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Kinross Gold Corporation

Publié le 27 juillet 2016

Kinross Reports 2016 Second-Quarter Results

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Kinross Reports 2016 Second-Quarter Results

Adjusted Operating Cash Flow Increases by 16% and Attributable Margins by 14%; Maintained Strong Balance Sheet With Robust Cash Position of $968 Million

TORONTO, ON -- (Marketwired) -- 07/27/16 -- Kinross Gold Corporation(TSX: K)(NYSE: KGC)today announced its results for the second quarter ended June 30, 2016.

(This news release contains forward-looking information about expected future events and financial and operating performance of the Company. We refer to the risks and assumptions set out in our Cautionary Statement on Forward-Looking Information located on page 17 of this release. All dollar amounts are expressed in U.S. dollars, unless otherwise noted.)

2016 second quarter highlights:

  • Production: 671,267 gold equivalent ounces (Au eq. oz.), compared with 660,898 Au eq. oz. in Q2 2015.
  • Revenue: $876.4 million, compared with $755.2 million in Q2 2015.
  • Production cost of sales: $731 per Au eq. oz., compared with $724 in Q2 2015.
  • All-in sustaining cost: $988 per Au eq. oz. sold, compared with $1,011 in Q2 2015. All-in sustaining cost per gold ounce (Au oz.) sold on a by-product basis was $976 in Q2 2016, compared with $1,006 in Q2 2015.
  • Adjusted operating cash flow: $187.2 million, or $0.15 per share, compared with $161.4 million, or $0.14 per share, in Q2 2015.
  • Adjusted net loss: $9.8 million, or $0.01 per share, compared with adjusted net loss of $13.6 million, or $0.01 per share, in Q2 2015.
  • Reported net loss:$25.0 million, or $0.02 per share, compared with a loss of $83.2 million, or $0.07 per share, in Q2 2015.
  • Balance sheet: Increased cash and cash equivalents to $968.2 million, adding $217.8 million during the quarter, with total liquidity of approximately $2.5 billion.
  • Average realized gold price: $1,266 per ounce, compared with $1,194 per ounce in Q2 2015.
  • Tasiast update: Kinross has resolved the expatriate work permit issue with the Government of Mauritania and expects to resume normal operations in August 2016.
  • Outlook: Kinross expects to be within its 2016 guidance range for production (2.7 - 2.9 million Au eq. oz.), production cost of sales ($675 - $735 per Au eq. oz.) and all-in sustaining cost ($890 - $990 per Au eq. oz.).

CEO Commentary

J. Paul Rollinson, President and CEO, made the following comments in relation to 2016 second-quarter results:

'Kinross generated robust free cash flow of more than $200 million from its operations and ended the second quarter with approximately $970 million in cash and cash equivalents. We remain on track to be within our full-year guidance range for both production and cost of sales as strong production from Russia and North America offset temporary production curtailments at Tasiast and Maricunga.

'Maricunga resumed operations in early July, subject to ongoing regulatory proceedings, while at Tasiast, we expect to resume normal operations in August. We have resolved the expatriate work permit issue with the Government of Mauritania as part of an agreed 'Mauritanization' plan to increase the number of skilled local workers at Tasiast. The required plan is an important milestone for the country and is a positive example of the ongoing partnership between the Government and Kinross.

'Our continued focus on cost management and capital discipline, combined with our high leverage to stronger gold prices, help to ensure we maximize cash generation. With an excellent balance sheet, financial flexibility, a diverse portfolio of producing mines and high-quality development projects, we remain well positioned to deliver value now and for the future.'

Financial results
Summary of financial and operating results
Three months ended Six months ended
June 30, June 30,
(in millions, except ounces, per share amounts, and per ounce amounts) 2016 2015 2016 2015
Operating Highlights
Total gold equivalent ounces
Produced 675,623 667,529 1,367,533 1,303,657
Sold 690,983 633,148 1,355,148 1,274,900
Attributable gold equivalent ounces
Produced 671,267 660,898 1,358,730 1,290,258
Sold 686,752 626,246 1,346,149 1,260,811
Financial Highlights
Metal sales $ 876.4 $ 755.2 $ 1,659.0 $ 1,536.6
Production cost of sales $ 506.7 $ 458.5 $ 964.4 $ 913.1
Depreciation, depletion and amortization $ 210.2 $ 216.7 $ 403.4 $ 422.9
Impairment charges $ - $ 24.5 $ - $ 24.5
Operating earnings (loss) $ 69.2 $ (67.8 ) $ 112.0 $ (25.3 )
Net earnings (loss) attributable to common shareholders $ (25.0 ) $ (83.2 ) $ 10.0 $ (89.9 )
Basic earnings (loss) per share attributable to common shareholders $ (0.02 ) $ (0.07 ) $ 0.01 $ (0.08 )
Diluted earnings (loss) per share attributable to common shareholders $ (0.02 ) $ (0.07 ) $ 0.01 $ (0.08 )
Adjusted net earnings (loss) attributable to common shareholders $ (9.8 ) $ (13.6 ) $ 11.4 $ 1.7
Adjusted net earnings (loss) per share $ (0.01 ) $ (0.01 ) $ 0.01 $ 0.00
Net cash flow provided from operating activities $ 315.9 $ 167.2 $ 530.4 $ 417.3
Adjusted operating cash flow $ 187.2 $ 161.4 $ 394.8 $ 376.2
Adjusted operating cash flow per share $ 0.15 $ 0.14 $ 0.33 $ 0.33
Average realized gold price per ounce $ 1,266 $ 1,194 $ 1,223 $ 1,206
Consolidated production cost of sales per equivalent ounce sold $ 733 $ 724 $ 712 $ 716
Attributable production cost of sales per equivalent ounce sold $ 731 $ 724 $ 709 $ 717
Attributable production cost of sales per ounce sold on a by-product basis $ 711 $ 712 $ 693 $ 704
Attributable all-in sustaining cost per ounce sold on a by-product basis $ 976 $ 1,006 $ 963 $ 982
Attributable all-in sustaining cost per equivalent ounce sold $ 988 $ 1,011 $ 972 $ 987
Attributable all-in cost per ounce sold on a by-product basis $ 1,027 $ 1,092 $ 1,022 $ 1,071
Attributable all-in cost per equivalent ounce sold $ 1,037 $ 1,094 $ 1,028 $ 1,074
'Total' includes 100% of Chirano production. 'Attributable' includes Kinross' share of Chirano (90%) production.
The definition and reconciliation of these non-GAAP financial measures is included on page 12 to 16 of this news release.
'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 the second quarter of 2016 was 75.06:1, compared with 72.75:1 for the second quarter of 2015 and for the first six months of 2016 was 77.20:1, compared with 72.84:1 for the first six months of 2015.

The following operating and financial results are based on second-quarter 2016 gold equivalent production. Production and cost measures are on an attributable basis:

Production: Kinross produced 671,267 attributable Au eq. oz. in Q2 2016, a 2% increase compared with Q2 2015, due mainly to higher production at Paracatu and the acquisition of Bald Mountain and 50% of Round Mountain.

Production cost of sales: Production cost of sales per Au eq. oz. was $731 for Q2 2016, compared with $724 for Q2 2015, mainly as a result of higher costs at Tasiast, Chirano, and Fort Knox.

Production cost of sales per Au oz. on a by-product basis was $711 in Q2 2016, compared with $712 in Q2 2015, based on Q2 2016 attributable gold sales of 665,032 ounces and attributable silver sales of 1,630,139 ounces.

All-in sustaining cost: All-in sustaining cost per Au eq. oz. sold decreased to $988 in Q2 2016, compared with $1,011 in Q2 2015. All-in sustaining cost per Au oz. sold on a by-product basis was $976 in Q2 2016, compared with $1,006 in Q2 2015.

Average realized gold price: The average realized gold price in Q2 2016 increased to $1,266 per ounce, compared with $1,194 per ounce in Q2 2015.

Revenue: Revenue from metal sales was $876.4 million in Q2 2016, compared with $755.2 million during the same period in 2015, primarily due to increases in gold equivalent ounces sold and the average realized gold price.

Margins: Kinross' attributable margin per Au eq. oz. sold was $535 per Au eq. oz. for Q2 2016, compared with a Q2 2015 margin of $470 per Au eq. oz.

Operating cash flow: Adjusted operating cash flow was $187.2 million, or $0.15 per share, for Q2 2016, compared with $161.4 million, or $0.14 per share, for Q2 2015.

Earnings/loss: Adjusted net loss was $9.8 million, or $0.01 per share, for Q2 2016, compared with adjusted net loss of $13.6 million, or $0.01 per share, for Q2 2015.

Reported net loss was $25.0 million, or $0.02 per share, for Q2 2016, mainly as a result of a $69.4 million tax expense, compared with reported net loss of $83.2 million, or $0.07 per share, for Q2 2015.

Capital expenditures: Capital expenditures decreased to $114.0 million for Q2 2016, compared with $128.5 million for the same period last year, primarily due to lower spending at Fort Knox and Paracatu.

Operating results and update
Mine-by-mine summaries for 2016 second-quarter operating results may be found on pages seven and 11 of this news release. Highlights include the following:

Americas

The region is tracking at the low end of its guidance range for production and the high end of its guidance range for cost of sales per ounce for the year. At Fort Knox, production increased compared with the previous quarter as a result of higher mill throughput and recoveries. Production decreased compared with Q2 2015 mainly as a result of lower mill grades and recoveries. Cost of sales per ounce increased compared with Q1 2016 and Q2 2015 primarily due to higher costs associated with mined operating waste.

Round Mountain continued to perform well, with production in line with Q1 2016, as an increase in the amount of ore processed and strong performance from the heap leach offset lower mill grades. Cost of sales per ounce increased compared with the previous quarter due to higher input costs.

As announced on June 29, 2016, Kinross added 2.4 million Au oz. to the Company's estimated inferred mineral resource at Round Mountain and expects that the Process Solution Management program will produce approximately 200,000 - 230,000 Au eq. oz. over life of mine at a low cost of approximately $200 - $400 per Au eq. oz. (which includes production cost of sales and capital expenditures).

At Bald Mountain, production increased compared with Q1 2016 as a result of an increase in ore mined and processed, offset by lower grades. Cost of sales per ounce increased quarter-over-quarter as a result of a higher level of operating stripping.

The Company believes it can substantially increase Bald Mountain's current mineral reserve estimate and extend life of mine by developing additional deposits in the near-term. The current mine plan conservatively assumes an approximate 30% conversion of Bald Mountain's current estimated mineral resources to mineral reserves upon receipt of permits, a process which is proceeding as planned and nearly complete, and completion of modest infill drilling at the Vantage Complex and additional drilling at the Saga deposit.

Kettle-River Buckhorn continued with its strong performance as it nears the end of its mine life, which is expected at year end. Production was largely in line with the previous quarter, with cost of sales per ounce decreasing as a result of slightly higher grades and recoveries.

At Paracatu, production was higher compared with Q1 2016 and Q2 2015 mainly due to an increase in ore processed, which included approximately 20,000 Au eq. oz. from the Santo Antonio tailing reprocessing initiative, offset by lower recoveries. Cost of sales per ounce increased slightly compared with the previous quarter mainly due to higher input costs, while costs decreased compared with Q2 2015 mainly as a result of favourable foreign exchange rates and currency hedge losses incurred in 2015.

Due to the lack of rainfall at Paracatu during the 2015-2016 rainy season, the Company now expects to temporarily suspend operation of the mine's Plant 1 facility in the second half of the third quarter. Plant 1 will remain suspended until the water balance rises sufficiently to allow for production to restart. To help mitigate the effect of the lack of rainfall in the area, the Company has increased the water capture area and water conservation activities at the site and commenced operation of an enhanced water pumping system. The Company's 2016 full-year regional and company-wide production guidance includes an allocation to production and costs for a potential curtailment at Paracatu.

At Maricunga, production was lower compared with Q1 2016 and Q2 2015 as a result of the regulatory suspension of mining and crushing activities which began on May 2, 2016. Operations resumed on July 9, 2016, the continuation of which remains subject to the ongoing regulatory proceedings. Cost of sales per ounce increased quarter-over-quarter due to the suspension, but was lower year-over-year as the mine incurred higher costs due to the extreme weather event in Q2 2015.

The regulatory suspension was a result of water curtailment orders imposed by Chile's environmental regulatory authority (SMA). As previously announced on March 21, 2016, the Company received notification from the SMA of a resolution commencing a legal process to seek closure of Maricunga's water pumping wells. On June 24, 2016, the SMA issued a revised resolution amending the initial sanction which, if affirmed by Chile'sEnvironmental Tribunal, would require the Company to effectively cease operations and close the mine. The Company vigorously disputes the resolution and the curtailment orders and has appeals pending with Chile'sEnvironmental Tribunal.

The Company has been assessing Maricunga's mine plan in the context of other capital priorities in its global portfolio and now expects to suspend mining in Q4 2016 and commence rinsing the residual gold from the heap leach pads, subject to the ongoing regulatory proceedings.

Russia

Kupol and Dvoinoye performed well in the second quarter, and achieved higher than expected production and lower cost of sales per ounce in the first half of 2016. As a result, the region expects to be at the higher end of production and at the lower end of cost of sales guidance for the year. Production was lower compared with Q1 2016 and Q2 2015 mainly as a result of anticipated lower grades at both mines, which was offset by an increase in ore processed. Cost of sales per ounce continued to decline mainly due to the sustained benefits from foreign exchange rates and rigorous cost management. Approximately 84,000 Au eq. oz. were produced from processing Dvoinoye ore in Q2 2016.

At the Russian development projects, haulage roads to both Moroshka, located near Kupol, and September Northeast, located near Dvoinoye, have been constructed. Portal construction is expected to begin in Q4 2016 at Moroskha, with mining scheduled to commence in 2018. Camp facilities have been constructed and site preparation is on schedule to be completed in Q4 2016 at September Northeast, with mining expected to commence in early 2017.

West Africa

The region expects to be at the lower end of its 2016 guidance range for production and at the higher end of its range for cost of sales per ounce. At Tasiast, production was lower quarter-over-quarter and year-over-year mainly as a result of the 18-day strike which ended on June 11, 2016 and the temporary suspension of mining and processing which began on June 18, 2016. Production cost of sales per ounce increased due to the decrease in gold equivalent ounces sold. Tonnes of ore mined increased compared with Q1 2016 and Q2 2015 due to additional heap leach material encountered in the West Branch footwall and planned mine sequencing to support the higher mill throughput rate, which continued to average more than 8,000 tonnes per day (tpd) in the quarter.

The Company and the Government of Mauritania have resolved the expatriate work permit issue as part of reaching a mutually acceptable 'Mauritanization' plan to increase the number of local workers who have the necessary skills and experience to work at Tasiast, a requirement under Mauritanian law. Kinross has remobilized its workforce and expects to resume normal mining and processing activities in August 2016. As a result of the suspension, the Phase One expansion's expected timing for commercial production may extend to Q2 2018.

Labour negotiations respecting the Company's collective labour agreement at Tasiast are expected to recommence in the near term following resumption of normal mining and processing activities.

At Chirano, production was lower compared with Q1 2016 and Q2 2015 as the site continued to transition to the Paboase underground deposit, which resulted in lower grades. Production cost of sales per ounce was higher compared with both Q1 2016 and Q2 2015 as a result of fewer ounces sold, higher power costs and increased maintenance costs. The Company expects to mine higher grades and larger volumes from Paboase in the second half of the year resulting in improved mine performance.

Balance sheet and liquidity

As of June 30, 2016, Kinross had cash and cash equivalents of $968.2 million, a decrease of $75.7 million since December 31, 2015, mainly as a result of the $588.0 million used in the acquisition of the Bald Mountain mine and the remaining 50% interest in the Round Mountain mine, offset by net proceeds of $275.7 million from the equity issuance in Q1 2016 and $276.9 million of free cash flow generated from its operations in the first half of 2016. The Company also has available credit of $1,499.6 million as of June 30, 2016 for total liquidity of approximately $2.5 billion.

The Company expects that its existing liquidity sources will be sufficient to fund the Tasiast Phase One expansion and the repayment of $250 million in senior notes due in September. After September, Kinross will have no other debt maturities until 2020, as the Company has extended the maturity dates of its $500 million term loan and $1,500 million revolving credit facility by one year to August 10, 2020 and August 10, 2021, respectively.

Outlook

The following section of the news release represents forward-looking information and users are cautioned that actual results may vary. We refer to the risks and assumptions contained in the Cautionary Statement on Forward-Looking Information on page 17 of this news release.

The Company expects to be within its 2016 production guidance range of approximately 2.7 - 2.9 million Au eq. oz., its production cost of sales guidance range of $675 - $735 per Au eq. oz., and its all-in sustaining cost guidance range of $890 - $990 per Au eq. oz. sold.

Kinross is tracking below its capital expenditure forecast of $755 million and is reviewing timing of its capital spend for the second half of 2016. The Company expects to provide an update in the third quarter.

Other operating costs are now forecast to be approximately $95 million, compared with the previously-stated forecast of $45 million, mainly due to the temporary suspension of mining at Tasiast and Maricunga during the quarter.

Depreciation, depletion and amortization is now forecast to be approximately $350 per Au eq. oz., compared with the previous forecast of $375 per Au eq. oz.

Conference call details

In connection with the release, Kinross will hold a conference call and audio webcast on Thursday, July 28, 2016 at 8 a.m. ET to discuss the results, followed by a question-and-answer session. To access the call, please dial:

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

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

Canada & US toll-free - 1-800-319-6413; Passcode - 00585 followed by #.
Outside of Canada & US - 1-604-638-9010; Passcode - 00585 followed by #.

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

This news release should be read in conjunction with Kinross' 2016 second-quarter unaudited Financial Statements and Management's Discussion and Analysis report at www.kinross.com. Kinross' 2016 second-quarter unaudited Financial Statements and Management's Discussion and Analysis have been filed with Canadian securities regulators (available at www.sedar.com) and furnished to the U.S. Securities and Exchange Commission (available at www.sec.gov). Kinross shareholders may obtain a copy of the financial statements free of charge upon request to the Company.

About Kinross Gold Corporation

Kinross is a Canadian-based senior gold mining company with mines and projects in the United States, Brazil, Russia, Mauritania, Chile and Ghana. Our focus is on delivering value based on the core principles of operational excellence, balance sheet strength, disciplined growth and responsible mining. Kinross maintains listings on the Toronto Stock Exchange (symbol:K) and the New York Stock Exchange (symbol:KGC).

Review of operations
Three months ended June 30, Gold equivalent ounces
Produced Sold Production cost of sales
($millions)
Production cost of sales/equivalent ounce sold
2016 2015 2016 2015 2016 2015 2016 2015
Fort Knox 97,221 116,061 97,625 113,697 $ 77.4 $ 68.9 $ 793 $ 606
Round Mountain 92,813 48,448 91,646 47,893 71.3 36.4 778 760
Bald Mountain 32,704 - 35,508 - 43.2 - 1,217 -
Kettle River - Buckhorn 25,031 29,580 24,808 29,524 18.2 23.4 734 793
Paracatu 126,774 110,366 126,365 107,169 87.5 90.5 692 844
Maricunga 44,304 47,713 45,362 50,957 42.6 55.0 939 1,079
Americas Total 418,847 352,168 421,314 349,240 340.2 274.2 807 785
Kupol 183,638 191,160 198,890 159,950 82.9 78.3 417 490
Russia Total 183,638 191,160 198,890 159,950 82.9 78.3 417 490
Tasiast 29,577 57,890 28,467 54,941 35.3 58.4 1,240 1,063
Chirano (100%) 43,561 66,311 42,312 69,017 48.3 47.6 1,142 690
West Africa Total 73,138 124,201 70,779 123,958 83.6 106.0 1,181 855
Operations Total 675,623 667,529 690,983 633,148 506.7 458.5 733 724
Less Chirano non-controlling interest (10%) (4,356 ) (6,631 ) (4,231 ) (6,902 ) (4.8 ) (4.8 )
Attributable Total 671,267 660,898 686,752 626,246 $ 501.9 $ 453.7 $ 731 $ 724
Six months ended June 30, Gold equivalent ounces
Produced Sold Production cost of sales
($millions)
Production cost of sales/equivalent ounce sold
2016 2015 2016 2015 2016 2015 2016 2015
Fort Knox 185,021 198,734 185,514 195,700 $ 139.6 $ 124.0 $ 753 $ 634
Round Mountain 185,739 88,710 182,120 88,340 131.7 72.4 723 820
Bald Mountain 53,126 - 46,705 - 56.3 - 1,205 -
Kettle River - Buckhorn 53,343 53,845 53,072 53,691 40.4 47.7 761 888
Paracatu 246,150 235,051 243,455 232,098 167.4 184.4 688 794
Maricunga 103,380 104,535 102,852 105,333 89.9 111.0 874 1,054
Americas Total 826,759 680,875 813,718 675,162 625.3 539.5 768 799
Kupol 376,088 376,889 374,581 352,117 161.1 169.8 430 482
Russia Total 376,088 376,889 374,581 352,117 161.1 169.8 430 482
Tasiast 76,655 111,899 76,858 106,731 82.5 110.3 1,073 1,033
Chirano (100%) 88,031 133,994 89,991 140,890 95.5 93.5 1,061 664
West Africa Total 164,686 245,893 166,849 247,621 178.0 203.8 1,067 823
Operations Total 1,367,533 1,303,657 1,355,148 1,274,900 964.4 913.1 712 716
Less Chirano non-controlling interest (10%) (8,803 ) (13,399 ) (8,999 ) (14,089 ) (9.6 ) (9.4 )
Attributable Total 1,358,730 1,290,258 1,346,149 1,260,811 $ 954.8 $ 903.7 $ 709 $ 717
Consolidated balance sheets
(unaudited expressed in millions of United States dollars, except share amounts)
As at
June 30 December 31,
2016 2015
Assets
Current assets
Cash and cash equivalents $ 968.2 1,043.9
Restricted cash 11.4 10.5
Accounts receivable and other assets 126.4 108.2
Current income tax recoverable 80.8 123.3
Inventories 1,056.5 1,005.2
Unrealized fair value of derivative assets 21.4 1.0
2,264.7 2,292.1
Non-current assets
Property, plant and equipment 5,059.8 4,593.7
Goodwill 162.7 162.7
Long-term investments 145.6 83.1
Investments in associate and joint ventures 163.3 157.1
Unrealized fair value of derivative assets 5.3 -
Other long-term assets 413.2 370.2
Deferred tax assets 92.3 76.5
Total assets $ 8,306.9 $ 7,735.4
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 432.4 $ 379.6
Current income tax payable 40.8 6.4
Current portion of long-term debt 249.9 249.5
Current portion of provisions 53.3 50.3
Current portion of unrealized fair value of derivative liabilities 1.0 16.0
777.4 701.8
Non-current liabilities
Long-term debt 1,733.1 1,731.9
Provisions 857.3 720.8
Other long-term liabilities 195.8 148.7
Deferred tax liabilities 432.1 499.0
Total liabilities 3,995.7 3,802.2
Equity
Common shareholders' equity
Common share capital $ 14,890.6 $ 14,603.5
Contributed surplus 233.8 239.2
Accumulated deficit (10,912.1 ) (10,922.1 )
Accumulated other comprehensive income (loss) 58.4 (31.3 )
Total common shareholders' equity 4,270.7 3,889.3
Non-controlling interest 40.5 43.9
Total equity 4,311.2 3,933.2
Total liabilities and equity $ 8,306.9 $ 7,735.4
Common shares
Authorized Unlimited Unlimited
Issued and outstanding 1,244,357,781 1,146,540,188
Consolidated statements of operations
(unaudited expressed in millions of United States dollars, except per share and share amounts)
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2016 2015 2016 2015
Revenue
Metal sales $ 876.4 $ 755.2 $ 1,659.0 $ 1,536.6
Cost of sales
Production cost of sales 506.7 458.5 964.4 913.1
Depreciation, depletion and amortization 210.2 216.7 403.4 422.9
Impairment charges - 24.5 - 24.5
Total cost of sales 716.9 699.7 1,367.8 1,360.5
Gross profit 159.5 55.5 291.2 176.1
Other operating expense 36.1 49.0 70.0 65.3
Exploration and business development 21.8 29.7 38.5 52.5
General and administrative 32.4 44.6 70.7 83.6
Operating earnings (loss) 69.2 (67.8 ) 112.0 (25.3 )
Other income (expense) - net 3.7 (6.3 ) 13.2 (8.2 )
Equity in earnings (losses) of associate and joint ventures (0.1 ) 5.9 0.1 4.9
Finance income 1.9 2.0 3.5 4.2
Finance expense (32.3 ) (23.7 ) (65.5 ) (47.7 )
Earnings (loss) before tax 42.4 (89.9 ) 63.3 (72.1 )
Income tax recovery (expense) - net (69.4 ) 5.4 (56.7 ) (19.9 )
Net earnings (loss) $ (27.0 ) $ (84.5 ) $ 6.6 $ (92.0 )
Net earnings (loss) attributable to:
Non-controlling interest $ (2.0 ) $ (1.3 ) $ (3.4 ) $ (2.1 )
Common shareholders $ (25.0 ) $ (83.2 ) $ 10.0 $ (89.9 )
Earnings (loss) per share attributable to common shareholders
Basic $ (0.02 ) $ (0.07 ) $ 0.01 $ (0.08 )
Diluted $ (0.02 ) $ (0.07 ) $ 0.01 $ (0.08 )
Weighted average number of common shares outstanding (millions)
Basic 1,244.2 1,146.2 1,208.9 1,145.7
Diluted 1,244.2 1,146.2 1,219.4 1,145.7
Consolidated statements of cash flows
(unaudited expressed in millions of United States dollars)
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2016 2015 2016 2015
Net inflow (outflow) of cash related to the following activities:
Operating:
Net earnings (loss) $ (27.0 ) $ (84.5 ) $ 6.6 $ (92.0 )
Adjustments to reconcile net earnings (loss) to net cash provided from operating activities:
Depreciation, depletion and amortization 210.2 216.7 403.4 422.9
Impairment of inventory - 24.5 - 24.5
Equity in losses (earnings) of associate and joint ventures 0.1 (5.9 ) (0.1 ) (4.9 )
Non-hedge derivative losses (gains) - net 5.9 (1.8 ) 0.4 (0.8 )
Share-based compensation expense 3.3 4.3 7.1 8.9
Finance expense 32.3 23.7 65.5 47.7
Deferred tax expense (recovery) (45.0 ) 12.7 (104.0 ) (17.1 )
Foreign exchange losses (gains) and other 7.4 (28.3 ) 15.9 (13.0 )
Changes in operating assets and liabilities:
Accounts receivable and other assets 4.9 (29.8 ) 3.6 11.0
Inventories 49.6 36.5 83.9 87.2
Accounts payable and accrued liabilities 101.0 28.0 115.0 0.4
Cash flow provided from operating activities 342.7 196.1 597.3 474.8
Income taxes paid (26.8 ) (28.9 ) (66.9 ) (57.5 )
Net cash flow provided from operating activities 315.9 167.2 530.4 417.3
Investing:
Additions to property, plant and equipment (114.0 ) (128.5 ) (253.5 ) (278.0 )
Business acquisition 22.0 - (588.0 ) -
Net additions to long-term investments and other assets (9.0 ) (20.0 ) (20.1 ) (41.7 )
Net proceeds from the sale of property, plant and equipment 2.5 1.6 6.9 2.9
Decrease (increase) in restricted cash (0.5 ) 2.6 (0.9 ) 2.8
Interest received and other 0.9 1.0 1.5 2.1
Net cash flow used in investing activities (98.1 ) (143.3 ) (854.1 ) (311.9 )
Financing:
Issuance of common shares on exercise of options 1.0 - 1.0 -
Proceeds from issuance of equity - - 275.7 -
Proceeds from issuance of debt - 3.0 - 22.5
Repayment of debt - (3.0 ) - (52.5 )
Interest paid (3.6 ) (2.5 ) (33.2 ) (23.5 )
Other - (1.0 ) - (1.0 )
Net cash flow provided from (used in) financing activities (2.6 ) (3.5 ) 243.5 (54.5 )
Effect of exchange rate changes on cash and cash equivalents 2.6 0.5 4.5 (3.0 )
Increase (decrease) in cash and cash equivalents 217.8 20.9 (75.7 ) 47.9
Cash and cash equivalents, beginning of period 750.4 1,010.5 1,043.9 983.5
Cash and cash equivalents, end of period $ 968.2 $ 1,031.4 $ 968.2 $ 1,031.4
Operating Summary
Mine Period Ownership Tonnes Ore Mined Ore
Processed (Milled)
Ore
Processed (Heap Leach)
Grade (Mill) Grade (Heap Leach) Recovery Gold Eq Production Gold Eq Sales Production cost of sales Production cost of sales/oz Cap Ex DD&A
(%) ('000 tonnes) ('000 tonnes) ('000 tonnes) (g/t) (g/t) (%) (ounces) (ounces) ($ millions) ($/ounce) ($ millions) ($ millions)
Americas
Fort Knox Q2 2016 100 6,141 3,467 4,914 0.64 0.28 83% 97,221 97,625 $ 77.4 $ 793 $ 15.2 $ 22.3
Q1 2016 100 6,786 3,246 7,495 0.66 0.26 81% 87,800 87,889 62.2 708 18.0 23.5
Q4 2015 100 4,454 3,407 6,712 0.66 0.26 82% 87,561 87,426 62.6 716 35.3 31.7
Q3 2015 100 5,950 3,328 6,697 0.86 0.27 83% 115,258 118,978 66.2 556 37.4 36.8
Q2 2015 100 6,543 3,345 8,255 0.87 0.28 84% 116,061 113,697 68.9 606 26.7 37.2
Round Mountain Q2 2016 100 6,632 942 6,234 0.80 0.40 80% 92,813 91,646 $ 71.3 $ 778 $ 12.3 $ 20.8
Q1 2016 100 4,018 869 3,617 1.17 0.44 83% 92,926 90,474 60.4 668 16.3 16.1
Q4 2015 50 6,392 898 3,724 0.86 0.42 77% 51,034 52,882 37.0 700 14.2 11.0
Q3 2015 50 6,962 924 4,546 0.91 0.47 81% 58,074 54,559 37.5 687 12.3 12.9
Q2 2015 50 5,286 748 4,372 1.08 0.40 75% 48,448 47,893 36.4 760 10.8 12.0
Bald Mountain Q2 2016 100 2,182 - 2,182 - 0.48 nm 32,704 35,508 $ 43.2 $ 1,217 $ 4.5 $ 8.6
Q1 2016 100 1,766 - 1,766 - 0.62 nm 20,422 11,197 13.1 1,170 1.7 2.0
Kettle River- Buckhorn
Q2 2016 100 101 101 - 7.40 - 93% 25,031 24,808 $ 18.2 $ 734 $ - $ 0.8
Q1 2016 100 86 107 - 7.23 - 92% 28,312 28,264 22.2 785 - 1.4
Q4 2015 100 84 90 - 9.67 - 92% 19,301 19,601 14.6 745 - 2.0
Q3 2015 100 97 106 - 6.93 - 92% 24,222 24,284 19.3 795 - 2.6
Q2 2015 100 95 130 - 8.58 - 93% 29,580 29,524 23.4 793 - 3.3
Paracatu Q2 2016 100 12,109 12,331 - 0.44 - 70% 126,774 126,365 $ 87.5 $ 692 $ 15.9 $ 35.4
Q1 2016 100 11,825 11,439 - 0.44 - 73% 119,376 117,090 79.9 682 10.7 35.4
Q4 2015 100 10,730 9,738 - 0.51 - 76% 113,547 117,796 89.2 757 30.1 34.9
Q3 2015 100 13,969 12,322 - 0.43 - 76% 129,064 134,838 100.7 747 36.9 38.4
Q2 2015 100 11,435 11,392 - 0.41 - 72% 110,366 107,169 90.5 844 29.4 36.4
Maricunga
Q2 2016 100 1,346 - 1,475 0.61 nm 44,304 45,362 $ 42.6 $ 939 $ 1.3 $ 11.6
Q1 2016 100 3,947 - 4,254 - 0.69 nm 59,076 57,490 47.3 823 0.8 10.8
Q4 2015 100 3,870 - 4,099 - 0.78 nm 54,948 56,440 52.6 932 4.7 8.2
Q3 2015 100 3,476 - 3,822 - 0.74 nm 52,672 52,282 52.5 1,004 5.2 7.3
Q2 2015 100 2,220 - 1,957 - 0.81 nm 47,713 50,957 55.0 1,079 7.1 6.4
Russia
Kupol
Q2 2016 100 513 428 - 12.75 - 95% 183,638 198,890 $ 82.9 $ 417 $ 15.1 $ 59.9
Q1 2016 100 494 416 - 13.92 - 95% 192,450 175,691 78.2 445 27.8 52.9
Q4 2015 100 449 429 - 13.81 - 96% 191,308 195,465 91.3 467 9.0 73.8
Q3 2015 100 468 410 - 13.65 - 96% 190,366 217,031 101.7 469 21.4 77.3
Q2 2015 100 516 423 - 13.43 - 95% 191,160 159,950 78.3 490 10.0 56.3
West Africa
Tasiast
Q2 2016 100 1,937 489 1,542 1.39 0.45 92% 29,577 28,467 $ 35.3 $ 1,240 $ 36.0 $ 22.3
Q1 2016 100 1,891 777 1,187 1.51 0.41 91% 47,078 48,391 47.2 975 49.9 22.7
Q4 2015 100 1,318 689 587 2.27 0.55 89% 53,706 52,146 49.9 957 49.6 26.5
Q3 2015 100 1,259 618 364 2.21 0.48 92% 53,440 57,163 60.4 1,057 44.1 19.5
Q2 2015 100 1,609 605 521 2.21 0.56 92% 57,890 54,941 58.4 1,063 31.1 18.7
Chirano - 100%
Q2 2016 90 547 882 - 1.72 - 91% 43,561 42,312 $ 48.3 $ 1,142 $ 11.1 $ 25.8
Q1 2016 90 453 847 - 1.77 - 91% 44,470 47,679 47.2 990 11.7 25.7
Q4 2015 90 559 853 - 2.32 - 91% 58,123 56,284 42.2 750 11.6 44.1
Q3 2015 90 873 917 - 2.36 - 91% 63,981 62,792 44.0 701 6.7 42.7
Q2 2015 90 875 823 - 2.73 - 92% 66,311 69,017 47.6 690 4.9 44.6
Chirano - 90%
Q2 2016 90 547 882 - 1.72 - 91% 39,205 38,081 $ 43.5 $ 1,142 $ 10.0 $ 23.2
Q1 2016 90 453 847 - 1.77 - 91% 40,023 42,911 42.5 990 10.5 23.1
Q4 2015 90 559 853 - 2.32 - 91% 52,311 50,655 38.0 750 10.4 39.7
Q3 2015 90 873 917 - 2.36 - 91% 57,583 56,513 39.6 701 6.0 38.4
Q2 2015 90 875 823 - 2.73 - 92% 59,680 62,115 42.8 689 4.4 40.1
Tonnes of ore mined and processed represent 100% Kinross for all periods presented.
Due to the nature of heap leach operations, recovery rates at Maricunga and Bald Mountain cannot be accurately measured on a quarterly basis. Recovery rates at Fort Knox, Round Mountain and Tasiast represent mill recovery only.
The Kupol segment includes the Kupol and Dvoinoye mines.
Kupol silver grade and recovery were as follows: Q2 (2016) 105.89 g/t, 86.5%; Q1 (2016) 104.19 g/t, 88%; Q4 (2015) 100.58 g/t, 87%; Q3 (2015) 100.55 g/t, 88%; Q2 (2015) 106.19 g/t, 87%.
Gold equivalent ounces include silver ounces produced and sold converted to a gold equivalent based on the ratio of the average spot market prices for the commodities for each period. The ratios for the quarters presented are as follows: Q2 2016: 75.06:1 , Q1 2016: 79.64:1; Q4 2015: 74.78:1; Q3 2015: 75.40:1, Q2 2015: 72.75:1.
Dvoinoye ore processed and grade were as follows: Q2 (2016) 118,057 tonnes, 22.42 g/t; Q1 (2016) 129,675 tonnes, 22.69 g/t; Q4 (2015) 122,987 tonnes, 22.91 g/t; Q3 (2015) 111,806 tonnes, 24.52 g/t; Q2 (2015) 104,465 tonnes, 26.43 g/t.
Capital expenditures are presented on a cash basis, consistent with the statement of cash flows.
On January 11, 2016, Kinross completed the acquisition of 100% of the Bald Mountain gold mine and the remaining 50% interest in the Round Mountain gold mine. The interim financial statements for the three months ended March 31, 2016 have been recasted to reflect the retrospective impact of the finalization of the purchase price allocation.
'nm' means not meaningful.

Reconciliation of non-GAAP financial measures

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

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

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

Adjusted Earnings
(in millions, except share and per share amounts) Three months ended Six months ended
June 30, June 30,
2016 2015 2016 2015
Net earnings (loss) attributable to common shareholders - as reported $ (25.0 ) $ (83.2 ) $ 10.0 $ (89.9 )
Adjusting items:
Foreign exchange losses 6.2 6.5 9.0 7.5
Non-hedge derivatives losses (gains) - net of tax 6.9 (0.1 ) 0.3 1.9
Losses (gains) on sale of other assets - net of tax (2.7 ) (0.1 ) (6.2 ) 0.8
Foreign exchange losses (gains) on translation of tax basis and foreign exchange on deferred income taxes within income tax expense (31.6 ) 2.8 (37.8 ) 20.5
Acquisition costs - - 7.6 -
Tax benefits realized upon acquisition - - (27.7 ) -
Impairment charges - net of tax - 26.0 - 26.0
Taxes in respect of prior years 24.0 19.3 45.2 19.7
Chile weather event related costs, net of tax - 15.2 - 15.2
Tasiast and Maricunga suspension related costs - net of tax 22.7 - 22.7 -
Insurance recoveries and other - net of tax (10.3 ) - (11.7 ) -
15.2 69.6 1.4 91.6
Adjusted net earnings (loss) attributable to common shareholders $ (9.8 ) $ (13.6 ) $ 11.4 $ 1.7
Weighted average number of common shares outstanding - Basic 1,244.2 1,146.2 1,208.9 1,145.7
Adjusted net earnings (loss) per share (0.01 ) (0.01 ) 0.01 0.00

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

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

Adjusted Operating Cash Flow
(in millions, except share and per share amounts) Three months ended Six months ended
June 30, June 30,
2016 2015 2016 2015
Net cash flow provided from operating activities - as reported $ 315.9 $ 167.2 $ 530.4 $ 417.3
Adjusting items:
Working capital changes:
Accounts receivable and other assets (4.9 ) 29.8 (3.6 ) (11.0 )
Inventories (49.6 ) (36.5 ) (83.9 ) (87.2 )
Accounts payable and other liabilities, including taxes (74.2 ) 0.9 (48.1 ) 57.1
(128.7 ) (5.8 ) (135.6 ) (41.1 )
Adjusted operating cash flow $ 187.2 $ 161.4 $ 394.8 $ 376.2
Weighted average number of common shares outstanding - Basic 1,244.2 1,146.2 1,208.9 1,145.7
Adjusted operating cash flow per share $ 0.15 $ 0.14 $ 0.33 $ 0.33

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

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

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

Consolidated and Attributable Production Cost of Sales Per Equivalent Ounce Sold
(in millions, except ounces and production cost of sales per equivalent ounce) Three months ended Six months ended
June 30, June 30,
2016 2015 2016 2015
Production cost of sales - as reported $ 506.7 $ 458.5 $ 964.4 $ 913.1
Less: portion attributable to Chirano non-controlling interest (4.8 ) (4.8 ) (9.6 ) (9.4 )
Attributable production cost of sales $ 501.9 $ 453.7 $ 954.8 $ 903.7
Gold equivalent ounces sold 690,983 633,148 1,355,148 1,274,900
Less: portion attributable to Chirano non-controlling interest (4,231 ) (6,902 ) (8,999 ) (14,089 )
Attributable gold equivalent ounces sold 686,752 626,246 1,346,149 1,260,811
Consolidated production cost of sales per equivalent ounce sold $ 733 $ 724 $ 712 $ 716
Attributable production cost of sales per equivalent ounce sold $ 731 $ 724 $ 709 $ 717

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:

Attributable Production Cost of Sales Per Ounce Sold on a
By-Product Basis
(in millions, except ounces and production cost of sales per ounce) Three months ended
June 30,
Six months ended
June 30,
2016 2015 2016 2015
Production cost of sales - as reported $ 506.7 $ 458.5 $ 964.4 $ 913.1
Less: portion attributable to Chirano non-controlling interest (4.8 ) (4.8 ) (9.6 ) (9.4 )
Less: attributable silver revenues (29.1 ) (20.2 ) (48.6 ) (40.4 )
Attributable production cost of sales net of silver by-product revenue $ 472.8 $ 433.5 $ 906.2 $ 863.3
Gold ounces sold 669,251 615,777 1,316,741 1,240,795
Less: portion attributable to Chirano non-controlling interest (4,219 ) (6,884 ) (8,976 ) (14,051 )
Attributable gold ounces sold 665,032 608,893 1,307,765 1,226,744
Attributable production cost of sales per ounce sold on a by-product basis $ 711 $ 712 $ 693 $ 704

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

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

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

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

Attributable All-In Sustaining Cost and All-In Cost Per Ounce
Sold on a By-Product Basis
(in millions, except ounces and costs per ounce) Three months ended Six months ended
June 30, June 30,
2016 2015 2016 2015
Production cost of sales - as reported $ 506.7 $ 458.5 $ 964.4 $ 913.1
Less: portion attributable to Chirano non-controlling interest (4.8 ) (4.8 ) (9.6 ) (9.4 )
Less: attributable silver revenues (29.1 ) (20.2 ) (48.6 ) (40.4 )
Attributable production cost of sales net of silver by-product revenue