KINROSS GOLD CORPORATION
25 York Street, 17th Floor
Toronto, Ontario, Canada
M5J 2V5
ANNUAL REPORT 2014
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Delivering Results
Operational Excellence
Balance Sheet Strength
Responsible Mining
Kinross is a Canadian-based
senior gold mining company with
mines and projects in Brazil, Chile,
Ghana, Mauritania, Russia and the
United States. Kinross is focused
on delivering value based on its
core principles of operational
excellence, balance sheet strength
and responsible mining.
Kinross maintains listings on the Toronto Stock Exchange (symbol:K)
and the New York Stock Exchange (symbol:KGC).
CORPORATE INFORMATION
Shareholder Information
Contact Information
Publications
Transfer Agent and Registrar
General
Computershare
Investor Services Inc.
Toronto, Ontario, Canada
Toll-free: 1-800-564-6253
Proxy Solicitation Agent
Kingsdale Shareholder Services
Toronto, Ontario, Canada
Annual and Special Shareholders
Meeting
Wednesday, May 6, 2015 at
10:00 a.m. EDT at the Glenn Gould
Studio, 250 Front Street West,
Toronto, Ontario, Canada
Trading Data
TSX
K — common
NYSE
KGC — common
Legal Counsel
Osler, Hoskin & Harcourt LLP
Toronto, Ontario, Canada
Sullivan & Cromwell LLP
New York, New York,
United States
Auditors
KPMG LLP
Toronto, Ontario, Canada
Kinross Gold Corporation
25 York Street, 17th Floor
Toronto, Ontario,
Canada M5J 2V5
Website: Kinross.com
Telephone: 416-365-5123
Toll-free: 1-866-561-3636
Facsimile: 416-363-6622
Email: info@kinross.com
Media Relations
Andrea Mandel-Campbell
Vice-President, Corporate
Communications
Telephone: 647-788-4179
Email: andrea.mandel-campbell@
kinross.com
Investor Relations
Tom Elliott, Vice-President,
Investor Relations
Telephone: 416-365-3390
Email: tom.elliott@kinross.com
Shareholder Inquiries
Computershare
Investor Services Inc.
9th Floor,
100 University Avenue
Toronto, Ontario,
Canada M5J 2Y1
www.computershare.com/kinross
Toll-free: 1-800-564-6253
Toll-free facsimile:
1-888-453-0330
To obtain copies of Kinross’
publications, please visit our
corporate website at Kinross.com,
or contact us by email at
info@kinross.com or call
1-866-561-3636.
Corporate Responsibility Report
Kinross publishes its corporate
responsibility performance data
annually and a comprehensive
Global Reporting Initiative (GRI)
report every two years. Our 2013
CR Report is currently available on
our website and provides a detailed
account of our social, environmental,
and health and safety performance
for 2012 and 2013.
@KinrossGold
Read the annual report online:
LETTER TO SHAREHOLDERS
2014ANNUALREPORT.KINROSS.COM
2014 ACHIEVEMENTS
DIRECTORS
CORPORATE GOVERNANCE HIGHLIGHTS
FINANCIAL REVIEW
CAUTIONARY STATEMENT ON
FORWARD-LOOKING INFORMATION
1
4
6
6
7
75
All figures in U.S. dollars and from continuing operations.
Endnotes can be found on page 77 of this 2014 Annual Report.
designed and produced by smith + associates
www.smithandassoc.com
Please recycle.
$1Billion
IN CASH AND
CASH EQUIVALENTS
$131
ADJUSTED NET EARNINGS 1
(MILLIONS)
$3,466
REVENUE
(MILLIONS)
J. PAUL ROLLINSON
President and Chief
Executive Officer
As we move into 2015, generating value for our
shareholders – and all our stakeholders – remains
our priority; we continue to target cost-saving
initiatives and explore growth opportunities. Our
decision in early February to defer the Tasiast
mill expansion underscores our emphasis on
preserving balance sheet strength in a challenging
gold price environment and affords us important
financial flexibility. While market conditions
remain challenging, and our share price has been
impacted along with many industry peers, Kinross’
strong operational track record, industry-leading
safety record and robust balance sheet provide
the necessary building blocks upon which to
generate value.
2014 Highlights
• Record annual production of 2.71 million Au eq.
oz. at an all-in sustaining cost of $973 per ounce,
a $109 reduction compared with 2013
• Record annual production at Paracatu,
Maricunga and Tasiast, and a 19% and 22%
reduction in cost of sales compared with 2013
at Maricunga and Chirano, respectively
• A 50% reduction over 2013 in capital
expenditure to $632 million
• $1 billion in cash on the balance sheet,
$2.5 billion in liquidity, $60 million in debt
repayments, with total net debt of $1 billion
as of year-end
1
KINROSS GOLD 2014 ANNUAL REPORT
TO OUR SHAREHOLDERS
Kinross’ continued focus on
operational excellence, financial
discipline and balance sheet strength
has set the Company on a solid
path that garnered excellent results
in 2014 with record production of
2.71 million gold equivalent ounces
and $1 billion in cash on the balance
sheet as of year-end.
2015E GOLD EQUIVALENT
PRODUCTION 2, 3
2.4 - 2.6M ounces
10
CONSECUTIVE QUARTERS
DELIVERING ON TARGETS
$720 - $780
PER AU EQ. OZ.
2015E PRODUCTION COST OF SALES 2
29%
17%
• Americas
• West Africa
• Russia
54%
$1.5
$1.0
• Sale of interest in Aurelian Resources and the
Fruta del Norte project for $240 million
Tasiast mill expansion, balance sheet strength
and future growth
• An industry-leading safety record, and the best
in company history
• Delivered 687 local community programs and
events, benefiting an estimated 805,000 people
2015 Guidance 2
Having met or exceeded our targets
for the last 10 consecutive quarters,
Kinross will continue its focus on
operational excellence in the year
ahead. Guidance for 2015 is largely
in line with 2014, with production
guidance of 2.4 to 2.6 million Au eq.
oz. Kinross’ centre of gravity remains
firmly in the Americas, where five of
our mines are expected to produce
54% of our 2015 production. Our two
West African mines are projected to
contribute 17% of production, with
our Russia region forecast to produce
the remaining 29%.
Forecast production cost of sales in the range of
$720 to $780 per Au eq. oz. is in line with 2014,
while all-in sustaining cost is forecast to be between
$1,000 and $1,100, reflecting a prudent approach
to cost assumptions for oil and foreign exchange
prices. Capital expenditures are expected to be
approximately $725 million, as we invest in stripping
to sustain, or possibly extend, the life of mine at
some of our existing operations.
With gold price volatility continuing
into 2015, maintaining balance
sheet strength will remain a key
consideration. That is why, as we
announced on February 10, 2015,
we are not proceeding with the
38,000 t/d Tasiast mill expansion at
the present time. Kinross continues
to believe in the expansion’s potential
to add significant value as a large, low
cost, cornerstone asset. However, we
would need to see a sustained higher
gold price in order to finance a capital
project of this magnitude over its
three-year construction period.
While a Tasiast mill expansion remains an exciting
growth opportunity leveraged to the gold
price, we are redoubling our efforts at reducing
operating costs at the current operation. In 2014,
we made substantial progress in reducing costs at
several sites with a Company-wide drive to replace
contractors with employees and continuous
improvement initiatives. That effort, which also
included cost-saving procurement strategies
and a rigorous approach to working capital and
inventory management as part of a “cash first”
focus at each site, will remain a centrepiece of
our disciplined management approach.
2
KINROSS GOLD 2014 ANNUAL REPORT
OUR VALUES:
• Putting people first
• Outstanding corporate citizenship
• High performance culture
• Rigorous financial discipline
$1,122
$1,082
$973
2
1
0
2
3
1
0
2
4
1
0
2
ALL-IN SUSTAINING
COST 1 PER GOLD
EQUIVALENT OUNCE
As a result of our solid financial position, Kinross
has the flexibility to take advantage of potential
growth opportunities, should they arise. In that
regard, a pre-feasibility study to explore the
potential restart of La Coipa is on track to be
completed this year and is further supported
by positive exploration results from the nearby
Catalina target. We also plan to continue work
on promising exploration targets near existing
operations, including at Chirano and Kupol.
Our Value Proposition
While focused on managing our
business for the long term, we remain
keenly aware of the decline in our
share price, which we do not believe
reflects Kinross’ strong fundamentals.
To a large degree, Kinross’ share price
is being impacted by the gold price
and concerns over current tensions
between Russia and the Ukraine.
In the case of Russia, it remains business as usual
at our operations in the country’s Far East, where
we have operated uninterrupted for the past
20 years. Our track record in Russia, and in every
jurisdiction where we operate, reflects Kinross’
strong in-country partnerships and respectful
approach to the people, laws and culture where
we do business. In 2014 alone, Kinross engaged
approximately 91,000 stakeholders – including
community members, government representatives
and non-profit organizations, among others – and,
in our 22-year history, we have never experienced
a major event or permitting delay as a result of
stakeholder concerns.
Whether it be our high standards
for corporate responsibility,
our best-in-class safety record,
excellent operational performance
or rigorous financial discipline, we
could not continue to deliver on
our commitments without the care,
diligence and professionalism of our
people. I would like to thank them
for a job well done. They are at the
core of our value proposition and the
reason Kinross is strongly positioned
to capitalize on opportunities, weather
market volatility and ultimately
generate value for our shareholders,
host communities and employees.
J. Paul Rollinson, President
and Chief Executive Officer
Kinross Gold Corporation
3
KINROSS GOLD 2014 ANNUAL REPORT
2014 ACHIEVEMENTS
OPERATIONS
6
10%
DECREASE IN ALL-IN
SUSTAINING COST 1
2.71
million
RECORD GOLD EQUIVALENT
OUNCES PRODUCED
(ATTRIBUTABLE) 3
Realized a 10% reduction year-over-
year in all-in sustaining cost per
Au eq. oz. to $973 primarily due
to reductions in sustaining capital
expenditures and exploration and
business development expenditures.
Achieved record production,
exceeding 2014 guidance, due
mainly to a 37% increase in
production at Kupol and a 32%
increase in production at Maricunga
compared with 2013.
$705
$743 $720
2
1
0
2
3
1
0
2
4
1
0
2
PRODUCTION
COST OF SALES 1
($ per gold equivalent ounce)
Successfully managed costs,
achieving reductions in production
cost of sales due mainly to
decreases of 22% at Chirano
and 19% at Maricunga over 2013.
$2.5B
TOTAL
LIQUIDITY
$1B
CASH
$1.5B
CREDIT
$1.86B
$1.26B
$632M
2
1
0
2
3
1
0
2
4
1
0
2
CAPITAL
EXPENDITURES
Capital expenditures were
$631.8 million, 50% less than
2013, mainly as a result of
reduced spending at Tasiast,
Chirano and Fort Knox.
Further strengthened the balance
sheet in 2014, completing the year
with $1 billion in cash and cash
equivalents and $1.5 billion in
undrawn credit facilities.
$240M
IN PROCEEDS FROM
FRUTA DEL NORTE SALE
Completed the sale of all of our
interest in Aurelian Resources
Inc. and the Fruta del Norte
project in Ecuador for gross
cash proceeds of $150 million
and $90 million of common
shares in Lundin Gold Inc.
3
records
@3mines
Operational excellence is driving
performance and contributed
to record annual production at
Paracatu, Maricunga and Tasiast due
to improved recoveries, operational
efficiencies, continuing improvement
initiatives and higher grades.
FINANCIAL
$977m
ADJUSTED OPERATING
CASH FLOW 1
Generated strong adjusted operating
cash flow in 2014 despite weaker
gold prices.
STRATEGIC
INITIATIVES
+765,000
AU OZ.
ADDED THROUGH
EXPLORATION 4
Our continued focus on exploration
within the existing footprint
of our mines and districts added
765,191 Au oz. estimated measured
and indicated mineral resources at
Kupol, Chirano and Tasiast.
4
KINROSS GOLD 2014 ANNUAL REPORT
HEALTH
AND SAFETY
6
zero
FATALITIES
Completed the second
consecutive year with zero
fatalities among employees
and contractors working at our
operations and projects.
CORPORATE
RESPONSIBILITY
90,500
STAKEHOLDERS ENGAGED
Through active engagement and
dialogue, our goal is to keep our
neighbours informed about our
activities, and provide them with
opportunities to raise issues of
interest or express their concerns.
100%
TRAINED
All of Kinross’ security workforce
trained under the Human Rights
Adherence and Verification Program.
0.05
LOST-TIME INJURY
FREQUENCY RATE PER
200,000 HOURS WORKED
Achieved the lowest Lost-Time
Injury Frequency Rate in the
past five years.
+ 800,000
PEOPLE
Our operations contributed to
687 local community programs,
initiatives and events to an
estimated 805,000 people through
cash and in-kind contributions.
96% 97% 98%
2
1
0
2
3
1
0
2
4
1
0
2
PERCENT OF WORKFORCE
FROM HOST COUNTRIES
Creating meaningful livelihoods for
our employees is one of the most
powerful positive social impacts of
our business. Local employment is
an important objective, and we are
committed to using national workers
in the countries where we operate.
.93
.86
.56
.42
.38
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
TOTAL REPORTABLE INJURY
FREQUENCY RATE
(Includes all employees and
contractors for 200,000 hours worked)
Achieved best safety performance
in Kinross’ history and among the
top performers in our industry.
zero
DISRUPTIONS
Open communication helps us
address community concerns
on a proactive basis. In 2014, we
experienced zero permitting delays,
disruptions to production or supply
chain, or other negative impacts
to business plans arising from
community opposition or protest.
100%
OF TAILINGS
FACILITIES REVIEWED
In addition to meeting host country
regulations and international best
practice, Kinross commissions
independent expert review of the
construction and operation of all
tailings facilities. All of our sites
have been reviewed in the past
two years.
See Kinross 2013 Corporate Responsibility Report
5
KINROSS GOLD 2014 ANNUAL REPORT
DIRECTORS*
JOHN A. BROUGH
Corporate Director A, H
JOHN K. CARRINGTON
Corporate Director CRT
JOHN M.H. HUXLEY
Corporate Director A, CG, H
JOHN A. KEYES **
Corporate Director CRT
CATHERINE MCLEOD-SELTZER
Non-Executive Chair, Bear Creek
Mining Corporation H , CRT
JOHN E. OLIVER
Independent Chair H
UNA M. POWER
Chief Financial Officer
and Senior Vice-President,
Corporate Planning and Business
Development, Nexen Inc. A, CRT
TERENCE C.W. REID **
Corporate Director A, CG
A Audit and Risk Committee
CG
Corporate Governance and
Nominating Committee
CRT Corporate Responsibility
and Technical Committee
Human Resource and
Compensation Committee
H
J. PAUL ROLLINSON
President and
Chief Executive Officer,
Kinross Gold Corporation
RUTH G. WOODS **
Chief Operating Officer,
Osler, Hoskin & Harcourt LLP CG, H
*
**
Kenneth C. Irving
resigned from the Board
on February 10, 2015.
Will not be standing for
re-election at Kinross’
2015 Annual and Special
Shareholders Meeting.
SENIOR LEADERSHIP TEAM
J. PAUL ROLLINSON
President and Chief Executive Officer
JAMES CROSSLAND
Executive Vice-President, Corporate Affairs
TONY S. GIARDINI
Executive Vice-President and Chief Financial Officer
GEOFFREY P. GOLD
Executive Vice-President, Corporate Development
and Human Resources, Chief Legal Officer
WARWICK MORLEY-JEPSON
Executive Vice-President and Chief Operating Officer
Read the annual report online:
2014ANNUALREPORT.KINROSS.COM
2014 CORPORATE
GOVERNANCE HIGHLIGHTS
• The Board of Directors met six times in 2014, each
meeting independent of management.
• Kinross ranked 41st out of 247 Canadian companies in
the Globe and Mail annual corporate governance survey.
• Scored 132 out of 150 points on the Board Shareholder
Confidence Index of the Clarkson Centre for
Board Effectiveness.
• All directors, except the CEO, were independent
and all committees were comprised solely of
independent directors.
• Implemented a policy to increase Board diversity, with a
33% target of women directors.
• Approved policy which limits the term for Directors to 10 to
15 years, in addition to a mandatory retirement age of 73.
6
KINROSS GOLD 2014 ANNUAL REPORT
FINANCIAL SUMMARY
(In millions except ounces, per share amounts, gold price and per ounce amounts)
Revenue
Net cash flow of continuing operations provided
from operating activities
Adjusted operating cash flow from continuing operations 1
Adjusted operating cash flow from continuing operations per share 1
Impairment charges 5
2014
2013
2012
$ 3,466.3
$ 3,779.5
$ 4,307.3
858.1
976.9
0.85
796.6
1,317.3
1,149.6
1,527.0
1.01
1.34
1,251.4
3,169.6
3,527.6
Net loss 5 from continuing operations attributable
(1,400.0)
(3,012.6)
(2,546.2)
to common shareholders
Basic
Diluted
Adjusted net earnings from continuing operations attributable
to common shareholders 1
Adjusted net earnings from continuing operations per share 1
Attributable production cost of sales from continuing operations
per equivalent ounce sold 1
All-in sustaining cost per gold equivalent ounce sold 1
Capital expenditures
Average realized gold price per ounce
Attributable gold equivalent ounces produced from
continuing operations 3
See Endnotes on page 77 of this report.
OUR OPERATIONS
A balanced portfolio of mines in three key regions.
Our corporate office is located in Toronto, Canada.
MINES
DVOINOYE, RUSSIA
KUPOL, RUSSIA
FORT KNOX, USA
KETTLE RIVER-BUCKHORN, USA
ROUND MOUNTAIN, USA
TORONTO, CANADA
TASIAST, MAURITANIA
CHIRANO, GHANA
PARACATU, BRAZIL
MARICUNGA, CHILE
(1.22)
(1.22)
131.1
0.11
720
973
631.8
1,263
(2.64)
(2.64)
321.2
0.28
743
1,082
1,262.4
1,402
(2.24)
(2.24)
886.2
0.78
705
1,122
1,858.3
1,643
2,710,390
2,631,092
2,617,813
FINANCIAL REVIEW
Management’s Discussion
and Analysis
MDA1
Management’s
Responsibility for Financial
Statements
Independent Auditors’
Report of Registered
Public Accounting Firm
Consolidated Financial
Statements and Notes
Mineral Reserve and
Mineral Resource Statement
Summarized Five-Year
Review
FS1
FS2
FS3
67
74
Kinross Share Trading Data
74
7
KINROSS GOLD 2014 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
This management's discussion and analysis ("MD&A"), prepared as of February 10, 2015, relates to the financial condition and results
of operations of Kinross Gold Corporation together with its wholly owned subsidiaries, as of December 31, 2014 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, 2014 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 2014 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, 2014, as well as our outlook.
This section contains forward-looking statements and should be read in conjunction with the risk factors described in "Risk Analysis".
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 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.
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. 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 considered to be a separate segment. The reportable segments are those
operations whose operating results are reviewed by the Chief Executive Officer to make decisions about resources to be allocated to
the segment and assess its performance.
MDA1 KINROSS GOLD 2014 ANNUAL REPORT
Operating SegmentsOperatorLocation20142013Fort KnoxKinrossU.S.A.100%100%Round MountainKinrossU.S.A.50%50%Kettle River-BuckhornKinrossU.S.A.100%100%Kupol(a)KinrossRussian Federation100%100%Paracatu KinrossBrazil100%100%MaricungaKinrossChile100%100%TasiastKinrossMauritania100%100%ChiranoKinrossGhana90%90%(a) The Kupol segment includes the Kupol and Dvoinoye mines.Ownership percentage at December 31,
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
Consolidated Financial and Operating Highlights
KINROSS GOLD 2014 ANNUAL REPORT MDA2
201420132012Change% Change Change % ChangeOperating Highlights Total gold equivalent ounces (a), (e)Produced (c)2,739,044 2,658,632 2,678,131 80,412 3%(19,499) (1%)Sold (c)2,743,398 2,697,093 2,654,107 46,305 2%42,986 2%Gold equivalent ounces from continuing operations (a), (d)Produced (c)2,739,044 2,658,632 2,647,137 80,412 3%11,495 0%Sold (c)2,743,398 2,697,093 2,621,343 46,305 2%75,750 3%Total attributable gold equivalent ounces (a), (e)Produced (c)2,710,390 2,631,092 2,648,807 79,298 3%(17,715) (1%)Sold (c)2,715,358 2,669,276 2,624,242 46,082 2%45,034 2%Attributable gold equivalent ounces from continuing operations (a), (d)Produced (c)2,710,390 2,631,092 2,617,813 79,298 3%13,279 1%Sold (c)2,715,358 2,669,276 2,591,478 46,082 2%77,798 3%Financial Highlights from Continuing Operations (d)Metal sales 3,466.3$ 3,779.5$ 4,307.3$ (313.2)$ (8%)(527.8)$ (12%)Production cost of sales1,971.2$ 2,004.4$ 1,849.2$ (33.2)$ (2%)155.2$ 8%Depreciation, depletion and amortization874.7$ 828.8$ 680.9$ 45.9$ 6%147.9$ 22%Impairment charges 1,251.4$ 3,169.6$ 3,527.6$ (1,918.2)$ (61%)(358.0)$ (10%)Operating loss(1,027.2)$ (2,635.2)$ (2,241.9)$ 1,608.0$ 61%(393.3)$ (18%)(1,400.0)$ (3,012.6)$ (2,546.2)$ 1,612.6$ 54%(466.4)$ (18%)(1.22)$ (2.64)$ (2.24)$ 1.42$ 54%(0.40)$ (18%)(1.22)$ (2.64)$ (2.24)$ 1.42$ 54%(0.40)$ (18%)131.1$ 321.2$ 886.2$ (190.1)$ (59%)(565.0)$ (64%)0.11$ 0.28$ 0.78$ (0.17)$ (61%)(0.50)$ (64%)858.1$ 796.6$ 1,317.3$ 61.5$ 8%(520.7)$ (40%)976.9$ 1,149.6$ 1,527.0$ (172.7)$ (15%)(377.4)$ (25%)631.8$ 1,262.4$ 1,858.3$ (630.6)$ (50%)(595.9)$ (32%)1,263$ 1,402$ 1,643$ (139)$ (10%)(241.0)$ (15%)719$ 743$ 705$ (24)$ (3%)38.2$ 5%720$ 743$ 705$ (23)$ (3%)38.0$ 5%705$ 703$ 627$ 2$ 0%76.5$ 12%965$ 1,063$ 1,079$ (98)$ (9%)(16.1)$ (1%)973$ 1,082$ 1,122$ (109)$ (10%)(39.9)$ (4%)1,072$ 1,357$ (285)$ (21%)1,077$ 1,360$ (283)$ (21%)(a)(b)(c)(d)(e)(f)On June 10, 2013, the Company announced its decision to cease development of Fruta del Norte ("FDN"). As a result, FDN was classified as a discontinued operation. On December 17, 2014, the Company disposed of its interest in FDN. On June 28, 2012, the Company disposed of its interest in Crixás. As a result, the comparative figures have been recast to exclude the results of FDN and Crixás."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 2014 was 66.29:1 (2013 - 59.23:1 and 2012 - 53.56:1)."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 in Section 11 of this document.The total gold equivalent ounces and total attributable gold equivalent ounces include Crixás up to June 28, 2012.Capital expenditures Amount was not computed for 2012 as this measure was adopted as of January 1, 2014.Attributable(a) production cost of sales per equivalent ounce (c) sold(b)2013 vs. 2012Years ended December 31,2014 vs. 2013(in millions, except ounces, per share amounts and per ounce amounts)Attributable(a) all-in cost per equivalent ounce (c) sold (b),(f)Attributable(a) production cost of sales per ounce sold on a by-product basis(b)Adjusted net earnings attributable to common shareholders(b)Adjusted net earnings per share (b)Net cash flow provided from operating activities Adjusted operating cash flow (b)Average realized gold price per ounce Net loss attributable to common shareholdersBasic loss per share attributable to common shareholders Diluted loss per share attributable to common shareholders Attributable(a) all-in sustaining cost per ounce sold on a by-product basis(b)Attributable(a) all-in sustaining cost per equivalent ounce (c) sold (b)Attributable(a) all-in cost per ounce sold on a by-product basis(b),(f)Consolidated production cost of sales per equivalent ounce(c) sold(b)
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
Consolidated Financial Performance
2014 vs. 2013
During 2014, Kinross’ attributable production increased by 3% compared with 2013, primarily due to increases in production from the
Kupol segment as a result of processing higher grade ore from Dvoinoye and at Maricunga as a result of improved heap leach
performance and increased efficiency of the Adsorption, Desorption and Recovery (“ADR”) plant, partially offset by a decrease in
production as a result of the suspension of mining at La Coipa in October 2013.
Metal sales decreased to $3,466.3 million in 2014 from $3,779.5 million in 2013 due to a decrease in metal prices realized, partially
offset by higher gold equivalent ounces sold. The average realized gold price decreased to $1,263 per ounce in 2014 from $1,402 per
ounce in 2013.
Production cost of sales decreased by 2% compared with 2013, primarily due to the impact of the suspension of mining at La Coipa
and lower production costs at Chirano as a result of the transition to owner mining and reduced power costs. These decreases were
partially offset by an increase in gold equivalent ounces sold from the Kupol segment as a result of Dvoinoye commencing commercial
production in October 2013 and higher costs at Fort Knox as a result of mining lower grade ore.
Depreciation, depletion and amortization increased by 6% in 2014 compared with 2013, primarily due to increases in the depreciable
asset base and gold equivalent ounces sold from the Kupol segment as a result of Dvoinoye commencing commercial production and
an increase in the depreciable asset base and a reduction in mineral reserves at Paracatu. These increases were partially offset by the
impact of the suspension of mining at La Coipa and decreases in the depreciable asset base at Tasiast and Maricunga.
As at December 31, 2014, the Company recorded an after-tax impairment charge of $932.2 million, upon completion of its annual
assessment of the carrying value of its Cash Generating Units (“CGUs”). The impairment charge included goodwill impairment of
$145.3 million and property plant and equipment impairment of $786.9 million. The property plant and equipment impairment
included $342.5 million for Tasiast, $213.8 million for Chirano and $230.6 million for other CGUs, net of a tax recovery of $127.9 million
and non-controlling interest of $23.7 million. The Company also recorded inventory impairment charges of $167.6 million in 2014 and
$177.6 million in 2013. During 2013, the Company recorded after-tax impairment charges aggregating $2,834.1 million, comprised of
$1,334.7 million for Tasiast, $573.6 million for Maricunga, and $925.8 million for other CGUs, net of a tax recovery of $157.9 million.
During 2014, the operating loss decreased to $1,027.2 million compared with an operating loss of $2,635.2 million in 2013. The change
was primarily due to decreases in impairment charges and exploration and business development costs, partially offset by a decrease
in metal sales and an increase in depreciation, depletion and amortization.
Net loss from continuing operations attributable to common shareholders in 2014 was $1,400.0 million, or $1.22 per share, compared
with a net loss from continuing operations attributable to common shareholders of $3,012.6 million, or $2.64 per share, in 2013. The
decrease was primarily a result of the change in operating loss as described above. In addition, at December 31, 2014, an impairment
charge of $156.6 million related to the Company’s investment in Cerro Casale was recorded in other income (expense). During 2013,
the Company recognized an impairment charge of $219.0 million related to its investment in Cerro Casale. These decreases were
partially offset by an increase in income tax expense. The Company recorded a tax expense of $109.7 million in 2014 compared with
$72.4 million in 2013. The $109.7 million tax expense in 2014 included a $137.8 million recovery due to impairment charges and
$145.5 million of expense due to re-measurements of deferred tax assets and liabilities as a result of income tax reforms enacted in
Chile and significant fluctuations in foreign exchange rates with respect to the Brazilian real and the Russian rouble. The $72.4 million
tax expense in 2013 included a $174.6 million recovery due to a re-measurement of deferred tax liabilities in respect of impairment
charges. Excluding the impact of items that are not reflective of the underlying operating performance of our business, the Company’s
adjusted effective tax rate for 2014 was 48.8%, compared with an adjusted effective tax rate of 34.8 % for 2013. The increase in the
Company’s adjusted effective tax rate for 2014, compared with 2013, was largely due to differences in the level of income in the
Company’s operating jurisdictions from one period to the next.
Adjusted net earnings attributable to common shareholders was $131.1 million, or $0.11 per share, for 2014 compared with $321.2
million, or $0.28 per share, in 2013. The decrease in adjusted net earnings attributable to common shareholders was primarily due to
the decrease in metal sales.
Net cash flow provided from operating activities increased by 8% compared with 2013, primarily due to more favourable working
capital changes and lower exploration and business development costs, partially offset by the decrease in metal sales.
During 2014, adjusted operating cash flow decreased to $976.9 million compared with $1,149.6 million in 2013, primarily due to the
decrease in margins, partially offset by lower exploration and business development costs.
MDA3 KINROSS GOLD 2014 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
Capital expenditures decreased to $631.8 million compared with $1,262.4 million in 2013, primarily due to reduced spending at
Tasiast, Chirano and Fort Knox.
Attributable all-in sustaining cost and all-in cost per equivalent ounce sold and per ounce sold on a by-product basis decreased in 2014
compared with 2013, primarily due to a decrease in both sustaining and non-sustaining capital expenditures and exploration and
business development costs.
2013 vs. 2012
Kinross’ attributable production from continuing operations in 2013 increased marginally compared with 2012, primarily due to
increases in production at Tasiast and Fort Knox from higher mill grades and improved leach performance. In addition, production at
Paracatu increased due to higher processing levels and recoveries. These increases were largely offset by decreases in production
resulting from the scheduled decline in grades at Round Mountain and Chirano, a decline in both grades and heap leach performance
at Maricunga, and due to the suspension of mining at La Coipa in October 2013. In addition, production decreased at the Kupol mine
due to the planned decline in grades and a less favourable gold equivalent ratio, partially offset by the processing of higher grade ore
from the Dvoinoye mine, which commenced commercial production in October 2013.
Metal sales from continuing operations decreased to $3,779.5 million in 2013 from $4,307.3 million in 2012, primarily due to a
decrease in the metal prices realized. The average gold price realized from continuing operations decreased to $1,402 per ounce from
$1,643 per ounce in 2012.
During 2013, production cost of sales from continuing operations increased to $2,004.4 million from $1,849.2 million in 2012, primarily
due to increases in gold equivalent ounces sold and input costs at Fort Knox and Tasiast as well as higher input costs at Maricunga as
a result of processing lower grade ore. In addition, production cost of sales at Kupol increased due to higher consumption of inputs
as a result of processing ore from the Dvoinoye mine and due to inflationary pressures on certain inputs such as labour. These
increases were partially offset by a decrease in production cost of sales at La Coipa, primarily due to the suspension of mining.
Depreciation, depletion and amortization from continuing operations increased by 22% in 2013 compared with 2012, primarily due to
an increase in gold equivalent ounces sold at Paracatu, Fort Knox, and Tasiast and an increase in the depreciable asset base at La Coipa,
Paracatu, Maricunga, and Fort Knox. These increases were partially offset by decreases in gold equivalent ounces sold at Chirano and
Kettle River-Buckhorn.
As at December 31, 2013, the Company recorded an after-tax impairment charge of $544.8 million, upon completion of its annual
assessment of the carrying value of its CGUs. The impairment charge included $376.0 million relating to property, plant and equipment
at Maricunga, net of a tax recovery of $49.2 million, and $168.8 million relating to goodwill at Quebrada Seca, a non-operating property
in Chile. The non-cash impairment charge at Maricunga was mainly a result of changes to the life of mine plan and a corresponding
reduction in mineral reserves. As at June 30, 2013, the Company had identified the decline in metal prices and the deferral of potential
construction at Tasiast as indicators of potential impairment, and performed an impairment assessment to determine the recoverable
amount of its CGUs using updated assumptions and estimates at that time. The forecasted production output and capital expenditures
included in the life of mine plans for all CGUs remained unchanged from the 2012 year-end impairment assessment with the exception
of Tasiast, which was based on a 38,000 tonne per day mill, adjusted for the deferral in potential construction and production. As a
result of the June 30, 2013 impairment assessment, the Company recorded after-tax non-cash impairment charges of $2,289.3 million,
comprised of property, plant and equipment impairment of $1,334.7 million at Tasiast and goodwill and property, plant and equipment
impairment aggregating $954.6 million at several of its other CGUs. The property, plant and equipment impairment charges were net
of a tax recovery of $108.7 million. The resulting non-cash impairment charges were primarily a result of the reduction in the
Company’s estimates of future metal prices. The Tasiast impairment charge was also impacted by the deferral of potential
construction and production. During 2012, the Company recorded after-tax impairment charges aggregating $3,206.1 million,
comprised of $3,094.8 million for Tasiast and $111.3 million for Chirano.
The operating loss from continuing operations increased to $2,635.2 million in 2013 from $2,241.9 million in 2012, primarily due to a
decrease in metal sales and increases in production cost of sales and depreciation, depletion and amortization, partially offset by lower
impairment charges and a decrease in exploration and business development costs.
KINROSS GOLD 2014 ANNUAL REPORT MDA4
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
During 2013, net loss from continuing operations attributable to common shareholders was $3,012.6 million, or $2.64 per share,
compared with $2,546.2 million, or $2.24 per share, in 2012. The increase in net loss from continuing operations attributable to
common shareholders was primarily a result of an increase in the operating loss as described above and an impairment charge of
$219.0 million related to the Company’s investment in Cerro Casale, which was recorded in other income (expense) in 2013, partially
offset by a decrease in income tax expense. For continuing operations, income tax expense for 2013 was $72.4 million compared with
$259.4 million in 2012. Excluding the impact of items that are not reflective of the underlying operating performance of our business,
such as impairment charges and re-measurements of the deferred tax liability due to increases in corporate income tax rates, the
Company’s adjusted effective tax rate was 34.8% in 2013, compared with 31.7% in 2012. The increase in the Company’s adjusted
effective tax rate was largely due to differences in the level of income in the Company’s operating jurisdictions from one year to the
next.
During 2013, adjusted net earnings from continuing operations attributable to common shareholders was $321.2 million, or $0.28 per
share, compared with $886.2 million, or $0.78 per share, in 2012. The decrease in adjusted net earnings from continuing operations
attributable to common shareholders was mainly due to the decrease in metal sales and increases in production cost of sales and
depreciation, depletion and amortization expense as described above.
Net cash flow of continuing operations provided from operating activities decreased by $520.7 million compared with 2012. The
decrease in cash flows was primarily due to the decrease in metal sales and less favourable working capital movements, partially offset
by a decrease in exploration and business development costs.
Adjusted operating cash flow from continuing operations decreased to $1,149.6 million from $1,527.0 million, mainly due to the
decrease in metal sales, partially offset by a decrease in exploration and business development costs.
Attributable production cost of sales from continuing operations per equivalent ounce sold increased by 5% in 2013 compared with
2012 due to an increase in production cost of sales as noted above.
During 2013, attributable all-in sustaining cost from continuing operations per equivalent ounce sold and per ounce sold on a by-
product basis decreased primarily due to a decrease in sustaining capital expenditures and an increase in attributable gold ounces
sold, partially offset by an increase in production cost of sales.
Mineral Reserves1
Kinross’ total estimated proven and probable mineral reserves at year-end 2014 were approximately 34.4 million ounces of gold, a
net decrease of approximately 8.4 million ounces compared with year-end 2013. The net year-over-year decrease in gold reserve
estimates was mainly a result of reclassifying approximately 6.0 million estimated gold ounces at Lobo-Marte to measured and
indicated mineral resources, based on a decision not to extend environmental permits for the project at this time.
The reduction was offset by slight additions at Paracatu, due to assumed higher productivity, improved recoveries, lower costs and
more favourable foreign exchange rates, and at Kupol, due to extensions of the mine plan. Other changes to the mineral reserve
estimates include approximate reductions of 0.51 million gold ounces at Maricunga, 0.49 million gold ounces at Chirano, 0.46 million
gold ounces at Fort Knox and 0.45 million gold ounces at Tasiast mainly due to depletion.
Proven and probable silver reserves at year-end 2014 were estimated at 44.0 million ounces, a net decrease of 0.72 million ounces
compared with year-end 2013, primarily due to production depletion.
Proven and probable copper reserves at year-end 2014, which are exclusively at Cerro Casale, were estimated at 1.4 billion pounds,
unchanged from year-end 2013.
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 press
release filed with Canadian and U.S. regulators on February 10, 2015.
MDA5 KINROSS GOLD 2014 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
2.
IMPACT OF KEY ECONOMIC TRENDS
Price of Gold
Source: London Bullion Marketing Association London PM Fix, Bloomberg, GFMS, Company records
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 continue 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 2014, the price of gold fluctuated between a low of $1,142 per ounce in November to a high
of $1,385 per ounce in March. The average price for the year based on the London Bullion Market Association PM Fix was $1,266 per
ounce, a $145 decrease over the 2013 average price of $1,411 per ounce. The major influences on the gold price included strong
jewelry demand, particularly in the first quarter of 2014, continued purchases by Central Banks, as well as reduced selling out of
Exchange Traded Funds and speculators. These positive influences were offset by changing expectations regarding the timing of
interest rate increases in the U.S. and material price declines in other commodity markets, particularly oil. Geo-political events in
Ukraine, the Middle East and Russia have caused a lot of uncertainty in the financial markets, but the gold price does not seem to have
been materially impacted.
Source: London Bullion Marketing Association London PM Fix, Bloomberg, GFMS, Company records
KINROSS GOLD 2014 ANNUAL REPORT MDA6
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
Source: London Bullion Marketing Association London PM Fix
During 2014, the Company realized an average gold price of $1,263 per ounce compared to the average PM Fix of $1,266 per ounce.
MDA7 KINROSS GOLD 2014 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
Gold Supply and Demand Fundamentals
Source: GFMS Gold Survey 2014
Total gold supply remained unchanged in 2014 relative to 2013, with global gold mine production increasing 2.0%, offset by a decrease
of 11.1% in the supply of recycled gold. Mine production and recycled gold have been the dominant sources of gold supply, and in
2014 they represented approximately 73% and 26% of total supply, respectively.
Macroeconomic factors and geo-political events were the overwhelming drivers of gold prices in 2014, which, combined with
increased mine production, contributed to lower prices during the year. Central banks have not been a source of supply to the market,
but have rather been net buyers, as noted below.
KINROSS GOLD 2014 ANNUAL REPORT MDA8
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
Source: GFMS 2014 Gold Survey
Overall demand decreased by 18.7% in 2014 relative to 2013. Fabrication demand is estimated to have decreased by 9.7% in 2014
relative to 2013 despite lower gold prices, mainly due to restrained demand in China. This was partially offset by an increase in demand
in India, the United States and some European countries. Bar hoarding decreased by approximately 40.1% in 2014, as speculative
interest from key Asian markets was largely absent during the year. Central banks continued to be buyers in 2014, increasing net
purchases by 12.7% during the year.
MDA9 KINROSS GOLD 2014 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
Inflationary Cost Pressures
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 have experienced modest decreases in fuel costs in 2014, reflecting global oil and fuel
price decreases that occurred during the second half of 2014. 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.
KINROSS GOLD 2014 ANNUAL REPORT MDA10
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
Currency Fluctuations
Source: Bloomberg
At the Company’s non-U.S. mining operations and exploration activities, which are primarily located in Brazil, Chile, Ghana, Mauritania,
the Russian Federation, 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 75% of the Company’s
expected attributable production in 2015 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.
MDA11 KINROSS GOLD 2014 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
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 "attributable" production includes only Kinross' share of Chirano production (90%). Production cost of sales
per attributable gold equivalent ounce is defined as production cost of sales as per the financial statements divided by the number of
gold equivalent ounces sold, reduced for Chirano (10%) sales attributable to third parties.
Approximately 60%-70% of the Company’s costs are denominated in U.S. dollars.
A 10% change in foreign exchange could result in an approximate $14 impact on production cost of sales per ounce2.
Specific to the Russian rouble, a 10% change in the exchange rate would be expected to result in an approximate $11 impact on Russian
production cost of sales per ounce.
A $10 per barrel change in the price of oil could result in an approximate $1 impact on production cost of sales per ounce.
The impact on royalties of a $100 change in the gold price could result in an approximate $3 impact on production cost of sales per
ounce.
Operational Outlook
In 2015, Kinross expects to produce approximately 2.4 to 2.6 million gold equivalent ounces from its current operations, lower than
the 2014 production of 2.71 million gold equivalent ounces.
Production cost of sales per gold equivalent ounce is expected to be in the range of $720 to $780 for 2015.
The Company has forecast an all-in sustaining cost for 2015 of $1,000 to $1,100 per gold equivalent ounce sold and per ounce sold on
a by-product basis.
Material assumptions used to forecast 2015 production costs are: a gold price of $1,200 per ounce, a silver price of $18 per ounce, an
oil price of $90 per barrel, and foreign exchange rates of 2.5 Brazilian reais to the U.S. dollar, 1.10 Canadian dollar to the U.S. dollar,
40 Russian roubles to the U.S. dollar, 575 Chilean pesos to the U.S. dollar, 2.75 Ghanaian cedi to the U.S. dollar, 290 Mauritanian
ouguiya to the U.S. dollar, and 1.30 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 ounce
and specific to the Russian rouble, a 10% change in the exchange rate would be expected to result in an approximate $11 impact on
Russian production cost of sales per ounce. A $10 per barrel change in the price of oil would be expected to result in an approximate
$1 impact on our production cost of sales per ounce, and a $100 change in the price of gold would be expected to result in an
approximate $3 impact on our production cost of sales per ounce as a result of a change in royalties.
Total capital expenditures for 2015 are forecast to be approximately $725 million (including estimated capitalized interest of
approximately $40 million). Of this amount, sustaining capital expenditures are expected to be approximately $505 million.
Exploration expenditures are forecast to be approximately $95 million, none of which is expected to be capitalized. 2015 overhead
(general and administrative expenses and business development) is expected to be approximately $205 million.
Other operating costs are forecast to be approximately $50 million, including $11 million for care and maintenance costs at La Coipa.
The above forecast expenses include approximately $30 million related to expected equity-based compensation.
Income tax expenses are expected to be $55 million based on our assumed gold price plus approximately 24% of any profit resulting
from higher gold prices. Depreciation, depletion and amortization is forecast to be approximately $330 per gold equivalent ounce.
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.
KINROSS GOLD 2014 ANNUAL REPORT MDA12
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
4. PROJECT UPDATES AND NEW DEVELOPMENTS
Tasiast mill expansion update
Following a comprehensive review, the Company has decided not to proceed with the 38,000 tonne per day mill expansion at the
present time. The current gold price environment does not provide the Company with sufficient confidence that it will be able to
maintain balance sheet strength while financing the expansion during the three-year construction period.
In addition to a supportive gold price environment, the Company previously identified project financing, de-risking of the execution
plan and conducive investment conditions in Mauritania as critical to a positive construction decision. Progress has been made
towards securing project financing and de-risking execution. All necessary project permits have been secured from the Government
of Mauritania, as well as approval for continuing to utilize 12-hour shifts. However, more work needs to be done to secure effective
implementation of recent legislation granting the mining industry a VAT exemption. In addition, the Company has thus far been unable
to reach a satisfactory agreement with the Government of Mauritania on payment of certain VAT refunds owed to the Company.
Kinross continues to believe a Tasiast mill expansion has the potential to create significant value over the long term. The Company
will continue to assess market conditions with a view to possibly expanding Tasiast, should circumstances change. In addition, Kinross
will continue to focus on reducing operating costs at Tasiast, consistent with the Company’s standards of operational excellence and
drive for continuous improvement.
La Coipa Phase 7 update
A pre-feasibility study (“PFS”), begun in the second quarter of 2014, to explore potential re-start options at La Coipa, is on track to be
completed during the third quarter of 2015. Kinross is also conducting a scoping study that focuses on processing options for known
near-surface sulfide mineralization in the district. Exploration continues at La Coipa, with the assessment of some attractive
opportunities to extend the mine life beyond what the PFS will contemplate.
Metallurgical test work continues to be a major component of the study. Results to date confirm the complexity of the ore types, with
more test work to follow.
Recent transactions
Completion of $500.0 million unsecured debt offering
On March 6, 2014, Kinross completed a $500.0 million offering of debt securities consisting of 5.950% senior notes due 2024. The
notes are senior unsecured obligations of the Company. Kinross received net proceeds of $ 492.9 million from the offering, after
discount, payment of the commissions to the initial purchasers and expenses of the offering.
On March 10, 2014, the Company used the net proceeds raised from the above mentioned debt offering to repay $500.0 million of
the term loan.
Amendment of Letter of Credit guarantee facility
On July 17, 2014, the Company entered into an amendment to increase the amount of its Letter of Credit guarantee facility with Export
Development Canada (“EDC”) from $200.0 million to $250.0 million.
Amendment of revolving credit and term loan facilities
On July 28, 2014, the Company amended its $500.0 million term loan and $1,500.0 million revolving credit facility to extend the
respective maturity dates by one year to August 10, 2018 and August 10, 2019, respectively. As part of this amendment, the interest
charge on the term loan is now LIBOR plus 1.65%, based on the Company’s current credit rating, and consequently, the fixed rate on
the hedged portion of the term loan is now 2.14%.
MDA13 KINROSS GOLD 2014 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
Sale of Fruta del Norte (“FDN”) project in Ecuador
On October 21, 2014, Kinross announced that it entered into an agreement with Fortress Minerals Corp. (“Fortress”, subsequently
renamed Lundin Gold Inc. (“Lundin Gold”)), a member of the Lundin Group of Companies, to sell all of its interest in Aurelian Resources
Inc. (“Aurelian”) and the FDN project in Ecuador for $240.0 million in cash and shares.
On December 17, 2014, the Company completed the sale for gross cash proceeds of $150.0 million and $90.0 million of Lundin Gold
common shares, resulting in an after-tax recovery of $238.0 million.
Other developments
Board of Directors update
Mr. John Macken resigned from the Kinross Board of Directors, effective July 30, 2014.
Mr. Kenneth Irving is resigning from the Kinross Board of Directors, effective February 10, 2015.
Temporary suspension of mill at Round Mountain mine
Mill operations at Round Mountain have been temporarily suspended as of October 1, 2014, following a fire in the mill building. Mill
repairs have commenced and the mill is expected to be re-commissioned in March 2015 with costs expected to be almost entirely
covered by insurance. Production continues uninterrupted from the mine's heap leach facilities, which account for approximately
75% of production. There was no material impact on the region’s 2014 production guidance from the temporary suspension of mill
operations.
KINROSS GOLD 2014 ANNUAL REPORT MDA14
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
5. CONSOLIDATED RESULTS OF OPERATIONS
MDA15 KINROSS GOLD 2014 ANNUAL REPORT
201420132012Change% Change Change% Change Operating Statistics Total gold equivalent ounces (a), (d)Produced (b)2,739,044 2,658,632 2,678,131 80,412 3%(19,499) (1%)Sold (b)2,743,398 2,697,093 2,654,107 46,305 2%42,986 2%Gold equivalent ounces from continuing operations (a), (c)Produced (b)2,739,044 2,658,632 2,647,137 80,412 3%11,495 0%Sold (b)2,743,398 2,697,093 2,621,343 46,305 2%75,750 3%Attributable gold equivalent ounces (a), (d)Produced (b)2,710,390 2,631,092 2,648,807 79,298 3%(17,715) (1%)Sold (b)2,715,358 2,669,276 2,624,242 46,082 2%45,034 2%Attributable gold equivalent ounces from continuing operations (a), (c)Produced (b)2,710,390 2,631,092 2,617,813 79,298 3%13,279 1%Sold (b)2,715,358 2,669,276 2,591,478 46,082 2%77,798 3%Gold ounces - sold from continuing operations(c)2,669,278 2,545,736 2,421,447 123,542 5%124,289 5%Silver ounces - sold from continuing operations (000's)(c)4,923 9,021 10,717 (4,098) (45%)(1,696) (16%)Average realized gold price per ounce 1,263$ 1,402$ 1,643$ (139)$ (10%)(241)$ (15%)Financial Data from Continuing Operations (c)Metal sales3,466.3$ 3,779.5$ 4,307.3$ (313.2)$ (8%)(527.8)$ (12%)Production cost of sales1,971.2$ 2,004.4$ 1,849.2$ (33.2)$ (2%)155.2$ 8%Depreciation, depletion and amortization874.7$ 828.8$ 680.9$ 45.9$ 6%147.9$ 22%Impairment charges 1,251.4$ 3,169.6$ 3,527.6$ (1,918.2)$ (61%)(358.0)$ (10%)Operating loss(1,027.2)$ (2,635.2)$ (2,241.9)$ 1,608.0$ 61%(393.3)$ (18%)(1,400.0)$ (3,012.6)$ (2,546.2)$ 1,612.6$ 54%(466.4)$ (18%)(a)(b)(c)(d)The total gold equivalent ounces and total attributable gold equivalent ounces include Crixás up to June 28, 2012.2014 vs. 2013(in millions, except ounces and per ounce amounts)Net loss attributable to common shareholders2013 vs. 2012"Total" includes 100% of Chirano production. "Attributable" includes Kinross' share of Chirano (90%) production. Years ended December 31,On June 10, 2013, the Company announced its decision to cease development of Fruta del Norte ("FDN"). As a result, FDN was classified as a discontinued operation. On December 17, 2014, the Company disposed of its interest in FDN. On June 28, 2012, the Company disposed of its interest in Crixás. As a result, the comparative figures have been recast to exclude the results of FDN and Crixás."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 2014 was 66.29:1 (2013 - 59.23:1 and 2012 - 53.56:1).
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
Operating Earnings (Loss) by Segment
KINROSS GOLD 2014 ANNUAL REPORT MDA16
(in millions)201420132012Change% ChangeChange% Change(d)Operating segments (a)Fort Knox99.9$ 251.0$ 260.9$ (151.1)$ (60%)(9.9)$ (4%)Round Mountain44.0 (106.7) 151.2 150.7 141%(257.9) (171%)Kettle River-Buckhorn(45.6) 53.6 90.2 (99.2) (185%)(36.6) (41%)Paracatu69.3 106.6 284.2 (37.3) (35%)(177.6) (62%)Maricunga36.3 (711.6) 178.9 747.9 105%(890.5) nmKupol (b)282.8 316.0 495.5 (33.2) (11%)(179.5) (36%)Tasiast (571.4) (1,575.4) (3,466.8) 1,004.0 64%1,891.4 55%Chirano (365.4) (344.4) (8.3) (21.0) (6%)(336.1) nmNon-operating segmentsCorporate and Other (c)(577.1) (624.3) (227.7) 47.2 8%(396.6) (174%)Total(1,027.2)$ (2,635.2)$ (2,241.9)$ 1,608.0$ 61%(393.3)$ (18%)Discontinued operationsCrixás-$ -$ 16.6$ -$ -(16.6)$ (100%)Fruta del Norte(5.2)$ (735.9)$ (6.9)$ 730.7$ 99%(729.0)$ nm(a)(b)(c)(d)Years ended December 31,2014 vs. 20132013 vs. 2012On June 10, 2013, the Company announced its decision to cease development of Fruta del Norte ("FDN"). As a result, FDN was classified as a discontinued operation. On December 17, 2014, the Company disposed of its interest in FDN. On June 28, 2012, the Company disposed of its interest in Crixás. As a result, the comparative figures have been recast to exclude the results of FDN and Crixás.The Kupol segment includes the Kupol and Dvoinoye mines."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 non-operating assets (including La Coipa (as of January 1, 2014), Lobo-Marte and White Gold). The comparative figures have been reclassified to conform to the 2014 segment presentation."nm" means not meaningful.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
Mining operations
Fort Knox (100% ownership and operator) – USA
The Company has been operating the Fort Knox mine, located near Fairbanks, Alaska, since it was acquired in 1998.
2014 vs. 2013
Tonnes of ore mined decreased by 31% compared with 2013 due to planned mine sequencing, which involved mining activities focused
on Phase 7 South. During 2014, tonnes of ore processed were 7% lower compared with 2013, primarily due to a decrease in tonnage
placed on the heap leach pads as a result of mine sequencing, which involved longer heap leach haulage cycles, partially offset by
higher mill throughput due to increased availability of the mill crusher. Mill grades decreased by 20% compared with 2013 as a result
of lower grade stockpile ore being processed through the mill rather than higher grade pit ore. Gold equivalent ounces produced
decreased by 10% compared with 2013, primarily due to lower mill grades. During 2014, gold equivalent ounces sold exceeded
production as ounces produced at the end of 2013 were sold in 2014.
Metal sales were 14% lower compared with 2013 due to decreases in metal prices realized and gold equivalent ounces sold.
Production cost of sales increased by 23% in 2014 compared with 2013, primarily due to higher costs associated with mining lower
grade ore, higher labour costs, increased consumption of reagents for heap leach operations, and a decrease in tonnes placed on the
heap leach pads. This increase was partially offset by lower gold equivalent ounces sold. Depreciation, depletion and amortization
increased by 14% compared with 2013, primarily due to an increase in the depreciable asset base and a decrease in mineral reserves
at December 31, 2013, partially offset by a decrease in gold equivalent ounces sold.
MDA17 KINROSS GOLD 2014 ANNUAL REPORT
20142013Change% ChangeOperating StatisticsTonnes ore mined (000's) 14,886 21,634 (6,748) (31%)Tonnes processed (000's) (a) 39,386 42,419 (3,033) (7%)Grade (grams/tonne)(b)0.66 0.82 (0.16) (20%)Recovery(b)84.4%83.7%0.7%1%Gold equivalent ounces:Produced379,453 421,641 (42,188) (10%)Sold408,472 416,103 (7,631) (2%)Financial Data (in millions)Metal sales515.7$ 596.5$ (80.8)$ (14%)Production cost of sales 291.0 236.6 54.4 23%Depreciation, depletion and amortization118.0 103.7 14.3 14%106.7 256.2 (149.5) (58%)Exploration and business development6.8 5.2 1.6 31%Segment operating earnings99.9$ 251.0$ (151.1)$ (60%)(a)(b)Includes 25,848,000 tonnes placed on the heap leach pads during 2014 (2013 - 29,751,000 tonnes).Amount represents mill grade and recovery only. Ore placed on the heap leach pads had an average grade of 0.29 grams per tonne during 2014 (2013 - 0.29 grams per tonne). Due to the nature of heap leach operations, point-in-time recovery rates are not meaningful. Years ended December 31,
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
Round Mountain (50% ownership and operator; Barrick 50% ownership) – USA
The Company acquired its ownership interest in the Round Mountain open pit mine, located in Nye County, Nevada, with the
acquisition of Echo Bay Mines Ltd. ("Echo Bay") on January 31, 2003.
2014 vs. 2013
Tonnes of ore mined and mill grades increased by 34% and 36%, respectively, compared with 2013, primarily due to planned mine
sequencing. Tonnes of ore processed were 21% higher in 2014 compared with 2013, primarily due to an increase in tonnage placed
on the leach pads. Gold equivalent ounces produced increased by 4% compared with 2013, largely due to higher mill grades and
recoveries, partially offset by a decrease in ounces recovered from the heap leach pads.
Metal sales were 7% lower in 2014 compared with 2013 due to a decrease in metal prices realized, partially offset by an increase in
gold equivalent ounces sold. Production cost of sales increased by 5% compared with 2013, primarily due to an increase in gold
equivalent ounces sold and higher tire costs, partially offset by lower royalty and cyanide costs. Depreciation, depletion and
amortization increased by 13% in 2014 compared with 2013, primarily due to an increase in gold equivalent ounces sold and a decrease
in mineral reserves at December 31, 2013, partially offset by a decrease in the depreciable asset base resulting from the impairment
charges recognized at June 30, 2013. During 2013, the Company recorded impairment charges of $177.4 million, comprised of $58.7
million related to goodwill and $118.7 million related to property, plant and equipment, primarily due to the reduction in the
Company’s estimates of future metal prices. No such impairment charges were recognized in 2014.
KINROSS GOLD 2014 ANNUAL REPORT MDA18
20142013Change% ChangeOperating StatisticsTonnes ore mined (000's)(a)26,356 19,648 6,708 34%Tonnes processed (000's)(a)26,026 21,595 4,431 21%Grade (grams/tonne)(b)0.94 0.69 0.25 36%Recovery(b)68.6%65.7%2.9%4%Gold equivalent ounces:Produced169,839 162,826 7,013 4%Sold166,441 161,836 4,605 3%Financial Data (in millions)Metal sales211.7$ 228.7$ (17.0)$ (7%)Production cost of sales 142.3 135.3 7.0 5%Depreciation, depletion and amortization25.2 22.4 2.8 13%Impairment charges - 177.4 (177.4) (100%)44.2 (106.4) 150.6 142%Exploration and business development0.2 0.3 (0.1) (33%)Segment operating earnings (loss)44.0$ (106.7)$ 150.7$ 141%(a)(b) Tonnes of ore mined/processed represent 100% of operations. Includes 23,098,000 tonnes placed on the heap leach pads during 2014 (2013 - 17,784,000 tonnes).Amount represents mill grade and recovery only. Ore placed on the heap leach pads had an average grade of 0.36 grams per tonne during 2014 (2013 - 0.36 grams per tonne). Due to the nature of heap leach operations, point-in-time recovery rates are not meaningful. Years ended December 31,
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
Kettle River–Buckhorn (100% ownership and operator) – USA
The Kettle River–Buckhorn properties are located in Ferry and Okanogan Counties in the State of Washington. Kinross acquired Kettle
River through the acquisition of Echo Bay on January 31, 2003.
2014 vs. 2013
Tonnes of ore mined decreased by 5% compared with 2013, primarily due to planned mine sequencing. Tonnes of ore processed
decreased by 2% in 2014 compared with 2013, primarily due to a decrease in available stockpile ore. Grades were 23% lower compared
with 2013 consistent with plan. Gold equivalent ounces produced decreased by 18% in 2014 compared with 2013, primarily due to
decreases in grades and tonnes processed, partially offset by the timing of ounces processed through the mill.
Metal sales decreased by 27% in 2014 compared with 2013 due to decreases in metal prices realized and gold equivalent ounces sold.
Production cost of sales increased slightly by 1% compared with 2013, primarily due to higher labour, contractor and energy costs,
largely offset by a decrease in gold equivalent ounces sold, and lower concrete and maintenance costs. Depreciation, depletion and
amortization were 20% lower in 2014 compared with 2013, primarily due to decreases in gold equivalent ounces sold and depreciable
asset base.
As at December 31, 2014, the Company recorded impairment charges of $53.8 million, comprised of $20.9 million related to goodwill
and $32.9 million related to property, plant and equipment. The non-cash impairment charge was primarily due to the mine
approaching the end of its life.
MDA19 KINROSS GOLD 2014 ANNUAL REPORT
20142013Change% Change Operating StatisticsTonnes ore mined (000's)347 367 (20) (5%)Tonnes processed (000's)394 404 (10) (2%)Grade (grams/tonne)9.98 13.00 (3.02) (23%)Recovery93.5%93.2%0.3%0%Gold equivalent ounces:Produced123,382 150,157 (26,775) (18%)Sold123,262 151,559 (28,297) (19%)Financial Data (in millions)Metal sales156.0$ 214.4$ (58.4)$ (27%)Production cost of sales 83.6 83.1 0.5 1%Depreciation, depletion and amortization50.2 62.8 (12.6) (20%)Impairment charges53.8 - 53.8 100%(31.6) 68.5 (100.1) (146%)Exploration and business development2.8 5.9 (3.1) (53%)Other11.2 9.0 2.2 24%Segment operating earnings (loss)(45.6)$ 53.6$ (99.2)$ (185%)Years ended December 31,
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
Paracatu (100% ownership and operator) – Brazil
The Company acquired a 49% ownership interest in the Paracatu open pit mine, located in the State of Minas Gerais, Brazil, in the
acquisition of TVX Gold Inc. (“TVX”) on January 31, 2003. On December 31, 2004, the Company purchased the remaining 51% of
Paracatu from Rio Tinto Plc.
2014 vs. 2013
Tonnes of ore mined and processed decreased by 5% and 8%, respectively, compared with 2013, primarily due to planned mine
sequencing, which involved processing, at a reduced throughput, an increased proportion of higher grade B2 ore. Gold equivalent
ounces produced increased by 4% compared with 2013, primarily due to higher grades and the timing of ounces processed through
the mill, partially offset by reduced throughput as a result of lower recoveries due to the ore hardness.
Metal sales were lower by 9% in 2014 compared with 2013 due to a decrease in metal prices realized. During 2014, production cost
of sales decreased by 2% compared with 2013, primarily due to a decrease in power and contractor costs, partially offset by an increase
in gold equivalent ounces sold and higher consumption of milling supplies and reagents. Depreciation, depletion and amortization
were 40% higher in 2014 compared with 2013, primarily due to an increase in the depreciable asset base and a reduction in mineral
reserves at December 31, 2013. During 2013, the Company recorded a goodwill impairment charge of $65.5 million, primarily due to
the reduction in the Company’s estimates of future metal prices. No such impairment charges were recognized in 2014.
KINROSS GOLD 2014 ANNUAL REPORT MDA20
20142013Change% ChangeOperating StatisticsTonnes ore mined (000's)53,584 56,431 (2,847) (5%)Tonnes processed (000's)51,397 55,699 (4,302) (8%)Grade (grams/tonne)0.41 0.38 0.03 8%Recovery74.7%75.8%(1.1%)(1%)Gold equivalent ounces:Produced521,026 500,380 20,646 4%Sold512,327 507,953 4,374 1%Financial Data (in millions)Metal sales644.3$ 710.1$ (65.8)$ (9%)Production cost of sales 418.2 424.9 (6.7) (2%)Depreciation, depletion and amortization154.3 110.2 44.1 40%Impairment charges - 65.5 (65.5) (100%)71.8 109.5 (37.7) (34%)Other2.5 2.9 (0.4) (14%)Segment operating earnings 69.3$ 106.6$ (37.3)$ (35%)Years ended December 31,
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
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 (“Bema”).
2014 vs. 2013
During 2014, tonnes of ore mined decreased by 7% compared with 2013, primarily due to planned mine sequencing. Tonnes of ore
processed increased by 6% in 2014 compared with 2013, primarily due to operational improvements made to the crusher plant,
increased availability of processing equipment and more favourable weather conditions during the winter. Grades increased by 23%
compared with 2013 as a result of planned mine sequencing, which involved processing higher grade ore from Phase 2 of the Pancho
pit. Gold equivalent ounces produced increased by 32% compared with 2013, primarily due to improved heap leach performance and
increased efficiency of the ADR plant. Gold equivalent ounces sold exceeded production as ounces produced at the end of 2013 were
sold in 2014.
Metal sales increased by 15% compared with 2013 due to an increase in gold equivalent ounces sold, partially offset by a decrease in
metal prices realized. Production cost of sales increased by 5% in 2014 compared with 2013, primarily due to an increase in gold
equivalent ounces sold, and higher labour and maintenance costs, partially offset by lower contractor costs as a result of maintenance
and other services being performed internally, and a decrease in the cost of diesel and royalties. Depreciation, depletion and
amortization decreased by 48% in 2014 compared with 2013, primarily due to a decrease in the depreciable asset base resulting from
the impairment charges recognized at June 30, 2013 and December 31, 2013. During 2013, the Company recorded impairment charges
of $693.4 million, comprised of $175.9 million related to goodwill, $452.6 million related to property, plant and equipment, and $64.9
million related to inventory. The non-cash impairment charges related to goodwill and property, plant and equipment were mainly a
result of the reduction in the Company’s estimates of future metal prices as at June 30, 2013, and changes to the life of mine plan and
corresponding reduction in mineral reserves as at December 31, 2013. The impairment charge related to inventory was recognized
to reduce its carrying value to net realizable value. No such impairment charges were recognized in 2014.
MDA21 KINROSS GOLD 2014 ANNUAL REPORT
20142013Change% Change (b)Operating Statistics (a)Tonnes ore mined (000's) 16,900 18,236 (1,336) (7%)Tonnes processed (000's)16,018 15,058 960 6%Grade (grams/tonne)0.74 0.60 0.14 23%Gold equivalent ounces:Produced247,216 187,815 59,401 32%Sold247,469 192,537 54,932 29%Financial Data (in millions)Metal sales314.6$ 272.5$ 42.1$ 15%Production cost of sales 235.9 225.3 10.6 5%Depreciation, depletion and amortization36.2 69.9 (33.7) (48%)Impairment charges - 693.4 (693.4) (100%)42.5 (716.1) 758.6 106%Exploration and business development- 0.1 (0.1) (100%)Other6.2 (4.6) 10.8 nmSegment operating earnings (loss)36.3$ (711.6)$ 747.9$ 105%(a)(b) "nm" means not meaningful.Years ended December 31,Due to the nature of heap leach operations, point-in-time recovery rates are not meaningful.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
Kupol (100% ownership and operator) – Russian Federation (a)
The Company acquired a 75% interest in the Kupol project in Far Eastern Russia on February 27, 2007 through the acquisition of Bema.
The remaining 25% interest was acquired from the State Unitary Enterprise of the Chukotka Autonomous Okrug on April 27, 2011.
2014 vs. 2013
During 2014, tonnes of ore mined increased by 17% compared with 2013, primarily due to ore mined at Dvoinoye, which commenced
commercial production in October 2013. Tonnes of ore processed were 16% higher compared with 2013, primarily due to higher mill
throughput on completion of the Kupol mill expansion in the third quarter of 2013 and the processing of ore from Dvoinoye. Gold
grades increased by 21% in 2014 compared with 2013 due to the processing of higher grade ore from the Dvoinoye mine, partially
offset by the planned decline in grades at Kupol. Gold equivalent ounces produced increased by 37% compared with 2013, primarily
due to higher grade ore from Dvoinoye and an increase in mill throughput and recoveries, partially offset by the processing of lower
grade ore from Kupol and a less favourable gold equivalent ratio. Gold equivalent ounces sold increased by 32% compared with 2013,
primarily due to an increase in gold equivalent ounces produced.
Metal sales increased by 22% compared with 2013 due to an increase in gold equivalent ounces sold, partially offset by a decrease in
metal prices realized. Production cost of sales increased by 32%, primarily due to an increase in gold equivalent ounces sold.
Depreciation, depletion and amortization increased to $254.7 million in 2014 from $102.7 million in 2013, mainly due to increases in
gold equivalent ounces sold and depreciable asset base as a result of Dvoinoye commencing commercial production in October 2013.
During 2013, the Company recorded an impairment charge of $30.5 million to reduce the carrying value of inventory to its net
realizable value. No such impairment charges were recognized in 2014.
KINROSS GOLD 2014 ANNUAL REPORT MDA22
20142013Change% Change Operating StatisticsTonnes ore mined (000's) (b)1,742 1,492 250 17%Tonnes processed (000's) 1,665 1,435 230 16%Grade (grams/tonne):Gold13.51 11.13 2.38 21%Silver92.91 132.13 (39.22) (30%)Recovery:Gold94.9%93.3%1.6%2%Silver85.1%84.2%0.9%1%Gold equivalent ounces: (c)Produced751,101 550,188 200,913 37%Sold750,998 569,432 181,566 32%Silver ounces:Produced (000's)4,273 5,000 (727) (15%)Sold (000's)4,331 5,302 (971) (18%)Financial Data (in millions)Metal sales947.5$ 775.1$ 172.4$ 22%Production cost of sales 380.5 288.6 91.9 32%Depreciation, depletion and amortization254.7 102.7 152.0 148%Impairment charges- 30.5 (30.5) (100%)312.3 353.3 (41.0) (12%)Exploration and business development14.9 24.8 (9.9) (40%)Other14.6 12.5 2.1 17%Segment operating earnings282.8$ 316.0$ (33.2)$ (11%)(a)(b)(c)The Kupol segment includes the Kupol and Dvoinoye mines."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 2014 was 66.29:1 (2013 - 59.23:1).Includes 439,000 tonnes of ore mined from Dvoinoye during 2014 (2013 - 170,000).Years ended December 31,
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
Tasiast (100% ownership and operator) – Mauritania
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.
2014 vs. 2013
Tonnes of ore mined decreased by 38% compared with 2013 as a result of planned mine sequencing. Tonnes of ore processed
decreased by 37% in 2014 compared with 2013, primarily due to a decision to increase the grade of ore placed on the dump leach
pads, which resulted in fewer tonnes being placed on the pads. Mill grades were 9% higher compared with 2013, primarily due to
higher grade ore mined from the Piment deposit. Gold equivalent ounces produced increased by 5% compared with 2013, primarily
due to higher mill grades, partially offset by a decrease in mill recoveries and reduced dump leach production.
Metal sales decreased by 7% compared with 2013, primarily due to a decrease in metal prices realized, partially offset by an increase
in gold equivalent ounces sold. During 2014, production cost of sales decreased by 2% compared with 2013, primarily due to decreases
in maintenance supplies and fuel costs as a result of the reduction in ore mined, the start-up of a new low cost power plant, and the
impact of cost reduction and continuous improvement initiatives, partially offset by an increase in gold equivalent ounces sold and
labour costs. Depreciation, depletion and amortization decreased by 29% compared with 2013, largely due to a decrease in the
depreciable asset base resulting from the impairment charge recognized at June 30, 2013 and an increase in mineral reserves.
As at December 31, 2014, the Company recorded impairment charges of $505.5 million, comprised of $342.5 million related to
property, plant and equipment and $163.0 million related to inventory. The non-cash impairment charge for property, plant and
equipment was primarily due to a change in estimated future operating costs, operating cost underperformance of the existing mill
and a decision not to proceed with a 38,000 tonne per day mill expansion at the present time. The impairment charge of $163.0
million related to inventory was recorded to reduce the carrying value of inventory to its net realizable value. During 2013, the
Company recorded impairment charges of $1,488.1 million, comprised of $1,409.2 million related to property, plant and equipment
and $78.9 million related to inventory. The non-cash impairment charge for property, plant and equipment was primarily due to the
reduction in the Company’s estimates of future metal prices, and was also impacted by the deferral of potential construction and
MDA23 KINROSS GOLD 2014 ANNUAL REPORT
20142013Change% ChangeOperating StatisticsTonnes ore mined (000's) 16,647 26,885 (10,238) (38%)Tonnes processed (000's) (a)10,584 16,890 (6,306) (37%)Grade (grams/tonne) (b)2.16 1.99 0.17 9%Recovery (b)90.9%92.0%(1.1%)(1%)Gold equivalent ounces:Produced260,485 247,818 12,667 5%Sold252,668 244,954 7,714 3%Financial Data (in millions)Metal sales319.8$ 344.5$ (24.7)$ (7%)Production cost of sales 252.2 256.7 (4.5) (2%)Depreciation, depletion and amortization66.6 93.8 (27.2) (29%)Impairment charges505.5 1,488.1 (982.6) (66%)(504.5) (1,494.1) 989.6 66%Exploration and business development16.0 30.0 (14.0) (47%)Other50.9 51.3 (0.4) (1%)Segment operating loss(571.4)$ (1,575.4)$ 1,004.0$ 64%(a)(b)Includes 8,028,000 tonnes placed on the dump leach pads during 2014 (2013 - 14,386,000 tonnes).Years ended December 31,Amount represents mill grade and recovery only. Ore placed on the dump leach pads had an average grade of 0.66 grams per tonne during 2014 (2013 - 0.41 grams per tonne). Due to the nature of dump leach operations, point-in-time recovery rates are not meaningful.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
production at Tasiast. The impairment charge of $78.9 million related to inventory was recorded to reduce the carrying value of
inventory to its net realizable value. Exploration and business development costs decreased by 47% compared with 2013, primarily
due to a decrease in exploration activity.
KINROSS GOLD 2014 ANNUAL REPORT MDA24
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
Chirano (90% ownership and operator) – Ghana(a)
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.
2014 vs. 2013
During 2014, tonnes of ore mined decreased by 15% compared with 2013 due to planned reduction in open pit mining activity as a
result of the Obra open pit having been fully mined in the first quarter of 2014. In addition, tonnes mined from the Tano open pit and
the Paboase and Akwaaba underground deposits decreased compared with 2013. Tonnes of ore processed were 6% lower compared
with 2013, primarily due to repairs at the mill, which were completed in June 2014. Grades were 14% higher compared with 2013,
largely due to the processing of higher grade ore from the Akwaaba deposit. Gold equivalent ounces produced were 4% higher
compared with 2013, primarily due to higher grades, partially offset by a decrease in tonnes processed.
Metal sales decreased by 8% in 2014 compared with 2013 due to a decrease in metal prices realized. Production cost of sales
decreased by 22% compared with 2013, primarily due to a decrease in contractor costs as a result of the transition to owner mining
and lower power costs due to a decrease in unit costs and consumption, partially offset by higher labour and plant maintenance costs
and an increase in gold equivalent ounces sold. Depreciation, depletion and amortization were 11% higher compared with 2013, due
to increases in the depreciable asset base attributable to the acquired self-perform equipment and gold equivalent ounces sold, and
a decline in mineral reserves at December 31, 2013.
As at December 31, 2014, the Company recorded impairment charges of $370.0 million, comprised of $365.4 million related to
property, plant and equipment and $4.6 million related to inventory. The non-cash impairment charge for property, plant and
equipment was mainly a result of a decrease in exploration potential. The impairment charge of $4.6 million related to inventory was
recorded to reduce the carrying value of inventory to its net realizable value. During 2013, the Company recorded a goodwill
impairment charge of $359.8 million at Chirano, primarily due to the reduction in the Company’s estimates of future metal prices.
MDA25 KINROSS GOLD 2014 ANNUAL REPORT
20142013Change% ChangeOperating StatisticsTonnes ore mined (000's) 3,221 3,786 (565) (15%)Tonnes processed (000's) 3,144 3,360 (216) (6%)Grade (grams/tonne)3.08 2.71 0.37 14%Recovery91.9%93.8%(1.9%)(2%)Gold equivalent ounces: Produced286,542 275,402 11,140 4%Sold280,396 278,171 2,225 1%Financial Data (in millions)Metal sales354.9$ 387.8$ (32.9)$ (8%)Production cost of sales 165.8 211.7 (45.9) (22%)Depreciation, depletion and amortization159.7 144.1 15.6 11%Impairment charges370.0 359.8 10.2 3%(340.6) (327.8) (12.8) (4%)Exploration and business development13.1 10.2 2.9 28%Other11.7 6.4 5.3 83%Segment operating loss(365.4)$ (344.4)$ (21.0)$ (6%)(a)Operating and financial data are at 100% for all periods.Years ended December 31,
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
Non-operating segment
La Coipa (100% ownership and operator) – Chile
There was no production at La Coipa in 2014 as mining was suspended in October 2013. During 2013, La Coipa produced 162,405 gold
equivalent ounces and sold 174,548 gold equivalent ounces.
An operating loss of $148.9 million was recorded in 2014, primarily due to the recognition of a goodwill impairment charge of $124.4
million as of December 31, 2014. The impairment charge was primarily due to a decline in valuations in Chile. Metal sales of $249.9
million, net of production cost of sales, depreciation, depletion and amortization, exploration and business development, and other
expenses, resulted in an operating loss of $34.9 million for 2013.
The Company continues to evaluate the exploration potential at La Coipa (Catalina and District targets), including the future economic
viability potential of La Coipa Phase 7 and Catalina.
Discontinued operation
Fruta del Norte – Ecuador
On June 10, 2013, the Company announced that it would not proceed with further development of the FDN project in Ecuador as the
Government of Ecuador and Kinross were unable to agree on certain key economic and legal terms.
Kinross' decision to cease the development of FDN resulted in a charge of $720.0 million in the second quarter of 2013, which was
included in expenses and reflected a write-down of the Company's carrying value of the FDN project of $714.7 million, and $5.3 million
of severance and other closure costs.
On October 21, 2014, Kinross announced that it entered into an agreement with Fortress to sell all of its interest in Aurelian and the
FDN project in Ecuador for $240.0 million in cash and shares. On December 17, 2014, the Company completed the sale for gross cash
proceeds of $150.0 million and $90.0 million in Lundin Gold common shares, resulting in an after-tax recovery of $238.0 million.
Kinross received approximately 26.2 million Lundin Gold common shares, resulting in a 25.8% ownership. The investment has been
accounted for as an available-for-sale investment as the Company determined that it does not have significant influence over Lundin
Gold.
Impairment charges
i.
Goodwill and property, plant and equipment
At December 31, 2014, the Company recorded an after-tax impairment charge of $932.2 million, upon completion of its annual
assessment of the carrying values of its CGUs. The impairment charge included goodwill impairment of $145.3 million and property
plant and equipment impairment of $786.9 million. The property, plant and equipment impairment was net of a tax recovery of
$127.9 million, and non-controlling interest of $23.7 million.
KINROSS GOLD 2014 ANNUAL REPORT MDA26
(in millions)20142013Change % ChangeGoodwill (i) 145.3$ 828.7$ (683.4)$ (82%)Property, plant and equipment (i) 938.5 2,163.3 (1,224.8)(57%)Inventory (ii)167.6 177.6 (10.0)(6%)Impairment charges1,251.4$ 3,169.6$ (1,918.2)$ (61%)Years ended December 31,2014 vs. 2013
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
The following table summarizes the goodwill and property, plant and equipment impairment charges, and the related tax recovery,
recognized as at December 31, 2014:
The impairment charge at Tasiast reflects a change in estimated future operating costs, operating cost underperformance of the
existing mill and a decision not to proceed with a 38,000 tonne per day mill expansion at the present time. Chirano’s impairment
charge was related to a decrease in exploration potential.
The impairment charges at La Coipa and Lobo-Marte were a result of declines in valuations in Chile and a reduction in mineral reserves
at Lobo-Marte. The charge at Kettle River-Buckhorn was a result of the mine approaching the end of its life and the charge at White
Gold was a result of a reduction in exploration potential.
Also as a result of its annual impairment assessment at December 31, 2014, the Company recognized an impairment charge of $156.6
million related to its investment in Cerro Casale. The impairment charge was recorded in other income (expense).
As at December 31, 2013, the Company recorded an after-tax impairment charge of $544.8 million, upon completion of its annual
assessment of the carrying value of its CGUs. The impairment charge included $376.0 million relating to property, plant and equipment
at Maricunga, net of a tax recovery of $49.2 million, and $168.8 million relating to goodwill at Quebrada Seca, a non-operating asset
in Chile. The non-cash impairment charge at Maricunga was mainly a result of changes to the life of mine plan and a corresponding
reduction in reserves.
As at June 30, 2013, the Company identified the decline in metal prices and the deferral of potential construction at Tasiast as
indicators of potential impairment. Upon the identification of these indicators, the Company performed an impairment assessment
to determine the recoverable amount of its CGUs using updated assumptions and estimates. The forecasted production output and
capital expenditures included in the life of mine plans for all CGUs remained unchanged from the 2012 year-end impairment
assessment with the exception of Tasiast, which was based on a 38,000 tonne per day mill, adjusted for the deferral in potential
construction and production. As a result of the impairment assessment, the recoverable amount for certain CGUs was determined to
be less than their carrying values, resulting in the Company recording after-tax non-cash impairment charges of $2,289.3 million,
comprised of property, plant and equipment impairment of $1,334.7 million at Tasiast and asset and goodwill impairment aggregating
$954.6 million at several other CGUs. The property, plant and equipment impairment charges were net of a tax recovery of $108.7
million.
The following table summarizes the June 30, 2013, goodwill and property, plant and equipment impairment charges, and the related
tax recovery:
Also as a result of the impairment assessment at June 30, 2013, the Company recognized an impairment charge of $219.0 million
related to its investment in Cerro Casale. This charge was recognized in other income (expense).
The significant estimates and assumptions used in the above mentioned impairment assessments are disclosed in Note 3 to the
financial statements.
MDA27 KINROSS GOLD 2014 ANNUAL REPORT
CGUGoodwillProperty, plant and equipmentTax recoveryTotal after-tax impairmentTasiast-$ 342.5$ -$ 342.5$ Chirano- 329.0 (115.2) 213.8 Kettle River-Buckhorn20.9 32.9 - 53.8 La Coipa124.4 - - 124.4 Lobo-Marte- 118.5 - 118.5 White Gold- 79.2 - 79.2 Total145.3$ 902.1$ (115.2)$ 932.2$ CGUGoodwillProperty, plant and equipmentTax recoveryTotal after-tax impairmentRound Mountain58.7$ 118.7$ (28.5)$ 148.9$ Paracatu65.5 - - 65.5 Maricunga175.9 27.4 (5.7) 197.6 Tasiast- 1,409.2 (74.5) 1,334.7 Chirano359.8 - - 359.8 Lobo-Marte- 182.8 - 182.8 Total659.9$ 1,738.1$ (108.7)$ 2,289.3$
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
In addition, during the second quarter of 2013, the Company wrote off the carrying value of its FDN project of $720.0 million, which
was entirely related to property, plant and equipment and reclassified FDN as a discontinued operation.
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 amounts of the CGUs which indicate that a previously recognized impairment loss may
no longer exist or may have decreased.
ii.
Inventory
As at December 31, 2014, the Company recognized an impairment charge of $167.6 million within cost of sales to reduce the carrying
value of inventory to its net realizable value. During 2013, impairment charges of $177.6 million were recorded within cost of sales to
reduce the carrying value of inventory to its net realizable value.
Exploration and business development
Exploration and business development expenses were $105.6 million compared with $147.1 million for 2013. Of the total exploration
and business development expense, expenditures on exploration totaled $79.6 million for 2014 compared with $111.5 million for
2013, with the decrease primarily due to reduced exploration activity. During 2014, capitalized exploration expenses, including
capitalized evaluation expenditures, totaled $2.1 million compared with $6.2 million in 2013.
Kinross was active on more than 32 mine sites, near-mine and greenfield initiatives in 2014, with a total of 257,858 metres drilled.
During 2013, Kinross was active on more than 35 mine sites, near-mine and greenfield initiatives, with a total of 272,131 metres drilled.
General and administrative
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, and the Canary Islands.
Other income (expense) – net
During 2014, other income (expense) decreased to an expense of $215.5 million from an expense of $259.1 million in 2013. The
discussion below details the significant changes in other income (expense) for 2014 compared with 2013.
KINROSS GOLD 2014 ANNUAL REPORT MDA28
(in millions)20142013Change % ChangeExploration and business development105.6$ 147.1$ (41.5)$ (28%)Years ended December 31,2014 vs. 2013(in millions)20142013Change % ChangeGeneral and administrative178.8$ 176.6$ 2.2$ 1%Years ended December 31,2014 vs. 2013
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
Impairment of investments
As at December 31, 2014, the Company recognized an impairment charge of $156.6 million related to its investment in Cerro Casale
and $1.5 million on certain of its available-for-sale investments. During 2013, the Company recognized an impairment charge of $219.0
million related to its investment in Cerro Casale and $21.3 million on certain of its available-for-sale.
Foreign exchange losses
Foreign exchange losses in 2014 were $50.1 million compared with losses of $21.9 million in 2013. The foreign exchange loss of $50.1
million during 2014 was primarily due to the translation of net monetary assets denominated in foreign currencies to the U.S. dollar,
with the U.S. dollar having strengthened against the Brazilian real, Ghanaian cedi, Chilean peso, Russian rouble, Canadian dollar and
Mauritanian ouguiya at December 31, 2014 relative to December 31, 2013.
The foreign exchange loss of $21.9 million during 2013 was due primarily to the translation of net monetary assets denominated in
foreign currencies to the U.S. dollar, with the U.S. dollar having strengthened against the Russian rouble, Canadian dollar, Brazilian
real, Chilean peso, Ghanaian cedi and Mauritanian ouguiya at December 31, 2013 relative to December 31, 2012.
Net non-hedge derivative gains (losses)
Net non-hedge derivative gains (losses) changed to a loss of $5.1 million in 2014 from a gain of $2.6 million in 2013. The changes were
primarily due to the closing out of certain interest rate swaps on March 10, 2014 (refer to Section 6 Liquidity and Capital Resources).
MDA29 KINROSS GOLD 2014 ANNUAL REPORT
(in millions)20142013Change % Change (a)Gains (losses) on sale of other assets - net(3.1)$ (1.1)$ (2.0)$ (182%)Impairment of investments(158.1) (240.3) 82.2 34%Foreign exchange losses(50.1) (21.9) (28.2) (129%)Net non-hedge derivative gains (losses)(5.1) 2.6 (7.7) nmOther 0.9 1.6 (0.7) (44%)(215.5)$ (259.1)$ 43.6$ 17%(a) "nm" means not meaningful.Years ended December 31,2014 vs. 2013
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
Finance expense
Finance expense includes accretion on reclamation and remediation obligations and interest expense.
During 2014, finance expense increased by $37.3 million, compared with 2013, primarily due to an increase in interest expense.
Interest expense increased by $26.9 million during 2014 compared with 2013 as a result of a reduction in interest capitalized as well
as additional interest recognized on the $500.0 million senior notes issued in March 2014. Interest capitalized during 2014 was $62.7
million compared with $82.6 million during 2013, with the decrease primarily due to lower qualifying capital expenditures.
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.
For continuing operations, income tax expense for 2014 was $109.7 million, compared with an income tax expense of $72.4 million in
2013. The $109.7 million tax expense in 2014 included $137.8 million of recovery due to impairment charges and $145.5 million of
expense due to re-measurements of deferred tax assets and liabilities as a result of income tax reforms enacted in Chile and significant
fluctuations in foreign exchange rates with respect to the Brazilian real and the Russian rouble. The tax expense of $72.4 million for
2013 included a $174.6 million recovery due to a re-measurement of deferred tax liabilities in respect of impairment charges.
Excluding the impact of items that are not reflective of the underlying operating performance of our business, such as impairments,
Chilean tax reform, and foreign exchange translation in both 2014 and 2013, the Company’s adjusted effective tax rate for 2014 was
48.8%, compared with an adjusted effective tax rate of 34.8% for 2013. The increase in the Company’s adjusted effective tax rate was
largely due to differences in the level of income in the Company’s operating jurisdictions from one period to the next. Kinross'
combined federal and provincial statutory tax rate for both 2014 and 2013 was 26.5%.
There are a number of factors that can significantly impact the Company's effective tax rate, including the geographic distribution of
income, varying rates in different jurisdictions, the non-recognition of tax assets, mining allowance, foreign currency exchange rate
movements, changes in tax laws, and the impact of specific transactions and assessments.
Due to the number of factors that can potentially impact the effective tax rate and the sensitivity of the tax provision to these factors,
as discussed above, it is expected that the Company's effective tax rate will fluctuate in future periods.
KINROSS GOLD 2014 ANNUAL REPORT MDA30
(in millions)20142013Change % ChangeFinance expense80.1$ 42.8$ 37.3$ 87%Years ended December 31,2014 vs. 2013
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
6. LIQUIDITY AND CAPITAL RESOURCES
The following table summarizes Kinross’ cash flow activity:
Cash and cash equivalent balances increased by $249.0 million in 2014 compared with a decrease of $898.2 million in 2013. Detailed
discussions regarding cash flow movements from continuing operations are noted below.
Operating Activities
2014 vs. 2013
Net cash flow provided from operating activities increased by $61.5 million in 2014 compared with 2013. The increase in cash flows
was largely the result of more favourable working capital changes and lower exploration and business development costs, partially
offset by the decrease in metal sales.
Investing Activities
2014 vs. 2013
Net cash flow used in investing activities was $634.6 million in 2014 compared with $1,031.1 million in 2013. The primary use of cash
in 2014 was for capital expenditures of $631.8 million and additions to long-term investments and other assets of $55.5 million,
partially offset by the proceeds on disposal of property, plant and equipment of $30.5 million. The primary use of cash in 2013 was
for capital expenditures of $1,262.4 million and additions to long-term investments and other assets of $131.2 million, partially offset
by the proceeds on disposal of short-term investments of $349.8 million.
MDA31 KINROSS GOLD 2014 ANNUAL REPORT
(in millions)20142013Change % Change(b)Cash flowOf continuing operations provided from operating activities 858.1$ 796.6$ 61.5$ 8%Of continuing operations used in investing activities (634.6) (1,031.1) 396.5 38%Of continuing operations used in financing activities (94.2) (615.5) 521.3 85%Of discontinued operation (a)139.4 (36.2) 175.6 nmEffect of exchange rate changes on cash and cash equivalents of continuing operations (19.7) (12.0) (7.7) (64%)Increase (decrease) in cash and cash equivalents249.0 (898.2) 1,147.2 128%Cash and cash equivalents, beginning of period 734.5 1,632.7 (898.2) (55%)Cash and cash equivalents, end of period983.5$ 734.5$ 249.0$ 34%Years ended December 31,2014 vs. 2013(a) On June 10, 2013, the Company announced its decision to cease development of FDN. As a result, FDN was classified as a discontinued operation. On December 17, 2014, the Company sold its interest in FDN.(b) "nm" means not meaningful.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
The following table presents a breakdown of capital expenditures on a cash basis:
During 2014, capital expenditures decreased by $630.6 million compared with 2013. The decreases in capital expenditures were
largely due to reduced spending at Tasiast, Chirano and Fort Knox.
Financing Activities
2014 vs. 2013
Net cash flow used in financing activities was $94.2 million in 2014 compared with cash used of $615.5 million in 2013. During 2014,
the Company made a net repayment of debt of $67.1 million, which included repayments of $500.0 million of the term loan and $60.0
million of the Kupol loan, partially offset by net proceeds of $492.9 million received from the issuance of senior notes on March 6,
2014. During 2013, the Company made a net repayment of debt of $523.3 million, of which $460.0 million was related to the
repurchase of the convertible senior notes and $60.0 million related to the periodic repayment of the Kupol loan. In addition, during
2013, dividends of $91.3 million were paid to common shareholders. No dividends were paid to common shareholders in 2014.
Cash Flow from Discontinued Operation
Net cash flow from discontinued operation was $139.4 million compared with cash used of $36.2 million in 2013. The increase in cash
flow was due to gross cash proceeds of $150.0 million received on completion of the sale of Aurelian and the FDN project.
KINROSS GOLD 2014 ANNUAL REPORT MDA32
(in millions)20142013Change % ChangeOperating segmentsFort Knox86.0$ 135.3$ (49.3)$ (36%)Round Mountain44.6 63.1 (18.5) (29%)Kettle River - Buckhorn6.8 8.6 (1.8) (21%)Paracatu 112.6 150.1 (37.5) (25%)Maricunga29.7 57.8 (28.1) (49%)Kupol (a)91.3 108.9 (17.6) (16%)Tasiast181.0 609.2 (428.2) (70%)Chirano42.2 96.1 (53.9) (56%)Non-operating segmentCorporate and Other (b)37.6 33.3 4.3 13%Total631.8$ 1,262.4$ (630.6)$ (50%)(a) Includes $34.1 million of capital expenditures at Dvoinoye during 2014 (2013 - $28.6 million).(b) "Corporate and Other" includes corporate and other non-operating assets (including La Coipa (as of January 1, 2014), Lobo-Marte and White Gold). The comparative figures have been reclassified to conform to the 2014 segment presentation.Year ended December 31,2014 vs. 2013
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
Balance Sheet
At December 31, 2014, Kinross had cash and cash equivalents of $983.5 million, an increase of $249.0 million from the balance as at
December 31, 2013, primarily due to net operating cash flows of $858.1 million and proceeds of $150.0 million received from the sale
of its interest in Aurelian and the FDN project, partially offset by cash flows of $631.8 million used in the purchase of property, plant
and equipment and the periodic repayment of $60.0 million on the Kupol loan. Current assets increased to $2,587.1 million, primarily
due to an increase in cash and cash equivalents. Total assets decreased by $1,335.3 million to $8,951.4 million, primarily due to the
recognition of impairment charges related to property, plant and equipment, goodwill, inventory and investment in associate, partially
offset by an increase in current assets and long-term investments. Current liabilities decreased to $604.4 million, largely due to a
decrease in accounts payable and accrued liabilities. Total debt decreased by $61.5 million to $2,058.1 million, primarily due to
repayments of $500.0 million of the term loan and $60.0 million of the Kupol loan, partially offset by net proceeds of $492.9 million
received from the issuance of senior notes on March 6, 2014.
At December 31, 2013, Kinross had cash and cash equivalents and short-term investments of $734.5 million, a decrease of $1,248.0
million from the balance as at December 31, 2012, primarily due to the Company’s repurchase of its convertible senior notes totaling
$460.0 million and cash flows used in the purchase of property, plant and equipment of $1,262.4 million. Current assets decreased to
$2,405.8 million, mainly due to the decrease in cash and cash equivalents and short-term investments. Total assets decreased by
$4,595.9 million to $10,286.7 million, primarily due to the recognition of impairment charges of $2,992.0 million related to goodwill
and property, plant and equipment, $720.0 million related to the write-down of the Company's net carrying value of FDN as a result
of its decision to cease development of FDN, and the decrease in cash and cash equivalents and short-term investments, partially
offset by additions to property, plant and equipment. Current liabilities decreased to $712.9 million as a result of a decrease in the
current portion of long-term debt reflecting the Company’s repurchase of the convertible senior notes. Total debt decreased to
$2,119.6 million, primarily due to the repurchase of the convertible senior notes and the periodic repayments made on the Kupol loan.
To help achieve the Company’s objective of maintaining a strong balance sheet and liquidity position in the current volatile gold price
environment, the Board of Directors suspended the payment of the semi-annual dividend on July 31, 2013. Future decisions regarding
the dividend will be based on a number of factors, including market conditions, balance sheet strength and liquidity, operational
performance, and the impact of ongoing cost reduction measures.
On February 13, 2013, the Board of Directors declared a dividend of $0.08 per common share to shareholders of record on March 21,
2013.
On August 8, 2012, the Board of Directors declared a dividend of $0.08 per common share to shareholders of record on September
21, 2012.
MDA33 KINROSS GOLD 2014 ANNUAL REPORT
(in millions)201420132012Cash and cash equivalents 983.5$ 734.5$ 1,982.5$ Current assets2,587.1$ 2,405.8$ 3,591.4$ Total assets8,951.4$ 10,286.7$ 14,882.6$ Current liabilities, including current portion of long-term debt604.4$ 712.9$ 1,309.6$ Total long-term financial liabilities(a)2,779.0$ 2,757.5$ 2,847.3$ Total debt, including current portion2,058.1$ 2,119.6$ 2,632.6$ Total liabilities 4,059.6$ 4,196.8$ 4,956.9$ Common shareholders' equity4,843.0$ 6,014.0$ 9,850.2$ Non-controlling interest48.8$ 75.9$ 75.5$ StatisticsWorking capital (b)1,982.7$ 1,692.9$ 2,281.8$ Working capital ratio (c)4.28:13.37:12.74:1(a) Includes long-term debt, provisions, and unrealized fair value of derivative liabilities.(b) Calculated as current assets less current liabilities.(c) Calculated as current assets divided by current liabilities.As at December 31,
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
On February 15, 2012, the Board of Directors declared a dividend of $0.08 per common share to shareholders of record on March 23,
2012.
As of February 9, 2015, there were 1,144.6 million common shares of the Company issued and outstanding. In addition, at the same
date, the Company had 14.1 million share purchase options outstanding under its share option plan.
Financings and Credit Facilities
Senior notes
On August 22, 2011, the Company completed a $1.0 billion offering of debt securities, consisting of $250.0 million principal amount
of 3.625% senior notes due 2016, $500.0 million principal amount of 5.125% senior notes due 2021 and $250.0 million principal
amount of 6.875% senior notes due 2041. Kinross received net proceeds of $980.9 million from the offering, after discount and
payment of fees and expenses related to the offering.
On March 6, 2014, the Company completed a $500.0 million offering of debt securities consisting of 5.950% senior notes due 2024.
Kinross received net proceeds of $492.9 million from the offering, after discount and payment of fees and expenses related to the
offering.
The senior notes referred to above (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 40 and 50 basis points, plus
accrued interest, if any. Within three months of maturity of the notes due in 2021 and 2024 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.
Kupol loan
On December 21, 2011, the Company completed a $200.0 million non-recourse loan from a group of international financial institutions.
The non-recourse loan carries a term of five years, maturing on September 30, 2016 and bears annual interest of LIBOR plus 2.5%.
Semi-annual principal repayments of $30.0 million commenced in March 2013 and will continue through September 30, 2015.
Principal repayments due on March 31, 2016 and September 30, 2016 are reduced to $13.0 million and $7.0 million, respectively. The
Company may prepay the loan in whole or in part, without penalty, but subject to customary break costs, if any. The agreement
contains various requirements that include limits on distributions if certain minimum debt service coverage levels are not achieved.
Property, plant and equipment with a carrying amount of $170.7 million (December 31, 2013 - $154.7 million) are pledged as security
as part of the Kupol loan.
As at December 31, 2014, cash of $34.0 million (December 31, 2013 - $34.0 million) was restricted for payments related to the loan.
Corporate revolving credit and term loan facilities
In August 2012, the Company completed a new unsecured term loan facility for $1,000.0 million. The facility was set to mature on
August 10, 2015, with the full amount having been drawn on August 22, 2012. Also, in August 2012, under the same agreement, the
Company amended the revolving credit facility increasing the available amount to $1,500.0 million and extending the maturity date
from March 2015 to August 2017.
On June 10, 2013, the Company amended its $1,500.0 million revolving credit facility and $1,000.0 million term loan to extend the
respective maturity dates and remove the minimum tangible net worth covenant. The revolving credit facility’s term was extended
by one year to August 10, 2018 from August 10, 2017, and the term loan was extended by two years to mature on August 10, 2017
from August 10, 2015.
On March 10, 2014, the Company repaid $500.0 million of the term loan, leaving a balance of $500.0 million outstanding. On July 28,
2014, the Company extended the maturity dates of the term loan and revolving credit facility by one year to August 10, 2018 and
August 10, 2019, respectively. As at December 31, 2014, the Company had utilized $32.1 million (December 31, 2013 – $31.9 million)
of the amended revolving credit facility. The amount utilized was entirely for letters of credit.
KINROSS GOLD 2014 ANNUAL REPORT MDA34
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
Loan interest for both the amended revolving credit facility and the amended term loan 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, 2014, interest
charges and fees, are as follows:
When the term loan was originally arranged in August 2012, the Company entered into interest rate swaps to swap the underlying 1-
month LIBOR interest rate into a fixed rate of 0.49% for the original three year term ending August 10, 2015. During the second
quarter of 2013, the term loan maturity was extended to August 2017. Accordingly, the interest rate swaps only hedged the term
loan’s interest rate exposure until the original maturity of August 2015. Concurrent with the repayment of $500.0 million of the term
loan on March 10, 2014, the Company closed out 60% of the interest rate swaps. The remaining outstanding interest rate swaps
continue to hedge 80% of the remaining underlying floating rate term loan to August 10, 2015. Based on the Company’s credit rating
at December 31, 2014, the fixed rate on the hedged portion of the term loan is 2.14%.
The amended revolving credit facility and unsecured term loan were arranged under one credit agreement, which contains various
covenants including limits on indebtedness, asset sales and liens. The significant financial covenant is a ratio of net debt to EBITDA,
as defined in the agreement, of no more than 3.5:1. The Company is in compliance with this covenant at December 31, 2014.
Other
On June 15, 2012, the Company entered into an amendment to increase the amount of its Letter of Credit guarantee facility with EDC
from $136.0 million to $200.0 million and to extend the maturity date to March 31, 2015. On July 17, 2014, the Company further
amended this facility to increase the amount from $200.0 million to $250.0 million. Letters of credit guaranteed by this facility are
solely for reclamation liabilities at Fort Knox, Round Mountain, and Kettle River–Buckhorn. Fees related to letters of credit under this
facility are 1.00% to 1.25%. As at December 31, 2014, $207.2 million (December 31, 2013 - $164.1 million) was utilized under this
facility.
In addition, at December 31, 2014, the Company had $49.3 million (December 31, 2013 - $42.0 million) in letters of credit outstanding
in respect of its operations in Brazil, Mauritania and Ghana. These letters of credit have been issued pursuant to arrangements with
certain international banks.
From time to time, the Company’s operations in Brazil may borrow U.S. dollars from Brazilian banks on a short-term unsecured basis
to meet working capital requirements. As at December 31, 2014, $nil (December 31, 2013 - $nil) was outstanding under such
borrowings.
MDA35 KINROSS GOLD 2014 ANNUAL REPORT
Type of creditDollar based LIBOR loan:Term LoanLIBOR plus 1.65%Revolving credit facilityLIBOR plus 1.70%Letters of credit1.13-1.70%Standby fee applicable to unused availability0.34%
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
The following table outlines the credit facility utilization and availability:
Total debt of $2,058.1 million at December 31, 2014 consists of $1,480.8 million for the senior notes, $498.0 million for the corporate
term loan, and $79.3 million for the Kupol loan. The current portion of this debt is $60.0 million at December 31, 2014.
Liquidity Outlook
In 2015, the Company expects to repay $60.0 million of debt in cash.
We believe that the Company’s existing cash and cash equivalents balance of $983.5 million, available credit of $1,510.7 million, and
expected operating cash flows based on current assumptions (noted in Section 3 of this MD&A) will be sufficient to fund operations,
our forecasted exploration and capital expenditures (noted in Section 3 of this MD&A), debt repayments noted above, and reclamation
and remediation obligations currently estimated for the next 12 months. Prior to any capital investments, consideration is given to
the cost and availability of various sources of capital resources.
With respect to longer term capital expenditure funding requirements, the Company continues to have discussions with lending
institutions that have been active in the jurisdictions in which the Company’s development projects are located. Some of the
jurisdictions in which the Company operates have seen the participation of lenders including export credit agencies, development
banks and multi-lateral agencies. The Company believes the capital from these institutions combined with traditional bank loans and
capital available through debt capital market transactions may fund a portion of the Company’s longer term capital expenditure
requirements. Another possible source of capital could be proceeds from the sale of non-core assets. These capital sources together
with operating cash flow and the Company’s active management of its operations and development activities will enable the Company
to maintain an appropriate overall liquidity position.
Contractual Obligations and Commitments
The following table summarizes our long-term financial liabilities and off-balance sheet contractual obligations as at December 31,
2014:
KINROSS GOLD 2014 ANNUAL REPORT MDA36
(in millions)20142013Utilization of revolving credit facility (32.1)$ (31.9)$ Utilization of EDC facility(207.2) (164.1) Borrowings(239.3)$ (196.0)$ Available under revolving credit facility 1,467.9$ 1,468.1$ Available under EDC credit facility42.8 35.9 Available credit1,510.7$ 1,504.0$ As at December 31,(in millions)Total201520162017201820192020 and thereafterLong-term debt obligations (a)2,080.0$ 60.0$ 270.0$ -$ 500.0$ -$ 1,250.0$ Operating lease obligations41.2 11.5 8.9 7.2 6.1 5.1 2.4 Purchase obligations (b)932.0 519.9 289.6 122.0 0.3 0.1 0.1 Reclamation and remediation obligations1,254.4 34.3 41.2 22.4 22.6 60.2 1,073.7 Interest and other fees (a)1,007.1 99.1 96.8 87.4 84.4 76.1 563.3 Derivative liabilities - net60.0 60.0 - - - - - Total5,374.7$ 784.8$ 706.5$ 239.0$ 613.4$ 141.5$ 2,889.5$ (a) Debt repayments are based on amounts due pursuant to the terms of the loan agreements. Projected interest payments on variable rate debt are based on interest rates in effect on December 31, 2014.(b) Includes both capital and operating commitments, of which $43.3 million relates to commitments for capital expenditures.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
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, 2014, all of which mature in 2015:
The following new derivative contracts were engaged during the year ended December 31, 2014:
$106.9 million Brazilian reais at an average rate of 2.60 maturing in 2015;
$53.0 million Chilean pesos at an average rate of 577.36 maturing in 2015;
$58.2 million Canadian dollars at an average rate of 1.10 maturing in 2015;
185,400 barrels of crude oil at an average rate of $83.89 per barrel maturing in 2015; and
8,184 tonnes of gasoil at an average rate of $779.72 per tonne maturing in 2015.
Subsequent to December 31, 2014, the following new derivative contracts were engaged:
$15.0 million Canadian dollars at an average rate of 1.20 maturing in 2015;
$25.7 million Chilean pesos at an average rate of 634.28 maturing in 2015;
133,120 barrels of crude oil at an average rate of $50.77 per barrel maturing in 2015; and
25,168 tonnes of gasoil at an average rate of $488.59 per tonne maturing in 2015.
MDA37 KINROSS GOLD 2014 ANNUAL REPORT
Foreign currencyBrazilian real forward buy contracts(in millions of U.S. dollars)194.9$ Average price2.48$ Chilean peso forward buy contracts(in millions of U.S. dollars)53.0$ Average price577.36$ Russian rouble forward buy contracts(in millions of U.S. dollars)48.0$ Average price35.88$ Canadian dollar forward buy contracts(in millions of U.S. dollars)58.2$ Average price1.10$ EnergyOil swap contracts (barrels)285,400 Average price84.85$ Diesel swap contracts (gallons)- Average price- Gasoil swap contracts (tonnes)8,184 Average price779.72$
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
When the term loan was originally arranged in August 2012, the Company entered into interest rate swaps to swap the underlying 1-
month LIBOR interest rate into a fixed rate of 0.49% for the original three year term ending August 10, 2015. During the second
quarter of 2013, the term loan maturity was extended to August 2017. Accordingly, the interest rate swaps only hedged the term
loan’s interest rate exposure until the original maturity of August 2015. Concurrent with the repayment of $500.0 million of the term
loan on March 10, 2014, the Company closed out 60% of the interest rate swaps. The remaining outstanding interest rate swaps
continue to hedge 80% of the remaining underlying floating rate term loan to August 10, 2015.
The Company engages into total return swaps (“TRS”) as economic hedges of the Company’s deferred share units (“DSUs”) and cash-
settled restricted share units (“RSUs”). Hedge accounting was not applied to the TRSs.
At December 31, 2014, 2,616,000 TRS units were outstanding. The following TRS contracts were entered into during the year ended
December 31, 2014:
435,912 units at an average price of CDN$3.08 to hedge DSUs.
1,500,000 units at an average price of CDN$3.79 to hedge cash-settled RSUs.
Fair value of derivative instruments
The fair values of derivative instruments are noted in the table below:
Contingencies
The Company is obligated to pay $20.0 million to Barrick if a positive production decision is made relating to the Cerro Casale project.
Other legal matters
The Company is from time to time involved in legal proceedings, arising in the ordinary course of its business. Typically, and currently,
except in the case of the actions described below, 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.
A putative securities class action complaint was filed on February 16, 2012 (the “U.S. Complaint”), entitled Bo Young Cha v. Kinross
Gold Corporation et al., in the United States District Court for the Southern District of New York (the “Court”). The U.S. Complaint
named as defendants the Company, Tye Burt, former President and CEO, Paul Barry, former Executive Vice President and Chief
Financial Officer, Glen Masterman, former Senior Vice President, Exploration and Kenneth Thomas, former Senior Vice President,
Projects. On May 31, 2012, the Court selected the City of Austin Police Retirement System (“City of Austin”) to be lead plaintiff.
Pursuant to an order of the Court, City of Austin filed an amended Complaint on July 23, 2012 (the “Amended U.S. Complaint”). The
Amended U.S. Complaint alleges among other things, that, between August 2, 2010 and January 17, 2012, the defendants inflated
Kinross’ share price by knowingly or recklessly making material misrepresentations concerning (i) the extent and quality of the due
diligence Kinross performed prior to its acquisition of Red Back and (ii) Kinross’ schedule for developing the Tasiast mine. The
defendants filed a motion to dismiss the Amended U.S. Complaint on September 7, 2012 and oral argument on the motion to dismiss
took place on November 30, 2012. On March 22, 2013, the Court issued an order (the “Order”) granting in part and denying in part
the defendants’ motion to dismiss the Amended U.S. Complaint. The Order granted the defendants’ motion to dismiss with respect
to all claims based on (a) Kinross’ disclosures about its due diligence for the Red Back acquisition, and (b) Kinross’ disclosures before
August 10, 2011 about the Tasiast development schedule. The Order denied the defendants’ motion to dismiss City of Austin’s
allegations that the defendants made misleading statements about the Tasiast development schedule between August 10, 2011 and
January 17, 2012. On April 5, 2013, the defendants filed a motion asking the Court to reconsider the portions of the Order allowing
the City of Austin’s claims to proceed. On April 8, 2013, the Court (i) directed the City of Austin to respond to the defendants’ motion
for reconsideration by April 19, 2013, and (ii) stated that it will wait until after its ruling on defendants’ motion for reconsideration
KINROSS GOLD 2014 ANNUAL REPORT MDA38
(in millions)20142013Asset (liability)Interest rate swaps(0.7)$ (2.9)$ Foreign currency forward contracts(48.8) (48.9) Energy swap contracts(9.9) 2.7 Total return swap contracts(0.6) (0.5) (60.0)$ (49.6)$ As at December 31,
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
before entering a case management schedule governing any future proceedings in the lawsuit. The City of Austin filed a response on
April 19, 2013 and the defendants filed a reply on May 1, 2013. On June 6, 2013 the Court issued an opinion and order denying the
defendants’ motion for reconsideration. On July 8, 2013 the defendants filed their answer to the Amended U.S. Complaint. The
parties have completed the initial fact discovery phase of litigation, which included the production of information and documents and
the oral depositions of witnesses. The parties have completed the submission of written arguments and supporting expert reports in
respect of the plaintiffs’ Application for Class Certification, which is expected to be heard and decided in the first quarter of 2015.
Should the plaintiffs’ application be successful, submissions in respect of the defendants’ Motion on Summary Judgment are expected
to be made in the first half of 2015, with a hearing and decision expected in the second half of 2015. The defendants intend to
vigorously defend against the surviving claims of the Amended U.S. Complaint and believe they are without merit.
A notice of action in a proposed class proceeding under Ontario’s Class Proceedings Act, 1992, was filed in the Ontario Superior Court
of Justice (the “Ontario Court”) on March 12, 2012, entitled Trustees of the Musicians’ Pension Fund of Canada v. Kinross Gold
Corporation et al. (the “Ontario Action”). A statement of claim in the Ontario Action was subsequently served on April 11, 2012. The
Ontario Action named as defendants the Company, Tye Burt, former President and CEO, Paul Barry, former Executive Vice President
and Chief Financial Officer, Glen Masterman, former Senior Vice President, Exploration, and Kenneth Thomas, former Senior Vice
President, Projects. The Ontario Action alleges, among other things, that Kinross made a number of misrepresentations relating to
the quantity and quality of gold ore at the Tasiast mine and the costs of operating the mine, and that Kinross and the individual
defendants knew that such misrepresentations were false or misleading when made. In a motion to the Ontario Court, the plaintiffs
sought certification of the action as a class proceeding and leave to proceed under the statutory civil liability provisions of Ontario’s
Securities Act. In their written argument on the motion, the plaintiffs also sought leave and certification of a claim based on allegations
that Kinross made a number of misrepresentations relating to the schedule for the Tasiast expansion project, and that Kinross and the
individual defendants knew that such misrepresentations were false or misleading when made. These claims were added to the
plaintiffs’ statement of claim in January 2014. A hearing on the plaintiffs’ leave and certification motions was held from October 22–
24, 2013. On November 5, 2013, the Ontario Court issued Reasons For Decision dismissing the leave motion in respect of the statutory
claims and dismissing the certification motion in respect of both the statutory claims and the common law negligent misrepresentation
claims. The plaintiffs appealed the Order of the Ontario Court to the Ontario Court of Appeal. The plaintiffs’ appeal was dismissed in
its entirety by the Ontario Court of Appeal on December 17, 2014. The plaintiffs are entitled to seek leave to appeal the Court of
Appeal’s decision to the Supreme Court of Canada. To date, the plaintiffs have not delivered an application for leave to appeal to the
Supreme Court of Canada, although Kinross believes that the plaintiffs will do so. Kinross believes that the claims are without merit
and intends to continue to vigorously defend against them.
MDA39 KINROSS GOLD 2014 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
7. SUMMARY OF QUARTERLY INFORMATION
The Company’s results over the past several quarters have been driven primarily by fluctuations in the gold price, input costs and
changes in the gold equivalent ounces sold. Fluctuations in the silver price have also affected results.
During the fourth quarter of 2014, revenue decreased to $791.3 million on total gold equivalent ounces sold of 658,730 compared
with $877.1 million on sales of 691,300 total gold equivalent ounces during the fourth quarter of 2013. The average gold price realized
in the fourth quarter of 2014 was $1,201 per ounce compared with $1,268 per ounce in the fourth quarter of 2013.
Production cost of sales decreased by 11% to $469.2 million in the fourth quarter of 2014 compared with $528.4 million in the same
period of 2013, primarily due to decreases in gold equivalent ounces sold as a result of the impact of the suspension of mining at La
Coipa and a decrease in input costs at various sites.
Fluctuations in the foreign exchange rates have also affected results. 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 during each of these years affected depreciation, depletion and amortization for quarters in the subsequent year.
In the fourth quarter of 2014, the Company recorded after-tax impairment charges of $932.2 million relating to several of its CGUs,
net of a tax recovery of $127.9 million and non-controlling interest of $23.7 million.
During the fourth quarter of 2014, the Company completed the sale of its FDN project for gross cash proceeds of $150.0 million and
$90.0 million of Lundin Gold common shares, resulting in an after-tax recovery of $238.0 million.
In the fourth quarter of 2013, the Company recorded after-tax impairment charges of $544.8 million, which included $376.0 million
relating to property, plant and equipment at Maricunga, net of a tax recovery of $49.2 million, and $168.8 million relating to goodwill
at Quebrada Seca.
During the second quarter of 2013, the Company recognized impairment charges of $2,289.3 million at several of its CGUs, net of a
tax recovery of $108.7 million.
Also in the second quarter of 2013, the Company announced that it would not proceed with further development of the FDN project
in Ecuador as the Government of Ecuador and Kinross were unable to agree on certain key economic and legal terms, which balanced
the interests of all stakeholders. Kinross' decision to cease the development of FDN resulted in a charge of $720.0 million in the second
quarter of 2013.
Operating cash flows decreased to $179.2 million in the fourth quarter of 2014, compared with $187.2 million in the same period of
2013, primarily due to a decrease in metal sales, partially offset by more favourable working capital changes.
KINROSS GOLD 2014 ANNUAL REPORT MDA40
(in millions, except per share amounts)Q4Q3Q2Q1Q4Q3Q2Q1(a)Metal sales 791.3$ 945.7$ 911.9$ 817.4$ 877.1$ 876.3$ 968.0$ 1,058.1$ (1,473.5)$ (4.3)$ 46.0$ 31.8$ (740.0)$ 46.9$ (2,481.9)$ 162.4$ 238.4$ (0.8)$ (1.9)$ (2.2)$ (2.1)$ (5.0)$ (721.1)$ (1.9)$ (1.29)$ -$ 0.04$ 0.03$ (0.65)$ 0.04$ (2.17)$ 0.14$ (1.29)$ -$ 0.04$ 0.03$ (0.65)$ 0.04$ (2.17)$ 0.14$ 179.2$ 304.5$ 163.9$ 210.5$ 187.2$ 137.7$ 106.4$ 365.3$ Net earnings (loss) from continuing operations attributable to common shareholdersNet earnings (loss) from discontinued operation after-tax (a)Basic earnings (loss) per share from continuing operations attributable to common shareholdersDiluted earnings (loss) per share from continuing operations attributable to common shareholdersNet cash flow of continuing operations provided from operating activities (a) On June 10, 2013, the Company announced its decision to cease development of FDN. As a result, FDN was classified as a discontinued operation. On December 17, 2014, the Company sold its interest in FDN.20132014
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
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 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 controls 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 disclosure controls and procedures and internal controls over financial reporting. In making this assessment,
management used the Internal Controls - Integrated Framework (2013) issued by the Committee of the Sponsoring Organizations of
the Treadway Commission. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that
Kinross’ disclosure controls and procedures, and internal controls over financial reporting, provide reasonable assurance that they
were effective as at December 31, 2014. During 2014, Tasiast converted to a new ERP system. The ERP system conversion has not
resulted in any significant changes in internal controls during the year ended December 31, 2014. Management employed appropriate
procedures to ensure internal controls were in place during and after the conversion.
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 controls 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
Kinross’ accounting policies are described in Note 3 to the financial statements. The preparation of the Company’s financial statements
in accordance 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.
The areas which require management to make significant judgments, estimates and assumptions in determining carrying values
include, but are not limited to:
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
information relating to the geological data on the size, depth and shape of the ore body requires complex geological judgments to
interpret the data. The estimation of future cash flows related to proven and probable mineral reserves is based upon factors such as
estimates of foreign exchange rates, commodity prices, 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 minerals
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.
Depreciation, Depletion and Amortization
Plants and other facilities used directly in mining activities are depreciated using the units-of-production (“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 mineral reserves.
Mobile and other equipment is 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 mineral 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
MDA41 KINROSS GOLD 2014 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
and actual costs of mining and differences in gold price used in the estimation of mineral reserves.
Significant judgment is involved in the determination of useful life 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.
Impairment of Goodwill and Other Assets
Goodwill is tested for impairment annually or more frequently if there is an indication of impairment. The carrying value of property,
plant and equipment is reviewed each reporting period to determine whether there is any indication of impairment. If the carrying
amount of an asset exceeds its recoverable amount, the asset is impaired and an impairment loss is recognized in the consolidated
statement of operations. The assessment of fair values, including those of the CGUs for purposes of testing goodwill, require the use
of estimates and assumptions for recoverable production, long-term commodity prices, discount rates, NAV multiples, foreign
exchange rates, future capital requirements and operating performance. Changes in any of the assumptions or estimates used in
determining the fair value of goodwill or other assets could impact the impairment analysis. 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 amounts of the CGUs which indicate that a previously recognized impairment loss may no longer exist or may have
decreased.
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 net realizable value (“NRV”). Write-downs 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 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, 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.
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.
KINROSS GOLD 2014 ANNUAL REPORT MDA42
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
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 significant 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.
In addition, 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.
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.
Recent Accounting Pronouncements
Revenue recognition
In May 2014, the IASB issued IFRS 15 “Revenue from Contracts with Customers” (“IFRS 15”). The standard replaces IAS 11 “Construction
Contracts”, IAS 18 “Revenue”, IFRIC 13 “Customer Loyalty Programmes”, IFRIC 15 “Agreements for the Construction of Real Estate”,
IFRIC 18 “Transfer of Assets From Customers” and SIC 31 “Revenue – Barter Transactions Involving Advertising Services”. IFRS 15
establishes principles for reporting the nature, amount, timing, and uncertainty of revenue and cash flows arising from an entity’s
contract with customers. This standard is effective for annual periods beginning on or after January 1, 2017, and permits early
adoption. The Company is in the process of determining the impact of IFRS 15 on its financial statements.
Financial instruments
In July 2014, the IASB issued the final version of IFRS 9 “Financial Instruments”. This standard is effective for annual periods beginning
on or after January 1, 2018, and permits early adoption. IFRS 9 provides a revised model for recognition and measurement and
impairment of financial instruments. IFRS 9 also includes a substantially reformed approach to hedge accounting. The Company is in
the process of determining the impact of IFRS 9 on its consolidated financial statements.
MDA43 KINROSS GOLD 2014 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
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 related to the mining industry in general while others are specific to Kinross.
Included in the risk factors below are details on how Kinross seeks to mitigate these risks wherever possible. For additional discussion
of risk factors please refer to the Company's Annual Information Form for the year ended December 31, 2013, 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, 2014, which will be filed on SEDAR.
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 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 2014, the Company’s average gold price realized decreased to $1,263 per ounce from $1,402 per ounce in 2013. If the world market
price of gold and/or silver continued to drop and the prices realized by Kinross on gold and/or silver sales were to decrease further
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. Kinross may curtail or suspend some or all of its exploration activities, with the result that
depleted reserves are not replaced. In addition, the market value of Kinross' gold and/or silver inventory may be reduced and existing
reserves may be reduced to the extent that ore cannot be mined and processed economically at the prevailing prices. Furthermore,
certain of Kinross' mineral projects include copper which is similarly subject to price volatility based on factors beyond Kinross' control.
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 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 incident to exploration, development and production of gold
and silver, any of which could result in damage to life or property, 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, such as unusual or unexpected formations, rock bursts, pressures, cave-ins, flooding, pit wall failures
or other conditions, may be encountered in the drilling 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 gold 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.
Kinross mitigates the likelihood and potential severity of these mining risks it encounters in its day-to-day operations through the
KINROSS GOLD 2014 ANNUAL REPORT MDA44
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
application of high operating standards. In addition, Kinross reviews its insurance coverage at least annually to ensure that the most
complete and cost-effective coverage is obtained.
Environmental Risks
Kinross' mining and processing operations and exploration activities in the United States, the Russian Federation, Brazil, Chile,
Mauritania, Ghana and Canada are subject to various laws and regulations governing the protection of the environment, exploration,
development, production, exports, taxes, labour standards, occupational health, waste disposal, toxic substances, mine safety, and
other matters. New laws and regulations, amendments to existing laws and regulations, or more stringent implementation of existing
laws and regulations could have a material adverse impact on Kinross through increased costs, a reduction in levels of production
and/or a delay or prevention of the development of new mining properties. Compliance with these laws and regulations requires
significant expenditures and increases Kinross' mine development and operating costs.
Permits from various governmental authorities are necessary in order to engage in mining operations in all jurisdictions in which
Kinross operates. Such permits relate to many aspects of mining operations, including maintenance of air, water and soil quality
standards. In most jurisdictions, the requisite permits cannot be obtained prior to completion of an environmental impact statement
and, in some cases, public consultation. Further, Kinross may be required to submit for government approval a reclamation plan, to
post financial assurance for the reclamation costs of the mine site, and to pay for the reclamation of the mine site upon the completion
of mining activities. Kinross mitigates this risk by performing certain reclamation activities concurrent with production.
Mining, like many other extractive natural resource industries, is subject to potential risks and liabilities concerning the environmental
effects associated with mineral exploration and production. Environmental liability may result from mining activities conducted by
others prior to Kinross' ownership of a property. To the extent Kinross is subject to uninsured environmental liabilities, the payment
of such liabilities would reduce funds otherwise available for business activities 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. Kinross mitigates the likelihood and potential severity of these environmental risks it encounters in its day-to-day
operations through the application of high operating standards.
Mineral Reserve and Mineral Resource Estimates
The 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 the price of gold 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, 2014, based
upon a gold price of $1,200 per ounce of gold.
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 reserves. 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.
There are numerous uncertainties inherent in estimating quantities of proven and probable mineral reserves. The estimates in this
document are based on various assumptions relating to gold 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.
MDA45 KINROSS GOLD 2014 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
Kinross’ future plans rely on mine development projects, which involve significant uncertainties
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; reserve estimates; and future metal prices. Development projects are also subject to accurate feasibility studies, the
acquisition of surface or land rights and the issuance of necessary governmental permits. Unforeseen circumstances, including those
related to the amount and nature of the mineralization at the development site, technological impediments to extraction and
processing, legal restrictions or 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 to
complete. 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 in development projects, developments are prone to 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 approvals necessary for the operation of a project. The timeline to
obtain these government 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 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; short term operating factors; revisions to mine plans; risks and hazards
associated with mining; natural phenomena, such as inclement weather conditions, water availability, floods, and earthquakes; and
unexpected labour shortages or strikes. Operating costs may also be affected by a variety of factors, including: ore grade metallurgy,
labour costs, cost of commodities 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.
Kinross’ actual production and costs may vary from estimates for a variety of reasons, including: actual ore mined varying from
estimates of grade, tonnage, dilution and metallurgical and other characteristics; short-term operating factors relating to the ore
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 mining; natural phenomena, such as inclement weather conditions, floods, and
earthquakes; and unexpected labour shortages or strikes. Costs of production may also be affected by a variety of factors, including:
changing waste-to-ore ratios, ore grade metallurgy, labour costs, the cost of supplies and services (for example, power and fuel),
general inflationary pressures and currency exchange rates.
Shortages and Price Volatility of Input Commodities and Equipment
The Company is dependent on various input commodities (such as diesel fuel, electricity, natural gas, steel, concrete and cyanide) and
equipment (including parts) to conduct its mining operations and development projects. A shortage of such input commodities or
equipment or a significant increase in their cost 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
to carry out its mining operations, and such access and supply may not be readily available, especially at the Company’s operations in
Chile. 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 or equipment 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.
KINROSS GOLD 2014 ANNUAL REPORT MDA46
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
Political Developments and Uncertainty in the Russian Federation
Ongoing political tensions and uncertainties as a result of the Russian Federation’s foreign policy decisions and actions in respect of
Ukraine have resulted in the imposition of economic sanctions and increased the risk that certain 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 or may otherwise act in support of Ukraine. 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 Canada, the United States 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.
Political, Economic and Legislative Risk
The Company has mining and exploration operations in various regions of the world, including the United States, Canada, Brazil, Chile,
the Russian Federation, Mauritania and Ghana and such operations are exposed to various levels of political, economic, and other
risks and uncertainties. These risks and uncertainties vary from country to country and include, but are not limited to: terrorism;
hostage taking; extreme fluctuations in currency exchange rates; high rates of inflation; labour unrest; the risks of civil unrest;
expropriation and nationalization; renegotiation or nullification of existing concessions, licenses, permits and contracts; illegal mining;
changes to policies and regulations impacting the mining sector; restrictions on foreign exchange and repatriation; 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.
Future political and economic conditions in these countries may result in these governments adopting different policies with respect
to foreign investment, 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, royalties, currency exchange
rates, gold sales, environmental protection, labour relations, price controls, repatriation of income, and return of capital, which may
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, which might extend to, as an example, expropriation of assets.
The tax regimes in these countries may be subject to differing interpretations 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.
The Company is subject to the considerations and risks of operating 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.
Although the Company has completed the sale of all of its interest in Aurelian and the FDN project in Ecuador to Lundin Gold, certain
residual risks may remain in respect of FDN. Certain liabilities and obligations exist under the purchase agreement with Lundin Gold.
In addition, the Company has also signed a bilateral treaty with the government of Ecuador in respect of the transition of the FDN
assets to Lundin Gold. There can be no guarantee that the Company (and/or any of its directors, officers or employees) will not be
subject to any obligations or liabilities, litigation, or other claims or actions in respect of its ongoing contractual obligations, or any of
the Company’s prior activities on or in respect thereof or otherwise in Ecuador.
Licenses and Permits
The 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. There can be no guarantee that Kinross will be able to obtain or maintain
all necessary licenses and permits that may be required to explore and develop its properties, commence construction or operation
of mining facilities and properties under exploration or development or to maintain continued operations that economically justify
the cost. Kinross endeavors to be in compliance with these regulations and permits at all times.
MDA47 KINROSS GOLD 2014 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
The Federal Public Attorney (“FPA”) in Brazil filed a lawsuit relating to alleged rights of Quilombola peoples in connection with certain
lands being used to construct the Eustaquio 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 Eustaquio tailings facility. The FPA's injunction was
denied, the permit to operate was issued and the Eustaquio 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. Kinross has filed its response to the appeals and will continue to vigorously oppose the
lawsuit. The Company believes that the lawsuit by the FPA should not be successful.
Title to Properties and Community Relations
The validity of mining claims which constitute most of Kinross' property holdings may, in certain cases, be uncertain and subject to
being contested. Kinross' 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 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 develop or operate its mining properties.
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 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 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 2015, sensitivity to
a 10% change in the gold price is estimated to have an approximate $300 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 2015, sensitivity to
a 10% change in the silver price is estimated to have a $9 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 corporate revolving credit
and term loan facilities and the Kupol project financing 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
metal sales. On occasion, 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, 2014, there were no gold or silver derivative financial instruments outstanding. In addition,
Kinross is not subject to margin requirements on any of its hedging lines.
KINROSS GOLD 2014 ANNUAL REPORT MDA48
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
Foreign Currency Exchange Risk
Currency fluctuations may affect the revenues which the Company will realize from its operations since gold is 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 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 equivalent 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 United States 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, 2014.
Credit, 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, 2014, the Company's gross credit exposure, including cash and cash equivalents, was $1,176.0 million and at
December 31, 2013, the gross credit exposure, including cash and cash equivalents, was $917.9 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.
The Company has investment grade credit ratings from Moody’s, Fitch Ratings and Standard & Poor’s. However, there is no assurance
that these credit ratings will remain in effect for any given period of time or that any such ratings will not be revised or withdrawn
entirely by a rating agency. 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.
Potential for Incurring Unexpected Costs or Liabilities as a Result of Acquisitions
Although the Company has conducted investigations in connection with recent acquisitions, risks remain regarding any undisclosed or
unknown liabilities associated with these acquisitions. 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 these acquisitions proves to be inaccurate. Such liabilities could have an adverse impact on the Company's business, financial
condition, results of operations and cash flows.
MDA49 KINROSS GOLD 2014 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
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 most 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;
Increased 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 the tighter credit markets have restricted the ability of certain companies to access capital, to date this has not affected the
Company's liquidity.
The Company re-negotiated its revolving credit facility and term loan in 2014 to extend their terms to August 2019 and August 2018,
respectively, and remove the minimum tangible net worth covenant. As at December 31, 2014, the Company had $1,510.7 million
available under its credit facility arrangements. However, continued 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 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 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 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 brought against companies, including Kinross, following periods of
volatility or significant decline in the market price of their securities. Securities litigation, including current proceedings against Kinross
as well as potential future proceedings, 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
Kinross evaluates, on at least an annual basis, the carrying amount of its CGUs to determine whether current events and circumstances
indicate that such carrying amount may no longer be recoverable. Goodwill is required to be tested annually for impairment and
Kinross performs this annual test at the end of the fourth quarter. In addition, at each reporting period end, Kinross assesses whether
there is any indication that any of its CGUs’ carrying amounts exceed their recoverable amounts, and if there is such an indication, the
Company would test for potential impairment at that time. The recoverable amounts, or fair values, of its 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
KINROSS GOLD 2014 ANNUAL REPORT MDA50
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
assumptions, some of which may be subjective, and it is possible that actual fair value could be significantly different than those
estimates.
As at December 31, 2014, Kinross recorded an after-tax impairment charge of $932.2 million. The impairment charge included
goodwill impairment of $145.3 million and property plant and equipment impairment of $786.9 million. The property, plant and
equipment impairment was net of a tax recovery of $127.9 million and non-controlling interest of $23.7 million. In the absence of any
mitigating valuation factors, Kinross’ failure to achieve its valuation assumptions or declines in the fair values of its CGUs may, over
time, result in further impairment charges.
MDA51 KINROSS GOLD 2014 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
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, gains and losses and other one-time
costs related to acquisitions, dispositions and other transactions, and non-hedge derivative gains and losses. Although some of the
items are recurring, the Company believes that they are not reflective of the underlying operating performance of its current business
and are not necessarily indicative of future operating results. Management believes that these measures, which are used internally
to assess performance and in planning and forecasting future operating results, provide investors with the ability to better evaluate
underlying performance, particularly since the excluded items are typically not included in public guidance. However, adjusted net
earnings and adjusted net earnings per share measures are not necessarily indicative of net earnings and earnings per share measures
as determined under IFRS.
The following table provides a reconciliation of net earnings from continuing operations to adjusted net earnings from continuing
operations for the periods presented:
KINROSS GOLD 2014 ANNUAL REPORT MDA52
(in millions, except share and per share amounts)20142013Net loss from continuing operations attributable to common shareholders - as reported(1,400.0)$ (3,012.6)$ Adjusting items:Foreign exchange losses50.1 21.9 Non-hedge derivatives losses (gains) - net of tax4.5 (2.2) Losses on sale of other assets - net of tax3.1 1.1 Foreign exchange losses on translation of tax basis and foreign exchange on deferred income taxes within income tax expense112.8 70.6 Change in deferred income taxes due to tax reforms enacted in Chile32.7 - Taxes in respect of prior years45.2 8.3 Impairment charges - net of tax1,098.2 2,995.0 Impairment of investments and other - net of tax162.6 240.3 Reclamation and remediation expense - net of tax21.9 (1.2) 1,531.1 3,333.8 131.1$ 321.2$ Weighted average number of common shares outstanding - Basic1,144.3 1,142.1 Adjusted net earnings from continuing operations per share0.11$ 0.28$ Years ended December 31,Adjusted net earnings from continuing operations attributable to common shareholders
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
Adjusted Operating Cash Flow
The Company makes reference to a non-GAAP measure for adjusted operating cash flow. 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, 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 cash flow from continuing operations for the periods presented:
MDA53 KINROSS GOLD 2014 ANNUAL REPORT
(in millions)20142013858.1$ 796.6$ Adjusting items:Working capital changes:Accounts receivable and other assets(26.9) 27.7 Inventories59.4 197.5 Accounts payable and other liabilities, including taxes86.3 127.8 118.8 353.0 Adjusted operating cash flow from continuing operations976.9$ 1,149.6$ Net cash flow of continuing operations provided from operating activities - as reportedYears ended December 31,
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
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:
KINROSS GOLD 2014 ANNUAL REPORT MDA54
(in millions, except ounces and production cost of sales per equivalent ounce)20142013Production cost of sales - as reported 1,971.2$ 2,004.4$ Less: portion attributable to Chirano non-controlling interest(16.6) (21.2) Attributable production cost of sales 1,954.6$ 1,983.2$ Gold equivalent ounces sold2,743,398 2,697,093 Less: portion attributable to Chirano non-controlling interest(28,040) (27,817) Attributable gold equivalent ounces sold 2,715,358 2,669,276 719$ 743$ 720$ 743$ Attributable production cost of sales per equivalent ounce soldConsolidated production cost of sales per equivalent ounce soldYears ended December 31,
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
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:
MDA55 KINROSS GOLD 2014 ANNUAL REPORT
(in millions, except ounces and production cost of sales per ounce)20142013Production cost of sales - as reported1,971.2$ 2,004.4$ Less: portion attributable to Chirano non-controlling interest(16.6) (21.2) Less: attributable silver revenues (93.6) (211.9) 1,861.0$ 1,771.3$ Gold ounces sold 2,669,278 2,545,736 Less: portion attributable to Chirano non-controlling interest(27,970) (27,745) Attributable gold ounces sold2,641,308 2,517,991 705$ 703$ Attributable production cost of sales net of silver by-product revenueAttributable production cost of sales per ounce sold on a by-product basisYears ended December 31,
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
Attributable All-In Sustaining Cost and All-In Cost per Ounce Sold on a By-Product Basis
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:
KINROSS GOLD 2014 ANNUAL REPORT MDA56
(in millions, except ounces and costs per ounce)20142013Production cost of sales - as reported 1,971.2$ 2,004.4$ Less: portion attributable to Chirano non-controlling interest (a)(16.6) (21.2) Less: attributable (b) silver revenues (c)(93.6) (211.9) Attributable (b) production cost of sales net of silver by-product revenue1,861.0$ 1,771.3$ Adjusting items on an attributable (b) basis:General and administrative (d)178.8 176.6 Other operating expense - sustaining (e)3.9 15.4 Reclamation and remediation - sustaining (f)61.8 57.1 Exploration and business development - sustaining (g)56.7 78.4 Additions to property, plant and equipment - sustaining (h)387.0 577.6 All-in Sustaining Cost on a by-product basis - attributable (b)2,549.2$ 2,676.4$ Other operating expense - non-sustaining (e)36.9 73.2 Reclamation and remediation - non-sustaining (f)17.5 (1.0) Exploration - non-sustaining (g)48.7 67.7 Additions to property, plant and equipment - non-sustaining (h)179.2 600.9 All-in Cost on a by-product basis - attributable (b)2,831.5$ 3,417.2$ Gold ounces sold 2,669,278 2,545,736 Less: portion attributable to Chirano non-controlling interest (i)(27,970) (27,745) Attributable (b) gold ounces sold 2,641,308 2,517,991 Attributable (b) all-in sustaining cost per ounce sold on a by-product basis 965$ 1,063$ Attributable (b) all-in cost per ounce sold on a by-product basis 1,072$ 1,357$ Years ended December 31,
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
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:
MDA57 KINROSS GOLD 2014 ANNUAL REPORT
(in millions, except ounces and costs per equivalent ounce)20142013Production cost of sales - as reported1,971.2$ 2,004.4$ Less: portion attributable to Chirano non-controlling interest (a)(16.6) (21.2) Attributable (b) production cost of sales 1,954.6$ 1,983.2$ Adjusting items on an attributable (b) basis:General and administrative (d)178.8 176.6 Other operating expense - sustaining (e)3.9 15.4 Reclamation and remediation - sustaining (f)61.8 57.1 Exploration and business development - sustaining (g)56.7 78.4 Additions to property, plant and equipment - sustaining (h)387.0 577.6 All-in Sustaining Cost - attributable (b)2,642.8$ 2,888.3$ Other operating expense - non-sustaining (e)36.9 73.2 Reclamation and remediation - non-sustaining (f)17.5 (1.0) Exploration - non-sustaining (g)48.7 67.7 Additions to property, plant and equipment - non-sustaining (h)179.2 600.9 All-in Cost - attributable (b)2,925.1$ 3,629.1$ Gold equivalent ounces sold 2,743,398 2,697,093 Less: portion attributable to Chirano non-controlling interest (i)(28,040) (27,817) Attributable (b) gold equivalent ounces sold 2,715,358 2,669,276 Attributable (b) all-in sustaining cost per equivalent ounce sold 973$ 1,082$ Attributable (b) all-in cost per equivalent ounce sold 1,077$ 1,360$ Years ended December 31,
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
KINROSS GOLD 2014 ANNUAL REPORT MDA58
(a) 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.(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 severance 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, 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 growth projects as well as enhancement capital for significant infrastructure improvements at existing operations. Non-sustaining capital expenditures during the year ended December 31, 2014 relate to projects at Tasiast, Chirano and Dvoinoye.(i) “Portion attributable to Chirano non-controlling interest” represents the non-controlling interest (10%) in the ounces sold from the Chirano mine.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
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 harbour’’ 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 “Mineral Reserves”, “Outlook, “Tasiast mill expansion update”, “La Coipa Phase 7 update” and include,
without limitation, statements with respect to our guidance for production; production costs of sales, all-in sustaining cost and capital expenditures; mineral
reserve and mineral resource estimates; expected savings pursuant to our cost review and reduction initiatives including, without limitation, optimization of
projects and operations, as well as references to other possible events, the future price of gold and silver, the estimation of mineral reserves and mineral resources,
the realization of mineral reserve and mineral resource estimates, the timing and amount of estimated future production, costs of production, capital expenditures,
costs and timing of the development of projects and new deposits, success of exploration, development and mining activities, permitting timelines, currency
fluctuations, requirements for additional capital, government regulation of mining operations, environmental risks, unanticipated reclamation expenses, title
disputes or claims and limitations on insurance coverage. The words “anticipate”, “believe”, “estimates”, ‘‘expects’’, ‘‘explore’’, ‘‘forecasts”, “focus”, “guidance”,
“indicative”, “initiative”, “intend”, “on track”, “options”, “outlook”, “plan”, “possible”, “potential”, “seek”, “schedule”, “study”, “target”, or “view”, 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 most recently filed Annual Information Form
and our Management’s Discussion and Analysis as well as: (1) there being no significant disruptions affecting the operations of the Company or any entity in
which it now or hereafter directly or indirectly holds an investment, whether due to labour disruptions, supply disruptions, power disruptions, damage to
equipment or otherwise; (2) permitting, development, operations and expansion at Paracatu (including, without limitation, land acquisitions and permitting for
the construction and operation of the new tailings facility) being consistent with our current expectations;(3) political and legal developments in any jurisdiction
in which the Company, or any entity in which it now or hereafter directly or indirectly holds an investment, operates being consistent with its current expectations
including, without limitation, the impact of escalating political tensions and uncertainty in the Russian Federation and Ukraine or any related sanctions and any
other similar restrictions or penalties imposed, or actions taken, by any government, and any potential amendments to the Brazilian Mining Code, the Mauritanian
Customs Code, the Mauritanian Mining Code, the Mauritanian VAT regime and water legislation or other water use restrictions in Chile (including, but not limited
to, the interpretation, implementation and application of any such amendments), being consistent with Kinross’ current expectations; (4) 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; (5) certain price assumptions for gold and silver; (6) prices for diesel, natural gas, fuel oil, electricity and other key supplies being approximately
consistent with current levels; (7) production and cost of sales forecasts for the Company, and entities in which it now or hereafter directly or indirectly holds an
investment, meeting expectations; (8) the accuracy of the current mineral reserve and mineral resource estimates of the Company (including but not limited to
ore tonnage and ore grade estimates); (9) labour and materials costs increasing on a basis consistent with Kinross’ current expectations; (10) the development
of, operations at and production from the Company’s operations, being 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; (12) goodwill and/or asset impairment potential; and (13) access to capital markets, including but not limited to maintaining an investment grade
debt rating and, as required, maintaining partial project financing for Dvoinoye and Kupol being consistent with the Company’s current expectations. 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: sanctions (any other similar restrictions or penalties) now or subsequently imposed, or 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;
litigation commenced, or other claims or actions brought, against the Company (and/or any of its directors, officers or employees) in respect of the cessation by
the Company of investment in and development of FDN and its sale, or any of the Company’s prior activities on or in respect thereof or otherwise in Ecuador;
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, royalty, 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, Ecuador, Mauritania, Ghana, or other countries in which Kinross, or entities in which
it now or hereafter directly or indirectly holds an interest, do 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 or development
activities; employee relations; litigation or other claims against, or regulatory investigations and/or any enforcement actions 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, or any
investigations, enforcement actions and/or sanctions under any applicable anti-bribery, international sanctions and/or anti-money laundering laws and
regulations in Canada, the United Stated 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 rating; 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 these cautionary statements 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 and Management
Discussion and Analysis. These factors are not intended to represent a complete list of the factors that could affect Kinross. Kinross disclaims any intention or
MDA59 KINROSS GOLD 2014 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2014
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.
Key Sensitivities
Approximately 60%-70 of the Company's costs are denominated in U.S. dollars.
A 10% change in foreign exchange could result in an approximate $14 impact on production cost of sales per ounce3.
Specific to the Russian rouble, a 10% change in the exchange rate would be expected to result in an approximate $11 impact on Russian production cost of sales
per ounce.
A $10 per barrel change in the price of oil could result in an approximate $1 impact on production cost of sales per ounce.
The impact on royalties of a $100 change in the gold price could result in an approximate $3 impact on production cost of sales per ounce.
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 material mineral properties contained in this MD&A, including but not limited to mineral reserve and mineral
resource estimates, has been prepared under the supervision of Mr. John Sims, an officer of the Company, who is a “qualified person” within the meaning of
National Instrument 43-101.
3 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.
KINROSS GOLD 2014 ANNUAL REPORT MDA60
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 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, the independent registered public accounting firm, in accordance with Canadian
generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States).
J. PAUL ROLLINSON
Chief Executive Officer
Toronto, Canada
February 10, 2015
TONY S. GIARDINI
Executive Vice President and Chief Financial Officer
Toronto, Canada
February 10, 2015
FS1 KINROSS GOLD 2014 ANNUAL REPORT
INDEPENDENT AUDITORS’ REPORT OF REGISTERED PUBLIC
ACCOUNTING FIRM
To the Shareholders of Kinross Gold Corporation
We have audited the accompanying consolidated financial statements of Kinross Gold Corporation, which comprise the consolidated balance sheets
as at December 31, 2014 and December 31, 2013, the consolidated statements of operations, comprehensive loss, cash flows and equity for the years
then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International
Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance
with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The
procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation
of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating
the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the
overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Kinross Gold
Corporation as at December 31, 2014 and December 31, 2013, and its consolidated financial performance and its consolidated cash flows for the
years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Chartered Professional Accountants, Licensed Public Accountants
February 10, 2015
Toronto, Canada
KINROSS GOLD 2014 ANNUAL REPORT FS2
CONSOLIDATED BALANCE SHEETS
(expressed in millions of United States dollars, except share amounts)
The accompanying notes are an integral part of these consolidated financial statements
Signed on behalf of the Board:
John A. Brough
Director
John M. H. Huxley
Director
FS3 KINROSS GOLD 2014 ANNUAL REPORT
December 31,December 31,20142013AssetsCurrent assetsCash and cash equivalentsNote 7983.5$ 734.5$ Restricted cashNote 741.3 59.0 Accounts receivable and other assetsNote 7170.4 208.1 Current income tax recoverable115.2 81.3 Inventories Note 71,276.7 1,322.9 2,587.1 2,405.8 Non-current assets Property, plant and equipment Note 75,409.4 6,582.7 GoodwillNote 7162.7 308.0 Long-term investments Note 7111.0 20.4 Investments in associate and joint ventureNote 9156.8 315.2 Deferred charges and other long-term assets Note 7417.9 491.1 Deferred tax assetsNote 17106.5 163.5 Total assets8,951.4$ 10,286.7$ LiabilitiesCurrent liabilitiesAccounts payable and accrued liabilitiesNote 7421.9$ 544.5$ Current income tax payable19.2 27.0 Current portion of long-term debt Note 1260.0 60.0 Current portion of provisionsNote 1343.1 40.1 Current portion of unrealized fair value of derivative liabilitiesNote 1060.2 41.3 604.4 712.9 Non-current liabilities Long-term debt Note 121,998.1 2,059.6 ProvisionsNote 13780.9 683.9 Unrealized fair value of derivative liabilitiesNote 10- 14.0 Other long-term liabilities207.2 192.7 Deferred tax liabilitiesNote 17469.0 533.7 Total liabilities4,059.6 4,196.8 Equity Common shareholders' equityCommon share capital and common share purchase warrantsNote 1414,587.7$ 14,737.1$ Contributed surplus239.0 84.5 Accumulated deficit(9,937.6) (8,771.1) Accumulated other comprehensive income (loss)Note 7(46.1) (36.5) Total common shareholders' equity4,843.0 6,014.0 Non-controlling interest48.8 75.9 Total equity4,891.8 6,089.9 Commitments and contingenciesNote 19Total liabilities and equity8,951.4$ 10,286.7$ Common shares AuthorizedUnlimitedUnlimitedIssued and outstandingNote 141,144,576,474 1,143,428,055 As at
CONSOLIDATED STATEMENTS OF OPERATIONS
(expressed in millions of United States dollars, except share and per share amounts)
The accompanying notes are an integral part of these consolidated financial statements
KINROSS GOLD 2014 ANNUAL REPORT FS4
December 31,December 31,20142013RevenueMetal sales3,466.3$ 3,779.5$ Cost of salesProduction cost of sales1,971.2 2,004.4 Depreciation, depletion and amortization874.7 828.8 Impairment charges Note 81,251.4 3,169.6 Total cost of sales4,097.3 6,002.8 Gross loss(631.0) (2,223.3) Other operating expense111.8 88.2 Exploration and business development 105.6 147.1 General and administrative 178.8 176.6 Operating loss(1,027.2) (2,635.2) Other income (expense) - netNote 7(215.5) (259.1) Equity in earnings (losses) of associate and joint ventureNote 7(5.8) (10.3) Finance income11.2 7.6 Finance expenseNote 7(80.1) (42.8) Loss before tax(1,317.4) (2,939.8) Income tax (expense) recovery - netNote 17(109.7) (72.4) Loss from continuing operations after tax(1,427.1) (3,012.2) Earnings (loss) from discontinued operation after taxNote 6233.5 (730.1) Net loss(1,193.6)$ (3,742.3)$ Net (loss) earnings from continuing operations attributable to: Non-controlling interest(27.1)$ 0.4$ Common shareholders(1,400.0)$ (3,012.6)$ Net (loss) earnings attributable to: Non-controlling interest(27.1)$ 0.4$ Common shareholders(1,166.5)$ (3,742.7)$ Loss per share from continuing operations attributable to common shareholdersBasic(1.22)$ (2.64)$ Diluted(1.22)$ (2.64)$ Loss per share attributable to common shareholdersBasic(1.02)$ (3.28)$ Diluted(1.02)$ (3.28)$ Weighted average number of common shares outstanding (millions)Note 16Basic1,144.3 1,142.1 Diluted1,144.3 1,142.1 Years ended
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(expressed in millions of United States dollars)
(a) Net of tax of $nil (2013 - $(1.2) million)
(b) Net of tax of $nil (2013 - $nil)
(c) Net of tax of $(4.9) million (2013 - $(18.1) million)
(d) Net of tax of $9.1 million (2013 - $7.9 million)
The accompanying notes are an integral part of these consolidated financial statements
FS5 KINROSS GOLD 2014 ANNUAL REPORT
December 31,December 31,20142013Net loss(1,193.6)$ (3,742.3)$ Other comprehensive income (loss), net of tax:Note 7Other comprehensive income (loss) to be reclassified to profit or loss in subsequent periods:Change in fair value of investments (a)7.0 (29.1) Reclassification to earnings for impairment charges1.5 21.3 Accumulated other comprehensive loss related to investments sold (b)(6.1) - Changes in fair value of derivative financial instruments designated as cash flow hedges (c) (40.3) (46.5) Accumulated other comprehensive income (loss) related to derivatives settled (d)28.3 12.9 (9.6) (41.4) Total comprehensive loss(1,203.2)$ (3,783.7)$ Comprehensive loss from continuing operations(1,436.7)$ (3,053.6)$ Comprehensive income (loss) from discontinued operationNote 6233.5 (730.1) Total comprehensive loss(1,203.2)$ (3,783.7)$ Attributable to non-controlling interest(27.1)$ 0.4$ Attributable to common shareholders(1,176.1)$ (3,784.1)$ Years ended
CONSOLIDATED STATEMENTS OF CASH FLOWS
(expressed in millions of United States dollars)
The accompanying notes are an integral part of these consolidated financial statements
KINROSS GOLD 2014 ANNUAL REPORT FS6
December 31,December 31,20142013Net inflow (outflow) of cash related to the following activities:Operating:Loss from continuing operations(1,427.1)$ (3,012.2)$ Adjustments to reconcile net loss from continuing operations to net cash provided from (used in) operating activities:Depreciation, depletion and amortization874.7 828.8 Losses (gains) on sale of other assets - net3.1 1.1 Impairment charges 1,251.4 3,169.6 Impairment of investments158.1 240.3 Equity in losses (earnings) of associate and joint venture5.8 10.3 Non-hedge derivative losses (gains) - net5.1 (2.6) Share-based compensation expense26.2 32.9 Accretion expense33.2 20.6 Deferred tax expense (recovery)(13.8) (247.5) Foreign exchange (gains) losses and other42.7 109.3 Reclamation expense (recovery)17.5 (1.0) Changes in operating assets and liabilities:Accounts receivable and other assets26.9 (27.7) Inventories(59.4) (197.5) Accounts payable and accrued liabilities99.0 157.6 Cash flow provided from operating activities1,043.4 1,082.0 Income taxes paid(185.3) (285.4) Net cash flow of continuing operations provided from operating activities858.1 796.6 Net cash flow of discontinued operations used in operating activities(8.8) (21.9) Investing:Additions to property, plant and equipment(631.8) (1,262.4) Net additions to long-term investments and other assets(55.5) (131.2) Net proceeds from the sale of property, plant and equipment30.5 6.1 Disposals of short-term investments- 349.8 Decrease (increase) in restricted cash17.7 (1.2) Interest received and other4.5 7.8 Net cash flow of continuing operations used in investing activities(634.6) (1,031.1) Net cash flow of discontinued operations provided from (used in) investing activities148.2 (14.3) Financing:Issuance of common shares on exercise of options 0.1 6.2 Proceeds from issuance of debt913.0 - Repayment of debt(980.1) (523.3) Interest paid(20.6) (5.0) Dividends paid to common shareholders- (91.3) Settlement of derivative instruments(2.0) - Other(4.6) (2.1) Net cash flow of continuing operations used in financing activities(94.2) (615.5) Net cash flow of discontinued operations used in financing activities- - Effect of exchange rate changes on cash and cash equivalents of continuing operations(19.7) (12.0) Increase (decrease) in cash and cash equivalents249.0 (898.2) Cash and cash equivalents, beginning of period734.5 1,632.7 Cash and cash equivalents, end of period $ 983.5 $ 734.5 Years ended
CONSOLIDATED STATEMENTS OF EQUITY
(expressed in millions of United States dollars)
The accompanying notes are an integral part of these consolidated financial statements
FS7 KINROSS GOLD 2014 ANNUAL REPORT
December 31,December 31,20142013Common share capital and common share purchase warrantsBalance at the beginning of the period14,737.1$ 14,692.5$ Common shares issued under employee share purchase plans- 4.0 Transfer from contributed surplus on exercise of options and restricted shares12.5 37.0 Options exercised, including cash0.1 3.6 Expiry of warrants(162.0) - Balance at the end of the period14,587.7$ 14,737.1$ Contributed surplusBalance at the beginning of the period84.5$ 89.9$ Share-based compensation25.1 31.6 Transfer of fair value of exercised options and restricted shares(17.1) (37.0) Expiry of warrants, net of tax146.5 - Balance at the end of the period239.0$ 84.5$ Accumulated deficitBalance at the beginning of the period(8,771.1)$ (4,937.1)$ Dividends paid- (91.3) Net loss attributable to common shareholders(1,166.5) (3,742.7) Balance at the end of the period(9,937.6)$ (8,771.1)$ Accumulated other comprehensive income (loss)Balance at the beginning of the period(36.5)$ 4.9$ Other comprehensive income (loss)(9.6) (41.4) Balance at the end of the period(46.1)$ (36.5)$ Total accumulated deficit and accumulated other comprehensive income (loss)(9,983.7)$ (8,807.6)$ Total common shareholders' equity4,843.0$ 6,014.0$ Non-controlling interestBalance at the beginning of the period75.9$ 75.5$ Net earnings (loss) attributable to non-controlling interest(27.1) 0.4 Balance at the end of the period48.8$ 75.9$ Total equity4,891.8$ 6,089.9$ Years ended
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
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.
The consolidated financial statements of the Company for the year ended December 31, 2014 were authorized for issue in
accordance with a resolution of the board of directors on February 10, 2015.
2.
BASIS OF PRESENTATION
These consolidated financial statements for the year ended December 31, 2014 (“financial statements”) have been prepared
in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards
Board (“IASB”).
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 significant accounting policies are presented in Note 3
and have been consistently applied in each of the periods presented. Significant accounting estimates, judgments and
assumptions used or exercised by management in the preparation of these financial statements are presented in Note 5.
KINROSS GOLD 2014 ANNUAL REPORT FS8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
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.
(a) On June 10, 2013, the Company announced that it would not proceed with further development of the Fruta del Norte (“FDN”) project in Ecuador. On
December 17, 2014, the Company sold its interest in Aurelian Resources Inc. and the FDN project in Ecuador to Lundin Gold Inc. (formerly Fortress Minerals
Corp. (“Fortress”)). See Note 6.
(b)
(c)
The Company holds a 90% interest in the Chirano Gold Mine with the Government of Ghana having the right to the remaining 10% interest.
The Company has a joint operation in Round Mountain through its 50% ownership in the Smoky Valley Common Operation. Under the joint operation
agreement between the Company and Barrick Gold Corporation, the Company is the operator.
The Management Committee of the joint operation represents the joint operation partners, authorizes annual programs and budgets and approves major
transactions prior to execution by site management. The joint operation owners are entitled to their pro-rata share of production and are obliged to make
their pro-rata share of contributions as requested.
FS9 KINROSS GOLD 2014 ANNUAL REPORT
December 31,December 31,EntityProperty/ SegmentLocation20142013Subsidiaries:(Consolidated) Fairbanks Gold Mining, IncFort KnoxUSA100%100% Kinross Brasil Mineração S.A. ("KBM")ParacatuBrazil100%100% Compania Minera MaricungaMaricunga and Lobo Marte / Maricunga and Corporate and OtherChile100%100% Compania Minera Mantos de OroLa Coipa / Corporate and OtherChile100%100% Echo Bay Minerals CompanyKettle River - BuckhornUSA100%100% Chukotka Mining and Geological CompanyKupolRussian Federation100%100% Northern Gold LLC/ Regionruda LLCDvoinoye/ KupolRussian Federation100%100% Aurelian Ecuador S.A. (a)Fruta del Norte Ecuador0%100% Selene Holdings LPWhite Gold/ Corporate and OtherCanada100%100% Tasiast Mauritanie Ltd. S.A.TasiastMauritania100%100% Chirano Gold Mines Ltd. (Ghana) (b)ChiranoGhana90%90%Interest in joint operation:(Relative share consolidated) Round Mountain Gold Corporation (c)Round Mountain USA50%50%Investment in associate:(Equity accounted) Compania Minera CasaleCerro Casale/ Corporate and OtherChile25%25%Interest in joint venture:(Equity accounted) Sociedad Contractual Minera Puren La Coipa/ Corporate and OtherChile65%65%As at
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
(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 over such arrangements 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 in the
consolidated financial statements 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 audited 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, accumulated other comprehensive income (“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 at 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 at 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 available-for-sale, is
recognized in other comprehensive income (“OCI”), the translation differences are also recognized in OCI.
KINROSS GOLD 2014 ANNUAL REPORT FS10
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
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 that is not available for general corporate use.
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.
v. Long-term investments
Investments in entities that are not subsidiaries, joint operations, joint ventures or investments in associates are designated
as available-for-sale investments. These investments are measured at fair value on acquisition and at each reporting date.
Any unrealized holding gains and losses related to these investments are excluded from net earnings and are included in OCI
until an investment is sold and gains or losses are realized, or there is objective evidence that the investment is impaired.
When there is evidence that an investment is impaired, the cumulative loss that was previously recognized in OCI is
reclassified from AOCI to the consolidated statement of operations.
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 estimated gold prices based on prevailing and long-
term metal prices and estimated costs to complete production into a saleable form.
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.
FS11 KINROSS GOLD 2014 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
viii. Business combinations
A business combination is a transaction or other event in which control over one or more businesses is obtained. A business
is 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 consists of inputs and processes applied
to those inputs that have the ability to create outputs that provide a return to the Company and its shareholders. A business
need not include all of the inputs and processes that were used by the acquiree to produce outputs if the business can be
integrated with the inputs and processes of the Company to continue to produce 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;
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.
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 the 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 for goodwill impairment testing purposes.
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.
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 has been reduced below its carrying amount, the carrying amount of the CGU is evaluated for
KINROSS GOLD 2014 ANNUAL REPORT FS12
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
potential impairment. If the carrying amount of the CGU exceeds its recoverable amount, an impairment is considered to
exist and an impairment loss is recognized to reduce the carrying value to its recoverable amount.
When an impairment review is undertaken, the recoverable amount is assessed by reference to the higher of value in use
and fair value less costs to sell.
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 and cannot take into account future development. These assumptions are different to those used
in calculating fair value and consequently the value in use calculation is likely to give a different result (usually lower) than a
fair value calculation.
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.
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. 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 2 year to 28 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 National Instrument 43-101 “Standards of Disclosure for Mineral Projects”.
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 long-term
metals prices. For the 2014 annual goodwill impairment analysis, estimated 2015, 2016, and long-term gold prices of $1,200,
$1,300 and $1,300 per ounce, respectively, and estimated 2015, 2016, and long-term silver prices of $18.00, $19.25 and
$20.30 per ounce, respectively, were used. For the 2013 annual goodwill impairment analysis, estimated 2014, 2015 and
long-term gold prices of $1,200, $1,300 and $1,300 per ounce, respectively, and estimated 2014, 2015 and long-term silver
prices of $21.00, $22.00 and $22.50 per ounce, respectively, were used. For the June 30, 2013 impairment analysis described
in Note 8, which was performed as a result of the identification of certain indicators of potential impairment as of that date,
the estimated 2013, 2014 and long-term gold prices used were $1,480, $1,450 and $1,300 per ounce, respectively, and the
estimated 2013, 2014 and long-term silver prices used were $26.00, $25.50 and $22.75 per ounce, respectively.
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 US dollar are translated to US 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 2014 annual goodwill impairment analysis, an
estimated 2015 and long-term oil price of $75 per barrel, was used. For the 2013 annual goodwill impairment analysis, an
estimated 2014 and long-term oil price of $100 per barrel was used. For the June 30, 2013 impairment analysis, an estimated
2013 and long-term oil price of $100 per barrel was 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 2014 annual goodwill impairment analysis, real discount rates of between
4.75% and 6.16% were used. For the 2013 annual goodwill impairment analysis, real discount rates of between 4.49% and
6.13% were used. For the June 30, 2013 impairment analysis, real discount rates of between 4.66% and 5.99% were used.
FS13 KINROSS GOLD 2014 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
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, 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, 2014 in respect of the fair value determinations at that date, which
ranged from 0.9 to 1.2. NAV multiples observed at June 30, 2013 and December 31, 2013 were in the range of 0.7 and 1.3.
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.
x. Exploration and evaluation (“E&E”) costs
Exploration and evaluation costs are those costs required to find a mineral property and determine 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 exploration and evaluation 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:
fair value of the 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 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 exploration and evaluation 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.
Repairs and maintenance costs are expensed as incurred. However, expenditures on major maintenance rebuilds or
KINROSS GOLD 2014 ANNUAL REPORT FS14
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
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, exploration and evaluation 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 exploration and evaluation 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. 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 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 exploration and evaluation costs and assets under construction are not depreciated. These assets
are depreciated when they are put into production in their intended use.
(c)
Impairment
The carrying amounts of the Company’s property, plant and equipment are reviewed at each reporting date to determine
whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is
estimated. In addition, capitalized exploration and evaluation costs are assessed for impairment upon demonstrating the
technical feasibility and commercial viability of a project.
Impairment 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 purposes.
An impairment exists when the carrying amount of the asset, or group of assets, exceeds its recoverable amount. The
impairment loss is the amount by which the carrying value exceeds the recoverable amount and such loss is recognized in
the consolidated statement of operations. The recoverable amount of an asset is the higher of its fair value less costs to sell
and its value in use.
FS15 KINROSS GOLD 2014 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
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 such that the recoverable amount has increased.
(d) 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. Financial instruments and hedging activity
(a) Financial instrument classification and measurement
Financial instruments are measured on initial recognition at fair value, plus, in the case of financial instruments other than
those classified as “fair value through profit and loss”, directly attributable transaction costs. Measurement of financial
assets in subsequent periods depends on whether the financial instrument has been classified as “fair value through profit
and loss”, “available-for-sale”, “held-to-maturity”, or “loans and receivables”. Measurement of financial liabilities
subsequent to initial recognition depends on whether they are classified as fair value through profit and loss or “other
financial liabilities”.
Financial assets and financial liabilities at fair value through profit and loss include financial assets and financial liabilities
that are held for trading or designated upon initial recognition as at fair value through profit and loss. These financial
instruments are measured at fair value with changes in fair values recognized in the consolidated statement of operations.
Financial assets classified as available-for-sale are measured at fair value, with changes in fair values recognized in OCI,
except when there is objective evidence that the asset is impaired, at which point the cumulative loss that had been
previously recognized in OCI is recognized within the consolidated statement of operations. Financial assets classified as
held-to-maturity and loans and receivables are measured subsequent to initial recognition at amortized cost using the
effective interest method. Financial liabilities, other than financial liabilities classified as fair value through profit and loss,
are measured in subsequent periods at amortized cost using the effective interest method.
Cash and cash equivalents, restricted cash and short-term investments are designated as fair value through profit and loss
and are measured at cost, which approximates fair value. Trade receivables and certain other assets are designated as loans
and receivables. Long-term investments in equity securities, where the Company cannot exert significant influence, are
designated as available-for sale. Accounts payable and accrued liabilities and long-term debt are classified as other financial
liabilities.
Derivative assets and liabilities include derivative financial instruments that do not qualify as hedges, or are not designated
as hedges and are classified as fair value through profit and loss.
(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 only included in earnings when the underlying hedged transaction, identified at the contract
inception, is completed. Any ineffective portion of a hedge relationship is recognized immediately in the consolidated
statement of operations. 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
KINROSS GOLD 2014 ANNUAL REPORT FS16
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
for hedge accounting, remain in OCI. Amounts recorded in OCI are recognized in the consolidated statement of operations
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 the consolidated statement of operations in the period in
which they occur.
For hedges that do not qualify for hedge accounting, gains or losses are recognized in the consolidated statement of
operations in the current period.
xiii. Impairment of financial assets
The Company assesses at each reporting date whether there is objective evidence that a financial asset or a group of
financial assets is impaired. In the case of investments classified as available-for-sale, an evaluation is made as to whether a
decline in fair value is significant or prolonged based on an analysis of indicators such as market price of the investment and
significant adverse changes in the technological, market, economic or legal environment in which the investee operates.
If an available-for-sale financial asset is impaired, an amount equal to the difference between its carrying value and its
current fair value is transferred from AOCI and recognized in the consolidated statement of operations. Reversals of
impairment charges in respect of equity instruments classified as available-for-sale are not recognized in the consolidated
statement of operations.
xiv. 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, the shares are issued from treasury.
Restricted Share Plan: Restricted share units (“RSUs”) and Restricted performance share units (“RPSUs”) are granted under
the Restricted Share Plan. Both RSUs and RPSUs are generally equity-settled and awarded to certain employees as a
percentage of long-term incentive awards.
(a) RSUs are fair valued 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. Annually, the estimated
forfeiture rate is adjusted for actual forfeitures in the period. On vesting of RSUs, shares are generally issued from
treasury.
(b) RPSUs are subject to certain vesting requirements based on performance criteria over the vesting period established
by the Company. RPSUs are fair valued as follows: The portion of the RPSUs related to market conditions is fair valued
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. Annually, the estimated
forfeiture rate is adjusted for actual forfeitures in the 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.
FS17 KINROSS GOLD 2014 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
xv. 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. Revenue from metal
sales is recognized when all the following conditions have been satisfied:
•
The significant risks and rewards of ownership have been transferred;
• Neither continuing managerial involvement to the degree usually associated with ownership, nor effective control over
the goods sold, has been retained;
The amount of revenue can be measured reliably;
It is probable that the economic benefits associated with the transaction will flow to the Company; and
The costs incurred or to be incurred in respect of the transaction can be measured reliably.
•
•
•
These conditions are generally met when the sales price is fixed and title has passed to the customer.
xvi. 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 where the liability is probable 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 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 end of mine life. The periodic unwinding of the discount
is recognized in the consolidated statement of operations as a finance expense.
KINROSS GOLD 2014 ANNUAL REPORT FS18
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
xvii. 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
Corporation has the legal right and intent to offset.
xviii. 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.
Diluted earnings per share is calculated using the treasury method, except the if-converted method is used in assessing the
dilution impact of convertible senior notes, outstanding stock options, warrants, RSUs and RPSUs. 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. The if-converted method assumes that all
convertible senior notes, RSUs and RPSUs have been converted in determining fully diluted earnings per share if they are in-
the-money except where such conversion would be anti-dilutive.
4.
RECENT ACCOUNTING PRONOUNCEMENTS
Revenue recognition
In May 2014, the IASB issued IFRS 15 “Revenue from Contracts with Customers” (“IFRS 15”). The standard replaces IAS 11
“Construction Contracts”, IAS 18 “Revenue”, IFRIC 13 “Customer Loyalty Programmes”, IFRIC 15 “Agreements for the
Construction of Real Estate”, IFRIC 18 “Transfer of Assets From Customers” and SIC 31 “Revenue – Barter Transactions
Involving Advertising Services”. IFRS 15 establishes principles for reporting the nature, amount, timing, and uncertainty of
revenue and cash flows arising from an entity’s contract with customers. This standard is effective for annual periods
beginning on or after January 1, 2017, and permits early adoption. The Company is in the process of determining the impact
of IFRS 15 on its consolidated financial statements.
FS19 KINROSS GOLD 2014 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
Financial instruments
In July 2014, the IASB issued the final version of IFRS 9 “Financial Instruments”. This standard is effective for annual periods
beginning on or after January 1, 2018, and permits early adoption. IFRS 9 provides a revised model for recognition,
measurement and impairment of financial instruments. IFRS 9 also includes a substantially reformed approach to hedge
accounting. The Company is in the process of determining the impact of IFRS 9 on its consolidated financial statements.
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
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 life 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
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 foreign exchange rates, commodity prices, 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.
KINROSS GOLD 2014 ANNUAL REPORT FS20
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
(b) 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 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.
Impairment of goodwill and other assets
(c)
Goodwill is tested for impairment annually or more frequently if there is an indication of impairment. The carrying value of
property, plant and equipment is reviewed each reporting period to determine whether there is any indication of
impairment. If the carrying amount of an asset exceeds its recoverable amount, the asset is impaired and an impairment
loss is recognized in the consolidated statement of operations. The assessment of fair values, including those of the CGUs
for purposes of testing goodwill, require the use of estimates and assumptions for recoverable production, future and long-
term commodity prices, discount rates, NAV multiples, foreign exchange rates, future capital requirements and operating
performance. Changes in any of the assumptions or estimates used in determining the fair value of goodwill or other assets
could impact the impairment analysis. 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 amounts of the CGUs
which indicate that a previously recognized impairment loss may no longer exist or may have decreased.
Inventories
(d)
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 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 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, 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.
FS21 KINROSS GOLD 2014 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
(e) 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.
(f) 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 significant 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.
(g) 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.
KINROSS GOLD 2014 ANNUAL REPORT FS22
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
6.
DISPOSITION
Disposition of interest in Fruta del Norte
On June 10, 2013, the Company announced that it would not proceed with further development of the FDN project in
Ecuador as the government of Ecuador and Kinross were unable to agree on certain key economic and legal terms.
Kinross' decision to cease the development of FDN resulted in a charge of $720.0 million in the second quarter of 2013, of
which $714.7 million reflected the Company's net carrying value of the FDN project, and $5.3 million represented severance
and closure costs.
On October 21, 2014, Kinross announced that it entered into an agreement with Fortress (subsequently renamed Lundin
Gold Inc., “Lundin Gold”), a member of the Lundin Group of Companies, to sell all of its interest in Aurelian Resources Inc.
and the FDN project in Ecuador for $240.0 million in cash and shares.
On December 17, 2014, the Company completed the sale for gross cash proceeds of $150.0 million and $90.0 million in
Lundin Gold common shares, resulting in an after-tax recovery of $238.0 million. Kinross received approximately 26.2 million
Lundin Gold common shares, resulting in a 25.8% ownership. The investment has been accounted for as an available-for-
sale investment as the Company determined that it does not have significant influence over Lundin Gold.
Loss from FDN
(a) Includes recovery on sale of $238.0 million (2013 - impairment charge of $720.0 million).
The significant assets and liabilities of FDN at the date of disposal were as follows:
Cash flows from FDN
(a) Includes proceeds of $150.0 million, net of cash disposed of.
FS23 KINROSS GOLD 2014 ANNUAL REPORT
20142013Results of discontinued operationRevenues-$ -$ Expenses (a)(233.5) 736.3 Earnings (loss) before tax233.5 (736.3) Income tax recovery- 6.2 Earnings (loss) and other comprehensive income (loss) from discontinued operation after tax233.5$ (730.1)$ Earnings (loss) per share from discontinued operation attributable to common shareholdersBasic0.20$ (0.64)$ Diluted0.20$ (0.64)$ Years ended December 31,December 17,2014Cash and cash equivalents1.8$ Accounts payable and accrued liabilities(0.8) Provisions(1.6) Net assets (liabilities)(0.6)$ 20142013Cash flows of discontinued operation:Net cash flow used in operating activities(8.8)$ (21.9)$ Net cash flow provided from investing activities (a)148.2 (14.3) Net cash flow used in financing activities- - Net cash flow of discontinued operation139.4$ (36.2)$ Years ended December 31,
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
7.
CONSOLIDATED FINANCIAL STATEMENT DETAILS
Consolidated Balance Sheets
i.
Cash and cash equivalents:
Restricted cash:
(a) Restricted cash relates to restricted payments for the Kupol loan (see Note 12 (iii)), loan escrow judicial deposits and letters
of guarantee for default protection and environmental indemnity related to Chirano and certain other sites.
ii.
Accounts receivable and other assets:
KINROSS GOLD 2014 ANNUAL REPORT FS24
December 31,December 31,20142013Cash on hand and balances with banks503.2$ 420.2$ Short-term deposits480.3 314.3 983.5$ 734.5$ December 31,December 31,20142013Restricted cash (a)41.3$ 59.0$ December 31,December 31,20142013Trade receivables 4.8$ 8.2$ Prepaid expenses32.3 17.9 VAT receivable72.5 90.8 Deposits36.3 49.7 Unrealized fair value of derivative assets0.2 5.1 Other 24.3 36.4 170.4$ 208.1$
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
iii.
Inventories:
(a) Ore in stockpiles relates to the Company’s operating mines. Ore in stockpiles includes low-grade material not scheduled for processing
within the next twelve months which is included in deferred charges and other long-term assets on the consolidated balance sheet. See
Note 7 vii.
(b) Ore on leach pads relates to the Company's Maricunga, Tasiast, Fort Knox, and 50% owned Round Mountain mines. Based on current
mine plans, the Company expects to place the last tonne of ore on its leach pads at Maricunga in 2019, Tasiast in 2019, Fort Knox in
2019, and 50% owned Round Mountain in 2018. Ore on leach pads includes material not scheduled for processing within the next twelve
months which is included in deferred charges and other long-term assets on the consolidated balance sheet. See Note 7 vii.
(c) Provision for impairment of inventory relates to impairment charges recorded within cost of sales to reduce the carrying value of
inventory to its net realizable value. See Note 8 ii.
FS25 KINROSS GOLD 2014 ANNUAL REPORT
December 31,December 31, 20142013Ore in stockpiles (a)331.8$ 331.9$ Ore on leach pads (b)434.6 380.3 In-process 82.0 95.4 Finished metal 78.9 83.3 Materials and supplies793.3 797.6 1,720.6 1,688.5 Provision for impairment of inventory (c)(299.9) (170.7) 1,420.7 1,517.8 Long-term portion of ore in stockpiles and ore on leach pads (a),(b)(144.0) (194.9) 1,276.7$ 1,322.9$
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
iv.
Property, plant and equipment:
(a) Assets not being depreciated relate to land, capitalized exploration and evaluation costs, assets under construction, which are the
construction of expansion projects, and other assets that are in various stages of being readied for use.
(b) At December 31, 2014, the significant development and operating properties include Fort Knox, Round Mountain, Paracatu,
Maricunga, Kupol, Kettle River-Buckhorn, Tasiast, Chirano, and Lobo-Marte. Included in pre-development properties are White Gold
and other exploration properties.
(c) At December 31, 2014, an impairment charge was recorded against property, plant and equipment at Tasiast, Chirano, Kettle River-
Buckhorn, Lobo-Marte, and White Gold. See Note 8.
(d) On December 17, 2014, the Company disposed of its interest in FDN for gross proceeds of $240.0 million. See Note 6.
KINROSS GOLD 2014 ANNUAL REPORT FS26
Land, plant and equipment Development and operating propertiesPre-development propertiesTotalCostBalance at January 1, 20146,699.3$ 8,172.3$ 177.4$ 15,049.0$ Additions352.7 272.8 - 625.5 Acquisitions- - - - Capitalized interest 26.9 35.8 - 62.7 Disposals (d)(77.8) (998.5) (8.6) (1,084.9) Other19.0 (20.2) - (1.2) Balance at December 31, 20147,020.1 7,462.2 168.8 14,651.1 Accumulated depreciation, depletion, amortization and impairmentBalance at January 1, 2014(3,589.9)$ (4,876.4)$ -$ (8,466.3)$ Depreciation, depletion and amortization(422.8) (453.3) - (876.1) Impairment charge (c)(218.9) (640.4) (79.2) (938.5) Disposals (d)43.2 998.5 - 1,041.7 Other(3.4) 0.9 - (2.5) Balance at December 31, 2014(4,191.8) (4,970.7) (79.2) (9,241.7) Net book value2,828.3$ 2,491.5$ 89.6$ 5,409.4$ Amount included above as at December 31, 2014:Assets under construction320.2$ 88.8$ -$ 409.0$ Assets not being depreciated (a)476.4$ 287.2$ 89.6$ 853.2$ Mineral Interests (b)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
(a) Assets not being depreciated relate to land, capitalized exploration and evaluation costs, assets under construction, which are the
construction of expansion projects, and other assets that are in various stages of being readied for use.
(b) At December 31, 2013, the significant development and operating properties include Fort Knox, Round Mountain, Paracatu,
Maricunga, Kupol, Kettle River-Buckhorn, Tasiast, Chirano, and Lobo-Marte. Included in pre-development properties are White Gold
and other exploration properties.
(c) At June 30, 2013, an impairment charge was recorded against property, plant and equipment at FDN (see Note 6), Round Mountain,
Maricunga, Tasiast and Lobo-Marte. At December 31, 2013, an impairment charge was recorded against property, plant and
equipment at Maricunga. See Note 8.
Land, plant and equipment with a carrying amount of $170.7 million (December 31, 2013 - $154.7 million) are pledged as
security as part of the Kupol loan. See Note 12 (iii).
Capitalized interest primarily relates to capital expenditures at Fort Knox, Round Mountain, Paracatu, Kupol, Chirano and
Tasiast and had a weighted average borrowing rate of 4.6% and 4.0% during the years ended December 31, 2014 and 2013,
respectively.
At December 31, 2014, $281.4 million of exploration and evaluation (“E&E”) assets were included in mineral interests
(December 31, 2013 - $660.5 million). During the year ended December 31, 2014, the Company acquired $nil of E&E assets,
capitalized $nil in E&E costs and transferred $nil from E&E assets to capitalized development. During the year ended
December 31, 2013, the Company acquired $nil of E&E assets, capitalized $nil in E&E costs and transferred $nil from E&E
assets to capitalized development. During the year ended December 31, 2014, the Company expensed $7.4 million (year
ended December 31, 2013 – $14.4 million), of E&E expenditures. The Company recognized property, plant and equipment
impairment charges related to E&E assets for the year ended December 31, 2014 of $379.1 million (year ended December
31, 2013 - $80.6 million).
The Company had cash expenditures for E&E included in operating cash flows for the year ended December 31, 2014 of $7.4
million (year ended December 31, 2013 – $14.4 million), and investing cash flows for the year ended December 31, 2014 of
$nil (year ended December 31, 2013 – $nil).
FS27 KINROSS GOLD 2014 ANNUAL REPORT
Land, plant and equipmentDevelopment and operating propertiesPre-development propertiesTotalCostBalance at January 1, 20135,720.9$ 7,810.3$ 177.6$ 13,708.8$ Additions980.0 299.0 - 1,279.0 Acquisitions- - - - Capitalized interest 58.2 24.4 - 82.6 Disposals(27.9) - - (27.9) Other(31.9) 38.6 (0.2) 6.5 Balance at December 31, 20136,699.3 8,172.3 177.4 15,049.0 Accumulated depreciation, depletion, amortization and impairmentBalance at January 1, 2013(1,897.4)$ (2,843.3)$ -$ (4,740.7)$ Depreciation, depletion and amortization(416.7) (444.0) - (860.7) Impairment charge (c)(1,231.5) (1,652.1) - (2,883.6) Disposals20.2 - - 20.2 Other(64.5) 63.0 - (1.5) Balance at December 31, 2013(3,589.9) (4,876.4) - (8,466.3) Net book value3,109.4$ 3,295.9$ 177.4$ 6,582.7$ Amount included above as at December 31, 2013:Assets under construction581.9$ 132.4$ -$ 714.3$ Assets not being depreciated (a)751.3$ 2,143.9$ 177.4$ 3,072.6$ Mineral Interests(b)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
v.
Goodwill:
The goodwill allocated to the Company's CGUs and included in the respective operating segment assets is shown in the table
below:
(a) At December 31, 2014, as part of the annual impairment test for goodwill, it was determined that the carrying amounts of La Coipa
and Kettle River-Buckhorn exceeded their recoverable amounts. See Note 8.
(b) At June 30, 2013, it was determined that the carrying amounts of Round Mountain, Paracatu, Maricunga and Chirano exceeded their
recoverable amounts. At December 31, 2013, as part of the annual impairment test for goodwill, it was determined that the carrying
amount of Quebrada Seca exceeded its recoverable amount. See Note 8.
(c) At December 31, 2014 and 2013, other operations include goodwill related to Jiboia.
vi.
Long-term investments:
Unrealized gains and losses on investments classified as available-for-sale are recorded in AOCI as follows:
KINROSS GOLD 2014 ANNUAL REPORT FS28
TasiastChiranoCost Balance at January 1, 2014 $ 145.9 $ 164.9 $ 190.3 $ 20.9 $ 827.2 $ 396.1 $ 4,620.4 $ 918.6 $ 278.2 $ 7,562.5 Acquisitions- - - - - - - - - - Disposals- - - - - - - - - - Balance at December 31, 2014 $ 145.9 $ 164.9 $ 190.3 $ 20.9 $ 827.2 $ 396.1 $ 4,620.4 $ 918.6 $ 278.2 $ 7,562.5 Accumulated impairment Balance at January 1, 2014 $ (145.9) $ (164.9) $ (65.9) $ - $ (668.4) $ (396.1) $ (4,620.4) $ (918.6) $ (274.3) $ (7,254.5) Impairment loss (a)- - (124.4) (20.9)- - - - - (145.3) Disposals- - - - - - - - - - Balance at December 31, 2014 $ (145.9) $ (164.9) $ (190.3) $ (20.9) $ (668.4) $ (396.1) $ (4,620.4) $ (918.6) $ (274.3) $ (7,399.8)Carrying amount at December 31, 2014 $ - $ - $ - $ - $ 158.8 $ - $ - $ - $ 3.9 $ 162.7 Total Round Mountain ParacatuLa CoipaKettle River - BuckhornKupolMaricungaOther Operations (c)TasiastChiranoCost Balance at January 1, 2013 $ 145.9 $ 164.9 $ 190.3 $ 20.9 $ 827.2 $ 396.1 $ 4,620.4 $ 918.6 $ 278.2 $ 7,562.5 Acquisitions - - - - - - - - - - Disposals - - - - - - - - - - Balance at December 31, 2013 $ 145.9 $ 164.9 $ 190.3 $ 20.9 $ 827.2 $ 396.1 $ 4,620.4 $ 918.6 $ 278.2 $ 7,562.5 Accumulated impairment Balance at January 1, 2013 $ (87.2) $ (99.4) $ (65.9) $ - $ (668.4) $ (220.2) $ (4,620.4) $ (558.8) $ (105.5) $ (6,425.8) Impairment loss (b) (58.7) (65.5) - - - (175.9) - (359.8) (168.8) (828.7) Disposals - - - - - - - - - - Balance at December 31, 2013 $ (145.9) $ (164.9) $ (65.9) $ - $ (668.4) $ (396.1) $ (4,620.4) $ (918.6) $ (274.3) $ (7,254.5)Carrying amount at December 31, 2013 $ - $ - $ 124.4 $ 20.9 $ 158.8 $ - $ - $ - $ 3.9 $ 308.0 Total Kettle River - BuckhornKupolMaricungaOther Operations (c)Round Mountain ParacatuLa CoipaFair valueGains (losses) in AOCIFair valueGains (losses) in AOCIInvestments in an unrealized gain position103.6$ 3.9$ $ 17.6 $ 1.6 Investments in an unrealized loss position7.4 (2.1) 2.8 (2.2)111.0$ 1.8$ 20.4$ (0.6)$ December 31, 2014December 31, 2013
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
vii.
Deferred charges and other long-term assets:
(a) Ore in stockpiles and on leach pads represents low-grade material not scheduled for processing within the next twelve months. At
December 31, 2014, long-term ore in stockpiles was at the Company’s Fort Knox, Kupol, Tasiast, Maricunga and Paracatu mines, and
long-term ore on leach pads was at the Company’s Fort Knox, Round Mountain and Tasiast mines.
viii.
Accounts payable and accrued liabilities:
ix.
Accumulated other comprehensive income (loss):
(a) Balance at December 31, 2012 net of tax of $(1.9) million.
(b) Balance at December 31, 2012 net of tax of $5.8 million.
FS29 KINROSS GOLD 2014 ANNUAL REPORT
December 31,December 31,20142013Long-term portion of ore in stockpiles and ore on leach pads (a)144.0$ 194.9$ Deferred charges, net of amortization6.5 8.5 Long-term receivables209.0 209.4 Advances for the purchase of capital equipment20.7 46.8 Unrealized fair value of derivative assets- 0.6 Other37.7 30.9 417.9$ 491.1$ December 31,December 31,20142013Trade payables 86.9$ 118.3$ Accrued liabilities223.2 307.3 Employee related accrued liabilities111.8 118.9 421.9$ 544.5$ Long-term Investments (a)Derivative Contracts (b)TotalBalance at December 31, 20127.2$ (2.3)$ 4.9$ Other comprehensive loss before tax(9.0) (43.8) (52.8) Tax1.2 10.2 11.4 Balance at December 31, 2013(0.6)$ (35.9)$ (36.5)$ Other comprehensive income (loss) before tax2.4 (7.8) (5.4) Tax- (4.2) (4.2) Balance at December 31, 20141.8$ (47.9)$ (46.1)$
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
Consolidated Statements of Operations
x.
Other income (expense) – net:
(a) During the year ended December 31, 2014, the Company recognized an impairment charge of $156.6 million (year ended December
31, 2013 - $219.0 million) related to its investment in Cerro Casale as a result of the impairment assessment disclosed in Note 8. The
Company also recognized impairment losses on certain of its available-for-sale investments during the years ended December 31,
2014 and 2013.
KINROSS GOLD 2014 ANNUAL REPORT FS30
20142013Gains (losses) on sale of other assets - net(3.1)$ (1.1)$ Impairment of investments (a)(158.1) (240.3) Foreign exchange losses(50.1) (21.9) Net non-hedge derivative gains (losses)(5.1) 2.6 Other 0.9 1.6 (215.5)$ (259.1)$ Years ended December 31,
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
xi.
Equity in earnings (losses) of associate and joint venture:
(a) The Company holds a 25% interest in Cerro Casale which is classified as an investment in associate and accounted for under the
equity method. See Note 9.
(b) Puren is classified as a joint venture and is accounted for under the equity method.
(c) Represents Kinross’ share of the net earnings (loss) and other comprehensive income (loss).
xii.
Finance expense:
(a) During the years ended December 31, 2014 and 2013, $62.7 million and $82.6 million, respectively, of interest was capitalized to
property, plant and equipment. See Note 7 iv.
Total interest paid, including interest capitalized, during the year ended December 31, 2014 was $82.4 million (year ended
December 31, 2013 - $80.1 million).
xiii.
Employee benefits expenses:
The following employee benefits expenses are included in production cost of sales, general and administrative, and
exploration and business development expenses:
FS31 KINROSS GOLD 2014 ANNUAL REPORT
20142013Cerro Casale(a)(c)(5.4)$ (7.5)$ Puren (b)(c)(0.4) (2.8) (5.8)$ (10.3)$ Years ended December 31,20142013Accretion on reclamation and remediation obligation(28.1)$ (17.7)$ Interest expense, including accretion on debt (a)(52.0) (25.1) (80.1)$ (42.8)$ Years ended December 31,20142013Salaries, short term incentives, and other benefits659.5$ 653.7$ Share-based payments32.3 32.9 Other30.2 75.3 722.0$ 761.9$ Years ended December 31,
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
8.
IMPAIRMENT
i.
Goodwill and property, plant and equipment
At December 31, 2014, the Company recorded an impairment charge of $1,083.8 million, upon completion of its annual
assessment of the carrying values of its CGUs. The impairment charge included goodwill impairment of $145.3 million and
property plant and equipment impairment of $938.5 million. As a result of the impairment charge related to property, plant
and equipment, a tax recovery of $127.9 million was recorded within tax expense.
The following table summarizes the impairment charges by CGU:
As at December 31, 2014 the carrying amounts of Tasiast, Chirano, Kettle River-Buckhorn, La Coipa, Lobo-Marte and White
Gold were $1,017.5 million, $458.9 million, ($79.2) million, ($54.8) million, $118.8 million and $44.3 million respectively.
The carrying amounts for Kettle River-Buckhorn and La Coipa were negative as a result of reclamation and remediation
obligations.
The impairment charge at Tasiast reflects a change in estimated future operating costs, operating cost underperformance
of the existing mill and a decision not to proceed with a 38,000 tonne per day mill expansion at the present time. Chirano’s
impairment charge was related to a decrease in exploration potential.
The impairment charges at La Coipa and Lobo-Marte were a result of declines in valuations in Chile and a reduction in mineral
reserves at Lobo-Marte. The charge at Kettle River-Buckhorn was a result of the mine approaching the end of its life and the
charge at White Gold was a result of a reduction in exploration potential.
Also as a result of its annual impairment assessment at December 31, 2014, the Company recognized an impairment charge
of $156.6 million related to its investment in Cerro Casale. The impairment charge was recorded in other income (expense).
As at December 31, 2013, the Company recorded an impairment charge of $594.0 million, upon completion of its annual
assessment of the carrying value of its CGUs. The impairment charge, which was recorded within cost of sales in the
consolidated statement of operations, included $425.2 million relating to property, plant and equipment at Maricunga and
$168.8 million relating to goodwill at Quebrada Seca. As a result of the impairment charge related to the Maricunga CGU, a
tax recovery of $49.2 million was recorded within tax expense. The non-cash impairment charge at Maricunga was mainly a
result of changes to the life of mine plan and a corresponding reduction in reserves.
As at June 30, 2013, the Company identified the decline in metal prices and the deferral of potential construction at Tasiast
as indicators of potential impairment, and performed an impairment assessment to determine the recoverable amount of
its CGUs using updated assumptions and estimates at that time, which included Tasiast being based on a 38,000 tonne per
day mill, adjusted for the deferral in potential construction and production.
KINROSS GOLD 2014 ANNUAL REPORT FS32
20142013Goodwill (i) 145.3$ 828.7$ Property, plant and equipment (i) 938.5 2,163.3 Inventory (ii)167.6 177.6 1,251.4$ 3,169.6$ Years ended December 31,CGUGoodwillProperty, plant and equipmentTotalTasiast-$ 342.5$ 342.5$ Chirano- 365.4 365.4 Kettle River - Buckhorn20.9 32.9 53.8 La Coipa124.4 - 124.4 Lobo-Marte- 118.5 118.5 White Gold- 79.2 79.2 Total145.3$ 938.5$ 1,083.8$
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
The following table summarizes the impairment charges related to goodwill and property, plant and equipment by CGU
recognized as at June 30, 2013:
The June 30, 2013 impairment charges were recorded within cost of sales in the consolidated statement of operations. As
a result of the impairment charges related to property, plant and equipment at the Round Mountain, Maricunga and Tasiast
CGUs, a tax recovery of $108.7 million was recorded within tax expense. These non-cash impairment charges were primarily
due to the reduction in the Company’s estimates of future metal prices. The Tasiast impairment charge was also impacted
by the deferral of potential construction and production.
As a result of the impairment assessment at June 30, 2013, the Company also recognized an impairment charge related to
its investment in Cerro Casale of $219.0 million, which was recorded in other income (expense).
Key assumptions and sensitivity
The key assumptions used in determining the recoverable amount (fair value less costs to sell) for each CGU are long-term
commodity prices, discount rates, cash costs of production, capital expenditures, foreign exchange rates, and NAV multiples.
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 carrying goodwill to exceed its recoverable amount.
ii.
Inventory
During the year ended December 31, 2014, impairment charges of $167.6 million were recorded within cost of sales to
reduce the carrying value of inventory to its net realizable value (year ended December 31, 2013 - $177.6 million).
FS33 KINROSS GOLD 2014 ANNUAL REPORT
CGUGoodwillProperty, plant and equipmentTotalRound Mountain58.7$ 118.7$ 177.4$ Paracatu65.5 - 65.5 Maricunga175.9 27.4 203.3 Tasiast- 1,409.2 1,409.2 Chirano359.8 - 359.8 Lobo-Marte- 182.8 182.8 Total659.9$ 1,738.1$ 2,398.0$
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
9.
INVESTMENTS IN ASSOCIATE AND JOINT VENTURE
The investments in associate and joint venture are accounted for under the equity method and had the following carrying
values:
There are no publicly quoted market prices for Cerro Casale and Puren. No dividend was received from Cerro Casale and
Puren during the years ended December 31, 2014 and 2013.
Summarized financial information, reflecting fair value adjustments made by the Company, for Cerro Casale on a 100%
basis are as follows:
(a) During the year ended December 31, 2014, the Company recognized an impairment charge of $156.6 million (year ended December
31, 2013 - $219.0 million) related to its investment in Cerro Casale as a result of the impairment assessment disclosed in Note 8.
A contingent liability related to the Company’s investment in Cerro Casale is disclosed in Note 19.
KINROSS GOLD 2014 ANNUAL REPORT FS34
December 31,December 31,20142013Cerro Casale139.7$ 297.7$ Puren 17.1 17.5 156.8$ 315.2$ 20142013Current assets3.5$ 4.9$ Non-current assets2,066.3 2,069.3 2,069.8 2,074.2 Current liabilities8.6 4.6 Non-current liabilities- 2.8 8.6 7.4 Net assets2,061.2$ 2,066.8$ Ownership interest25%25%515.3 516.7 Impairment charge (a)(375.6) (219.0) Carrying amount of the investment139.7$ 297.7$ 20142013Revenue-$ -$ Expense21.6 30.0 21.6$ 30.0$ Equity in losses of Cerro Casale5.4$ 7.5$ For the years ended December 31,As at December 31,Statement of OperationsBalance SheetNet loss and total comprehensive loss
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
10.
FAIR VALUE MEASUREMENT
Recurring fair value measurement:
(a)
Carrying values for financial instruments, including cash and cash equivalents, 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, 2014 include:
During the year ended December 31, 2014, 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:
Available-for-sale investments:
The fair value of available-for-sale investments 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 available-for-sale investments 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, 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.
FS35 KINROSS GOLD 2014 ANNUAL REPORT
Level 1Level 2Level 3Aggregate Fair ValueAvailable-for-sale investments111.0$ -$ -$ 111.0$ Derivative contracts:Interest rate swaps - (0.7) - (0.7) Foreign currency forward contracts - (48.8) - (48.8) Energy swap contracts - (9.9) - (9.9) Total return swap contracts - (0.6) - (0.6) $ 111.0 $ (60.0)-$ $ 51.0
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
The following table summarizes information about derivative contracts outstanding at December 31, 2014 and December
31, 2013:
(a) Of the total amount recorded in AOCI, $(0.9) million will be reclassified to net earnings within the next 12 months.
(b) Of the total amount recorded in AOCI, $(39.1) million will be reclassified to net earnings within the next 12 months as a result of
settling the contracts.
(c) Of the total amount recorded in AOCI, $(7.9) million will be reclassified to net earnings within the next 12 months as a result of
settling the contracts.
(i)
Interest rate swaps
When the floating rate term loan was originally arranged in August 2012 (see Note 12(i)), the Company entered into interest
rate swaps to swap the underlying 1-month LIBOR interest rate into a fixed rate of 0.49% for the original three year term
ending August 10, 2015. Concurrent with the repayment of $500.0 million of the term loan on March 10, 2014, the Company
closed out 60% of the interest rate swaps. The remaining outstanding interest rate swaps continue to hedge 80% of the
remaining underlying floating rate term loan to August 10, 2015.
KINROSS GOLD 2014 ANNUAL REPORT FS36
Asset / (Liability)Asset / (Liability)Fair ValueFair ValueInterest rate contracts Interest rate swaps (a) (i) $ (0.7) $ (0.9) $ (2.9) $ (2.9)Currency contracts Foreign currency forward contracts (b) (ii)(48.8) (39.1) (48.9) (34.1)Commodity contracts Energy swap contracts (c) (iii)(9.9) (7.9) 2.7 1.1 Other contracts Total return swap contracts (iv)(0.6) - (0.5)- Total all contracts $ (60.0) $ (47.9) $ (49.6) $ (35.9)Unrealized fair value of derivative assets Current 0.2 5.1 Non-current - 0.6 $ 0.2 $ 5.7 Unrealized fair value of derivative liabilities Current (60.2) (41.3) Non-current - (14.0) $ (60.2) $ (55.3)Total net fair value $ (60.0) $ (49.6)AOCIDecember 31, 2014December 31, 2013AOCI
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
(ii)
Foreign currency forward contracts
The following table provides a summary of foreign currency forward contracts outstanding at December 31, 2014,
maturing in 2015:
During 2014, the following new forward buy derivative contracts were engaged:
$106.9 million Brazilian reais at an average rate of 2.60 maturing in 2015;
$53.0 million Chilean pesos at an average rate of 577.36 maturing in 2015; and
$58.2 million Canadian dollars at an average rate of 1.10 maturing in 2015.
At December 31, 2014, the unrealized gain or loss on the derivative contracts recorded in AOCI is as follows:
Brazilian real forward buy contracts – unrealized loss of $14.4 million (December 31, 2013 – $31.5 million loss);
Chilean peso forward buy contracts - unrealized loss of $2.3 million (December 31, 2013 – $0.7 million loss);
Russian rouble forward buy contracts – unrealized loss of $19.3 million (December 31, 2013 – $1.1 million gain); and
Canadian dollar forward buy contracts – unrealized loss of $3.1 million (December 31, 2013 – $3.0 million loss).
(iii)
Energy swap contracts
The Company is exposed to changes in energy prices through its consumption of diesel and other fuels, and the price of
electricity in some electricity supply contracts. The Company entered into energy swap contracts that protect against the
risk of fuel price increases. Fuel is consumed in the operation of mobile equipment and electricity generation.
The following table provides a summary of energy swap contracts outstanding at December 31, 2014, maturing in 2015:
FS37 KINROSS GOLD 2014 ANNUAL REPORT
Foreign currencyBrazilian real forward buy contracts(in millions of U.S. dollars)194.9$ Average price2.48$ Chilean peso forward buy contracts(in millions of U.S. dollars)53.0$ Average price577.36$ Russian rouble forward buy contracts(in millions of U.S. dollars)48.0$ Average price35.88$ Canadian dollar forward buy contracts(in millions of U.S. dollars)58.2$ Average price1.10$ EnergyOil swap contracts (barrels)285,400 Average price84.85$ Gasoil swap contracts (tonnes)8,184 Average price779.72$
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
During 2014, the following new commodity derivative contracts were engaged:
185,400 barrels of crude oil at an average rate of $83.89 per barrel maturing in 2015; and
8,184 tonnes of gasoil at an average rate of $779.72 per tonne maturing in 2015.
At December 31, 2014, the unrealized gain or loss on these derivative contracts recorded in AOCI is as follows:
Oil swap contracts – unrealized loss of $6.1 million (December 31, 2013 – $0.3 million gain);
Diesel swap contracts - unrealized loss of $nil (December 31, 2013 – $0.1 million gain); and
Gasoil swap contracts – unrealized loss of $1.8 million (December 31, 2013 – $0.7 million gain).
(iv)
Total return swap contracts
The Company engages 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, 2014, 2,616,000 TRS units were outstanding. The following TRS contracts were entered into
during the year ended December 31, 2014:
435,912 units at an average price of CDN$3.08 to hedge DSUs.
1,500,000 units at an average price of CDN$3.79 to hedge cash-settled RSUs.
At December 31, 2014, 88% of the DSUs were economically hedged (December 31, 2013 – 86%) and 61% of cash-settled
RSUs were economically hedged (December 31, 2013 – nil), although hedge accounting was not applied.
Non-recurring fair value measurement:
(b)
During the year ended December 31, 2014, property, plant and equipment and goodwill related to certain CGUs were written
down to their recoverable amounts. Certain assumptions used in the calculation of these recoverable amounts are
categorized as Level 3 in the fair value hierarchy. See Note 3 (ix) and Note 8.
Fair value of financial assets and liabilities not measured and recognized at fair value:
(c)
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.
KINROSS GOLD 2014 ANNUAL REPORT FS38
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
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, energy and interest rates 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:
ii. Gold and silver price risk management
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.
No derivatives to hedge metal sales were outstanding in 2013 and 2014.
FS39 KINROSS GOLD 2014 ANNUAL REPORT
December 31,December 31,20142013Long-term debt $ 1,998.1 $ 2,059.6 Current portion of long-term debt60.0 60.0 Total debt2,058.1 2,119.6 Common shareholders' equity4,843.0 6,014.0 Total debt / total debt and common shareholders' equity ratio29.8%26.1%Company target0 – 30%0 – 30%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
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 forward contracts to lock in the exchange rates on future
non-U.S. denominated currency cash outflows. The Company has entered into forward contracts to purchase Canadian
dollars, Brazilian reais, Chilean pesos, 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.
At December 31, 2014, 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.
(a) As described in Note 3 (ii), 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 British pounds, Australian dollars, South African rand, and Japanese yen.
At December 31, 2014, with other variables unchanged, the following represents the effect of the Company's foreign
currency forward contracts on OCI before taxes from a 10% change in the exchange rate of the U.S. dollar against the
Canadian dollar, Brazilian real, Chilean peso and Russian rouble.
(a) Upon maturity of these contracts, the amounts in OCI before taxes will reverse against hedged items the contracts relate to, which
may be to earnings or property, plant and equipment.
iv.
Interest rate risks
When the floating rate term loan was originally arranged in August 2012 (see Note 12(i)), the Company entered into interest
rate swaps to swap the underlying 1-month LIBOR into a fixed rate of 0.49% for the original three year term ending August
10, 2015. Concurrent with the repayment of $500.0 million of the term loan on March 10, 2014, the Company closed out
60% of the interest rate swaps. The remaining outstanding interest rate swaps continue to hedge 80% of the remaining
underlying floating rate term loan to August 10, 2015. At December 31, 2014 with other variables unchanged, a 50 basis
point downward shift in the interest rate curve would decrease OCI before taxes by $1.1 million, and a 50 basis point upward
shift in the interest rate curve would increase OCI before taxes by $1.1 million.
KINROSS GOLD 2014 ANNUAL REPORT FS40
Foreign currency net working capitalEffect on earnings before taxes, gain (loss)(a) Effect on earnings before taxes, gain (loss)(a) Canadian dollars3.0 (0.3) 0.3 Brazilian reais(96.7) 8.8 (10.7) Chilean pesos(1.0) 0.1 (0.1) Russian roubles35.8 (3.3) 4.0 Euros(5.3) 0.5 (0.6) Mauritanian ouguiya(10.1) 0.9 (1.1) Ghanaian cedi17.4 (1.6) 1.9 Other (b)(1.7) 0.2 (0.2) 10% weakening in U.S. dollar10% strengthening in U.S. dollar10% strengthening in U.S. dollar10% weakening in U.S. dollarEffect on OCI before taxes, gain (loss) (a)Effect on OCI before taxes, gain (loss) (a)Canadian dollars(5.0)$ 6.1$ Brazilian reais(14.9)$ 18.0$ Chilean pesos(4.5)$ 5.5$ Russian roubles(2.3)$ 2.8$
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
v. 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 protect against the
risk of fuel price increases. Fuel is consumed in the operation of mobile equipment and electricity generation.
At December 31, 2014, 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 oil, gasoil, and diesel prices.
(a) Upon maturity of these contracts, the amounts in OCI before taxes will reverse against hedged items the contracts relate to, which
will be to earnings.
vi. Liquidity risk
The Company manages liquidity risk by maintaining adequate cash and cash equivalent balances (December 31, 2014 -
$983.5 million in aggregate), by utilizing its lines of credit and by monitoring developments in the capital markets. The
Company continuously monitors and reviews both actual and forecasted cash flows. The contractual cash flow requirements
for financial liabilities at December 31, 2014 are as follows:
(a)
Includes long-term debt, including the current portion, interest, other fees and the full face value of the senior notes.
vii. Credit risk management
Credit risk relates to cash and cash equivalents, accounts receivable and derivative contracts and arises from the possibility
that any counterparty to an instrument fails to perform. The Company only transacts with highly-rated counterparties and a
limit on contingent exposure has been established for any counterparty based on that counterparty's credit rating. As at
December 31, 2014, the Company’s maximum exposure to credit risk was the carrying value of cash and cash equivalents,
accounts receivable and derivative contracts.
FS41 KINROSS GOLD 2014 ANNUAL REPORT
10% increase in price10% decrease in priceEffect on OCI before taxes, gain (loss) (a)Effect on OCI before taxes, gain (loss) (a)Oil 1.6$ (1.6)$ Gasoil 0.4$ (0.4)$ TotalWithin 1 year2 to 3 years4 to 5 yearsMore than 5 yearsLong-term debt (a)3,059.9$ 152.7$ 442.7$ 651.2$ 1,813.3$ Derivative liabilities - net60.0$ 60.0$ -$ -$ -$
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
12.
LONG-TERM DEBT AND CREDIT FACILITIES
(a) Includes transaction costs on debt financings.
(b) The fair value of debt is primarily determined using quoted market prices. See Note 10(c).
Scheduled debt repayments
(i)
Corporate revolving credit and term loan facilities
In August 2012, the Company completed a new unsecured term loan facility for $1,000.0 million. The facility was set to
mature on August 10, 2015, with the full amount having been drawn on August 22, 2012. Also, in August 2012, under the
same agreement, the Company amended the revolving credit facility increasing the available amount to $1,500.0 million
and extending the maturity date from March 2015 to August 2017.
On June 10, 2013, the Company amended its $1,500.0 million revolving credit facility and $1,000.0 million term loan to
extend the respective maturity dates and remove the minimum tangible net worth covenant. The revolving credit facility’s
term was extended by one year to August 10, 2018 from August 10, 2017, and the term loan was extended by two years to
mature on August 10, 2017 from August 10, 2015.
On March 10, 2014, the Company repaid $500.0 million of the term loan, leaving a balance of $500.0 million outstanding.
On July 28, 2014, the Company extended the maturity dates of the term loan and revolving credit facility by one year to
August 10, 2018 and August 10, 2019, respectively. As at December 31, 2014, the Company had utilized $32.1 million
(December 31, 2013 – $31.9 million) of the amended revolving credit facility. The amount utilized was entirely for letters of
credit.
Loan interest for both the amended revolving credit facility and the amended term loan is variable, set at LIBOR plus an
interest rate margin which is dependent on the Company’s credit rating. Based on the Company’s credit rating at December
31, 2014, interest charges and fees are as follows:
When the term loan was originally arranged in August 2012, the Company entered into interest rate swaps to swap the
underlying 1-month LIBOR interest rate into a fixed rate of 0.49% for the original three year term ending August 10,
2015. During the second quarter of 2013, the term loan maturity was extended to August 2017. Accordingly, the interest
rate swaps only hedged the term loan’s interest rate exposure until the original maturity of August 2015. Concurrent with
KINROSS GOLD 2014 ANNUAL REPORT FS42
Interest RatesNominal AmountDeferred Financing CostsCarrying Amount (a)Fair Value (b)Carrying Amount (a)Fair Value (b)Corporate term loan facility(i)Variable500.0$ (2.0)$ 498.0$ 498.0$ 996.0$ 996.0$ Senior notes(ii)3.625%-6.875%1,493.4 (12.6) 1,480.8 1,416.9 985.4 965.9 Kupol loan(iii)Variable80.0 (0.7) 79.3 79.3 138.2 138.2 2,073.4 (15.3) 2,058.1 1,994.2 2,119.6 2,100.1 Less: current portion(60.0) - (60.0) (60.0) (60.0) (60.0) Long-term debt2,013.4$ (15.3)$ 1,998.1$ 1,934.2$ 2,059.6$ 2,040.1$ December 31, 2014December 31, 2013201520162017201820192020 and thereafterTotalCorporate term loan facility $ - $ - $ - $ 500.0 $ - $ - $ 500.0 Senior notes - 250.0 - - - 1,250.0 1,500.0 Kupol loan60.020.0 - - - - 80.0 Total debt payable $ 60.0 $ 270.0 $ - $ 500.0 $ - 1,250.0$ $ 2,080.0 Type of creditDollar based LIBOR loan:Term LoanLIBOR plus 1.65%Revolving credit facilityLIBOR plus 1.70%Letters of credit1.13-1.70%Standby fee applicable to unused availability0.34%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
the repayment of $500.0 million of the term loan on March 10, 2014, the Company closed out 60% of the interest rate swaps.
The remaining outstanding interest rate swaps continue to hedge 80% of the remaining underlying floating rate term loan
to August 10, 2015.
Based on the Company’s credit rating at December 31, 2014, the fixed rate on the hedged portion of the term loan is 2.14%.
The amended revolving credit facility and amended unsecured term loan were arranged under one credit agreement, which
contains various covenants including limits on indebtedness, asset sales and liens. The significant financial covenant is a
ratio of net debt to EBITDA, as defined in the agreement, of no more than 3.5:1. The Company is in compliance with this
covenant at December 31, 2014.
(ii)
Senior notes
On August 22, 2011, the Company completed a $1.0 billion offering of debt securities consisting of $250.0 million principal
amount of 3.625% senior notes due 2016, $500.0 million principal amount of 5.125% senior notes due 2021 and $250.0
million principal amount of 6.875% senior notes due 2041. Kinross received net proceeds of $980.9 million from the offering,
after discount and payment of fees and expenses related to the offering.
On March 6, 2014, the Company completed a $500.0 million offering of debt securities consisting of 5.950% senior notes
due 2024. Kinross received net proceeds of $492.9 million from the offering, after discount and payment of fees and
expenses related to the offering.
The senior notes referred to above (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
40 and 50 basis points, plus accrued interest, if any. Within three months of maturity of the notes due in 2021 and 2024 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.
(iii)
Kupol loan
On December 21, 2011, the Company completed a $200.0 million non-recourse loan from a group of international financial
institutions. The non-recourse loan carries a term of five years, maturing on September 30, 2016 and bears annual interest
of LIBOR plus 2.5%. Semi-annual principal repayments of $30.0 million commenced in March 2013 and will continue through
September 30, 2015. Principal repayments due on March 31, 2016 and September 30, 2016 are reduced to $13.0 million
and $7.0 million, respectively. The Company may prepay the loan in whole or in part, without penalty, but subject to
customary break costs, if any. The agreement contains various requirements that include limits on distributions if certain
minimum debt service coverage levels are not achieved. Property, plant and equipment with a carrying amount of $170.7
million (December 31, 2013 - $154.7 million) are pledged as security as part of the Kupol loan.
As at December 31, 2014, cash of $34.0 million (December 31, 2013 - $34.0 million) was restricted for payments related to
this loan.
(iv)
Other
On June 15, 2012, the Company entered into an amendment to increase the amount of its Letter of Credit guarantee facility
with Export Development Canada (“EDC”) from $136.0 million to $200.0 million and to extend the maturity date to March
31, 2015. On July 17, 2014, the Company further amended this facility to increase the amount from $200.0 million to $250.0
million. Letters of credit guaranteed by this facility are solely for reclamation liabilities at Fort Knox, Round Mountain, and
Kettle River–Buckhorn. Fees related to letters of credit under this facility are 1.00% to 1.25%. As at December 31, 2014,
$207.2 million (December 31, 2013 - $164.1 million) was utilized under this facility.
FS43 KINROSS GOLD 2014 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
In addition, at December 31, 2014, the Company had approximately $49.3 million (December 31, 2013 - $42.0 million) in
letters of credit outstanding in respect of its operations in Brazil, Mauritania and Ghana. These letters of credit have been
issued pursuant to arrangements with certain international banks.
From time to time, the Company’s operations in Brazil may borrow US dollars from Brazilian banks on a short-term unsecured
basis to meet working capital requirements. As at December 31, 2014 and December 31, 2013, $nil was outstanding under
such borrowings.
13.
PROVISIONS
(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 costs for the year ended December 31, 2014 is a $17.5 million charge (year ended December 31,
2013 – $1.0 million recovery) reflecting revised estimated fair values of costs that support the reclamation and remediation
obligations for properties that have been closed. The majority of the expenditures are expected to occur between 2015 and
2043. The discount rates used in estimating the site restoration cost obligation were between 0.3% and 8.1% for the year
ended December 31, 2014 (year ended December 31, 2013 - 0.2% and 10.3%), and the inflation rate used was between 2.0%
and 11.2% for the year ended December 31, 2014 (year ended December 31, 2013 - 1.5% and 7.0%).
Regulatory authorities in certain jurisdictions require that security be provided to cover the estimated reclamation and
letters of credit totaling $243.6 million (December 31,
remediation obligations. As at December 31, 2014,
2013 – $200.5 million) had been issued to various regulatory agencies to satisfy financial assurance requirements for this
purpose. The letters of credit were issued against the Company's Letter of Credit guarantee facility with EDC, the corporate
revolving credit facility, and pursuant to arrangements with certain international banks. The Company is in compliance with
all applicable requirements under these facilities.
KINROSS GOLD 2014 ANNUAL REPORT FS44
Reclamation and remediation obligations (i)OtherTotalBalance at January 1, 2014664.1$ 59.9$ 724.0$ Additions 90.1 24.5 114.6 Reductions (8.3) (34.0) (42.3) Reclamation spending (17.9) - (17.9) Accretion28.1 - 28.1 Reclamation expenses17.5 - 17.5 Balance at December 31, 2014773.6$ 50.4$ 824.0$ Current portion 34.3 8.8 43.1 Non-current portion 739.3 41.6 780.9 $ 773.6 $ 50.4 $ 824.0
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
14.
COMMON SHARE CAPITAL AND COMMON SHARE PURCHASE WARRANTS
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, 2014 and 2013 is as follows:
i. Dividends on common shares
The following summarizes dividends paid during the year ended December 31, 2013. There were no dividends declared or
paid in 2014.
FS45 KINROSS GOLD 2014 ANNUAL REPORT
Number of sharesAmount ($)Number of sharesAmount ($)(000's)(000's)Common sharesBalance at January 1, 1,143,428 14,575.1$ 1,140,132 14,530.5$ Under employee share purchase plan - - 621 4.0 Under share option and restricted share plans 1,112 12.0 1,710 22.9 Under Red Back options36 0.6 965 17.7 Balance at end of period1,144,576 14,587.7$ 1,143,428 14,575.1$ Common share purchase warrantsBalance at January 1, 25,759 162.0$ 45,454 162.0$ Conversion of warrants - - - - Expiry of warrants(25,759) (162.0) (19,695) - Balance at end of period- -$ 25,759 162.0$ Total common share capital and common share purchase warrants14,587.7$ 14,737.1$ Year ended December 31, 2013Year ended December 31, 2014Per shareTotal amount ($)Dividends paid during the following period:Three months ended March 31, 2013 $ 0.08 91.3 Total $ 91.3
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
ii. Common share purchase warrants
The Company has issued U.S. dollar denominated common share purchase warrants.
The following table summarizes information about the common share purchase warrants outstanding at December 31, 2014:
These U.S. dollar denominated common share purchase warrants expired on September 17, 2014.
KINROSS GOLD 2014 ANNUAL REPORT FS46
Share equivalents of warrants (000's)Weighted average exercise price ($/warrant)Balance at January 1, 201425,759 21.30$ Issued- - Exercised- - Expired(25,759) 21.30 Balance at December 31, 2014- -$
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
15.
SHARE-BASED PAYMENTS
Share-based compensation recorded during the years ended December 31, 2014 and 2013 was as follows:
(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 the lower of 21.1 million
common shares or 10% of the total number of outstanding common shares at any time. Each option granted under the plan
before February 16, 2011 is for a maximum of five years. 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 stock options outstanding at December 31, 2014 expire at various dates to 2021. The number of
common shares available for the granting of options as at December 31, 2014 was 13.8 million.
The following table summarizes the status of the share option plan and changes during the years ended December 31, 2014
and 2013:
For the years ended December 31, 2014 and 2013, the weighted average share price at the date of exercise was CDN$5.48
and CDN$5.77, respectively.
FS47 KINROSS GOLD 2014 ANNUAL REPORT
20142013Share option plan expense (i) $ 7.3 8.0$ 22.421.8 Deferred share units expense (iii)1.81.8 2.6 1.3 Total share-based compensation $ 34.1 32.9$ Years ended December 31, Restricted share unit plan expense, including restricted performance shares (ii)Employer portion of employee share purchase plan (iv)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 114,342 12.09$ 14,650 13.15$ Granted3,295 5.82 3,037 7.63 Exercised(36) 3.76 (965) 3.84 Forfeited(967) 10.40 (1,051) 11.49 Expired(2,459) 12.71 (1,329) 20.06 Outstanding at end of period14,175 10.66$ 14,342 12.09$ 20132014
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
The following table summarizes information about the stock options outstanding and exercisable at December 31, 2014:
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 years ended December 31, 2014 and 2013:
The expected volatility used in the Black-Scholes option pricing model is based on the historical volatility of the Company’s
shares.
(ii)
Restricted Share Plan
The Company has a Restricted Share Plan whereby RSUs and RPSUs may be granted to employees, officers and contractors
of the Company. The current maximum number of common shares issuable under this plan is 20.0 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 the RSUs outstanding at December 31, 2014 and 2013:
KINROSS GOLD 2014 ANNUAL REPORT FS48
Number of optionsWeighted average exercise priceWeighted average remaining contractual lifeNumber of optionsWeighted average exercise priceWeighted average remaining contractual life(000’s)(CDN$)(years)(000’s)(CDN$)(years) $ 3.55 $ 4.22 39 3.55$ 4.2139 3.55$ 4.21 4.23 9.53 7,100 6.96 5.501,825 7.89 4.92 9.54 14.31 2,371 10.75 3.731,743 10.76 3.57 14.32 21.48 4,665 16.34 1.084,665 16.34 1.0814,175 10.66$ 3.758,272 13.24$ 2.47Options exercisableExercise price range in CDN$:Options outstanding20142013 Weighted average share price (CDN$)5.82$ $ 7.63 Expected dividend yield0.0%1.7% Expected volatility39.9%40.7% Risk-free interest rate1.6%1.5% Estimated forfeiture rate3.0%3.0% Expected option life (in years)4.5 4.5Weighted average fair value per stock option granted (CDN$)2.05$ $ 2.31 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 14,626 9.08$ 3,954 12.00$ Granted4,492 5.42 3,027 7.62 Reinvested- - 53 9.72 Redeemed(1,898) 10.12 (1,666) 12.84 Forfeited(563) 7.21 (742) 10.27 Outstanding at end of period6,657 6.47$ 4,626 9.08$ 20142013
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
At December 31, 2014, the Company had recognized a liability of $3.5 million (December 31, 2013 - $nil) in respect of its
cash-settled RSUs.
(b) Restricted performance share units
In 2009, the Company commenced issuing RPSUs under the Restricted Share Plan. 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.
The following table summarizes information about the RPSUs outstanding at December 31, 2014 and 2013:
(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 last date of each quarter. At such time as an outside director ceases to be a director, the Company
will make a cash payment to the outside director, equal to the market value of a Kinross common share on the date of
departure, multiplied by the number of DSUs held on that date.
The number of DSUs granted by the Company and the weighted average fair value per unit issued for the years ended
December 31, 2014 and 2013 are as follows:
There were 1,264,362 DSUs outstanding, for which the Company had recognized a liability of $3.6 million, as at December
31, 2014 (December 31, 2013 - $3.5 million).
(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, 2014 was $2.6 million (year ended
December 31, 2013 – $1.3 million).
FS49 KINROSS GOLD 2014 ANNUAL REPORT
Number of units (000's)Weighted average fair value (CDN$/unit)Number of units (000's)Weighted average fair value (CDN$/unit)Balance at January 11,390 9.60$ 843 12.98$ Granted1,517 5.39 816 7.05 Reinvested- - 16 8.74 Redeemed(97) 14.51 (44) 17.95 Forfeited(385) 7.42 (241) 11.23 Outstanding at end of period2,425 7.12$ 1,390 9.60$ 2014201320142013DSUs granted (000's) 489 340Weighted average grant-date fair value (CDN$/ unit) $ 3.91 $ 5.47 Years ended December 31,
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
16.
EARNINGS (LOSS) PER SHARE
Basic and diluted net loss from continuing operations attributable to common shareholders of Kinross for the year ended
December 31, 2014 was $1,400.0 million (year ended December 31, 2013 – $3,012.6 million). Basic and diluted net loss
attributable to common shareholders of Kinross for the year ended December 31, 2014 was $1,166.5 million (year ended
December 31, 2013 - $3,742.7 million).
Loss 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 and common share purchase warrants 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 earnings (loss) per common share for the
following periods:
(a) Dilutive stock options and warrants were determined using the Company’s average share price for the year. For the years ended
December 31, 2014 and 2013, the average share price used was $3.89 and $6.01, respectively.
(b) These adjustments were excluded, as they are anti-dilutive.
KINROSS GOLD 2014 ANNUAL REPORT FS50
(Number of common shares in thousands)20142013Basic weighted average shares outstanding:1,144,287 1,142,109 Weighted average shares dilution adjustments:Share options (a)- - Restricted shares - - Restricted performance shares- - Diluted weighted average shares outstanding1,144,287 1,142,109 Weighted average shares dilution adjustments - exclusions: (b)Share options 15,728 15,227 Restricted shares 6,311 4,906 Restricted performance shares2,486 1,408 Common share purchase warrants- 25,759 Convertible senior notes- 15,515 Years ended December 31,
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
17.
INCOME TAX EXPENSE
The following table shows the components of the current and deferred tax expense:
The reconciliation of the combined Canadian federal and provincial statutory income tax rate to the effective tax rate is as
follows:
i.
Deferred income tax
The following table summarizes the components of deferred income tax:
Deferred tax assets and liabilities have been offset where they relate to income taxes levied by the same taxation authority
and the Company has the legal right and intent to offset.
FS51 KINROSS GOLD 2014 ANNUAL REPORT
20142013Current tax expense Current period160.7$ 301.8$ Adjustment for prior period(37.2) 18.1 Deferred tax expenseOrigination and reversal of temporary differences(306.6) (616.5) Impact of changes in tax rate2.0 2.3 Change in unrecognized deductible temporary differences293.7 396.4 Recognition of previously unrecognized tax losses(2.9) (29.7) 109.7$ 72.4$ Years ended December 31, 20142013Combined statutory income tax rate26.5%26.5%Increase (decrease) resulting from:Mining taxes0.3%0.3%Resource allowance and depletion0.5%0.5%(11.5%)(5.5%)Benefit of losses not recognized(3.9%)(1.4%)0.7%(8.8%)Under (over) provided in prior periods(2.0%)1.4%Income not subject to tax4.3%1.4%Effect of non-deductible impairment(19.5%)(14.2%)Enacted rate change(0.2%)(0.1%)Accounting expenses disallowed for tax(3.2%)(1.8%)Taxes on repatriation of foreign earnings(1.6%)(0.5%)Recovery on expiry of warrants in KGC (Equity Offset)1.2%0.0%Other0.1%(0.3%)Effective tax rate(8.3%)(2.5%)Difference in foreign tax rates and FX on deferred income taxes within income tax expenseRecognition of tax attributes not previously benefited December 31, 2014December 31, 2013Deferred tax assetsAccrued expenses and other 8.7$ 168.2$ Property, plant and equipment53.1 18.4 Reclamation and remediation obligations205.3 134.8 Inventory capitalization8.0 6.7 Non-capital loss carryforwards4.9 21.3 280.0 349.4 Deferred tax liabilities Accrued expenses and other 11.3 14.8 Property, plant and equipment578.4 688.7 Inventory capitalization52.8 16.1 Deferred tax liabilities - net362.5$ 370.2$
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
Movement in net deferred tax liabilities:
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, 2014 is $6.0 billion (December 31, 2013 – $6.1 billion).
Deferred tax assets have not been recognized in respect of the following items:
The tax losses not recognized expire as per the amount and years noted below. The deductible temporary differences do
not expire under current tax legislation. Deferred tax assets have not been recognized in respect of these items because it
is not probable that future taxable profit will be available against which the group can utilize the benefits therefrom.
iii.
Non-capital losses (not recognized)
The following table summarizes the Company’s non-capital losses that can be applied against future taxable profit:
(a) Utilization of the United States loss carry forwards will be limited in any year as a result of the previous changes in ownership.
KINROSS GOLD 2014 ANNUAL REPORT FS52
December 31, 2014December 31, 2013Balance at the beginning of the period370.2$ 628.3$ Recognized in profit/loss (13.8) (247.5)Recognized in OCI3.4 (11.3) Discontinued operations- - Other2.7 0.7 Balance at the end of the period362.5$ 370.2$ December 31, 2014December 31, 2013Deductible temporary differences750.7$ 525.1$ Tax losses215.2 173.4 CountryTypeAmountExpiry DateCanadaNet operating losses$ 460.4 2015 - 2034United States(a)Net operating losses 43.0 2015 - 2034ChileNet operating losses 97.1 No expiryMexicoNet operating losses 14.7 2018 - 2024BarbadosNet operating losses 893.6 2015 - 2023MauritaniaNet operating losses 93.6 2015-2019OtherNet operating losses 61.1 2024
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
18.
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 Executive Officer 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 reviewed various factors, including geographical
location and managerial structure. It was determined by management that a reportable operating segment consists of an
individual mining property managed by a single general manager and management team. Certain properties that are in
development or have not reached commercial production levels are considered reportable segments because they have
reached quantitative thresholds. These have been identified as non-operating segments. Finance income, finance expense,
other income (expense) – net, and equity in earnings (losses) of associate and joint venture are managed on a consolidated
basis and are not allocated to operating segments.
Non-mining and other operations are reported in Corporate and other.
On June 10, 2013, the Company announced that it would not proceed with further development of the FDN project in
Ecuador. Kinross' decision to cease the development of FDN resulted in an impairment charge of $720.0 million in the second
quarter of 2013. As a result, FDN was no longer a reportable segment, and was considered a discontinued operation from
that date. On December 17, 2014, the Company sold its interest in FDN. See Note 6.
FS53 KINROSS GOLD 2014 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
i.
Operating segments
The following tables set forth operating results by reportable segment for the following periods:
KINROSS GOLD 2014 ANNUAL REPORT FS54
Non-operating segments (a)Year ended December 31, 2014:Fort KnoxRound MountainParacatuMaricungaKupol Kettle River-BuckhornTasiastChiranoCorporate and other (b)TotalRevenueMetal sales515.7$ 211.7 644.3 314.6 947.5 156.0 319.8 354.9 1.8 3,466.3$ Cost of salesProduction cost of sales291.0 142.3 418.2 235.9 380.5 83.6 252.2 165.8 1.7 1,971.2 Depreciation, depletion and amortization118.0 25.2 154.3 36.2 254.7 50.2 66.6 159.7 9.8 874.7 Impairment charges- - - - - 53.8 505.5 370.0 322.1 1,251.4 Total cost of sales409.0 167.5 572.5 272.1 635.2 187.6 824.3 695.5 333.6 4,097.3 Gross profit (loss)106.7$ 44.2 71.8 42.5 312.3 (31.6) (504.5) (340.6) (331.8) (631.0)$ Other operating expense- - 2.5 6.2 - 11.2 50.9 11.7 29.3 111.8 Exploration and business development6.8 0.2 - - 14.9 2.8 16.0 13.1 51.8 105.6 General and administrative- - - - 14.6 - - - 164.2 178.8 Operating earnings (loss)99.9$ 44.0 69.3 36.3 282.8 (45.6) (571.4) (365.4) (577.1) (1,027.2)$ Other income (expense) - net(215.5) Equity in earnings (losses) of associate and joint venture(5.8) Finance income11.2 Finance expense(80.1) Loss from continuing operations before tax(1,317.4)$ Earnings from discontinued operations (d)233.5$ Operating segmentsNon-operating segments (a)Year ended December 31, 2013:Fort KnoxRound MountainParacatuMaricungaKupol Kettle River-BuckhornTasiastChiranoCorporate and other (b)TotalRevenueMetal sales596.5$ 228.7 710.1 272.5 775.1 214.4 344.5 387.8 249.9 3,779.5$ Cost of salesProduction cost of sales236.6 135.3 424.9 225.3 288.6 83.1 256.7 211.7 142.2 2,004.4 Depreciation, depletion and amortization103.7 22.4 110.2 69.9 102.7 62.8 93.8 144.1 119.2 828.8 Impairment charges- 177.4 65.5 693.4 30.5 - 1,488.1 359.8 354.9 3,169.6 Total cost of sales340.3 335.1 600.6 988.6 421.8 145.9 1,838.6 715.6 616.3 6,002.8 Gross profit (loss)256.2$ (106.4) 109.5 (716.1) 353.3 68.5 (1,494.1) (327.8) (366.4) (2,223.3)$ Other operating expense (income)- - 2.9 (4.6) - 9.0 51.2 6.4 23.3 88.2 Exploration and business development5.2 0.3 - 0.1 24.8 5.9 30.0 10.2 70.6 147.1 General and administrative- - - - 12.5 - 0.1 - 164.0 176.6 Operating earnings (loss)251.0$ (106.7) 106.6 (711.6) 316.0 53.6 (1,575.4) (344.4) (624.3) (2,635.2)$ Other income (expense) - net(259.1) Equity in income (losses) of associate and joint venture(10.3) Finance income7.6 Finance expense(42.8) Loss from continuing operations before tax(2,939.8)$ Loss from discontinued operation before tax (d)(736.3)$ Operating segments
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
(a) Non-operating segments include development properties.
(b) Corporate and other includes corporate, Cerro Casale, shutdown and other non-operating assets (including La Coipa (as of January 1,
2014), Lobo-Marte and White Gold). The comparative figures have been reclassified to conform to the December 31, 2014 segment
presentation.
(c) Segmented 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.
(d) On June 10, 2013, the Company announced that it would not proceed with further development of the FDN project in Ecuador. On
December 17, 2014, the Company sold its interest in Aurelian Resources Inc. and the FDN Project. See Note 6.
ii.
Geographic segments
The following table shows metal sales and property, plant and equipment by geographic region:
(a) Geographic location is determined based on location of the mining assets.
FS55 KINROSS GOLD 2014 ANNUAL REPORT
Fort KnoxRound MountainParacatuMaricungaKupol Kettle River-BuckhornTasiastChiranoCorporate and other (b)Discontinued Operation (d)TotalProperty, plant and equipment at:December 31, 2014467.0$ 189.1 1,806.2 138.0 990.2 11.7 809.5 634.4 363.3 - 5,409.4$ Total assets at:December 31, 2014703.3$ 262.0 2,058.7 416.4 1,956.6 38.9 1,465.4 796.9 1,253.2 - 8,951.4$ Capital expenditures for year ended December 31, 2014 (c)85.2$ 44.3 105.0 29.7 87.9 6.4 147.7 61.1 38.4 - 605.7$ Operating segmentsNon-operating segments(a)Fort KnoxRound MountainParacatuMaricungaKupol Kettle River-BuckhornTasiastChiranoCorporate and other (b)Discontinued Operation (d)TotalProperty, plant and equipment at:December 31, 2013486.0$ 164.8 1,863.3 135.8 1,163.0 54.4 1,082.1 1,085.0 548.3 - 6,582.7$ Total assets at:December 31, 2013721.9$ 230.2 2,113.6 342.0 2,262.1 102.8 1,669.2 1,251.6 1,591.4 1.9 10,286.7$ Capital expenditures for year ended December 31, 2013 (c)137.6$ 63.2 152.8 57.8 117.1 8.4 729.7 96.0 33.1 14.3 1,410.0$ Operating segmentsNon-operating segments(a)2014201320142013Geographic information (a)United States883.4$ 1,039.6$ 672.2$ 710.1$ Russian Federation947.5 775.1 990.2 1,163.0 Brazil644.3 710.1 1,810.2 1,867.3 Chile 316.4 522.4 391.3 477.3 Mauritania319.8 344.5 814.8 1,091.7 Ghana354.9 387.8 643.6 1,104.9 Canada- - 87.1 168.4 Total3,466.3$ 3,779.5$ 5,409.4$ 6,582.7$ Metal salesProperty, plant and equipmentYears ended December 31,As at December 31,
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
iii.
Significant customers
The following table represents sales to individual customers exceeding 10% of annual metal sales for the following periods:
The Company is not economically dependent on a limited number of customers for the sale of its product because gold can
be sold through numerous commodity market traders worldwide.
19.
COMMITMENTS AND CONTINGENCIES
i.
Commitments
Operating leases
The Company has a number of operating lease agreements involving office space and equipment. The operating 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. The operating 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. Future minimum lease payments required to meet obligations that have initial or remaining non-cancelable
lease terms in excess of one year are $11.5 million, $8.9 million, $7.2 million, $6.1 million and $5.1 million for each year
from 2015 to 2019, respectively, and $2.4 million thereafter.
Purchase commitments
At December 31, 2014, the Company had future commitments of approximately $43.3 million (December 31, 2013 – $68.6
million) for capital expenditures.
ii. Contingencies
General
Estimated losses from contingencies are accrued by a charge to earnings when information available prior to the issuance
of the financial statements indicates that it is likely that a future event will confirm that an asset has been impaired or a
liability incurred at the date of the financial statements and the amount of the loss can be reasonably estimated.
KINROSS GOLD 2014 ANNUAL REPORT FS56
For the year ended December 31, 2014:Fort KnoxRound MountainParacatuLa CoipaMaricungaKupolKettle River-BuckhornTasiastChiranoTotalCustomer1$ 83.2 19.4 115.8 1.7 262.9 430.1 61.1 59.3 49.6 $1,083.12 - - - - - 517.4 - - - 517.43 158.7 22.5 82.0 - 14.5 - 19.3 72.3 54.6 423.9$2,024.4% of total metal sales58.4%For the year ended December 31, 2013:Fort KnoxRound MountainParacatuLa CoipaMaricungaKupolKettle River-BuckhornTasiastChiranoTotalCustomer1$ 111.7 72.5 369.0 43.6 272.5 123.5 36.5 69.3 69.9 $1,168.52 - - - - - 651.6 - - - 651.63 156.6 48.0 41.4 38.4 - - 50.8 75.4 49.4 460.0$2,280.1% of total metal sales60.3%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
Cerro Casale contingency
The Company is obligated to pay $20 million to Barrick if a positive production decision is made relating to the Cerro Casale
project.
Other legal matters
The Company is from time to time involved in legal proceedings, arising in the ordinary course of its business. Typically, and
currently, except in the case of the actions described below, 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.
A putative securities class action complaint was filed on February 16, 2012 (the “U.S. Complaint”), entitled Bo Young Cha v.
Kinross Gold Corporation et al., in the United States District Court for the Southern District of New York (the “Court”). The
U.S. Complaint named as defendants the Company, Tye Burt, former President and CEO, Paul Barry, former Executive Vice
President and Chief Financial Officer, Glen Masterman, former Senior Vice President, Exploration and Kenneth Thomas,
former Senior Vice President, Projects. On May 31, 2012, the Court selected the City of Austin Police Retirement System
(“City of Austin”) to be lead plaintiff. Pursuant to an order of the Court, City of Austin filed an amended Complaint on July
23, 2012 (the “Amended U.S. Complaint”). The Amended U.S. Complaint alleges among other things, that, between August
2, 2010 and January 17, 2012, the defendants inflated Kinross’ share price by knowingly or recklessly making material
misrepresentations concerning (i) the extent and quality of the due diligence Kinross performed prior to its acquisition of
Red Back and (ii) Kinross’ schedule for developing the Tasiast mine. The defendants filed a motion to dismiss the Amended
U.S. Complaint on September 7, 2012 and oral argument on the motion to dismiss took place on November 30, 2012. On
March 22, 2013, the Court issued an order (the “Order”) granting in part and denying in part the defendants’ motion to
dismiss the Amended U.S. Complaint. The Order granted the defendants’ motion to dismiss with respect to all claims based
on (a) Kinross’ disclosures about its due diligence for the Red Back acquisition, and (b) Kinross’ disclosures before August 10,
2011 about the Tasiast development schedule. The Order denied the defendants’ motion to dismiss City of Austin’s
allegations that the defendants made misleading statements about the Tasiast development schedule between August 10,
2011 and January 17, 2012. On April 5, 2013, the defendants filed a motion asking the Court to reconsider the portions of
the Order allowing the City of Austin’s claims to proceed. On April 8, 2013, the Court (i) directed the City of Austin to respond
to the defendants’ motion for reconsideration by April 19, 2013, and (ii) stated that it will wait until after its ruling on
defendants’ motion for reconsideration before entering a case management schedule governing any future proceedings in
the lawsuit. The City of Austin filed a response on April 19, 2013 and the defendants filed a reply on May 1, 2013. On June
6, 2013 the Court issued an opinion and order denying the defendants’ motion for reconsideration. On July 8, 2013 the
defendants filed their answer to the Amended U.S. Complaint. The parties have completed the initial fact discovery phase
of litigation, which included the production of information and documents and the oral depositions of witnesses. The parties
have completed the submission of written arguments and supporting expert reports in respect of the plaintiffs’ Application
for Class Certification, which is expected to be heard and decided in the first quarter of 2015. Should the plaintiffs’
application be successful, submissions in respect of the defendants’ Motion on Summary Judgment are expected to be made
in the first half of 2015, with a hearing and decision expected in the second half of 2015. The defendants intend to vigorously
defend against the surviving claims of the Amended U.S. Complaint and believe they are without merit.
A notice of action in a proposed class proceeding under Ontario’s Class Proceedings Act, 1992, was filed in the Ontario
Superior Court of Justice (the “Ontario Court”) on March 12, 2012, entitled Trustees of the Musicians’ Pension Fund of
Canada v. Kinross Gold Corporation et al. (the “Ontario Action”). A statement of claim in the Ontario Action was
subsequently served on April 11, 2012. The Ontario Action named as defendants the Company, Tye Burt, former President
and CEO, Paul Barry, former Executive Vice President and Chief Financial Officer, Glen Masterman, former Senior Vice
President, Exploration, and Kenneth Thomas, former Senior Vice President, Projects. The Ontario Action alleges, among
other things, that Kinross made a number of misrepresentations relating to the quantity and quality of gold ore at the Tasiast
mine and the costs of operating the mine, and that Kinross and the individual defendants knew that such misrepresentations
were false or misleading when made. In a motion to the Ontario Court, the plaintiffs sought certification of the action as a
class proceeding and leave to proceed under the statutory civil liability provisions of Ontario’s Securities Act. In their written
argument on the motion, the plaintiffs also sought leave and certification of a claim based on allegations that Kinross made
a number of misrepresentations relating to the schedule for the Tasiast expansion project, and that Kinross and the individual
defendants knew that such misrepresentations were false or misleading when made. These claims were added to the
plaintiffs’ statement of claim in January 2014. A hearing on the plaintiffs’ leave and certification motions was held from
October 22–24, 2013. On November 5, 2013, the Ontario Court issued Reasons For Decision dismissing the leave motion in
respect of the statutory claims and dismissing the certification motion in respect of both the statutory claims and the
FS57 KINROSS GOLD 2014 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
common law negligent misrepresentation claims. The plaintiffs appealed the Order of the Ontario Court to the Ontario
Court of Appeal. The plaintiffs’ appeal was dismissed in its entirety by the Ontario Court of Appeal on December 17, 2014.
The plaintiffs are entitled to seek leave to appeal the Court of Appeal’s decision to the Supreme Court of Canada. To date,
the plaintiffs have not delivered an application for leave to appeal to the Supreme Court of Canada, although Kinross believes
that the plaintiffs will do so. Kinross believes that the claims are without merit and intends to continue to vigorously defend
against them.
Income taxes
The Company operates in numerous countries around the world and accordingly is subject to, and pays, annual income taxes
under the various regimes in countries in which it operates. These tax regimes are determined under general corporate
income tax laws of the country. The Company has historically filed, and continues to file, all required income 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. 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 income tax rules.
20.
RELATED PARTY TRANSACTIONS
There were no material related party transactions in 2014 and 2013 other than compensation of key management personnel.
Key management personnel
Compensation of key management personnel of the Company is as follows:
Key management personnel are defined as the Senior Leadership Team and members of the Board of Directors.
21.
CONSOLIDATING FINANCIAL STATEMENTS
The obligations of the Company under the notes are guaranteed by the following 100% owned subsidiaries of the Company
(the “guarantor subsidiaries”): Round Mountain Gold Corporation, Kinross Brasil Mineração S.A., BGO (Bermuda) Ltd., Crown
Resources Corporation, Fairbanks Gold Mining, Inc., Melba Creek Mining, Inc., Compania Minera Mantos de Oro, Compania
Minera Maricunga, Red Back Mining Inc., and Red Back Mining Mauritania No. 2 Ltd. 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. On December 17, 2014, the Company sold all of its interest in Aurelian Resources
Inc., previously a guarantor of the notes. As a result, Aurelian Resources Inc. was released in December 2014 as a guarantor,
in accordance with release provisions of the Indenture.
The following tables contain separate financial information related to the guarantor subsidiaries as set out in the
consolidating balance sheets as at December 31, 2014 and December 31, 2013 and the consolidating statements of
operations, statements of comprehensive loss and statements of cash flows for the years ended December 31, 2014 and
2013. 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.
KINROSS GOLD 2014 ANNUAL REPORT FS58
20142013 Cash compensation - Salaries, short term incentives, and other benefits9.4$ 10.7$ Long term incentives, including share-based payments11.8 11.7 Termination and post-retirement benefits4.8 3.0 Total compensation paid to key management personnel26.0$ 25.4$ Years ended December 31,
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
Consolidating balance sheet as at December 31, 2014
FS59 KINROSS GOLD 2014 ANNUAL REPORT
Kinross Gold Corp. Guarantor SubsidiariesGuarantor AdjustmentsTotalGuarantorsAssetsCurrent assetsCash and cash equivalents315.1$ 131.0$ -$ 446.1$ 537.4$ -$ 983.5$ Restricted cash- 3.5 - 3.5 37.8 - 41.3 Accounts receivable and other assets6.5 50.8 - 57.3 113.1 - 170.4 Intercompany receivables492.4 1,038.3 (190.1) 1,340.6 4,852.3 (6,192.9) - Current income tax recoverable- 76.3 - 76.3 38.9 - 115.2 Inventories 3.7 458.1 - 461.8 814.9 - 1,276.7 817.7 1,758.0 (190.1) 2,385.6 6,394.4 (6,192.9) 2,587.1 Non-current assets Property, plant and equipment 20.6 2,891.6 - 2,912.2 2,497.2 - 5,409.4 Goodwill - - - - 162.7 - 162.7 Long-term investments 109.4 0.1 - 109.5 1.5 - 111.0 Investments in associate and joint venture- 17.2 - 17.2 139.6 - 156.8 Intercompany investments4,705.7 (1,029.5) (2,703.0) 973.2 7,954.0 (8,927.2) - Deferred charges and other long-term assets 6.5 186.4 - 192.9 225.0 - 417.9 Long-term intercompany receivables2,403.3 2,610.7 (1,744.8) 3,269.2 4,599.3 (7,868.5) - Deferred tax assets- 6.7 - 6.7 99.8 - 106.5 Total assets8,063.2$ 6,441.2$ (4,637.9)$ 9,866.5$ 22,073.5$ (22,988.6)$ 8,951.4$ LiabilitiesCurrent liabilitiesAccounts payable and accrued liabilities74.7$ 160.1$ -$ 234.8$ 187.1$ -$ 421.9$ Intercompany payables201.4 598.1 (190.1) 609.4 5,646.2 (6,255.6) - Current income tax payable- 5.5 - 5.5 13.7 - 19.2 Current portion of long-term debt - - - - 60.0 - 60.0 Current portion of provisions- 23.4 - 23.4 19.7 - 43.1 Current portion of unrealized fair value of derivative liabilities23.0 26.8 - 49.8 10.4 - 60.2 299.1 813.9 (190.1) 922.9 5,937.1 (6,255.6) 604.4 Non-current liabilities Long-term debt 1,978.8 - - 1,978.8 19.3 - 1,998.1 Provisions11.2 506.6 - 517.8 263.1 - 780.9 Unrealized fair value of derivative liabilities9.2 - - 9.2 (9.2) - - Other long-term liabilities- 125.2 - 125.2 82.0 - 207.2 Long-term intercompany payables921.9 2,109.3 (1,744.8) 1,286.4 6,519.4 (7,805.8) - Deferred tax liabilities- 183.2 - 183.2 285.8 - 469.0 Total liabilities3,220.2 3,738.2 (1,934.9) 5,023.5 13,097.5 (14,061.4) 4,059.6 Equity Common shareholders' equityCommon share capital and common share purchase warrants14,587.7$ 3,221.0$ (3,221.0)$ 14,587.7$ 16,431.8$ (16,431.8)$ 14,587.7$ Contributed surplus239.0 82.8 (82.8) 239.0 2,401.1 (2,401.1) 239.0 Accumulated deficit(9,937.6) (582.0) 582.0 (9,937.6) (9,878.4) 9,878.4 (9,937.6) Accumulated other comprehensive income (loss)(46.1) (18.8) 18.8 (46.1) (27.3) 27.3 (46.1) Total common shareholders' equity4,843.0 2,703.0 (2,703.0) 4,843.0 8,927.2 (8,927.2) 4,843.0 Non-controlling interest- - - - 48.8 - 48.8 Total equity4,843.0 2,703.0 (2,703.0) 4,843.0 8,976.0 (8,927.2) 4,891.8 Total liabilities and equity8,063.2$ 6,441.2$ (4,637.9)$ 9,866.5$ 22,073.5$ (22,988.6)$ 8,951.4$ GuarantorsNon-guarantorsEliminationsConsolidated
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
Consolidating balance sheet as at December 31, 2013
KINROSS GOLD 2014 ANNUAL REPORT FS60
Kinross Gold Corp. Guarantor SubsidiariesGuarantor AdjustmentsTotalGuarantorsAssetsCurrent assetsCash and cash equivalents218.3$ 118.9$ -$ 337.2$ 397.3$ -$ 734.5$ Restricted cash15.5 4.2 - 19.7 39.3 - 59.0 Accounts receivable and other assets5.0 87.3 - 92.3 115.8 - 208.1 Intercompany receivables697.1 3,309.8 (344.3) 3,662.6 4,218.2 (7,880.8) - Current income tax recoverable- 30.2 - 30.2 51.1 - 81.3 Inventories - 453.4 - 453.4 869.5 - 1,322.9 935.9 4,003.8 (344.3) 4,595.4 5,691.2 (7,880.8) 2,405.8 Non-current assets Property, plant and equipment 23.8 2,806.9 - 2,830.7 3,752.0 - 6,582.7 Goodwill - 124.3 - 124.3 183.7 - 308.0 Long-term investments 20.2 0.2 - 20.4 - - 20.4 Investments in associate and joint ventures - 17.5 - 17.5 297.7 - 315.2 Intercompany investments5,947.3 (1,174.6) (2,687.9) 2,084.8 7,270.0 (9,354.8) - Deferred charges and other long-term assets 8.7 180.9 - 189.6 301.5 - 491.1 Long-term intercompany receivables2,272.4 475.2 (1,625.1) 1,122.5 2,617.3 (3,739.8) - Deferred tax assets- 40.4 - 40.4 123.1 - 163.5 Total assets9,208.3$ 6,474.6$ (4,657.3)$ 11,025.6$ 20,236.5$ (20,975.4)$ 10,286.7$ LiabilitiesCurrent liabilitiesAccounts payable and accrued liabilities68.6$ 198.0$ -$ 266.6$ 277.9$ -$ 544.5$ Intercompany payables237.6 754.8 (344.3) 648.1 7,231.0 (7,879.1) - Current income tax payable- 10.3 - 10.3 16.7 - 27.0 Current portion of long-term debt - - - - 60.0 - 60.0 Current portion of provisions- 20.9 - 20.9 19.2 - 40.1 Current portion of unrealized fair value of derivative liabilities3.3 38.0 - 41.3 - - 41.3 309.5 1,022.0 (344.3) 987.2 7,604.8 (7,879.1) 712.9 Non-current liabilities Long-term debt 1,981.4 - - 1,981.4 78.2 - 2,059.6 Provisions9.5 476.3 - 485.8 198.1 - 683.9 Unrealized fair value of derivative liabilities3.0 11.0 - 14.0 - - 14.0 Other long-term liabilities- 131.1 - 131.1 61.6 - 192.7 Long-term intercompany payables890.9 2,005.1 (1,625.1) 1,270.9 2,470.6 (3,741.5) - Deferred tax liabilities- 141.2 - 141.2 392.5 - 533.7 Total liabilities3,194.3 3,786.7 (1,969.4) 5,011.6 10,805.8 (11,620.6) 4,196.8 Equity Common shareholders' equityCommon share capital and common share purchase warrants14,737.1$ 2,975.3$ (2,975.3)$ 14,737.1$ 16,235.2$ (16,235.2)$ 14,737.1$ Contributed surplus84.5 82.8 (82.8) 84.5 2,334.0 (2,334.0) 84.5 Accumulated deficit(8,771.1) (337.9) 337.9 (8,771.1) (9,201.8) 9,201.8 (8,771.1) Accumulated other comprehensive income (loss)(36.5) (32.3) 32.3 (36.5) (12.6) 12.6 (36.5) Total common shareholders' equity6,014.0 2,687.9 (2,687.9) 6,014.0 9,354.8 (9,354.8) 6,014.0 Non-controlling interest- - - - 75.9 - 75.9 Total equity6,014.0 2,687.9 (2,687.9) 6,014.0 9,430.7 (9,354.8) 6,089.9 Total liabilities and equity9,208.3$ 6,474.6$ (4,657.3)$ 11,025.6$ 20,236.5$ (20,975.4)$ 10,286.7$ GuarantorsNon-guarantorsEliminationsConsolidated
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
Consolidating statement of operations for the year ended December 31, 2014
FS61 KINROSS GOLD 2014 ANNUAL REPORT
Kinross Gold Corp. Guarantor SubsidiariesGuarantor AdjustmentsTotalGuarantorsRevenueMetal sales1,341.9$ 1,672.5$ (1,174.5)$ 1,839.9$ 1,626.4$ -$ 3,466.3$ Cost of salesProduction cost of sales1,323.2 1,089.9 (1,174.5) 1,238.6 732.6 - 1,971.2 Depreciation, depletion and amortization7.3 350.2 - 357.5 517.2 - 874.7 Impairment charges 26.8 242.8 - 269.6 981.8 - 1,251.4 Total cost of sales1,357.3 1,682.9 (1,174.5) 1,865.7 2,231.6 - 4,097.3 Gross loss(15.4) (10.4) - (25.8) (605.2) - (631.0) Other operating expense1.8 24.6 - 26.4 85.4 - 111.8 Exploration and business development22.3 16.5 - 38.8 66.8 - 105.6 General and administrative108.4 5.3 - 113.7 65.1 - 178.8 Operating loss(147.9) (56.8) - (204.7) (822.5) - (1,027.2) Other income (expense) - net(0.9) (27.0) - (27.9) 325.0 (512.6) (215.5) Equity in earnings (losses) of associate, joint venture and intercompany investments(1,251.0) (938.1) 1,102.1 (1,087.0) (5.4) 1,086.6 (5.8) Finance income29.0 2.2 (2.2) 29.0 59.3 (77.1) 11.2 Finance expense(40.5) (25.5) 2.2 (63.8) (93.4) 77.1 (80.1) Loss before tax(1,411.3) (1,045.2) 1,102.1 (1,354.4) (537.0) 574.0 (1,317.4) Income tax recovery (expense) - net11.3 (56.9) - (45.6) (64.1) - (109.7) Loss from continuing operations after tax(1,400.0) (1,102.1) 1,102.1 (1,400.0) (601.1) 574.0 (1,427.1) Earnings (loss) from discontinued operations after tax233.5 (3.3) 3.3 233.5 (0.2) 0.2 233.5 Net loss(1,166.5)$ (1,105.4)$ 1,105.4$ (1,166.5)$ (601.3)$ 574.2$ (1,193.6)$ Net (loss) earnings from continuing operations attributable to:Non-controlling interest-$ -$ -$ -$ (27.1)$ -$ (27.1)$ Common shareholders(1,400.0)$ (1,102.1)$ 1,102.1$ (1,400.0)$ (574.0)$ 574.0$ (1,400.0)$ Net (loss) earnings attributable to:Non-controlling interest-$ -$ -$ -$ (27.1)$ -$ (27.1)$ Common shareholders(1,166.5)$ (1,105.4)$ 1,105.4$ (1,166.5)$ (574.2)$ 574.2$ (1,166.5)$ GuarantorsNon-guarantorsEliminationsConsolidated
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
Consolidating statement of operations for the year ended December 31, 2013
KINROSS GOLD 2014 ANNUAL REPORT FS62
Kinross Gold Corp. Guarantor SubsidiariesGuarantor AdjustmentsTotalGuarantorsRevenueMetal sales137.5$ 2,053.6$ (133.5)$ 2,057.6$ 1,721.9$ -$ 3,779.5$ Cost of salesProduction cost of sales133.6 1,164.4 (133.5) 1,164.5 839.9 - 2,004.4 Depreciation, depletion and amortization6.0 444.7 - 450.7 378.1 - 828.8 Impairment charges - 939.7 - 939.7 2,229.9 - 3,169.6 Total cost of sales139.6 2,548.8 (133.5) 2,554.9 3,447.9 - 6,002.8 Gross loss(2.1) (495.2) - (497.3) (1,726.0) - (2,223.3) Other operating expense3.7 17.1 - 20.8 67.4 - 88.2 Exploration and business development25.2 18.8 - 44.0 103.1 - 147.1 General and administrative112.2 5.9 - 118.1 58.5 - 176.6 Operating loss(143.2) (537.0) - (680.2) (1,955.0) - (2,635.2) Other income (expense) - net(14.8) (23.0) - (37.8) 659.8 (881.1) (259.1) Equity in earnings (losses) of associate, joint venture and intercompany investments(2,864.9) (2,185.3) 2,798.8 (2,251.4) (7.5) 2,248.6 (10.3) Finance income27.9 3.2 (2.1) 29.0 47.5 (68.9) 7.6 Finance expense(12.2) (17.1) 2.1 (27.2) (84.5) 68.9 (42.8) Loss before tax(3,007.2) (2,759.2) 2,798.8 (2,967.6) (1,339.7) 1,367.5 (2,939.8) Income tax recovery (expense) - net(5.4) (39.6) - (45.0) (27.4) - (72.4) Loss from continuing operations after tax(3,012.6) (2,798.8) 2,798.8 (3,012.6) (1,367.1) 1,367.5 (3,012.2) Earnings (loss) from discontinued operations after tax(730.1) (730.1) 730.1 (730.1) (730.1) 730.1 (730.1) Net loss(3,742.7)$ (3,528.9)$ 3,528.9$ (3,742.7)$ (2,097.2)$ 2,097.6$ (3,742.3)$ Net (loss) earnings from continuing operations attributable to:Non-controlling interest-$ -$ -$ -$ 0.4$ -$ 0.4$ Common shareholders(3,012.6)$ (2,798.8)$ 2,798.8$ (3,012.6)$ (1,367.5)$ 1,367.5$ (3,012.6)$ Net (loss) earnings attributable to:Non-controlling interest-$ -$ -$ -$ 0.4$ -$ 0.4$ Common shareholders(3,742.7)$ (3,528.9)$ 3,528.9$ (3,742.7)$ (2,097.6)$ 2,097.6$ (3,742.7)$ GuarantorsNon-guarantorsEliminationsConsolidated
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
Consolidating statement of comprehensive loss for the year ended December 31, 2014
FS63 KINROSS GOLD 2014 ANNUAL REPORT
Kinross Gold Corp. Guarantor SubsidiariesGuarantor AdjustmentsTotalGuarantorsNet loss$(1,166.5) $(1,105.4) $1,105.4 $(1,166.5) $(601.3) $574.2 $(1,193.6) Other comprehensive income (loss), net of tax: Other comprehensive income (loss) to be reclassified to profit or loss in subsequent periods:Change in fair value of investments (a)9.7 (0.2) - 9.5 (2.5) - 7.0 Reclassification to earnings for impairment charges1.3 0.2 - 1.5 - - 1.5 Accumulated other comprehensive loss related to investments sold (b)(6.1) - - (6.1) - - (6.1) Changes in fair value of derivative financial instruments designated as cash flow hedges (c) (22.8) (8.5) - (31.3) (9.0) - (40.3) Accumulated other comprehensive income (loss) related to derivatives settled (d)8.3 17.3 - 25.6 2.7 - 28.3 (9.6) 8.8 - (0.8) (8.8) - (9.6) Equity in other comprehensive income (loss) of intercompany investments- - (8.8) (8.8) - 8.8 - Total comprehensive income (loss)$(1,176.1) $(1,096.6) $1,096.6 $(1,176.1) $(610.1) $583.0 $(1,203.2) Comprehensive loss from continuing operations$(1,409.6) $(1,093.3) $1,093.3 $(1,409.6) $(609.9) $582.8 $(1,436.7) Comprehensive income (loss) from discontinued operations233.5 (3.3) 3.3 233.5 (0.2) 0.2 233.5 Total comprehensive income (loss)$(1,176.1) $(1,096.6) $1,096.6 $(1,176.1) $(610.1) $583.0 $(1,203.2) Attributable to non-controlling interest$- $- $- $- $(27.1) $- $(27.1) Attributable to common shareholders$(1,176.1) $(1,096.6) $1,096.6 $(1,176.1) $(583.0) $583.0 $(1,176.1) (a) Net of tax of$- $- $- $- $- $- $- (b) Net of tax of$- $- $- $- $- $- $- (c) Net of tax of$- $(1.9) $- $(1.9) $(3.0) $- $(4.9) (d) Net of tax of$- $8.2 $- $8.2 $0.9 $- $9.1 GuarantorsNon-guarantorsEliminationsConsolidated
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
Consolidating statement of comprehensive loss for the year ended December 31, 2013
KINROSS GOLD 2014 ANNUAL REPORT FS64
Kinross Gold Corp. Guarantor SubsidiariesGuarantor AdjustmentsTotalGuarantorsNet loss$(3,742.7) $(3,528.9) $3,528.9 $(3,742.7) $(2,097.2) $2,097.6 $(3,742.3) Other comprehensive income (loss), net of tax: Other comprehensive income (loss) to be reclassified to profit or loss in subsequent periods:Change in fair value of investments (a)(14.7) (1.2) - (15.9) (13.2) - (29.1) Reclassification to earnings for impairment charges20.2 1.1 - 21.3 - - 21.3 Accumulated other comprehensive loss related to investments sold (b)- - - - - - - Changes in fair value of derivative financial instruments designated as cash flow hedges (c) (9.6) (34.9) - (44.5) (2.0) - (46.5) Accumulated other comprehensive income (loss) related to derivatives settled (d)1.2 14.2 - 15.4 (2.5) - 12.9 (2.9) (20.8) - (23.7) (17.7) - (41.4) Equity in other comprehensive income (loss) of intercompany investments(38.5) - 20.8 (17.7) - 17.7 - Total comprehensive income (loss)$(3,784.1) $(3,549.7) $3,549.7 $(3,784.1) $(2,114.9) $2,115.3 $(3,783.7) Comprehensive loss from continuing operations$(3,054.0) $(2,819.6) $2,819.6 $(3,054.0) $(1,384.8) $1,385.2 $(3,053.6) Comprehensive income (loss) from discontinued operations(730.1) (730.1) 730.1 (730.1) (730.1) 730.1 (730.1) Total comprehensive income (loss)$(3,784.1) $(3,549.7) $3,549.7 $(3,784.1) $(2,114.9) $2,115.3 $(3,783.7) Attributable to non-controlling interest$- $- $- $- $0.4 $- $0.4 Attributable to common shareholders$(3,784.1) $(3,549.7) $3,549.7 $(3,784.1) $(2,115.3) $2,115.3 $(3,784.1) (a) Net of tax of$- $- $- $- $(1.2) $- $(1.2) (b) Net of tax of$- $- $- $- $- $- $- (c) Net of tax of$- $(17.2) $- $(17.2) $(0.9) $- $(18.1) (d) Net of tax of$- $8.7 $- $8.7 $(0.8) $- $7.9 GuarantorsNon-guarantorsEliminationsConsolidated
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
Consolidating statement of cash flows for the year ended December 31, 2014
FS65 KINROSS GOLD 2014 ANNUAL REPORT
Kinross Gold Corp. Guarantor SubsidiariesGuarantor AdjustmentsTotalGuarantorsNet inflow (outflow) of cash related to the following activities:Operating:Loss from continuing operations(1,400.0)$ (1,102.1)$ 1,102.1$ (1,400.0)$ (601.1)$ 574.0$ (1,427.1)$ Adjustments to reconcile net loss from continuing operations to net cash provided from (used in) operating activities: Depreciation, depletion and amortization7.3 350.2 - 357.5 517.2 - 874.7 Losses (gains) on sale of other assets - net(4.6) (1.1) - (5.7) 8.8 - 3.1 Impairment charges26.8 242.8 - 269.6 981.8 - 1,251.4 Impairment of investments1.3 0.2 - 1.5 156.6 - 158.1 Equity in losses (earnings) of associate, joint venture and intercompany investments1,251.0 938.1 (1,102.1) 1,087.0 5.4 (1,086.6) 5.8 Non-hedge derivative (gains) losses - net14.7 1.2 - 15.9 (10.8) - 5.1 Share-based compensation expense26.2 - - 26.2 - - 26.2 Accretion expense3.9 19.0 - 22.9 10.3 - 33.2 Deferred tax expense (recovery) - 61.9 - 61.9 (75.7) - (13.8) Foreign exchange (gains) losses and other4.3 (2.6) - 1.7 41.0 - 42.7 Reclamation expense (recovery)- - - - 17.5 - 17.5 Changes in operating assets and liabilities: Accounts receivable and other assets(1.9) 15.6 - 13.7 13.2 - 26.9 Inventories(3.7) (21.2) - (24.9) (34.5) - (59.4) Accounts payable and accrued liabilities0.4 (8.1) - (7.7) 106.7 - 99.0 Cash flow provided from (used in) operating activities(74.3) 493.9 - 419.6 1,136.4 (512.6) 1,043.4 Income taxes paid- (11.4) - (11.4) (173.9) - (185.3) Net cash flow of continuing operations provided from (used in) operating activities(74.3) 482.5 - 408.2 962.5 (512.6) 858.1 Net cash flow of discontinued operations used in operating activities(1.2) (3.8) - (5.0) (3.8) - (8.8) Investing: Additions to property, plant and equipment(29.9) (279.7) - (309.6) (322.2) - (631.8) Net proceeds from (additions to) long-term investments and other assets8.0 (33.4) - (25.4) (30.1) - (55.5) Net proceeds from the sale of property, plant and equipment- 1.8 - 1.8 28.7 - 30.5 Disposals of short-term investments- - - - - - - Decrease (increase) in restricted cash15.5 0.6 - 16.1 1.6 - 17.7 Interest received and other0.5 2.1 - 2.6 1.9 - 4.5 Net cash flow of continuing operations provided from (used in) investing activities(5.9) (308.6) - (314.5) (320.1) - (634.6) Net cash flow of discontinued operations provided from (used in) investing activities150.0 (0.8) - 149.2 (1.0) - 148.2 Financing: Issuance of common shares on exercise of options 0.1 - - 0.1 - - 0.1 Proceeds from issuance of debt492.9 420.1 - 913.0 - - 913.0 Repayment of debt(500.0) (420.1) - (920.1) (60.0) - (980.1) Interest paid(17.4) (0.1) - (17.5) (3.1) - (20.6) Dividends received from (paid to) common shareholders and subsidiaries96.7 (44.6) - 52.1 (564.7) 512.6 - Settlement of derivative instruments(2.0) - - (2.0) - - (2.0) Intercompany advances(38.6) (108.5) - (147.1) 147.1 - - Other(3.5) (4.0) - (7.5) 2.9 - (4.6) Net cash flow of continuing operations provided from (used in) financing activities28.2 (157.2) - (129.0) (477.8) 512.6 (94.2) Net cash flow of discontinued operations used in financing activities- - - - - - - Effect of exchange rate changes on cash and cash equivalents of continuing operations- - - - (19.7) - (19.7) Increase (decrease) in cash and cash equivalents96.8 12.1 - 108.9 140.1 - 249.0 Cash and cash equivalents, beginning of period218.3 118.9 - 337.2 397.3 - 734.5 Cash and cash equivalents, end of period315.1$ 131.0$ -$ 446.1$ 537.4$ -$ 983.5$ GuarantorsNon-guarantorsEliminationsConsolidated
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
(Tabular amounts in millions of United States dollars)
Consolidating statement of cash flows for the year ended December 31, 2013
KINROSS GOLD 2014 ANNUAL REPORT FS66
Kinross Gold Corp. Guarantor SubsidiariesGuarantor AdjustmentsTotalGuarantorsNet inflow (outflow) of cash related to the following activities:Operating:Loss from continuing operations(3,012.6)$ (2,798.8)$ 2,798.8$ (3,012.6)$ (1,367.1)$ 1,367.5$ (3,012.2)$ Adjustments to reconcile net loss from continuing operations to net cash provided from (used in) operating activities: Depreciation, depletion and amortization6.0 444.7 - 450.7 378.1 - 828.8 Loss (gains) on sale of other assets - net(0.5) (1.1) - (1.6) 2.7 - 1.1 Impairment charges- 939.7 - 939.7 2,229.9 - 3,169.6 Impairment of investments16.8 1.0 - 17.8 222.5 - 240.3 Equity in losses (earnings) of associate, joint venture and intercompany investments2,864.9 2,185.3 (2,798.8) 2,251.4 7.5 (2,248.6) 10.3 Non-hedge derivative (gains) losses - net(0.8) (0.3) - (1.1) (1.5) - (2.6) Share-based compensation expense32.9 - - 32.9 - - 32.9 Accretion expense1.1 12.1 - 13.2 7.4 - 20.6 Deferred tax (recovery) expense- (25.4) - (25.4) (222.1) - (247.5) Foreign exchange (gains) losses and other(3.4) 18.5 - 15.1 94.2 - 109.3 Reclamation expense (recovery)- - - - (1.0) - (1.0) Changes in operating assets and liabilities: Accounts receivable and other assets0.4 19.8 - 20.2 (47.9) - (27.7) Inventories- (33.8) - (33.8) (163.7) - (197.5) Accounts payable and accrued liabilities10.1 (3.9) - 6.2 151.4 - 157.6 Cash flow provided from (used in) operating activities(85.1) 757.8 - 672.7 1,290.4 (881.1) 1,082.0 Income taxes paid(5.4) (99.3) - (104.7) (180.7) - (285.4) Net cash flow of continuing operations provided from (used in) operating activities(90.5) 658.5 - 568.0 1,109.7 (881.1) 796.6 Net cash flow of discontinued operations used in operating activities- (0.1) - (0.1) (21.8) - (21.9) Investing: Additions to property, plant and equipment(8.5) (417.3) - (425.8) (836.6) - (1,262.4) Net proceeds from (additions to) long-term investments and other assets(6.6) (38.2) - (44.8) (86.4) - (131.2) Net proceeds from the sale of property, plant and equipment- 2.5 - 2.5 3.6 - 6.1 Disposals of short-term investments349.8 - - 349.8 - - 349.8 Decrease (increase) in restricted cash- (1.3) - (1.3) 0.1 - (1.2) Interest received and other1.0 1.9 - 2.9 4.9 - 7.8 Net cash flow of continuing operations provided from (used in) investing activities335.7 (452.4) - (116.7) (914.4) - (1,031.1) Net cash flow of discontinued operations provided from (used in) investing activities- - - - (14.3) - (14.3) Financing: Issuance of common shares on exercise of options and warrants6.2 - - 6.2 - - 6.2 Proceeds from issuance of debt- - - - - - - Repayment of debt(460.0) (3.3) - (463.3) (60.0) - (523.3) Interest paid- - - - (5.0) - (5.0) Dividends received from (paid to) common shareholders and subsidiaries307.4 (153.0) - 154.4 (1,126.8) 881.1 (91.3) Settlement of derivative instruments- - - - - - - Intercompany advances(521.0) (108.2) - (629.2) 629.2 - - Other(2.1) - - (2.1) - - (2.1) Net cash flow of continuing operations provided from (used in) financing activities(669.5) (264.5) - (934.0) (562.6) 881.1 (615.5) Net cash flow of discontinued operations used in financing activities- - - - - - - Effect of exchange rate changes on cash and cash equivalents of continuing operations- - - - (12.0) - (12.0) Increase (decrease) in cash and cash equivalents(424.3) (58.5) - (482.8) (415.4) - (898.2) Cash and cash equivalents, beginning of period642.6 177.4 - 820.0 812.7 - 1,632.7 Cash and cash equivalents, end of period218.3$ 118.9$ -$ 337.2$ 397.3$ -$ 734.5$ GuarantorsNon-guarantorsEliminationsConsolidated
MINERAL RESERVE AND
MINERAL RESOURCE STATEMENT
PROVEN AND PROBABLE MINERAL RESERVES
Gold
Proven and Probable Mineral Reserves (1, 3, 4, 5, 6, 8)
Kinross Gold Corporation’s Share at December 31, 2014
Property
Location
Kinross
Interest
(%)
Proven
Probable
Proven and Probable
Tonnes
(kt)
Grade
(g/t)
Ounces
(koz)
Tonnes
(kt)
Grade
(g/t)
Ounces
(koz)
Tonnes
(kt)
Grade
(g/t)
Ounces
(koz)
NORTH AMERICA
Fort Knox Area
Kettle River
Round Mountain Area
Subtotal
SOUTH AMERICA
Cerro Casale 8
Maricunga Area
Paracatu
Subtotal
AFRICA
Chirano
Tasiast
Subtotal
RUSSIA
Dvoinoye
Kupol
Subtotal
Total Gold
USA
USA
USA
100.0%
100.0%
50.0%
67,855
–
15,255
0.40
–
0.84
872
–
414
95,989
351
12,045
0.49
9.00
0.71
1,526
101
275
163,844
351
27,300
0.46
9.00
0.79
2,398
101
689
83,110
0.48
1,286
108,385
0.55
1,902
191,495
0.52
3,188
Chile
Chile
Brazil
25.0%
100.0%
100.0%
57,425
24,176
496,857
0.65
0.82
0.41
1,195
637
6,541
241,975
42,511
252,268
0.59
0.76
0.49
4,616
1,033
3,969
299,400
66,687
749,125
0.60
0.78
0.44
5,811
1,670
10,510
578,458
0.45
8,373
536,754
0.56
9,618
1,115,212
0.50
17,991
Ghana
Mauritania
90.0%
100.0%
7,504
40,810
1.23
1.38
296
1,805
4,551
121,012
4.29
1.90
628
7,391
12,055
161,822
2.38
1.77
924
9,196
48,314
1.35
2,101
125,563
1.99
8,019
173,877
1.81
10,120
Russia
Russia
100.0%
100.0%
629
1,236
18.11
8.61
1,865
11.81
366
342
708
1,508
6,380
13.66
8.52
662
1,747
2,137
7,616
14.97
8.53
1,028
2,089
7,888
9.50
2,409
9,753
9.94
3,117
711,747
0.54
12,468
778,590
0.88
21,948
1,490,337
0.72
34,416
67 KINROSS GOLD 2014 ANNUAL REPORT
Silver
Proven and Probable Mineral Reserves (1, 3, 4, 5, 6, 8)
Kinross Gold Corporation’s Share at December 31, 2014
Property
Location
Kinross
Interest
(%)
Proven
Probable
Proven and Probable
Tonnes
(kt)
Grade
(g/t)
Ounces
(koz)
Tonnes
(kt)
Grade
(g/t)
Ounces
(koz)
Tonnes
(kt)
Grade
(g/t)
Ounces
(koz)
NORTH AMERICA
Round Mountain Area
Subtotal
SOUTH AMERICA
Cerro Casale 8
Subtotal
RUSSIA
Dvoinoye
Kupol
Subtotal
Total Silver
USA
50.0%
518
518
Chile
25.0%
57,425
57,425
11.6
11.6
1.9
1.9
194
194
2,608
2,608
8.8
8.8
741
741
3,126
3,126
9.3
9.3
935
935
3,522
241,975
1.4
11,150
299,400
1.5
14,672
3,522
241,975
1.4
11,150
299,400
1.5
14,672
Russia
Russia
100.0%
100.0%
629
1,236
27.1
112.3
548
4,464
1,508
6,380
21.4
109.1
1,040
22,379
2,137
7,616
23.1
109.6
1,588
26,843
1,865
112.3
5,012
7,888
92.3
23,419
9,753
90.7
28,431
59,808
4.5
8,728
252,471
4.4
35,310
312,279
4.4
44,038
Copper
Proven and Probable Mineral Reserves (1, 3, 4, 5, 6, 8)
Kinross Gold Corporation’s Share at December 31, 2014
Property
Location
Kinross
Interest
(%)
Proven
Probable
Proven and Probable
Tonnes
(kt)
Grade
(%)
Pounds
(Mlb)
Tonnes
(kt)
Grade
(%)
Pounds
(Mlb)
Tonnes
(kt)
Grade
(%)
Pounds
(Mlb)
SOUTH AMERICA
Cerro Casale 8
Subtotal
Total Copper
Chile
25.0%
57,425
57,425
57,425
0.19
0.19
0.19
240
241,975
0.23
1,204
299,400
0.15
1,444
240
241,975
0.23
1,204
299,400
0.15
1,444
240
241,975
0.23
1,204
299,400
0.15
1,444
KINROSS GOLD 2014 ANNUAL REPORT 68
MEASURED AND INDICATED MINERAL RESOURCES
Gold
Measured and Indicated Mineral Resources (Excludes Proven and Probable Mineral Reserves) (2, 3, 4, 5, 6, 7, 8, 9)
Kinross Gold Corporation’s Share at December 31, 2014
Property
Location
NORTH AMERICA
Fort Knox Area
Kettle River
Round Mountain Area
White Gold
USA
USA
USA
Yukon
Kinross
Interest
(%)
100.0%
100.0%
50.0%
100.0%
Chile
Chile
Chile
Chile
Brazil
25.0%
100.0%
100.0%
100.0%
100.0%
Measured
Indicated
Measured and Indicated
Tonnes
(kt)
Grade
(g/t)
Ounces
(koz)
Tonnes
(kt)
Grade
(g/t)
Ounces
(koz)
Tonnes
(kt)
Grade
(g/t)
Ounces
(koz)
8,416
–
10,414
–
18,830
5,739
11,410
96,646
21,499
125,395
0.41
–
0.61
–
0.52
0.30
1.52
1.13
0.63
0.28
110
–
204
–
97,037
18
13,354
9,788
0.43
7.27
0.55
2.67
1,336
4
236
840
105,453
18
23,768
9,788
0.43
7.27
0.58
2.67
1,446
4
440
840
314
120,197
0.62
2,416
139,027
0.61
2,730
56
559
3,525
436
1,119
68,423
7,986
88,720
173,963
165,890
0.36
1.23
1.22
0.64
0.35
787
317
3,489
3,560
1,883
74,162
19,396
185,366
195,462
291,285
0.35
1.40
1.18
0.64
0.32
843
876
7,014
3,996
3,002
260,689
0.68
5,695
504,982
0.62
10,036
765,671
0.64
15,731
Ghana
Mauritania
90.0%
100.0%
Russia
Russia
100.0%
100.0%
5,797
10,496
16,293
2.05
0.68
1.17
–
–
–
–
–
–
383
229
612
–
–
–
9,559
75,077
2.70
1.21
831
2,919
15,356
85,573
2.46
1.14
1,214
3,148
84,636
1.38
3,750
100,929
1.34
4,362
118
386
9.94
15.97
504
14.56
38
198
236
118
386
9.94
15.97
504
14.56
38
198
236
295,812
0.70
6,621
710,319
0.72
16,438
1,006,131
0.71
23,059
Subtotal
SOUTH AMERICA
Cerro Casale 8
La Coipa 9
Lobo Marte
Maricunga Area
Paracatu
Subtotal
AFRICA
Chirano
Tasiast
Subtotal
RUSSIA
Dvoinoye
Kupol
Subtotal
Total Gold
Silver
Measured and Indicated Mineral Resources (Excludes Proven and Probable Mineral Reserves) (2, 3, 4, 5, 6, 7, 8, 9)
Kinross Gold Corporation’s Share at December 31, 2014
Property
Location
Kinross
Interest
(%)
NORTH AMERICA
Round Mountain Area
USA
50.0%
Measured
Indicated
Measured and Indicated
Tonnes
(kt)
Grade
(g/t)
Ounces
(koz)
Tonnes
(kt)
Grade
(g/t)
Ounces
(koz)
Tonnes
(kt)
Grade
(g/t)
Ounces
(koz)
86
86
9.3
9.3
26
26
1,009
1,009
8.4
8.4
273
273
1,095
1,095
8.5
8.5
299
299
Chile
Chile
25.0%
100.0%
5,739
11,410
1.2
37.9
220
13,906
68,423
7,986
1.1
37.2
2,328
9,564
74,162
19,396
1.1
37.6
2,548
23,470
17,149
25.6
14,126
76,409
4.8
11,892
93,558
8.6
26,018
Russia
Russia
100.0%
100.0%
–
–
–
–
–
–
–
–
–
118
386
20.3
185.1
77
2,298
118
386
20.3
185.1
77
2,298
504
146.5
2,375
504
146.5
2,375
17,235
25.5
14,152
77,922
5.8
14,540
95,157
9.4
28,692
Subtotal
SOUTH AMERICA
Cerro Casale 8
La Coipa 9
Subtotal
RUSSIA
Dvoinoye
Kupol
Subtotal
Total Silver
69 KINROSS GOLD 2014 ANNUAL REPORT
Copper
Measured and Indicated Mineral Resources (Excludes Proven and Probable Mineral Reserves) (2, 3, 4, 5, 6, 7, 8)
Kinross Gold Corporation’s Share at December 31, 2014
Property
Location
Kinross
Interest
(%)
Measured
Indicated
Measured and Indicated
Tonnes
(kt)
Grade
(%)
Pounds
(Mlb)
Tonnes
(kt)
Grade
(%)
Pounds
(Mlb)
Tonnes
(kt)
Grade
(%)
Pounds
(Mlb)
SOUTH AMERICA
Cerro Casale 8
Subtotal
Total Copper
Chile
25.0%
5,739
5,739
0.1
0.1
5,739
0.13
17
17
17
68,423
68,423
0.2
0.2
68,423
0.16
248
248
248
74,162
74,162
74,162
0.16
0.16
0.16
265
265
265
INFERRED MINERAL RESOURCES
Gold
Inferred Mineral Resources (2, 3, 4, 5, 6, 7, 8, 9)
Kinross Gold Corporation’s Share at December 31, 2014
Property
NORTH AMERICA
Fort Knox Area
Kettle River
Round Mountain Area
White Gold
Subtotal
SOUTH AMERICA
Cerro Casale 8
La Coipa 9
Lobo Marte
Maricunga Area
Paracatu
Subtotal
AFRICA
Chirano
Tasiast
Subtotal
RUSSIA
Dvoinoye
Kupol
Subtotal
Total Gold
Kinross
Interest
(%)
100.0%
100.0%
50.0%
100.0%
Location
USA
USA
USA
Yukon
Tonnes
(kt)
13,500
26
7,861
2,166
23,553
Chile
Chile
Chile
Chile
Brazil
25.0% 123,860
726
2,003
57,439
2,283
100.0%
100.0%
100.0%
100.0%
Inferred
Grade
(g/t)
Ounces
(koz)
0.44
7.19
0.51
1.79
0.59
0.38
1.06
1.07
0.58
0.31
189
6
130
125
450
1,498
25
69
1,065
22
Ghana
Mauritania
90.0%
100.0%
Russia
Russia
100.0%
100.0%
186,311
0.45
2,679
1,204
8,951
10,155
122
474
596
3.43
1.71
1.91
12.10
12.55
12.46
133
492
625
47
191
238
220,615
0.56
3,992
KINROSS GOLD 2014 ANNUAL REPORT 70
Silver
Inferred Mineral Resources (2, 3, 4, 5, 6, 7, 8, 9)
Kinross Gold Corporation’s Share at December 31, 2014
Property
NORTH AMERICA
Round Mountain Area
Subtotal
SOUTH AMERICA
Cerro Casale 8
La Coipa 9
Subtotal
RUSSIA
Dvoinoye
Kupol
Subtotal
Total Silver
Copper
Inferred Mineral Resources (2, 3, 4, 5, 6, 7, 8)
Kinross Gold Corporation’s Share at December 31, 2014
Property
SOUTH AMERICA
Cerro Casale 8
Subtotal
Total Copper
Kinross
Interest
(%)
Inferred
Tonnes
(kt)
Location
Grade
(g/t)
Ounces
(koz)
USA
50.0%
647
647
5.8
5.8
121
121
Chile
Chile
25.0% 123,860
726
100.0%
1.0
28.8
4,126
673
124,586
1.2
4,799
Russia
Russia
100.0%
100.0%
122
474
596
16.6
199.3
65
3,034
161.9
3,099
125,829
2.0
8,019
Kinross
Interest
(%)
Inferred
Tonnes
(kt)
Location
Grade
(%)
Pounds
(Mlb)
Chile
25.0% 123,860
123,860
123,860
0.19
0.19
0.19
523
523
523
71 KINROSS GOLD 2014 ANNUAL REPORT
Mineral Reserve and Mineral Resource Statement Notes
(1) Unless otherwise noted, the Company’s mineral reserves are estimated using appropriate cut-off grades based on an assumed gold price of
$US 1,200 per ounce, a silver price of $US 20.00 per ounce and a copper price of $US $3.00 per pound. 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 and are estimated based on the following foreign exchange rates:
Russian Rouble to $US
Chilean Peso to $US
Brazilian Real to $US
Ghanaian Cedi to $US
35
575
2.50
2.75
Mauritanian Ouguiya to $US
290
(2) Unless otherwise noted, the Company’s mineral resources are estimated using appropriate cut-off grades based on a gold price of $US 1,400 per
ounce, a silver price of $US 22.00 per ounce, a copper price of $US $3.25 per pound and the following foreign exchange rates:
Russian Rouble to $US
Chilean Peso to $US
Brazilian Real to $US
Ghanaian Cedi to $US
34
525
2.50
2.50
Mauritanian Ouguiya to $US
300
(3)
The Company’s mineral reserve and mineral resource estimates as at December 31, 2014 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.
(4) 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” and “probable mineral reserve” are Canadian mining terms as defined in accordance
with NI 43-101 and the CIM Definition Standards. The CIM Definition Standards differ from the definitions in the United States Securities and
Exchange Commission (“SEC”) Guide 7 (“SEC Guide 7”) under the United States Securities Act of 1933, as amended. Under SEC 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 Guide 7 or
recognized under U.S. securities laws. U.S. investors are cautioned not to assume that any part or all of mineral deposits in these categories
will ever be upgraded to 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. Accordingly, these mineral reserve and mineral resource estimates and related information 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 laws and the rules and regulations thereunder, including SEC Guide 7.
(5)
(6)
Except as provided in Note (8), the Company’s mineral resource and mineral reserve estimates were prepared under the supervision of and
verified by Mr. John Sims, an officer of Kinross, who is a qualified person as defined by NI 43-101.
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.
(7) 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.
(8)
Estimates for the Cerro Casale project are based on a project update completed by Barrick Gold Corporation in the first half of 2011 and have
been updated to reflect current guidance. Mineral reserves and mineral resources are estimated using appropriate cut-off grades based on the
following commodity prices and foreign exchange rates:
Mineral reserves – Gold price of $US 1,000 per ounce, Silver price of $US 16.00 per ounce, Copper price of $US 2.00 per pound, Chilean Peso
to $US 525
Mineral resources – Gold price of $US 1,400 per ounce, Silver price of $US 19.00 per ounce, Copper price of $US 3.50 per pound, Chilean Peso
to $US 585
The mineral reserve and mineral resource estimates for Cerro Casale were prepared under the supervision of Mr. Rick Sims, who is a qualified
person as defined by NI 43-101.
(9)
Includes mineral resources from the Puren deposit in which the Company holds a 65% interest.
KINROSS GOLD 2014 ANNUAL REPORT 72
MINERAL RESERVE AND MINERAL RESOURCE DEFINITIONS
A Mineral Reserve is the economically mineable part of a Measured or Indicated Mineral Resource demonstrated
by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing,
metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic
extraction can be justified. A Mineral Reserve includes diluting materials and allowances for losses that may occur
when the material is mined.
A “Probable Mineral Reserve” is the economically mineable part of an Indicated and, in some circumstances,
a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must
include adequate information on mining, processing, metallurgical, economic, and other relevant factors that
demonstrate, at the time of reporting, that economic extraction can be justified.
A “Proven Mineral Reserve” is the economically mineable part of a Measured Mineral Resource demonstrated
by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing,
metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic
extraction is justified.
A Mineral Resource is a concentration or occurrence of diamonds, natural solid inorganic material, or natural solid
fossilized organic material including base and precious metals, coal, and industrial minerals in or on the Earth’s crust
in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction.
The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or
interpreted from specific geological evidence and knowledge.
An “Inferred Mineral Resource” is that part of a Mineral Resource for which quantity and grade or quality
can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not
verified, geological and grade continuity. The estimate is based on limited information and sampling gathered
through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.
An “Indicated Mineral Resource” is that part of a Mineral Resource for which quantity, grade or quality,
densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the
appropriate application of technical and economic parameters, to support mine planning and evaluation of
the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing
information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings
and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed.
A “Measured Mineral Resource” is that part of a Mineral Resource for which quantity, grade or quality,
densities, shape, and physical characteristics are so well established that they can be estimated with confidence
sufficient to allow the appropriate application of technical and economic parameters, to support production
planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable
exploration, sampling and testing information gathered through appropriate techniques from locations such as
outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and
grade continuity.
73 KINROSS GOLD 2014 ANNUAL REPORT
SUMMARIZED FIVE-YEAR REVIEW (6, 7)
(in millions, except per share amounts)
Operating results from continuing operations
Revenue
Net earnings (loss) from continuing operations
attributable to common shareholders
2014
2013
2012
2011
2010
$ 3,466.3
$ 3,779.5
$ 4,307.3
$ 3,842.5
$ 2,915.4
(1,400.0)
(3,012.6)
(2,546.2)
(2,093.5)
1,034.4
Cash flow from continuing operations provided
858.1
796.6
1,317.3
1,366.6
967.4
from operating activities
Capital expenditures
Financial position
631.8
1,262.4
1,858.3
1,538.5
564.0
Cash, cash equivalents and short-term investments
$
983.5
$
734.5
$ 1,982.5
$ 1,767.3
$ 1,466.6
Working capital
Total assets
1,982.7
1,692.9
2,281.8
2,322.1
1,687.0
8,951.4
10,286.7
14,882.6
16,508.8
17,795.2
Long-term debt (including current portion)
2,058.1
2,119.6
2,632.6
1,633.1
474.4
Common shareholders’ equity
4,843.0
6,014.0
9,850.2
12,390.4
14,531.1
Per share data
Net earnings (loss) from continuing operations
attributable to common shareholders – basic
$
(1.22)
$
(2.64)
$
(2.24)
$
(1.84)
$
1.25
2014 KINROSS SHARE TRADING DATA
TSX (Cdn dollars)
First quarter
Second quarter
Third quarter
Fourth quarter
NYSE (U.S. dollars)
First quarter
Second quarter
Third quarter
Fourth quarter
High
Low
$
$
$
$
$
$
$
$
5.99
4.82
4.78
3.80
5.44
4.45
4.47
3.38
$
$
$
$
$
$
$
$
4.42
3.97
3.62
2.27
4.01
3.66
3.23
2.00
KINROSS GOLD 2014 ANNUAL REPORT 74
CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION
All statements, other than statements of historical fact, contained or incorporated by reference in this Annual Report
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 harbour’’ 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. Forward-looking statements contained in this Annual Report, include, but are not limited
to, those under the headings “To Our Shareholders”, “2015 Guidance”, “Our Value Proposition”, “Mineral Reserve
and Mineral Resource Statement”, “Proven and Probable Mineral Reserves”, “Measured and Indicated Mineral
Resources”, “Inferred Mineral Resources”, and include, without limitation, statements with respect to our guidance
for production, production costs of sales, all-in sustaining cost and capital expenditures; mineral reserve and mineral
resource estimates; cost review and reduction initiatives including, without limitation, optimization of projects and
operations, as well as references to other possible events, the future price of gold and silver, the estimation and
realization of mineral reserves and mineral resources, the timing and amount of estimated future production, costs of
production, capital expenditures, exploration, development and mining activities, permitting timelines, currency
fluctuations, requirements for additional capital, government regulation, environmental risks and reclamation costs,
title disputes, or litigation or claims and limitations on insurance coverage. The words “2015E”, “believe”,
“estimate”, ‘‘expect’’, ‘‘explore’’, ‘‘forecast”, “focus”, “guidance”, “initiative”, “on track”, “opportunity”, “plan”,
“possible”, “potential”, “principle”, “priority”, “projected”, “promising”, “proposition”, “prospect”, “study” and
“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, which may prove to
be incorrect, include, but are not limited to, the various assumptions set forth herein and in our most recently filed
Annual Information Form and our Management’s Discussion and Analysis for the fiscal year ended December 31,
2014 (“2014 MD&A”) as well as: (1) there being no significant disruptions affecting the operations of the Company or
any entity in which it now or hereafter directly or indirectly holds an investment, whether due to labour disruptions,
supply disruptions, power disruptions, damage to equipment or otherwise; (2) permitting, development, operations
and expansion at Paracatu (including, without limitation, land acquisitions and permitting for the construction and
operation of the new tailings facility) being consistent with our current expectations; (3) political and legal
developments in any jurisdiction in which the Company, or any entity in which it now or hereafter directly or indirectly
holds an investment, operates being consistent with its current expectations including, without limitation, the impact
of escalating political tensions and uncertainty in the Russian Federation and Ukraine or any related sanctions and any
other similar restrictions or penalties imposed, or actions taken, by any government, and any potential amendments
to the Brazilian Mining Code, the Mauritanian Customs Code, the Mauritanian Mining Code, the Mauritanian VAT
regime and water legislation or other water use restrictions in Chile (including, but not limited to, the interpretation,
implementation and application of any such amendments), being consistent with Kinross’ current expectations; (4) 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; (5) certain price assumptions for
gold and silver; (6) prices for diesel, natural gas, fuel oil, electricity and other key supplies being approximately
consistent with current levels; (7) production and cost of sales forecasts for the Company, and entities in which it now
or hereafter directly or indirectly holds an investment, meeting expectations; (8) the accuracy of the current mineral
reserve and mineral resource estimates of the Company (including but not limited to ore tonnage and ore grade
estimates); (9) labour and materials costs increasing on a basis consistent with Kinross’ current expectations; (10) the
development of, operations at and production from the Company’s operations, being 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; (12)
goodwill and/or asset impairment potential; and (13) access to capital markets, including but not limited to
75 KINROSS GOLD 2014 ANNUAL REPORT
maintaining an investment grade debt rating and, as required, maintaining partial project financing for Dvoinoye and
Kupol being consistent with the Company’s current expectations. 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: sanctions (any other similar restrictions or penalties) now or subsequently imposed, or 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; litigation commenced, or other claims or actions brought, against the Company
(and/or any of its directors, officers or employees) in respect of the cessation by the Company of investment in and
development of FDN and its sale, or any of the Company’s prior activities on or in respect thereof or otherwise in
Ecuador; 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, royalty, 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, Ecuador, Mauritania, Ghana, or other countries in which Kinross, or entities in which it now or
hereafter directly or indirectly holds an interest, do 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 or development activities; employee relations; litigation
or other claims against, or regulatory investigations and/or any enforcement actions 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, or any investigations, enforcement actions and/or sanctions under any applicable
anti-bribery, 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 rating; 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 Annual Report are qualified by these cautionary statements 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 and “Risk Analysis”
section of our 2014 MD&A. 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.
KINROSS GOLD 2014 ANNUAL REPORT 76
Key Sensitivities
Approximately 60%-70% of the Company’s costs are denominated in US 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 ounce 8.
Specific to the Russian rouble, a 10% change in the exchange rate would be expected to result in an approximate
$11 impact on Russian production cost of sales per ounce. A $10 per barrel change in the price of oil would be
expected to result in an approximate $1 impact on production cost of sales per ounce. A $100 change in the price
of gold would be expected to result in an approximate $3 impact on production cost of sales per ounce as a result
of a change in royalties.
Other Information
Where we say ‘‘we’’, ‘‘us’’, ‘‘our’’, the ‘‘Company’’, or ‘‘Kinross’’ in this Annual Report, 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 (other than exploration activities) contained in this Annual Report, including but not limited to
mineral reserve and mineral resource estimates, has been prepared under the supervision of Mr. John Sims, an officer
of the Company who is a “qualified person” within the meaning of National Instrument 43-101 (“NI 43-101”). The
technical information about the Company’s exploration activities contained in this Annual Report, including but not
limited to drill programs and results, has been prepared under the supervision of Mr. Sylvain Guerard, an officer of
the Company who is a “qualified person” within the meaning of NI 43‐101.
ENDNOTES
1 “Adjusted net earnings attributable to common shareholders”, “Adjusted net earnings per share”, “Adjusted operating cash flow”,
“Attributable production cost of sales per equivalent ounce sold” and “Attributable all-in sustaining cost per equivalent ounce sold” figures
used throughout this report are non-GAAP financial measures. For the definition and reconciliation of these non-GAAP measures, refer to Section
11, Supplemental Information of Management’s Discussion and Analysis in this report. Adjusted operating cash flow per share, also a non-GAAP
measure, is defined as “adjusted operating cash flow” divided by the “weighted average number of common shares outstanding (basic)”.
The weighted average number of common shares outstanding (basic) during the year ended December 31, 2014 was 1,144.3 million
(2013: 1,142.1 million; 2012: 1,139.1 million).
2 Kinross’ guidance and outlook for 2015 represents forward-looking information and users are cautioned that actual results may vary. Please
refer to the Cautionary Statement on page 75, as well as the Company’s news release dated February 10, 2015, available on our website at
www.kinross.com for more information.
3 “Attributable” are based on Kinross’ 90% share of Chirano production.
4 See Kinross’ 2014 Mineral Reserve and Mineral Resource Statement released on February 10, 2015 and on pages 67 to 73 in this report.
5 Reported net loss includes an after-tax non-cash impairment charge of $932.2 million (2013: $2,834.1 million; 2012: $3,206.1 million) which
includes charges related to property, plant and equipment of $342.5 million at Tasiast and $213.8 million at Chirano.
6 On June 10, 2013, the Company announced its decision to cease development of Fruta del Norte (“FDN”). As a result, FDN was classified as a
discontinued operation. On December 17, 2014, the Company disposed of its interest in FDN. On June 28, 2012, the Company disposed of its
interest in Crixás. The comparative figures exclude the results of FDN and Crixás.
7 Figures reported for 2010 and 2011 have not been recast for IFRS 11, which was adopted on January 1, 2013.
8 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.
77 KINROSS GOLD 2014 ANNUAL REPORT
Kinross is a Canadian-based
senior gold mining company with
mines and projects in Brazil, Chile,
Ghana, Mauritania, Russia and the
United States. Kinross is focused
on delivering value based on its
core principles of operational
excellence, balance sheet strength
and responsible mining.
Kinross maintains listings on the Toronto Stock Exchange (symbol:K)
and the New York Stock Exchange (symbol:KGC).
CORPORATE INFORMATION
Shareholder Information
Contact Information
Publications
Transfer Agent and Registrar
General
Computershare
Investor Services Inc.
Toronto, Ontario, Canada
Toll-free: 1-800-564-6253
Proxy Solicitation Agent
Kingsdale Shareholder Services
Toronto, Ontario, Canada
Annual and Special Shareholders
Meeting
Wednesday, May 6, 2015 at
10:00 a.m. EDT at the Glenn Gould
Studio, 250 Front Street West,
Toronto, Ontario, Canada
Trading Data
TSX
K — common
NYSE
KGC — common
Legal Counsel
Osler, Hoskin & Harcourt LLP
Toronto, Ontario, Canada
Sullivan & Cromwell LLP
New York, New York,
United States
Auditors
KPMG LLP
Toronto, Ontario, Canada
Kinross Gold Corporation
25 York Street, 17th Floor
Toronto, Ontario,
Canada M5J 2V5
Website: Kinross.com
Telephone: 416-365-5123
Toll-free: 1-866-561-3636
Facsimile: 416-363-6622
Email: info@kinross.com
Media Relations
Andrea Mandel-Campbell
Vice-President, Corporate
Communications
Telephone: 647-788-4179
Email: andrea.mandel-campbell@
kinross.com
Investor Relations
Tom Elliott, Vice-President,
Investor Relations
Telephone: 416-365-3390
Email: tom.elliott@kinross.com
Shareholder Inquiries
Computershare
Investor Services Inc.
9th Floor,
100 University Avenue
Toronto, Ontario,
Canada M5J 2Y1
www.computershare.com/kinross
Toll-free: 1-800-564-6253
Toll-free facsimile:
1-888-453-0330
To obtain copies of Kinross’
publications, please visit our
corporate website at Kinross.com,
or contact us by email at
info@kinross.com or call
1-866-561-3636.
Corporate Responsibility Report
Kinross publishes its corporate
responsibility performance data
annually and a comprehensive
Global Reporting Initiative (GRI)
report every two years. Our 2013
CR Report is currently available on
our website and provides a detailed
account of our social, environmental,
and health and safety performance
for 2012 and 2013.
@KinrossGold
Read the annual report online:
LETTER TO SHAREHOLDERS
2014ANNUALREPORT.KINROSS.COM
2014 ACHIEVEMENTS
DIRECTORS
CORPORATE GOVERNANCE HIGHLIGHTS
FINANCIAL REVIEW
CAUTIONARY STATEMENT ON
FORWARD-LOOKING INFORMATION
1
4
6
6
7
75
All figures in U.S. dollars and from continuing operations.
Endnotes can be found on page 77 of this 2014 Annual Report.
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KINROSS GOLD CORPORATION
25 York Street, 17th Floor
Toronto, Ontario, Canada
M5J 2V5
ANNUAL REPORT 2014
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Delivering Results
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Responsible Mining