million (December 31, 2019 - $3.2 million gain). |
(iii) | Total return swap contracts |
The Company enters into total return swaps (“TRS”) as economic hedges of the Company’s DSUs and cash-settled RSUs. Under the terms of the TRS, a bank has the right to purchase Kinross shares in the marketplace as a hedge against the returns in the TRS. At December 31, 2020, 5,695,000 TRS units were outstanding. Hedge accounting is not applied for the DSU/RSU hedging program.
(b) | Fair value measurements related to non-financial assets: |
The Company recorded reversals of previous impairment charges related to the property, plant and equipment at Tasiast, Chirano and Lobo-Marte during the year ended December 31, 2020 and at Tasiast and Paracatu during the year ended December 31, 2019, due to changes in the estimates used to determine the recoverable amount of these CGUs since their last impairment losses were recognized. Certain assumptions used in the calculation of the recoverable amounts, calculated on a fair value less cost of disposal basis, are categorized as Level 3 in the fair value hierarchy. See Notes 5ii(d) and 8.
(c) | Fair value of financial assets and liabilities not measured and recognized at fair value: |
Long-term debt is measured at amortized cost. The fair value of long-term debt is primarily measured using market determined variables, and therefore was classified within Level 2 of the fair value hierarchy. See Note 12.
35
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
11. | CAPITAL AND FINANCIAL RISK MANAGEMENT |
The Company manages its capital to ensure that it will be able to continue to meet its financial and operational strategies and obligations, while maximizing the return to shareholders through the optimization of debt and equity financing. The Board of Directors has established a number of quantitative measures related to the management of capital. Management continuously monitors its capital position and periodically reports to the Board of Directors.
The Company’s operations are sensitive to changes in commodity prices, foreign exchange and interest rates. The Company manages its exposure to changes in currency exchange rates and energy prices by periodically entering into derivative contracts in accordance with the formal risk management policy approved by the Company’s Board of Directors. The Company’s practice is to not hedge metal sales. However, in certain circumstances the Company may use derivative contracts to hedge against the risk of falling prices for a portion of its forecasted metal sales. The Company may also assume derivative contracts as part of a business acquisition or they may be required under financing arrangements.
All of the Company’s hedges are cash flow hedges. The Company applies hedge accounting whenever hedging relationships exist and have been documented.
i. | Capital management |
The Company’s objectives when managing capital are to:
• | Ensure the Company has sufficient cash available to support the mining, exploration, and other areas of the business in any gold price environment; |
• | Ensure the Company has the capital and capacity to support a long-term growth strategy; |
• | Provide investors with a superior rate of return on their invested capital; |
• | Ensure compliance with all bank covenant ratios; and |
• | Minimize counterparty credit risk. |
Kinross adjusts its capital structure based on changes in forecasted economic conditions and based on its long-term strategic business plan. Kinross has the ability to adjust its capital structure by issuing new equity, drawing on existing credit facilities, issuing new debt, and by selling or acquiring assets. Kinross can also control how much capital is returned to shareholders through dividends and share buybacks.
The Company is not subject to any externally imposed capital requirements.
The Company’s quantitative capital management objectives are largely driven by the requirements under its debt agreements as well as a target total debt to total debt and common shareholders’ equity ratio as noted in the table below:
December 31, | December 31, | |||||||
2020 | 2019 | |||||||
Long-term debt and credit facilities | $ | 1,424.2 | $ | 1,837.4 | ||||
Current portion of long-term debt and credit facilities | 499.7 | - | ||||||
Total debt | $ | 1,923.9 | $ | 1,837.4 | ||||
Common shareholders’ equity | $ | 6,596.5 | $ | 5,318.5 | ||||
Total debt / total debt and common shareholders’ equity ratio | 22.6 | % | 25.7 | % | ||||
Company target | 0 – 30 | % | 0 – 30 | % |
ii. | Gold and silver price risk management |
In order to manage short-term metal price risk, the Company may enter into derivative contracts in relation to metal sales that it believes are highly likely to occur within a given quarter. No such contracts were outstanding at December 31, 2020 or December 31, 2019.
iii. | Currency risk management |
The Company is primarily exposed to currency fluctuations relative to the U.S. dollar on expenditures that are denominated in Canadian dollars, Brazilian reais, Chilean pesos, Russian roubles, Mauritanian ouguiya and Ghanaian cedi. This risk is reduced, from time to time, through the use of foreign currency hedging contracts to lock in the exchange rates on future non-U.S. denominated currency cash outflows. The Company has entered into hedging contracts to purchase Canadian dollars, Brazilian reais, and Russian roubles as part of this risk management strategy. The Company is also exposed to the impact of currency fluctuations on its monetary assets and liabilities. The Company may from time to time manage the exposure on the net monetary items.
36
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
At December 31, 2020, with other variables unchanged, the following represents the effect of movements in foreign exchange rates on the Company’s net working capital, on earnings before taxes from a 10% change in the exchange rate of the U.S. dollar against the Canadian dollar, Brazilian real, Chilean peso, Russian rouble, Mauritanian ouguiya, Ghanaian cedi and other foreign currencies.
10% strengthening in
U.S. dollar |
10% weakening in
U.S. dollar |
|||||||||||
Foreign currency net
working capital |
Effect on earnings before
taxes, gain (loss)(a) |
Effect on earnings before
taxes, gain (loss)(a) |
||||||||||
Canadian dollar | $ | (43.7 | ) | $ | 4.0 | $ | (4.9 | ) | ||||
Brazilian real | $ | (158.9 | ) | $ | 14.4 | $ | (17.7 | ) | ||||
Chilean peso | $ | (13.4 | ) | $ | 1.2 | $ | (1.5 | ) | ||||
Russian rouble | $ | 33.5 | $ | (3.0 | ) | $ | 3.7 | |||||
Mauritanian ouguiya | $ | 3.0 | $ | (0.3 | ) | $ | 0.3 | |||||
Ghanaian cedi | $ | 9.2 | $ | (0.8 | ) | $ | 1.0 | |||||
Other(b) | $ | (1.7 | ) | $ | 0.2 | $ | (0.2 | ) |
(a) | As described in Note 3ii, the Company translates its monetary assets and liabilities into U.S. dollars at the rates of exchange at the consolidated balance sheet dates. Gains and losses on translation of foreign currencies are included in earnings. |
(b) | Includes Euro, British pound, Australian dollar and South African rand. |
At December 31, 2020, with other variables unchanged, the following represents the effect of the Company’s foreign currency hedging contracts on OCI before taxes from a 10% change in the exchange rate of the U.S. dollar against the Canadian dollar, Brazilian real and Russian rouble.
10% strengthening in
U.S. dollar |
10% weakening in
U.S. dollar |
|||||||
Effect on OCI before
taxes, (loss)(a) |
Effect on OCI before
taxes, gain(a) |
|||||||
Canadian dollar | $ | (3.6 | ) | $ | 4.5 | |||
Brazilian real | $ | (10.1 | ) | $ | 11.8 | |||
Russian rouble | $ | (4.8 | ) | $ | 6.4 |
(a) | Upon maturity of these contracts, the amounts in OCI before taxes will reverse against hedged items that the contracts relate to, which may be to earnings or property, plant and equipment. |
iv. | Energy price risk |
The Company is exposed to changes in energy prices through its consumption of diesel and other fuels, and the price of electricity in some electricity supply contracts. The Company entered into energy swap contracts that partially protect against the risk of fuel price increases. Fuel is consumed in the operation of mobile equipment and electricity generation.
At December 31, 2020, with other variables unchanged, the following represents the effect of the Company’s energy swap contracts on OCI before taxes from a 10% change in WTI oil prices.
10% increase in
price |
10% decrease in
price |
|||||||
Effect on OCI before
taxes, gain(a) |
Effect on OCI before
taxes, (loss)(a) |
|||||||
WTI oil | $ | 11.4 | $ | (11.3 | ) |
(a) | Upon maturity of these contracts, the amounts in OCI before taxes will reverse against hedged items that the contracts relate to, which may be to earnings or property, plant and equipment. |
37
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
v. | Liquidity risk |
The Company manages liquidity risk by maintaining adequate cash and cash equivalent balances (December 31, 2020 - $1,210.9 million in aggregate), by utilizing its lines of credit and by monitoring developments in the capital markets. The Company continuously monitors and reviews both actual and forecasted cash flows. The contractual cash flow requirements for financial liabilities at December 31, 2020 are as follows:
2021 | 2022-2025 | 2026+ | ||||||||||||||
Total | Within 1 year(b) | 2 to 5 years | More than 5 years | |||||||||||||
Long-term debt(a) | $ | 2,640.0 | $ | 604.5 | $ | 870.9 | $ | 1,164.6 |
(a) | Includes the full face value of the senior notes, drawdowns on the revolving credit facility, Tasiast loan, and estimated interest. |
(b) | Represents interest on the senior notes, revolving credit facility and Tasiast loan, due within the next 12 months. |
vi. | Credit risk management |
Credit risk relates to cash and cash equivalents, accounts receivable and derivative contracts and arises from the possibility that any counterparty to an instrument fails to perform. The Company generally transacts with highly-rated counterparties and a limit on contingent exposure has been established for counterparties based on their credit ratings. As at December 31, 2020, the Company’s maximum exposure to credit risk was the carrying value of cash and cash equivalents, restricted cash, accounts receivable, and derivative assets.
12. | LONG-TERM DEBT AND CREDIT FACILITIES |
December 31, 2020 | December 31, 2019 | |||||||||||||||||||||||||||||
Interest Rates |
Nominal
Amount |
Deferred
Financing Costs |
Carrying
Amount(a) |
Fair
Value(b) |
Carrying
Amount(a) |
Fair
Value(b) |
||||||||||||||||||||||||
Senior notes | (i) | 4.50%-6.875% | $ | 1,747.7 | $ | (7.9 | ) | $ | 1,739.8 | $ | 1,999.5 | $ | 1,737.4 | $ | 1,881.9 | |||||||||||||||
Revolving credit facility | (ii) | LIBOR plus 1.625% | - | - | - | - | 100.0 | 100.0 | ||||||||||||||||||||||
Tasiast loan | (iii) | LIBOR plus 4.380% | 200.0 | (15.9 | ) | 184.1 | 200.0 | - | - | |||||||||||||||||||||
Total long-term and current debt | $ | 1,947.7 | $ | (23.8 | ) | $ | 1,923.9 | $ | 2,199.5 | $ | 1,837.4 | $ | 1,981.9 | |||||||||||||||||
Less: current portion | (500.0 | ) | 0.3 | (499.7 | ) | (509.3 | ) | - | - | |||||||||||||||||||||
Long-term debt and credit facility | $ | 1,447.7 | $ | (23.5 | ) | $ | 1,424.2 | $ | 1,690.2 | $ | 1,837.4 | $ | 1,981.9 |
(a) | Includes transaction costs on senior notes financings. |
(b) | The fair value of senior notes is primarily determined using quoted market determined variables. See Note 10(c). |
Scheduled debt repayments
2021 | 2022 | 2023 | 2024 | 2025 |
2026 and
thereafter |
Total | ||||||||||||||||||||||
Senior notes | $ | 500.0 | $ | - | $ | - | $ | 500.0 | $ | - | $ | 750.0 | $ | 1,750.0 | ||||||||||||||
Tasiast loan | $ | - | $ | 40.0 | $ | 36.0 | $ | 32.0 | $ | 4.0 | $ | 88.0 | $ | 200.0 | ||||||||||||||
Total debt payable | $ | 500.0 | $ | 40.0 | $ | 36.0 | $ | 532.0 | $ | 4.0 | $ | 838.0 | $ | 1,950.0 |
(i) | Senior notes |
The Company’s $1,750.0 million of senior notes consist of $500.0 million principal amount of 5.125% notes due in September 2021, $500.0 million principal amount of 5.950% notes due 2024, $500.0 million principal amount of 4.50% notes due 2027 and $250.0 million principal amount of 6.875% notes due 2041.
38
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
The senior notes (collectively, the “notes”) pay interest semi-annually. Except as noted below, the notes are redeemable by the Company, in whole or part, for cash at any time prior to maturity, at a redemption price equal to the greater of 100% of the principal amount or the sum of the present value of the remaining scheduled principal and interest payments on the notes discounted at the applicable treasury rate, as defined in the indentures, plus a premium of between 45 and 50 basis points, plus accrued interest, if any. Within three months of maturity of the notes due in 2021, 2024 and 2027, and within six months of maturity of the notes due in 2041, the Company can only redeem the notes in whole at 100% of the principal amount plus accrued interest, if any. In addition, the Company is required to make an offer to repurchase the notes prior to maturity upon certain fundamental changes at a repurchase price equal to 101% of the principal amount of the notes plus accrued and unpaid interest to the repurchase date, if any.
(ii) | Revolving credit facility |
As at December 31, 2020, the Company had utilized $7.5 million (December 31, 2019 - $119.1 million) of its $1,500.0 million revolving credit facility, entirely for letters of credit.
In February 2020, the Company repaid the previously outstanding $100.0 million balance on the revolving credit facility. The Company drew down $750.0 million on March 20, 2020 as a precautionary measure to protect against economic and business uncertainties caused by the COVID-19 pandemic. The Company repaid $250.0 million of this drawn amount on July 24, 2020 and repaid the remaining $500.0 million balance on September 18, 2020.
On July 25, 2019, the Company amended its $1,500.0 million revolving credit facility to extend the maturity date by one year from August 10, 2023 to August 10, 2024.
Loan interest on the revolving credit facility is variable, set at LIBOR plus an interest rate margin, which is dependent on the Company’s credit rating. Based on the Company’s credit rating at December 31, 2020, interest charges and fees are as follows:
Type of credit | |
Revolving credit facility | LIBOR plus 1.625% |
Letters of credit | 1.0833-1.625% |
Standby fee applicable to unused availability | 0.325% |
The revolving credit facility’s credit agreement contains various covenants including limits on indebtedness, asset sales and liens. The Company is in compliance with its financial covenant in the credit agreement at December 31, 2020.
(iii) | Tasiast Loan |
On December 16, 2019, the Company completed a definitive loan agreement for up to $300.0 million for Tasiast, with the first drawdown of $200.0 million received on April 9, 2020, and the remaining $100.0 million is available to be drawn up to March 2022.
The asset recourse loan has a term of eight years, maturing in December 2027, a floating interest rate of LIBOR plus a weighted average margin of 4.38% and a standby fee applicable to unused availability of 1.60%, with semi-annual interest payments to be made in June and December for the term of the loan, and first principal repayments due in June 2022.
As at December 31, 2020, the Company held $25.0 million in a separate bank account as required under the Tasiast loan agreement. This cash, which is subject to fluctuations over time depending on the next scheduled principal and interest payments, is required to remain in the bank account for the duration of the loan and is therefore recorded as restricted cash in other long-term assets. See Note 7viii.
(iv) | Other |
The
maturity date for the Company’s $300.0 million Letter of Credit guarantee facility with Export Development Canada (“EDC”)
was extended to June 30, 2022, effective July 1, 2020. As part of the EDC renewal, the facility was expanded to allow for use
for other obligations beyond reclamation liabilities. Total fees related to letters of credit under this facility were 0.75% of
the utilized amount. As at December 31, 2020, $228.9 million (December 31, 2019 - $227.8 million) was utilized under this facility.
39
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
In addition, at December 31, 2020, the Company had $175.6 million (December 31, 2019 - $184.7 million) in letters of credit and surety bonds outstanding in respect of its operations in Brazil, Mauritania, Ghana and Chile. These have been issued pursuant to arrangements with certain international banks and incur average fees of 0.74%.
As at December 31, 2020, $290.1 million (December 31, 2019 - $276.5 million) of surety bonds were outstanding with respect to Kinross’ properties in the United States. These surety bonds were issued pursuant to arrangements with international insurance companies and incur fees of 0.50%.
(v) | Changes in liabilities arising from financing activities |
Long-term debt | Lease | Accrued interest | ||||||||||||||
and credit facilities | liabilities | payable(a) | Total | |||||||||||||
Balance as at January 1, 2020 | $ | 1,837.4 | $ | 54.9 | $ | 33.3 | $ | 1,925.6 | ||||||||
Changes from financing cash flows | ||||||||||||||||
Debt issued | 950.0 | - | - | 950.0 | ||||||||||||
Debt repayments | (850.0 | ) | - | - | (850.0 | ) | ||||||||||
Interest paid | - | - | (63.1 | ) | (63.1 | ) | ||||||||||
Payment of lease liabilities | - | (20.7 | ) | - | (20.7 | ) | ||||||||||
1,937.4 | 34.2 | (29.8 | ) | 1,941.8 | ||||||||||||
Other changes | ||||||||||||||||
Interest expense and accretion | $ | - | $ | - | $ | 86.6 | $ | 86.6 | ||||||||
Capitalized interest | - | - | 49.1 | 49.1 | ||||||||||||
Capitalized interest paid | - | - | (47.9 | ) | (47.9 | ) | ||||||||||
Additions of lease liabilities | - | 38.2 | - | 38.2 | ||||||||||||
Accretion of lease liabilities | - | 3.0 | - | 3.0 | ||||||||||||
Other cash changes | (12.8 | ) | - | (13.8 | ) | (26.6 | ) | |||||||||
Other non-cash changes | (0.7 | ) | (0.7 | ) | (10.5 | ) | (11.9 | ) | ||||||||
(13.5 | ) | 40.5 | 63.5 | 90.5 | ||||||||||||
Balance as at December 31, 2020 | $ | 1,923.9 | $ | 74.7 | $ | 33.7 | $ | 2,032.3 |
(a) | Included in Accounts payable and accrued liabilities. |
Long-term debt | Lease | Accrued interest | ||||||||||||||
and credit facilities | liabilities(a) | payable(b) | Total | |||||||||||||
Balance as at January 1, 2019(a) | $ | 1,735.0 | $ | 42.9 | $ | 33.3 | $ | 1,811.2 | ||||||||
Changes from financing cash flows | ||||||||||||||||
Debt issued | 300.0 | - | - | 300.0 | ||||||||||||
Debt repayments | (200.0 | ) | - | - | (200.0 | ) | ||||||||||
Interest paid | - | - | (55.6 | ) | (55.6 | ) | ||||||||||
Payment of lease liabilities | - | (14.3 | ) | - | (14.3 | ) | ||||||||||
1,835.0 | 28.6 | (22.3 | ) | 1,841.3 | ||||||||||||
Other changes | ||||||||||||||||
Interest expense and accretion | $ | - | $ | - | $ | 74.0 | $ | 74.0 | ||||||||
Capitalized interest | - | - | 47.4 | 47.4 | ||||||||||||
Capitalized interest paid | - | - | (45.0 | ) | (45.0 | ) | ||||||||||
Additions of lease liabilities | - | 22.9 | - | 22.9 | ||||||||||||
Accretion of lease liabilities | - | 2.9 | - | 2.9 | ||||||||||||
Other cash changes | - | - | (10.0 | ) | (10.0 | ) | ||||||||||
Other non-cash changes | 2.4 | 0.5 | (10.8 | ) | (7.9 | ) | ||||||||||
2.4 | 26.3 | 55.6 | 84.3 | |||||||||||||
Balance as at December 31, 2019 | $ | 1,837.4 | $ | 54.9 | $ | 33.3 | $ | 1,925.6 |
(a) | Total lease liabilities of $42.9 million was recognized upon the initial application of IFRS 16 as of January 1, 2019. |
(b) | Included in Accounts payable and accrued liabilities. |
40
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
13. | LEASES |
December 31, | December 31, | |||||||
2020 | 2019 | |||||||
Current portion of lease liabilities | $ | 28.4 | $ | 16.0 | ||||
Long-term lease liabilities | 46.3 | 38.9 | ||||||
$ | 74.7 | $ | 54.9 |
The Company has a number of lease agreements involving office space, buildings, vehicles and equipment. Many of the leases for equipment provide that the Company may, after the initial lease term, renew the lease for successive yearly periods or may purchase the equipment at its fair market value. Leases for certain office facilities contain escalation clauses for increases in operating costs and property taxes. A majority of these leases are cancelable and are renewable on a yearly basis.
The following table summarizes total undiscounted lease liability maturities as at December 31, 2020:
2021 | 2021-2025 | 2026+ | ||||||||||||||
Total | Within 1 year | 1 to 5 years | More than 5 years | |||||||||||||
Lease liabilities | $ | 88.7 | $ | 28.6 | $ | 45.8 | $ | 14.3 |
The following table summarizes such lease payments that have been expensed for the years ended December 31, 2020 and 2019:
December 31, | December 31, | |||||||
2020 | 2019 | |||||||
Leases with a term of 12 months or less | $ | 4.8 | $ | 23.7 | ||||
Leases of assets with underlying value, when new, of $5,000 or less | 0.1 | 0.4 | ||||||
Leases with variable lease payments | 31.2 | 23.3 | ||||||
$ | 36.1 | $ | 47.4 |
41
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
14. | PROVISIONS |
Reclamation and
remediation obligations (i) |
Other | Total | ||||||||||
Balance at January 1, 2020 | $ | 866.1 | $ | 30.4 | $ | 896.5 | ||||||
Additions | 45.0 | 8.6 | 53.6 | |||||||||
Reductions | (5.0 | ) | (10.2 | ) | (15.2 | ) | ||||||
Reclamation spending | (39.6 | ) | - | (39.6 | ) | |||||||
Accretion | 23.0 | - | 23.0 | |||||||||
Reclamation expense | 6.6 | - | 6.6 | |||||||||
Balance at December 31, 2020 | $ | 896.1 | $ | 28.8 | $ | 924.9 | ||||||
Current portion | 58.7 | 5.1 | 63.8 | |||||||||
Non-current portion | 837.4 | 23.7 | 861.1 | |||||||||
$ | 896.1 | $ | 28.8 | $ | 924.9 |
(i) | Reclamation and remediation obligations |
The Company conducts its operations so as to protect the public health and the environment, and to comply with all applicable laws and regulations governing protection of the environment. Reclamation and remediation obligations arise throughout the life of each mine. The Company estimates future reclamation costs based on the level of current mining activity and estimates of costs required to fulfill the Company’s future obligations. The above table details the items that affect the reclamation and remediation obligations.
Included in other operating expense for the year ended December 31, 2020 is a $6.6 million expense (year ended December 31, 2019 - $11.9 million recovery) reflecting revised estimated fair values of costs that support the reclamation and remediation obligations for properties that have been closed or are nearing the end of their operating life. The majority of the expenditures are expected to occur between 2021 and 2044. The discount rates used in estimating the site restoration cost obligation were between 0.4% and 13.3% for the year ended December 31, 2020 (year ended December 31, 2019 – 1.7% and 14.7%), and the inflation rates used were between 2.1% and 4.0% for the year ended December 31, 2020 (year ended December 31, 2019 - 2.2% and 4.0%).
Regulatory authorities in certain jurisdictions require that security be provided to cover the estimated reclamation and remediation obligations. As at December 31, 2020, letters of credit totaling $379.9 million (December 31, 2019 - $391.9 million) had been issued to various regulatory agencies to satisfy financial assurance requirements for this purpose. The letters of credit were issued against the Company’s Letter of Credit guarantee facility with EDC, the revolving credit facility, and pursuant to arrangements with certain international banks. The Company is in compliance with all applicable requirements under these facilities. As at December 31, 2020, $289.3 million (December 31, 2019 - $275.7 million) of surety bonds were outstanding as security over reclamation and remediation obligations with respect to Kinross’ assets in the United States. The surety bonds were issued pursuant to arrangements with international insurance companies.
42
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
15. | COMMON SHARE CAPITAL |
The authorized share capital of the Company is comprised of an unlimited number of common shares without par value. A summary of common share transactions for the years ended December 31, 2020 and 2019 is as follows:
Year ended December 31, 2020 |
Year ended December 31, 2019 |
|||||||||||||||
Number of shares | Amount | Number of shares | Amount | |||||||||||||
(000’s) | (000’s) | |||||||||||||||
Common shares | ||||||||||||||||
Balance at January 1, | 1,253,766 | $ | 14,926.2 | 1,250,229 | $ | 14,913.4 | ||||||||||
Transfer to contributed surplus on reduction of stated capital(a) | - | (10,473.4 | ) | - | - | |||||||||||
Issued under share option and restricted share plans | 4,554 | 20.9 | 3,537 | 12.8 | ||||||||||||
Balance at end of period | 1,258,320 | $ | 4,473.7 | 1,253,766 | $ | 14,926.2 | ||||||||||
Total common share capital | $ | 4,473.7 | $ | 14,926.2 |
(a) | Effective as of May 6, 2020, the shareholders of the Company approved a resolution to reduce the stated capital account of the common shares, with a resulting addition to contributed surplus. |
i. | Dividends on common shares |
The following summarizes dividends declared and paid during the year ended December 31, 2020:
Total | ||||||||
Per share | amount | |||||||
Dividends declared during the periods: | ||||||||
Three months ended March 31, 2020 | $ | - | $ | - | ||||
Three months ended June 30, 2020 | - | - | ||||||
Three months ended September 30, 2020 | 0.03 | 37.7 | ||||||
Three months ended December 31, 2020 | 0.03 | 37.8 | ||||||
Total | $ | 75.5 | ||||||
Dividends paid during the periods: | ||||||||
Three months ended March 31, 2020 | $ | - | $ | - | ||||
Three months ended June 30, 2020 | - | - | ||||||
Three months ended September 30, 2020 | - | - | ||||||
Three months ended December 31, 2020 | 0.06 | 75.5 | ||||||
Total | $ | 75.5 |
On February 10, 2021 the Board of Directors declared a dividend of $0.03 per common share payable on March 18, 2021 to shareholders of record on March 3, 2021.
There were no dividends declared but unpaid at December 31, 2020, and no dividends were declared or paid during the year ended December 31, 2019.
43
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
16. | SHARE-BASED PAYMENTS |
Share-based compensation expense recorded during the years ended December 31, 2020 and 2019 was as follows:
Years ended December 31, | ||||||||
2020 | 2019 | |||||||
Share option plan expense (i) | $ | 1.0 | $ | 2.4 | ||||
Restricted share unit plan expense, including restricted performance shares (ii) | 29.7 | 24.6 | ||||||
Deferred share units expense (iii) | 1.3 | 1.1 | ||||||
Employer portion of employee share purchase plan (iv) | 2.4 | 2.1 | ||||||
Total share-based compensation expense | $ | 34.4 | $ | 30.2 |
(i) | Share option plan |
The Company has a share option plan for officers, employees, and contractors enabling them to purchase common shares. Under the share option plan, the aggregate number of shares reserved for issuance may not exceed 31.2 million common shares. Additionally, the aggregate number of Common Shares reserved for issuance under the share option plan to insiders, at any one time upon the exercise of Options and pursuant to all other compensation arrangements of the Company shall not exceed 10% of the total number of Common Shares then outstanding. Each option granted under the plan on or after February 16, 2011 is for a maximum term of seven years. One-third of the options granted are exercisable each year commencing one year after the date of grant. The exercise price is determined by the Company’s Board of Directors at the time the option is granted, and may not be less than the closing market price of the common shares on the last trading day prior to the grant date of the option. The share options outstanding at December 31, 2020 expire at various dates through 2026. The number of common shares available for the granting of options as at December 31, 2020 was 14.6 million.
The following table summarizes the status of the share option plan and changes during the years ended December 31, 2020 and 2019:
2020 | 2019 | ||||||||||||||||
Number of options (000’s) | Weighted average exercise price (CDN$/option) | Number of options (000’s) | Weighted average exercise price (CDN$/option) | ||||||||||||||
Balance at January 1 | 10,170 | $ | 5.16 | 12,344 | $ | 5.77 | |||||||||||
Granted | - | - | 2,042 | 4.59 | |||||||||||||
Exercised | (2,566 | ) | 4.90 | (1,577 | ) | 4.41 | |||||||||||
Forfeited | (808 | ) | 5.02 | (741 | ) | 4.42 | |||||||||||
Expired | (1,195 | ) | 8.03 | (1,898 | ) | 9.42 | |||||||||||
Outstanding at end of period | 5,601 | $ | 4.68 | 10,170 | $ | 5.16 | |||||||||||
Exercisable at end of period | 3,813 | $ | 4.68 | 6,459 | $ | 5.38 |
For the year ended December 31, 2020, the weighted average share price at the date of exercise was CDN$8.63 (December 31, 2019 - CDN$6.20).
The following table summarizes information about the stock options outstanding and exercisable at December 31, 2020:
Options outstanding | Options exercisable | ||||||||||||||||||||||||||||
Exercise price range in CDN$: | Number of options | Weighted average exercise price | Weighted average remaining contractual life | Number of options | Weighted average exercise price | Weighted average remaining contractual life | |||||||||||||||||||||||
(000’s) | (CDN$) | (years) | (000’s) | (CDN$) | (years) | ||||||||||||||||||||||||
3.73 | 4.50 | 1,438 | 3.89 | 1.48 | 1,438 | 3.89 | 1.48 | ||||||||||||||||||||||
4.51 | 5.00 | 2,794 | 4.74 | 3.90 | 1,006 | 4.82 | 3.76 | ||||||||||||||||||||||
5.01 | 5.82 | 1,369 | 5.39 | 1.74 | 1,369 | 5.40 | 1.74 | ||||||||||||||||||||||
5,601 | $ | 4.68 | 2.75 | 3,813 | $ | 4.68 | 2.17 |
44
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
No options were granted during the year ended December 31, 2020. The following weighted average assumptions were used in computing the fair value of stock options using the Black-Scholes option pricing model granted during the year ended December 31, 2019:
2019 | ||||
Weighted average share price (CDN$) | $ | 4.59 | ||
Expected dividend yield | 0.0 | % | ||
Expected volatility | 44.8 | % | ||
Risk-free interest rate | 1.8 | % | ||
Expected option life (in years) | 4.5 | |||
Weighted average fair value per stock option granted (CDN$) | $ | 1.79 |
The expected volatility used in the Black-Scholes option pricing model is based primarily on the historical volatility of the Company’s shares.
(ii) | Restricted share unit plans |
The Company has a Restricted Share Plan and a Restricted Share Unit Plan (Cash-Settled) whereby RSUs and RPSUs may be granted to employees, officers and contractors of the Company. Under the Restricted Share Plan, the aggregate number of shares reserved for issuance may not exceed 50 million common shares. The number of common shares available for the granting of restricted shares under this plan as at December 31, 2020 was 21.9 million.
(a) | Restricted share units |
RSUs are generally exercisable into one common share entitling the holder to acquire the common share for no additional consideration. RSUs vest over a three year period.
The following table summarizes information about all RSUs and related changes during the years ended December 31, 2020 and 2019:
2020 | 2019 | ||||||||||||||||
Number of units (000’s) | Weighted average fair value (CDN$/unit) | Number of units (000’s) | Weighted average fair value (CDN$/unit) | ||||||||||||||
Balance at January 1 | 8,512 | $ | 4.68 | 7,626 | $ | 4.88 | |||||||||||
Granted | 3,106 | 7.42 | 5,740 | 4.56 | |||||||||||||
Redeemed | (4,199 | ) | 4.78 | (3,888 | ) | 4.86 | |||||||||||
Forfeited | (944 | ) | 5.17 | (966 | ) | 4.81 | |||||||||||
Outstanding at end of period | 6,475 | $ | 5.86 | 8,512 | $ | 4.68 |
As at December 31, 2020, the Company had recognized a liability of $17.6 million (December 31, 2019 - $13.9 million) within employee related accrued liabilities (see Note 7ix) in respect of its cash-settled RSUs.
(b) | Restricted performance share units |
The RPSUs are subject to certain vesting requirements and vest at the end of three years. The vesting requirements are based on certain performance criteria over the vesting period established by the Company.
45
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
The following table summarizes information about the RPSUs and related changes during the years ended December 31, 2020 and 2019:
2020 | 2019 | ||||||||||||||||
Number of units (000’s) | Weighted average fair value (CDN$/unit) | Number of units (000’s) | Weighted average fair value (CDN$/unit) | ||||||||||||||
Balance at January 1 | 4,937 | $ | 5.16 | 4,990 | $ | 5.14 | |||||||||||
Granted | 1,436 | 7.76 | 2,263 | 4.54 | |||||||||||||
Redeemed | (1,575 | ) | 5.32 | (1,702 | ) | 4.45 | |||||||||||
Forfeited | (339 | ) | 5.02 | (614 | ) | 4.71 | |||||||||||
Outstanding at end of period | 4,459 | $ | 5.95 | 4,937 | $ | 5.16 |
(iii) | Deferred share unit plan |
The Company has a DSU plan for its outside directors which provides that each outside director receives, on the last date in each quarter a number of DSUs having a value equal to a minimum of 50% of the compensation of the outside director for the current quarter. Each outside director can elect to receive a greater percentage of their compensation in DSUs. The number of DSUs granted to an outside director is based on the closing price of the Company’s common shares on the Toronto Stock Exchange on the business day immediately preceding the DSU issue date. At such time as an outside director ceases to be a director, the Company will make a cash payment on the outstanding DSUs to the outside director in accordance with the redemption election made by the departing director or in the absence of an election to defer redemption, in accordance with the default redemption provisions provided in the Deferred Share Unit Plan.
The number of DSUs granted by the Company and the weighted average fair value per unit issued for the years ended December 31, 2020 and 2019 are as follows:
Years ended December 31, | ||||||||
2020 | 2019 | |||||||
DSUs granted (000’s) | 203 | 269 | ||||||
Weighted average grant-date fair value (CDN$/ unit) | $ | 8.66 | $ | 5.39 |
There were 1,422,650 DSUs outstanding, for which the Company had recognized a liability of $10.4 million, as at December 31, 2020 (December 31, 2019 - $7.8 million), within employee related accrued liabilities (see Note 7ix).
(iv) | Employee share purchase plan |
The Company has an employee SPP whereby certain employees of the Company have the opportunity to contribute up to a maximum of 10% of their annual base salary to purchase common shares. Since 2004, the Company has made contributions equal to 50% of the employees’ contributions.
The compensation expense related to the employee SPP for the year ended December 31, 2020 was $2.4 million (year ended December 31, 2019 - $2.1 million).
46
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
17. | EARNINGS PER SHARE |
Basic and diluted net earnings attributable to common shareholders of Kinross for the year ended December 31, 2020 was $1,342.4 million (year ended December 31, 2019 - $718.6 million).
Earnings per share has been calculated using the weighted average number of common shares and common share equivalents issued and outstanding during the period. Stock options are reflected in diluted earnings per share by application of the treasury method. The following table details the weighted average number of outstanding common shares for the purpose of computing basic and diluted loss per common share for the following periods:
(Number of common shares in thousands) | Years ended December 31, | |||||||
2020 | 2019 | |||||||
Basic weighted average shares outstanding: | 1,257,163 | 1,252,316 | ||||||
Weighted average shares dilution adjustments: | ||||||||
Stock options | 3,218 | 1,679 | ||||||
Restricted share units | 2,929 | 3,181 | ||||||
Restricted performance share units | 4,660 | 5,168 | ||||||
Diluted weighted average shares outstanding | 1,267,970 | 1,262,344 | ||||||
Weighted average shares dilution adjustments - exclusions:(a) | ||||||||
Stock options(b) | 165 | 3,870 | ||||||
Restricted share units | - | - | ||||||
Restricted performance share units | - | - |
(a) | These adjustments were excluded, as they are anti-dilutive. |
(b) | Anti-dilutive stock options were determined using the Company’s average share price for the year. For the years ended December 31, 2020 and 2019, the average share price used was $7.00 and $3.97, respectively. |
18. | INCOME TAX EXPENSE |
The following table shows the components of the current and deferred tax expense:
Years ended December 31, | ||||||||
2020 | 2019 | |||||||
Current tax expense | ||||||||
Current period | $ | 297.7 | $ | 206.6 | ||||
Adjustment for prior periods | (75.8 | ) | (1.0 | ) | ||||
Deferred tax expense | ||||||||
Origination and reversal of temporary differences | 335.5 | 223.0 | ||||||
Impact of changes in tax rate | (0.8 | ) | (1.6 | ) | ||||
Change in unrecognized deductible temporary differences | (73.4 | ) | (156.3 | ) | ||||
Recognition of previously unrecognized tax losses | (43.4 | ) | (24.0 | ) | ||||
Total tax expense | $ | 439.8 | $ | 246.7 |
On March 27, 2020 the U.S. CARES Act was signed into law. Kinross benefited primarily from two significant changes in tax law included in the U.S. CARES Act. First, $33.1 million of federal Alternative Minimum Tax (“AMT”) credits that were previously expected to be received after 2020, were received in 2020. Second, the tax law amendments provided for new tax loss carry-back opportunities that created additional federal AMT credits of $73.7 million, which were also refunded in 2020. The carry-back of U.S. net operating losses also resulted in a $25.4 million net tax benefit to tax expense, the result of the 35% U.S. federal corporate income tax rates prior to 2018, compared to 21% post 2017.
47
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
The reconciliation of the combined Canadian federal and provincial statutory income tax rate to the effective tax rate is as follows:
2020 | 2019 | |||||||
Combined statutory income tax rate | 26.5% | 26.5% | ||||||
Increase (decrease) resulting from: | ||||||||
Mining taxes | 1.7% | 1.2% | ||||||
Percentage of depletion | (0.9% | ) | (1.4% | ) | ||||
Difference in foreign tax rates and foreign exchange on deferred income taxes within income tax expense | 5.5% | 4.5% | ||||||
Change in unrecognized deferred tax assets | (0.4% | ) | (4.1% | ) | ||||
Over provided in prior periods | - | (0.4% | ) | |||||
Income not subject to tax | (0.7% | ) | (0.7% | ) | ||||
Effect of non-taxable impairment reversals | (6.9% | ) | (4.2% | ) | ||||
Accounting expenses disallowed for tax | 1.7% | 2.3% | ||||||
Taxes on repatriation of foreign earnings | 0.1% | 0.5% | ||||||
Impact of CARES Act | (1.4% | ) | - | |||||
AMT credit receivable due to U.S. Tax Reform | - | (0.5% | ) | |||||
Other | (0.7% | ) | 1.9% | |||||
Effective tax rate | 24.5% | 25.6% |
i. | Deferred income tax |
The following table summarizes the components of deferred income tax:
December
31,
2020 |
December
31,
2019 |
|||||||
Deferred tax assets | ||||||||
Accrued expenses and other | $ | 51.1 | $ | 29.0 | ||||
Property, plant and equipment | 5.2 | - | ||||||
Reclamation and remediation obligations | 123.3 | 109.6 | ||||||
Inventory capitalization | 20.8 | 16.8 | ||||||
Non-capital loss | 54.4 | 34.7 | ||||||
254.8 | 190.1 | |||||||
Deferred tax liabilities | ||||||||
Accrued expenses and other | 2.4 | 2.7 | ||||||
Reclamation and remediation obligations | - | 2.8 | ||||||
Property, plant and equipment | 677.5 | 423.4 | ||||||
Inventory capitalization | 60.0 | 30.5 | ||||||
Deferred tax liabilities - net | $ | 485.1 | $ | 269.3 |
For balance sheet disclosure purposes, deferred tax assets and liabilities have been offset where they relate to income taxes levied by the same taxation authority and the Company has the legal right and intent to offset.
Movement in net deferred tax liabilities:
December
31,
2020 |
December
31,
2019 |
|||||||
Balance at the beginning of the period | $ | 269.3 | $ | 220.2 | ||||
Recognized in the statement of operations | 217.9 | 41.1 | ||||||
Recognized in OCI | (2.1 | ) | 8.0 | |||||
Balance at the end of the period | $ | 485.1 | $ | 269.3 |
48
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
ii. | Unrecognized deferred tax assets and liabilities |
The aggregate amount of taxable temporary differences associated with investments in subsidiaries, for which deferred tax liabilities have not been recognized, as at December 31, 2020 is $8.9 billion (December 31, 2019 - $7.3 billion).
Deferred tax assets have not been recognized in respect of the following items:
December
31,
2020 |
December
31,
2019 |
|||||||
Deductible temporary differences | $ | 535.2 | $ | 656.5 | ||||
Tax losses | $ | 394.1 | $ | 441.3 |
The tax losses not recognized expire as per the amount and years noted below. The deductible temporary differences do not expire under current tax legislation. Deferred tax assets have not been recognized in respect of these items because it is not probable that future taxable profit will be available against which the Company can utilize the benefits therefrom.
iii. | Non-capital losses (not recognized) |
The following table summarizes the Company’s non-capital losses that can be applied against future taxable profit:
Country | Type | Amount | Expiry Date | ||||||
Canada | Net operating losses | $ | 1,011.9 | 2027 - 2040 | |||||
United States(a) | Net operating losses | 33.6 | 2021 - 2033 | ||||||
Chile | Net operating losses | 243.8 | No expiry | ||||||
Brazil | Net operating losses | 2.1 | No expiry | ||||||
Russia | Net operating losses | 2.5 | No expiry | ||||||
Mauritania | Net operating losses | 88.6 | 2021 - 2025 | ||||||
Barbados | Net operating losses | 144.9 | 2020 - 2026 | ||||||
Luxembourg | Net operating losses | 75.1 | Various | ||||||
Other | Net operating losses | 57.5 | Various |
(a) | Utilization of the United States loss carry forwards will be limited in any year as a result of the previous changes in ownership. |
19. | SEGMENTED INFORMATION |
The Company operates primarily in the gold mining industry and its major product is gold. Its activities include gold production, acquisition, exploration and development of gold properties. The Company’s primary mining operations are in the United States, the Russian Federation, Brazil, Chile, Ghana and Mauritania.
The reportable segments are those operations whose operating results are reviewed by the chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance provided those operations pass certain quantitative thresholds. Operations whose revenues, earnings or losses or assets exceed 10% of the total consolidated revenue, earnings or losses or assets are reportable segments.
In order to determine reportable operating segments, management reviews various factors, including geographical location and managerial structure. It was determined by management that a reportable operating segment generally consists of an individual mining property managed by a single general manager and management team.
The Kupol segment includes the Kupol and Dvoinoye mines. These two mines have been aggregated into one reportable segment as they have integrated cost structures, due to the processing of Dvoinoye ore at the Kupol mill, and other shared infrastructure such as the purchasing function.
The Corporate and other segment includes corporate, shutdown and other non-operating assets (including Chulbatkan, Kettle River-Buckhorn, La Coipa, Lobo-Marte, Maricunga, and Peak) and non-mining and other operations. These have been aggregated into one reportable segment.
Finance income, finance expense, and other income - net are managed on a consolidated basis and are not allocated to operating segments.
49
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
i. | Operating segments |
The following tables set forth operating results by reportable segment for the following years:
Operating segments | Non-operating segments(a) | ||||||||||||||||||||||||||||
Year ended December 31, 2020: | Fort Knox | Round Mountain | Bald Mountain | Paracatu | Kupol | Tasiast | Chirano | Corporate and other(b),(c) | Total | ||||||||||||||||||||
Revenue | |||||||||||||||||||||||||||||
Metal sales | $ | 422.9 | 565.5 | 330.5 | 960.7 | 904.6 | 718.0 | 295.1 | 16.1 | $ | 4,213.4 | ||||||||||||||||||
Cost of sales | |||||||||||||||||||||||||||||
Production cost of sales | 251.3 | 219.6 | 155.9 | 358.9 | 304.5 | 235.7 | 196.1 | 3.7 | 1,725.7 | ||||||||||||||||||||
Depreciation, depletion and amortization | 97.2 | 49.6 | 128.3 | 183.5 | 123.5 | 191.8 | 58.2 | 10.2 | 842.3 | ||||||||||||||||||||
(Reversals of) impairment charges - net | - | - | - | - | 27.8 | (289.2 | ) | (204.5 | ) | (185.0 | ) | (650.9 | ) | ||||||||||||||||
Total cost of sales | 348.5 | 269.2 | 284.2 | 542.4 | 455.8 | 138.3 | 49.8 | (171.1 | ) | 1,917.1 | |||||||||||||||||||
Gross profit | $ | 74.4 | 296.3 | 46.3 | 418.3 | 448.8 | 579.7 | 245.3 | 187.2 | $ | 2,296.3 | ||||||||||||||||||
Other operating expense (income) | 2.6 | 3.9 | 5.2 | 11.3 | 32.5 | 73.4 | (2.2 | ) | 59.8 | 186.5 | |||||||||||||||||||
Exploration and business development | 4.8 | 5.6 | 6.5 | - | 5.8 | 2.0 | 9.4 | 58.4 | 92.5 | ||||||||||||||||||||
General and administrative | - | - | - | - | - | - | - | 117.9 | 117.9 | ||||||||||||||||||||
Operating earnings (loss) | $ | 67.0 | 286.8 | 34.6 | 407.0 | 410.5 | 504.3 | 238.1 | (48.9 | ) | $ | 1,899.4 | |||||||||||||||||
Other income - net | 7.4 | ||||||||||||||||||||||||||||
Finance income | 4.3 | ||||||||||||||||||||||||||||
Finance expense | (112.6 | ) | |||||||||||||||||||||||||||
Earnings before tax | $ | 1,798.5 |
Operating segments | Non-operating segments(a) | ||||||||||||||||||||||||||||
Year ended December 31, 2019: | Fort Knox | Round Mountain | Bald Mountain | Paracatu | Kupol | Tasiast | Chirano | Corporate and other(b),(c) | Total | ||||||||||||||||||||
Revenue | |||||||||||||||||||||||||||||
Metal sales | $ | 279.6 | 502.2 | 249.2 | 856.3 | 734.4 | 532.8 | 281.6 | 61.2 | $ | 3,497.3 | ||||||||||||||||||
Cost of sales | |||||||||||||||||||||||||||||
Production cost of sales | 213.7 | 250.6 | 136.6 | 412.3 | 314.1 | 230.4 | 189.7 | 31.5 | 1,778.9 | ||||||||||||||||||||
Depreciation, depletion and amortization | 90.3 | 39.8 | 79.5 | 163.4 | 125.1 | 130.2 | 92.6 | 10.4 | 731.3 | ||||||||||||||||||||
Reversal of impairment charges | - | - | - | (200.7 | ) | - | (161.1 | ) | - | - | (361.8 | ) | |||||||||||||||||
Total cost of sales | 304.0 | 290.4 | 216.1 | 375.0 | 439.2 | 199.5 | 282.3 | 41.9 | 2,148.4 | ||||||||||||||||||||
Gross profit (loss) | $ | (24.4 | ) | 211.8 | 33.1 | 481.3 | 295.2 | 333.3 | (0.7 | ) | 19.3 | $ | 1,348.9 | ||||||||||||||||
Other operating expense (income) | 25.1 | (0.3 | ) | 7.8 | (10.9 | ) | (8.9 | ) | 46.4 | (0.9 | ) | 50.2 | 108.5 | ||||||||||||||||
Exploration and business development | 3.4 | 4.8 | 12.6 | - | 23.0 | 1.8 | 8.0 | 59.9 | 113.5 | ||||||||||||||||||||
General and administrative | - | - | - | - | - | - | - | 135.8 | 135.8 | ||||||||||||||||||||
Operating earnings (loss) | $ | (52.9 | ) | 207.3 | 12.7 | 492.2 | 281.1 | 285.1 | (7.8 | ) | (226.6 | ) | $ | 991.1 | |||||||||||||||
Other income - net | 72.7 | ||||||||||||||||||||||||||||
Finance income | 7.9 | ||||||||||||||||||||||||||||
Finance expense | (107.9 | ) | |||||||||||||||||||||||||||
Earnings before tax | $ | 963.8 |
Operating segments | Non-operating segments(a) | |||||||||||||||||||||||||||
Fort Knox | Round Mountain | Bald Mountain | Paracatu | Kupol | Tasiast | Chirano | Corporate and other(b),(c) | Total | ||||||||||||||||||||
Property, plant and equipment at: | ||||||||||||||||||||||||||||
December 31, 2020 | $ | 488.7 | 774.6 | 635.7 | 1,718.8 | 271.2 | 2,277.3 | 332.7 | 1,154.5 | $ | 7,653.5 | |||||||||||||||||
Total assets at: | ||||||||||||||||||||||||||||
December 31, 2020 | $ | 719.7 | 1,028.0 | 857.1 | 2,226.3 | 896.9 | 2,699.8 | 429.8 | 2,075.6 | $ | 10,933.2 | |||||||||||||||||
Capital expenditures for year ended December 31, 2020(d) | $ | 150.1 | 180.6 | 129.1 | 161.3 | 32.9 | 302.2 | 23.4 | 82.3 | $ | 1,061.9 |
Operating segments | Non-operating segments(a) | |||||||||||||||||||||||||||
Fort Knox | Round Mountain | Bald Mountain | Paracatu | Kupol | Tasiast | Chirano | Corporate and other(b),(c) | Total | ||||||||||||||||||||
Property, plant and equipment at: | ||||||||||||||||||||||||||||
December 31, 2019 | $ | 421.1 | 653.7 | 685.1 | 1,748.1 | 332.8 | 1,924.8 | 152.9 | 421.5 | $ | 6,340.0 | |||||||||||||||||
Total assets at: | ||||||||||||||||||||||||||||
December 31, 2019 | $ | 633.2 | 846.8 | 862.5 | 2,024.0 | 1,053.4 | 2,312.5 | 255.0 | 1,088.6 | $ | 9,076.0 | |||||||||||||||||
Capital expenditures for year ended December 31, 2019(d) | $ | 149.3 | 241.5 | 249.3 | 113.5 | 39.7 | 370.5 | 16.4 | 27.1 | $ | 1,207.3 |
(a) | Non-operating segments include development and pre-development properties. |
(b) | Corporate and other includes corporate, shutdown and other non-operating assets (including Chulbatkan, Kettle River-Buckhorn, La Coipa, Lobo-Marte, Maricunga, and Peak). |
(c) | The Company suspended mining and crushing activities at Maricunga in the third quarter of 2016, however there was continued production through 2019 as ounces continued to be recovered from heap leach pads until the fourth quarter of 2019 when all processing activities transitioned to care and maintenance. As such the Maricunga segment was reclassified as non-operating within the Corporate and other segment in 2020. Accordingly, Corporate and other includes metal sales and operating (losses) earnings of Maricunga of $16.1 million and $(12.5) million, respectively, for the year ended December 31, 2020 ($61.2 million and $10.9 million, respectively, for the year ended December 31, 2019) as Maricunga continues to sell its remaining finished metals inventories. |
(d) | Segment capital expenditures are presented on an accrual basis. Additions to property, plant and equipment in the consolidated statements of cash flows are presented on a cash basis. |
50
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
ii. | Geographic segments |
The following table shows metal sales and property, plant and equipment by geographic region:
Metal sales | Property, plant and equipment | |||||||||||||||
Years ended December 31, | As at December 31, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Geographic information(a) | ||||||||||||||||
United States | $ | 1,318.9 | $ | 1,031.0 | $ | 2,043.7 | $ | 1,765.0 | ||||||||
Russian Federation | 904.6 | 734.4 | 604.0 | 337.4 | ||||||||||||
Brazil | 960.7 | 856.3 | 1,721.5 | 1,749.3 | ||||||||||||
Chile | 16.1 | 61.2 | 653.5 | 394.1 | ||||||||||||
Mauritania | 718.0 | 532.8 | 2,289.2 | 1,932.4 | ||||||||||||
Ghana | 295.1 | 281.6 | 341.6 | 161.8 | ||||||||||||
Total | $ | 4,213.4 | $ | 3,497.3 | $ | 7,653.5 | $ | 6,340.0 |
(a) | Geographic location is determined based on location of the mining assets. |
iii. | Significant customers |
The following table represents sales to individual customers exceeding 10% of annual metal sales for the following periods:
Year ended December 31, 2020: | Fort Knox | Round Mountain | Bald Mountain | Paracatu | Kupol | Tasiast | Chirano | Corporate and other(a) | Total | ||||||||||||||||||||||||||||
Customer | |||||||||||||||||||||||||||||||||||||
1 | $ | 36.1 | 83.7 | 48.3 | 109.4 | 100.6 | 233.1 | 36.8 | 0.6 | 648.6 | |||||||||||||||||||||||||||
2 | 17.6 | 22.9 | 14.9 | 54.3 | 225.5 | 109.3 | 54.0 | - | 498.5 | ||||||||||||||||||||||||||||
3 | 73.1 | 81.6 | 43.7 | 121.5 | - | 45.0 | 61.9 | 1.7 | 428.5 | ||||||||||||||||||||||||||||
$ | 1,575.6 | ||||||||||||||||||||||||||||||||||||
% of total metal sales | 37.4 | % |
(a) | The Corporate and other segment includes metal sales for Maricunga for the year ended December 31, 2020. |
Year ended December 31, 2019: | Fort Knox | Round Mountain | Bald Mountain | Paracatu | Kupol | Tasiast | Chirano | Corporate and other(a) | Total | ||||||||||||||||||||||||||||
Customer | |||||||||||||||||||||||||||||||||||||
1 | $ | 11.3 | 56.3 | 17.0 | 59.4 | 145.4 | 175.5 | 51.7 | 0.7 | 517.3 | |||||||||||||||||||||||||||
2 | 31.5 | 49.0 | 40.4 | 76.8 | 55.8 | 78.5 | 57.8 | 8.0 | 397.8 | ||||||||||||||||||||||||||||
3 | 24.2 | 14.5 | 16.7 | 181.1 | - | 66.6 | 47.8 | 4.1 | 355.0 | ||||||||||||||||||||||||||||
$ | 1,270.1 | ||||||||||||||||||||||||||||||||||||
% of total metal sales | 36.3 | % |
(a) | The Corporate and other segment includes metal sales for Maricunga for the year ended December 31, 2019. |
The Company is not economically dependent on a limited number of customers for the sale of its product as gold can be sold through numerous commodity market traders worldwide.
51
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
20. | COMMITMENTS AND CONTINGENCIES |
i. | Commitments |
Purchase commitments
At December 31, 2020, the Company had future purchase commitments of approximately $992.6 million (December 31, 2019 - $1,104.3 million), of which $153.1 million relates to commitments for capital expenditures (December 31, 2019 - $186.6 million).
ii. | Contingencies |
General
Estimated losses from contingencies are accrued by a charge to earnings when information available prior to the issuance of the financial statements indicates that it is likely that a future event will confirm that an asset has been impaired or a liability incurred at the date of the financial statements and the amount of the loss can be reasonably estimated.
Other legal matters
The Company is from time to time involved in legal proceedings, arising in the ordinary course of its business. Typically, the amount of ultimate liability with respect to these actions will not, in the opinion of management, materially affect Kinross’ financial position, results of operations or cash flows.
Maricunga regulatory proceedings
In May 2015, the Chile environmental enforcement authority (the “SMA”) commenced an administrative proceeding against Compania Minera Maricunga (“CMM”) alleging that pumping of groundwater to support the Maricunga operation had impacted area wetlands and, on March 18, 2016, issued a resolution alleging that CMM’s pumping was impacting the “Valle Ancho” wetland. Beginning in May 2016, the SMA issued a series of resolutions ordering CMM to temporarily curtail pumping from its wells. In response, CMM suspended mining and crushing activities and reduced water consumption to minimal levels. CMM contested these resolutions, but its efforts were unsuccessful and, except for a short period of time in July 2016, CMM’s operations have remained suspended. On June 24, 2016, the SMA amended its initial sanction (the “Amended Sanction”) and effectively required CMM to cease operations and close the mine, with water use from its wells curtailed to minimal levels. On July 9, 2016, CMM appealed the sanctions and, on August 30, 2016, submitted a request to the Environmental Tribunal that it issue an injunction suspending the effectiveness of the Amended Sanction pending a final decision on the merits of CMM’s appeal. On September 16, 2016, the Environmental Tribunal rejected CMM’s injunction request and on August 7, 2017, upheld the SMA’s Amended Sanction and curtailment orders on procedural grounds. On October 9, 2018, the Supreme Court affirmed the Environmental Tribunal’s ruling on procedural grounds and dismissed CMM’s appeal.
On June 2, 2016, CMM was served with two separate lawsuits filed by the Chilean State Defense Counsel (“CDE”). Both lawsuits, filed with the Environmental Tribunal, alleged that pumping from the Maricunga groundwater wells caused environmental damage to area wetlands. One action relates to the “Pantanillo” wetland and the other action relates to the Valle Ancho wetland (described above). Hearings on the CDE lawsuits took place in 2016 and 2017, and on November 23, 2018, the Tribunal ruled in favor of CMM in the Pantanillo case and against CMM in the Valle Ancho case. In the Valle Ancho case, the Tribunal is requiring CMM to, among other things, submit a restoration plan to the SMA for approval. CMM has appealed the Valle Ancho ruling to the Supreme Court. The CDE has appealed to the Supreme Court in both cases and is asserting in the Valle Ancho matter that the Environmental Tribunal erred by not ordering a complete shutdown of Maricunga’s groundwater wells. The Supreme Court has the discretion to decide whether it will hear any of the appeals and has determined that it will hear the CDE’s appeal in the Pantanillo case. The Supreme Court has not yet determined whether it will hear the appeals in the Valle Ancho case. The timing of any rulings by the Supreme Court on the parties’ respective appeals remains uncertain.
52
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Sunnyside litigation
The Sunnyside Mine is an inactive mine situated in the so-called Bonita Peak Mining District (“District”) near Silverton, Colorado. A subsidiary of Kinross, Sunnyside Gold Corporation (“SGC”), was involved in operations at the mine from 1985 through 1991 and subsequently conducted various reclamation and closure activities at the mine and in the surrounding area. On August 5, 2015, while working in another mine in the District known as the Gold King, the Environmental Protection Agency (the “EPA”) caused a release of approximately three million gallons of contaminated water into a tributary of the Animas River. In the third quarter of 2016, the EPA listed the District, including areas impacted by SGC’s operations and closure activities, on the National Priorities List pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”). SGC challenged portions of the CERCLA listing in the United States Court of Appeals for District of Columbia Circuit, but SGC’s petition for review was denied, as was its subsequent petition for rehearing. The EPA has notified SGC that SGC is a potentially responsible party under CERCLA and may be jointly and severally liable for cleanup of the District or cleanup costs incurred by the EPA in the District. The EPA may in the future provide similar notification to Kinross, as the EPA contends that Kinross has liability in the District under CERCLA and other statutes. In the second quarter of 2018, the EPA issued to SGC a modified Unilateral Administrative Order for Remedial Investigation (“the Order”). In the second quarter of 2019, pursuant to the original Order, the EPA issued to SGC a Modified Statement of Work, Work Plan and Field Sampling Plan (together with the Order, the “Modified Order”). The Modified Order significantly altered and expanded upon the work set out under the original Order. In the third quarter of 2019, after consulting with external legal counsel, SGC provided notice to the EPA that the Modified Order is legally indefensible, does not address any imminent hazard and SGC does not intend to comply with the Modified Order. On July 26, 2019, the EPA acknowledged receipt of SGC’s notice of its intention not to comply with the Modified Order. The EPA indicated that it would undertake to complete the work ordered under the Modified Order, and has subsequently completed some of that work. While SGC believes that it has good cause not to comply with the Modified Order, failure to comply with the Modified Order may subject SGC to significant penalties, damages and/or potential reimbursement of the cost of remediation work undertaken by the EPA.
In the second quarter of 2016, the State of New Mexico filed a complaint naming the EPA, SGC, Kinross and others alleging violations of CERCLA, the Resource Conservation and Recovery Act (“RCRA”), and the Clean Water Act (“CWA”) and claiming negligence, gross negligence, public nuisance and trespass. New Mexico subsequently dropped the RCRA claim. The New Mexico complaint seeks cost recovery, damages, injunctive relief, and attorney’s fees. In the third quarter of 2016, the Navajo Nation initiated litigation against the EPA, SGC and Kinross, alleging entitlement to cost recovery under CERCLA for past and future costs incurred, negligence, gross negligence, trespass, and public and private nuisance, and seeking reimbursement of past and future costs, compensatory, consequential and punitive damages, injunctive relief and attorneys’ fees. In the third quarter of 2017, the State of Utah filed a complaint, which has been amended to name the EPA, SGC, Kinross and others, alleging negligence, gross negligence, public nuisance, trespass, and violation of the Utah Water Quality Act and the Utah Solid and Hazardous Waste Act.
The Utah complaint seeks cost recovery, compensatory, consequential and punitive damages, penalties, disgorgement of profits, declaratory, injunctive and other relief under CERCLA, attorney’s fees, and costs. In the third quarter of 2018, numerous members of the Navajo Nation initiated litigation against the EPA, SGC and Kinross, alleging negligence, gross negligence and injury, including great spiritual and emotional distress. The complaint of the Navajo members seeks compensatory and consequential damages, interest, punitive damages, attorneys’ fees and expenses. The New Mexico, Navajo Nation, Utah and Navajo member cases have been centralized for coordinated or consolidated pretrial proceedings in the United States District Court for the District of New Mexico. In the third quarter of 2019 (i) the EPA filed a cross claim against SGC and Kinross seeking contribution, including contribution under CERCLA, for any damages awarded to New Mexico, the Navajo Nation, or Utah as well as cost-recovery for the EPA’s response costs and remedial expenses incurred by the EPA in the District pursuant to CERCLA or other laws; (ii) Environmental Restoration, LLC, an EPA contractor, filed a cross claim against SGC seeking contribution under CERCLA and attorneys’ fees and expenses; and (iii) SGC filed a cross claim against the United States and certain contractors of the United States seeking contribution and equitable indemnity and making a due process claim against the United States. In the first quarter of 2020, the Court granted the United States judgment on SGC’s due process cross claim and dismissed it.
In the fourth quarter of 2020, SGC and Kinross reached settlements with the Navajo Nation and the State of New Mexico, which settlements will result in a dismissal with prejudice of all claims by these parties against SGC and Kinross. Although these settlements are not subject to entry of a Consent Decree approving the settlements, a Consent Decree approving the settlements will be lodged with the United States District Court for the District of New Mexico for public notice and comment. Upon expiration of the comment period, the parties will move the Court for entry of the Consent Decree.
53
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Income taxes
The Company operates in numerous countries around the world and accordingly is subject to, and pays taxes under the various regimes in countries in which it operates. These tax regimes are determined under general corporate tax laws of the country. The Company has historically filed, and continues to file, all required tax returns and to pay the taxes reasonably determined to be due. The tax rules and regulations in many countries are complex and subject to interpretation. Changes in tax law or changes in the way that tax law is interpreted may also impact the Company’s effective tax rate as well as its business and operations.
Kinross’ tax records, transactions and filing positions may be subject to examination by the tax authorities in the countries in which the Company has operations. The tax authorities may review the Company’s transactions in respect of the year, or multiple years, which they have chosen for examination. The tax authorities may interpret the tax implications of a transaction in form or in fact, differently from the interpretation reached by the Company. In circumstances where the Company and the tax authority cannot reach a consensus on the tax impact, there are processes and procedures which both parties may undertake in order to reach a resolution, which may span many years in the future. Uncertainty in the interpretation and application of applicable tax laws, regulations or the relevant sections of Mining Conventions by the tax authorities, or the failure of relevant Governments or tax authorities to honour tax laws, regulations or the relevant sections of Mining Conventions could adversely affect Kinross.
21. | RELATED PARTY TRANSACTIONS |
There were no material related party transactions in 2020 and 2019 other than compensation of key management personnel.
Key management personnel
Compensation of key management personnel of the Company is as follows:
Years ended December 31, | ||||||||
2020 | 2019 | |||||||
Cash compensation - salaries, short-term incentives, and other benefits | $ | 7.4 | $ | 7.3 | ||||
Long-term incentives, including share-based payments | 8.8 | 8.5 | ||||||
Termination and post-retirement benefits | 1.1 | 10.2 | ||||||
Total compensation paid to key management personnel | $ | 17.3 | $ | 26.0 |
Key management personnel are defined as the Senior Leadership Team and members of the Board of Directors.
22. | CONSOLIDATING FINANCIAL STATEMENTS |
The obligations of the Company under the senior notes are guaranteed by the following 100% owned subsidiaries of the Company (the “guarantor subsidiaries”): Round Mountain Gold Corporation, Kinross Brasil Mineração S.A., Fairbanks Gold Mining, Inc., Melba Creek Mining, Inc., KG Mining (Round Mountain) Inc., KG Mining (Bald Mountain) Inc., Red Back Mining (Ghana) Limited, White Ice Ventures Limited and KG Far East (Luxembourg) Sarl. All guarantees by the guarantor subsidiaries are joint and several, and full and unconditional; subject to certain customary release provisions contained in the indenture governing the senior notes.
During the year ended December 31, 2020, a change was made to the guarantor subsidiaries such that Red Back Mining B.V. is no longer a guarantor.
The following tables contain separate financial information related to the guarantor subsidiaries as set out in the consolidating balance sheets as at December 31, 2020 and 2019 and the consolidating statements of operations, statements of comprehensive income (loss) and statements of cash flows for the years ended December 31, 2020 and 2019. For purposes of this information, the financial statements of Kinross Gold Corporation and of the guarantor subsidiaries reflect investments in subsidiary companies on an equity accounting basis. As a result of the change in the guarantor subsidiaries noted above, the consolidating balance sheet, consolidating statement of operations, comprehensive income (loss) and cash flows for the comparative periods have been recast.
54
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Consolidating balance sheet as at December 31, 2020
Guarantors |
Non-
guarantors |
Eliminations | Consolidated | |||||||||||||||||||||||||
Kinross Gold Corp. | Guarantor Subsidiaries | Guarantor Adjustments |
Total
Guarantors |
|||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||
Current assets | ||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 115.5 | $ | 366.8 | $ | - | $ | 482.3 | $ | 728.6 | $ | - | $ | 1,210.9 | ||||||||||||||
Restricted cash | - | 5.7 | - | 5.7 | 8.0 | - | 13.7 | |||||||||||||||||||||
Accounts receivable and other assets | 13.7 | 45.3 | - | 59.0 | 63.3 | - | 122.3 | |||||||||||||||||||||
Intercompany receivables | 610.1 | 1,553.5 | (300.1 | ) | 1,863.5 | 4,293.7 | (6,157.2 | ) | - | |||||||||||||||||||
Current income tax recoverable | - | 0.7 | - | 0.7 | 29.2 | - | 29.9 | |||||||||||||||||||||
Inventories | 3.9 | 584.1 | - | 588.0 | 484.9 | - | 1,072.9 | |||||||||||||||||||||
743.2 | 2,556.1 | (300.1 | ) | 2,999.2 | 5,607.7 | (6,157.2 | ) | $ | 2,449.7 | |||||||||||||||||||
Non-current assets | ||||||||||||||||||||||||||||
Property, plant and equipment | 76.1 | 3,619.0 | - | 3,695.1 | 3,958.4 | - | 7,653.5 | |||||||||||||||||||||
Goodwill | - | 158.8 | - | 158.8 | - | - | 158.8 | |||||||||||||||||||||
Long-term investments | 103.0 | - | - | 103.0 | 10.0 | - | 113.0 | |||||||||||||||||||||
Investment in joint venture | - | - | - | - | 18.3 | - | 18.3 | |||||||||||||||||||||
Intercompany investments | 5,779.7 | 3,241.6 | (7,482.7 | ) | 1,538.6 | 18,247.8 | (19,786.4 | ) | - | |||||||||||||||||||
Other long-term assets | 18.9 | 209.7 | - | 228.6 | 308.6 | - | 537.2 | |||||||||||||||||||||
Long-term intercompany receivables | 3,024.9 | 66.2 | (1.5 | ) | 3,089.6 | 5,242.1 | (8,331.7 | ) | - | |||||||||||||||||||
Deferred tax assets | - | - | - | - | 2.7 | - | 2.7 | |||||||||||||||||||||
Total assets | $ | 9,745.8 | $ | 9,851.4 | $ | (7,784.3 | ) | $ | 11,812.9 | $ | 33,395.6 | $ | (34,275.3 | ) | $ | 10,933.2 | ||||||||||||
Liabilities | ||||||||||||||||||||||||||||
Current liabilities | ||||||||||||||||||||||||||||
Accounts payable and accrued liabilities | $ | 96.2 | $ | 202.0 | $ | - | $ | 298.2 | $ | 181.0 | $ | - | $ | 479.2 | ||||||||||||||
Intercompany payables | 102.4 | 871.8 | (300.1 | ) | 674.1 | 5,483.1 | (6,157.2 | ) | - | |||||||||||||||||||
Current income tax payable | - | 112.6 | - | 112.6 | 1.9 | - | 114.5 | |||||||||||||||||||||
Current portion of long-term debt and credit facilities | 499.7 | - | - | 499.7 | - | - | 499.7 | |||||||||||||||||||||
Current portion of provisions | - | 30.6 | - | 30.6 | 33.2 | - | 63.8 | |||||||||||||||||||||
Other current liabilities | 13.9 | 27.8 | - | 41.7 | 8.0 | - | 49.7 | |||||||||||||||||||||
Deferred payment obligation | - | - | - | - | 141.5 | - | 141.5 | |||||||||||||||||||||
712.2 | 1,244.8 | (300.1 | ) | 1,656.9 | 5,848.7 | (6,157.2 | ) | 1,348.4 | ||||||||||||||||||||
Non-current liabilities | ||||||||||||||||||||||||||||
Long-term debt and credit facilities | 1,240.2 | - | - | 1,240.2 | 184.0 | - | 1,424.2 | |||||||||||||||||||||
Provisions | 13.3 | 461.1 | - | 474.4 | 386.7 | - | 861.1 | |||||||||||||||||||||
Long-term lease liabilities | 17.3 | 25.9 | - | 43.2 | 3.1 | - | 46.3 | |||||||||||||||||||||
Other long-term liabilities | 0.5 | 37.4 | - | 37.9 | 64.5 | - | 102.4 | |||||||||||||||||||||
Long-term intercompany payables | 1,165.8 | 276.8 | (1.5 | ) | 1,441.1 | 6,890.6 | (8,331.7 | ) | - | |||||||||||||||||||
Deferred tax liabilities | - | 322.7 | - | 322.7 | 165.1 | - | 487.8 | |||||||||||||||||||||
Total liabilities | 3,149.3 | 2,368.7 | (301.6 | ) | 5,216.4 | 13,542.7 | (14,488.9 | ) | 4,270.2 | |||||||||||||||||||
Equity | ||||||||||||||||||||||||||||
Common shareholders' equity | ||||||||||||||||||||||||||||
Common share capital | $ | 4,473.7 | $ | 1,786.7 | $ | (1,786.7 | ) | $ | 4,473.7 | $ | 19,619.5 | $ | (19,619.5 | ) | $ | 4,473.7 | ||||||||||||
Contributed surplus | 10,709.0 | 2,187.6 | (2,187.6 | ) | 10,709.0 | 7,943.3 | (7,943.3 | ) | 10,709.0 | |||||||||||||||||||
Accumulated deficit | (8,562.5 | ) | 3,527.4 | (3,527.4 | ) | (8,562.5 | ) | (7,727.4 | ) | 7,727.4 | (8,562.5 | ) | ||||||||||||||||
Accumulated other comprehensive income (loss) | (23.7 | ) | (19.0 | ) | 19.0 | (23.7 | ) | (49.0 | ) | 49.0 | (23.7 | ) | ||||||||||||||||
Total common shareholders' equity | 6,596.5 | 7,482.7 | (7,482.7 | ) | 6,596.5 | 19,786.4 | (19,786.4 | ) | 6,596.5 | |||||||||||||||||||
Non-controlling interests | - | - | - | - | 66.5 | - | 66.5 | |||||||||||||||||||||
Total equity | 6,596.5 | 7,482.7 | (7,482.7 | ) | 6,596.5 | 19,852.9 | (19,786.4 | ) | 6,663.0 | |||||||||||||||||||
Total liabilities and equity | $ | 9,745.8 | $ | 9,851.4 | $ | (7,784.3 | ) | $ | 11,812.9 | $ | 33,395.6 | $ | (34,275.3 | ) | $ | 10,933.2 | ||||||||||||
55
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Consolidating balance sheet as at December 31, 2019
Guarantors |
Non-
guarantors |
Eliminations | Consolidated | |||||||||||||||||||||||||
Kinross Gold Corp. | Guarantor Subsidiaries | Guarantor Adjustments |
Total
Guarantors |
|||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||
Current assets | ||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 124.9 | $ | 118.1 | $ | - | $ | 243.0 | $ | 332.1 | $ | - | $ | 575.1 | ||||||||||||||
Restricted cash | - | 6.6 | - | 6.6 | 8.6 | - | 15.2 | |||||||||||||||||||||
Accounts receivable and other assets | 10.6 | 57.6 | - | 68.2 | 69.2 | - | 137.4 | |||||||||||||||||||||
Intercompany receivables | 601.5 | 1,217.6 | (280.7 | ) | 1,538.4 | 4,420.0 | (5,958.4 | ) | - | |||||||||||||||||||
Current income tax recoverable | - | 0.7 | - | 0.7 | 42.5 | - | 43.2 | |||||||||||||||||||||
Inventories | 3.4 | 507.1 | - | 510.5 | 543.3 | - | 1,053.8 | |||||||||||||||||||||
740.4 | 1,907.7 | (280.7 | ) | 2,367.4 | 5,415.7 | (5,958.4 | ) | $ | 1,824.7 | |||||||||||||||||||
Non-current assets | ||||||||||||||||||||||||||||
Property, plant and equipment | 77.8 | 3,497.3 | - | 3,575.1 | 2,764.9 | - | 6,340.0 | |||||||||||||||||||||
Goodwill | - | 158.8 | - | 158.8 | - | - | 158.8 | |||||||||||||||||||||
Long-term investments | 116.5 | - | - | 116.5 | 9.7 | - | 126.2 | |||||||||||||||||||||
Investment in joint venture | - | - | - | - | 18.4 | - | 18.4 | |||||||||||||||||||||
Intercompany investments | 4,354.0 | 2,206.8 | (5,994.5 | ) | 566.3 | 17,765.7 | (18,332.0 | ) | - | |||||||||||||||||||
Other long-term assets | 17.2 | 166.5 | - | 183.7 | 389.0 | - | 572.7 | |||||||||||||||||||||
Long-term intercompany receivables | 3,215.1 | 234.8 | (1.1 | ) | 3,448.8 | 5,230.2 | (8,679.0 | ) | - | |||||||||||||||||||
Deferred tax assets | - | - | - | - | 35.2 | - | 35.2 | |||||||||||||||||||||
Total assets | $ | 8,521.0 | $ | 8,171.9 | $ | (6,276.3 | ) | $ | 10,416.6 | $ | 31,628.8 | $ | (32,969.4 | ) | $ | 9,076.0 | ||||||||||||
Liabilities | ||||||||||||||||||||||||||||
Current liabilities | ||||||||||||||||||||||||||||
Accounts payable and accrued liabilities | $ | 89.1 | $ | 208.6 | $ | - | $ | 297.7 | $ | 171.6 | $ | - | $ | 469.3 | ||||||||||||||
Intercompany payables | 123.0 | 821.1 | (280.7 | ) | 663.4 | 5,295.0 | (5,958.4 | ) | - | |||||||||||||||||||
Current income tax payable | - | 65.4 | - | 65.4 | 2.6 | - | 68.0 | |||||||||||||||||||||
Current portion of long-term debt and credit facilities | - | - | - | - | - | - | - | |||||||||||||||||||||
Current portion of provisions | - | 25.7 | - | 25.7 | 32.2 | - | 57.9 | |||||||||||||||||||||
Other current liabilities | 2.6 | 10.8 | - | 13.4 | 6.9 | - | 20.3 | |||||||||||||||||||||
Deferred payment obligation | - | - | - | - | - | - | - | |||||||||||||||||||||
214.7 | 1,131.6 | (280.7 | ) | 1,065.6 | 5,508.3 | (5,958.4 | ) | 615.5 | ||||||||||||||||||||
Non-current liabilities | ||||||||||||||||||||||||||||
Long-term debt and credit facilities | 1,837.4 | - | - | 1,837.4 | - | - | 1,837.4 | |||||||||||||||||||||
Provisions | 11.4 | 448.4 | - | 459.8 | 378.8 | - | 838.6 | |||||||||||||||||||||
Long-term lease liabilities | 18.4 | 11.5 | - | 29.9 | 9.0 | - | 38.9 | |||||||||||||||||||||
Other long-term liabilities | 0.3 | 45.0 | - | 45.3 | 63.2 | - | 108.5 | |||||||||||||||||||||
Long-term intercompany payables | 1,120.3 | 276.3 | (1.1 | ) | 1,395.5 | 7,283.5 | (8,679.0 | ) | - | |||||||||||||||||||
Deferred tax liabilities | - | 264.6 | - | 264.6 | 39.9 | - | 304.5 | |||||||||||||||||||||
Total liabilities | 3,202.5 | 2,177.4 | (281.8 | ) | 5,098.1 | 13,282.7 | (14,637.4 | ) | 3,743.4 | |||||||||||||||||||
Equity | ||||||||||||||||||||||||||||
Common shareholders' equity | ||||||||||||||||||||||||||||
Common share capital | $ | 14,926.2 | $ | 1,786.6 | $ | (1,786.6 | ) | $ | 14,926.2 | $ | 19,285.5 | $ | (19,285.5 | ) | $ | 14,926.2 | ||||||||||||
Contributed surplus | 242.1 | 2,187.6 | (2,187.6 | ) | 242.1 | 7,844.4 | (7,844.4 | ) | 242.1 | |||||||||||||||||||
Accumulated deficit | (9,829.4 | ) | 2,039.8 | (2,039.8 | ) | (9,829.4 | ) | (8,744.0 | ) | 8,744.0 | (9,829.4 | ) | ||||||||||||||||
Accumulated other comprehensive income (loss) | (20.4 | ) | (19.5 | ) | 19.5 | (20.4 | ) | (53.9 | ) | 53.9 | (20.4 | ) | ||||||||||||||||
Total common shareholders' equity | 5,318.5 | 5,994.5 | (5,994.5 | ) | 5,318.5 | 18,332.0 | (18,332.0 | ) | 5,318.5 | |||||||||||||||||||
Non-controlling interests | - | - | - | - | 14.1 | - | 14.1 | |||||||||||||||||||||
Total equity | 5,318.5 | 5,994.5 | (5,994.5 | ) | 5,318.5 | 18,346.1 | (18,332.0 | ) | 5,332.6 | |||||||||||||||||||
Total liabilities and equity | $ | 8,521.0 | $ | 8,171.9 | $ | (6,276.3 | ) | $ | 10,416.6 | $ | 31,628.8 | $ | (32,969.4 | ) | $ | 9,076.0 | ||||||||||||
56
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Consolidating statement of operations for the year ended December 31, 2020
Guarantors | Non-guarantors | Eliminations | Consolidated | |||||||||||||||||||||||||
Kinross Gold Corp. | Guarantor Subsidiaries | Guarantor Adjustments |
Total
Guarantors |
|||||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||||
Metal sales | $ | 2,225.4 | $ | 2,229.0 | $ | (2,165.8 | ) | $ | 2,288.6 | $ | 1,924.8 | $ | - | $ | 4,213.4 | |||||||||||||
Cost of sales | ||||||||||||||||||||||||||||
Production cost of sales | 2,181.9 | 980.8 | (2,165.8 | ) | 996.9 | 728.8 | - | 1,725.7 | ||||||||||||||||||||
Depreciation, depletion and amortization | 5.0 | 458.9 | - | 463.9 | 378.4 | - | 842.3 | |||||||||||||||||||||
Reversals of impairment charges - net | - | - | - | - | (650.9 | ) | - | (650.9 | ) | |||||||||||||||||||
Total cost of sales | 2,186.9 | 1,439.7 | (2,165.8 | ) | 1,460.8 | 456.3 | - | 1,917.1 | ||||||||||||||||||||
Gross profit | 38.5 | 789.3 | - | 827.8 | 1,468.5 | - | 2,296.3 | |||||||||||||||||||||
Other operating expense | 8.3 | 23.1 | - | 31.4 | 155.1 | - | 186.5 | |||||||||||||||||||||
Exploration and business development | 25.6 | 17.4 | - | 43.0 | 49.5 | - | 92.5 | |||||||||||||||||||||
General and administrative | 80.4 | 2.7 | - | 83.1 | 34.8 | - | 117.9 | |||||||||||||||||||||
Operating earnings (loss) | (75.8 | ) | 746.1 | - | 670.3 | 1,229.1 | - | 1,899.4 | ||||||||||||||||||||
Other income (expense) - net | 22.8 | 7.7 | - | 30.5 | 188.2 | (211.3 | ) | 7.4 | ||||||||||||||||||||
Equity in earnings (losses) of intercompany investments | 1,389.2 | 1,016.2 | (1,522.7 | ) | 882.7 | - | (882.7 | ) | - | |||||||||||||||||||
Finance income | 80.6 | 2.7 | (0.4 | ) | 82.9 | 143.5 | (222.1 | ) | 4.3 | |||||||||||||||||||
Finance expense | (75.6 | ) | (32.3 | ) | 0.4 | (107.5 | ) | (227.2 | ) | 222.1 | (112.6 | ) | ||||||||||||||||
Earnings (loss) before tax | 1,341.2 | 1,740.4 | (1,522.7 | ) | 1,558.9 | 1,333.6 | (1,094.0 | ) | 1,798.5 | |||||||||||||||||||
Income tax expense - net | 1.2 | (217.7 | ) | - | (216.5 | ) | (223.3 | ) | - | (439.8 | ) | |||||||||||||||||
Net earnings (loss) | $ | 1,342.4 | $ | 1,522.7 | $ | (1,522.7 | ) | $ | 1,342.4 | $ | 1,110.3 | $ | (1,094.0 | ) | $ | 1,358.7 | ||||||||||||
Net earnings (loss) attributable to: | ||||||||||||||||||||||||||||
Non-controlling interests | $ | - | $ | - | $ | - | $ | - | $ | 16.3 | $ | - | $ | 16.3 | ||||||||||||||
Common shareholders | $ | 1,342.4 | $ | 1,522.7 | $ | (1,522.7 | ) | $ | 1,342.4 | $ | 1,094.0 | $ | (1,094.0 | ) | $ | 1,342.4 | ||||||||||||
57
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Consolidating statement of operations for the year ended December 31, 2019
Guarantors |
Non-
guarantors |
Eliminations | Consolidated | |||||||||||||||||||||||||
Kinross Gold Corp. | Guarantor Subsidiaries | Guarantor Adjustments |
Total
Guarantors |
|||||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||||
Metal sales | $ | 1,892.0 | $ | 1,848.0 | $ | (1,794.7 | ) | $ | 1,945.3 | $ | 1,552.0 | $ | - | $ | 3,497.3 | |||||||||||||
Cost of sales | ||||||||||||||||||||||||||||
Production cost of sales | 1,857.5 | 1,009.8 | (1,794.5 | ) | 1,072.8 | 706.1 | - | 1,778.9 | ||||||||||||||||||||
Depreciation, depletion and amortization | 3.3 | 373.7 | (0.2 | ) | 376.8 | 354.5 | - | 731.3 | ||||||||||||||||||||
Reversals of impairment charges - net | - | (200.7 | ) | - | (200.7 | ) | (161.1 | ) | - | (361.8 | ) | |||||||||||||||||
Total cost of sales | 1,860.8 | 1,182.8 | (1,794.7 | ) | 1,248.9 | 899.5 | - | 2,148.4 | ||||||||||||||||||||
Gross profit | 31.2 | 665.2 | - | 696.4 | 652.5 | - | 1,348.9 | |||||||||||||||||||||
Other operating expense | 18.0 | 21.6 | - | 39.6 | 68.9 | - | 108.5 | |||||||||||||||||||||
Exploration and business development | 29.6 | 20.8 | - | 50.4 | 63.1 | - | 113.5 | |||||||||||||||||||||
General and administrative | 86.1 | 4.0 | - | 90.1 | 45.7 | - | 135.8 | |||||||||||||||||||||
Operating earnings (loss) | (102.5 | ) | 618.8 | - | 516.3 | 474.8 | - | 991.1 | ||||||||||||||||||||
Other income (expense) - net | 33.0 | 1.9 | - | 34.9 | 249.5 | (211.7 | ) | 72.7 | ||||||||||||||||||||
Equity in earnings (losses) of intercompany investments | 767.1 | 399.2 | (824.4 | ) | 341.9 | - | (341.9 | ) | - | |||||||||||||||||||
Finance income | 83.5 | 12.3 | (0.4 | ) | 95.4 | 134.5 | (222.0 | ) | 7.9 | |||||||||||||||||||
Finance expense | (63.7 | ) | (44.7 | ) | 0.4 | (108.0 | ) | (221.9 | ) | 222.0 | (107.9 | ) | ||||||||||||||||
Earnings (loss) before tax | 717.4 | 987.5 | (824.4 | ) | 880.5 | 636.9 | (553.6 | ) | 963.8 | |||||||||||||||||||
Income tax expense - net | 1.2 | (163.1 | ) | - | (161.9 | ) | (84.8 | ) | - | (246.7 | ) | |||||||||||||||||
Net earnings (loss) | $ | 718.6 | $ | 824.4 | $ | (824.4 | ) | $ | 718.6 | $ | 552.1 | $ | (553.6 | ) | $ | 717.1 | ||||||||||||
Net earnings (loss) attributable to: | ||||||||||||||||||||||||||||
Non-controlling interests | $ | - | $ | - | $ | - | $ | - | $ | (1.5 | ) | $ | - | $ | (1.5 | ) | ||||||||||||
Common shareholders | $ | 718.6 | $ | 824.4 | $ | (824.4 | ) | $ | 718.6 | $ | 553.6 | $ | (553.6 | ) | $ | 718.6 | ||||||||||||
58
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Consolidating statement of comprehensive income (loss) for the year ended December 31, 2020
Guarantors |
Non-
guarantors |
Eliminations | Consolidated | |||||||||||||||||||||||||
Kinross Gold Corp. | Guarantor Subsidiaries | Guarantor Adjustments |
Total
Guarantors |
|||||||||||||||||||||||||
Net earnings (loss) | $ | 1,342.4 | $ | 1,522.7 | $ | (1,522.7 | ) | $ | 1,342.4 | $ | 1,110.3 | $ | (1,094.0 | ) | $ | 1,358.7 | ||||||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||||||||||||||
Items that will not be reclassified to profit or loss: | ||||||||||||||||||||||||||||
Equity investments at fair value through other comprehensive income - net change in fair value (a) | (5.9 | ) | - | - | (5.9 | ) | 6.2 | - | 0.3 | |||||||||||||||||||
Items that are or may be reclassified to profit or loss in subsequent periods: | ||||||||||||||||||||||||||||
Cash flow hedges - effective portion of changes in fair value (b) | (1.9 | ) | (25.8 | ) | - | (27.7 | ) | - | - | (27.7 | ) | |||||||||||||||||
Cash flow hedges - reclassified out of accumulated other comprehensive income (c) | 5.2 | 18.9 | - | 24.1 | - | - | 24.1 | |||||||||||||||||||||
(2.6 | ) | (6.9 | ) | - | (9.5 | ) | 6.2 | - | (3.3 | ) | ||||||||||||||||||
Equity in other comprehensive income (loss) of intercompany investments | (0.7 | ) | - | 6.9 | 6.2 | - | (6.2 | ) | - | |||||||||||||||||||
Total comprehensive income (loss) | $ | 1,339.1 | $ | 1,515.8 | $ | (1,515.8 | ) | $ | 1,339.1 | $ | 1,116.5 | $ | (1,100.2 | ) | $ | 1,355.4 | ||||||||||||
Attributable to non-controlling interests | $ | - | $ | - | $ | - | $ | - | $ | 16.3 | $ | - | $ | 16.3 | ||||||||||||||
Attributable to common shareholders | $ | 1,339.1 | $ | 1,515.8 | $ | (1,515.8 | ) | $ | 1,339.1 | $ | 1,100.2 | $ | (1,100.2 | ) | $ | 1,339.1 | ||||||||||||
(a) Net of tax of | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||
(b) Net of tax of | $ | (0.7 | ) | $ | (11.8 | ) | $ | - | $ | (12.5 | ) | $ | - | $ | - | $ | (12.5 | ) | ||||||||||
(c) Net of tax of | $ | 1.9 | $ | 8.5 | $ | - | $ | 10.4 | $ | - | $ | - | $ | 10.4 |
59
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Consolidating statement of comprehensive income (loss) for the year ended December 31, 2019
Guarantors |
Non-
guarantors |
Eliminations | Consolidated | |||||||||||||||||||||||||
Kinross Gold Corp. | Guarantor Subsidiaries | Guarantor Adjustments |
Total
Guarantors |
|||||||||||||||||||||||||
Net earnings (loss) | $ | 718.6 | $ | 824.4 | $ | (824.4 | ) | $ | 718.6 | $ | 552.1 | $ | (553.6 | ) | $ | 717.1 | ||||||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||||||||||||||
Items that will not be reclassified to profit or loss: | ||||||||||||||||||||||||||||
Equity investments at fair value through other comprehensive income - net change in fair value (a) | 49.6 | - | - | 49.6 | (0.6 | ) | - | 49.0 | ||||||||||||||||||||
Items that are or may be reclassified to profit or loss in subsequent periods: | ||||||||||||||||||||||||||||
Cash flow hedges - effective portion of changes in fair value (b) | 14.2 | 9.4 | - | 23.6 | - | - | 23.6 | |||||||||||||||||||||
Cash flow hedges - reclassified out of accumulated other comprehensive income (c) | (0.3 | ) | 5.8 | - | 5.5 | - | - | 5.5 | ||||||||||||||||||||
63.5 | 15.2 | - | 78.7 | (0.6 | ) | - | 78.1 | |||||||||||||||||||||
Equity in other comprehensive income (loss) of intercompany investments | 14.6 | - | (15.2 | ) | (0.6 | ) | - | 0.6 | - | |||||||||||||||||||
Total comprehensive income (loss) | $ | 796.7 | $ | 839.6 | $ | (839.6 | ) | $ | 796.7 | $ | 551.5 | $ | (553.0 | ) | $ | 795.2 | ||||||||||||
Attributable to non-controlling interests | $ | - | $ | - | $ | - | $ | - | $ | (1.5 | ) | $ | - | $ | (1.5 | ) | ||||||||||||
Attributable to common shareholders | $ | 796.7 | $ | 839.6 | $ | (839.6 | ) | $ | 796.7 | $ | 553.0 | $ | (553.0 | ) | $ | 796.7 | ||||||||||||
(a) Net of tax of | $ | - | $ | - | $ | - | $ | - | $ | 0.3 | $ | - | $ | 0.3 | ||||||||||||||
(b) Net of tax of | $ | 1.3 | $ | 3.2 | $ | - | $ | 4.5 | $ | - | $ | - | $ | 4.5 | ||||||||||||||
(c) Net of tax of | $ | (0.1 | ) | $ | 3.3 | $ | - | $ | 3.2 | $ | - | $ | - | $ | 3.2 |
60
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Consolidating statement of cash flows for the year ended December 31, 2020
Guarantors |
Non-
guarantors |
Eliminations | Consolidated | |||||||||||||||||||||||||
Kinross Gold Corp. | Guarantor Subsidiaries | Guarantor Adjustments |
Total
Guarantors |
|||||||||||||||||||||||||
Net inflow (outflow) of cash related to the following activities: | ||||||||||||||||||||||||||||
Operating: | ||||||||||||||||||||||||||||
Net earnings (loss) | $ | 1,342.4 | $ | 1,522.7 | $ | (1,522.7 | ) | $ | 1,342.4 | $ | 1,110.3 | $ | (1,094.0 | ) | $ | 1,358.7 | ||||||||||||
Adjustments to reconcile net earnings (loss) to net cash provided from (used in) operating activities: | ||||||||||||||||||||||||||||
Depreciation, depletion and amortization | 5.0 | 458.9 | - | 463.9 | 378.4 | - | 842.3 | |||||||||||||||||||||
Reversals of impairment charges - net | - | - | - | - | (650.9 | ) | - | (650.9 | ) | |||||||||||||||||||
Equity in (earnings) losses of intercompany investments | (1,389.2 | ) | (1,016.2 | ) | 1,522.7 | (882.7 | ) | - | 882.7 | - | ||||||||||||||||||
Share-based compensation expense | 13.7 | - | - | 13.7 | - | - | 13.7 | |||||||||||||||||||||
Finance expense | 75.6 | 32.3 | (0.4 | ) | 107.5 | 227.2 | (222.1 | ) | 112.6 | |||||||||||||||||||
Deferred tax expense (recovery) | (1.2 | ) | 61.1 | - | 59.9 | 158.0 | - | 217.9 | ||||||||||||||||||||
Foreign exchange (gains) losses and other | 15.0 | 0.5 | - | 15.5 | (3.7 | ) | - | 11.8 | ||||||||||||||||||||
Reclamation expense (recovery) | - | - | - | - | 6.6 | - | 6.6 | |||||||||||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||||||||||||||
Accounts receivable and other assets | (2.4 | ) | 3.7 | - | 1.3 | (122.2 | ) | - | (120.9 | ) | ||||||||||||||||||
Inventories | (0.5 | ) | (61.9 | ) | - | (62.4 | ) | 55.6 | - | (6.8 | ) | |||||||||||||||||
Accounts payable and accrued liabilities | (5.5 | ) | 124.5 | - | 119.0 | 160.0 | - | 279.0 | ||||||||||||||||||||
Cash flow provided from (used in) operating activities | 52.9 | 1,125.6 | (0.4 | ) | 1,178.1 | 1,319.3 | (433.4 | ) | 2,064.0 | |||||||||||||||||||
Income taxes paid | - | (88.4 | ) | - | (88.4 | ) | (18.0 | ) | - | (106.4 | ) | |||||||||||||||||
Net cash flow provided from (used in) operating activities | 52.9 | 1,037.2 | (0.4 | ) | 1,089.7 | 1,301.3 | (433.4 | ) | 1,957.6 | |||||||||||||||||||
Investing: | ||||||||||||||||||||||||||||
Additions to property, plant and equipment | (3.2 | ) | (554.0 | ) | - | (557.2 | ) | (358.9 | ) | - | (916.1 | ) | ||||||||||||||||
Interest paid capitalized to property, plant and equipment | (0.1 | ) | (26.8 | ) | - | (26.9 | ) | (21.0 | ) | - | (47.9 | ) | ||||||||||||||||
Acquisitions | 1.3 | - | - | 1.3 | (268.3 | ) | - | (267.0 | ) | |||||||||||||||||||
Net proceeds from the sale of (additions to) long-term investments and other assets | 7.5 | (21.9 | ) | - | (14.4 | ) | 8.5 | - | (5.9 | ) | ||||||||||||||||||
Net proceeds from the sale of property, plant and equipment | - | 1.8 | - | 1.8 | 6.6 | - | 8.4 | |||||||||||||||||||||
(Increase) decrease in restricted cash - net | - | 1.0 | - | 1.0 | (24.5 | ) | - | (23.5 | ) | |||||||||||||||||||
Interest received and other - net | 0.7 | 0.5 | - | 1.2 | 1.7 | - | 2.9 | |||||||||||||||||||||
Net cash flow provided from (used in) investing activities | 6.2 | (599.4 | ) | - | (593.2 | ) | (655.9 | ) | - | (1,249.1 | ) | |||||||||||||||||
Financing: | ||||||||||||||||||||||||||||
Proceeds from drawdown of debt | 750.0 | - | - | 750.0 | 200.0 | - | 950.0 | |||||||||||||||||||||
Repayment of debt | (850.0 | ) | - | - | (850.0 | ) | - | - | (850.0 | ) | ||||||||||||||||||
Interest paid | (63.1 | ) | - | - | (63.1 | ) | - | - | (63.1 | ) | ||||||||||||||||||
Payment of lease liabilities | (1.8 | ) | (10.8 | ) | - | (12.6 | ) | (8.1 | ) | - | (20.7 | ) | ||||||||||||||||
Dividends received from (paid to) common shareholders and
subsidiaries |
(72.0 | ) | (48.4 | ) | - | (120.4 | ) | (166.4 | ) | 211.3 | (75.5 | ) | ||||||||||||||||
Dividend paid to non-controlling interest | - | - | - | - | (6.0 | ) | - | (6.0 | ) | |||||||||||||||||||
Intercompany advances | 159.2 | (129.9 | ) | 0.4 | 29.7 | (251.8 | ) | 222.1 | - | |||||||||||||||||||
Other - net | 9.2 | - | - | 9.2 | (11.6 | ) | - | (2.4 | ) | |||||||||||||||||||
Net cash flow provided from (used in) financing activities | (68.5 | ) | (189.1 | ) | 0.4 | (257.2 | ) | (243.9 | ) | 433.4 | (67.7 | ) | ||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | - | - | - | - | (5.0 | ) | - | (5.0 | ) | |||||||||||||||||||
Increase (decrease) in cash and cash equivalents | (9.4 | ) | 248.7 | - | 239.3 | 396.5 | - | 635.8 | ||||||||||||||||||||
Cash and cash equivalents, beginning of period | 124.9 | 118.1 | - | 243.0 | 332.1 | - | 575.1 | |||||||||||||||||||||
Cash and cash equivalents, end of period | $ | 115.5 | $ | 366.8 | $ | - | $ | 482.3 | $ | 728.6 | $ | - | $ | 1,210.9 | ||||||||||||||
61
Kinross Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Consolidating statement of cash flows for the year ended December 31, 2019
Guarantors |
Non-
guarantors |
Eliminations | Consolidated | |||||||||||||||||||||||||
Kinross Gold Corp. | Guarantor Subsidiaries | Guarantor Adjustments |
Total
Guarantors |
|||||||||||||||||||||||||
Net inflow (outflow) of cash related to the following activities: | ||||||||||||||||||||||||||||
Operating: | ||||||||||||||||||||||||||||
Net earnings (loss) | $ | 718.6 | $ | 824.4 | $ | (824.4 | ) | $ | 718.6 | $ | 552.1 | $ | (553.6 | ) | $ | 717.1 | ||||||||||||
Adjustments to reconcile net earnings (loss) to net cash provided from (used in) operating activities: | ||||||||||||||||||||||||||||
Depreciation, depletion and amortization | 3.3 | 373.7 | (0.2 | ) | 376.8 | 354.5 | - | 731.3 | ||||||||||||||||||||
Reversals of impairment charges - net | - | (200.7 | ) | - | (200.7 | ) | (161.1 | ) | - | (361.8 | ) | |||||||||||||||||
Equity in (earnings) losses of intercompany investments | (767.1 | ) | (399.2 | ) | 824.4 | (341.9 | ) | - | 341.9 | - | ||||||||||||||||||
Share-based compensation expense | 14.3 | - | - | 14.3 | - | - | 14.3 | |||||||||||||||||||||
Finance expense | 63.7 | 44.7 | (0.4 | ) | 108.0 | 221.9 | (222.0 | ) | 107.9 | |||||||||||||||||||
Deferred tax expense (recovery) | (1.2 | ) | 65.8 | - | 64.6 | (23.5 | ) | - | 41.1 | |||||||||||||||||||
Foreign exchange (gains) losses and other | (9.8 | ) | (10.4 | ) | - | (20.2 | ) | (33.0 | ) | - | (53.2 | ) | ||||||||||||||||
Reclamation expense (recovery) | - | - | - | - | (11.9 | ) | - | (11.9 | ) | |||||||||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||||||||||||||
Accounts receivable and other assets | (1.2 | ) | (14.4 | ) | - | (15.6 | ) | (48.9 | ) | - | (64.5 | ) | ||||||||||||||||
Inventories | (0.8 | ) | 12.6 | 0.2 | 12.0 | 41.8 | - | 53.8 | ||||||||||||||||||||
Accounts payable and accrued liabilities | 4.1 | 75.0 | - | 79.1 | 86.8 | - | 165.9 | |||||||||||||||||||||
Cash flow provided from (used in) operating activities | 23.9 | 771.5 | (0.4 | ) | 795.0 | 978.7 | (433.7 | ) | 1,340.0 | |||||||||||||||||||
Income taxes paid | - | (51.7 | ) | - | (51.7 | ) | (63.4 | ) | - | (115.1 | ) | |||||||||||||||||
Net cash flow provided from (used in) operating activities | 23.9 | 719.8 | (0.4 | ) | 743.3 | 915.3 | (433.7 | ) | 1,224.9 | |||||||||||||||||||
Investing: | ||||||||||||||||||||||||||||
Additions to property, plant and equipment | (30.4 | ) | (663.8 | ) | - | (694.2 | ) | (366.0 | ) | - | (1,060.2 | ) | ||||||||||||||||
Interest paid capitalized to property, plant and equipment | (0.3 | ) | (32.6 | ) | - | (32.9 | ) | (12.1 | ) | - | (45.0 | ) | ||||||||||||||||
Acquisitions | - | - | - | - | (30.0 | ) | - | (30.0 | ) | |||||||||||||||||||
Net proceeds from the sale of (additions to) long-term
investments and other assets |
126.8 | (22.6 | ) | - | 104.2 | (32.6 | ) | - | 71.6 | |||||||||||||||||||
Net proceeds from the sale of property, plant and
equipment |
12.0 | 0.3 | - | 12.3 | 19.6 | - | 31.9 | |||||||||||||||||||||
(Increase) decrease in restricted cash - net | - | (0.4 | ) | - | (0.4 | ) | (2.1 | ) | - | (2.5 | ) | |||||||||||||||||
Interest received and other - net | 0.5 | 1.6 | - | 2.1 | 5.5 | - | 7.6 | |||||||||||||||||||||
Net cash flow provided from (used in) investing activities | 108.6 | (717.5 | ) | - | (608.9 | ) | (417.7 | ) | - | (1,026.6 | ) | |||||||||||||||||
Financing: | ||||||||||||||||||||||||||||
Proceeds from drawdown of debt | 300.0 | - | - | 300.0 | - | - | 300.0 | |||||||||||||||||||||
Repayment of debt | (200.0 | ) | - | - | (200.0 | ) | - | - | (200.0 | ) | ||||||||||||||||||
Interest paid | (55.6 | ) | - | - | (55.6 | ) | - | - | (55.6 | ) | ||||||||||||||||||
Payment of lease liabilities | (2.0 | ) | (8.6 | ) | - | (10.6 | ) | (3.7 | ) | - | (14.3 | ) | ||||||||||||||||
Dividends received from (paid to) common shareholders and
subsidiaries |
- | (22.3 | ) | - | (22.3 | ) | (189.4 | ) | 211.7 | - | ||||||||||||||||||
Dividend paid to non-controlling interest | - | - | - | - | (5.0 | ) | - | (5.0 | ) | |||||||||||||||||||
Intercompany advances | (83.6 | ) | 57.5 | 0.4 | (25.7 | ) | (196.3 | ) | 222.0 | - | ||||||||||||||||||
Other - net | 3.9 | - | - | 3.9 | (3.9 | ) | - | - | ||||||||||||||||||||
Net cash flow provided from (used in) financing activities | (37.3 | ) | 26.6 | 0.4 | (10.3 | ) | (398.3 | ) | 433.7 | 25.1 | ||||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | - | - | - | - | 2.7 | - | 2.7 | |||||||||||||||||||||
Increase (decrease) in cash and cash equivalents | 95.2 | 28.9 | - | 124.1 | 102.0 | - | 226.1 | |||||||||||||||||||||
Cash and cash equivalents, beginning of period | 29.7 | 89.2 | - | 118.9 | 230.1 | - | 349.0 | |||||||||||||||||||||
Cash and cash equivalents, end of period | $ | 124.9 | $ | 118.1 | $ | - | $ | 243.0 | $ | 332.1 | $ | - | $ | 575.1 | ||||||||||||||
62
Exhibit 99.4
Consent of Independent Registered Public Accounting Firm
The Board of Directors of Kinross Gold Corporation
We consent to the use in this annual report on Form 40-F of:
• | our Report of Independent Registered Public Accounting Firm dated February 10, 2021 addressed to the shareholders and board of directors of Kinross Gold Corporation (the “Company”) on the consolidated financial statements of the Company comprising the consolidated balance sheets of the Company as of December 31, 2020 and December 31, 2019, the consolidated statements of operations, comprehensive income, cash flows and equity for the years then ended, and the related notes, and |
• | our Report of Independent Registered Public Accounting Firm dated February 10, 2021 on the Company’s internal control over financial reporting as of December 31, 2020, |
each of which is included in this annual report on Form 40-F of the Company for the fiscal year ended December 31, 2020.
We also consent to the incorporation by reference of such reports into the Company’s Registration Statements on Form S-8 (Registration Nos. 333-180822, 333-180823, 333-180824 and 333-217099) and Registration Statement on Form F-10 (Registration No. 333-239219).
/s/ KPMG LLP
Chartered Professional Accountants, Licensed Public Accountants
March 30, 2021
Toronto, Canada
EXHIBIT 99.5
Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, filed herewith
The following disclosures are provided by Kinross Gold Corporation in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”) and Item 104 of Regulation S-K. These provisions require the following disclosures from companies that operate mines regulated under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”) and that are required to file periodic reports under the Securities Exchange Act of 1934, as amended. The disclosures referenced in the table below identify the number of administrative citations, orders and proposed penalty assessments that were issued to a Kinross U.S. mine by the federal Mine Safety and Health Administration (“MSHA”) during the year ending December 31, 2020. Certain citations, orders and penalty assessments are contested and appealed by the Company in legal actions before the Federal Mine Safety and Health Review Commission (“Review Commission”). The Review Commission is an independent adjudicative agency that reviews disputes between MSHA and the Company concerning the validity of certain citations and orders (referred to as "Subtitle B" legal actions) and concerning the validity of proposed penalty assessments (referred to as "Subtitle C" legal actions) under the Mine Act. The table below lists the number of Subtitle B and Subtitle C legal actions initiated, resolved and pending as of December 31, 2020. These disclosure requirements pertain only to the Kinross U.S. mining operations and do not apply to mines operated outside the United States.
Mine or Operating Name /MSHA Identification Number |
Section 104 S&S Citations (#) |
Section 104(b) Orders (#) |
Section 104(d) Citations and Orders (#) |
Section 110(b)(2) Violations (#) |
Section 107(a) Orders (#) |
Total Dollar Value of MSHA Assessments Proposed (#) |
Total Number of Mining- Related Fatalities (#) |
Received Notice of Pattern of Violations under Section 104(e) (yes/no) |
Received Notice of Potential to have Pattern under Section 104(e) (yes/no) |
Legal Actions(2) Pending as of Last Day of Period Subtitle B/Subtitle C |
Legal Actions Initiated During Period Subtitle B/Subtitle C |
Legal Actions Resolved During Period Subtitle B/Subtitle C |
||||||||||||||
Bald Mtn 26-01842 |
8 | 0 | 0 | 0 | 0 | $ | 18,135 | 0 | No | No | 1 | 4 | 4 | |||||||||||||
Round Mtn 26-00594 |
1 | 0 | 0 | 0 | 0 | $ | 11,068 | 1 | No | No | 2 | 2 | 0 | |||||||||||||
Fort Knox 50-01616 |
1 | 0 | 0 | 0 | 0 | $ | 2,922 | 0 | No | No | 2 | 2 | 0 | |||||||||||||
Buckhorn 45-03615 |
0 | 0 | 0 | 0 | 0 | $ | 0 | 0 | No | No | 0 | 0 | 0 | |||||||||||||
Kettle River 45-03283 |
0 | 0 | 0 | 0 | 0 | $ | 0 | 0 | No | No | 0 | 0 | 0 | |||||||||||||
TOTAL | 10(1) | 0 | 0 | 0 | 0 | $ | 32,125 | (1) | 1 | No | No | 5 | 8 | 4 |
(1) A number of the citations, alleged violations and proposed penalties issued by MSHA comprising these values are currently being contested.
(2) Legal action as used above means a single proceeding before the Review Commission addressing one or more citations, orders, penalty assessments or related claims.
Notes:
• | This sheet includes all assessed and not assessed Significant & Substantial (S&S) citations and orders issued during calendar year 2020. |
• | Total dollar value of MSHA assessments proposed includes all citations/orders assessed during 2020. |
• | Total dollar value of MSHA assessments taken from MSHA.gov. |
EXHIBIT 99.6
CONSENT OF JOHN SIMS
TO BEING NAMED AS A QUALIFIED PERSON
March 30, 2021
I hereby consent to being named and identified as a “qualified person” in connection with the mineral reserve and mineral resource estimates and the property descriptions in the Annual Information Form for the year ended December 31, 2020 (the “AIF”) and the related annual report on Form 40-F of Kinross Gold Corporation.
I also hereby consent to the incorporation by reference of the information contained in the AIF and annual report on Form 40-F, into Kinross Gold Corporation’s Registration Statements on Form S-8 (Registration Nos. 333-180822, 333-180823, 333-180824), filed on April 19, 2012 and (Registration No. 333-217099) filed on April 3, 2017, and on Form F-10 (Registration No. 333-239219) filed on June 16, 2020, as amended.
Sincerely,
/s/ John Sims
Exhibit 99.7
CERTIFICATION PURSUANT TO RULE 13A-14
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES - OXLEY ACT OF 2002
I, J. Paul Rollinson certify that:
1. | I have reviewed this annual report on Form 40-F of Kinross Gold Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report; |
4. | The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and
5. | The issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.
March 30, 2021 | /s/ J. Paul Rollinson | |
J. Paul Rollinson | ||
President and Chief Executive Officer | ||
(principal executive officer) |
Exhibit 99.8
CERTIFICATION PURSUANT TO RULE 13A-14
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES - OXLEY ACT OF 2002
I, Andrea S. Freeborough, certify that:
1. | I have reviewed this annual report on Form 40-F of Kinross Gold Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report; |
4. | The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as to the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and
5. | The issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.
March 30, 2021 | /s/ Andrea S. Freeborough |
Andrea S. Freeborough | |
Senior Vice President & Chief Financial Officer | |
(principal financial and accounting officer) |
EXHIBIT 99.9
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES - OXLEY ACT OF 2002
In connection with the annual report of Kinross Gold Corporation (the “Company”) on Form 40-F for the year ended December 31, 2020, J. Paul Rollinson hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:
1. | The annual report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the annual report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
March 30, 2021 | /s/ J. Paul Rollinson |
J. Paul Rollinson | |
President and Chief Executive Officer | |
(principal executive officer) |
EXHIBIT 99.10
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES - OXLEY ACT OF 2002
In connection with the annual report of Kinross Gold Corporation (the “Company”) on Form 40-F for the year ended December 31, 2020, Andrea S. Freeborough hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:
1. | The annual report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the annual report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
March 30, 2021 | /s/ Andrea S. Freeborough |
Andrea S. Freeborough | |
Senior Vice President & Chief Financial Officer | |
(principal financial and accounting officer) |