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Annual Report 2016
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Building Value.
Kinross is a global gold mining company with strong
and consistent operating results driven by a high
performance culture. With nine mines in three regions,
our focus is delivering value based on the core
principles of operational excellence, balance sheet
strength and responsible mining.
hinge - >
TSX: K
Toronto Stock
Exchange
NYSE: KGC
New York
Stock Exchange
Dvoinoye
Kupol
Fort Knox
Kettle River-Buckhorn
Toronto
Bald Mountain
Round Mountain
Tasiast
Chirano
Paracatu
La Coipa
Operating mine
Organic development projects
Letter to Shareholders 1
2016 Achievements 4
Corporate Governance Highlights 6
Directors + Senior Leadership 6
Financial Summary 7
Financial Review 7
Cautionary Statement on Forward-Looking Information 76
All figures in U.S. dollars and from continuing operations
Endnotes can be found on page 78 of this 2016 Annual Report
D KINROSS GOLD ANNUAL REPORT 2016
P
2.8 Million
RECORD PRODUCTION
AU EQ. OZ. (ATTRIBUTABLE) 1
P
$1.1 Billion
OPERATING CASH FLOW
P
$2.3 Billion
IN LIQUIDITY
We took major steps to advance those projects,
which we expect will extend the life of our mines and
maintain consistent and quality production, while
reducing costs and growing cash flow.
At Tasiast, we began building Phase One of an
expansion to deliver the full value of this world-class
deposit, while launching a feasibility study on Phase
Two. At Bald Mountain, our drilling program doubled
reserves and added new resources which extended
estimated mine life, and confirmed the significant
upside potential we saw when we acquired the
asset. We also made progress advancing additional
organic projects at our other sites, including our two
Russian operations and the Round Mountain Phase W
expansion, all of which have the potential to extend
mine life or expand production.
J. Paul Rollinson
President and
Chief Executive Officer
CEO Letter to Shareholders
In 2016, Kinross delivered strong results both at our
mining operations and at the organic projects that
will shape our future.
Our production of 2.8 million gold equivalent
ounces (Au eq. oz.) set a new company record as
we continued to rank among the world’s largest
gold producers. Despite the challenges we
faced throughout 2016, we met our guidance on
production and costs for the fifth straight year,
reflecting a culture of continuous improvement,
operational excellence, and disciplined cost
management. Our solid operational performance,
combined with an improved gold price, generated
robust cash flow of more than $1 billion. We
continued to maintain significant liquidity and one of
the strongest balance sheets in the industry, giving
us the financial strength and flexibility to fund our
pipeline of organic development projects.
2016 Highlights
Remained one of the safest mining companies
in our sector
Launched Phase One of Tasiast mill expansion, which
is on track for full production in Q2 2018,
and began a feasibility study on Phase Two
Produced a record 2.8 million Au eq. oz. at a cost of
sales of $712 per Au eq. oz. and an all-in sustaining
cost of $984 per Au eq. oz.
Met or exceeded production and cost guidance for
the fifth consecutive year
Generated $465 million of free cash flow, and
$1.1 billion in operating cash flow, a 32% increase
year-over-year
Maintained one of the strongest balance sheets in
the industry by ending the year with $827 million in
cash and total liquidity of approximately $2.3 billion
Paid down $250 million of debt and have no
scheduled debt repayments until 2020
Doubled mineral reserve estimates and added new
mineral resources at Bald Mountain for a potential
significant mine life extension
Added high-margin ounces to mine life in Russia with
the September Northeast and Moroshka projects
Upgraded and added to mineral resource estimates
as part of Round Mountain Phase W feasibility study
Identified promising brownfield exploration
opportunities at Kupol, Tasiast, Fort Knox, and
Kettle River
Spent more than $2 billion in countries where
we operate through local purchasing, wages and
taxes to benefit local communities and provide
economic value
1
KINROSS GOLD ANNUAL REPORT 2016 2017 Outlook
We forecast another year of solid operating results
in 2017, with gold output consistent with recent
years, and production cost of sales in line with 2016.
Production is forecast 3 to be 2.5 – 2.7 million Au eq.
oz., with production cost of sales of $660 – $720
per Au eq. oz. and all-in sustaining costs of $925 –
$1,025 per Au eq. oz.
In addition, we are leveraging our strong financial
position to invest approximately $455 million in our
development projects and our future.
Generating Future Value at Our
Organic Projects
We expect 2017 to be an exciting year of milestones
at the organic development projects in our three
regions. These projects include large expansions
expected to significantly lower production costs,
as well as mine life extensions at some of our most
successful operations. These organic projects also
offer the major benefits of established infrastructure,
familiar permitting and operating jurisdictions to
lower execution risk.
Tasiast Expansion
Entering 2017, Phase One of our Tasiast mill
expansion is on budget and on schedule for start-
up in the second quarter of 2018. Once complete,
Phase One is expected to almost double Tasiast’s
production to approximately 400,000 Au. eq. oz., and
significantly reduce all-in sustaining costs.
Our two-step approach to developing Tasiast is
designed to minimize capital and execution risk as
we realize the ore body’s great long-term potential.
The feasibility study for Phase Two is on schedule to
be completed in the third quarter of 2017, and we
expect to make a development decision at that time.
Phase Two is forecast to double mine production
once again and further reduce production costs. This
would make Tasiast one of the largest, lowest cost
mines in our portfolio, and significantly reduce the
Company’s overall all-in sustaining cost per ounce.
2017E Gold
Production 1,3
2.5 – 2.7
million Au eq. oz.
61%
Americas
22 %
Russia
17%
West Africa
Bald Mountain
At Bald Mountain in Nevada, our goal of doubling
reserves was achieved ahead of schedule, adding
a total of 1 million ounces from both the North and
South areas to estimated proven and probable gold
reserves as of year-end 2016. We also added 0.27
million gold ounces to the inferred mineral resources.4
This is expected to significantly increase the mine life
estimate and confirms our vision of Bald Mountain as
a long-life asset with considerable upside potential.
We see numerous opportunities for additional
resource conversions and exploration success, given
the site’s large under-explored land package and
pipeline of high-quality targets.
We are on track to double production and reduce
unit costs at Bald Mountain in 2017 compared with
2016, and expect continued strong production and
lower costs in future years.
Round Mountain
At the Round Mountain Phase W project in Nevada,
we upgraded 1.3 million gold ounces of resources
and added 1.7 million gold ounces to inferred
resources. We expect to complete work on a
feasibility study at Phase W in the third quarter of
2017, with the aim of extending mine life at one of
our high-performing operations.
Russia
We have had good success extending mine life at
our combined Kupol-Dvoinoye operation, which has
been a standout contributor to our portfolio. Our
September Northeast project near Dvoinoye was
completed on time and on budget, and stripping has
now commenced. At Moroshka, four kilometres from
Kupol, mining is on schedule to commence in the
first half of 2018. These two additional ore sources
are expected to add high-margin ounces and extend
current mine life at Kupol-Dvoinoye to 2021.
2 KINROSS GOLD ANNUAL REPORT 2016
Exploration
In 2017, we are intensifying our exploration focus
on extensions to known zones of mineralization at
our mine sites, which has proven to be a successful
strategy for finding economic ounces that add to
near-term mine life.
Kupol is a high priority. Drilling has revealed that
mineralization is open in all directions in certain
zones, and further drilling, geological interpretation,
and resource estimation for the target extensions will
be a major focus in 2017.
Other priority targets are Fort Knox in the East
and South Wall of the pit, Bald Mountain, and
Kettle River, where we have identified potentially
promising opportunities in the State of Washington’s
Curlew district.
Balance Sheet Strength
We are well positioned to fund these organic
opportunities, given our significant liquidity and one
of the strongest balance sheets in the industry.
In 2016, we generated free cash flow of $465 million,
and ended the year with $827 million in cash and
$1.4 billion in undrawn credit facilities for total liquidity
of approximately $2.3 billion, a trailing net debt to
EBITDA ratio of 0.8, and no debt maturities until 2020.
Our Commitment to Responsible Mining
Responsible mining is core to our strategy and
day-to-day activities. Our approach combines
company-wide policies and standards with site-
based responsibility plans to ensure we consistently
deliver on our commitments, both in managing
operational impacts and generating opportunities for
our host communities.
Stakeholder engagement underlies our history
of strong and co-operative community relations.
In 2016, we had more than 123,000 stakeholder
interactions, including community members,
government representatives, and non-profit
organizations at our sites. We also spent more than
$2 billion in the countries where we operate through
wages, local purchasing, and taxes, ensuring we
generate direct and indirect economic value in our
host communities.
For the seventh consecutive year, Kinross Gold was
named one of Canada’s Best 50 Corporate Citizens
by Corporate Knights magazine in 2016, placing first
among gold mining companies for the second year
in a row.
The Kinross Value Proposition
In 2016, we were among the top performing major
gold equities and, with the strong foundation we
have built on operational excellence and balance
sheet strength, we are poised to continue building
value for our shareholders. Our strengths add up,
and today we are a major gold producer with:
• A five-year track record for consistently delivering
operational results and meeting production and
cost targets;
• A strong culture of continuous improvement and
cost management;
• A steadfast commitment to balance sheet strength;
• An impressive pipeline of low-risk organic
development projects at our existing operations
to potentially extend mine life and continue our
strong and consistent production at a lower cost in
the coming years;
• One of the best safety records in the industry;
• A long history of co-operative relations with our
host communities and governments, built on our
core values and commitment to responsible mining;
• A highly skilled global team determined to
continue delivering on our commitments.
We believe these strong fundamentals equate to a
compelling value opportunity – and promise Kinross
a bright future in the years ahead.
In closing, I want to thank our employees worldwide
for their dedication and hard work, and our
shareholders for your continued support.
J. Paul Rollinson
President and
Chief Executive Officer
KINROSS GOLD ANNUAL REPORT 2016
3
2016 Achievements
Operational Excellence
5 years
Fifth consecutive year meeting or
outperforming our production and
cost guidance.
Financial Discipline
$1.43 billion
undrawn
credit
$827 million
cash and cash
equivalents
2.8
Au eq. oz.
million1
$1.1billion
in operating
cash flow
Delivered record production due to
strong operating performance and
acquisition of Bald Mountain and
50% of Round Mountain.
Increased operating cash flow by
32% year-over-year.
$2.3
billion in
liquidity
$827million
strong cash
position
zero
debt maturities
until 2020
Maintained one of the strongest
balance sheets in the industry.
Ended the year in a strong cash
position with $827 million in cash
and cash equivalents.
With no debt maturities until 2020,
we have the financial flexibility to
fund our pipeline of organic projects.
Organic Growth
regions
advancing
organic
projects
Tasiast
Phase One
on schedule
on budget
+
doubled
mineral reserves
at Bald Mountain4
3
High-quality opportunities are
expected to extend mine life at our
operations in Russia, the Americas
and West Africa.
Tasiast Phase One project is on
track to begin full production in
Q2 2018 and is expected to almost
double production and significantly
reduce costs.
Doubled Bald Mountain’s mineral
reserves to 2.1 million Au eq. oz.,
which is expected to extend mine
life and confirmed the site’s
significant upside potential.
4 KINROSS GOLD ANNUAL REPORT 2016
Responsible Mining
0.93
0.56
0.43
0.38
0.33
0.35
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
WORKFORCE SAFETY
(Total reportable injury frequency rate
includes all employees and contractors
for 200,000 hours worked)
Continued to deliver strong safety
performance and remained among
the top performers in the industry.
+123
thousand
stakeholder
interactions
Our success depends upon
effective, honest dialogue and
engagement with stakeholders in
our host communities. By listening
to them, we understand both their
concerns and their vision for the
development of their community.
$2 billion
The majority of direct and
indirect economic value we
generate through metal sales is
spent in host countries, through
local purchasing, taxes and wages.
in-country
spending
97%
of workforce
from host
countries
1million
over
beneficiaries
33%
diversity
board target met
Creating meaningful livelihoods for
our employees is one of the most
powerful impacts of our business.
We contributed to 778 local
community programs, initiatives
and events with more than one
million beneficiaries from our local
communities.
The Board of Directors maintained
its diversity target with six men and
three women on the Board in 2016.
100%
certified
for CN
zero
reportable
spills
100%
trained
security
All Kinross mine sites are now
certified under the International
Cyanide Management Code with
the certification of the Tasiast mine.
Kinross sites experienced no
reportable spills or accidental
releases in 2016.
All of Kinross’ security workforce
trained under our Human Rights
Adherence and Verification Program.
KINROSS GOLD ANNUAL REPORT 2016
5
Corporate Governance Highlights
• The Board of Directors met eight times, six of
which were independent of management. The
directors met independent of management at all
regularly scheduled Board meetings.
• All directors were independent, except the CEO.
• All committees comprised solely of
independent directors.
• Achieved Board diversity target of 33%
women directors.
• Completed comprehensive review and update
of the Kinross Code of Business Conduct and
Ethics, Whistleblower Policy and the Disclosure,
Confidentiality and Insider Trading Policy.
• Kinross ranked 26th out of 231 companies in
the Globe and Mail annual corporate governance
survey. Kinross received a score of 90 out of
100 points, and was the top ranked gold mining
company for the second consecutive year and the
third highest among all mining companies.
•
Scored 134 out of 150 points on the Board
Shareholder Confidence Index of the Clarkson
Centre for Board Effectiveness.
Board of Directors
(left to right)
John E. Oliver
Independent Chair H
John M.H. Huxley
Corporate Director A, CGN, H
Kelly J. Osborne
Corporate Director CGN, CR
Ian Atkinson
Corporate Director CGN, CR
Ave G. Lethbridge
Corporate Director A, H
Una M. Power
Corporate Director A, CR
John A. Brough
Corporate Director A, H
Catherine
McLeod-Seltzer
Corporate Director CGN, CR
J. Paul Rollinson
President and Chief
Executive Officer
Senior Leadership Team
A
Audit and Risk Committee
CGN Corporate Governance and
Nominating Committee
CR
H
Corporate Responsibility and
Technical Committee
Human Resource and
Compensation Committee
Tony S. Giardini
Executive Vice-President
and Chief Financial Officer
Geoffrey P. Gold (front)
Executive Vice-President,
Corporate Development,
External Affairs, and Chief
Legal Officer
(left to right)
Paul B. Tomory (front)
Senior Vice-President
and Chief Technical Officer
Lauren M. Roberts
Senior Vice-President
and Chief Operating Officer
Gina M. Jardine
Senior Vice-President,
Human Resources
J. Paul Rollinson
President and Chief
Executive Officer
6 KINROSS GOLD ANNUAL REPORT 2016
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 2
Impairment charges 5
Net loss from continuing operations 5
Net loss from continuing operations attributable to common shareholders 5
Basic
Diluted
Adjusted net earnings (loss) 2 from continuing operations
Adjusted net earnings (loss) 2 from continuing operations per share
Production cost of sales per equivalent ounce sold 2
All-in sustaining cost per gold equivalent ounce sold 2
Capital expenditures
Average realized gold price per ounce
2016
$3,472.0
1,099.2
926.7
139.6
(104.0)
(0.08)
(0.08)
93.0
0.08
712
984
633.8
1,249
2015
$ 3,052.2
831.6
786.6
699.0
(984.5)
(0.86)
(0.86)
(91.0)
(0.08)
696
975
610.0
1,159
2014
$ 3,466.3
858.1
1,023.8
1,251.4
(1,400.0)
(1.22)
(1.22)
131.1
0.11
720
973
631.8
1,263
Attributable gold equivalent ounces produced from continuing operations 1
2,789,150
2,594,652
2,710,390
Financial Review
Management’s Discussion and Analysis
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
Kinross Share Trading Data
MDA 1
FS 1
FS 3
FS 5
68
75
75
KINROSS GOLD ANNUAL REPORT 2016
7
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
This management's discussion and analysis ("MD&A"), prepared as of February 15, 2017, relates to the financial condition and results
of operations of Kinross Gold Corporation together with its wholly owned subsidiaries, as at December 31, 2016 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, 2016 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 2016 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, 2016, as well as our outlook.
This MD&A contains forward-looking statements and should be read in conjunction with the risk factors described in "Risk Analysis"
and in the “Cautionary Statement on Forward-Looking Information” on pages 56 – 57 of this MD&A. 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 generally considered to be a separate segment. The reportable segments are
those operations whose operating results are reviewed by the chief operating decision maker to make decisions about resources to
be allocated to the segment and assess its performance.
Ownership percentage at December 31,
Operating Segments
Fort Knox
Round Mountain(a)
Bald Mountain(a)
Kettle River-Buckhorn
Kupol(b)
Paracatu
Maricunga
Tasiast
Chirano
Operator
Location
Kinross
Kinross
Kinross
Kinross
U.S.A.
U.S.A.
U.S.A.
U.S.A.
Kinross Russian Federation
Kinross
Kinross
Kinross
Kinross
Brazil
Chile
Mauritania
Ghana
2016
100%
100%
100%
100%
100%
100%
100%
100%
90%
2015
100%
50%
-
100%
100%
100%
100%
100%
90%
(a) On January 11, 2016, the Company acquired the remaining 50% interest in the Round Mountain mine and 100% of the Bald
Mountain Gold mine ("Bald Mountain") from Barrick Gold Corporation ("Barrick").
(b) The Kupol segment includes the Kupol and Dvoinoye mines.
MDA 1
Kinross Gold Annual Report 2016
1
MDA
KINROSS GOLD ANNUAL REPORT 2016
K.4.219 Kinross MD&A_HR.pdf - p1 (March 16, 2017 19:53:19)
DT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Consolidated Financial and Operating Highlights
(in millions, except ounces, per share amounts and
per ounce amounts)
Operating Highlights
Total gold equivalent ounces (a)
Produced (c)
Sold (c)
Attributable gold equivalent ounces (a)
Produced (c)
Sold (c)
Financial Highlights
Metal sales
Production cost of sales
Years ended December 31,
2016 vs. 2015
2015 vs. 2014
2016
2015
2014
Change
% Change (d)
Change
% Change
2,810,345
2,620,262
2,778,902
2,634,867
2,739,044
2,743,398
190,083
144,035
2,789,150
2,594,652
2,758,306
2,608,870
2,710,390
2,715,358
194,498
149,436
7%
5%
7%
6%
(118,782)
(108,531)
(115,738)
(106,488)
$
3,472.0
$
3,052.2
$
3,466.3
$
419.8
14%
$
(414.1)
$
1,983.8
$
1,834.8
$
1,971.2
$
149.0
8%
$
(136.4)
Depreciation, depletion and amortization
$
855.0
$
897.7
$
874.7
$
(42.7)
(5%)
$
23.0
Impairment charges
Operating earnings (loss)
$
139.6
$
699.0
$
1,251.4
$
(559.4)
(80%)
$
(552.4)
$
46.3
$
(742.9)
$
(1,027.2)
$
789.2
106%
$
284.3
Net loss attributable to common shareholders
$
(104.0)
$
(984.5)
$
(1,400.0)
$
880.5
Basic loss per share attributable to common shareholders
$
(0.08)
$
(0.86)
$
(1.22)
$
0.78
Diluted loss per share attributable to common shareholders
Adjusted net earnings (loss) attributable to common shareholders (b)
Adjusted net earnings (loss) per share (b)
Net cash flow provided from operating activities
Adjusted operating cash flow (b)
Capital expenditures
Average realized gold price per ounce
Consolidated production cost of sales per equivalent ounce (c) sold(b)
Attributable(a) production cost of sales per equivalent ounce (c) sold(b)
Attributable(a) production cost of sales per ounce sold on a by-product basis (b)
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)
Attributable(a) all-in cost per equivalent ounce (c) sold (b)
$
$
(0.08)
93.0
$
$
(0.86)
(91.0)
$
$
(1.22)
131.1
$
$
0.78
184.0
$
0.08
$
(0.08)
$
0.11
$
0.16
200%
$
(0.19)
$
1,099.2
$
831.6
$
858.1
$
267.6
$
926.7
$
786.6
$
1,023.8
$
140.1
$
633.8
$
610.0
$
631.8
$
23.8
$
1,249
$
1,159
$
1,263
$
90
$
714
$
696
$
719
$
18
$
712
$
696
$
720
$
16
$
696
$
684
$
705
$
12
$
975
$
971
$
965
$
4
$
984
$
975
$
973
$
9
$
$
1,073
1,079
$
$
1,047
1,049
$
$
1,072
1,077
$
$
26
30
32%
$
(26.5)
18%
$
(237.2)
4%
8%
3%
2%
2%
0%
1%
2%
3%
$
(21.8)
$
(104)
$
(23)
$
(24)
$
(21)
$
6
$
2
$
$
(25)
(28)
89%
$
415.5
91%
$
0.36
91%
nm
$
$
0.36
(222.1)
(4%)
(4%)
(4%)
(4%)
(12%)
(7%)
3%
(44%)
28%
30%
30%
30%
(169%)
(173%)
(3%)
(23%)
(3%)
(8%)
(3%)
(3%)
(3%)
1%
0%
(2%)
(3%)
(a)
"Total" includes 100% of Chirano production. "Attributable" includes Kinross' share of Chirano (90%) production.
(b)
The definition and reconciliation of these non-GAAP financial measures is included in Section 11 of this document.
(c)
"Gold equivalent ounces" include silver ounces produced and sold converted to a gold equivalent based on a ratio of the average spot market prices for the commodities for each
period. The ratio for 2016 was 72.95:1 (2015 - 73.92:1 and 2014 - 66.29:1).
(d)
"nm" means not meaningful.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Consolidated Financial Performance
2016 vs. 2015
Kinross’ attributable production increased by 7% compared with 2015, primarily due to the acquisition of Bald Mountain and the
remaining 50% interest in Round Mountain (the “acquisition”). These increases were partially offset by lower production at Chirano
due to a decrease in grades, at Tasiast due to lower recovery from the dump leach pads and the 6 week temporary suspension of
operations, and at Maricunga as a result of the suspension of mining activities.
Metal sales increased by 14% in 2016 compared with 2015 due to an increase in metal prices realized and gold equivalent ounces sold.
The average realized gold price increased to $1,249 per ounce in 2016 from $1,159 per ounce in 2015 Gold equivalent ounces sold in
2016 increased to 2,778,902 ounces from 2,634,867 ounces in 2015, primarily due to the increase in production described above.
Production cost of sales increased by 8% compared with 2015, primarily due to the increase in gold equivalent ounces sold as described
above, as well as an increase in operating waste mined at Fort Knox, partially offset by lower costs at Maricunga, Tasiast and Kupol
due to decreases in gold equivalent ounces sold, lower fuel and labour costs at Kupol, and favourable foreign exchange movements
at Paracatu resulting from the effectiveness of the Company’s hedge program. The increase in production cost of sales resulted in
higher attributable production cost of sales per equivalent ounce sold compared with 2015.
During 2016, depreciation, depletion and amortization decreased by 5% compared with 2015, primarily due to a decrease in the
depreciable asset base at Fort Knox and Kupol. Additionally, depreciation was lower at Chirano related to an increase in mineral
reserves at December 31, 2015 and a decrease in gold equivalent ounces sold. The decreases were partially offset by an increase in
the depreciable asset base as a result of the acquisition.
At September 30, 2016, the Company identified the suspension of mining at Maricunga as an indication of impairment and performed
an impairment assessment to determine the recoverable amount of the Maricunga Cash Generating Unit (“CGU”). As the recoverable
amount was lower than the carrying amount, an impairment charge of $68.3 million was recorded against property, plant and
equipment. The Company also recorded an inventory impairment charge of $71.3 million related to metals and supplies inventory as
a result of the suspension. During 2015, the Company recorded after-tax impairment charges of $430.2 million related to property
plant and equipment, and impairment charges of $259.5 million related to inventory and other assets in 2015.
Operating earnings increased to $46.3 million in 2016 from an operating loss of $742.9 million in the same period of 2015. The change
in earnings was primarily due to lower impairment charges as well as increased margins (metal sales less production cost of sales).
During 2016, net loss attributable to common shareholders was $104.0 million, or $0.08 per share, compared with a net loss
attributable to common shareholders of $984.5 million, or $0.86 per share, in 2015. The change was primarily a result of the increase
in operating earnings described above. In addition, an income tax expense of $49.6 million was recorded in 2016, compared with an
income tax expense of $141.7 million in 2015. The $49.6 million income tax expense recognized in 2016 included a $65.1 million
recovery due to re-measurement of deferred tax assets and liabilities as a result of fluctuations in foreign exchange rates with respect
to the Brazilian real and the Russian rouble, $32.0 million of expense due to a proposal to reassess taxes which was received in the
second quarter of 2016 and a tax benefit of $27.7 million realized by the Company as a result of the acquisition. The $141.7 million
tax expense in 2015 included a $30.3 million recovery due to impairment charges and $132.9 million of expense due to re-
measurements of deferred tax assets and liabilities, as a result of significant fluctuations in foreign exchange rates with respect to the
Brazilian real and the Russian rouble. In addition, tax expense decreased 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 2016 was 26.5%
(2015 – 26.5%).
Adjusted net earnings attributable to common shareholders was $93.0 million, or $0.08 per share, for 2016 compared with adjusted
net loss attributable to common shareholders of $91.0 million, or $0.08 per share, in 2015. The increase in adjusted net earnings was
mainly due to the increase in margins described above.
During 2016, net cash flow provided from operating activities increased to $1,099.2 million from $831.6 million in 2015 and adjusted
operating cash flow increased to $926.7 million from $786.6 million in 2015, both primarily due to the increase in margins.
Capital expenditures increased by 4% in 2016 compared with 2015, primarily due to increased spending resulting from the acquisition
as well as at Kupol, Tasiast and Chirano, partially offset by lower spending at Fort Knox, Maricunga and the Corporate and other
segment.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
During 2016, attributable all-in sustaining cost per equivalent ounce sold and per ounce sold on a by-product basis remained
comparable with 2015. Attributable all-in cost per equivalent ounce sold and per ounce sold on a by-product basis increased compared
with 2015, primarily due to an increase in non-sustaining capital and reclamation expenditures.
2015 vs. 2014
Kinross’ attributable production decreased by 4% compared with 2014, primarily due to lower production at Tasiast as a result of a
decrease in ounces recovered from the dump leach pads and at Maricunga as a result of the extreme weather event that occurred in
March 2015. In addition, production decreased at Kettle River–Buckhorn due to a decrease in grades and at Paracatu, largely due to
lower mill throughput as a result of planned mine sequencing and lack of rainfall. These decreases were partially offset by higher
production at Round Mountain largely due to improved heap leach performance and at Fort Knox due to higher mill grades.
During 2015, metal sales declined by 12% compared with 2014 due to decreases in metal prices realized and gold equivalent ounces
sold. The average realized gold price decreased to $1,159 per ounce in 2015 from $1,263 per ounce in 2014. Gold equivalent ounces
sold in 2015 decreased to 2,634,867 ounces compared with 2,743,398 ounces in 2014, primarily due to the decrease in gold equivalent
ounces produced as described above.
Production cost of sales decreased by 7% compared with 2014, primarily due to the decrease in gold equivalent ounces sold, lower
energy costs and favourable foreign exchange movements. The decrease in costs also resulted in a 3% decrease in attributable
production cost of sales per equivalent ounce sold compared with 2014.
During 2015, depreciation, depletion and amortization increased by 3% compared with 2014, primarily due to increases in the
depreciable asset base at Round Mountain, the Kupol segment, Tasiast, Fort Knox and Chirano. These increases were partially offset
by decreases in the depreciable asset base and gold equivalent ounces sold at Kettle River-Buckhorn.
As at December 31, 2015, upon completion of the annual assessment of the carrying value of its CGUs, the Company recorded an
after-tax impairment charge of $430.2 million as a result of a reduction in the Company’s short-term and long-term gold price forecast.
The impairment charge was entirely related to property plant and equipment and included a charge of $240.2 million at Fort Knox,
$147.0 million at Tasiast and $43.0 million at Round Mountain. The impairment charge at Fort Knox was net of a tax recovery of $9.3
million. In addition, during 2015, the Company recognized impairment charges of $259.5 million related to inventory and other assets.
During 2014, the Company recorded after-tax impairment charges of $932.2 million, comprising goodwill impairment of $145.3 million
and property plant and equipment impairment of $786.9 million. The Company also recorded inventory impairment charges of $167.6
million in 2014.
The operating loss decreased to $742.9 million in 2015 from $1,027.2 million in 2014. The change was primarily due to the decrease
in impairment charges, partially offset by lower metal sales.
During 2015, net loss from continuing operations attributable to common shareholders was $984.5 million, or $0.86 per share,
compared with $1,400.0 million, or $1.22 per share, in 2014. The change was primarily a result of the decrease 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). These decreases were partially offset by an increase in income tax expense.
During 2015, the Company recorded a tax expense of $141.7 million compared with $109.7 million in 2014. The $141.7 million tax
expense in 2015 included a $30.3 million recovery due to impairment charges and $132.9 million of expense due to re-measurements
of deferred tax assets and liabilities, as a result of significant fluctuations in foreign exchange rates with respect to the Brazilian real
and the Russian rouble. 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. In addition, tax
expense increased due to differences in the level of income in the Company’s operating jurisdictions from one period to the next.
Adjusted net loss attributable to common shareholders was $91.0 million, or $0.08 per share, for 2015 compared with adjusted net
earnings attributable to common shareholders of $131.1 million, or $0.11 per share, in 2014. The decrease in adjusted net earnings
was primarily due to the decrease in margins.
During 2015, net cash flow provided from operating activities decreased by 3% compared with 2014. The decrease in cash flows was
primarily the result of the decrease in metal sales, partially offset by favourable working capital changes and lower production costs.
Adjusted operating cash flow decreased to $786.6 million in 2015 compared with $1,023.8 million in 2014, primarily due to the
decrease in metal sales.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Capital expenditures decreased by 3% in 2015 compared with 2014, primarily due to reduced spending at Kupol and at Tasiast, partially
offset by increased spending at Fort Knox.
Attributable all-in sustaining cost per equivalent ounce sold and per ounce sold on a by-product basis increased slightly compared with
2014, mainly due to the decrease in attributable ounces sold and an increase in sustaining capital expenditures, largely offset by lower
production costs as described above.
Attributable all-in cost per equivalent ounce sold and per ounce sold on a by-product basis decreased compared with 2014, primarily
due to a decrease in non-sustaining capital expenditures at Tasiast, Chirano and the Kupol segment.
Mineral Reserves1
Kinross’ total estimated proven and probable gold reserves at year-end 2016 were approximately 31.0 million ounces. The decrease
of 2.2 million ounces in estimated gold reserves compared to year-end 2015 was mainly a result of depletion across the Company’s
portfolio and reclassification of reserves to resources at Maricunga, offset by reserve increases at Bald Mountain.
Proven and probable silver reserves at year-end 2016 were estimated at approximately 37.4 million ounces, a net decrease of 3.6
million ounces compared with year-end 2015, primarily due to production depletion offset by increases at Round Mountain and Kupol.
Proven and probable copper reserves at year-end 2016, which are exclusively at Cerro Casale, were estimated at approximately 1.4
billion pounds, unchanged from year-end 2015.
1 For details concerning mineral reserve and mineral resource estimates, refer to the Mineral Reserves and Mineral Resources tables and notes in the Company's news
release filed with Canadian and U.S. regulators on February 15, 2017.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
2.
IMPACT OF KEY ECONOMIC TRENDS
Price of Gold
Source: Bloomberg
The price of gold is the largest single factor in determining profitability and cash flow from operations, therefore, the financial
performance of the Company has been, and is expected to be closely linked to the price of gold. Historically, the price of gold has
been subject to volatile price movements over short periods of time and is affected by numerous macroeconomic and industry factors
that are beyond the Company’s control. Major influences on the gold price include currency exchange rate fluctuations and the
relative strength of the U.S. dollar, the supply of and demand for gold and macroeconomic factors such as the level of interest rates
and inflation expectations. During 2016, the price of gold fluctuated between a low of $1,075 per ounce in January to a high of $1,366
per ounce in July. The average price for the year based on the London Bullion Market Association PM Fix was $1,251 per ounce, a $91
per ounce increase over the 2015 average price of $1,160 per ounce. Major influences on the gold price in 2016 included the
strengthening of the U.S. dollar, with the U.S Federal Reserve raising interest rates by 25 basis points, and negative interest rate
policies in Japan and Europe. Investors buying gold exchange-traded funds (“ETF”) returned in 2016, reversing the flow of redemptions
seen between 2013 and 2015. In 2016, gold ETFs increased until November, at which point investors reduced their ETF holdings based
on a strong outlook for the U.S. dollar. Gold was also impacted by the continued uncertainty over Brexit and the change in
administration in the United States.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Source: London Bullion Marketing Association London PM Fix
During 2016, the Company realized an average gold price of $1,249 per ounce compared to the average PM Fix of $1,251 per ounce.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Gold Supply and Demand Fundamentals
Source: GFMS Gold Survey 2016 Q4 Update
Total gold supply increased by approximately 2.8% in 2016 relative to 2015, largely due to an increase in producer hedging. Global
gold mine production decreased by 1.5% offset by an increase of 9.9% in supply of recycled gold. Mine production and recycled gold
remain the dominant sources of gold supply, and in 2016 they represented approximately 70% and 28% of total supply, respectively.
Central banks have not been a source of supply to the market, but have rather been net buyers, as noted below.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Source: GFMS 2016 Gold Survey Q4 Update
Physical demand was at a seven year low and decreased by approximately 20% in 2016 relative to 2015, despite lower gold prices in
the second half of 2016. Fabrication demand is estimated to have decreased by 20% in 2016 relative to 2015, mainly due to lower
demand in China and India. Bar hoarding decreased by approximately 14% in 2016, with the sharpest declines coming in western
markets and India. Purchases from central banks decreased by 42% during the year, due to slower pace of purchases from Russia and
China.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Cost Sensitivity
The Company’s profitability is subject to industry wide cost pressures on development and operating costs with respect to labour,
energy, capital expenditures and consumables in general. Since mining is generally an energy intensive activity, especially in open pit
mining, energy prices can have a significant impact on operations. The cost of fuel as a percentage of operating costs varies amongst
the Company’s mines, and overall, operations have experienced modest fuel price increases in the second half of 2016, reflecting
OPEC’s decision to reduce production. 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.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
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 60% of the Company’s
expected attributable production in 2017 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.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
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.
Operational Outlook
In 2017, Kinross expects to produce 2.5 to 2.7 million gold equivalent ounces from its operations, which is consistent with the
Company’s average production over the past five years. The forecast decrease compared with full-year 2016 production is mainly a
result of the suspension of mining activities at Maricunga, the anticipated lower grades at the Russia operations due to mine
sequencing, and the expected closure of Kettle River-Buckhorn in the first quarter of 2017, partially offset by significantly higher
forecast production at Bald Mountain, and expected increases from the West African region. Production guidance once again takes
into consideration the potential for a temporary curtailment of mill operations at Paracatu due to the possibility of seasonal rainfall
shortages in south central Brazil. Production in the second half of 2017 is expected to be higher compared with the first half of the
year, mainly due to the seasonal impact of the heap leaches at Fort Knox and Round Mountain, and the significantly higher production
expected at Bald Mountain in the fourth quarter of 2017 due to mine sequencing and a lag from the heap leach.
Production cost of sales per gold equivalent ounce is expected to be in the range of $660 to $720 per gold equivalent ounce for 2017,
the mid-point of which is lower compared with full-year 2016 production cost of sales of $712 per gold equivalent ounce. Lower
production in the first half of 2017 is expected to result in higher production costs compared with the second half of 2017.
The Company has forecast an all-in sustaining cost of $925 - $1,025 per ounce sold on both a gold equivalent and by-product basis for
2017. The mid-point of the all-in sustaining cost guidance range is lower compared with 2016 all-in sustaining cost of sales of $984 per
gold equivalent ounce.
Material assumptions used to forecast 2017 production costs are: a gold price of $1,200 per ounce, a silver price of $16 per ounce, an
oil price of $60 per barrel, and foreign exchange rates of 3.25 Brazilian real to the U.S. dollar, 1.25 Canadian dollar to the U.S. dollar,
60 Russian roubles to the U.S. dollar, 630 Chilean pesos to the U.S. dollar, 4.00 Ghanaian cedi to the U.S. dollar, 330 Mauritanian
ouguiya to the U.S. dollar, and 1.10 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 $15 impact on our production cost of sales per ounce,
and specific to the Russian rouble and Brazilian real, a 10% change in the exchange rates would be expected to result in an impact of
approximately $16 and $32 on the Russian and Brazilian production cost of sales per ounce, respectively. A $10 per barrel change in
the price of oil would be expected to result in an approximate $2 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 $4 impact on our production cost of sales per ounce as a result of
a change in royalties.
Total capital expenditures for 2017 are forecast to be approximately $900 million (including capitalized interest of approximately $25
million). Of this amount, sustaining capital expenditures are expected to be approximately $420 million, and non-sustaining capital of
approximately $455 million for the Tasiast expansion project and other development projects and studies.
The 2017 forecast for exploration expenditures is approximately $70 million, none of which is expected to be capitalized, and overhead
(general and administrative and business development expenses) is expected to be approximately $165 million, both of which are
consistent with 2016.
Other operating costs are forecast to be approximately $60 million, which includes approximately $30 million for care and
maintenance costs in Chile.
Based on the Company’s assumed gold price and other inputs, net income tax expense is expected to be $90 million and taxes paid
are expected to be $150 million, with both increasing at 26% of any profit resulting from higher gold prices.
Depreciation, depletion and amortization is forecast to be approximately $350 per gold equivalent ounce sold.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
4. PROJECT UPDATES AND NEW DEVELOPMENTS
Tasiast Phase One and Phase Two expansion
The Tasiast Phase One project continues to progress well and is on schedule and on budget, with full commercial production expected
in the second quarter of 2018. Engineering and procurement of all equipment packages are substantially concluded. Plant construction
is about 20% complete, with significant progress made on earthworks, concrete, and the tailings storage facility (“TSF”). The first level
of the TSF dam core is complete and liner placement is now underway. The foundations for the Semi-Autogenous Grinding Mill (“SAG”)
and primary crusher are progressing, and installation contracts have been awarded for most key elements. Major components for the
SAG mill and primary crusher have arrived at site, and the SAG mill installation is expected to begin towards the end of February 2017.
Phase One is expected to increase plant throughput to 12,000 tonnes per day (“t/d”), and almost double production to approximately
400,000 gold equivalent ounces per year at an all-in sustaining cost of $760 per gold equivalent ounce.
The Tasiast Phase Two expansion feasibility study is also progressing well and is on schedule to be completed in the third quarter of
2017. The feasibility study contemplates installing an additional 18,000 t/d of throughput capacity (for a total combined capacity of
30,000 t/d for both phases), an expanded power plant, upgraded water supply infrastructure, and additions to the mining fleet. The
Phase Two project is expected to produce approximately 780,000 gold equivalent ounces per year at an all-in sustaining cost of $665
per gold equivalent ounce. The Company expects to make a development decision on Phase Two once the feasibility study has been
completed.
The combined Phase One and Two expansion is expected to transform Tasiast into the Company’s largest operation, with a long mine
life and estimated costs amongst the lowest in its portfolio.
Bald Mountain update
The Company continues to develop Bald Mountain’s potential for a significant mine life extension and production expansion. At year-
end 2016, the Company doubled Bald Mountain’s proven and probable mineral reserve estimates to 2.1 million ounces, adding a total
of 1.24 million ounces, with approximately 0.68 million ounces from the North area, and approximately 0.57 million ounces from the
South area.
The mineral reserve additions in the North area are primarily the result of continued exploration, definition drilling and mine plan
optimization at the Saga, Duke and Top pits.
The mineral reserve additions in the South area are a result of the Company’s pre-feasibility work at the Vantage Complex project,
and exploration and confirmatory drilling, geological modelling and metallurgical testing at the Vantage, Luxe and Saddle pits. The pre-
feasibility study also contemplates construction of a new heap leach pad with associated processing facilities and infrastructure. The
preliminary capital estimate for the Vantage Complex project is expected to be in the range of $90 - $120 million, with major works
expected to begin in the first half of 2018. The proposed design of the facilities allows for the full development of the Vantage, Luxe
and Saddle pits, which have a combined 28 million tonnes of ore at an average grade of 0.63 grams per tonne, and makes
accommodation for future development of additional potential satellite pits in the South area, with forecast incremental capacity for
34 million tonnes of ore, for a total capacity of 62 million tonnes.
A net addition 0.27 million ounces of inferred mineral resources were added to estimates at Bald Mountain as of December 31, 2016,
mainly as a result of drilling, refinements to mineral resource models, and engineering optimization.
Russia projects update
Kinross' Russian development projects continue to advance as planned. At September Northeast, located approximately 15 kilometres
from Dvoinoye, stripping has commenced, with the project completed on time and on budget. At the Moroshka project, located
approximately four kilometres from Kupol, decline development and the installation of limited surface infrastructure is underway,
with portal construction now 30% complete. Mining is on schedule to commence in the first half of 2018. These two additional sources
of ore are expected to add high-margin ounces into the mine plan, contributing to a one-year mine life extension at Kupol-Dvoinoye
to 2021.
A dry-stack tailings filter cake plant has been constructed at Kupol and is currently being commissioned. The plant allows for tailings
storage for the current mineral reserves estimates, and flexibility to permit additional storage capacity for potential mine life
extensions.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Round Mountain Phase W
Infill, geostatistical, geotechnical, and metallurgical drilling on the Phase W project continued during the fourth quarter of 2016 to
support the Phase W feasibility study. The drill program upgraded a total of 1.3 million ounces to the Company’s measured and
indicated mineral resources estimates and added 1.7 million ounces to its inferred mineral resources estimates as at December 31,
2016. Feasibility study activities are now fully underway, with a focus on mine plan optimization, geologic modelling, metallurgical and
geotechnical test work, and engineering of required infrastructure. Permitting activities in support of the project are also ongoing. The
feasibility study on Phase W is expected to be completed in the third quarter of 2017.
The Phase W expansion project could potentially extend life of mine at Round Mountain, one of the most consistent mines in the
Company’s portfolio.
La Coipa project update
At La Coipa, the Phase 7 district drill program was completed in the third quarter of 2016 for a total of 9,257 metres drilled. The
program identified mineralized extensions to Pompeya and Catalina, and defined the new Belen mineralized zone. The target will
undergo further review, although drilling in 2017 may focus on other target zones in the Company’s portfolio.
Paracatu Optimization Study
At Paracatu, the Company has recently launched an asset optimization study, which is expected to be completed in late 2017. The
objective of the study is to determine the optimal mine plan after taking into account recent improvements such as the successful re-
processing of tailings, the blending of ores to extend Plant 1 life, and several other continuous improvement initiatives. The study will
also assess the impact of recently encountered challenges, such as throughput variances in quartzite-impacted zones, lower realized
recoveries in certain zones of the ore body, water shortages, and local cost inflation.
Acquisition of Bald Mountain and remaining 50% interest in Round Mountain
On January 11, 2016, the Company completed the acquisition of 100% of the Bald Mountain gold mine (“Bald Mountain”), which
includes a large associated land package, and the remaining 50% interest in the Round Mountain gold mine for $610 million in cash,
subject to a working capital adjustment, which reduced the purchase price by $22 million to $588 million.
The acquisition, which was accounted for as a business combination as at January 11, 2016, represents a strategic fit with the
Company’s open-pit heap leach skill set and existing portfolio of operating assets, and enhances the production profile in the United
States.
Equity offering
On March 4, 2016, the Company completed a public equity offering of 83.4 million common shares at a price of $3.00 per common
share for gross proceeds of approximately $250.0 million. On March 15, 2016, the underwriters elected to exercise an option to
purchase up to an additional 15% of the offering to cover over-allotments, and as a result, an additional 12.5 million common shares
were issued at a price of $3.00 per common share. The sale was completed on March 18, 2016 and increased the gross proceeds from
the offering to $287.7 million.
Board of Directors update
The Board of Directors of Kinross appointed Mr. Ian Atkinson as a Director effective February 10, 2016. Mr. Atkinson has more than
40 years of experience in the mining industry and was most recently the President and Chief Executive Officer, and a Director, of
Centerra Gold Inc. Mr. Atkinson has extensive background in exploration, project development, and mergers and acquisitions.
Mr. John K. Carrington, who had been a Kinross Board member since 2005, decided to retire and not stand for re-election at the
Company’s Annual General Meeting of Shareholders held in May 2016.
Executive update
On August 17, 2016, the Company announced the appointments of Lauren Roberts as Chief Operating Officer and Paul Tomory as
Chief Technical Officer, a new role within the senior leadership team, both effective January 1, 2017. Mr. Roberts replaced Warwick
Morley-Jepson, whose departure was also announced on August 17, 2016.
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DT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
5. CONSOLIDATED RESULTS OF OPERATIONS
Operating Highlights
(in millions, except ounces and per ounce amounts)
Operating Statistics
Total gold equivalent ounces (a)
Produced (b)
Sold (b)
Attributable gold equivalent ounces (a)
Produced (b)
Sold (b)
Gold ounces - sold
Silver ounces - sold (000's)
Years ended December 31,
2016 vs. 2015
2015 vs. 2014
2016
2015
2014
Change
% Change
Change
% Change
2,810,345
2,620,262
2,778,902
2,634,867
2,739,044
2,743,398
190,083
144,035
2,789,150
2,594,652
2,758,306
2,608,870
2,710,390
2,715,358
194,498
149,436
7%
5%
7%
6%
(118,782)
(108,531)
(115,738)
(106,488)
2,697,912
2,562,219
2,669,278
135,693
5,913
5,378
4,923
535
5%
10%
(107,059)
455
Average realized gold price per ounce
$
1,249
$
1,159
$
1,263
$
90
8%
$
(104)
Financial data
Metal sales
Production cost of sales
Depreciation, depletion and amortization
Impairment charges
Operating earnings (loss)
Net loss attributable to common shareholders
$
3,472.0
$
3,052.2
$
3,466.3
$
419.8
14%
$
(414.1)
$
1,983.8
$
1,834.8
$
1,971.2
$
149.0
8%
$
(136.4)
$
$
855.0
139.6
$
$
897.7
699.0
$
$
874.7
1,251.4
$
$
(42.7)
(559.4)
$
$
46.3
(104.0)
$
$
(742.9)
(984.5)
$
$
(1,027.2)
(1,400.0)
$
$
789.2
880.5
(5%)
(80%)
106%
89%
$
$
23.0
(552.4)
$
$
284.3
415.5
(4%)
(4%)
(4%)
(4%)
(4%)
9%
(8%)
(12%)
(7%)
3%
(44%)
28%
30%
(a)
(b)
"Total" includes 100% of Chirano production. "Attributable" includes Kinross' share of Chirano (90%) production.
"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 2016 was 72.95:1 (2015 - 73.92:1 and 2014 - 66.29:1).
MDA 15
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Operating Earnings (Loss) by Segment
(in millions)
Operating segm ents
Fort Knox
Round Mountain
Bald Mountain
Kettle River-Buckhorn
Paracatu
Maricunga
Kupol (a)
Tasiast
Chirano
Non-operating segm ent
Corporate and Other (b)
Total
Years ended December 31,
2016 vs. 2015
2015 vs. 2014
2016
2015
2014
Change % Change (c) Change
% Change
$
110.0
85.8
(37.4)
64.0
36.2
(150.6)
345.3
(119.9)
(58.0)
$
(180.8)
(8.9)
-
30.3
24.4
(60.4)
150.1
(361.2)
(70.1)
$
99.9
44.0
-
(45.6)
69.3
36.3
297.4
(571.4)
(365.4)
$
290.8
94.7
(37.4)
33.7
11.8
(90.2)
195.2
241.3
12.1
161%
nm
(100%)
111%
48%
(149%)
130%
67%
17%
$
(280.7)
(52.9)
-
75.9
(44.9)
(96.7)
(147.3)
210.2
295.3
(229.1)
46.3
$
(266.3)
(742.9)
$
(591.7)
(1,027.2)
$
37.2
789.2
$
14%
106%
325.4
284.3
$
nm
(120%)
-
166%
(65%)
nm
(50%)
37%
81%
55%
28%
(a)
The Kupol segment includes the Kupol and Dvoinoye mines.
(b)
"Corporate and Other" includes operating costs that 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, Lobo-
Marte, Cerro Casale and White Gold).
(c)
"nm" means not meaningful.
MDA 16
Kinross Gold Annual Report 2016
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Mining operations
Fort Knox (100% ownership and operator) – USA
Years ended December 31,
2016
2015
Change
% Change
Operating Statistics
Tonnes ore mined (000's)
Tonnes processed (000's) (a)
Grade (grams/tonne)(b)
Recovery(b)
Gold equivalent ounces:
Produced
Sold
31,750
42,360
0.69
82.8%
22,761
38,664
0.76
82.9%
409,844
408,059
401,553
402,104
8,989
3,696
(0.07)
(0.1%)
8,291
5,955
Financial Data (in millions)
Metal sales
Production cost of sales
Depreciation, depletion and amortization
Impairment charges
Exploration and business development
Other
Segment operating earnings (loss)
$
510.8
302.2
88.7
-
119.9
8.9
1.0
110.0
$
$
$
467.0
252.8
130.3
252.7
(168.8)
10.6
1.4
(180.8)
43.8
49.4
(41.6)
(252.7)
288.7
(1.7)
(0.4)
290.8
$
$
39%
10%
(9%)
(0%)
2%
1%
9%
20%
(32%)
(100%)
171%
(16%)
(29%)
161%
(a)
(b)
Includes 29,142,000 tonnes placed on the heap leach pads during 2016 (2015 - 25,218,000 tonnes).
Amount represents mill grade and recovery only. Ore placed on the heap leach pads had an average
grade of 0.27 grams per tonne during 2016 (2015 - 0.27 grams per tonne). Due to the nature of heap
leach operations, point-in-time recovery rates are not meaningful.
The Company has been operating the Fort Knox mine, located near Fairbanks, Alaska, since it was acquired in 1998.
2016 vs. 2015
During 2016, tonnes of ore mined increased by 39% compared with 2015, primarily due to planned mine sequencing, which involved
mining activities focused on the Phase 7 South and Phase 8 West areas of the Fort Knox pit as well as shorter haul cycles of mining
activities. Tonnes of ore processed increased by 10% in 2016 compared with 2015, largely due to an increase in lower grade ore being
stacked on the leach pads as a result of milder winter conditions experienced during the first quarter of 2016 and an increase in leach
grade ore mined during the third quarter of 2016. Mill grades were 9% lower in 2016 compared with 2015 as a result of mine
sequencing. Gold equivalent ounces produced increased by 2% compared with 2015, primarily due to an increase in gold ounces
recovered from the heap leach pads, partially offset by the lower mill grade.
Metal sales were 9% higher in 2016 compared with 2015 due to increases in metal prices realized and gold equivalent ounces sold.
During 2016, production cost of sales were higher by 20% compared with 2015, of which 12% was the result of an increase in operating
waste mined and 2% was due to higher reagent and labour costs, partially offset by lower fuel costs, which was driven by a decrease
in diesel prices. Depreciation, depletion and amortization in 2016 decreased by 32% compared with 2015, mainly due to a decrease in
the depreciable asset base resulting from the impairment charge recognized at December 31, 2015.
At December 31, 2015, the Company recorded impairment charges of $252.7 million, comprised of $249.5 million related to property,
plant and equipment and $3.2 million related to inventory. The non-cash impairment charge related to property, plant and equipment
was primarily due to a reduction in the Company’s estimates of future metal prices. No such impairment charges were recognized in
2016.
MDA 17
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Round Mountain (2016: 100% ownership; 2015: 50% ownership and operator and Barrick 50%) – USA
Years ended December 31,
2016 (a)
2015
Change % Change (d)
Operating Statistics
Tonnes ore mined (000's)(b)
Tonnes processed (000's)(b)
Grade (grams/tonne)(c)
Recovery(c)
Gold equivalent ounces:
Produced
Sold
Financial Data (in millions)
Metal sales
Production cost of sales
Depreciation, depletion and amortization
Impairment charges
Exploration and business development
Segment operating earnings (loss)
23,530
23,713
0.98
80.7%
26,134
22,084
0.93
77.4%
(2,604)
1,629
0.05
3.3%
378,264
377,910
197,818
195,781
180,446
182,129
$
$
$
477.1
292.0
94.7
-
90.4
4.6
85.8
228.1
146.9
44.9
44.0
(7.7)
1.2
(8.9)
249.0
145.1
49.8
(44.0)
98.1
3.4
94.7
$
$
$
(10%)
7%
5%
4%
91%
93%
109%
99%
111%
(100%)
nm
nm
nm
(a)
(b)
(c)
On January 11, 2016, Kinross completed its acquisition of the remaining 50% interest in the
Round Mountain gold mine from Barrick. Results include 100% of Round Mountain from January
11, 2016 to December 31, 2016.
Tonnes of ore mined/processed represent 100% of operations for all periods. Includes
20,084,000 tonnes placed on the heap leach pads during 2016 (2015 - 19,368,000 tonnes).
Amount represents mill grade and recovery only. Ore placed on the heap leach pads had an
average grade of 0.44 grams per tonne for 2016 (2015 - 0.42 grams per tonne). Due to the nature
of heap leach operations, point-in-time recovery rates are not meaningful.
(d)
"nm" means not meaningful.
The Company acquired its 50% ownership interest in the Round Mountain open pit mine, located in Nye County, Nevada, with the
acquisition of Echo Bay Mines Ltd. ("Echo Bay") on January 31, 2003. On January 11, 2016, the Company acquired the remaining 50%
interest in Round Mountain, along with the Bald Mountain gold mine from Barrick.
2016 vs. 2015
During 2016, tonnes of ore mined decreased by 10% compared with 2015, primarily due to longer hauls and narrower mining width
from the current phase of mining. Tonnes of ore processed in 2016 were higher by 7% compared with 2015, largely due to higher mill
throughput as a result of operational improvements and an increase in planned leached tonnes of ore mined, which resulted in more
tonnes placed on the heap leach pads. Mill recoveries in 2016 were 4% higher compared with the same period in 2015, largely due to
improvements in the operating efficiency of the mill as a result of its recommissioning in March 2015 after the mill fire. During 2016,
gold equivalent ounces produced increased by 91% compared with the same period in 2015, primarily due to the acquisition and the
increases in mill throughput and recoveries, partially offset by a decrease in ounces recovered from the heap leach pads.
Metal sales increased to $477.1 million in 2016 from $228.1 million in 2015 due to an increase in gold equivalent ounces sold, mainly
as a result of the acquisition, and an increase in metal prices realized. During 2016, production cost of sales increased to $292.0 million
from $146.9 million in 2015, primarily due to the increase in gold equivalent ounces sold, partially offset by an 18% decrease in fuel
cost, a 27% decrease in electricity cost and lower reagent costs. Depreciation, depletion and amortization increased to $94.7 million
in 2016 from $44.9 million in 2015, primarily due to the acquisition, partially offset by an increase in mineral reserves at December 31,
2015.
At December 31, 2015, the Company recorded impairment charges of $44.0 million, including $43.0 million related to property, plant
and equipment due to a reduction in the Company’s estimates of future metal prices. No such impairment charges were recognized
in 2016.
MDA 18
Kinross Gold Annual Report 2016
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Bald Mountain (100% ownership and operator) – USA
Operating Statistics (a)
Tonnes ore mined (000's)
Tonnes processed (000's)
Grade (grams/tonne)
Gold equivalent ounces:
Produced
Sold
Financial Data (in millions)
Metal sales
Production cost of sales
Depreciation, depletion and amortization
Exploration and business development
Other
Segment operating loss
Period ended
December 31, 2016
10,656
10,656
0.64
130,144
111,464
$
139.6
131.7
38.6
(30.7)
4.7
2.0
(37.4)
$
(a)
Due to the nature of heap leach operations, point-in-time recovery rates are not meaningful.
On January 11, 2016, the Company completed the acquisition of 100% of the Bald Mountain gold mine (“Bald Mountain”), which
includes a large associated land package, and the remaining 50% interest in the Round Mountain gold mine for $610 million in cash,
subject to a working capital adjustment, which reduced the purchase price by $22 million to $588 million.
During the period from January 11, 2016 to December 31, 2016, ore mined and processed at Bald Mountain amounted to 10,656,000
tonnes, ore placed on the heap leach pad had an average grade of 0.64 g/t. Bald Mountain produced and sold 130,144 and 111,464
gold equivalent ounces, respectively.
During the same period, metal sales of $139.6 million, net of cost of sales, depreciation, depletion and amortization, and exploration
and business development expenses, resulted in an operating loss of $37.4 million.
MDA 19
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Kettle River–Buckhorn (100% ownership and operator) – USA
Years ended December 31,
2016
2015
Change % Change (a)
Operating Statistics
Tonnes ore mined (000's)
Tonnes processed (000's)
Grade (grams/tonne)
Recovery
Gold equivalent ounces:
Produced
Sold
Financial Data (in millions)
Metal sales
Production cost of sales
Depreciation, depletion and amortization
Exploration and business development
Other
Segment operating earnings
438
441
7.84
93.3%
369
437
7.75
92.3%
69
4
0.09
1.0%
112,274
112,038
97,368
97,576
14,906
14,462
$
$
$
139.8
73.0
1.3
65.5
2.2
(0.7)
64.0
113.3
81.6
12.0
19.7
2.0
(12.6)
30.3
26.5
(8.6)
(10.7)
45.8
0.2
11.9
33.7
$
$
$
19%
1%
1%
1%
15%
15%
23%
(11%)
(89%)
nm
10%
94%
111%
(a) "nm" means not meaningful.
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.
2016 vs. 2015
During 2016, gold equivalent ounces produced and sold increased by 15%, compared with 2015, primarily due to timing of ounces
processed through the mill.
Metal sales increased by 23% in 2016 compared with 2015 due to increases in gold equivalent ounces sold and metal prices realized.
During 2016, production cost of sales decreased by 11% compared with 2015, of which 7% was due to lower labour, contractor and
material costs. Depreciation, depletion and amortization decreased by 89% in 2016 compared with 2015, largely as a result of a
decrease in the depreciable asset base as Kettle River-Buckhorn nears the end of its mine life.
MDA 20
Kinross Gold Annual Report 2016
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Paracatu (100% ownership and operator) – Brazil
Years ended December 31,
2016
2015
Change % Change (a)
Operating Statistics
Tonnes ore mined (000's)
Tonnes processed (000's)
Grade (grams/tonne)
Recovery
Gold equivalent ounces:
Produced
Sold
47,206
46,816
0.45
72.3%
47,750
45,277
0.44
75.4%
483,014
482,827
477,662
484,732
(544)
1,539
0.01
(3.1%)
5,352
(1,905)
Financial Data (in millions)
Metal sales
Production cost of sales
Depreciation, depletion and amortization
Impairment charges
Other
Segment operating earnings
(a) "nm" means not meaningful.
$
599.6
346.4
142.7
-
110.5
74.3
36.2
$
$
$
559.8
374.3
147.5
3.3
34.7
10.3
24.4
39.8
(27.9)
(4.8)
(3.3)
75.8
64.0
11.8
$
$
(1%)
3%
2%
(4%)
1%
(0%)
7%
(7%)
(3%)
(100%)
nm
nm
48%
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. on January 31, 2003. On December 31, 2004, the Company purchased the remaining 51% of Paracatu from
Rio Tinto Plc.
2016 vs. 2015
During 2016, tonnes of ore mined decreased slightly and tonnes of ore processed increased slightly compared with 2015, primarily
due to planned mine sequencing. The change in grades and recoveries in 2016 compared with 2015 was largely due to the metallurgical
characteristics of the ore mined. Gold equivalent ounces produced increased slightly compared with 2015, primarily due to higher
throughput, which included an increase in gold recovered from the processing of Santo Antonio tailings, partially offset by a decrease
in mill recoveries.
Metal sales increased by 7% in 2016 compared with 2015 due to an increase in metal prices realized. Production cost of sales were
lower by 7% in 2016 compared with 2015, primarily due to favourable foreign exchange movements resulting from the effectiveness
of the Company’s hedge program, and lower costs of milling supplies. The decreases were partially offset by an increase in contractor
costs and fuel consumption related to the Santo Antonio tailings reprocessing project. Depreciation, depletion and amortization were
3% lower compared with 2015, primarily due to a decrease in the depreciable asset base.
During 2016, other costs of $74.3 million included $58.0 million related to a write-off of value-added tax (“VAT”) receivables and
settlement of VAT disputes due to regulatory changes in Brazil.
MDA 21
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Maricunga (100% ownership and operator) – Chile
Operating Statistics (a)
Tonnes ore mined (000's)
Tonnes processed (000's)
Grade (grams/tonne)
Gold equivalent ounces:
Produced
Sold
Financial Data (in millions)
Metal sales
Production cost of sales
Depreciation, depletion and amortization
Impairment charges
Other
Segment operating loss
Years ended December 31,
Change
2015
2016
% Change
6,059
6,508
0.67
12,261
12,790
0.75
(6,202)
(6,282)
(0.08)
175,532
175,670
212,155
214,055
(36,623)
(38,385)
$
$
$
219.4
145.2
34.4
139.6
(99.8)
50.8
(150.6)
249.1
216.1
27.3
48.7
(43.0)
17.4
(60.4)
(29.7)
(70.9)
7.1
90.9
(56.8)
33.4
(90.2)
$
$
$
(51%)
(49%)
(11%)
(17%)
(18%)
(12%)
(33%)
26%
187%
(132%)
192%
(149%)
(a)
Due to the nature of heap leach operations, point-in-time recovery rates are not meaningful.
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”). During the third quarter of 2016, the mining activities at Maricunga were suspended
as a result of the imposition of a water curtailment order by Chile’s environmental enforcement authority (the “SMA”).
2016 vs. 2015
During 2016, tonnes of ore mined and processed decreased by 51% and 49%, respectively, compared with 2015, primarily due to the
suspension of mining and crushing operations in the third quarter of 2016 as a result of the imposition of a water curtailment order
by Chile’s environmental enforcement authority (the “SMA”). In 2015, mining and crushing operations were suspended due to the
stockpile tower replacement and the extreme weather event in March 2015. During 2016, grades decreased by 11% compared with
2015 as a result of planned mine sequencing. Gold equivalent ounces produced and sold decreased by 17% and 18% respectively,
compared with 2015, primarily due to the decrease in grades and the tonnes of ore placed on the heap leach pads.
Metal sales in 2016 decreased by 12%, compared with 2015 due to the decrease in gold equivalent ounces sold, partially offset by an
increase in metal prices realized. During 2016, production cost of sales decreased by 33% compared with 2015, primarily due to the
decrease in gold equivalent ounces sold and lower labour, contractor, energy, reagent and maintenance costs as a result of the
suspension of mining activities. Depreciation, depletion and amortization increased by 26% in 2016 compared with 2015, primarily
due to a decrease in mineral reserves at December 31, 2015.
At September 30, 2016, the Company recorded impairment charges of $139.6 million, comprised of $68.3 million related to property,
plant and equipment and $71.3 million related to inventory. The non-cash impairment charges resulted from the suspension of mining
in the third quarter of 2016. At December 31, 2015, the Company recorded an impairment charge of $24.2 million due to a reduction
of the carrying value of inventory to its net realizable value. In addition, at June 30, 2015, the carrying value of inventory was written
down by $24.5 million due to the March 2015 extreme weather event, which resulted in an increase in the per ounce cost to complete
inventory.
During 2016, other costs of $50.8 million included $20.1 million related to the suspension of mining activities and $27.3 million related
to reclamation and remediation costs. During 2015, other costs of $17.4 million were incurred, primarily related to the March 2015
extreme weather event.
MDA 22
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Kupol (100% ownership and operator) – Russian Federation (a)
Years ended December 31,
2016
2015
Change
% Change
Operating Statistics
Tonnes ore mined (000's) (b)
Tonnes processed (000's)
Grade (grams/tonne):
Gold
Silver
Recovery:
Gold
Silver
Gold equivalent ounces: (c)
Produced
Sold
Silver ounces:
Produced (000's)
Sold (000's)
2,002
1,710
12.72
103.38
1,897
1,680
13.52
100.75
95.3%
87.8%
95.4%
86.7%
105
30
(0.80)
2.63
(0.1%)
1.1%
734,143
736,001
758,563
764,613
(24,420)
(28,612)
4,909
4,902
4,700
4,730
209
172
Financial Data (in millions)
Metal sales
Production cost of sales
Depreciation, depletion and amortization
Impairment charges
Exploration and business development
Other
$
919.2
324.3
236.8
-
358.1
13.3
(0.5)
$
883.2
362.8
271.3
84.7
164.4
14.5
(0.2)
$
36.0
(38.5)
(34.5)
(84.7)
193.7
(1.2)
(0.3)
Segment operating earnings
$
345.3
$
150.1
$
195.2
6%
2%
(6%)
3%
(0%)
1%
(3%)
(4%)
4%
4%
4%
(11%)
(13%)
(100%)
118%
(8%)
(150%)
130%
(a)
The Kupol segment includes the Kupol and Dvoinoye mines.
(b)
(c)
Includes 665,000 tonnes of ore mined from Dvoinoye during 2016 (2015 - 605,000 tonnes).
"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 2016 was 72.95:1 (2015 - 73.92:1).
The Company acquired a 75% interest in the Kupol project in Far Eastern Russia on February 27, 2007. The remaining 25% interest
was acquired from the State Unitary Enterprise of the Chukotka Autonomous Okrug on April 27, 2011.
2016 vs. 2015
During 2016, tonnes of ore mined increased by 6%, compared with 2015, primarily due to increased mining activities at Dvoinoye and
more favourable underground conditions at Kupol. Tonnes of ore processed increased by 2%, compared with 2015 largely due to an
increase in performance of the mill. Gold grades were 6% lower during 2016 compared with 2015, largely due to lower grades
processed from the Upper Central stopes at Dvoinoye, consistent with the mine plan. Gold equivalent ounces produced decreased by
3% in 2016, compared with 2015 due to lower gold grades, partially offset by slightly higher mill throughput. During 2016, gold
equivalent ounces sold exceeded production due to the timing of shipments.
Metal sales increased by 4% in 2016, compared with 2015 due to an increase in metal prices realized, partially offset by a reduction in
gold equivalent ounces sold. During 2016, production cost of sales decreased by 11% compared with 2015, primarily due to the
decrease in gold equivalent ounces sold, lower labour and fuel costs as a result of favourable foreign exchange movements and a
decrease in maintenance costs. Depreciation, depletion and amortization decreased by 13% compared with 2015 due to the decrease
in gold equivalent ounces sold and a decrease in the depreciable asset base. At December 31, 2015, the Company recorded an
impairment charge of $84.7 million to reduce the carrying value of inventory to its net realizable value. No such impairment charges
were recognized during 2016.
MDA 23
Kinross Gold Annual Report 2016
23
MDA
KINROSS GOLD ANNUAL REPORT 2016
K.4.219 Kinross MD&A_HR.pdf - p23 (March 16, 2017 19:53:32)
DT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Tasiast (100% ownership and operator) – Mauritania
Operating Statistics
Tonnes ore mined (000's)
Tonnes processed (000's) (a)
Grade (grams/tonne) (b)
Recovery (b)
Gold equivalent ounces:
Produced
Sold
Financial Data (in millions)
Metal sales
Production cost of sales
Depreciation, depletion and amortization
Impairment charges
Exploration and business development
Other
Segment operating loss
Years ended December 31,
2016
2015
Change
% Change
7,973
7,227
1.80
92.0%
5,195
4,080
2.17
90.5%
2,778
3,147
(0.37)
1.5%
175,176
168,969
219,045
216,040
(43,869)
(47,071)
$
$
$
208.0
179.3
96.4
-
(67.7)
5.9
46.3
(119.9)
249.4
220.6
80.9
259.7
(311.8)
14.1
35.3
(361.2)
(41.4)
(41.3)
15.5
(259.7)
244.1
(8.2)
11.0
241.3
$
$
$
53%
77%
(17%)
2%
(20%)
(22%)
(17%)
(19%)
19%
(100%)
78%
(58%)
31%
67%
(a)
(b)
Includes 4,768,000 tonnes placed on the dump leach pads during 2016 (2015 - 1,538,000 tonnes).
Amount represents mill grade and recovery only. Ore placed on the dump leach pads had an
average grade of 0.44 grams per tonne during 2016 (2015 - 0.55 grams per tonne). Due to the
nature of dump leach operations, point-in-time recovery rates are not meaningful.
Kinross acquired its 100% interest in the Tasiast mine on September 17, 2010 upon completing its acquisition of Red Back Mining Inc.
(“Red Back”). The Tasiast mine is an open pit operation located in north-western Mauritania and is approximately 300 kilometres
north of the capital Nouakchott.
2016 vs. 2015
Tonnes of ore mined increased by 53% in 2016 compared with 2015, primarily due to planned mine sequencing that involved mining
a higher proportion of lower grade leachable ore from the West Branch deposit. During 2016 there was an increase in the mining
rate to support the higher mill throughput rate of over 8,000 t/d achieved from continuous improvement initiatives completed in the
fourth quarter of 2015. Tonnes of ore processed were 77% higher compared with 2015, largely due to an increase in tonnes placed on
the dump leach pads as a result of planned mine sequencing and the higher mill throughput rate. The increases in tonnes of ore mined
and processed were partially offset by the negative impact of the 6 week temporary suspension of mining and processing activities
between June and August 2016. Grades relating to the ore processed through the mill and placed on dump leach pads decreased by
17% and 20%, respectively, compared with 2015, mainly due to planned mine sequencing. During 2016, gold equivalent ounces
produced decreased by 20% compared with the same period in 2015, primarily due to the decrease in mill grade, a decrease in ounces
recovered from the dump leach pads, and the temporary suspension of operations.
Metal sales decreased by 17% compared with 2015 due to a decrease in gold equivalent ounces sold, partially offset by an increase in
metal prices realized. During 2016, production cost of sales were lower by 19% compared with 2015, primarily due to the decrease in
gold equivalent ounces sold. Depreciation, depletion and amortization increased by 19% in 2016 compared with 2015, largely due to
a decrease in mineral reserves at December 31, 2015 and an increase in the depreciable asset base.
At December 31, 2015, the Company recorded impairment charges of $259.7 million, comprised of $147.0 million related to property,
plant and equipment, $98.0 million related to inventory and $14.7 million related to other assets. The non-cash impairment charge
related to property, plant and equipment was primarily due to a reduction in the Company’s estimates of future metal prices. The
impairment charge for inventory was recognized to reduce the carrying value of certain supplies and metal inventory to net realizable
value. No such impairment charges were recognized during 2016.
During 2016, other operating costs of $46.3 million included $20.3 million of costs associated with the temporary suspension of
operations.
MDA 24
Kinross Gold Annual Report 2016
MDA
KINROSS GOLD ANNUAL REPORT 2016
24
K.4.219 Kinross MD&A_HR.pdf - p24 (March 16, 2017 19:53:32)
DT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Chirano (90% ownership and operator) – Ghana(a)
Operating Statistics
Tonnes ore mined (000's)
Tonnes processed (000's)
Grade (grams/tonne)
Recovery
Gold equivalent ounces:
Produced
Sold
Financial Data (in millions)
Metal sales
Production cost of sales
Depreciation, depletion and amortization
Impairment charges
Exploration and business development
Other
Segment operating loss
Years ended December 31,
2016
2015
Change % Change (b)
2,722
3,458
2.10
91.4%
3,046
3,492
2.51
90.6%
(324)
(34)
(0.41)
0.8%
211,954
205,964
256,098
259,966
(44,144)
(54,002)
$
258.5
189.7
$
302.3
179.7
$
(43.8)
10.0
109.9
-
175.0
5.9
(65.1)
(5.9)
(41.1)
8.9
8.0
(58.0)
$
(58.3)
13.5
(1.7)
(70.1)
$
17.2
(4.6)
9.7
12.1
$
(11%)
(1%)
(16%)
1%
(17%)
(21%)
(14%)
6%
(37%)
(100%)
30%
(34%)
nm
17%
(a)
(b)
Operating and financial data are at 100% for all periods.
"nm" means not meaningful.
Kinross acquired its 90% interest in the Chirano mine on September 17, 2010 upon completing its acquisition of Red Back. Chirano is
located in southwestern Ghana, approximately 100 kilometres southwest of Kumasi, Ghana's second largest city. A 10% carried
interest is held by the government of Ghana.
2016 vs. 2015
During 2016, tonnes of ore mined decreased by 11% compared with 2015, primarily due to the suspension of activities in the Mamnao
open pit and fewer tonnes mined from the Akwaaba underground deposit. These decreases were partially offset by an increase in
tonnes mined from the Paboase underground deposit due to production ramp-up and from the Tano open pit, which was fully
operational throughout 2016. During 2016, grades were 16% lower, mainly due to lower grade ore mined at Paboase compared with
higher grade ore mined during 2015 at Akwaaba. Gold equivalent ounces produced were 17% lower compared with 2015, primarily
due to the lower grades.
During 2016, metal sales were lower by 14% compared with 2015 due to a decrease in gold equivalent ounces sold, partially offset by
an 8% increase in metal prices realized. Production cost of sales increased by 6% compared with 2015, primarily due to a 22% increase
in power costs, as well as higher fuel, maintenance and consultancy costs. The increases were partially offset by the decrease in gold
equivalent ounces sold. Depreciation, depletion and amortization decreased by 37% compared with 2015, largely due to the decrease
in gold equivalent ounces sold and an increase in mineral reserves at December 31, 2015.
At December 31, 2015, the Company recorded an impairment charge of $5.9 million to reduce the carrying value of inventory to its
net realizable value. No such impairment charges were recognized during 2016.
MDA 25
Kinross Gold Annual Report 2016
25
MDA
KINROSS GOLD ANNUAL REPORT 2016
K.4.219 Kinross MD&A_HR.pdf - p25 (March 16, 2017 19:53:33)
DT
MANAGEMENT’S DISCUSSION AND ANALYSIS
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
For the year ended December 31, 2016
Impairment charges
Impairment charges
(i n mi l l i ons )
(i n mi l l i ons )
Property, pl a nt a nd equi pment (i )
Property, pl a nt a nd equi pment (i )
Inventory (i i )
Inventory (i i )
Impa i rment cha rges
Impa i rment cha rges
2016
2016
68.3
68.3
71.3
71.3
139.6
139.6
$
$
$
$
Years ended December 31,
Years ended December 31,
2015
2015
439.5
439.5
259.5
259.5
699.0
699.0
$
$
$
$
Change
Change
(371.2)
(371.2)
(188.2)
(188.2)
(559.4)
(559.4)
$
$
$
$
% Change
% Change
(84%)
(84%)
(73%)
(73%)
(80%)
(80%)
Property, plant and equipment
Property, plant and equipment
i.
i.
As at September 30, 2016, the Company identified the suspension of mining at Maricunga as an indication of impairment and
As at September 30, 2016, the Company identified the suspension of mining at Maricunga as an indication of impairment and
performed an impairment assessment to determine the recoverable amount of the Maricunga CGU. The recoverable amount was
performed an impairment assessment to determine the recoverable amount of the Maricunga CGU. The recoverable amount was
determined by considering observable market values for comparable assets. As the recoverable amount was lower than the carrying
determined by considering observable market values for comparable assets. As the recoverable amount was lower than the carrying
amount, an impairment charge of $68.3 million was recorded against property, plant and equipment. No impairment charges were
amount, an impairment charge of $68.3 million was recorded against property, plant and equipment. No impairment charges were
recorded as a result of the Company’s annual assessment of impairment at December 31, 2016.
recorded as a result of the Company’s annual assessment of impairment at December 31, 2016.
At December 31, 2015, upon completion of the annual assessment of the carrying values of its CGUs, the Company recorded an after-
At December 31, 2015, upon completion of the annual assessment of the carrying values of its CGUs, the Company recorded an after-
tax impairment charge of $430.2 million as a result of decreases in the Company’s short-term and long-term gold price estimates. The
tax impairment charge of $430.2 million as a result of decreases in the Company’s short-term and long-term gold price estimates. The
impairment charge was entirely related to property, plant and equipment and included a charge of $240.2 million at Fort Knox, $147.0
impairment charge was entirely related to property, plant and equipment and included a charge of $240.2 million at Fort Knox, $147.0
million at Tasiast, and $43.0 million at Round Mountain. The Fort Knox impairment charge was net of a tax recovery of $9.3 million,
million at Tasiast, and $43.0 million at Round Mountain. The Fort Knox impairment charge was net of a tax recovery of $9.3 million,
which was recorded within income tax expense. The significant estimates and assumptions used in the impairment assessments are
which was recorded within income tax expense. The significant estimates and assumptions used in the impairment assessments are
disclosed in Note 3 to the financial statements.
disclosed in Note 3 to the financial statements.
Impairment charges recognized against property, plant and equipment may be reversed if there are changes in the assumptions or
Impairment charges recognized against property, plant and equipment may be reversed if there are changes in the assumptions or
estimates used in determining the recoverable amount of a CGU which indicate that a previously recognized impairment loss may no
estimates used in determining the recoverable amount of a CGU which indicate that a previously recognized impairment loss may no
longer exist or may have decreased.
longer exist or may have decreased.
Inventory and other assets
Inventory and other assets
ii.
ii.
During 2016, the Company recognized impairment charges of $71.3 million related to metals and supplies inventory at Maricunga,
During 2016, the Company recognized impairment charges of $71.3 million related to metals and supplies inventory at Maricunga,
resulting from the suspension of mining in the third quarter of 2016.
resulting from the suspension of mining in the third quarter of 2016.
During 2015, the Company recognized impairment charges of $259.5 million related to inventory and other assets. The inventory
During 2015, the Company recognized impairment charges of $259.5 million related to inventory and other assets. The inventory
impairment charge of $244.8 million was recorded to reduce the carrying value of certain metal and supplies inventory to net realizable
impairment charge of $244.8 million was recorded to reduce the carrying value of certain metal and supplies inventory to net realizable
value.
value.
Other operating expense
Other operating expense
% Change
(in millions)
% Change
(in millions)
175%
Other operating expense
175%
Other operating expense
In 2016, other operating expense included $58.0 million related to a write-off of VAT receivables and settlement of VAT disputes due
In 2016, other operating expense included $58.0 million related to a write-off of VAT receivables and settlement of VAT disputes due
to regulatory changes in Brazil and $40.4 million in costs related to the suspension of mining activities at Maricunga and Tasiast which
to regulatory changes in Brazil and $40.4 million in costs related to the suspension of mining activities at Maricunga and Tasiast which
were not forecasted, as well as care and maintenance and other costs.
were not forecasted, as well as care and maintenance and other costs.
Change
Change
133.1
133.1
2016
2016
209.3
209.3
$
$
$
$
$
$
2015
2015
76.2
76.2
Years ended December 31,
Years ended December 31,
MDA 26
MDA 26
Kinross Gold Annual Report 2016
Kinross Gold Annual Report 2016
MDA
KINROSS GOLD ANNUAL REPORT 2016
26
K.4.219 Kinross MD&A_HR.pdf - p26 (March 16, 2017 19:53:33)
DT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Exploration and business development
(in millions)
2016
2015
Change
% Change
Exploration and business development
$
94.3
$
108.0
$
(13.7)
(13%)
Years ended December 31,
During 2016, exploration and business development expenses were $94.3 million compared with $108.0 million in 2015. Of the total
exploration and business development expense, expenditures on exploration totaled $67.4 million in 2016 compared with $79.9
million in 2015. Capitalized exploration expenses, including capitalized evaluation expenditures, totaled $3.1 million compared with
$11.7 million during 2015 due to reduced exploration activities.
Kinross was active on more than 23 mine sites, near-mine and greenfield initiatives in 2016, with a total 277,955 metres drilled. In
2015, Kinross was active on more than 21 mine sites, near-mine and greenfield initiatives, with a total of 339,708 metres drilled.
General and administrative
(in millions)
2016
2015
Change
% Change
General and administrative
$
143.7
$
179.4
$
(35.7)
(20%)
Years ended December 31,
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, Brazil, the Russian Federation, Chile,
and the Canary Islands.
General and administrative costs were lower by $35.7 million in 2016 compared with 2015 as a result of cost reduction activities
completed in the second half of 2015, which were in effect for the full year in 2016.
Other income (expense) – net
(in millions)
Years ended December 31,
2016
2015
Change
% Change (a)
Gains (losses) on sale of other assets - net
$
9.7
$
(16.2)
$
25.9
Impairment of investments
Foreign exchange losses
Net non-hedge derivative losses
Other
Other income (expense) - net
(a) "nm" means not meaningful.
-
(6.3)
(0.4)
19.5
(7.6)
(30.6)
(3.4)
37.5
7.6
24.3
3.0
(18.0)
$
22.5
$
(20.3)
$
42.8
160%
100%
79%
88%
48%
nm
During 2016, other income (expense) increased to income of $22.5 million from an expense of $20.3 million in 2015. The discussion
below details the significant changes in other income (expense) for 2016 compared with 2015.
Gains (losses) on sale of other assets - net
During 2016, the sale of other assets resulted in a gain of $9.7 million compared with a loss of $16.2 million in 2015.
Impairment of investments
As at December 31, 2015, the Company recognized impairment charges of $7.6 million on certain of its available-for-sale investments
due to a significant or prolonged decline in the fair value of the investments. No such impairment charges were recognized in 2016.
MDA 27
Kinross Gold Annual Report 2016
27
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KINROSS GOLD ANNUAL REPORT 2016
K.4.219 Kinross MD&A_HR.pdf - p27 (March 16, 2017 19:53:34)
DT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Foreign exchange losses
During 2016, foreign exchange losses were $6.3 million compared with losses of $30.6 million in 2015. The foreign exchange losses of
$6.3 million in 2016 were mainly due to the translation of net monetary assets denominated in foreign currencies to the U.S. dollar,
with the U.S. dollar having weakened against the Brazilian real, Chilean peso and Canadian dollar and strengthened against the
Mauritanian ouguiya as at December 31, 2016 relative to December 31, 2015.
During 2015, the foreign exchange losses of $30.6 million were largely 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 Russian rouble, Brazilian real, Chilean peso,
Canadian dollar, Ghanaian cedi and Mauritanian ouguiya at December 31, 2015 relative to December 31, 2014.
Other
Other gains of $19.5 million recognized in 2016 included insurance recoveries of $13.0 million related to Round Mountain. In 2015,
other gains of $37.5 million included insurance recoveries of $31.7 million related to Chirano and Maricunga.
Finance expense
(in millions)
Finance expense
Years ended December 31,
2016
2015
Change
% Change
$
134.6
$
96.0
$
38.6
40%
Finance expense includes accretion on reclamation and remediation obligations and interest expense.
Finance expense increased by $38.6 million compared with 2015, primarily due to an increase in interest expense. During 2016,
interest expense was $100.4 million compared with $68.2 million in 2015, with the increase primarily due to a decrease in interest
capitalized. Interest capitalized was $15.2 million in 2016 compared with $40.5 million in 2015, with the decrease mainly 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.
Income tax expense in 2016 was $49.6 million, compared with $141.7 million in 2015. The $49.6 million expense recognized in 2016
included a $65.1 million recovery due to re-measurement of deferred tax assets and liabilities as a result of fluctuation in foreign
exchange rates with respect to the Brazilian real and the Russian rouble, $32.0 million of expense due to a proposal to reassess taxes
which was received in the second quarter of 2016 and a tax benefit of $27.7 million realized by the Company as a result of the
acquisition. The $141.7 million expense in 2015 included a $30.3 million recovery due to impairment charges and $132.9 million of
expense due to re-measurements of deferred tax assets and liabilities, as a result of significant fluctuations in foreign exchange rates
with respect to the Brazilian real and the Russian rouble. In addition, income tax expense decreased 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 2016 and 2015 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.
MDA 28
Kinross Gold Annual Report 2016
MDA
KINROSS GOLD ANNUAL REPORT 2016
28
K.4.219 Kinross MD&A_HR.pdf - p28 (March 16, 2017 19:53:34)
DT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
6. LIQUIDITY AND CAPITAL RESOURCES
The following table summarizes Kinross’ cash flow activity:
Years ended December 31,
2016
2015
Change
% Change (a)
(in millions)
Cash flow
Provided from operating activities
Used in investing activities
Used in financing activities
Effect of exchange rate changes on cash and cash
equivalents
$
1,099.2
$
831.6
$
267.6
(1,270.1)
(48.3)
2.3
(631.6)
(131.7)
(7.9)
(638.5)
83.4
10.2
Increase (decrease) in cash and cash equivalents
(216.9)
60.4
(277.3)
Cash and cash equivalents, beginning of period
1,043.9
983.5
60.4
32%
(101%)
63%
129%
nm
6%
Cash and cash equivalents, end of period
$
827.0
$
1,043.9
$
(216.9)
(21%)
(a) "nm" means not meaningful.
Cash and cash equivalent balances decreased by $216.9 million in 2016 compared with an increase of $60.4 million in 2015. Detailed
discussions regarding cash flow movements from continuing operations are noted below.
Operating Activities
2016 vs. 2015
Net cash flow provided from operating activities increased by $267.6 million in 2016 compared with 2015, with the increase largely
due to higher margins.
Investing Activities
2016 vs. 2015
Net cash flow used in investing activities was $1,270.1 million in 2016 compared with $631.6 million in 2015. The primary uses of cash
in 2016 were for the acquisition of the Bald Mountain mine and the remaining 50% interest in the Round Mountain mine for $588.0
million and capital expenditures of $633.8 million. In 2015, the primary use of cash was capital expenditures of $610.0 million.
MDA 29
Kinross Gold Annual Report 2016
29
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KINROSS GOLD ANNUAL REPORT 2016
K.4.219 Kinross MD&A_HR.pdf - p29 (March 16, 2017 19:53:35)
DT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
The following table presents a breakdown of capital expenditures on a cash basis:
(in millions)
Operating segments
Fort Knox
Round Mountain
Bald Mountain
Kettle River - Buckhorn
Paracatu
Maricunga
Kupol (a)
Tasiast
Chirano
Non-operating segment
Corporate and Other (b)
Total
Year ended December 31,
2016 vs. 2015
2016
2015
Change
% Change
$
70.2
$
140.8
$
(70.6)
71.9
40.5
-
108.5
5.1
88.8
190.9
46.6
48.5
-
0.6
112.7
24.5
55.9
161.2
30.5
23.4
40.5
(0.6)
(4.2)
(19.4)
32.9
29.7
16.1
11.3
35.3
(24.0)
$
633.8
$
610.0
$
23.8
(50%)
48%
100%
(100%)
(4%)
(79%)
59%
18%
53%
(68%)
4%
(a) Inc ludes $14.4 million of c apital expenditures at Dvoinoye during 2016 (2015 - $14.5 million).
(b) "Corporate and Other" inc ludes c orporate and other non- operating assets (inc luding La Coipa,
Lobo- Marte and White Gold).
During 2016, capital expenditures increased by $23.8 million compared with 2015, primarily due to higher spending resulting from the
acquisition of Bald Mountain and 50% of Round Mountain as well as at Kupol, Tasiast and Chirano. These increases were partially
offset by lower spending at Fort Knox as a result of lower capitalized stripping in 2016 and haulage trucks purchased in 2015, lower
expenditures at Maricunga as a result of the suspension of mining activities, and lower expenditures in the Corporate and other
segment.
Financing Activities
2016 vs. 2015
Net cash flow used in financing activities was $48.3 million in 2016 compared with cash used of $131.7 million in 2015. During 2016,
the Company received net proceeds of $275.7 million on the completion of the public equity offering of 95.9 million common shares,
including 12.5 million common shares issued to underwriters on the exercise of their over-allotment option. On March 4, 2016, Kinross
used $175.0 million of the net proceeds to repay its drawing on the revolving credit facility on January 4, 2016. On September 1, 2016,
the Company repaid the principal amount of $250.0 million of the senior notes upon maturity. During 2015, the Company repaid debt
of $80.0 million on the Kupol loan. Interest paid during 2016 was $95.3 million, of which $73.5 million was included in financing
activities. Total interest paid during 2015 was $91.5 million, of which $48.8 million was included in financing activities.
MDA 30
Kinross Gold Annual Report 2016
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30
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DT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Balance Sheet
(in millions)
Cash and cash equivalents
Current assets
Total assets
As at December 31,
2016
2015
2014
$
827.0
$
1,043.9
$
983.5
$
2,080.7
$
2,292.1
$
2,587.1
$
7,979.3
$
7,735.4
$
8,951.4
Current liabilities, including current portion of long-term debt
$
637.7
$
701.8
$
604.4
Total long-term financial liabilities (a)
Total debt, including current portion
Total liabilities
Common shareholders' equity
Non-controlling interest
Statistics
Working capital (b)
Working capital ratio (c)
(a) Includes long-term debt and provisions.
(b) Calculated as current assets less current liabilities.
(c) Calculated as current assets divided by current liabilities.
$
2,594.4
$
2,452.7
$
2,779.0
$
1,733.2
$
1,981.4
$
2,058.1
$
3,795.0
$
3,802.2
$
4,059.6
$
4,145.5
$
3,889.3
$
4,843.0
$
38.8
$
43.9
$
48.8
$
1,443.0
$
1,590.3
$
1,982.7
3.26:1
3.27:1
4.28:1
At December 31, 2016, Kinross had cash and cash equivalents of $827.0 million, a decrease of $216.9 million from the balance as at
December 31, 2015, primarily due to net cash outflows of $588.0 million used in the acquisition, capital expenditures of $633.8 million,
repayment of debt of $250.0 million, and $59.8 million for additions to long-term investments and other assets, partially offset by net
operating cash flows of $1,099.2 million and net proceeds of $275.7 million received from the equity issuance. Current assets
decreased to $2,080.7 million, mainly due to the decrease in cash and cash equivalents, partially offset by an increase in trade
receivables. Total assets increased by $243.9 million to $7,979.3 million, largely due to the acquisition. Current liabilities decreased
to $637.7 million, primarily due to the repayment of the current portion of the senior notes of $250.0 million, partially offset by an
increase in accounts payable and accrued liabilities and income tax payable. Total long-term financial liabilities were higher by $141.7
million, primarily due to an increase in provisions as a result of the acquisition.
At December 31, 2015, Kinross had cash and cash equivalents of $1.0 billion, an increase of $60.4 million from the balance as at
December 31, 2014, primarily due to net operating cash flows of $831.6 million, partially offset by cash outflows of $610.0 million
used in the purchase of property, plant and equipment, $59.7 million for additions to long-term investments and other assets, and
$80.0 million for the repayment of the Kupol loan. Current assets decreased to $2,292.1 million, mainly as a result of inventory
impairment charges, partially offset by the increase in cash and cash equivalents. Total assets decreased by $1,216.0 million to
$7,735.4 million, largely due to impairment charges related to inventory and property, plant and equipment. Current liabilities
increased to $701.8 million, largely due to the increase in the current portion of long-term debt related to the $250.0 million senior
notes due in August 2016. This was partially offset by the $80.0 million repayment of the Kupol loan during 2015. Total debt decreased
by $76.7 million to $1,981.4 million, primarily due to the repayment of the Kupol loan.
As of February 14, 2017, there were 1,245.5 million common shares of the Company issued and outstanding. In addition, at the same
date, the Company had 12.4 million share purchase options outstanding under its share option plan.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Financings and Credit Facilities
Senior notes
The Company’s $1,250.0 million of senior notes consist of $500.0 million principal amount of 5.125% notes due 2021, $500.0 million
principal amount of 5.950% notes due 2024, and $250.0 million principal amount of 6.875% notes due 2041.
The Company repaid its $250.0 million 3.625% notes in full on the maturity date in September 2016.
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 carried a term of five years with a maturity date of September 30, 2016 and had an annual interest rate of
LIBOR plus 2.5%. Semi-annual principal repayments of $30.0 million commenced in March 2013 and continued through September
30, 2015. Principal repayments were scheduled for March 31, 2016 and September 30, 2016 in the amounts of $13.0 million and $7.0
million, respectively. On September 30, 2015, the Company prepaid the remaining $20.0 million, resulting in full repayment of the
loan.
Corporate revolving credit and term loan facilities
On July 24, 2015, the Company amended its $1,500.0 million revolving credit facility and $500.0 million term loan to extend the
respective maturity dates. The revolving credit facility’s term was extended by one year to August 10, 2020 from August 10, 2019,
and the term loan was extended by one year to August 10, 2019 from August 10, 2018.
On July 26, 2016, the Company extended the maturity dates of the term loan and revolving credit facility by one year to August 10,
2020 and August 10, 2021, respectively.
As at December 31, 2016, the Company had utilized $104.5 million (December 31, 2015 – $31.3 million) of the amended $1,500.0
million revolving credit facility. The amount utilized was entirely for letters of credit. On January 4, 2016, the Company drew $175.0
million in cash on the revolving credit facility, and repaid the amount in full on March 4, 2016.
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, 2016, interest
charges and fees, are as follows:
Type of credit
Dollar based LIBOR loan:
Term Loan
Revolving credit facility
Letters of credit
Standby fee applicable to unused availability
LIBOR plus 1.95%
LIBOR plus 2.00%
1.33-2.00%
0.40%
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 Company is in compliance with its financial covenant in
the credit agreement at December 31, 2016.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Other
Effective June 30, 2016, the maturity date for the $250.0 million Letter of Credit guarantee facility with Export Development Canada
(“EDC”) was extended to June 30, 2017. Letters of credit guaranteed under 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 1.10% to 1.15%. As at
December 31, 2016, $215.1 million (December 31, 2015 - $212.7 million) was utilized under this facility.
In addition, at December 31, 2016, the Company had $117.7 million (December 31, 2015 - $33.4 million) in letters of credit outstanding
in respect of its operations in Brazil, Mauritania, Ghana and Chile. These letters of credit have been issued pursuant to arrangements
with certain international banks.
As at December 31, 2016, $216.7 million of surety bonds were issued with respect to Kinross’ operations in the United States. The
surety bonds were issued pursuant to arrangements with international insurance companies.
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, 2016 and December 31, 2015, $nil was outstanding under such borrowings.
The following table outlines the credit facility utilization and availability:
Credit Facility Utilization:
(in millions)
As at December 31,
2016
2015
Utilization of revolving credit facility
$
(104.5)
$
(31.3)
Utilization of EDC facility
Borrowings
(215.1)
(212.7)
$
(319.6)
$
(244.0)
Available under revolving credit facility
$
1,395.5
$
1,468.7
Available under EDC credit facility
34.9
37.3
Available credit
$
1,430.4
$
1,506.0
Total debt of $1,733.2 million at December 31, 2016 consists of $1,235.8 million for the senior notes and $497.4 million for the
corporate term loan facility. The current portion of this debt at December 31, 2016 is $nil.
Liquidity Outlook
In 2016, the Company repaid its $250.0 million 3.625% senior notes. The Company has no scheduled debt repayments until 2020.
We believe that the Company’s existing cash and cash equivalents balance of $827.0 million, available credit of $1,430.4 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), and reclamation and remediation obligations
currently estimated for 2017. 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.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Contractual Obligations and Commitments
The following table summarizes our long-term financial liabilities and off-balance sheet contractual obligations as at December 31,
2016:
(in millions)
Long-term debt obligations (a)
Operating lease obligations
Purchase obligations (b)
Reclamation and remediation obligations
Interest and other fees (a)
Total
Total
2017
2018
2019
2020
2021
2022 and
thereafter
$
1,750.0
$
-
$
-
$
-
$
500.0
$
500.0
$
750.0
41.3
1,183.3
1,365.0
872.2
16.6
545.7
85.3
95.8
13.6
143.0
50.5
94.5
5.3
417.3
48.5
94.5
2.4
6.1
132.4
89.9
1.0
56.6
73.9
78.9
2.4
14.6
974.4
418.6
$
5,211.8
$
743.4
$
301.6
$
565.6
$
730.8
$
710.4
$
2,160.0
(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, 2016.
(b) Includes both capital and operating commitments, of which $108.9 million relates to commitments for capital expenditures.
The Company manages its exposure to fluctuations in input commodity prices, currency exchange rates and interest rates, by entering
into derivative financial instruments from time to time, in accordance with the Company's risk management policy.
The following table provides a summary of derivative contracts outstanding at December 31, 2016:
Foreign currency
Brazilian real zero cost collars
2017
2018
2019
(in millions of U.S. dollars)
$
85.8
$
25.2
$
-
Average put (Brazilian reais)
Average call (Brazilian reais)
Canadian dollar forward buy contracts
3.68
4.11
3.75
4.12
-
-
(in millions of U.S. dollars)
$
52.5
$
-
$
-
Average price (Canadian dollars)
Russian rouble zero cost collars
1.33
-
-
(in millions of U.S. dollars)
$
19.8
$
-
$
-
Average put (Russian roubles)
Average call (Russian roubles)
Oil swap contracts (barrels)
60.0
71.9
-
-
-
-
737,976
517,482
85,651
Average price
$
46.21
$
48.35
$
48.17
The following new derivative contracts were entered into during the year ended December 31, 2016:
$63.0 million Canadian dollars at an average rate of 1.35 maturing from 2016 to 2017;
$111.0 million Brazilian reais at an average put and call strike of 3.70 and 4.11, respectively, maturing from 2017 to 2018;
$19.8 million Russian roubles at an average put and call strike of 60.0 and 71.9, respectively, maturing in 2017; and
1,600,189 barrels of crude oil at an average rate of $46.38 per barrel maturing from 2016 to 2019.
The Company enters into total return swaps (“TRS”) as economic hedges of the Company’s deferred share units and cash-settled
restricted share units. Hedge accounting was not applied to the TRSs. At December 31, 2016, 5,695,000 TRS units were outstanding.
MDA 34
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Fair value of derivative instruments
The fair values of derivative instruments are noted in the table below:
(in millions)
Asset (liability)
Foreign currency forward and collar contracts
Energy swap contracts
Total return swap contracts
Contingencies
As at December 31,
2016
2015
8.9
12.3
(6.2)
(13.8)
(2.2)
1.0
$
15.0
$
(15.0)
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 actions described below, the amount of ultimate liability, if any, with respect to these actions will not, in the
opinion of management, materially affect Kinross’ financial position, results of operations or cash flows.
Maricunga Regulatory Proceedings
In late 2013, Compania Minera Maricunga (“CMM”) was fined approximately $40,000 in respect of the degradation of the Pantanillo
wetland located near the Maricunga mine’s water pumping wells. In May 2015, the SMA issued a resolution alleging that CMM had
irreparably harmed portions of the Pantanillo wetland and two other downstream wetlands known respectively as Valle Ancho and
Barros Negros, and that the mine’s continuing water use poses an imminent risk to those wetlands. In response, CMM submitted legal
and technical defenses, expert reports and other materials challenging the SMA’s allegations, and, as required by law, responded to
various information requests from the SMA. On March 18, 2016, the SMA issued a resolution against CMM in respect of the SMA’s
May 2015 allegations regarding the Valle Ancho wetland, located approximately 7 kilometers downgradient from CMM’s groundwater
wells, seeking to impose a sanction of an immediate complete curtailment of water use from the groundwater wells and related
aquifer (the “sanction proceedings”). The Maricunga mine relies solely on water from the Pantanillo area groundwater wells to
support its operations. On March 28, 2016, CMM filed a request with the SMA to reconsider the sanction proceedings resolution (the
“reconsideration”). While reserving its rights of appeal, CMM requested reconsideration of the sanction on the basis that a complete
stoppage of water use at the Maricunga mine was both legally and technically flawed, and could have serious environmental, health
and safety consequences. Specifically, until the Maricunga mine is closed in accordance with the government-approved closure plan,
the mine will require some water to ensure the health and safety of its personnel and local communities, maintain the environmental
stability of the heap leach facilities, and complete closure of the mine in an environmentally responsible manner in accordance with
its permits, applicable laws and international best practices. Beginning in May 2016, the SMA issued a series of resolutions ordering
CMM to “temporarily” curtail the pumping of water from the groundwater wells. In response, CMM suspended mining and crushing
activities and reduced water consumption to minimal levels. CMM contested these resolutions by seeking reconsideration with the
SMA and appealing to Chile’s Environmental Tribunal, but its efforts were unsuccessful and, except for a short period of time in July
2016, the Company’s operations have remained suspended. On June 24, 2016, the SMA amended its initial sanction (the “Amended
Sanction”). The Amended Sanction, if affirmed by the Environmental Tribunal, would require CMM to effectively cease operations
and close the mine, with water use curtailed to levels far below those required for closure in compliance with the mine’s government-
approved plan. On July 9, 2016, CMM filed its appeal in the sanction proceedings. As part of its appeal, CMM submitted legal and
technical arguments and reports by experts on wetland vegetation, analysis of long-term satellite imagery and groundwater hydrology
criticizing the evidence relied upon by the SMA and concluding that current data does not support an assertion that CMM’s pumping
is negatively impacting water levels 7 kilometers downgradient at the Valle Ancho wetland. On August 30, 2016, CMM submitted a
request to the Environmental Tribunal that it issue an injunction suspending the effectiveness of the Amended Sanction pending a
final decision on the merits of CMM’s appeal of the Amended Sanction. On September 16, 2016, the Environmental Tribunal rejected
CMM’s injunction request. On October 11, 2016, a hearing was held before the Environmental Tribunal on CMM’s appeal of the
Amended Sanction and on CMM’s appeals of prior water curtailment orders. Decisions in these appeals remain pending.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
On June 2, 2016, CMM was served with two separate lawsuits filed by the Chilean State Defense Counsel. Both lawsuits are based
upon allegations that CMM’s pumping from its Pantanillo area groundwater wells has caused damage to area wetlands. One action
relates to the Pantanillo wetland, and is based upon the sanction imposed upon CMM in late 2013 (as described above). The other
action relates to the Valle Ancho wetland, and is largely based upon the same factual assertions at issue in the SMA sanction
proceedings. These lawsuits seek, among other things, to require CMM to cease pumping from the groundwater wells, finance various
investigations and conduct restoration activities. On June 20, 2016, CMM filed its defenses. Evidentiary hearings took place in
November and December 2016, and additional hearings in the matter are in the process of being scheduled. CMM will continue to
vigorously defend itself in these proceedings.
La Coipa Permit Proceedings
Although Mantos De Oro (“MDO”) suspended operations at the La Coipa mine in the fourth quarter of 2013, in accordance with the
mine’s permit MDO continued its water treatment program (“WTP”) to remediate levels of mercury in the ground water due to
seepage from its tailing facility. La Coipa’s WTP, related facilities and monitoring program, including downstream monitoring wells,
have been in place since 2000. The mine’s groundwater treatment permit establishes a very low standard for mercury of 1 part per
billion. The La Coipa mine has four monitor wells at or near its downstream property boundary at which there has never been an
exceedance of the permitted standard.
In 2015, the SMA conducted an inspection of the WTP and monitoring wells and requested various information regarding those
facilities and their performance, with which MDO fully cooperated. On March 16, 2016, the SMA, issued a resolution alleging violations
under La Coipa’s water treatment permit. The resolution specified a total of seven charges, alleging permit violations at the WTP
and/or failure to properly permit certain related activities, including capturing water at an undesignated reservoir, deficiencies in the
mercury capture system, deficiencies in the monitoring system, and four WTP effluent samples from 2013 above the permitted
standard and various monitoring well samples taken in 2013 and 2014. On April 15, 2016, MDO submitted a compliance plan to
remediate the alleged permit violations which, following further submissions to the SMA, was ultimately accepted on July 7, 2016. As
a result, the sanctioning process has been suspended without any fine or other penalty to MDO provided the plan is implemented and
maintained per its terms. Failure to comply with the plan will re-initiate the sanction process and could result in doubled fines of up
to $7.7 million per alleged minor violation (5 in total) and $15.4 million per alleged serious violation (2 in total).
On October 14, 2016, six members of a local indigenous community commenced an action in the Copiapo Court of Appeals challenging
the recent approval of the DIA (Declaration of Impact to Environment) permit for La Coipa’s Phase 7 project. On January 13, 2017, the
Court of Appeals rejected the legal challenge, which the plaintiffs have not appealed and their right to do so has lapsed. As with any
permit, the Phase 7 DIA is open to challenge in other venues, which the Company will vigorously oppose. If such a challenge were
brought and successful in its ultimate disposition, the DIA could be revoked, requiring the mine to undertake a more rigorous and
lengthy Environmental Impact Study, which in approving the DIA the Chilean environmental permitting authority had deemed
unnecessary.
Sunnyside Litigation
The Sunnyside Mine is an inactive mine situated in the so-called Bonita Peak Mining District (“District”) near Silverton, Colorado. A
subsidiary of Kinross, Sunnyside Gold Corporation ("SGC"), was involved in operations at the mine for a period in the late-1980s to
early 1990s and subsequently conducted various reclamation and closure activities at the mine and in the surrounding area. In the
third quarter of 2016, the Environmental Protection Agency (the “EPA”) listed the District, including areas impacted by SGC’s
operations and closure activities, on the National Priorities List pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act (“CERCLA”). SGC has challenged portions of the CERCLA listing in the United States Court of Appeals
for District of Columbia Circuit. It is likely that the EPA will assert that the Company is a potentially responsible party under CERCLA
and is jointly and severally liable for CERCLA response costs incurred in the District. In addition, the EPA may seek to require the
Company to conduct investigative and remedial activities. On August 5, 2015, while working in another mine in the District known as
the Gold King, the EPA caused a release of approximately three million gallons of contaminated water into a tributary of the Animas
River. In the second quarter of 2016, the State of New Mexico filed a Complaint naming the EPA, SGC, Kinross and others alleging
violations of CERCLA, the Resource Conservation and Recovery Act (“RCRA”), and the Clean Water Act (“CWA”) and claiming
negligence, gross negligence, public nuisance and trespass. The Complaint seeks cost recovery, damages, injunctive relief, and
attorney’s fees. In the third quarter of 2016, the Navajo Nation initiated litigation against the EPA, SGC and Kinross, alleging
entitlement to cost recovery under CERCLA for past and future costs incurred, negligence, gross negligence, trespass, and public and
private nuisance, and seeking reimbursement of past and future costs, compensatory, consequential and punitive damages, injunctive
relief and attorneys’ fees. The suits brought by New Mexico and the Navajo Nation have been consolidated. The Company has also
received a “notice of intent to sue” letter from the State of Utah indicating that it intends to sue a number of parties, including the
EPA and the Company, for, among other things, injunctive relief, costs, damages and attorneys’ fees under RCRA, the CWA and the
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Utah Water Quality Act. Kinross and SGC will vigorously defend themselves in the actions that have been brought and in any future
actions that may be brought.
Kettle River-Buckhorn Regulatory Proceedings
Crown Resources Corporation (“Crown”) is the holder of a waste discharge permit (the “Permit”) in respect of the Buckhorn Mine,
which authorizes and regulates mine-related discharges from the mine and its water treatment plant. On February 27, 2014, the
Washington Department of Ecology (the “WDOE”) renewed the Buckhorn Mine’s National Pollution Discharge Elimination System
Permit (the “Renewed Permit”), with an effective date of March 1, 2014. The Renewed Permit contained conditions that were more
restrictive than the original discharge permit. In addition, the Company felt that the Renewed Permit was internally inconsistent,
technically unworkable and inconsistent with existing agreements in place with the WDOE, including a settlement agreement
previously entered into by Crown and the WDOE in June 2013 (the “Settlement Agreement”). On February 28, 2014, Crown filed an
appeal of the Renewed Permit with the Washington Pollution Control Hearings Board (“PCHB”). In addition, on January 15, 2015,
Crown filed a lawsuit against the WDOE in Ferry County Superior Court, Washington, claiming that the WDOE breached the Settlement
Agreement by including various unworkable compliance terms in the Renewed Permit (the “Crown Action”). On July 30, 2015, the
PCHB upheld the Renewed Permit. Crown filed a Petition for Review in Ferry County Superior Court, Washington, on August 27, 2015,
seeking to have the PCHB decision overturned (the “Appeal”). Oral argument in that Appeal is set for February 22, 2017.
On July 19, 2016, the WDOE issued an Administrative Order (“AO”) to Crown and Kinross Gold Corporation asserting that the
companies had exceeded the discharge limits in the Renewed Permit a total of 931 times and has also failed to maintain the capture
zone required under the Renewed Permit. The AO orders the companies to develop an action plan to capture and treat water escaping
the capture zone, undertake various investigations and studies, revise its Adaptive Management Plan, and report findings by various
deadlines in the fourth quarter 2016. The companies timely made the required submittals. On August 17, 2016, the companies filed
an appeal of the AO with the PCHB (the “AO Appeal”). Because the AO Appeal raises many of the same issues that have been raised
in the Appeal and Crown Action that are currently pending before the Ferry County Court, the companies and WDOE agreed to stay
the AO Appeal indefinitely to allow the Ferry County Court to rule on those issues. The PCHB granted the request for stay on August
26, 2016.
Crown also faces potential legal actions by non-governmental organizations relating to the Permit and the Renewed Permit. In the
past, Crown and Kinross Gold U.S.A., Inc. have received a Notice of Intent to Sue letter from the Okanogan Highlands Alliance (“OHA”)
advising that it intends to file a citizen’s suit against Crown under the CWA for alleged violations of its Permit and the CWA, including
failure to adequately capture and treat mine-impacted groundwater and surface water at the site in violation of the Permit. OHA’s
notice letter further recites that the CWA authorizes injunctive relief and civil penalties in the amount of up to $37,500 per day per
violation. However, to date, OHA has not filed a lawsuit.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
7. SUMMARY OF QUARTERLY INFORMATION
(in millions, except per share amounts)
Q4
2016
Q3
Q2
Q1 (a)
Q4
2015
Q3
Q2
Q1
876.4
782.6
910.2
902.8
$
(116.5)
$
$
$
$
$
$
Metal sales
Net earnings (loss) attributable to
common shareholders
Basic earnings (loss) per share
attributable to common shareholders
Diluted earnings (loss) per share
attributable to common shareholders
Net cash flow provided from operating
$
activities
(a) As a result of reflecting the final purchase price adjustments for the acquisition retrospectively, the interim financial statements for the three months ended
March 31, 2016 were recast.
$ 0.00
$ 0.00
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(841.9)
$
$
$
$
$
$
$
$
(25.0)
(0.09)
(0.73)
(0.02)
(0.09)
(0.02)
(0.73)
(0.07)
(83.2)
(0.07)
(52.7)
(0.05)
(0.05)
302.6
755.2
706.2
809.4
315.9
167.2
214.5
182.2
266.2
232.1
$
$
$
$
35.0
0.03
0.03
2.5
781.4
$
(6.7)
(0.01)
(0.01)
250.1
The Company’s results over the past several quarters have been driven primarily by fluctuations in the gold price, input costs and
changes in gold equivalent ounces sold. Fluctuations in the silver price have also affected results.
During the fourth quarter of 2016, revenue increased to $902.8 million on total gold equivalent ounces sold of 743,427 compared with
$706.2 million on sales of 638,040 total gold equivalent ounces during the fourth quarter of 2015. The average gold price realized in
the fourth quarter of 2016 was $1,217 per ounce compared with $1,108 per ounce in the fourth quarter of 2015.
Production cost of sales increased to $529.4 million compared with $439.4 million in the same period of 2015, primarily due to an
increase in gold equivalent ounces sold and the acquisition of Bald Mountain and the remaining 50% of Round Mountain, partially
offset by lower production cost of sales resulting from the suspension of mining activities at Maricunga.
Fluctuations in 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.
On January 11, 2016, Kinross completed the acquisition of 100% of the Bald Mountain gold mine and the remaining 50% interest in
the Round Mountain gold mine from Barrick for $610 million in cash, subject to a working capital adjustment. In April 2016, the
Company received $22.0 million in cash from Barrick in connection with the working capital adjustment, which reduced the purchase
price to $588.0 million.
During the third quarter of 2016, the Company recorded an impairment charge of $139.6 million relating to its Maricunga CGU as a
result of the suspension of mining activities. The impairment charge included $68.3 million related to property, plant and equipment
and $71.3 million related to inventory.
In the fourth quarter of 2015, the Company recorded an after-tax impairment charge of $430.2 million relating to its Fort Knox, Tasiast
and Round Mountain CGUs, net of a tax recovery of $9.3 million, and inventory and other asset impairment charges of $235.0 million.
In addition, during the second quarter of 2015, the Company recognized an inventory impairment charge of $24.5 million at Maricunga.
Net operating cash flows increased to $302.6 million in the fourth quarter of 2016, compared with $182.2 million in the same period
of 2015, primarily due to the increase in margins.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
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 (the
“Sarbanes-Oxley Act”) 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 criteria specified in 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 were effective as at
December 31, 2016.
During 2016, Bald Mountain converted to a new ERP system. 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 control over financial reporting, no matter how well designed and operated, can have inherent limitations.
Therefore, even those systems determined to be effective can provide only reasonable assurance that the objectives of the control
system are met.
9. CRITICAL ACCOUNTING POLICIES, ESTIMATES AND ACCOUNTING CHANGES
Critical Accounting Policies and Estimates
Critical accounting policies and estimates are disclosed in Note 5 of the financial statements.
Recent Accounting Pronouncements
Recent accounting pronouncements issued by the IASB are disclosed in Note 4 of the financial statements.
10. RISK ANALYSIS
The business of Kinross contains significant risk due to the nature of mining, exploration, and development activities. Certain risk
factors, including but not limited to those listed below, are similar across the mining industry while others are specific to Kinross. The
risk factors below may include details of how Kinross seeks to mitigate these risks where possible. For additional discussion of risk
factors please refer to the Company's Annual Information Form for the year ended December 31, 2015, 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, 2016, which will be filed on SEDAR on or about March 31, 2017.
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.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
In 2016, the Company’s average gold price realized increased to $1,249 per ounce from $1,159 per ounce in 2015. 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, possibly material. Kinross may curtail or suspend some or all of its exploration activities, with
the result that depleted mineral reserves are not replaced. In addition, the market value of Kinross' gold and/or silver inventory may
be reduced and existing mineral reserves and resource estimates may be reduced to the extent that ore cannot be mined and
processed economically at the prevailing prices. 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 geological
structures may result in substantial rewards, few properties explored are ultimately developed into producing mines. Major
expenditures are required to establish reserves by drilling and to construct mining and processing facilities at a site. It is impossible
to ensure that the current or proposed exploration programs on properties in which Kinross has an interest will result in profitable
commercial mining operations.
The operations of Kinross are subject to the hazards and risks normally incidental to exploration, development and production of gold
and silver, any of which could result in damage to life or property, or environmental damage, and possible legal liability for such
damage. The activities of Kinross may be subject to prolonged disruptions due to weather conditions depending on the location of
operations in which it has interests. Hazards, such as unusual or unexpected formations, rock bursts, pressures, cave-ins, flooding, pit
wall failures, tailings dam failures or other conditions, may be encountered in the drilling, processing and removal of material. While
Kinross may obtain insurance against certain risks, potential claims could exceed policy limits or could be excluded from coverage.
There are also risks against which Kinross cannot or may elect not to insure. The potential costs which could be associated with any
liabilities not covered by insurance or in excess of insurance coverage or compliance with applicable laws and regulations may cause
substantial delays and require significant capital outlays, adversely affecting the future earnings and competitive position of Kinross
and, potentially, its financial viability.
Whether a mineral deposit will be commercially viable depends on a number of factors, some of which include the particular attributes
of the deposit, such as its size and grade, costs and efficiency of the recovery methods that can be employed, proximity to
infrastructure, financing costs and governmental regulations, including regulations relating to prices, taxes, royalties, infrastructure,
land and water use, importing and exporting of gold and environmental protection. The effect of these factors cannot be accurately
predicted, but the combination of these factors may result in Kinross not receiving an adequate return on its invested capital.
Kinross mitigates the likelihood and potential severity of these mining risks in its day-to-day operations through the application of high
operating standards. In addition, Kinross reviews its insurance coverage at least annually to ensure that the most appropriate and
cost-effective coverage available is obtained.
Environmental Impact and related Regulatory Risk
Mining, like many other extractive natural resource industries, is subject to potential risks and liabilities associated with the effects on
the environment resulting from mineral exploration and production. The Company may be held responsible for the costs of addressing
contamination at, or arising from, current or former activities. Environmental liability may result from activities conducted by others
prior to the ownership of a property by Kinross. In addition, Kinross may be liable to third parties for exposure to hazardous materials
or substances, or may otherwise be involved in civil litigation related to environmental claims. The costs associated with such
responsibilities and liabilities may be substantial. The payment of such liabilities would reduce funds otherwise available and could
have a material adverse effect on Kinross. Should Kinross be unable to fully fund the cost of remedying an environmental problem,
Kinross might be required to suspend operations or enter into interim compliance measures pending completion of the required
remedy, which could have a material adverse effect on the operations and business of Kinross.
Kinross’ mining and processing operations and exploration activities are subject to various laws and regulations governing the
protection of the environment, exploration, development, production, imports/exports, taxes, labour standards, occupational health,
waste disposal, toxic substances, mine closure, mine safety, and other matters. The legal and political circumstances outside of North
America cause these risks to be different from, and in many cases, greater than, comparable risks associated with operations within
North America. New laws and regulations, amendments to existing laws and regulations, or more stringent enforcement of existing
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
laws and regulations could have a material adverse impact on Kinross, increase costs, cause a reduction in levels of production and/or
delay or prevent the development of new mining properties. Compliance with these laws and regulations is part of the business and
requires significant expenditures. Changes in laws and regulations, including those pertaining to the rights of leaseholders or the
payment of royalties, net profit interest or similar obligations, could adversely affect Kinross’ operations or substantially increase the
costs associated with those operations. Kinross is unable to predict what new legislation or revisions may be proposed that might
affect its business or when any such proposals, if enacted, might become effective.
Certain of the Company’s operations are the subject of ongoing regulatory review and evaluation by governmental authorities. These
may result in additional regulatory actions against the affected operating subsidiaries, and may have an adverse effect on the
Company’s future operations and/or financial condition. For further details refer to Section 6 Other legal matters.
Reclamation Costs
In certain jurisdictions in which the Company has operations, the Company is required to submit a reclamation plan for its applicable
operations to address post-operation reclamation obligations. The Company may incur significant costs in connection with these
reclamation activities, which may exceed the provisions the Company has made in respect of its reclamation obligations. In some
jurisdictions, reclamation bonds, letters of credit or other forms of financial assurance are required as security for these reclamation
obligations. The amount and nature of financial assurance are dependent upon a number of factors, including the Company’s financial
condition and reclamation cost estimates. Kinross may be required to replace or supplement the existing financial assurance, or source
new financial assurance with more expensive forms, which might include cash deposits, which would reduce its cash available for
operations and financing activities. There can be no assurance that Kinross will be able to maintain or add to its current level of
financial assurance. To the extent that Kinross is or becomes unable to post and maintain sufficient financial assurance for reclamation
costs, where required it could potentially result in closure of one or more of the Company’s operations, which could have a material
adverse effect on the financial condition of the Company.
Internal Controls
Kinross has invested resources to document and assess its system of internal controls over financial reporting and undertakes
continuous evaluation of such internal controls. Internal controls over financial reporting are procedures designed to provide
reasonable assurance that transactions are properly authorized, assets are safeguarded against unauthorized or improper use, and
transactions are properly recorded and reported. A control system, no matter how well designed and operated, can provide only
reasonable, not absolute, safeguards with respect to the reliability of financial reporting and financial statement preparation.
Kinross is required to satisfy the requirement of Section 404 of the U.S. Sarbanes-Oxley Act of 2002 (“SOX”), which requires an annual
assessment by management of the effectiveness of Kinross’ internal control over financial reporting and an attestation report by
Kinross’ independent auditors addressing the operating effectiveness of Kinross’ internal control over financial reporting.
If Kinross fails to maintain the adequacy of its internal control over financial reporting, as such standards are modified, supplemented,
or amended from time to time, Kinross may not be able to ensure that it can conclude on an ongoing basis that it has effective internal
controls over financial reporting in accordance with SOX. Kinross’ failure to satisfy SOX requirements on an ongoing, timely basis
could result in the loss of investor confidence in the reliability of its financial statements, which in turn could harm Kinross’ business
and negatively impact the trading price of its common shares. In addition, any failure to implement required new or improved controls,
or difficulties encountered in their implementation, could harm Kinross’ operating results or cause it to fail to meet its reporting
obligations.
Although Kinross is committed to ensure ongoing compliance, Kinross cannot be certain that it will be successful in complying with
SOX.
Indebtedness and an inability to satisfy Repayment Obligations
Although Kinross has been successful in repaying debt historically, there can be no assurance that it can continue to do so. Kinross’
level of indebtedness could have important and potentially adverse consequences for its operations and the value of its common
shares including: (a) limiting Kinross’ ability to borrow additional amounts for working capital, capital expenditures, debt service
requirements, execution of Kinross’ growth strategy or other purposes; (b) limiting Kinross’ ability to use operating cash flow in other
areas because of its obligations to service debt; (c) increasing Kinross’ vulnerability to general adverse economic and industry
conditions, including increases in interest rates; (d) limiting Kinross’ ability to capitalize on business opportunities and to react to
competitive pressures and adverse changes in government regulation; and (e) limiting Kinross’ ability or increasing the costs to
refinance indebtedness.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Kinross expects to obtain the funds to pay its expenses and to pay principal and interest on its debt by utilizing cash flow from
operations. Kinross’ ability to meet these payment obligations will depend on its future financial performance, which will be affected
by financial, business, economic, legal and other factors. Kinross will not be able to control many of these factors, such as economic
conditions in the markets in which it operates. Kinross cannot be certain that its future cash flow from operations will be sufficient to
allow it to pay principal and interest on Kinross’ debt and meet its other obligations. If cash flow from operations is insufficient or if
there is a contravention of its debt covenant(s), Kinross may be required to refinance all or part of its existing debt, sell assets, borrow
more money or issue additional equity. There can be no assurance that Kinross will be able to refinance all or part of its existing debt
on terms that are commercially reasonable.
Mineral Reserve and Mineral Resource Estimates
Mineral reserve and mineral resource figures are estimates, and no assurance can be given that the anticipated tonnages and grades
will be achieved or that the indicated level of recovery will be realized. Market fluctuations in metal prices may render the mining of
mineral reserves and mineral resources uneconomical and require Kinross to take a write-down of an asset or to discontinue
development or production. Moreover, short-term operating factors relating to the mineral reserves, such as the need for orderly
development of the ore body or the processing of new or different ore grades, may cause a mining operation to be unprofitable in any
particular accounting period.
Proven and probable mineral reserves at Kinross' mines and development projects were estimated as of December 31, 2016, 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 reserve estimates. 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 proven and probable mineral reserves. The estimates in this document are
based on various assumptions relating to metal prices and exchange rates during the expected life of production and the results of
additional planned development work. Actual future production rates and amounts, revenues, taxes, operating expenses,
environmental and regulatory compliance expenditures, development expenditures and recovery rates may vary substantially from
those assumed in the estimates. Any significant change in these assumptions, including changes that result from variances between
projected and actual results, could result in a material downward or upward revision of current estimates.
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; mineral 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 requirements, governmental intervention, infrastructure limitations, environmental issues, disputes with local
communities or other events, could result in one or more of our planned developments becoming impractical or uneconomic. Any
such occurrence could have an adverse impact on Kinross’ financial condition and results of operations.
In addition, as a result of the substantial expenditures involved in development projects, developments are at significant risk of
material cost overruns versus budget. The capital expenditures and time required to develop new mines are considerable and changes
in cost or construction schedules can significantly increase both the time and capital required to build the project. The project
development schedules are also dependent on obtaining the governmental 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
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
projects and the fluctuation and increase of costs over time, development projects may be prone to material cost overruns. Kinross'
actual production and costs may vary from estimates for a variety of reasons, including: increased competition for resources and
development inputs; cost inflation affecting the mining industry in general; actual ore mined varying from estimates of grade, tonnage,
dilution and metallurgical and other characteristics; short term operating factors including relating to the ore mineral reserves, such
as the need for sequential development of ore bodies and the processing of new or different ore grades; revisions to mine plans;
difficulties with supply chain management, including the implementation and management of enterprise resource planning software;
risks and hazards associated with development, mining and processing; natural phenomena, such as inclement weather conditions,
water availability, floods, and earthquakes; and unexpected labour shortages, strikes or other disruptions. Costs of production may
also be affected by a variety of factors, including: ore grade, ore hardness, metallurgy, changing waste-to-ore ratios, labour costs, cost
of services, commodities (such as power and fuel) and other inputs, general inflationary pressures and currency exchange rates. Many
of these factors are beyond Kinross’ control. No assurance can be given that Kinross’ cost estimates will be achieved. Failure to
achieve production or cost estimates or material increases in costs could have an adverse impact on Kinross’ future cash flows,
profitability, results of operations and financial condition.
Shortages and Price Volatility of Input Commodities, Services and Other Inputs
The Company is dependent on various input commodities (such as diesel fuel, electricity, natural gas, steel, concrete and cyanide),
labour, and equipment (including parts) to conduct its mining operations and development projects. A shortage of such input
commodities, labour, or equipment or a significant increase in their costs could have a material adverse effect on the Company’s ability
to carry out its operations and therefore limit, or increase the cost of, production. The Company is also dependent on access to and
supply of water and electricity to carry out its mining operations, and such access and supply may not be readily available, especially
at the Company’s operations in Chile, Brazil and Ghana. Market prices of input commodities can be subject to volatile price movements
which can be material, occur over short periods of time and are affected by factors that are beyond the Company’s control. An increase
in the cost, or decrease in the availability, of input commodities, labour, or equipment 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.
Political Developments and Uncertainty regarding the Russian Federation
Ongoing political tensions and uncertainties with respect to the Russian Federation (including as a result of the Russian Federation’s
foreign policy decisions, actions in respect of Ukraine and allegations of cyberattacks and other interference with the 2016 U.S.
presidential elections) have resulted in the imposition of sectoral and other economic sanctions, and increased the risk that the U.S.
and certain other governments may impose further economic, or other, sanctions or penalties on, or may take other actions against,
the Russian Federation or on persons and/or companies conducting business in the Russian Federation 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 the United States, Canada
or the European Union and/or other governments against the Russian Federation or persons and/or companies conducting business
in the Russian Federation. The imposition of such economic sanctions or other penalties, or such other actions by the Russian
Federation and/or other governments, could have a material adverse effect on the Company’s assets and operations.
U.S. Environmental Liability Risk
In the United States, certain mining wastes from extraction and processing of ores that would otherwise be considered hazardous
waste under the U.S. Resource Conservation and Recovery Act (“RCRA”) and state law equivalents, are currently exempt from certain
U.S. Environmental Protection Agency (“EPA”) regulations governing hazardous waste. If mine wastes from the Company’s U.S. mining
operations, including those at the Sunnyside Mine (see Section 6 Other legal matters), are not exempt, and are treated as hazardous
waste under the RCRA, material expenditures could be required for waste management and/or the construction of additional waste
disposal facilities. In addition, the Company’s activities and ownership interests potentially expose the Company to liability under the
Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) and its state law equivalents. Under CERCLA and
its state law equivalents, subject to certain defenses, any present or past owners or operators of a facility, and any parties that disposed
or arranged for the disposal of hazardous substances at such a facility, could be held jointly and severally liable for cleanup costs and
may be forced to undertake remedial cleanup actions or to pay for the cleanup efforts in response to unpermitted releases of
hazardous substances. Such parties may also be liable to governmental entities for the cost of damages to natural resources, which
may be substantial. Additional regulations or requirements may also be imposed upon the Company’s operations, tailings, and waste
disposal areas as well as upon mine closure under federal and state environmental laws and regulations, including, without
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
limitation, the U.S. Clean Water Act (“CWA”) and state law equivalents. Air emissions in the U.S. are subject to the Clean Air Act and
its state equivalents as well. Additionally, the Company is subject to other federal and state environmental laws, and potential
claims existing under common law, relating to the operation and closure of the Company’s U.S. mine sites.
Political, Security, Legal and Economic Risk
The Company has mining and exploration operations in various regions of the world, including the United States, Canada, Brazil, Chile,
the Russian Federation, Mauritania and Ghana and such operations are exposed to various levels of political, security, legal, 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; crime, including organized criminal enterprise; thefts and illegal incursions on property (including as occur
at Paracatu and Tasiast) which illegal incursions could result in serious security and operational issues, including the endangerment of
life and property; 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
(including at Tasiast) could result in serious environmental, social, political, security and operational issues, including the
endangerment of life and property; adequacy, response and training of local law enforcement; 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 including value added and
withholding taxes, royalties, currency exchange rates, gold sales, environmental protection, labour relations, price controls,
repatriation of income, and return of capital, which may 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 development projects and operations of Kinross require licenses and permits from various governmental authorities. However,
such licenses and permits are subject to challenge and change in various circumstances. Applicable governmental authorities may
revoke or refuse to issue, amend or renew necessary permits. The loss of such permits may hinder Kinross’ ability to operate and could
have a material effect on Kinross’ financial performance and results of operations. There can be no guarantee that Kinross will be able
to obtain or maintain all necessary licenses and permits that may be required to explore and develop its properties, commence
construction of or operation of mining facilities, or to maintain continued operations that economically justify the cost. Kinross
endeavors to be in compliance with these licenses and permits, and underlying laws and regulations, at all times.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Title to Properties and Community Relations
The validity of mining rights, including mining claims which constitute most of Kinross' property holdings, may, in certain cases, be
uncertain and subject to being contested. Kinross' mining rights, claims and other land titles, particularly title to undeveloped
properties, may be defective and open to being challenged by governmental authorities and local communities.
Certain of Kinross’ properties may be subject to the rights or the asserted rights of various community stakeholders, including
indigenous people. The presence of community stakeholders may also impact on the Company’s ability to explore, develop or operate
its mining properties. In certain circumstances, consultation with such stakeholders may be required and the outcome may affect the
Company’s ability to explore, develop or operate its mining properties.
Competition
The mineral exploration and mining business is competitive in all of its phases. In the search for and the acquisition of attractive
mineral properties, Kinross competes with numerous other companies and individuals, including competitors with greater financial,
technical and other resources than Kinross. The ability of the Company to operate successfully in the future will depend not only on
its ability to develop its present properties, but also on its ability to select and acquire suitable new producing properties or prospects
for mineral exploration. Kinross may be unable to compete successfully with its competitors in acquiring such properties or prospects
on terms it considers acceptable, if at all.
Joint Arrangements
Certain of the operations in which the Company has an interest are operated through joint arrangements with other mining
companies. Any failure of such other companies to meet their obligations to Kinross or to third parties could have a material adverse
effect on the joint arrangement. In addition, Kinross may be unable to exert control over strategic decisions made in respect of such
properties.
Disclosures about Market Risks
To determine its market risk sensitivities, Kinross uses an internally generated financial forecast model that is sensitized to, among
other things, various gold prices, currency exchange rates, interest rates and energy prices. The variable with the greatest impact is
the gold price, and Kinross prepares a base case scenario and then sensitizes it by a 10% increase and decrease in the gold price. For
2017, 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 2017, sensitivity to a 10% change in the silver price is estimated to have an $8 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 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, 2016, there were no metal derivative financial instruments outstanding. In addition, Kinross is
not subject to margin requirements on any of its hedging lines.
Foreign Currency Exchange Risk
Currency fluctuations may affect the revenues which the Company will realize from its operations since gold and silver are sold in the
world market in United States dollars. The costs of Kinross are incurred principally in Canadian dollars, United States dollars, Chilean
pesos, Brazilian reais, Russian roubles, Mauritanian ouguiya and Ghanaian cedis. The appreciation of non-U.S. dollar currencies against
the U.S. dollar increases the cost of gold and silver production in U.S. dollar terms. Kinross’ results are positively affected when the
U.S. dollar strengthens against these foreign currencies and are adversely affected when the U.S. dollar weakens against these foreign
MDA 45
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
currencies. Where possible, Kinross’ cash and cash equivalents balances are primarily held in U.S. dollars. From time to time, Kinross
transacts currency hedging to reduce the risk associated with currency fluctuations. While the Chilean peso, Brazilian real, and Russian
rouble are currently convertible into Canadian and United States dollars, they may not always be convertible in the future. The
Mauritanian ouguiya and Ghanaian cedis are convertible into Canadian and U.S. dollars, but conversion may be subject to regulatory
and/or central bank approval.
The sensitivity of the Company’s pre-tax earnings to changes in the U.S. dollar is disclosed in Note 11 of the Company’s financial
statements for the year ended December 31, 2016.
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, 2016, the Company's gross credit exposure, including cash and cash equivalents, was $1,075.2 million and at
December 31, 2015, the gross credit exposure, including cash and cash equivalents, was $1,263.4 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’s ability to access debt markets and the related cost of debt financing is impacted by its credit ratings. The Company
has a BBB- rating from Fitch Ratings, a Ba1 rating from Moody’s and a BB+ rating from Standard & Poor’s. There is no assurance that
its credit ratings will remain in effect for any given period of time or that such ratings will not be revised or withdrawn entirely by the
rating agencies.
Real or anticipated changes in credit ratings can affect the price of the Company’s existing debt as well as the Company’s ability to
access the capital markets and the cost of such debt financing.
Kinross’ ability to access Capital Markets is dependent upon its Credit Ratings
The Company’s ability to access debt markets and the related cost of debt financing is dependent upon its credit ratings. The Company
has investment grade credit ratings from Fitch Ratings and Standard & Poor’s. On March 16, 2015, Moody’s announced a downgrade
of the Company’s senior unsecured ratings from Baa3 to Ba1 in light of the Moody’s downgrade of the Russian Federation’s sovereign
rating to Ba1 and the Company’s concentration of cash flows from its operations in the Russian Federation. 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. On January 21, 2016, Moody’s announced plans to conduct a review of its ratings on a number of mining companies
globally, including Kinross, in light of the recent downturn in the commodities markets. 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 conducts investigations in connection with acquisitions, risks remain regarding any undisclosed or unknown
liabilities associated with any such acquisitions, and the Company may discover that it has acquired substantial undisclosed liabilities.
The Company may have little recourse against the seller if any of the representations or warranties provided in connection with an
acquisition proves to be inaccurate. Such liabilities could have an adverse impact on the Company's business, financial condition,
results of operations and cash flows.
MDA 46
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Global Financial Condition
The volatility and challenges that economies continue to experience around the world continues to affect the profitability and liquidity
of businesses in many industries, which in turn has resulted in the following conditions that may have an effect on the profitability
and cash flows of the Company:
•
•
•
•
Volatility in commodity prices and foreign exchange rates;
Tightening of credit markets;
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 term loan and revolving credit facility in 2016 to extend their terms to August 2020 and August 2021,
respectively, while also amending the leverage ratio covenant. As at December 31, 2016, the Company had $1,430.4 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 (“TSX”) and the New York Stock Exchange (“NYSE”). The price of
Kinross’ common shares is likely to be significantly affected by short-term changes in the gold price or in its financial condition or
results of operations as reflected in its quarterly earnings reports. Other factors unrelated to the performance of Kinross that may
have an effect on the price of the Kinross common shares include the following: a reduction in analytical coverage of Kinross by
investment banks with research capabilities; increased political risk in countries where the Company operates; a drop in trading
volume and general market interest in the securities of Kinross may adversely affect an investor’s ability to liquidate an investment
and consequently an investor’s interest in acquiring a significant stake in Kinross; a failure of Kinross to meet the reporting and other
obligations under Canadian and U.S. securities laws or imposed by the exchanges could result in a delisting of the Kinross common
shares; and a substantial decline in the price of the Kinross common shares that persists for a significant period of time could cause
the Kinross common shares to be delisted from the TSX or NYSE further reducing market liquidity.
As a result of any of these factors, the market price of Kinross’ common shares at any given point in time may not accurately reflect
Kinross’ long-term value. Securities class action litigation has been commenced against companies, including Kinross, following
periods of volatility or significant decline in the market price of their securities. Securities litigation could result in substantial costs
and damages and divert management’s attention and resources. Any decision resulting from any such litigation that is adverse to the
Company could have a negative impact on the Company’s financial position.
Impairment
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
MDA 47
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
assumptions, some of which may be subjective, and it is possible that actual fair value could be significantly different than those
estimates.
At September 30, 2016, Kinross recorded an after-tax impairment charge of $68.3 million related to property plant and equipment
and an inventory impairment charge of $71.3 million related to metals and supplies inventory. 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. No impairment charges were recorded as a result of the Company’s annual assessment of impairment
at December 31, 2016.
Paracatu Water Supply and Use
Operations at Paracatu are dependent on rainfall and river water capture as the primary source of process water. During the rainy
season, the mine channels surface runoff water to temporary storage ponds from where it is pumped to the process plants. Similarly,
surface runoff and rain water and water captured from the river is stored in the tailings impoundment, which constitutes the main
water reservoir for the process plants. The objective is to capture and store as much water as possible during the rainy season to
ensure adequate water supply during the dry season.
Accordingly, prolonged periods without adequate rainfall may adversely impact operations at Paracatu. As a result, production may
fall below historic or forecast levels and Kinross may incur significant costs or experience significant delays that could have a material
effect on Kinross’ financial performance, liquidity and results of operations.
Human Resources
In order to operate successfully, Kinross must find and retain qualified employees. Kinross and other companies in the mining industry
compete for personnel and Kinross is not always able to fill positions in a timely manner. One factor that has contributed to an
increased turnover rate is the ageing workforce and it is expected that this factor will further increase the turnover rate in upcoming
years. If Kinross is unable to attract and retain qualified personnel or fails to establish adequate succession planning strategies, Kinross’
operations could be adversely affected.
In addition, Kinross has a relatively small executive management team and in the event that the services of a number of these
executives are no longer available, Kinross and its business could be adversely affected. Kinross does not carry key-man life insurance
with respect to its executives.
Cybersecurity Risks
The Company relies heavily on its information technology systems including, without limitation, its networks, equipment, hardware,
software, telecommunications, and other information technology (collectively, “IT systems”), and the IT systems of its vendors and
third-party service providers, to operate its business as a whole including mining operations and development projects.
IT systems are subject to an increasing threat of continually evolving cybersecurity risks including, without limitation, computer viruses,
security breaches, and cyberattacks. In addition, the Company is subject to the risk of unauthorized access to its IT systems or its
information through fraud or other means. Kinross’ operations also depend on the timely maintenance, upgrade and replacement of
its IT systems, as well as pre-emptive expenses to mitigate cybersecurity risks and other IT systems disruptions.
Although Kinross has not experienced any material losses to date relating to cybersecurity, or other IT systems disruptions, there can
be no assurance that Kinross will not incur such losses in the future. Despite the Company’s mitigation efforts including implementing
an IT systems security risk management framework, the risk and exposure to these threats cannot be fully mitigated because of,
among other things, the evolving nature of cybersecurity threats. As a result, cybersecurity and the continued development and
enhancement of controls, processes and practices designed to protect IT systems from cybersecurity threats remain a priority. As
these threats continue to evolve, the Company, its vendors and third-party service providers, including IT service providers, may be
required to expend additional resources to continue to modify or enhance protective measures or to investigate and remediate any
cybersecurity vulnerabilities.
Any cybersecurity incidents or other IT systems disruption could result in production downtimes, operational delays, destruction or
corruption of data, security breaches, financial losses from remedial actions, the theft or other compromising of confidential or
otherwise protected information, fines and lawsuits, or damage to the Company’s reputation. Any such occurrence could have an
adverse impact on Kinross’ financial condition and results of operations.
MDA 48
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KINROSS GOLD ANNUAL REPORT 2016
48
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
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 (loss) to adjusted net earnings (loss) for the periods presented:
(in millions, except share and per share amounts)
Net earnings (loss) attributable to common shareholders - as reported
Adjusting items (a):
Foreign exchange losses
Losses (gains) on sale of other assets
Foreign exchange losses (gains) on translation of tax basis and foreign exchange on deferred
income taxes within income tax expense
Acquisition costs
Tax benefits realized upon acquisition
Impairment charges
Taxes in respect of prior years
Chile weather event related costs
Impairment of investments
Tasiast and Maricunga suspension related costs
Insurance recoveries
Reclamation and remediation expense (recovery)
Restructuring
Other(b)
Tax effect of above adjustments
Years ended
December 31,
2016
2015
$
(104.0)
$
(984.5)
6.3
(9.7)
(65.1)
7.8
(27.7)
139.6
85.5
-
-
40.4
(13.0)
27.2
1.7
2.1
1.9
197.0
30.6
16.2
132.9
-
-
699.0
22.2
18.2
7.6
-
(25.1)
(7.9)
22.2
5.8
(28.2)
893.5
Adjusted net earnings (loss) attributable to common shareholders
$
93.0
$
(91.0)
Weighted average number of common shares outstanding - Basic
Adjusted net earnings (loss) per share
1,227.0
1,146.0
$
0.08
$
(0.08)
(a) In 2016, the Company amended its presentation of the reconciliation of net earnings to adjusted net earnings by presenting the adjusting
items on a pre-tax basis and including their tax impact as a separate line item. As a result, the comparative period has been recast to reflect
this change in presentation.
(b) In 2016, other includes non-hedge derivatives losses (gains) and settlement resulting from renegotiation of a labour agreement. In 2015,
other includes non-hedge derivatives losses (gain) and transaction costs.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
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 for the periods presented:
(in millions)
Net cash flow provided from operating activities - as reported
Adjusting items:
Working capital changes:
Accounts receivable and other assets
Inventories
Accounts payable and other liabilities, including taxes
Years ended
December 31,
2016
2015
$
1,099.2
$
831.6
21.2
(79.5)
(114.2)
(172.5)
(91.0)
(63.5)
109.5
(45.0)
Adjusted operating cash flow
$
926.7
$
786.6
MDA 50
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
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:
(in millions, except ounces and production cost of sales per equivalent ounce)
2016
2015
Years ended
December 31,
Production cost of sales - as reported
Less: portion attributable to Chirano non-controlling interest
Attributable production cost of sales
Gold equivalent ounces sold
Less: portion attributable to Chirano non-controlling interest
Attributable gold equivalent ounces sold
Consolidated production cost of sales per equivalent ounce sold
Attributable production cost of sales per equivalent ounce sold
$
1,983.8
$
1,834.8
(19.0)
(18.0)
$
1,964.8
$
1,816.8
2,778,902
(20,596)
2,758,306
2,634,867
(25,997)
2,608,870
$
714
$
696
$
712
$
696
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
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:
(in millions, except ounces and production cost of sales per ounce)
Production cost of sales - as reported
Less: portion attributable to Chirano non-controlling interest
Less: attributable silver revenues
Years ended
December 31,
2016
2015
$
1,983.8
$
1,834.8
(19.0)
(102.5)
(18.0)
(82.5)
Attributable production cost of sales net of silver by-product revenue
$
1,862.3
$
1,734.3
Gold ounces sold
Less: portion attributable to Chirano non-controlling interest
Attributable gold ounces sold
2,697,912
(20,545)
2,677,367
2,562,219
(25,925)
2,536,294
Attributable production cost of sales per ounce sold on a by-product basis
$
696
$
684
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
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:
(in millions, except ounces and costs per ounce)
Production cost of sales - as reported
Less: portion attributable to Chirano non-controlling interest (a)
Less: attributable (b) silver revenues (c)
Attributable (b) production cost of sales net of silver by-product revenue
Adjusting items on an attributable (b) basis:
General and administrative (d)
Other operating expense - sustaining (e)
Reclamation and remediation - sustaining (f)
Exploration and business development - sustaining (g)
Additions to property, plant and equipment - sustaining (h)
All-in Sustaining Cost on a by-product basis - attributable (b)
Other operating expense - non-sustaining (e)
Reclamation and remediation - non-sustaining (f)
Exploration - non-sustaining (g)
Additions to property, plant and equipment - non-sustaining (h)
All-in Cost on a by-product basis - attributable (b)
Gold ounces sold
Less: portion attributable to Chirano non-controlling interest (i)
Attributable (b) gold ounces sold
Attributable (b) all-in sustaining cost per ounce sold on a by-product basis
Attributable (b) all-in cost per ounce sold on a by-product basis
Years ended December 31,
2016
2015
$
1,983.8
$
1,834.8
(19.0)
(102.5)
(18.0)
(82.5)
$
1,862.3
$
1,734.3
143.7
18.6
94.9
50.8
440.1
160.6
21.5
58.0
59.0
428.5
$
2,610.4
$
2,461.9
25.6
34.9
42.6
160.1
20.8
(7.9)
47.6
132.7
$
2,873.6
$
2,655.1
2,697,912
(20,545.0)
2,677,367
2,562,219
(25,925)
2,536,294
$
975
$
971
$
1,073
$
1,047
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
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:
(in millions, except ounces and costs per equivalent ounce)
Production cost of sales - as reported
Less: portion attributable to Chirano non-controlling interest (a)
Attributable (b) production cost of sales
Adjusting items on an attributable (b) basis:
General and administrative (d)
Other operating expense - sustaining (e)
Reclamation and remediation - sustaining (f)
Exploration and business development - sustaining (g)
Additions to property, plant and equipment - sustaining (h)
All-in Sustaining Cost - attributable (b)
Other operating expense - non-sustaining (e)
Reclamation and remediation - non-sustaining (f)
Exploration - non-sustaining (g)
Additions to property, plant and equipment - non-sustaining (h)
All-in Cost - attributable (b)
Gold equivalent ounces sold
Less: portion attributable to Chirano non-controlling interest (i)
Attributable (b) gold equivalent ounces sold
Attributable (b) all-in sustaining cost per equivalent ounce sold
Attributable (b) all-in cost per equivalent ounce sold
Years ended December 31,
2016
2015
$
1,983.8
$
1,834.8
(19.0)
(18.0)
$
1,964.8
$
1,816.8
143.7
18.6
94.9
50.8
440.1
160.6
21.5
58.0
59.0
428.5
$
2,712.9
$
2,544.4
25.6
34.9
42.6
160.1
20.8
(7.9)
47.6
132.7
$
2,976.1
$
2,737.6
2,778,902
(20,596)
2,758,306
2,634,867
(25,997)
2,608,870
$
984
$
975
$
1,079
$
1,049
MDA 54
Kinross Gold Annual Report 2016
MDA
KINROSS GOLD ANNUAL REPORT 2016
54
K.4.219 Kinross MD&A_HR.pdf - p54 (March 16, 2017 19:53:51)
DT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
(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 for the year ended December 31, 2016 relate to projects at Tasiast, Round
Mountain, Chirano and Bald Mountain.
(i) “Portion attributable to Chirano non-controlling interest” represents the non-controlling interest (10%) in the ounces sold from the
Chirano mine.
MDA 55
Kinross Gold Annual Report 2016
55
MDA
KINROSS GOLD ANNUAL REPORT 2016
K.4.219 Kinross MD&A_HR.pdf - p55 (March 16, 2017 19:53:52)
DT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
Cautionary Statement on Forward-Looking Information
All statements, other than statements of historical fact, contained or incorporated by reference in this MD&A including, but not limited to, any information as to
the future financial or operating performance of Kinross, constitute ‘‘forward-looking information’’ or ‘‘forward-looking statements’’ within the meaning of certain
securities laws, including the provisions of the Securities Act (Ontario) and the provisions for “safe harbor” under the United States Private Securities Litigation
Reform Act of 1995 and are based on expectations, estimates and projections as of the date of this MD&A. Forward-looking statements contained in this MD&A,
include, but are not limited to, those under the headings (or headings that include): “Outlook”, “Balance sheet” and “Project Updates and New Developments”,
and include, without limitation, statements with respect to our guidance for production; production costs of sales, all-in sustaining cost and capital expenditures;
and continuous improvement initiatives, as well as references to other possible events, the future price of gold and silver, the timing and amount of estimated
future production, costs of production, capital expenditures, costs and timing of the development of projects and new deposits, success of exploration,
development and mining activities, currency fluctuations, capital requirements, project studies, mine life extensions, restarting suspended or disrupted operations;
continuous improvement initiatives; and resolution of pending litigation. The words “anticipate”, “assumption”, “believe”, “consideration”, “estimates”,
‘‘expects’’, “explore”, “forecast”, “focus”, , “guidance”, “intend”, “initiative”, “measures”, “optimize”, “outlook”, “opportunity”, “phased”, “plan”, “possible”,
“potential”, “project”, , “schedule”, “seek”, “study”, “target” or variations of or similar such words and phrases or statements that certain actions, events or
results may, could, should or will be achieved, received or taken, or will occur or result and similar such expressions identify forward-looking statements. Forward-
looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by Kinross as of the date of such
statements, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The estimates, models and assumptions of
Kinross referenced, contained or incorporated by reference in this 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 as well as: (1) there being no significant disruptions affecting the operations of the
Company whether due to extreme weather events (including, without limitation, excessive or lack of rainfall) and other or related natural disasters, labour
disruptions (including but not limited to following workforce reductions), supply disruptions, power disruptions, damage to equipment or otherwise; (2) permitting,
development, operations and production from the Company’s operations being consistent with Kinross’ current expectations including, without limitation, land
acquisitions and permitting for the construction and operation of the new tailings facility, water and power supply and launch of the new tailings reprocessing
facility at Paracatu and the construction and operation of the TSF and SAG Mill at Tasiast; (3) political and legal developments in any jurisdiction in which the
Company operates being consistent with its current expectations including, without limitation, the impact of any 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, including
but not limited to potential power rationing, tailings facility regulation and amendments to mining laws in Brazil, potential amendments to water laws and/or
other water use restrictions and regulatory actions in Chile, potential amendments to minerals and mining laws and dam safety regulation in Ghana, potential
amendments to customs and mining laws (including but not limited amendments to the VAT) in Mauritania, and potential amendments to and enforcement of
tax laws in Russia (including, but not limited to, the interpretation, implementation, application and enforcement of any such laws and amendments thereto),
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 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) and mine plans for the Company’s mining operations (including but not limited to throughput and recoveries being affected by
metallurgical characteristics at Paracatu); (9) labour and materials costs increasing on a basis consistent with Kinross’ current expectations; (10) 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; (11) goodwill and/or asset impairment potential; and (12) access to capital markets, including but not limited to maintaining
debt ratings 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,
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; 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, Mauritania,
Ghana, or other countries in which Kinross does business or may carry on business; business opportunities that may be presented to, or pursued by, us; our ability
to successfully integrate acquisitions and complete divestitures; operating or technical difficulties in connection with mining 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-corruption, international sanctions and/or anti-money laundering laws and regulations in
Canada, the United States or any other applicable jurisdiction; the speculative nature of gold exploration and development including, but not limited to, the risks
of obtaining necessary licenses and permits; diminishing quantities or grades of reserves; adverse changes in our credit 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, tailings dam failures, 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
the “Risk Analysis” section of our full year 2016 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.
MDA 56
Kinross Gold Annual Report 2016
MDA
KINROSS GOLD ANNUAL REPORT 2016
56
K.4.219 Kinross MD&A_HR.pdf - p56 (March 16, 2017 19:53:53)
DT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2016
(cid:60)(cid:286)(cid:455) (cid:94)(cid:286)(cid:374)s(cid:349)(cid:410)(cid:349)v(cid:349)(cid:410)(cid:349)(cid:286)s
Approximately 70%-80% of the Company's costs are denominated in U.S. dollars.
A 10% change in foreign currency exchange rates would be expected to result in an approximate $15 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 $16 impact on Russian production cost of sales
per ounce.
Specific to the Brazilian real, a 10% change in the exchange rate would be expected to result in an approximate $32 impact on Brazilian production cost of sales
per ounce.
A $10 per barrel change in the price of oil would be expected to result in an approximate $2 impact on production cost of sales per ounce.
A $100 change in the price of gold would be expected to result in an approximate $4 impact on production cost of sales per ounce as a result of a change in
royalties.
(cid:75)(cid:410)(cid:346)(cid:286)(cid:396) (cid:349)(cid:374)(cid:296)(cid:381)(cid:396)(cid:373)(cid:258)(cid:410)(cid:349)(cid:381)(cid:374)
Where we say ‘‘we’’, ‘‘us’’, ‘‘our’’, the ‘‘Company’’, or ‘‘Kinross’’ in this MD&A, we mean Kinross Gold Corporation and/or one or more or all of its subsidiaries, as
may be applicable.
The technical information about the Company’s mineral properties contained in this MD&A has been prepared under the supervision of Mr. John Sims, an officer
of the Company, who is a “qualified person” within the meaning of National Instrument 43-101.
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.
MDA 57
Kinross Gold Annual Report 2016
57
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KINROSS GOLD ANNUAL REPORT 2016
K.4.219 Kinross MD&A_HR.pdf - p57 (March 16, 2017 19:53:53)
DT
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 w
tandards Board and are the
responsibility of the management of Kinross Gold Corporation. The financial information presented elsew here in the Management’s Discussion and
Analysis is consistent w
ith the data that is contained in the consolidated financial statements. The consolidated financial statements, w here necessary,
include amounts w hich are based on the best estimates and j udgment of management.
tandards as issued by the International Accounting S
ith International Financial Reporting S
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 q uality standards in hiring and training of employees, policies and procedures manuals, a corporate code of conduct
ithin appropriate and w ell-defined areas of responsibility. The system of internal controls
and ensuring that there is proper accountability for performance w
is further supported by a compliance function, w hich is designed to ensure that w e and our employees comply w
ith 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
ith management as w ell as the external auditors to ensure that management is
Audit Committee, w hich is composed of non-executive directors, meets w
properly fulfilling its financial reporting responsibilities to the Directors w ho 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 adeq uacy 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 w
generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (U nited S
tates).
ith Canadian
J. PAUL ROLLINSON
President and Chief E xecutive Officer
Toronto, Canada
February 15, 2017
TONY S. GIARDINI
ice-President and Chief Financial Officer
E xecutive V
Toronto, Canada
February 15, 2017
K.4.219 Kinross Financials_HR.pdf - p1 (March 16, 2017 19:51:48)
DT
FS
1
Kinross Gold Annual Report 2016
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KINROSS GOLD ANNUAL REPORT 2016
1
MANAGEMENT’S REPORT ON
INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Kinross Gold Corporation (“Kinross”) is responsible for establishing and maintaining adeq uate internal control over financial reporting,
and have designed such internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with International Financial Reporting Standards (“IFRS”) as issued by the
International Accounting S
tandards Board.
Management has used the Internal Control—Integrated Framew ork (2013) to evaluate the effectiveness of internal control over financial reporting, w hich
is a recogniz ed and suitable framew ork issued by the Committee of S ponsoring Organiz ations for the Treadw ay Commission (COS O).
Because of inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Also, proj ections of any evaluation of
effectiveness to future periods are subj ect to the risk that controls may become inadeq uate because of changes in conditions, or that the degree of
compliance w
ith the policies or procedures may deteriorate.
Management has evaluated the design and operation of Kinross’ internal control over financial reporting as of December 31, 2016, and has concluded
that such internal control over financial reporting is effective.
The effectiveness of Kinross’ internal control over financial reporting as of December 31, 2016 has been audited by KPMG LLP, Chartered Professional
Accountants, as stated in their report that appears therein.
J. PAUL ROLLINSON
President and Chief E xecutive Officer
Toronto, Canada
February 15, 2017
TONY S. GIARDINI
ice-President and Chief Financial Officer
E xecutive V
Toronto, Canada
February 15, 2017
FS
2
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
2
INDEPENDENT AUDITORS’ REPORT OF REGISTERED PUBLIC
ACCOUNTING FIRM
To the B oard
of D
irectors and
S harehold ers of K
inross G old
Corporation
We have audited the accompanying consolidated financial statements of Kinross Gold Corporation, w hich comprise the consolidated balance sheets as
at December 31, 2016 and December 31, 2015, the consolidated statements of operations, comprehensive loss, cash flow s and eq uity 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 w
Reporting S
to enable the preparation of consolidated financial statements that are free from material misstatement, w hether due to fraud or error.
ith International Financial
tandards Board, and for such internal control as management determines is necessary
tandards as issued by the International Accounting S
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance w
Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (U nited S
req uire that w e comply w
statements are free from material misstatement.
ith
tates). Those standards
ith ethical req uirements and plan and perform the audit to obtain reasonable assurance about w hether the consolidated financial
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 j udgment, 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 w ell as evaluating the overall
presentation of the consolidated financial statements.
We believe that the audit evidence w e have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.
inion
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, 2016 and December 31, 2015, and its consolidated financial performance and its consolidated cash flow s for the years then ended
in accordance w
tandards as issued by the International Accounting S
ith International Financial Reporting S
tandards Board.
r M
r
ith the standards of the Public Company Accounting Oversight Board (United States), Kinross Gold Corporation’s
We also have audited, in accordance w
internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control – Integrated Framew ork (2013)
issued by the Committee of S ponsoring Organiz ations of the Treadw ay Commission (COS O), and our report dated February 15, 2017 expressed an
unq ualified (unmodified) opinion on the effectiveness of Kinross Gold Corporation’s internal control over financial reporting.
Chartered Professional Accountants, Licensed Public Accountants
February 15, 2017
Toronto, Canada
FS
3
Kinross Gold Annual Report 2016
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KINROSS GOLD ANNUAL REPORT 2016
3
O
p
O
t
h
e
a
t
t
e
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and S hareholders
Kinross Gold Corporation
We have audited Kinross Gold Corporation’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal
Control – Integrated Framew ork (2013) issued by the Committee of S ponsoring Organiz ations of the Treadw ay Commission (COS O). Kinross Gold
Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying management’s report on internal controls over financial reporting. Our responsibility
is to express an opinion on the Company’s internal control over financial reporting based on our audit.
tates). Those standards req uire
We conducted our audit in accordance w
that w e plan and perform the audit to obtain reasonable assurance about w hether effective internal control over financial reporting w as maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material w eakness
exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing
such other procedures as w e considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
ith the standards of the Public Company Accounting Oversight Board (U nited S
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
ith generally accepted accounting principles. A company’s internal
and the preparation of financial statements for external purposes in accordance w
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance w
ith generally accepted accounting principles, and that receipts and expenditures
of the company are being made only in accordance w
ith authoriz ations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material
effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, proj ections of any evaluation
of effectiveness to future periods are subj ect to the risk that controls may become inadeq uate because of changes in conditions, or that the degree of
compliance w
ith the policies or procedures may deteriorate.
In our opinion, Kinross Gold Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016,
based on criteria established in Internal Control – Integrated Framew ork (2013) issued by the Committee of S ponsoring Organiz ations of the Treadw ay
Commission (COS O).
ith the Canadian generally accepted auditing standards and the standards of the Public Company Accounting
We also have audited, in accordance w
Oversight Board (U nited S
tates), the consolidated balance sheets of Kinross Gold Corporation as of December 31, 2016 and 2015, and the related
consolidated statements of operations, comprehensive loss, cash flow s and eq uity for each of the years then ended, and our report dated February 15,
2017 expressed an unmodified (unq ualified) opinion on those consolidated financial statements.
Chartered Professional Accountants, Licensed Public Accountants
February 15, 2017
Toronto, Canada
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Kinross Gold Annual Report 2016
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KINROSS GOLD ANNUAL REPORT 2016
4
CONSOLIDATED BALANCE SHEETS
(expressed in millions of United States dollars, except share amounts)
Assets
Current assets
Cash and cash equivalents
Restricted cash
Accounts receivable and other assets
Current income tax recoverable
Inventories
Unrealized fair value of derivative assets
Non-current assets
Property, plant and equipment
Goodwill
Long-term investments
Investments in associate and joint ventures
Unrealized fair value of derivative assets
Other long-term assets
Deferred tax assets
Total assets
Liabilities
Current liabilities
Accounts payable and accrued liabilities
Current income tax payable
Current portion of long-term debt
Current portion of provisions
Current portion of unrealized fair value of derivative liabilities
Non-current liabilities
Long-term debt
Provisions
Other long-term liabilities
Deferred tax liabilities
Total liabilities
Equity
Common shareholders' equity
Common share capital
Contributed surplus
Accumulated deficit
Accumulated other comprehensive income (loss)
Total common shareholders' equity
Non-controlling interest
Total equity
Commitments and contingencies
Total liabilities and equity
Common shares
Authorized
Issued and outstanding
As at
December 31,
2016
December 31,
2015
$
827.0
11.6
127.3
111.9
986.8
16.1
2,080.7
4,917.6
162.7
142.9
163.6
6.0
411.3
94.5
7,979.3
$
$
1,043.9
10.5
108.2
123.3
1,005.2
1.0
2,292.1
4,593.7
162.7
83.1
157.1
-
370.2
76.5
7,735.4
$
$
464.8
72.6
-
93.2
7.1
$
379.6
6.4
249.5
50.3
16.0
637.7
701.8
1,733.2
861.2
172.2
390.7
3,795.0
1,731.9
720.8
148.7
499.0
3,802.2
$
14,894.2
238.3
(11,026.1)
39.1
4,145.5
38.8
4,184.3
$
14,603.5
239.2
(10,922.1)
(31.3)
3,889.3
43.9
3,933.2
$
7,979.3
$
7,735.4
Note 7
Note 7
Note 7
Note 7
Note 10
Note 7
Note 7
Note 7
Note 9
Note 10
Note 7
Note 17
Note 7
Note 12
Note 13
Note 10
Note 12
Note 13
Note 17
Note 14
Note 7
Note 19
Unlimited
Note 14 1,245,049,712
Unlimited
1,146,540,188
The accompanying notes are an integral part of these consolidated financial statements
Signed on behalf of the Board:
John A. Brough John M. H. Huxley
Director Director
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5
Kinross Gold Annual Report 2016
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KINROSS GOLD ANNUAL REPORT 2016
5
CONSOLIDATED STATEMENTS OF OPERATIONS
(expressed in millions of United States dollars, except share and per share amounts)
Revenue
Metal sales
Cost of sales
Production cost of sales
Depreciation, depletion and amortization
Impairment charges
Total cost of sales
Gross profit (loss)
Other operating expense
Exploration and business development
General and administrative
Operating earnings (loss)
Other income (expense) - net
Equity in earnings (losses) of associate and joint ventures
Finance income
Finance expense
Loss before tax
Income tax expense - net
Net loss
Net loss attributable to:
Non-controlling interest
Common shareholders
Loss per share attributable to common shareholders
Basic
Diluted
Years ended
December 31,
December 31,
2016
2015
$
3,472.0
$
3,052.2
1,983.8
855.0
139.6
2,978.4
493.6
209.3
94.3
143.7
46.3
22.5
(1.2)
7.5
(134.6)
(59.5)
(49.6)
Note 8
Note 7
Note 7
Note 9
Note 7
Note 17
1,834.8
897.7
699.0
3,431.5
(379.3)
76.2
108.0
179.4
(742.9)
(20.3)
3.2
8.3
(96.0)
(847.7)
(141.7)
$
(109.1)
$
(989.4)
$
(5.1)
$
(4.9)
$
(104.0)
$
(984.5)
$
$
(0.08)
(0.08)
$
$
(0.86)
(0.86)
Weighted average number of common shares outstanding
(millions)
Basic
Note 16
Diluted
1,227.0
1,227.0
1,146.0
1,146.0
The accompanying notes are an integral part of these consolidated financial statements
FS
6
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
6
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(expressed in millions of United States dollars)
Years ended
December 31,
December 31,
2016
2015
Net loss
$
(109.1)
$
(989.4)
Note 7
Other comprehensive income (loss), net of tax:
Items to be reclassified to profit or loss in subsequent
periods:
Changes in fair value of investments (a)
Reclassification to earnings for impairment charges
Accumulated other comprehensive (income) loss related to
investments sold (b)
Changes in fair value of derivative financial instruments
designated as cash flow hedges (c)
Accumulated other comprehensive (income) loss related to
derivatives settled (d)
50.8
-
(8.5)
29.2
(1.1)
70.4
(28.1)
7.6
-
(38.1)
73.4
14.8
Total comprehensive loss
$
(38.7)
$
(974.6)
Attributable to non-controlling interest
Attributable to common shareholders
$
(5.1)
$
(4.9)
$
(33.6)
$
(969.7)
(a ) Net of tax of $nil (2015 - $nil)
(b ) Net of tax of $nil (2015 - $nil)
(c ) Net of tax of $10.6 million (2015 - $(13.1) million)
(d ) Net of tax of $(1.1) million (2015 - $21.3 million)
The accompanying notes are an integral part of these consolidated financial statements
FS
7
Kinross Gold Annual Report 2016
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KINROSS GOLD ANNUAL REPORT 2016
7
CONSOLIDATED STATEMENTS OF CASH FLOWS
(expressed in millions of United States dollars)
Net inflow (outflow) of cash related to the following activities:
Operating:
Net loss
Adjustments to reconcile net loss to net cash provided from operating activities:
$
(109.1)
$
(989.4)
Years ended
December 31,
December 31,
2016
2015
Depreciation, depletion and amortization
Impairment charges
Equity in losses (earnings) of associate and joint ventures
Share-based compensation expense
Finance expense
Deferred tax expense (recovery)
Foreign exchange losses and other
Reclamation expense (recovery)
Changes in operating assets and liabilities:
Accounts receivable and other assets
Inventories
Accounts payable and accrued liabilities
Cash flow provided from operating activities
Income taxes paid
Net cash flow provided from operating activities
Investing:
Additions to property, plant and equipment
Business acquisition
Net additions to long-term investments and other assets
Net proceeds from the sale of property, plant and equipment
Decrease (increase) in restricted cash
Interest received and other
Net cash flow used in investing activities
Financing:
Issuance of common shares on exercise of options
Proceeds from issuance of equity
Proceeds from issuance of debt
Repayment of debt
Interest paid
Other
Net cash flow used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
The accompanying notes are an integral part of these consolidated financial statements
855.0
139.6
1.2
13.5
134.6
(149.7)
14.4
27.2
(21.2)
79.5
239.9
1,224.9
(125.7)
1,099.2
(633.8)
(588.0)
(59.8)
9.1
(1.1)
3.5
(1,270.1)
2.8
275.7
-
(250.0)
(73.5)
(3.3)
(48.3)
2.3
(216.9)
1,043.9
897.7
699.0
(3.2)
17.1
96.0
53.0
24.3
(7.9)
91.0
63.5
27.9
969.0
(137.4)
831.6
(610.0)
-
(59.7)
3.3
30.8
4.0
(631.6)
-
-
22.5
(102.5)
(48.8)
(2.9)
(131.7)
(7.9)
60.4
983.5
$ 827.0
$ 1,043.9
FS
8
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
8
CONSOLIDATED STATEMENTS OF EQUITY
(expressed in millions of United States dollars)
Years ended
December 31,
December 31,
2016
2015
Common share capital
Balance at the beginning of the period
Shares issued on equity offering
Transfer from contributed surplus on exercise of options and restricted shares
Options exercised, including cash
Balance at the end of the period
Contributed surplus
Balance at the beginning of the period
Share-based compensation
Transfer of fair value of exercised options and restricted shares
Balance at the end of the period
Accumulated deficit
Balance at the beginning of the period
Net loss attributable to common shareholders
Balance at the end of the period
Accumulated other comprehensive income (loss)
Balance at the beginning of the period
Other comprehensive income
Balance at the end of the period
$
$
14,603.5
275.7
12.2
2.8
14,894.2
14,587.7
-
15.8
-
14,603.5
$
$
$
239.2
14.2
(15.1)
$
239.0
17.1
(16.9)
$
238.3
$
239.2
$
(10,922.1)
$
(9,937.6)
(104.0)
(984.5)
$
(11,026.1)
$
(10,922.1)
$
(31.3)
70.4
$
(46.1)
14.8
$
39.1
$
(31.3)
Total accumulated deficit and accumulated other comprehensive income (loss)
$
(10,987.0)
$
(10,953.4)
Total common shareholders' equity
$
4,145.5
$
3,889.3
Non-controlling interest
Balance at the beginning of the period
Net loss attributable to non-controlling interest
Balance at the end of the period
Total equity
The accompanying notes are an integral part of these consolidated financial statements
$
43.9
$
48.8
(5.1)
(4.9)
$
38.8
$
43.9
$
4,184.3
$
3,933.2
FS
9
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
9
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(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, 2016 were authorized for issue in
accordance with a resolution of the board of directors on February 15, 2017.
2.
BASIS OF PRESENTATION
These consolidated financial statements for the year ended December 31, 2016 (“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.
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10
Kinross Gold Annual Report 2016
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KINROSS GOLD ANNUAL REPORT 2016
10
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, 2016 were authorized for issue in
accordance with a resolution of the board of directors on February 15, 2017.
2.
BASIS OF PRESENTATION
These consolidated financial statements for the year ended December 31, 2016 (“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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
1.
DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS
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.
Entity
Subsidiaries:
(Consolidated)
Fairbanks Gold Mining, Inc.
Kinross Brasil Mineração S.A. ("KBM")
Compania Minera Maricunga
Compania Minera Mantos de Oro
Echo Bay Minerals Company
Chukotka Mining and Geological
Company
Northern Gold LLC
Selene Holdings LP
Tasiast Mauritanie Ltd. S.A.
Chirano Gold Mines Ltd. (Ghana) (a)
KG Mining (Bald Mountain) Inc. (b)
Round Mountain Gold Corporation (b) /
KG Mining (Round Mountain) Inc. (b)
Interest in joint operation:
(Relative share consolidated)
Round Mountain Gold Corporation (b)
Investment in associate:
(Equity accounted)
Compania Minera Casale
Interest in joint ventures:
(Equity accounted)
Sociedad Contractual Minera Puren
Bald Mountain Exploration LLC (c)
Property/ Segment
Location
2016
2015
As at
December 31, December 31,
Fort Knox
Paracatu
Maricunga and Lobo Marte
/ Maricunga and Corporate
and Other
La Coipa / Corporate and
Other
Kettle River - Buckhorn
Kupol
Dvoinoye/ Kupol
USA
Brazil
Chile
100%
100%
100%
100%
100%
100%
Chile
100%
100%
USA
Russian
Federation
Russian
Federation
100%
100%
100%
White Gold/ Corporate and
Other
Tasiast
Chirano
Bald Mountain
Round Mountain
Canada
100%
Mauritania
Ghana
USA
USA
100%
90%
100% (b)
100% (b)
100%
100%
100%
100%
100%
90%
-
-
Round Mountain
USA
-
50%(b)
Cerro Casale/ Corporate
and Other
Chile
25%
25%
Puren/ Corporate and
Other
Bald Mountain Exploration
Joint Venture/ Bald
Mountain
Chile
USA
65%
50% (c)
65%
-
(a)
The Company holds a 90% interest in the Chirano Gold Mine with the Government of Ghana having the right to the remaining 10%
interest.
(b) On January 11, 2016, the Company acquired 100% of the Bald Mountain gold mine (“Bald Mountain”) and the remaining 50% interest
in the Round Mountain gold mine (“Round Mountain”) from Barrick Gold Corporation (“Barrick”).
Prior to the acquisition of the remaining 50% interest in Round Mountain, the Company had 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, the Company was the operator. The Management Committee of the joint operation represented the joint operation partners,
authorized annual programs and budgets and approved major transactions prior to execution by site management. The joint operation
owners were entitled to their pro-rata share of production and were obliged to make their pro-rata share of contributions as requested.
(c) As part of the acquisition of Bald Mountain, the Company acquired a large associated land package, of which approximately 40% is
subject to a 50/50 joint venture between the Company and Barrick, with Kinross as operator.
FS
10
Kinross Gold Annual Report 2016
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11
Kinross Gold Annual Report 2016
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KINROSS GOLD ANNUAL REPORT 2016
11
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(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 and requiring unanimous consent of each of the parties regarding those activities
that significantly affect the returns of the arrangement. The Company’s interest in a joint arrangement is classified as either
a joint operation or a joint venture depending on its rights and obligations in the arrangement. In a joint operation, the
Company has rights to its share of the assets, and obligations for its share of the liabilities, of the joint arrangement, while
in a joint venture, the Company has rights to its share of the net assets of the joint arrangement. For a joint operation, the
Company recognizes in the consolidated financial statements, its share of the assets, liabilities, revenue, and expenses of
the joint arrangement, while for a joint venture, the Company recognizes its investment in the joint arrangement using the
equity method of accounting in the consolidated financial statements.
(c) Associates
Associates are entities, including unincorporated entities such as partnerships, over which the Company has significant
influence and that are neither subsidiaries nor interests in joint arrangements. Significant influence is the ability to
participate in the financial and operating policy decisions of the investee without having control or joint control over those
policies. In general, significant influence is presumed to exist when the Company has between 20% and 50% of voting
power. Significant influence may also be evidenced by factors such as the Company’s representation on the board of
directors, participation in policy-making of the investee, material transactions with the investee, interchange of managerial
personnel, or the provision of essential technical information. Associates are equity accounted for from the effective date
of commencement of significant influence to the date that the Company ceases to have significant influence.
Results of associates are equity accounted for using the results of their most recent annual financial statements or interim
financial statements, as applicable. Losses from associates are recognized in the consolidated financial statements until the
interest in the associate is written down to nil. Thereafter, losses are recognized only to the extent that the Company is
committed to providing financial support to such associates.
The carrying value of the investment in an associate represents the cost of the investment, including goodwill, a share of the
post-acquisition retained earnings and losses, 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 on the consolidated balance sheet date;
Non-monetary assets and liabilities are translated at historical exchange rates prevailing at each transaction date;
Revenue and expenses are translated at the exchange rate at the date of the transaction, except depreciation,
depletion and amortization, which are translated at the rates of exchange applicable to the related assets, and
share-based compensation expense, which is translated at the rates of exchange applicable on the date of grant
of the share-based compensation; and
Exchange gains and losses on translation are included in earnings.
When the gain or loss on certain non-monetary items, such as long-term investments classified as available-for-sale, is
recognized in other comprehensive income (“OCI”), the translation differences are also recognized in OCI.
FS
12
Kinross Gold Annual Report 2016
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KINROSS GOLD ANNUAL REPORT 2016
12
Subsidiaries are entities controlled by the Company. Control exists when an investor is exposed, or has rights, to variable
returns from its involvement with an investee and has the ability to affect those returns through its power over the
investee. Subsidiaries are included in the consolidated financial statements from the date control is obtained until the date
control ceases. Where the Company’s interest in a subsidiary is less than 100%, the Company recognizes non-controlling
interests. All intercompany balances, transactions, income, expenses, profits and losses, including unrealized gains and
losses have been eliminated on consolidation.
(b) Joint Arrangements
The Company conducts a portion of its business through joint arrangements where the parties are bound by contractual
arrangements establishing joint control and requiring unanimous consent of each of the parties regarding those activities
that significantly affect the returns of the arrangement. The Company’s interest in a joint arrangement is classified as either
a joint operation or a joint venture depending on its rights and obligations in the arrangement. In a joint operation, the
Company has rights to its share of the assets, and obligations for its share of the liabilities, of the joint arrangement, while
in a joint venture, the Company has rights to its share of the net assets of the joint arrangement. For a joint operation, the
Company recognizes in the consolidated financial statements, its share of the assets, liabilities, revenue, and expenses of
the joint arrangement, while for a joint venture, the Company recognizes its investment in the joint arrangement using the
equity method of accounting in the consolidated financial statements.
(c) Associates
Associates are entities, including unincorporated entities such as partnerships, over which the Company has significant
influence and that are neither subsidiaries nor interests in joint arrangements. Significant influence is the ability to
participate in the financial and operating policy decisions of the investee without having control or joint control over those
policies. In general, significant influence is presumed to exist when the Company has between 20% and 50% of voting
power. Significant influence may also be evidenced by factors such as the Company’s representation on the board of
directors, participation in policy-making of the investee, material transactions with the investee, interchange of managerial
personnel, or the provision of essential technical information. Associates are equity accounted for from the effective date
of commencement of significant influence to the date that the Company ceases to have significant influence.
Results of associates are equity accounted for using the results of their most recent annual financial statements or interim
financial statements, as applicable. Losses from associates are recognized in the consolidated financial statements until the
interest in the associate is written down to nil. Thereafter, losses are recognized only to the extent that the Company is
committed to providing financial support to such associates.
The carrying value of the investment in an associate represents the cost of the investment, including goodwill, a share of the
post-acquisition retained earnings and losses, 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
Transactions denominated in foreign currencies are translated into the United States dollar as follows:
Monetary assets and liabilities are translated at the rates of exchange on the consolidated balance sheet date;
Non-monetary assets and liabilities are translated at historical exchange rates prevailing at each transaction date;
Revenue and expenses are translated at the exchange rate at the date of the transaction, except depreciation,
depletion and amortization, which are translated at the rates of exchange applicable to the related assets, and
share-based compensation expense, which is translated at the rates of exchange applicable on the date of grant
of the share-based compensation; and
Exchange gains and losses on translation are included in earnings.
When the gain or loss on certain non-monetary items, such as long-term investments classified as available-for-sale, is
recognized in other comprehensive income (“OCI”), the translation differences are also recognized in OCI.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
(a) Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(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.
The functional and presentation currency of the Company is the United States dollar.
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.
FS
12
Kinross Gold Annual Report 2016
FS
13
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
13
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(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.
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.
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KINROSS GOLD ANNUAL REPORT 2016
14
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(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.
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
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
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.
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KINROSS GOLD ANNUAL REPORT 2016
15
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
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) 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. Impairment of Goodwill and Long-lived Assets
Goodwill is tested for impairment on an annual basis as at December 31, and at any other time if events or changes in
circumstances indicate that the recoverable amount of a CGU has been reduced below its carrying amount.
The carrying value of property, plant and equipment is reviewed each reporting period to determine whether there is any
indication of impairment. 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. For such non-current assets, the recoverable amount is determined for an individual asset
unless the asset does not generate cash inflows that are independent of those generated from other assets or groups of
assets, in which case, the individual assets are grouped together into CGUs for impairment testing purposes.
If the carrying amount of the CGU or asset exceeds its recoverable amount, an impairment is considered to exist and an
impairment loss is recognized in the consolidated statement of operations to reduce the carrying value to its recoverable
amount. The recoverable amount of a CGU or asset is the higher of its fair value less costs to sell and its value in use.
Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction
between knowledgeable and willing parties. Fair value for mineral assets is generally determined as the present value of the
estimated future cash flows expected to arise from the continued use of the asset, including any expansion prospects, and
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KINROSS GOLD ANNUAL REPORT 2016
16
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
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
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.
date of the change.
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) 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. Impairment of Goodwill and Long-lived Assets
Goodwill is tested for impairment on an annual basis as at December 31, and at any other time if events or changes in
circumstances indicate that the recoverable amount of a CGU has been reduced below its carrying amount.
The carrying value of property, plant and equipment is reviewed each reporting period to determine whether there is any
indication of impairment. 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. For such non-current assets, the recoverable amount is determined for an individual asset
unless the asset does not generate cash inflows that are independent of those generated from other assets or groups of
assets, in which case, the individual assets are grouped together into CGUs for impairment testing purposes.
If the carrying amount of the CGU or asset exceeds its recoverable amount, an impairment is considered to exist and an
impairment loss is recognized in the consolidated statement of operations to reduce the carrying value to its recoverable
amount. The recoverable amount of a CGU or asset is the higher of its fair value less costs to sell and its value in use.
Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction
between knowledgeable and willing parties. Fair value for mineral assets is generally determined as the present value of the
estimated future cash flows expected to arise from the continued use of the asset, including any expansion prospects, and
its eventual disposal, using assumptions that an independent market participant may take into account. These cash flows
are discounted by an appropriate discount rate to arrive at a net present value or net asset value (“NAV”) of the asset.
Value in use is determined as the present value of the estimated future cash flows expected to arise from the continued use
of the asset in its present form and its eventual disposal. Value in use is determined by applying assumptions specific to the
Company’s continued use of the asset and does not take into account assumptions of significant future enhancements of an
asset’s performance or capacity to which the Company is not committed.
Estimates of expected future cash flows reflect estimates of future revenues, cash costs of production and capital
expenditures contained in the Company’s long-term life of mine (“LOM”) plans, which are updated for each CGU on an
annual basis. 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 6 year to 26 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 2016 annual impairment analysis, estimated 2017, 2018 and long-term gold prices of $1,200, $1,250
and $1,250 per ounce, respectively, and estimated 2017, 2018 and long-term silver prices of $18.50, $18.70 and $20.00 per
ounce, respectively, were used. For the 2015 annual impairment analysis, estimated 2016, 2017 and long-term gold prices
of $1,100, $1,100 and $1,250 per ounce, respectively, and estimated 2016, 2017 and long-term silver prices of $16.00, $17.00
and $18.00 per ounce, respectively, were used.
The Company’s estimates of future cash costs of production and capital expenditures are based on the LOM plans for each
CGU. Costs incurred in currencies other than the 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 2016 annual impairment analysis, an estimated short-
term and long-term oil price of $60 per barrel was used. For the 2015 annual impairment analysis, estimated 2016, 2017 and
long-term oil prices of $55, $55 and $65 per barrel, respectively, were used.
The discount rate applied to present value the net future cash flows is based on a real weighted average cost of capital by
country to account for geopolitical risk. For the 2016 annual impairment analysis, real discount rates of between 5.05% and
5.18% were used for the CGUs tested. For the CGUs tested in the 2015 annual impairment analysis, real discount rates of
between 4.36% and 6.44% were used.
Since public gold companies typically trade at a market capitalization that is based on a multiple of their underlying NAV, a
market participant would generally apply a NAV multiple when estimating the fair value of a gold mining property.
Consequently, where applicable, the Company estimates the fair value of each CGU by applying a market NAV multiple to
the NAV of each CGU.
When selecting NAV multiples to arrive at fair value, the Company considered the trading prices and NAV estimates of
comparable gold mining companies as at December 31, 2016 in respect of the fair value determinations at that date, which
ranged from 0.7 to 1.5. NAV multiples observed at December 31, 2015 were in the range of 0.7 to 1.1. 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.
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Kinross Gold Annual Report 2016
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Kinross Gold Annual Report 2016
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KINROSS GOLD ANNUAL REPORT 2016
17
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
For property, plant and equipment and other long-lived assets, a previously recognized impairment loss is reversed if there
has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was
recognized.
xiii. 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 in 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 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
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.
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Kinross Gold Annual Report 2016
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KINROSS GOLD ANNUAL REPORT 2016
18
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
For property, plant and equipment and other long-lived assets, a previously recognized impairment loss is reversed if there
has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was
recognized.
xiii. 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 in 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 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
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
For hedges that do not qualify for hedge accounting, gains or losses are recognized in the consolidated statement of
which they occur.
operations in the current period.
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Kinross Gold Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
(c)
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.
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;
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KINROSS GOLD ANNUAL REPORT 2016
19
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
• 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.
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. The treasury method, which assumes that outstanding
stock options, warrants, RSUs and RPSUs with an average exercise price below the market price of the underlying shares,
are exercised and the assumed proceeds are used to repurchase common shares of the Company at the average market
price of the common shares for the period.
4.
RECENT ACCOUNTING PRONOUNCEMENTS
Revenue from Contracts with Customers
In May 2014, the IASB issued IFRS 15 “Revenue from Contracts with Customers” (“IFRS 15”). IFRS 15 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”, and is effective for annual periods beginning on or after January 1, 2018. Early adoption is
permitted.
The standard contains a single model that applies to contracts with customers and two approaches to recognizing revenue:
at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether,
how much and when revenue is recognized. New estimates and judgmental thresholds have been introduced, which may
affect the amount and/or timing of revenue recognized.
The Company intends to adopt IFRS 15 for the annual period beginning January 1, 2018 using the modified retrospective
approach. Under this approach, the Company intends to recognize transitional adjustments in retained earnings on the date
of adoption (January 1, 2018), without restating the comparative financial statements on a retrospective basis.
The Company has made progress in its implementation of IFRS 15, however, has not yet determined the extent of the impact
of the new standard on its consolidated financial statements. The Company expects to report more detailed information,
including estimated quantitative financial impacts, if material, in its 2017 consolidated financial statements.
Financial instruments
In July 2014, the IASB issued the final version of IFRS 9 “Financial Instruments” (“IFRS 9”), which replaces IAS 39 “Financial
Instruments: Recognition and Measurement”. IFRS 9 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 and includes a
substantially reformed approach to hedge accounting. IFRS 9 includes a revised model for classifying financial assets, which
results in classification according to their contractual cash flow characteristics and the business models under which they
The Company intends to adopt IFRS 9 for the annual period beginning January 1, 2018 on a retrospective basis, using certain
available transitional provisions.
The Company has made progress in its implementation of IFRS 9, however, has not yet determined the extent of the impact
of the new standard on its consolidated financial statements. The Company expects to report more detailed information,
including estimated quantitative financial impacts, if material, in its 2017 consolidated financial statements.
are held.
Leases
In January 2016, the IASB issued IFRS 16 “Leases” (“IFRS 16”), which replaces IAS 17 “Leases”. The standard is effective for
annual periods beginning on or after January 1, 2019, and permits early adoption, provided IFRS 15 has been applied, or is
applied at the same date as IFRS 16.
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KINROSS GOLD ANNUAL REPORT 2016
20
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Kinross Gold Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
(Tabular amounts in millions of United States dollars)
• 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.
xvii. Income tax
recognized directly in equity.
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
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
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Kinross Gold Annual Report 2016
earnings (loss) attributable to common shareholders for the period by the weighted average number of common shares
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)
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.
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. The treasury method, which assumes that outstanding
Diluted earnings per share is calculated using the treasury method. The treasury method, which assumes that outstanding
stock options, warrants, RSUs and RPSUs with an average exercise price below the market price of the underlying shares,
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
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.
price of the common shares for the period.
4.
4.
RECENT ACCOUNTING PRONOUNCEMENTS
RECENT ACCOUNTING PRONOUNCEMENTS
Revenue from Contracts with Customers
Revenue from Contracts with Customers
In May 2014, the IASB issued IFRS 15 “Revenue from Contracts with Customers” (“IFRS 15”). IFRS 15 replaces IAS 11
In May 2014, the IASB issued IFRS 15 “Revenue from Contracts with Customers” (“IFRS 15”). IFRS 15 replaces IAS 11
“Construction Contracts”, IAS 18 “Revenue”, IFRIC 13 “Customer Loyalty Programmes”, IFRIC 15 “Agreements for the
“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
Construction of Real Estate”, IFRIC 18 “Transfer of Assets from Customers” and SIC 31 “Revenue – Barter Transactions
Involving Advertising Services”, and is effective for annual periods beginning on or after January 1, 2018. Early adoption is
Involving Advertising Services”, and is effective for annual periods beginning on or after January 1, 2018. Early adoption is
permitted.
permitted.
The standard contains a single model that applies to contracts with customers and two approaches to recognizing revenue:
The standard contains a single model that applies to contracts with customers and two approaches to recognizing revenue:
at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether,
at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether,
how much and when revenue is recognized. New estimates and judgmental thresholds have been introduced, which may
how much and when revenue is recognized. New estimates and judgmental thresholds have been introduced, which may
affect the amount and/or timing of revenue recognized.
affect the amount and/or timing of revenue recognized.
The Company intends to adopt IFRS 15 for the annual period beginning January 1, 2018 using the modified retrospective
The Company intends to adopt IFRS 15 for the annual period beginning January 1, 2018 using the modified retrospective
approach. Under this approach, the Company intends to recognize transitional adjustments in retained earnings on the date
approach. Under this approach, the Company intends to recognize transitional adjustments in retained earnings on the date
of adoption (January 1, 2018), without restating the comparative financial statements on a retrospective basis.
of adoption (January 1, 2018), without restating the comparative financial statements on a retrospective basis.
The Company has made progress in its implementation of IFRS 15, however, has not yet determined the extent of the impact
The Company has made progress in its implementation of IFRS 15, however, has not yet determined the extent of the impact
of the new standard on its consolidated financial statements. The Company expects to report more detailed information,
of the new standard on its consolidated financial statements. The Company expects to report more detailed information,
including estimated quantitative financial impacts, if material, in its 2017 consolidated financial statements.
including estimated quantitative financial impacts, if material, in its 2017 consolidated financial statements.
Financial instruments
Financial instruments
In July 2014, the IASB issued the final version of IFRS 9 “Financial Instruments” (“IFRS 9”), which replaces IAS 39 “Financial
In July 2014, the IASB issued the final version of IFRS 9 “Financial Instruments” (“IFRS 9”), which replaces IAS 39 “Financial
Instruments: Recognition and Measurement”. IFRS 9 is effective for annual periods beginning on or after January 1, 2018,
Instruments: Recognition and Measurement”. IFRS 9 is effective for annual periods beginning on or after January 1, 2018,
and permits early adoption.
and permits early adoption.
IFRS 9 provides a revised model for recognition, measurement and impairment of financial instruments and includes a
IFRS 9 provides a revised model for recognition, measurement and impairment of financial instruments and includes a
substantially reformed approach to hedge accounting. IFRS 9 includes a revised model for classifying financial assets, which
substantially reformed approach to hedge accounting. IFRS 9 includes a revised model for classifying financial assets, which
results in classification according to their contractual cash flow characteristics and the business models under which they
results in classification according to their contractual cash flow characteristics and the business models under which they
are held.
are held.
The Company intends to adopt IFRS 9 for the annual period beginning January 1, 2018 on a retrospective basis, using certain
The Company intends to adopt IFRS 9 for the annual period beginning January 1, 2018 on a retrospective basis, using certain
available transitional provisions.
available transitional provisions.
The Company has made progress in its implementation of IFRS 9, however, has not yet determined the extent of the impact
The Company has made progress in its implementation of IFRS 9, however, has not yet determined the extent of the impact
of the new standard on its consolidated financial statements. The Company expects to report more detailed information,
of the new standard on its consolidated financial statements. The Company expects to report more detailed information,
including estimated quantitative financial impacts, if material, in its 2017 consolidated financial statements.
including estimated quantitative financial impacts, if material, in its 2017 consolidated financial statements.
Leases
Leases
In January 2016, the IASB issued IFRS 16 “Leases” (“IFRS 16”), which replaces IAS 17 “Leases”. The standard is effective for
In January 2016, the IASB issued IFRS 16 “Leases” (“IFRS 16”), which replaces IAS 17 “Leases”. The standard is effective for
annual periods beginning on or after January 1, 2019, and permits early adoption, provided IFRS 15 has been applied, or is
annual periods beginning on or after January 1, 2019, and permits early adoption, provided IFRS 15 has been applied, or is
applied at the same date as IFRS 16.
applied at the same date as IFRS 16.
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Kinross Gold Annual Report 2016
Kinross Gold Annual Report 2016
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KINROSS GOLD ANNUAL REPORT 2016
21
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
IFRS 16 requires lessees to recognize assets and liabilities for most leases on its balance sheet, as well as corresponding
depreciation and interest expense.
The Company expects to adopt IFRS 16 for the annual period beginning January 1, 2019. The extent of the impact of adoption
of the standard has not yet been determined.
Foreign Currency Transactions and Advance Consideration
In December 2016, the IASB issued IFRIC Interpretation 22 “Foreign Currency Transactions and Advance Consideration”
(“IFRIC 22”). IFRIC 22 is applicable for annual periods beginning on or after January 1, 2018, and permits early adoption.
IFRIC 22 clarifies which date should be used for translation when a foreign currency transaction involves an advance payment
or receipt. The Interpretation clarifies that the date of the transaction for the purpose of determining the exchange rate to
use on initial recognition of the related asset, expense or income (or part of it) is the date on which an entity initially
recognizes the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration.
The Company intends to adopt IFRIC 22 in its financial statements for the annual period beginning on January 1, 2018. The
extent of the impact of adoption of IFRIC 22 has not yet been determined.
5.
SIGNIFICANT JUDGMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the Company’s financial statements in conformity with IFRS requires management to make judgments,
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Estimates and assumptions are continually evaluated and are based on management’s experience and
other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual
results could differ from these estimates.
i.
Significant Judgments in Applying Accounting Policies
The areas which require management to make significant judgments in applying the Company’s accounting policies in
determining carrying values include, but are not limited to:
(a) Mineral Reserves and Mineral Resources
The information relating to the geological data on the size, depth and shape of the ore body requires complex geological
judgments to interpret the data. Changes in the proven and probable mineral reserves or measured and indicated and
inferred mineral resources estimates may impact the carrying value of property, plant and equipment, goodwill, reclamation
and remediation obligations, recognition of deferred tax amounts and depreciation, depletion and amortization.
(b) Depreciation, depletion and amortization
Significant judgment is involved in the determination of useful 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.
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KINROSS GOLD ANNUAL REPORT 2016
22
IFRS 16 requires lessees to recognize assets and liabilities for most leases on its balance sheet, as well as corresponding
depreciation and interest expense.
The Company expects to adopt IFRS 16 for the annual period beginning January 1, 2019. The extent of the impact of adoption
of the standard has not yet been determined.
Foreign Currency Transactions and Advance Consideration
In December 2016, the IASB issued IFRIC Interpretation 22 “Foreign Currency Transactions and Advance Consideration”
(“IFRIC 22”). IFRIC 22 is applicable for annual periods beginning on or after January 1, 2018, and permits early adoption.
IFRIC 22 clarifies which date should be used for translation when a foreign currency transaction involves an advance payment
or receipt. The Interpretation clarifies that the date of the transaction for the purpose of determining the exchange rate to
use on initial recognition of the related asset, expense or income (or part of it) is the date on which an entity initially
recognizes the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration.
The Company intends to adopt IFRIC 22 in its financial statements for the annual period beginning on January 1, 2018. The
extent of the impact of adoption of IFRIC 22 has not yet been determined.
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.
The areas which require management to make significant judgments in applying the Company’s accounting policies in
determining carrying values include, but are not limited to:
(a) Mineral Reserves and Mineral Resources
The information relating to the geological data on the size, depth and shape of the ore body requires complex geological
judgments to interpret the data. Changes in the proven and probable mineral reserves or measured and indicated and
inferred mineral resources estimates may impact the carrying value of property, plant and equipment, goodwill, reclamation
and remediation obligations, recognition of deferred tax amounts and depreciation, depletion and amortization.
(b) Depreciation, depletion and amortization
Significant judgment is involved in the determination of useful 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
ii.
Significant Accounting Estimates and Assumptions
The areas which require management to make significant estimates and assumptions in determining carrying values include,
but are not limited to:
(a) Mineral Reserves and Mineral Resources
Proven and probable mineral reserves are the economically mineable parts of the Company’s measured and indicated
mineral resources demonstrated by at least a preliminary feasibility study. The Company estimates its proven and probable
mineral reserves and measured and indicated and inferred mineral resources based on information compiled by
appropriately qualified persons. The estimation of future cash flows related to proven and probable mineral reserves is
based upon factors such as estimates of 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.
(b) Purchase Price Allocation
Applying the acquisition method to business combinations requires each identifiable asset and liability to be measured at its
acquisition-date fair value. The excess, if any, of the fair value of consideration over the fair value of the net identifiable
assets acquired is recognized as goodwill. The determination of the acquisition-date fair values often requires management
to make assumptions and estimates about future events. The assumptions and estimates relating to determining the fair
value of property, plant and equipment acquired generally require a high degree of judgment, and include estimates of
mineral reserves acquired, future metal prices and discount rates. Changes in any of the assumptions or estimates used in
determining the fair value of acquired assets and liabilities could affect the amounts assigned to assets, liabilities and
goodwill in the purchase price allocation.
i.
Significant Judgments in Applying Accounting Policies
(c) Depreciation, depletion and amortization
Plants and other facilities used directly in mining activities are depreciated using the UOP method over a period not to exceed
the estimated life of the ore body based on recoverable ounces to be mined from proven and probable reserves. Mobile and
other equipment is depreciated, net of residual value, on a straight-line basis, over the useful life of the equipment but does
not exceed the related estimated life of the mine based on proven and probable reserves.
The calculation of the UOP rate, and therefore the annual depreciation, depletion and amortization expense, could be
materially affected by changes in the underlying estimates. Changes in estimates can be the result of actual future
production differing from current forecasts of future production, expansion of mineral reserves through exploration
activities, differences between estimated and actual costs of mining and differences in gold price used in the estimation of
mineral reserves.
(d)
Impairment of goodwill and long-lived 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, 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.
(e)
Inventories
Expenditures incurred, and depreciation, depletion and amortization of assets used in mining and processing activities are
deferred and accumulated as the cost of ore in stockpiles, ore on leach pads, in-process and finished metal inventories.
These deferred amounts are carried at the lower of average cost or NRV. Write-downs 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
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Kinross Gold Annual Report 2016
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23
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
23
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
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,
forecasted usage of supplies inventory, proven and probable reserves estimates, gold and silver prices, and the ultimate
estimated recovery for ore on leach pads. There can be no assurance that actual results will not differ significantly from
estimates used in the determination of the carrying value of inventories.
(f) Provision for reclamation and remediation
The Company assesses its provision for reclamation and remediation on an annual basis or when new material information
becomes available. Mining and exploration activities are subject to various laws and regulations governing the protection
of the environment. In general, these laws and regulations are continually changing and the Company has made, and intends
to make in the future, expenditures to comply with such laws and regulations. Accounting for reclamation and remediation
obligations requires management to make estimates of the future costs the Company will incur to complete the reclamation
and remediation work required to comply with existing laws and regulations at each mining operation. Actual costs incurred
may differ from those amounts estimated. Also, future changes to environmental laws and regulations could increase the
extent of reclamation and remediation work required to be performed by the Company. Increases in future costs could
materially impact the amounts charged to operations for reclamation and remediation. The provision represents
management’s best estimate of the present value of the future reclamation and remediation obligation. The actual future
expenditures may differ from the amounts currently provided.
(g) Deferred taxes
The Company recognizes the deferred tax benefit related to deferred income and resource tax assets to the extent recovery
is probable. Assessing the recoverability of deferred income tax assets requires management to make estimates of future
taxable profit. To the extent that future cash flows and taxable profit differ significantly from estimates, the ability of the
Company to realize the net deferred tax assets recorded at the balance sheet date could be impacted. In addition, future
changes in tax laws could limit the ability of the Company to obtain tax deductions in future periods from deferred income
and resource tax assets.
(h) Contingencies
Due to the size, complexity and nature of the Company’s operations, various legal and tax matters are outstanding from time
to time. Contingencies can be possible assets or liabilities arising from past events which, by their nature, will only be
resolved when one or more future events not wholly within our control occur or fail to occur. The assessment of such
contingencies involves the use of significant judgment and estimates. In the event that management’s estimate of the future
resolution of these matters changes, the Company will recognize the effects of the changes in its consolidated financial
statements on the date such changes occur.
FS
24
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
24
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
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,
forecasted usage of supplies inventory, proven and probable reserves estimates, gold and silver prices, and the ultimate
estimated recovery for ore on leach pads. There can be no assurance that actual results will not differ significantly from
estimates used in the determination of the carrying value of inventories.
(f) Provision for reclamation and remediation
The Company assesses its provision for reclamation and remediation on an annual basis or when new material information
becomes available. Mining and exploration activities are subject to various laws and regulations governing the protection
of the environment. In general, these laws and regulations are continually changing and the Company has made, and intends
to make in the future, expenditures to comply with such laws and regulations. Accounting for reclamation and remediation
obligations requires management to make estimates of the future costs the Company will incur to complete the reclamation
and remediation work required to comply with existing laws and regulations at each mining operation. Actual costs incurred
may differ from those amounts estimated. Also, future changes to environmental laws and regulations could increase the
extent of reclamation and remediation work required to be performed by the Company. Increases in future costs could
materially impact the amounts charged to operations for reclamation and remediation. The provision represents
management’s best estimate of the present value of the future reclamation and remediation obligation. The actual future
expenditures may differ from the amounts currently provided.
The Company recognizes the deferred tax benefit related to deferred income and resource tax assets to the extent recovery
is probable. Assessing the recoverability of deferred income tax assets requires management to make estimates of future
taxable profit. To the extent that future cash flows and taxable profit differ significantly from estimates, the ability of the
Company to realize the net deferred tax assets recorded at the balance sheet date could be impacted. In addition, future
changes in tax laws could limit the ability of the Company to obtain tax deductions in future periods from deferred income
(g) Deferred taxes
and resource tax assets.
(h) Contingencies
Due to the size, complexity and nature of the Company’s operations, various legal and tax matters are outstanding from time
to time. Contingencies can be possible assets or liabilities arising from past events which, by their nature, will only be
resolved when one or more future events not wholly within our control occur or fail to occur. The assessment of such
contingencies involves the use of significant judgment and estimates. In the event that management’s estimate of the future
resolution of these matters changes, the Company will recognize the effects of the changes in its consolidated financial
statements on the date such changes occur.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
6.
ACQUISITION
Acquisition of Bald Mountain and remaining 50% interest in Round Mountain
On January 11, 2016, the Company completed the acquisition of 100% of Bald Mountain, which includes a large associated
land package, and the remaining 50% interest in Round Mountain for $610.0 million in cash, subject to a working capital
adjustment, which reduced the purchase price by $22.0 million to $588.0 million. In addition to the purchase price, Barrick
will receive a contingent 2% net smelter return royalty on future gold production from Kinross’ 100%-owned Bald Mountain
lands that will come into effect following the post-closing production of 10 million ounces from such lands. Approximately
40% of the Bald Mountain land package is subject to a 50/50 exploration joint venture between Kinross and Barrick, with
Kinross as the operator. Transaction costs associated with the acquisition totaling $7.8 million were expensed and included
within other operating expense.
The acquisition, which was accounted for as a business combination as at January 11, 2016, represents a strategic fit with
the Company’s open-pit heap leach skill set and existing portfolio of operating assets, and enhances the production profile
in the United States.
In finalizing the purchase price allocation during the second quarter of 2016, the Company adjusted the preliminary
allocation as indicated below. As the Company gained control of Round Mountain in the transaction, in accordance with
IFRS, the assets and liabilities set out below represent 100% of the fair value of Round Mountain in addition to 100% of Bald
Mountain.
Preliminary
Adjustments
Final
Purchase Price Allocation
Net working capital
Property, plant and equipment (including mineral interests)
Other long-term assets and investment in joint venture
Deferred tax liabilities
Provisions and other long-term liabilities
Net assets
Less: Fair value of previously held interest in Round Mountain
Cash consideration
$
182.8
725.9
19.7
-
(178.4)
750.0
(140.0)
610.0
$
$
(90.0)
91.6
(0.3)
(16.2)
(7.1)
(22.0)
-
(22.0)
92.8
817.5
19.4
(16.2)
(185.5)
728.0
(140.0)
588.0
$
$
$
$
$
$
As a result of reflecting the final purchase price adjustments retrospectively, the interim financial statements for the three
months ended March 31, 2016 were recast.
For the three months ended March 31, 2016, production cost of sales, depreciation, depletion, and amortization, other
income (expense), and income tax expense decreased by $4.6 million, $14.6 million, $1.4 million, and $28.3 million
respectively. As a result, net loss attributable to common shareholders and accumulated deficit decreased by $48.9 million.
As at March 31, 2016, net working capital and other long-term assets decreased by $61.8 million and $4.9 million,
respectively; whereas, property, plant and equipment, deferred tax assets, deferred tax liabilities, provisions, and
investment in joint ventures increased by $100.1 million, $25.2 million, $12.1 million, $2.9 million and $5.3 million,
respectively.
FS
24
Kinross Gold Annual Report 2016
FS
25
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
7.
CONSOLIDATED FINANCIAL STATEMENT DETAILS
Consolidated Balance Sheets
i.
Cash and cash equivalents:
Cash on hand and balances with banks
Short-term deposits
Restricted cash:
Restricted cash (a)
December 31,
2016
$
December 31,
2015
$
514.0
313.0
827.0
460.3
583.6
1,043.9
$
$
December 31,
2016
December 31,
2015
$
11.6
$
10.5
(a) Restricted cash relates to loan escrow judicial deposits and environmental indemnities related to Chirano and certain other sites.
ii.
Accounts receivable and other assets:
December 31,
December 31,
2016
2015
$
$
20.1
21.9
59.3
11.4
14.6
127.3
4.4
17.0
53.4
11.8
21.6
108.2
$
$
Trade receivables
Prepaid expenses
VAT receivable
Deposits
Other
FS
26
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
26
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
7.
CONSOLIDATED FINANCIAL STATEMENT DETAILS
Consolidated Balance Sheets
i.
Cash and cash equivalents:
Cash on hand and balances with banks
Short-term deposits
Restricted cash:
Restricted cash (a)
Trade receivables
Prepaid expenses
VAT receivable
Deposits
Other
December 31,
December 31,
2016
2015
$
514.0
$
460.3
313.0
583.6
$
827.0
$
1,043.9
December 31,
December 31,
2016
2015
$
11.6
$
10.5
December 31,
December 31,
2016
2015
$
20.1
$
4.4
21.9
59.3
11.4
14.6
17.0
53.4
11.8
21.6
$
127.3
$
108.2
(a) Restricted cash relates to loan escrow judicial deposits and environmental indemnities related to Chirano and certain other sites.
ii.
Accounts receivable and other assets:
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
iii.
Inventories:
Ore in stockpiles (a)
Ore on leach pads (b)
In-process
Finished metal
Materials and supplies
Long-term portion of ore in stockpiles and ore on leach pads (a),(b)
December 31,
2016
December 31,
2015
$
242.3
$
195.7
301.6
78.6
49.1
534.1
1,205.7
250.0
85.5
24.4
607.2
1,162.8
$
(218.9)
986.8
$
(157.6)
1,005.2
(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 other long-term assets on the consolidated balance sheet. See Note 7 vii.
(b) Ore on leach pads relates to the Company's Tasiast, Fort Knox, Round Mountain and Bald Mountain mines. Based on current mine plans,
the Company expects to place the last tonne of ore on its leach pads at Tasiast in 2017, Fort Knox in 2020, Round Mountain in 2019 and
Bald Mountain in 2023. Ore on leach pads includes material not scheduled for processing within the next twelve months which is included
in other long-term assets on the consolidated balance sheet. See Note 7 vii.
(c) During the years ended December 31, 2016 and 2015, inventory impairment charges were recorded within cost of sales to reduce the
carrying value of inventory to its net realizable value. See Note 8 ii.
FS
26
Kinross Gold Annual Report 2016
FS
27
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
27
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
iv.
Property, plant and equipment:
Cost
Balance at January 1, 2016
Additions
Acquisitions (b)
Book value of Round Mountain prior to
remeasurement on acquisition
Capitalized interest
Disposals
Other
Balance at December 31, 2016
Accumulated depreciation, depletion,
amortization and impairment
Balance at January 1, 2016
Depreciation, depletion and amortization
Impairment charge (c)
Book value of Round Mountain prior to
remeasurement on acquisition
Disposals
Other
Balance at December 31, 2016
Mineral Interests (a)
Land, plant and
equipment
Development and
operating
properties
Pre-development
properties
$
7,332.2
445.6
$
7,651.4
207.7
417.4
400.1
(359.4)
10.4
(57.8)
2.9
7,791.3
(294.7)
4.8
(0.7)
1.6
7,970.2
$
164.3
-
-
-
-
-
-
164.3
Total
$
15,147.9
653.3
817.5
(654.1)
15.2
(58.5)
4.5
15,925.8
$
(4,835.1)
(528.1)
$
(5,639.7)
(399.4)
$
(79.4)
-
$
(10,554.2)
(927.5)
(68.3)
-
305.4
50.4
(0.7)
(5,076.4)
187.6
-
(0.9)
(5,852.4)
-
-
-
-
(79.4)
(68.3)
493.0
50.4
(1.6)
(11,008.2)
Net book value
$
2,714.9
$
2,117.8
$
84.9
$
4,917.6
Amount included above as at December 31, 2016:
Assets under construction
Assets not being depreciated (d)
$
373.5
$
119.4
$
-
$
492.9
$
545.3
$
322.3
$
84.9
$
952.5
(a) At December 31, 2016, the significant development and operating properties include Fort Knox, Round Mountain, Bald Mountain,
Paracatu, Kupol, Tasiast, Chirano and Lobo-Marte. Included in pre-development properties are White Gold and other exploration
properties.
(b) Bald Mountain and the remaining 50% interest in Round Mountain were acquired on January 11, 2016. See Note 6.
(c) At September 30, 2016, an impairment charge was recorded against property, plant and equipment at Maricunga. See Note 8 i.
(d) Assets not being depreciated relate to land, capitalized exploration and evaluation costs, assets under construction, which relate to
expansion projects, and other assets that are in various stages of being readied for use.
FS
28
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
28
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
iv.
Property, plant and equipment:
Mineral Interests (a)
Development and
Land, plant and
equipment
operating
Pre-development
properties
properties
Balance at January 1, 2016
$
7,332.2
$
7,651.4
$
164.3
$
15,147.9
Cost
Additions
Acquisitions (b)
Book value of Round Mountain prior to
remeasurement on acquisition
Capitalized interest
Disposals
Other
Balance at December 31, 2016
Accumulated depreciation, depletion,
amortization and impairment
Balance at January 1, 2016
Depreciation, depletion and amortization
Impairment charge (c)
Book value of Round Mountain prior to
remeasurement on acquisition
Disposals
Other
Balance at December 31, 2016
445.6
417.4
(359.4)
10.4
(57.8)
2.9
7,791.3
(528.1)
(68.3)
305.4
50.4
(0.7)
(5,076.4)
207.7
400.1
(294.7)
4.8
(0.7)
1.6
7,970.2
(399.4)
-
-
187.6
(0.9)
(5,852.4)
164.3
15,925.8
Total
653.3
817.5
(654.1)
15.2
(58.5)
4.5
(927.5)
(68.3)
493.0
50.4
(1.6)
-
-
-
-
-
-
-
-
-
-
-
$
(4,835.1)
$
(5,639.7)
$
(79.4)
$
(10,554.2)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
Cost
Balance at January 1, 2015
Additions
Capitalized interest
Disposals
Other
Balance at December 31, 2015
Accumulated depreciation, depletion,
amortization and impairment
Balance at January 1, 2015
Depreciation, depletion and amortization
Impairment charge (b)
Disposals
Other
Balance at December 31, 2015
Mineral Interests(a)
Land, plant and
equipment
Development
and operating
properties
Pre-development
properties
Total
$
7,020.1
349.3
16.9
(71.0)
16.9
7,332.2
$
7,462.2
175.9
23.6
(3.6)
(6.7)
7,651.4
$
168.8
-
-
(4.7)
0.2
164.3
$
14,651.1
525.2
40.5
(79.3)
10.4
15,147.9
$
(4,191.8)
$
(4,970.7)
$
(79.2)
$
(9,241.7)
(484.5)
(220.8)
59.9
2.1
(4,835.1)
(446.4)
(218.7)
-
(3.9)
(5,639.7)
-
-
-
(0.2)
(79.4)
(930.9)
(439.5)
59.9
(2.0)
(10,554.2)
Net book value
$
2,497.1
$
2,011.7
$
84.9
$
4,593.7
Amount included above as at December 31,
2015:
Net book value
$
2,714.9
$
2,117.8
$
84.9
$
4,917.6
(79.4)
(11,008.2)
Assets under construction
Assets not being depreciated (c)
$
201.9
$
121.2
$
-
$
323.1
$
361.1
$
322.1
$
84.9
$
768.1
Amount included above as at December 31, 2016:
Assets under construction
Assets not being depreciated (d)
$
373.5
$
119.4
$
-
$
492.9
$
545.3
$
322.3
$
84.9
$
952.5
(a) At December 31, 2015, the significant development and operating properties include Fort Knox, 50% owned Round Mountain, Paracatu,
Maricunga, Kupol, Tasiast, Chirano and Lobo-Marte. Included in pre-development properties are White Gold and other exploration
properties.
(b) At December 31, 2015, an impairment charge was recorded against property, plant and equipment at Fort Knox, 50% owned Round
Mountain, and Tasiast. See Note 8 i.
(a) At December 31, 2016, the significant development and operating properties include Fort Knox, Round Mountain, Bald Mountain,
Paracatu, Kupol, Tasiast, Chirano and Lobo-Marte. Included in pre-development properties are White Gold and other exploration
(c) Assets not being depreciated relate to land, capitalized exploration and evaluation costs, assets under construction, which relate to
expansion projects, and other assets that are in various stages of being readied for use.
properties.
(b) Bald Mountain and the remaining 50% interest in Round Mountain were acquired on January 11, 2016. See Note 6.
(c) At September 30, 2016, an impairment charge was recorded against property, plant and equipment at Maricunga. See Note 8 i.
(d) Assets not being depreciated relate to land, capitalized exploration and evaluation costs, assets under construction, which relate to
expansion projects, and other assets that are in various stages of being readied for use.
Capitalized interest primarily relates to capital expenditures at Fort Knox, Round Mountain, Kupol, Paracatu, and Tasiast and
had a weighted average borrowing rate of 4.9% and 4.7% during the years ended December 31, 2016 and 2015, respectively.
At December 31, 2016, $216.8 million of exploration and evaluation (“E&E”) assets were included in mineral interests
(December 31, 2015 – $215.6 million). During the year ended December 31, 2016, the Company acquired $nil E&E assets,
disposed of $nil E&E assets and transferred $nil E&E assets to capitalized development (year ended December 31, 2015 –
$nil, $4.0 million and $nil, respectively). During the year ended December 31, 2016, the Company capitalized $1.2 million
and expensed $6.8 million of E&E costs, respectively (year ended December 31, 2015 – $11.7 million and $8.4 million,
respectively). Expensed E&E costs are included in operating cash flows.
FS
28
Kinross Gold Annual Report 2016
FS
29
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
29
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(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:
Kupol
Other
Operations
Total
Cost
Balance at January 1, 2016
Acquisitions
Disposals
Balance at December 31, 2016
Accumulated impairment
Balance at January 1, 2016
Impairment loss
Disposals
Balance at December 31, 2016
$ 827.2 $ 3.9 $ 831.1
-
-
-
-
-
-
$ 827.2 $ 3.9 $ 831.1
$ (668.4)
-
-
$ - $ (668.4)
- -
- -
$ (668.4)
$ - $ (668.4)
Carrying amount at December 31, 2016
$ 158.8 $ 3.9 $ 162.7
Cost
Balance at January 1, 2015
Acquisitions
Disposals
Balance at December 31, 2015
Accumulated impairment
Balance at January 1, 2015
Impairment loss
Disposals
Balance at December 31, 2015
Kupol
Other
Operations
Total
$ 827.2 $ 3.9 $ 831.1
- - -
- - -
$ 827.2 $ 3.9 $ 831.1
$ (668.4)
$ - $ (668.4)
- - -
- - -
$ (668.4)
$ - $ (668.4)
Carrying amount at December 31, 2015
$ 158.8 $ 3.9 $ 162.7
vi.
Long-term investments:
Unrealized gains and losses on investments classified as available-for-sale are recorded in AOCI as follows:
December 31, 2016
December 31, 2015
$
$
Fair value
110.2
32.7
142.9
Gains (losses) in
AOCI
30.3
(6.7)
23.6
Fair value
Gains (losses) in
AOCI
$ 10.4 $ 1.4
72.7 (20.1)
(18.7)
$
$
83.1
$
$
Investments in an unrealized gain position
Investments in an unrealized loss position
FS
30
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
30
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
The goodwill allocated to the Company's CGUs and included in the respective operating segment assets is shown in the table
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
vii.
Other long-term assets:
Long-term portion of ore in stockpiles and ore on leach pads (a)
Deferred charges, net of amortization
Long-term receivables
Advances for the purchase of capital equipment
Other
v.
Goodwill:
below:
Cost
Balance at January 1, 2016
Acquisitions
Disposals
Balance at December 31, 2016
Accumulated impairment
Balance at January 1, 2016
Impairment loss
Disposals
Balance at December 31, 2016
Cost
Balance at January 1, 2015
Acquisitions
Disposals
Balance at December 31, 2015
Accumulated impairment
Balance at January 1, 2015
Impairment loss
Disposals
Balance at December 31, 2015
Kupol
Operations
Total
Other
$ 827.2 $ 3.9 $ 831.1
-
-
-
-
$ 827.2 $ 3.9 $ 831.1
$ (668.4)
$ - $ (668.4)
- -
- -
$ (668.4)
$ - $ (668.4)
-
-
-
-
Kupol
Operations
Total
Other
$ 827.2 $ 3.9 $ 831.1
- - -
- - -
$ 827.2 $ 3.9 $ 831.1
$ (668.4)
$ - $ (668.4)
- - -
- - -
$ (668.4)
$ - $ (668.4)
Carrying amount at December 31, 2016
$ 158.8 $ 3.9 $ 162.7
December 31,
2016
December 31,
2015
$
$
218.9
8.6
147.2
2.8
33.8
411.3
86.8
251.4
126.6
464.8
(a) Ore in stockpiles and on leach pads represents low-grade material not scheduled for processing within the next twelve months. At
December 31, 2016, long-term ore in stockpiles was at the Company’s Fort Knox, Kupol, Tasiast, Chirano and Paracatu mines, and long-
term ore on leach pads was at the Company’s Fort Knox and Round Mountain mines.
$
$
viii.
Accounts payable and accrued liabilities:
Trade payables
Accrued liabilities
Employee related accrued liabilities
ix.
Accumulated other comprehensive income (loss):
Long-term
Investments
December 31,
2016
December 31,
2015
$
$
$
$
$
$
$
Derivative
Contracts
(47.9)
43.5
(8.2)
(12.6)
1.8
(20.5)
-
(18.7)
$
$
$
42.3
-
37.6
(9.5)
79.9
(9.5)
$
23.6
$
15.5
$
39.1
157.6
7.9
161.7
6.7
36.3
370.2
75.2
206.2
98.2
379.6
Total
(46.1)
23.0
(8.2)
(31.3)
Carrying amount at December 31, 2015
$ 158.8 $ 3.9 $ 162.7
vi.
Long-term investments:
Unrealized gains and losses on investments classified as available-for-sale are recorded in AOCI as follows:
December 31, 2016
December 31, 2015
Gains (losses) in
Gains (losses) in
Fair value
AOCI
Fair value
AOCI
Investments in an unrealized gain position
$
110.2
$
30.3
$ 10.4 $ 1.4
Investments in an unrealized loss position
32.7
(6.7)
72.7 (20.1)
$
142.9
$
23.6
$
83.1
$
(18.7)
Balance at December 31, 2014
Other comprehensive income (loss) before tax
Tax
Balance at December 31, 2015
Other comprehensive income before tax
Tax
Balance at December 31, 2016
FS
30
Kinross Gold Annual Report 2016
FS
31
Kinross Gold Annual Report 2016
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KINROSS GOLD ANNUAL REPORT 2016
31
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
Consolidated Statements of Operations
x.
Other operating expense:
Other operating expense (a)
Years ended December 31,
2016
2015
$
$
209.3
209.3
$
$
76.2
76.2
(a) Other operating expense includes the write-off of value-added tax (“VAT”) receivables and settlement of VAT disputes due to
regulatory changes in Brazil and costs related to the suspension of mining activities at Maricunga and Tasiast, in addition to care and
maintenance and other costs.
xi.
Other income (expense) – net:
Gains (losses) on sale of other assets - net
Impairment of investments
Foreign exchange losses
Net non-hedge derivative losses
Other (a)
Years ended December 31,
2016
2015
$
9.7
-
(6.3)
(0.4)
$
(16.2)
(7.6)
(30.6)
(3.4)
$
19.5
22.5
$
37.5
(20.3)
(a) During the year ended December 31, 2016, the Company received $13.0 million in insurance recoveries (year ended December 31,
2015 – $31.7 million).
xii.
Finance expense:
Accretion on reclamation and remediation obligations
Interest expense, including accretion on debt (a)
Years ended December 31,
2016
2015
$
(34.2)
$
(27.8)
$
(100.4)
(134.6)
$
(68.2)
(96.0)
(a) During the years ended December 31, 2016 and 2015, $15.2 million and $40.5 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, 2016 was $95.3 million (year ended
December 31, 2015 - $91.5 million).
FS
32
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
32
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
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:
Years ended December 31,
2016
2015
Salaries, short-term incentives, and other benefits
Share-based payments
Other
$
$
665.7
26.8
19.2
711.7
611.5
20.8
15.5
647.8
$
$
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
Consolidated Statements of Operations
x.
Other operating expense:
Other operating expense (a)
(a) Other operating expense includes the write-off of value-added tax (“VAT”) receivables and settlement of VAT disputes due to
regulatory changes in Brazil and costs related to the suspension of mining activities at Maricunga and Tasiast, in addition to care and
maintenance and other costs.
xi.
Other income (expense) – net:
Gains (losses) on sale of other assets - net
$
9.7
$
(16.2)
Years ended December 31,
2016
2015
$
209.3
$
76.2
$
209.3
$
76.2
Years ended December 31,
2016
2015
-
(6.3)
(0.4)
19.5
(7.6)
(30.6)
(3.4)
37.5
$
22.5
$
(20.3)
(a) During the year ended December 31, 2016, the Company received $13.0 million in insurance recoveries (year ended December 31,
Impairment of investments
Foreign exchange losses
Net non-hedge derivative losses
Other (a)
2015 – $31.7 million).
xii.
Finance expense:
Accretion on reclamation and remediation obligations
$
(34.2)
$
(27.8)
Interest expense, including accretion on debt (a)
Years ended December 31,
2016
2015
(100.4)
(68.2)
$
(134.6)
$
(96.0)
(a) During the years ended December 31, 2016 and 2015, $15.2 million and $40.5 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, 2016 was $95.3 million (year ended
December 31, 2015 - $91.5 million).
FS
32
Kinross Gold Annual Report 2016
FS
33
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
33
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
8.
IMPAIRMENT
Property, plant and equipment (i)
Inventory and other assets (ii)
i.
Property, plant and equipment
Years ended December 31,
2016
2015
$
$
68.3
71.3
139.6
439.5
259.5
699.0
$
$
As at September 30, 2016, the Company identified the suspension of mining at Maricunga as an indication of impairment
and performed an impairment assessment to determine the recoverable amount of the Maricunga CGU. The recoverable
amount was determined by considering observable market values for comparable assets. As the recoverable amount was
lower than the carrying amount, an impairment charge of $68.3 million was recorded against property, plant and equipment,
resulting in a carrying amount of $(10.9) million for the Maricunga CGU. The carrying amount was negative as a result of
reclamation and remediation obligations. No impairment charges were recorded as a result of the annual assessment of the
carrying value of the Company’s CGUs at December 31, 2016.
At December 31, 2015, upon completion of the annual assessment of the carrying values of its CGUs, the Company recorded
an impairment charge of $439.5 million as a result of decreases in the Company’s short-term and long-term gold price
estimates. The impairment charge was entirely related to property, plant and equipment and included a charge of $249.5
million at Fort Knox, $147.0 million at Tasiast, and $43.0 million at Round Mountain. As at December 31, 2015, the carrying
amounts of Tasiast, Fort Knox, and Round Mountain were $827.9 million, $349.1 million, and $140.0 million, respectively.
The significant estimates and assumptions used in the impairment assessment are disclosed in Note 3 to the financial
statements.
Impairment charges recognized against property, plant and equipment may be reversed if there are changes in the
assumptions or estimates used in determining the recoverable amount of a CGU which indicate that a previously recognized
impairment loss may no longer exist or may have decreased.
(cid:60)(cid:286)(cid:455) (cid:258)(cid:400)(cid:400)(cid:437)(cid:373)(cid:393)(cid:410)(cid:349)(cid:381)(cid:374)(cid:400) (cid:258)(cid:374)(cid:282) (cid:400)(cid:286)(cid:374)(cid:400)(cid:349)(cid:410)(cid:349)(cid:448)(cid:349)(cid:410)(cid:455)
The significant estimates and assumptions used in the Company’s annual impairment assessments are disclosed in Note 3
to the financial statements. The Company performed a sensitivity analysis on all key assumptions and determined that no
reasonably possible change in any of the key assumptions would cause the carrying value of any CGU carrying goodwill to
exceed its recoverable amount.
ii.
Inventory and other assets
During 2016, the Company recognized impairment charges of $71.3 million related to metals and supplies inventory at
Maricunga, resulting from the suspension of mining in the third quarter of 2016.
During 2015, the Company recognized impairment charges of $259.5 million related to inventory and other assets. The
inventory impairment charge of $244.8 million was recorded to reduce the carrying value of certain metal and supplies
inventory to net realizable value.
FS
34
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
34
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
8.
IMPAIRMENT
Property, plant and equipment (i)
Inventory and other assets (ii)
i.
Property, plant and equipment
Years ended December 31,
2016
2015
$
68.3
$
439.5
71.3
259.5
$
139.6
$
699.0
As at September 30, 2016, the Company identified the suspension of mining at Maricunga as an indication of impairment
and performed an impairment assessment to determine the recoverable amount of the Maricunga CGU. The recoverable
amount was determined by considering observable market values for comparable assets. As the recoverable amount was
lower than the carrying amount, an impairment charge of $68.3 million was recorded against property, plant and equipment,
resulting in a carrying amount of $(10.9) million for the Maricunga CGU. The carrying amount was negative as a result of
reclamation and remediation obligations. No impairment charges were recorded as a result of the annual assessment of the
carrying value of the Company’s CGUs at December 31, 2016.
At December 31, 2015, upon completion of the annual assessment of the carrying values of its CGUs, the Company recorded
an impairment charge of $439.5 million as a result of decreases in the Company’s short-term and long-term gold price
estimates. The impairment charge was entirely related to property, plant and equipment and included a charge of $249.5
million at Fort Knox, $147.0 million at Tasiast, and $43.0 million at Round Mountain. As at December 31, 2015, the carrying
amounts of Tasiast, Fort Knox, and Round Mountain were $827.9 million, $349.1 million, and $140.0 million, respectively.
The significant estimates and assumptions used in the impairment assessment are disclosed in Note 3 to the financial
statements.
Impairment charges recognized against property, plant and equipment may be reversed if there are changes in the
assumptions or estimates used in determining the recoverable amount of a CGU which indicate that a previously recognized
impairment loss may no longer exist or may have decreased.
The significant estimates and assumptions used in the Company’s annual impairment assessments are disclosed in Note 3
to the financial statements. The Company performed a sensitivity analysis on all key assumptions and determined that no
reasonably possible change in any of the key assumptions would cause the carrying value of any CGU carrying goodwill to
(cid:60)(cid:286)(cid:455) (cid:258)(cid:400)(cid:400)(cid:437)(cid:373)(cid:393)(cid:410)(cid:349)(cid:381)(cid:374)(cid:400) (cid:258)(cid:374)(cid:282) (cid:400)(cid:286)(cid:374)(cid:400)(cid:349)(cid:410)(cid:349)(cid:448)(cid:349)(cid:410)(cid:455)
exceed its recoverable amount.
ii.
Inventory and other assets
During 2016, the Company recognized impairment charges of $71.3 million related to metals and supplies inventory at
Maricunga, resulting from the suspension of mining in the third quarter of 2016.
During 2015, the Company recognized impairment charges of $259.5 million related to inventory and other assets. The
inventory impairment charge of $244.8 million was recorded to reduce the carrying value of certain metal and supplies
inventory to net realizable value.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
9.
INVESTMENTS IN ASSOCIATE AND JOINT VENTURES
The investments in associate and joint ventures are accounted for under the equity method and had the following carrying
values:
December 31,
2016
December 31,
2015
Cerro Casale
Puren
Bald Mountain Exploration Joint Venture (a)
$
$
139.5
18.6
5.5
163.6
$
138.3
18.8
-
$
157.1
(a) As part of the Company’s acquisition of Bald Mountain on January 11, 2016, it acquired an associated land package, of which
approximately 40% is subject to a 50/50 joint venture between the Company and Barrick. See Note 6.
There are no publicly quoted market prices for Cerro Casale, Puren, or the Bald Mountain Exploration Joint Venture.
The equity in earnings (losses) of associate and joint ventures is as follows:
Cerro Casale (a)
Puren (a)
Bald Mountain Exploration Joint Venture (a)
Years ended December 31,
2016
2015
$
(0.6)
$
(3.0)
(0.2)
$
6.2
$
(0.4)
(1.2)
-
$
3.2
(a) Represents Kinross’ share of the net earnings (loss) and other comprehensive income (loss).
Summarized financial information, reflecting fair value adjustments made by the Company, for Cerro Casale on a 100%
basis is as follows:
Balance Sheet
As at December 31,
2016
2015
$
$
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Ownership interest
Impairment charge
Carrying amount of the investment
Revenue
Expense
Net loss and total comprehensive loss
Equity in losses of Cerro Casale
0.8
2,065.2
2,066.0
5.6
-
5.6
2,060.4
25%
515.1
(375.6)
139.5
0.4
2,061.1
2,061.5
5.9
-
5.9
2,055.6
25%
513.9
(375.6)
138.3
$
$
$
$
Statement of Operations
For the years ended December 31,
2016
-
$
2.5
2.5
0.6
$
$
2015
-
$
12.0
12.0
3.0
$
$
A contingent liability related to the Company’s investment in Cerro Casale is disclosed in Note 19.
FS
34
Kinross Gold Annual Report 2016
FS
35
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
35
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
10.
(a)
FAIR VALUE MEASUREMENT
Recurring fair value measurement:
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, 2016 include:
Available-for-sale investments
Derivative contracts:
Foreign currency forward and collar
contracts
Energy swap contracts
Total return swap contracts
$
Level 1
142.9
Level 2
Level 3
$
-
$
-
Aggregate Fair
Value
142.9
$
8.9
-
12.3
-
-
(6.2)
$ 142.9 $ 15.0
-
-
-
$
-
8.9
12.3
(6.2)
$ 157.9
During the year ended December 31, 2016, 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.
FS
36
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
36
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
10.
(a)
FAIR VALUE MEASUREMENT
Recurring fair value measurement:
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, 2016 include:
Available-for-sale investments
$
142.9
$
-
$
-
$
142.9
Level 1
Level 2
Level 3
Aggregate Fair
Value
Derivative contracts:
Foreign currency forward and collar
contracts
Energy swap contracts
Total return swap contracts
-
-
-
8.9
12.3
(6.2)
-
-
-
8.9
12.3
(6.2)
$ 142.9 $ 15.0
$
-
$ 157.9
During the year ended December 31, 2016, 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.
FS
36
Kinross Gold Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
The following table summarizes information about derivative contracts outstanding at December 31, 2016 and 2015:
Currency contracts
Foreign currency forward and collar
contracts (a), (c) (i)
Commodity contracts
Energy swap contracts (b) (ii)
Other contracts
Total return swap contracts (iii)
December 31, 2016
December 31, 2015
Asset / (Liability)
Asset / (Liability)
Fair Value
AOCI
Fair Value
AOCI
8.9
5.9
(13.8) (10.9)
12.3
(6.2)
9.6
(2.2)
-
1.0
(1.7)
-
Total all contracts
$ 15.0 $ 15.5 $ (15.0) $ (12.6)
Unrealized fair value of derivative assets
Current
Non-current
Unrealized fair value of derivative liabilities
Current
Non-current
16.1
6.0
$ 22.1
(7.1)
-
$ (7.1)
1.0
-
$ 1.0
(16.0)
-
$ (16.0)
Total net fair value
$ 15.0
$ (15.0)
(a) Of the total amount recorded in AOCI at December 31, 2016, $5.1 million will be reclassified to net earnings within the next 12 months
as a result of settling the contracts.
(b) Of the total amount recorded in AOCI at December 31, 2016, $5.9 million will be reclassified to net earnings within the next 12 months
as a result of settling the contracts.
(c) During the year ended December 31, 2016, the Company entered into zero cost collar contracts for future exchange rates of the
Brazilian real and the Russian rouble. The put and call collars were entered into with a counterparty, in which a floor and ceiling relative
to the future exchange rate of the Brazilian real or Russian rouble is agreed upon. If the Brazilian real or Russian rouble is below the
floor, the counterparty pays the Company the difference between the exchange rate and the floor. If the Brazilian real or Russian rouble
is above the ceiling, the Company pays the counterparty the difference between the ceiling and the exchange rate.
FS
37
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
(i)
Foreign currency forward and collar contracts
The following table provides a summary of foreign currency forward and collar contracts outstanding at December 31,
2016, maturing in 2017 and 2018:
Foreign currency
Brazilian real zero cost collars
2017
2018
(in millions of U.S. dollars)
$
85.8
$
25.2
Average put (Brazilian reais)
Average call (Brazilian reais)
Canadian dollar forward buy contracts
3.68
4.11
3.75
4.12
(in millions of U.S. dollars)
$
52.5
$
-
Average price (Canadian dollars)
Russian rouble zero cost collars
1.33
-
(in millions of U.S. dollars)
$
19.8
$
-
Average put (Russian roubles)
Average call (Russian roubles)
60.0
71.9
-
-
During 2016, the Company entered into the following new forward buy and zero cost collar derivative contracts:
$63.0 million Canadian dollars at an average rate of 1.35 maturing from 2016 to 2017;
$111.0 million Brazilian reais at an average put and call strike of 3.70 and 4.11, respectively, maturing from 2017 to
2018; and
$19.8 million Russian roubles at an average put and call strike of 60.0 and 71.9, respectively, maturing in 2017.
At December 31, 2016, the unrealized gain or loss on the derivative contracts recorded in AOCI is as follows:
Brazilian real forward buy contracts – $nil (December 31, 2015 – $4.7 million loss);
Brazilian real zero cost collar contracts – unrealized gain of $6.0 million (December 31, 2015 – $nil).
Chilean peso forward buy contracts – $nil (December 31, 2015 – $2.3 million loss);
Canadian dollar forward buy contracts – unrealized loss of $0.2 million (December 31, 2015 – $3.9 million loss); and
Russian rouble zero cost collar contracts – unrealized gain of $0.1 million (December 31, 2015 – $nil).
(ii)
Energy swap contracts
The Company is exposed to changes in energy prices through its consumption of diesel and other fuels, and the price of
electricity in some electricity supply contracts. The Company 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, 2016, maturing in 2017 to
2019:
Energy
2017
2018
2019
Oil swap contracts (barrels)
737,976
517,482
85,651
Average price
$
46.21
$
48.35
$
48.17
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Kinross Gold Annual Report 2016
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KINROSS GOLD ANNUAL REPORT 2016
38
The following table provides a summary of foreign currency forward and collar contracts outstanding at December 31,
1,600,189 barrels of crude oil at an average rate of $46.38 per barrel maturing from 2016 to 2019.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
During 2016, the following new commodity derivative contracts were entered into:
At December 31, 2016, the unrealized gain or loss on these derivative contracts recorded in AOCI is as follows:
Oil swap contracts – unrealized gain of $9.6 million (December 31, 2015 – $1.7 million loss).
(iii)
Total return swap contracts
The Company enters into total return swaps (“TRS”) as economic hedges of the Company’s DSUs and cash-settled RSUs.
Under the terms of the TRS, a bank has the right to purchase Kinross shares in the marketplace as a hedge against the returns
in the TRS. At December 31, 2016, 5,695,000 TRS units were outstanding.
At December 31, 2016, 90% of the DSUs were economically hedged (December 31, 2015 – 97%) and 84% of cash-settled
RSUs were economically hedged (December 31, 2015 – 95%), although hedge accounting was not applied.
Non-recurring fair value measurement:
(b)
During the year ended December 31, 2016, property, plant and equipment at Maricunga was written down to its recoverable
amount. Certain assumptions used in the calculation of the recoverable amount are categorized as Level 3 in the fair value
hierarchy.
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
(i)
Foreign currency forward and collar contracts
2016, maturing in 2017 and 2018:
Foreign currency
Brazilian real zero cost collars
2017
2018
(in millions of U.S. dollars)
$
85.8
$
25.2
(in millions of U.S. dollars)
$
52.5
$
-
Average put (Brazilian reais)
Average call (Brazilian reais)
Canadian dollar forward buy contracts
Average price (Canadian dollars)
Russian rouble zero cost collars
Average put (Russian roubles)
Average call (Russian roubles)
3.68
4.11
1.33
60.0
71.9
3.75
4.12
-
-
-
(in millions of U.S. dollars)
$
19.8
$
-
During 2016, the Company entered into the following new forward buy and zero cost collar derivative contracts:
$63.0 million Canadian dollars at an average rate of 1.35 maturing from 2016 to 2017;
$111.0 million Brazilian reais at an average put and call strike of 3.70 and 4.11, respectively, maturing from 2017 to
2018; and
$19.8 million Russian roubles at an average put and call strike of 60.0 and 71.9, respectively, maturing in 2017.
At December 31, 2016, the unrealized gain or loss on the derivative contracts recorded in AOCI is as follows:
Brazilian real forward buy contracts – $nil (December 31, 2015 – $4.7 million loss);
Brazilian real zero cost collar contracts – unrealized gain of $6.0 million (December 31, 2015 – $nil).
Chilean peso forward buy contracts – $nil (December 31, 2015 – $2.3 million loss);
Canadian dollar forward buy contracts – unrealized loss of $0.2 million (December 31, 2015 – $3.9 million loss); and
Russian rouble zero cost collar contracts – unrealized gain of $0.1 million (December 31, 2015 – $nil).
(ii)
Energy swap contracts
The Company is exposed to changes in energy prices through its consumption of diesel and other fuels, and the price of
electricity in some electricity supply contracts. The Company 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, 2016, maturing in 2017 to
2019:
Energy
Oil swap contracts (barrels)
737,976
517,482
85,651
Average price
$
46.21
$
48.35
$
48.17
2017
2018
2019
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KINROSS GOLD ANNUAL REPORT 2016
39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(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 and energy by periodically entering into derivative contracts in
accordance with the formal risk management policy approved by the Company’s Board of Directors. The Company’s practice
is to not hedge metal sales. However, in certain circumstances the Company may use derivative contracts to hedge against
the risk of falling prices for a portion of its forecasted metal sales. The Company may also assume derivative contracts as
part of a business acquisition or they may be required under financing arrangements.
All of the Company’s hedges are cash flow hedges. The Company applies hedge accounting whenever hedging relationships
exist and have been documented.
i.
Capital management
The Company’s objectives when managing capital are to:
Ensure the Company has sufficient cash available to support the mining, exploration, and other areas of the business in
any gold price environment;
Ensure the Company has the capital and capacity to support a long-term growth strategy;
Provide investors with a superior rate of return on their invested capital;
Ensure compliance with all bank covenant ratios; and
Minimize counterparty credit risk.
Kinross adjusts its capital structure based on changes in forecasted economic conditions and based on its long-term
strategic business plan. Kinross has the ability to adjust its capital structure by issuing new equity, drawing on existing
credit facilities, issuing new debt, and by selling or acquiring assets. Kinross can also control how much capital is returned
to shareholders through dividends and share buybacks.
The Company is not subject to any externally imposed capital requirements.
The Company’s quantitative capital management objectives are largely driven by the requirements under its debt
agreements as well as a target total debt to total debt and common shareholders’ equity ratio as noted in the table below:
December 31,
2016
December 31,
2015
-
$ 1,733.2 $ 1,731.9
249.5
1,981.4
3,889.3
33.8%
0 – 30%
1,733.2
4,145.5
29.5%
0 – 30%
Long-term debt
Current portion of long-term debt
Total debt
Common shareholders' equity
Total debt / total debt and common shareholders' equity ratio
Company target
ii.
Gold and silver price risk management
No derivatives to hedge metal sales were outstanding in 2015 and 2016.
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KINROSS GOLD ANNUAL REPORT 2016
40
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(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 and energy 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:
Long-term debt
Current portion of long-term debt
Total debt
Common shareholders' equity
Total debt / total debt and common shareholders' equity ratio
Company target
ii.
Gold and silver price risk management
No derivatives to hedge metal sales were outstanding in 2015 and 2016.
December 31,
December 31,
2016
2015
$ 1,733.2 $ 1,731.9
-
1,733.2
4,145.5
29.5%
0 – 30%
249.5
1,981.4
3,889.3
33.8%
0 – 30%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(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 hedging contracts to lock in the exchange rates on future
non-U.S. denominated currency cash outflows. The Company has entered into hedging contracts to purchase Canadian
dollars, Brazilian reais, 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, 2016, 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.
10% strengthening in
U.S. dollar
10% weakening in
U.S. dollar
Effect on earnings
before taxes, gain
(loss)(a)
Effect on earnings
before taxes, gain
(loss)(a)
1.7
0.3
0.8
(3.0)
0.2
3.3
(1.6)
0.1
(2.1)
(0.3)
(1.0)
3.6
(0.3)
(4.0)
2.0
(0.1)
Foreign currency
net working capital
(19.0)
(2.9)
(8.9)
32.8
(2.5)
(36.4)
17.9
(1.0)
Canadian dollars
Brazilian reais
Chilean pesos
Russian roubles
Euros
Mauritanian ouguiya
Ghanaian cedi
Other (b)
(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.
Includes British pounds, Australian dollars and South African rand.
(b)
At December 31, 2016, with other variables unchanged, the following represents the effect of the Company's foreign
currency hedging contracts on OCI before taxes from a 10% change in the exchange rate of the U.S. dollar against the
Canadian dollar, Brazilian real and Russian rouble.
10% strengthening in
U.S. dollar
10% weakening in
U.S. dollar
Effect on OCI before
taxes, gain (loss) (a)
Effect on OCI before
taxes, gain (loss) (a)
$
$
$
(4.7)
(8.2)
(0.9)
$
$
$
5.8
10.7
1.2
Canadian dollars
Brazilian real
Russian rouble
(a) Upon maturity of these contracts, the amounts in OCI before taxes will reverse against hedged items that the contracts relate to, which
may be to earnings or property, plant and equipment.
FS
40
Kinross Gold Annual Report 2016
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KINROSS GOLD ANNUAL REPORT 2016
41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
iv.
Energy price risk
The Company is exposed to changes in energy prices through its consumption of diesel and other fuels, and the price of
electricity in some electricity supply contracts. The Company entered into energy swap contracts that partially protect
against the risk of fuel price increases. Fuel is consumed in the operation of mobile equipment and electricity generation.
At December 31, 2016, 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 prices.
10% increase in
price
10% decrease in
price
Effect on OCI before
taxes, gain (loss) (a)
Effect on OCI before
taxes, gain (loss) (a)
Oil
$
7.5
$
(7.5)
(a) Upon maturity of these contracts, the amounts in OCI before taxes will reverse against hedged items that the contracts relate to, which
will be to earnings.
v.
Liquidity risk
The Company manages liquidity risk by maintaining adequate cash and cash equivalent balances (December 31, 2016 -
$827.0 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, 2016 are as follows:
Long-term debt (a)
$
2,580.0
$
86.0
$
172.0
$
1,153.9
$
1,168.1
Total
2017
Within 1 year
2018, 2019
2 to 3 years
2020, 2021
4 to 5 years
2022+
More than 5 years
(a)
vi.
Includes long-term debt, including the current portion, interest and the full face value of the senior notes.
Credit risk management
Credit risk relates to cash and cash equivalents, accounts receivable and derivative contracts and arises from the possibility
that any counterparty to an instrument fails to perform. The Company generally transacts with highly-rated counterparties
and a limit on contingent exposure has been established for counterparties based on their credit ratings. As at December
31, 2016, the Company’s maximum exposure to credit risk was the carrying value of cash and cash equivalents, accounts
receivable and derivative contracts.
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KINROSS GOLD ANNUAL REPORT 2016
42
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
iv.
Energy price risk
The Company is exposed to changes in energy prices through its consumption of diesel and other fuels, and the price of
electricity in some electricity supply contracts. The Company entered into energy swap contracts that partially protect
against the risk of fuel price increases. Fuel is consumed in the operation of mobile equipment and electricity generation.
At December 31, 2016, 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 prices.
10% increase in
10% decrease in
price
price
Effect on OCI before
Effect on OCI before
taxes, gain (loss) (a)
taxes, gain (loss) (a)
Oil
$
7.5
$
(7.5)
will be to earnings.
v.
Liquidity risk
The Company manages liquidity risk by maintaining adequate cash and cash equivalent balances (December 31, 2016 -
$827.0 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, 2016 are as follows:
Long-term debt (a)
$
2,580.0
$
86.0
$
172.0
$
1,153.9
$
1,168.1
Total
2017
Within 1 year
2018, 2019
2 to 3 years
2020, 2021
4 to 5 years
2022+
More than 5 years
Includes long-term debt, including the current portion, interest and the full face value of the senior notes.
(a)
vi.
Credit risk management
Credit risk relates to cash and cash equivalents, accounts receivable and derivative contracts and arises from the possibility
that any counterparty to an instrument fails to perform. The Company generally transacts with highly-rated counterparties
and a limit on contingent exposure has been established for counterparties based on their credit ratings. As at December
31, 2016, the Company’s maximum exposure to credit risk was the carrying value of cash and cash equivalents, accounts
receivable and derivative contracts.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
12.
LONG-TERM DEBT AND CREDIT FACILITIES
Interest
Rates
Nominal
Amount
December 31, 2016
Deferred
Financing
Costs
Carrying
Amount (a)
December 31, 2015
Fair
Value (b)
Carrying
Amount (a)
Fair
Value (b)
Corporate term loan facility
Senior notes
(i)
(ii)
Variable
5.125%-
6.875%
Less: current portion
Long-term debt
$
500.0
$
(2.6)
$
497.4
$
497.4
$
498.0
$
498.0
1,245.1
1,745.1
-
$
1,745.1
(9.3)
(11.9)
-
(11.9)
$
1,235.8
1,733.2
-
1,245.7
1,743.1
-
$
1,733.2
$
1,743.1
1,483.4
1,981.4
(249.5)
1,731.9
$
1,035.3
1,533.3
(250.4)
1,282.9
$
(a) Upon maturity of these contracts, the amounts in OCI before taxes will reverse against hedged items that the contracts relate to, which
(a) Includes transaction costs on debt financings.
(b) The fair value of debt is primarily determined using quoted market determined variables. See Note 10 (c).
Scheduled debt repayments
Corporate term loan facility
Senior notes
2017
2020
$ - $ - $ - $ 500.0
- - -
$ -
- 500.0
2019
2021
2018
Total debt payable
$ - $ - $ - $ 500.0
$ 500.0
(i)
Corporate revolving credit and term loan facilities
2022 and
thereafter
Total
$ - $ 500.0
750.0 $ 1,250.0
$ 750.0 $ 1,750.0
On July 24, 2015, the Company amended its $1,500.0 million revolving credit facility and $500.0 million term loan to extend
the respective maturity dates. The revolving credit facility’s term was extended by one year to August 10, 2020 from August
10, 2019, and the term loan was extended by one year to August 10, 2019 from August 10, 2018.
On July 26, 2016, the Company extended the maturity dates of the term loan and revolving credit facility by one year to
August 10, 2020 and August 10, 2021, respectively.
As at December 31, 2016, the Company had utilized $104.5 million (December 31, 2015 – $31.3 million) of the amended
$1,500.0 million revolving credit facility. The amount utilized was entirely for letters of credit. On January 4, 2016, the
Company drew $175.0 million in cash on the revolving credit facility, and repaid the amount in full on March 4, 2016.
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, 2016, interest charges and fees are as follows:
Type of credit
Dollar based LIBOR loan:
Term Loan
Revolving credit facility
Letters of credit
Standby fee applicable to unused availability
LIBOR plus 1.95%
LIBOR plus 2.00%
1.33-2.00%
0.40%
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 Company is in compliance with its
financial covenant in the credit agreement at December 31, 2016.
FS
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Kinross Gold Annual Report 2016
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Kinross Gold Annual Report 2016
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KINROSS GOLD ANNUAL REPORT 2016
43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
(ii)
Senior notes
The Company’s $1,250.0 million of senior notes consist of $500.0 million principal amount of 5.125% senior notes due 2021,
$500.0 million principal amount of 5.95% notes due 2024, and $250.0 million principal amount of 6.875% senior notes due
2041.
The Company repaid its $250.0 million 3.625% notes in full on the maturity date in September 2016.
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 carried a term of five years with a maturity date of September 30, 2016 and had an
annual interest rate of LIBOR plus 2.5%. Semi-annual principal repayments of $30.0 million commenced in March 2013 and
continued through September 30, 2015. Principal repayments were scheduled for March 31, 2016 and September 30, 2016
in the amounts of $13.0 million and $7.0 million, respectively. On September 30, 2015, the Company prepaid the remaining
$20.0 million, resulting in full repayment of the loan.
(iv)
Other
Effective June 30, 2016, the maturity date for the Company’s $250.0 million Letter of Credit guarantee facility with Export
Development Canada (“EDC”) was extended to June 30, 2017. Letters of credit guaranteed under 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 1.10% to 1.15%. As at December 31, 2016, $215.1 million (December 31, 2015 - $212.7 million) was utilized under
this facility.
In addition, at December 31, 2016, the Company had $117.7 million (December 31, 2015 - $33.4 million) in letters of credit
outstanding in respect of its operations in Brazil, Mauritania, Ghana and Chile. These letters of credit have been issued
pursuant to arrangements with certain international banks.
As at December 31, 2016, $216.7 million of surety bonds were issued with respect to Kinross’ operations in the United
States. The surety bonds were issued pursuant to arrangements with international insurance companies.
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, 2016 and 2015, $nil was outstanding under such
borrowings.
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44
Kinross Gold Annual Report 2016
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KINROSS GOLD ANNUAL REPORT 2016
44
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
(ii)
Senior notes
2041.
The Company’s $1,250.0 million of senior notes consist of $500.0 million principal amount of 5.125% senior notes due 2021,
$500.0 million principal amount of 5.95% notes due 2024, and $250.0 million principal amount of 6.875% senior notes due
The Company repaid its $250.0 million 3.625% notes in full on the maturity date in September 2016.
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
(iv)
Other
this facility.
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 carried a term of five years with a maturity date of September 30, 2016 and had an
annual interest rate of LIBOR plus 2.5%. Semi-annual principal repayments of $30.0 million commenced in March 2013 and
continued through September 30, 2015. Principal repayments were scheduled for March 31, 2016 and September 30, 2016
in the amounts of $13.0 million and $7.0 million, respectively. On September 30, 2015, the Company prepaid the remaining
$20.0 million, resulting in full repayment of the loan.
Effective June 30, 2016, the maturity date for the Company’s $250.0 million Letter of Credit guarantee facility with Export
Development Canada (“EDC”) was extended to June 30, 2017. Letters of credit guaranteed under 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 1.10% to 1.15%. As at December 31, 2016, $215.1 million (December 31, 2015 - $212.7 million) was utilized under
In addition, at December 31, 2016, the Company had $117.7 million (December 31, 2015 - $33.4 million) in letters of credit
outstanding in respect of its operations in Brazil, Mauritania, Ghana and Chile. These letters of credit have been issued
pursuant to arrangements with certain international banks.
As at December 31, 2016, $216.7 million of surety bonds were issued with respect to Kinross’ operations in the United
States. The surety bonds were issued pursuant to arrangements with international insurance companies.
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, 2016 and 2015, $nil was outstanding under such
borrowings.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
13.
PROVISIONS
Balance at January 1, 2016
Additions resulting from acquisitions (a)
Additions
Reductions
Reclamation spending
Accretion
Reclamation expense
Balance at December 31, 2016
Current portion
Non-current portion
$
$
$
Reclamation and
remediation
obligations (i)
720.3
123.4
51.7
(28.4)
(20.1)
34.2
27.2
908.3
Other
50.8
-
9.6
(14.3)
-
-
-
46.1
Total
771.1
123.4
61.3
(42.7)
(20.1)
34.2
27.2
954.4
$
$
$
81.9 11.3 93.2
826.4 34.8 861.2
$ 908.3 $ 46.1 $ 954.4
(a) Bald Mountain and the remaining 50% interest in Round Mountain were acquired on January 11, 2016. See Note 6.
(i)
Reclamation and remediation obligations
The Company conducts its operations so as to protect the public health and the environment, and to comply with all
applicable laws and regulations governing protection of the environment. Reclamation and remediation obligations arise
throughout the life of each mine. The Company estimates future reclamation costs based on the level of current mining
activity and estimates of costs required to fulfill the Company’s future obligations. The above table details the items that
affect the reclamation and remediation obligations.
Included in other operating expense for the year ended December 31, 2016 is a $27.2 million expense (year ended December
31, 2015 – $7.9 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 2017 and 2041. The discount rates used in estimating the site restoration cost obligation were between 0.9% and
13.9% for the year ended December 31, 2016 (year ended December 31, 2015 – 0.6% and 11.2%), and the inflation rate used
was between 2.4% and 5.6% for the year ended December 31, 2016 (year ended December 31, 2015 – 1.1% and 7.8%).
Regulatory authorities in certain jurisdictions require that security be provided to cover the estimated reclamation and
remediation obligations. As at December 31, 2016, letters of credit totaling $402.0 million (December 31, 2015 – $249.5
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. As at December 31, 2016, $216.7 million of surety bonds were issued with
respect to Kinross’ operations in the United States. The surety bonds were issued pursuant to arrangements with
international insurance companies.
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Kinross Gold Annual Report 2016
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KINROSS GOLD ANNUAL REPORT 2016
45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
14.
COMMON SHARE CAPITAL
The authorized share capital of the Company is comprised of an unlimited number of common shares without par value. A
summary of common share transactions for the years ended December 31, 2016 and 2015 is as follows:
Year ended
Year ended
December 31, 2016
December 31, 2015
Number of shares
(000's)
Amount ($) Number of shares
(000's)
Amount ($)
Common shares
Balance at January 1,
Equity issuance (a)
Under share option and restricted share plans
Balance at end of period
1,146,540
$
14,603.5
1,144,576
$
14,587.7
95,910
2,600
1,245,050
275.7
15.0
14,894.2
$
-
1,964
1,146,540
-
15.8
14,603.5
$
Total common share capital
$
14,894.2
$
14,603.5
(a) On March 4, 2016, the Company completed a public equity offering of 83.4 million common shares at a price of $3.00 per common
share for gross proceeds of approximately $250.0 million. On March 15, 2016, the underwriters elected to exercise an option to
purchase up to an additional 15% of the offering to cover over-allotments, and as a result, an additional 12.5 million common shares
were issued at a price of $3.00 per common share. The sale was completed on March 18, 2016 and increased the gross proceeds from
the offering to $287.7 million. Transaction costs of $12.0 million resulted in net proceeds of $275.7 million.
FS
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Kinross Gold Annual Report 2016
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KINROSS GOLD ANNUAL REPORT 2016
46
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
14.
COMMON SHARE CAPITAL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
15.
SHARE-BASED PAYMENTS
The authorized share capital of the Company is comprised of an unlimited number of common shares without par value. A
summary of common share transactions for the years ended December 31, 2016 and 2015 is as follows:
Share-based compensation recorded during the years ended December 31, 2016 and 2015 was as follows:
Year ended
Year ended
December 31, 2016
December 31, 2015
Number of shares
Amount ($) Number of shares
Amount ($)
(000's)
Common shares
Balance at January 1,
Equity issuance (a)
Under share option and restricted share plans
95,910
2,600
275.7
15.0
-
15.8
Balance at end of period
1,245,050
$
14,894.2
1,146,540
$
14,603.5
1,146,540
$
14,603.5
1,144,576
$
14,587.7
(000's)
-
1,964
Total common share capital
$
14,894.2
$
14,603.5
(a) On March 4, 2016, the Company completed a public equity offering of 83.4 million common shares at a price of $3.00 per common
share for gross proceeds of approximately $250.0 million. On March 15, 2016, the underwriters elected to exercise an option to
purchase up to an additional 15% of the offering to cover over-allotments, and as a result, an additional 12.5 million common shares
were issued at a price of $3.00 per common share. The sale was completed on March 18, 2016 and increased the gross proceeds from
the offering to $287.7 million. Transaction costs of $12.0 million resulted in net proceeds of $275.7 million.
Share option plan expense (i)
Restricted share unit plan expense, including restricted performance shares (ii)
Deferred share units expense (iii)
Employer portion of employee share purchase plan (iv)
Total share-based compensation
(i)
Share option plan
Years ended December 31,
2016
2015
$ 2.8
24.0
1.2
2.0
$ 30.0
$
$
6.0
15.6
1.0
2.1
24.7
The Company has a share option plan for officers, employees, and contractors enabling them to purchase common shares.
Under the share option plan, the aggregate number of shares reserved for issuance may not exceed 31.2 million common
shares. Additionally, the aggregate number of Common Shares reserved for issuance under the share option plan to insiders,
at any one time upon the exercise of Options and pursuant to all other compensation arrangements of the Company shall
not exceed 10% of the total number of Common Shares then outstanding. Each option granted under the plan before
February 16, 2011 was 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, 2016 expire at various dates to 2023. The number of common shares
available for the granting of options as at December 31, 2016 was 12.5 million.
The following table summarizes the status of the share option plan and changes during the years ended December 31, 2016
and 2015:
2016
2015
Number of options
(000's)
Weighted average
exercise price
(CDN$/option)
Number of options
(000's)
Weighted average
exercise price
(CDN$/option)
Balance at January 1
Granted
Exercised
Forfeited
Expired
Outstanding at end of period
13,513
1,872
(708)
(1,300)
(948)
12,429
7.57
4.17
5.17
6.57
12.17
6.95
14,175
3,599
-
(890)
(3,371)
13,513
$
$
$
$
10.66
3.69
-
7.85
16.35
7.57
For the year ended December 31, 2016, the weighted average share price at the date of exercise was CDN$6.88.
FS
46
Kinross Gold Annual Report 2016
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Kinross Gold Annual Report 2016
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KINROSS GOLD ANNUAL REPORT 2016
47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
The following table summarizes information about the stock options outstanding and exercisable at December 31, 2016:
Options outstanding
Options exercisable
Exercise price range in
CDN$:
Number of
options
Weighted
average
exercise
price
Weighted
average
remaining
contractual
life
Number of
options
Weighted
average
exercise
price
Weighted
average
remaining
contractual
life
(000’s)
(CDN$)
(years)
(000’s)
(CDN$)
(years)
$ 2.96 $ 4.22
4,609
$
3.88
4.23 9.53
9.54 14.31
14.32 16.25
5,307
1,667
846
12,429
6.97
10.69
16.25
6.95
$
5.15
3.30
2.22
1.14
3.69
833
$
3.72
4,565
1,667
846
7,911
7.16
10.69
16.25
8.51
$
4.44
3.21
2.22
1.14
2.91
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, 2016 and 2015:
2016
2015
Weighted average share price (CDN$)
Expected dividend yield
Expected volatility
Risk-free interest rate
Expected option life (in years)
Weighted average fair value per stock option granted (CDN$)
$
$
4.17
0.0%
56.9%
0.6%
4.5
1.92
$ 3.69
0.0%
43.3%
0.6%
4.5
$ 1.34
The expected volatility used in the Black-Scholes option pricing model is based primarily on the historical volatility of the
Company’s shares.
(ii)
Restricted Share 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 13.9 million.
(a) Restricted share units
RSUs are generally exercisable into one common share entitling the holder to acquire the common share for no additional
consideration. RSUs vest over a three year period.
The following table summarizes information about the RSUs outstanding at December 31, 2016 and 2015:
Balance at January 1
Granted
Redeemed
Forfeited
Outstanding at end of period
2016
2015
Number of units
(000's)
Weighted average
fair value
(CDN$/unit)
Number of units
(000's)
Weighted average
fair value
(CDN$/unit)
9,041
$
4.41
6,657
$
6.47
5,502
(4,435)
(889)
9,219
4.14
4.96
$
4.11
4.01
6,586
(2,850)
(1,352)
9,041
3.62
7.18
$
4.87
4.41
As at December 31, 2016, the Company had recognized a liability of $11.4 million (December 31, 2015 - $4.8 million) in
respect of its cash-settled RSUs.
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48
Kinross Gold Annual Report 2016
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KINROSS GOLD ANNUAL REPORT 2016
48
$
$
$
Number of units
(000's)
2,425
2,723
(318)
(517)
4,313
Weighted average
fair value
(CDN$/unit)
4.88
4.47
6.55
5.20
4.51
Weighted average
fair value
(CDN$/unit)
7.12
3.57
9.24
5.83
4.88
Balance at January 1
Granted
Redeemed
Forfeited
Outstanding at end of period
(iii)
Deferred share unit plan
Number of units
(000's)
4,313
1,887
(495)
(712)
4,993
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
The following table summarizes information about the stock options outstanding and exercisable at December 31, 2016:
(b) Restricted performance share units
The RPSUs are subject to certain vesting requirements and vest at the end of three years. The vesting requirements are
based on certain performance criteria over the vesting period established by the Company.
The following table summarizes information about the RPSUs outstanding at December 31, 2016 and 2015:
2016
2015
Options outstanding
Options exercisable
Weighted
average
Weighted
remaining
Weighted
Weighted
average
average
remaining
Exercise price range in
Number of
contractual
Number of
exercise
contractual
CDN$:
life
(years)
options
(000’s)
price
(CDN$)
life
(years)
average
exercise
price
(CDN$)
options
(000’s)
$ 2.96 $ 4.22
4,609
$
3.88
833
$
3.72
4.23 9.53
9.54 14.31
14.32 16.25
5,307
1,667
846
6.97
10.69
16.25
4,565
1,667
846
7.16
10.69
16.25
12,429
$
6.95
7,911
$
8.51
5.15
3.30
2.22
1.14
3.69
4.44
3.21
2.22
1.14
2.91
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, 2016 and 2015:
Weighted average share price (CDN$)
$
4.17
$ 3.69
2016
2015
0.0%
56.9%
0.6%
4.5
0.0%
43.3%
0.6%
4.5
Weighted average fair value per stock option granted (CDN$)
$
1.92
$ 1.34
The expected volatility used in the Black-Scholes option pricing model is based primarily on the historical volatility of the
Expected dividend yield
Expected volatility
Risk-free interest rate
Expected option life (in years)
Company’s shares.
(ii)
Restricted Share Plan
(a) Restricted share units
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 13.9 million.
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, 2016 and 2015:
Balance at January 1
Granted
Redeemed
Forfeited
2016
2015
Weighted average
Weighted average
Number of units
fair value
Number of units
(000's)
(CDN$/unit)
(000's)
fair value
(CDN$/unit)
9,041
$
4.41
6,657
$
6.47
5,502
(4,435)
(889)
4.14
4.96
4.11
6,586
(2,850)
(1,352)
3.62
7.18
4.87
Outstanding at end of period
9,219
$
4.01
9,041
$
4.41
As at December 31, 2016, the Company had recognized a liability of $11.4 million (December 31, 2015 - $4.8 million) in
respect of its cash-settled RSUs.
The Company has a DSU plan for its outside directors which provides that each outside director receives, on the last date in
each quarter a number of DSUs having a value equal to a minimum of 50% of the compensation of the outside director for
the current quarter. Each outside director can elect to receive a greater percentage of their compensation in DSUs. The
number of DSUs granted to an outside director is based on the closing price of the Company's common shares on the Toronto
Stock Exchange on the last business day of each quarter. At such time as an outside director ceases to be a director, the
Company will make a cash payment to the outside director, equal to the market value of a Kinross common share on the
date of departure, multiplied by the number of DSUs held on that date.
The number of DSUs granted by the Company and the weighted average fair value per unit issued for the years ended
December 31, 2016 and 2015 are as follows:
DSUs granted (000's)
Years ended December 31,
2016
2015
308
446
Weighted average grant-date fair value (CDN$/ unit)
$
4.97
$ 2.60
There were 1,321,449 DSUs outstanding, for which the Company had recognized a liability of $4.1 million, as at December
31, 2016 (December 31, 2015 - $2.2 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, 2016 was $2.0 million (year ended
December 31, 2015 – $2.1 million).
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48
Kinross Gold Annual Report 2016
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Kinross Gold Annual Report 2016
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KINROSS GOLD ANNUAL REPORT 2016
49
$
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
16.
EARNINGS (LOSS) PER SHARE
Basic and diluted net loss attributable to common shareholders of Kinross for the year ended December 31, 2016 was $104.0
million (year ended December 31, 2015 – $984.5 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 are reflected in diluted earnings per share by application of the
treasury method. The following table details the weighted average number of outstanding common shares for the purpose
of computing basic and diluted loss per common share for the following periods:
(Number of common shares in thousands)
Basic weighted average shares outstanding:
Weighted average shares dilution adjustments:
Stock options
Restricted shares
Restricted performance shares
Diluted weighted average shares outstanding
Weighted average shares dilution adjustments - exclusions: (b)
Stock options (a)
Restricted shares
Restricted performance shares
Years ended December 31,
2016
2015
1,146,043
1,227,007
-
-
-
1,227,007
-
-
-
1,146,043
12,429
3,625
4,786
13,064
3,971
3,940
(a) Anti-dilutive stock options were determined using the Company’s average share price for the year. For the years ended December 31,
2016 and 2015, the average share price used was $3.91 and $2.27, respectively.
(b) These adjustments were excluded, as they are anti-dilutive.
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50
Kinross Gold Annual Report 2016
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KINROSS GOLD ANNUAL REPORT 2016
50
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
16.
EARNINGS (LOSS) PER SHARE
Basic and diluted net loss attributable to common shareholders of Kinross for the year ended December 31, 2016 was $104.0
million (year ended December 31, 2015 – $984.5 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 are reflected in diluted earnings per share by application of the
treasury method. The following table details the weighted average number of outstanding common shares for the purpose
of computing basic and diluted loss per common share for the following periods:
(Number of common shares in thousands)
Basic weighted average shares outstanding:
Weighted average shares dilution adjustments:
Stock options
Restricted shares
Restricted performance shares
Diluted weighted average shares outstanding
Weighted average shares dilution adjustments - exclusions: (b)
Stock options (a)
Restricted shares
Restricted performance shares
Years ended December 31,
2016
2015
1,227,007
1,146,043
-
-
-
-
-
-
1,227,007
1,146,043
12,429
3,625
4,786
13,064
3,971
3,940
(a) Anti-dilutive stock options were determined using the Company’s average share price for the year. For the years ended December 31,
2016 and 2015, the average share price used was $3.91 and $2.27, respectively.
(b) These adjustments were excluded, as they are anti-dilutive.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(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:
Current tax expense
Current period
Adjustment for prior period
Deferred tax expense
Origination and reversal of temporary differences
Impact of changes in tax rate
Change in unrecognized deductible temporary differences
Recognition of previously unrecognized tax losses
Years ended December 31,
2016
2015
$
223.9
(24.6)
$
135.0
(46.2)
(143.6)
-
(6.7)
0.6
49.6
$
64.8
(0.3)
(9.4)
(2.2)
141.7
$
The reconciliation of the combined Canadian federal and provincial statutory income tax rate to the effective tax rate is as
follows:
Combined statutory income tax rate
Increase (decrease) resulting from:
Mining taxes
Resource allowance and depletion
Difference in foreign tax rates and foreign exchange on deferred income taxes
within income tax expense
Benefit of losses not recognized
Recognition of tax attributes not previously benefited
Under (over) provided in prior periods
Income not subject to tax
Effect of non-deductible impairment
Accounting expenses disallowed for tax
Taxes on repatriation of foreign earnings
Other
Effective tax rate
i.
Deferred income tax
The following table summarizes the components of deferred income tax:
Deferred tax assets
Accrued expenses and other
Property, plant and equipment
Reclamation and remediation obligations
Inventory capitalization
Deferred tax liabilities
Accrued expenses and other
Property, plant and equipment
Inventory capitalization
Deferred tax liabilities - net
2016
2015
26.5%
26.5%
4.4%
1.1%
94.0%
(160.1%)
(44.0%)
(8.2%)
109.2%
0.0%
(17.2%)
(79.9%)
(9.2%)
(83.4%)
0.4%
0.1%
(17.2%)
(5.0%)
(20.3%)
3.3%
10.7%
(0.3%)
(12.6%)
(1.4%)
(0.9%)
(16.7%)
December 31,
2016
December 31,
2015
$
39.3
25.5
118.1
8.8
191.7
$
82.6
10.3
94.8
8.7
196.4
14.5
442.0
31.4
296.2
$
1.2
567.6
50.1
422.5
$
For balance sheet disclosure purposes, deferred tax assets and liabilities have been offset where they relate to income taxes
levied by the same taxation authority and the Company has the legal right and intent to offset.
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Kinross Gold Annual Report 2016
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Kinross Gold Annual Report 2016
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KINROSS GOLD ANNUAL REPORT 2016
51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
Movement in net deferred tax liabilities:
Balance at the beginning of the period
Recognized in profit/loss
Recognized in OCI
Other
Balance at the end of the period
December 31,
2016
December 31,
2015
$
(149.7) 53.0
$
422.5
362.5
9.5
13.9
296.2
$
8.2
(1.2)
422.5
$
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, 2016 is $6.5 billion (December 31, 2015 – $6.0 billion).
Deferred tax assets have not been recognized in respect of the following items:
Deductible temporary differences
Tax losses
December 31,
2016
December 31,
2015
$
721.4
458.5
$
731.4
436.4
The tax losses not recognized expire as per the amount and years noted below. The deductible temporary differences do
not expire under current tax legislation. Deferred tax assets have not been recognized in respect of these items because it
is not probable that future taxable profit will be available against which the Company can utilize the benefits therefrom.
iii.
Non-capital losses (not recognized)
The following table summarizes the Company’s non-capital losses that can be applied against future taxable profit:
Country
Canada
United States (a)
Chile
Barbados
Mauritania
Other
Type
Amount
Expiry Date
Net operating losses
$ 713.9
Net operating losses
Net operating losses
Net operating losses
Net operating losses
Net operating losses
40.1
98.9
885.4
22.0
55.1
2017 - 2036
2017 - 2036
No expiry
2017 - 2023
2017 - 2021
Various
(a) Utilization of the United States loss carry forwards will be limited in any year as a result of the previous changes in ownership.
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KINROSS GOLD ANNUAL REPORT 2016
52
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
Movement in net deferred tax liabilities:
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
18.
SEGMENTED INFORMATION
Balance at the beginning of the period
Recognized in profit/loss
Recognized in OCI
Other
Balance at the end of the period
December 31,
December 31,
2016
2015
$
422.5
$
362.5
(149.7) 53.0
9.5
13.9
8.2
(1.2)
$
296.2
$
422.5
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, 2016 is $6.5 billion (December 31, 2015 – $6.0 billion).
Deferred tax assets have not been recognized in respect of the following items:
Deductible temporary differences
Tax losses
December 31,
December 31,
2016
2015
$
721.4
$
731.4
458.5
436.4
The tax losses not recognized expire as per the amount and years noted below. The deductible temporary differences do
not expire under current tax legislation. Deferred tax assets have not been recognized in respect of these items because it
is not probable that future taxable profit will be available against which the Company can utilize the benefits therefrom.
iii.
Non-capital losses (not recognized)
The following table summarizes the Company’s non-capital losses that can be applied against future taxable profit:
Country
Canada
United States (a)
Chile
Barbados
Mauritania
Other
Type
Amount
Expiry Date
Net operating losses
$ 713.9
Net operating losses
Net operating losses
Net operating losses
Net operating losses
Net operating losses
40.1
98.9
885.4
22.0
55.1
2017 - 2036
2017 - 2036
No expiry
2017 - 2023
2017 - 2021
Various
(a) Utilization of the United States loss carry forwards will be limited in any year as a result of the previous changes in ownership.
The Company operates primarily in the gold mining industry and its major product is gold. Its activities include gold
production, acquisition, exploration and development of gold properties. The Company’s primary mining operations are in
the United States, the Russian Federation, Brazil, Chile, Ghana and Mauritania.
The reportable segments are those operations whose operating results are reviewed by the chief operating decision maker
to make decisions about resources to be allocated to the segment and assess its performance provided those operations
pass certain quantitative thresholds. Operations whose revenues, earnings or losses or assets exceed 10% of the total
consolidated revenue, earnings or losses or assets are reportable segments.
In order to determine reportable operating segments, management reviews various factors, including geographical location
and managerial structure. It was determined by management that a reportable operating segment generally consists of an
individual mining property managed by a single general manager and management team.
The Kupol segment includes the Kupol and Dvoinoye mines. These two mines have been aggregated into one reportable
segment as they have integrated cost structures, due to the processing of Dvoinoye ore at the Kupol mill, and other shared
infrastructure such as the purchasing function.
The Corporate and other segment includes corporate, Cerro Casale, shutdown and other non-operating assets (including La
Coipa, Lobo-Marte and White Gold) and non-mining and other operations. These have been aggregated into one reportable
segment as they do not generate revenues for the Company.
Finance income, finance expense, other income (expense), and equity in earnings (losses) of associate and joint ventures are
managed on a consolidated basis and are not allocated to operating segments.
FS
52
Kinross Gold Annual Report 2016
FS
53
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(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:
Year ended December 31, 2016:
Revenue
Metal sales
Cost of sales
Production cost of sales
Depreciation, depletion and amortization
Impairment charges
Total cost of sales
Gross profit (loss)
Other operating expense
Exploration and business development
General and administrative
Operating earnings (loss)
Other income (expense) - net
Equity in earnings (losses) of associate and joint ventures
Finance income
Finance expense
Loss before tax
Round
Mountain (c)
Fort Knox
Operating segments
Bald
Kettle
River-
Mountain (c) Paracatu Maricunga
Kupol
Buckhorn Tasiast Chirano
Non-
operating
segments (a)
Corporate
and other (b)
Total
$
510.8
477.1
139.6
599.6
219.4
919.2
139.8
208.0
258.5
-
$
3,472.0
302.2
88.7
-
390.9
119.9
1.0
$
8.9
-
110.0
$
292.0
94.7
-
386.7
90.4
-
4.6
-
85.8
131.7
38.6
-
170.3
(30.7)
2.0
4.7
-
(37.4)
346.4
142.7
-
489.1
110.5
74.3
-
-
36.2
145.2
34.4
139.6
319.2
(99.8)
50.8
-
-
(150.6)
324.3
236.8
-
561.1
358.1
(0.5)
13.3
-
345.3
73.0
1.3
-
74.3
65.5
(0.7)
2.2
-
64.0
179.3
96.4
-
275.7
(67.7)
46.3
5.9
-
(119.9)
189.7
109.9
-
299.6
(41.1)
8.0
8.9
-
(58.0)
-
11.5
-
11.5
(11.5)
28.1
45.8
1,983.8
855.0
139.6
2,978.4
493.6
209.3
$
94.3
143.7
(229.1)
$
143.7
46.3
22.5
(1.2)
7.5
(134.6)
$
(59.5)
Year ended December 31, 2015:
Revenue
Metal sales
Cost of sales
Production cost of sales
Depreciation, depletion and amortization
Impairment charges
Total cost of sales
Gross profit (loss)
Other operating expense
Exploration and business development
General and administrative
Operating earnings (loss)
Other income (expense) - net
Equity in earnings (losses) of associate and joint venture
Finance income
Finance expense
Loss before tax
Operating segments
Non-
operating
segments (a)
Round
Fort Knox
Mountain Paracatu Maricunga
Kupol
Kettle
River-
Buckhorn
Tasiast
Chirano
Corporate
and other (b)
Total
$
467.0
228.1
559.8
249.1
883.2
113.3
249.4
302.3
-
$
3,052.2
252.8
130.3
252.7
635.8
(168.8)
1.4
$
10.6
-
$
(180.8)
146.9
44.9
44.0
235.8
(7.7)
-
1.2
-
(8.9)
374.3
147.5
3.3
525.1
34.7
10.3
-
-
24.4
216.1
27.3
48.7
292.1
(43.0)
17.4
-
-
(60.4)
362.8
271.3
84.7
718.8
164.4
(0.2)
14.5
-
150.1
81.6
12.0
-
93.6
19.7
(12.6)
2.0
-
30.3
220.6
80.9
259.7
561.2
(311.8)
35.3
14.1
-
(361.2)
179.7
175.0
5.9
360.6
(58.3)
(1.7)
13.5
-
(70.1)
-
8.5
-
8.5
(8.5)
26.3
52.1
1,834.8
897.7
699.0
3,431.5
(379.3)
76.2
$
108.0
179.4
(266.3)
$
179.4
(742.9)
(20.3)
3.2
8.3
(96.0)
$
(847.7)
FS
54
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(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:
Year ended December 31, 2016:
Fort Knox
Mountain (c)
Mountain (c) Paracatu Maricunga
Kupol
Buckhorn Tasiast Chirano
Round
Bald
Operating segments
Kettle
River-
$
510.8
477.1
139.6
599.6
219.4
919.2
139.8
208.0
258.5
$
3,472.0
302.2
88.7
-
390.9
$
119.9
1.0
8.9
-
292.0
94.7
386.7
90.4
4.6
-
-
-
131.7
38.6
-
170.3
(30.7)
2.0
4.7
-
346.4
142.7
489.1
110.5
74.3
-
-
-
145.2
34.4
139.6
319.2
(99.8)
50.8
-
-
324.3
236.8
561.1
358.1
(0.5)
13.3
-
-
73.0
1.3
74.3
65.5
(0.7)
2.2
-
-
179.3
96.4
-
-
46.3
5.9
189.7
109.9
-
8.0
8.9
-
275.7
299.6
(67.7)
(41.1)
11.5
2,978.4
(11.5)
$
493.6
$
110.0
85.8
(37.4)
36.2
(150.6)
345.3
64.0
(119.9)
(58.0)
(229.1)
$
46.3
Year ended December 31, 2015:
Fort Knox
Mountain Paracatu Maricunga
Kupol
Buckhorn
Tasiast
Chirano
Round
Operating segments
Kettle
River-
$
467.0
228.1
559.8
249.1
883.2
113.3
249.4
302.3
$
3,052.2
252.8
130.3
252.7
635.8
1.4
10.6
-
$
(168.8)
146.9
44.9
44.0
235.8
(7.7)
1.2
-
-
374.3
147.5
3.3
525.1
34.7
10.3
-
-
216.1
27.3
48.7
292.1
(43.0)
17.4
-
-
362.8
271.3
84.7
718.8
164.4
(0.2)
14.5
-
81.6
12.0
-
93.6
19.7
(12.6)
2.0
-
220.6
80.9
259.7
561.2
(311.8)
35.3
14.1
-
179.7
175.0
5.9
360.6
(58.3)
(1.7)
13.5
-
Revenue
Metal sales
Cost of sales
Production cost of sales
Depreciation, depletion and amortization
Impairment charges
Total cost of sales
Gross profit (loss)
Other operating expense
Exploration and business development
General and administrative
Operating earnings (loss)
Other income (expense) - net
Finance income
Finance expense
Loss before tax
Equity in earnings (losses) of associate and joint ventures
Revenue
Metal sales
Cost of sales
Production cost of sales
Depreciation, depletion and amortization
Impairment charges
Total cost of sales
Gross profit (loss)
Other operating expense
Exploration and business development
General and administrative
Operating earnings (loss)
Other income (expense) - net
Finance income
Finance expense
Loss before tax
Equity in earnings (losses) of associate and joint venture
Non-
operating
segments (a)
Corporate
and other (b)
Total
-
-
-
11.5
28.1
45.8
143.7
1,983.8
855.0
139.6
209.3
94.3
143.7
22.5
(1.2)
7.5
(134.6)
$
(59.5)
Non-
operating
segments (a)
Corporate
and other (b)
Total
1,834.8
897.7
699.0
8.5
3,431.5
(8.5)
$
(379.3)
-
-
-
8.5
26.3
52.1
179.4
76.2
108.0
179.4
(20.3)
3.2
8.3
(96.0)
$
(847.7)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
Operating segments
Round
Mountain (c)
Fort Knox
Bald
Kettle
River-
Mountain (c) Paracatu Maricunga
Kupol
Buckhorn Tasiast Chirano
Non-
operating
segments(a)
Corporate
and other (b)
Total
$
248.4
307.1
440.9
1,647.5
37.6
599.5
2.0
826.9
416.6
391.1
$
4,917.6
$
457.7
430.8
598.9
1,880.4
145.3
1,417.0
15.9
1,122.8
581.5
1,329.0
$
7,979.3
Property, plant and equipment at:
December 31, 2016
Total assets at:
December 31, 2016
Capital expenditures for year ended December 31, 2016 (d)
$
67.2
70.1
41.2
113.8
5.1
88.0
-
200.4
48.2
11.1
$
645.1
Operating segments
Non-
operating
segments (a)
Round
Fort Knox
Mountain Paracatu Maricunga
Kupol
Kettle
River-
Buckhorn
Tasiast
Chirano
Corporate
and other (b)
Total
$
244.9
161.4
1,693.0
139.0
753.0
2.5
736.3
489.2
374.4
$
4,593.7
$
480.5
229.5
1,935.9
373.3
1,566.3
26.6
1,010.1
645.6
1,467.6
$
7,735.4
Property, plant and equipment at:
December 31, 2015
Total assets at:
December 31, 2015
Capital expenditures for year ended December 31, 2015 (d)
$
145.0
50.0
109.0
31.2
56.7
0.5
165.4
32.0
35.1
$
624.9
(a) Non-operating segments include development properties.
(b) Corporate and other includes corporate, Cerro Casale, shutdown and other non-operating assets (including La Coipa, Lobo-Marte and
White Gold).
(c) Bald Mountain and the remaining 50% interest in Round Mountain were acquired on January 11, 2016. See Note 6.
(d) Segment capital expenditures are presented on an accrual basis. Additions to property, plant and equipment in the consolidated
statements of cash flows are presented on a cash basis.
ii.
Geographic segments
$
(180.8)
(8.9)
24.4
(60.4)
150.1
30.3
(361.2)
(70.1)
(266.3)
$
(742.9)
The following table shows metal sales and property, plant and equipment by geographic region:
Metal sales
Property, plant and equipment
Years ended December 31,
2016
2015
As at December 31,
2016
2015
Geographic information (a)
United States
Russian Federation
Brazil
Chile
Mauritania
Ghana
Canada
Total
$
1,267.3
919.2
599.6
219.4
208.0
258.5
$
808.4
883.2
559.8
249.1
249.4
302.3
-
-
$
3,472.0
$
3,052.2
(a) Geographic location is determined based on location of the mining assets.
$
$
1,002.1
630.8
1,647.5
306.6
832.5
427.9
70.2
4,917.6
412.9
786.1
1,693.0
387.8
743.0
498.4
72.5
4,593.7
$
$
FS
54
Kinross Gold Annual Report 2016
FS
55
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(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:
For the year ended
December 31, 2016:
Fort
Knox
Round
Mountain
Bald
Mountain
Paracatu Maricunga
Kupol
Kettle River-
Buckhorn
Tasiast
Chirano
Total
Customer
1
2
3
% of total metal sales
$ 101.8
-
-
75.9 22.0 130.1
- - -
- - -
41.8
- 473.5
- 405.5
20.5 66.6
-
-
80.2
-
-
72.5 $
-
-
$
611.4
473.5
405.5
1,490.4
42.9%
For the year ended
December 31, 2015:
Fort
Knox
Round
Mountain Paracatu Maricunga
Kupol
Kettle
River-
Buckhorn
Tasiast
Chirano
Total
Customer
1
2
3
% of total metal sales
-
89.6
78.0
- - -
15.6 94.7 30.2
46.5 43.4 50.4
677.7
170.5
- -
34.9 83.5
- 23.6 45.6
-
80.6
61.9
$
$
677.7
599.6
349.4
1,626.7
53.3%
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 $16.6 million, $13.6 million, $5.3 million, $2.4 million and $1.0 million for each year from
2017 to 2021, respectively, and $2.4 million thereafter.
Purchase commitments
At December 31, 2016, the Company had future commitments of approximately $108.9 million (December 31, 2015 –
$19.9 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.
FS
56
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
iii.
Significant customers
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
Cerro Casale contingency
The following table represents sales to individual customers exceeding 10% of annual metal sales for the following periods:
The Company is obligated to pay $20.0 million to Barrick if a positive production decision is made relating to the Cerro Casale
project.
For the year ended
December 31, 2016:
Fort
Knox
Round
Bald
Mountain
Mountain
Paracatu Maricunga
Kupol
Buckhorn
Tasiast
Chirano
Total
Kettle River-
Other legal matters
$ 101.8
75.9 22.0 130.1
41.8
20.5 66.6
80.2
72.5 $
-
- - -
- 473.5
-
-
-
-
- - -
- 405.5
-
-
-
For the year ended
December 31, 2015:
Fort
Knox
Round
Mountain Paracatu Maricunga
Kupol
Buckhorn
Tasiast
Chirano
Total
Kettle
River-
-
- - -
- -
-
$
89.6
15.6 94.7 30.2
34.9 83.5
80.6
78.0
46.5 43.4 50.4
- 23.6 45.6
61.9
677.7
170.5
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
611.4
473.5
405.5
1,490.4
42.9%
677.7
599.6
349.4
1,626.7
53.3%
$
$
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 $16.6 million, $13.6 million, $5.3 million, $2.4 million and $1.0 million for each year from
2017 to 2021, respectively, and $2.4 million thereafter.
At December 31, 2016, the Company had future commitments of approximately $108.9 million (December 31, 2015 –
$19.9 million) for capital expenditures.
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.
Customer
1
2
3
% of total metal sales
Customer
1
2
3
% of total metal sales
i.
Commitments
Operating leases
Purchase commitments
ii. Contingencies
General
FS
56
Kinross Gold Annual Report 2016
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 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.
Maricunga Regulatory Proceedings
In late 2013, Compania Minera Maricunga (“CMM”) was fined approximately $40,000 in respect of the degradation of the
Pantanillo wetland located near the Maricunga mine’s water pumping wells. In May 2015, the Chile environmental
enforcement authority (the “SMA”) issued a resolution alleging that CMM had irreparably harmed portions of the Pantanillo
wetland and two other downstream wetlands known respectively as Valle Ancho and Barros Negros, and that the mine’s
continuing water use poses an imminent risk to those wetlands. In response, CMM submitted legal and technical defenses,
expert reports and other materials challenging the SMA’s allegations, and, as required by law, responded to various
information requests from the SMA. On March 18, 2016, the SMA issued a resolution against CMM in respect of the SMA’s
May 2015 allegations regarding the Valle Ancho wetland, located approximately 7 kilometers downgradient from CMM’s
groundwater wells, seeking to impose a sanction of an immediate complete curtailment of water use from the groundwater
wells and related aquifer (the “sanction proceedings”). The Maricunga mine relies solely on water from the Pantanillo area
groundwater wells to support its operations. On March 28, 2016, CMM filed a request with the SMA to reconsider the
sanction proceedings resolution (the “reconsideration”). While reserving its rights of appeal, CMM requested
reconsideration of the sanction on the basis that a complete stoppage of water use at the Maricunga mine was both legally
and technically flawed, and could have serious environmental, health and safety consequences. Specifically, until the
Maricunga mine is closed in accordance with the government-approved closure plan, the mine will require some water to
ensure the health and safety of its personnel and local communities, maintain the environmental stability of the heap leach
facilities, and complete closure of the mine in an environmentally responsible manner in accordance with its permits,
applicable laws and international best practices. Beginning in May 2016, the SMA issued a series of resolutions ordering
CMM to “temporarily” curtail the pumping of water from the groundwater wells. In response, CMM suspended mining and
crushing activities and reduced water consumption to minimal levels. CMM contested these resolutions by seeking
reconsideration with the SMA and appealing to Chile’s Environmental Tribunal, but its efforts were unsuccessful and, except
for a short period of time in July 2016, the Company’s operations have remained suspended. On June 24, 2016, the SMA
amended its initial sanction (the “Amended Sanction”). The Amended Sanction, if affirmed by the Environmental Tribunal,
would require CMM to effectively cease operations and close the mine, with water use curtailed to levels far below those
required for closure in compliance with the mine’s government-approved plan. On July 9, 2016, CMM filed its appeal in the
sanction proceedings. As part of its appeal, CMM submitted legal and technical arguments and reports by experts on wetland
vegetation, analysis of long-term satellite imagery and groundwater hydrology criticizing the evidence relied upon by the
SMA and concluding that current data does not support an assertion that CMM’s pumping is negatively impacting water
levels 7 kilometers downgradient at the Valle Ancho wetland. On August 30, 2016, CMM submitted a request to the
Environmental Tribunal that it issue an injunction suspending the effectiveness of the Amended Sanction pending a final
decision on the merits of CMM’s appeal of the Amended Sanction. On September 16, 2016, the Environmental Tribunal
rejected CMM’s injunction request. On October 11, 2016, a hearing was held before the Environmental Tribunal on CMM’s
appeal of the Amended Sanction and on CMM’s appeals of prior water curtailment orders. Decisions in these appeals remain
pending.
On June 2, 2016, CMM was served with two separate lawsuits filed by the Chilean State Defense Counsel. Both lawsuits are
based upon allegations that CMM’s pumping from its Pantanillo area groundwater wells has caused damage to area
wetlands. One action relates to the Pantanillo wetland, and is based upon the sanction imposed upon CMM in late 2013 (as
described above). The other action relates to the Valle Ancho wetland, and is largely based upon the same factual assertions
at issue in the SMA sanction proceedings. These lawsuits seek, among other things, to require CMM to cease pumping from
the groundwater wells, finance various investigations and conduct restoration activities. On June 20, 2016, CMM filed its
defenses. Evidentiary hearings took place in November and December 2016, and additional hearings in the matter are in
the process of being scheduled. CMM will continue to vigorously defend itself in these proceedings.
FS
57
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
Sunnyside Litigation
The Sunnyside Mine is an inactive mine situated in the so-called Bonita Peak Mining District (“District”) near Silverton,
Colorado. A subsidiary of Kinross, Sunnyside Gold Corporation ("SGC"), was involved in operations at the mine for a period
in the late-1980s to early 1990s and subsequently conducted various reclamation and closure activities at the mine and in
the surrounding area. In the third quarter of 2016, the Environmental Protection Agency (the “EPA”) listed the District,
including areas impacted by SGC’s operations and closure activities, on the National Priorities List pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”). SGC has challenged portions of the
CERCLA listing in the United States Court of Appeals for District of Columbia Circuit. It is likely that the EPA will assert that
the Company is a potentially responsible party under CERCLA and is jointly and severally liable for CERCLA response costs
incurred in the District. In addition, the EPA may seek to require the Company to conduct investigative and remedial
activities. On August 5, 2015, while working in another mine in the District known as the Gold King, the EPA caused a release
of approximately three million gallons of contaminated water into a tributary of the Animas River. In the second quarter of
2016, the State of New Mexico filed a Complaint naming the EPA, SGC, Kinross and others alleging violations of CERCLA, the
Resource Conservation and Recovery Act (“RCRA”), and the Clean Water Act (“CWA”) and claiming negligence, gross
negligence, public nuisance and trespass. The Complaint seeks cost recovery, damages, injunctive relief, and attorney’s fees.
In the third quarter of 2016, the Navajo Nation initiated litigation against the EPA, SGC and Kinross, alleging entitlement to
cost recovery under CERCLA for past and future costs incurred, negligence, gross negligence, trespass, and public and private
nuisance, and seeking reimbursement of past and future costs, compensatory, consequential and punitive damages,
injunctive relief and attorneys’ fees. The suits brought by New Mexico and the Navajo Nation have been consolidated. The
Company has also received a “notice of intent to sue” letter from the State of Utah indicating that it intends to sue a number
of parties, including the EPA and the Company, for, among other things, injunctive relief, costs, damages and attorneys’ fees
under RCRA, the CWA and the Utah Water Quality Act. Kinross and SGC will vigorously defend themselves in the actions
that have been brought and in any future actions that may be brought.
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.
FS
58
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
58
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
Sunnyside Litigation
The Sunnyside Mine is an inactive mine situated in the so-called Bonita Peak Mining District (“District”) near Silverton,
Colorado. A subsidiary of Kinross, Sunnyside Gold Corporation ("SGC"), was involved in operations at the mine for a period
in the late-1980s to early 1990s and subsequently conducted various reclamation and closure activities at the mine and in
the surrounding area. In the third quarter of 2016, the Environmental Protection Agency (the “EPA”) listed the District,
including areas impacted by SGC’s operations and closure activities, on the National Priorities List pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”). SGC has challenged portions of the
CERCLA listing in the United States Court of Appeals for District of Columbia Circuit. It is likely that the EPA will assert that
the Company is a potentially responsible party under CERCLA and is jointly and severally liable for CERCLA response costs
incurred in the District. In addition, the EPA may seek to require the Company to conduct investigative and remedial
activities. On August 5, 2015, while working in another mine in the District known as the Gold King, the EPA caused a release
of approximately three million gallons of contaminated water into a tributary of the Animas River. In the second quarter of
2016, the State of New Mexico filed a Complaint naming the EPA, SGC, Kinross and others alleging violations of CERCLA, the
Resource Conservation and Recovery Act (“RCRA”), and the Clean Water Act (“CWA”) and claiming negligence, gross
negligence, public nuisance and trespass. The Complaint seeks cost recovery, damages, injunctive relief, and attorney’s fees.
In the third quarter of 2016, the Navajo Nation initiated litigation against the EPA, SGC and Kinross, alleging entitlement to
cost recovery under CERCLA for past and future costs incurred, negligence, gross negligence, trespass, and public and private
nuisance, and seeking reimbursement of past and future costs, compensatory, consequential and punitive damages,
injunctive relief and attorneys’ fees. The suits brought by New Mexico and the Navajo Nation have been consolidated. The
Company has also received a “notice of intent to sue” letter from the State of Utah indicating that it intends to sue a number
of parties, including the EPA and the Company, for, among other things, injunctive relief, costs, damages and attorneys’ fees
under RCRA, the CWA and the Utah Water Quality Act. Kinross and SGC will vigorously defend themselves in the actions
that have been brought and in any future actions that may be brought.
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
20.
RELATED PARTY TRANSACTIONS
There were no material related party transactions in 2016 and 2015 other than compensation of key management personnel.
The Company received no dividends from Puren during the year ended December 31, 2016 (year ended December 31, 2015
– $4.6 million).
Key management personnel
Compensation of key management personnel of the Company is as follows:
Years ended December 31,
2016
2015
Cash compensation - Salaries, short-term incentives, and other benefits
Long-term incentives, including share-based payments
Termination and post-retirement benefits
Total compensation paid to key management personnel
$
$
7.3
9.3
3.9
20.5
8.0
10.6
3.5
22.1
$
$
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 senior notes are guaranteed by the following 100% owned subsidiaries of the
Company (the “guarantor subsidiaries”): Round Mountain Gold Corporation, Kinross Brasil Mineração S.A., Fairbanks Gold
Mining, Inc., Melba Creek Mining, Inc., KG Mining (Round Mountain) Inc., KG Mining (Bald Mountain) Inc., Red Back Mining
B.V., Red Back Mining (Ghana) Limited, White Ice Ventures Limited, KG Far East (Luxembourg) Sarl. All guarantees by the
guarantor subsidiaries are joint and several, and full and unconditional; subject to certain customary release provisions
contained in the indenture governing the senior notes.
During the year ended December 31, 2016, certain changes were made to the guarantor subsidiaries. The following
subsidiaries are no longer guarantors: BGO (Bermuda) Ltd., Crown Resources Corporation, Compania Minera Mantos de Oro,
Compania Minera Maricunga, Red Back Mining Inc., and RBM Mauritania No 2 Ltd., and were replaced by: KG Mining (Round
Mountain) Inc., KG Mining (Bald Mountain) Inc., Red Back Mining B.V., Red Back Mining (Ghana) Limited, White Ice Ventures
Limited, and KG Far East (Luxembourg) Sarl.
The following tables contain separate financial information related to the guarantor subsidiaries as set out in the
consolidating balance sheets as at December 31, 2016 and December 31, 2015 and the consolidating statements of
operations, statements of comprehensive loss and statements of cash flows for the years ended December 31, 2016 and
2015. For purposes of this information, the financial statements of Kinross Gold Corporation and of the guarantor
subsidiaries reflect investments in subsidiary companies on an equity accounting basis. As a result of the changes in the
guarantor subsidiaries noted above, the consolidating balance sheet, and the consolidating statements of operations,
comprehensive income (loss) and cash flows for the comparative periods have been recast.
FS
58
Kinross Gold Annual Report 2016
FS
59
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
Consolidating balance sheet as at December 31, 2016
K
inross G old
Corp.
G
u arantors
G
u arantor
iaries
b sid
G
u arantor
u stm ents
Total
u arantors
Non-
gu arantors
E lim inations
Consolid ated
$
126.2
$
145.6
$
-
$
271.8
$
555.2
$
-
$
827.0
-
6.4
541.5
-
5.7
12.6
692.4
26.8
-
141.5
-
3,150.2
19.0
8.6
3,250.6
-
4.6
42.3
-
-
4.6
48.7
7.0
78.6
-
-
1,277.3
(175.5)
1,643.3
4,384.9
(6,028.2)
12.0
440.3
(1.6)
-
-
-
12.0
446.0
11.0
99.9
540.8
5.1
-
-
-
11.6
127.3
-
111.9
986.8
16.1
1,920.5
(175.5)
2,437.4
5,671.5
(6,028.2)
2,080.7
2,704.0
2,213.6
2,677.2
158.8
-
5.5
-
-
-
-
1,699.7
(4,360.2)
(14.7)
121.6
-
-
158.8
141.5
5.5
489.7
4.3
130.2
2,084.3
(1,758.8)
3,576.1
0.7
-
0.7
3.9
1.4
158.1
-
-
-
-
11,787.5
(12,277.2)
1.7
281.1
3,396.9
93.8
-
-
(6,973.0)
-
4,917.6
162.7
142.9
163.6
-
6.0
411.3
-
94.5
$
7,289.1
$
8,653.6
$
(6,294.5)
$
9,648.2
$
23,609.5
$
(25,278.4)
$
7,979.3
$
72.9
$
207.0
$
-
$
279.9
$
184.9
$
-
$
464.8
120.1
-
-
-
7.1
200.1
1,733.2
11.1
-
1,199.2
-
3,143.6
601.0
10.9
-
13.2
-
832.1
-
367.4
85.0
2,779.0
229.9
4,293.4
(175.5)
-
-
-
-
(175.5)
-
-
-
(1,758.8)
-
(1,934.3)
545.6
10.9
-
13.2
7.1
856.7
1,733.2
378.5
85.0
2,219.4
229.9
5,502.7
5,482.6
(6,028.2)
61.7
-
80.0
-
-
-
-
-
-
72.6
-
93.2
7.1
5,809.2
(6,028.2)
637.7
-
482.7
87.2
4,753.6
160.8
-
-
-
(6,973.0)
-
11,293.5
(13,001.2)
1,733.2
861.2
172.2
-
390.7
3,795.0
$
14,894.2
$
1,713.3
$
(1,713.3)
$
14,894.2
$
18,053.2
$
(18,053.2)
$
14,894.2
238.3
(11,026.1)
39.1
4,145.5
-
4,145.5
2,396.0
(2,396.0)
238.3
4,402.0
(4,402.0)
238.3
243.5
7.4
(243.5)
(11,026.1)
(10,157.4)
10,157.4
(11,026.1)
(7.4)
39.1
(20.6)
20.6
4,360.2
(4,360.2)
4,145.5
12,277.2
(12,277.2)
-
-
-
38.8
-
4,360.2
(4,360.2)
4,145.5
12,316.0
(12,277.2)
39.1
4,145.5
38.8
4,184.3
$
7,289.1
$
8,653.6
$
(6,294.5)
$
9,648.2
$
23,609.5
$
(25,278.4)
$
7,979.3
A ssets
Current assets
Cash and cash eq uivalents
Restricted cash
Accounts receivable and other assets
Intercompany receivables
Current income tax recoverable
Inventories
U nrealiz ed fair value of derivative assets
N on-current assets
Property, plant and eq uipment
Goodw
ill
Long-term investments
Investments in associate and j oint ventures
Intercompany investments
U nrealiz ed fair value of derivative assets
Other long-term assets
Long-term intercompany receivables
Deferred tax assets
Total assets
iab
ilities
Current liabilities
Accounts payable and accrued liabilities
Intercompany payables
Current income tax payable
Current portion of long-term debt
Current portion of provisions
Current portion of unrealiz ed fair value of derivative liabilities
N on-current liabilities
Long-term debt
Provisions
Other long-term liabilities
Long-term intercompany payables
Deferred tax liabilities
Total liab
ilities
ity
Common shareholders' eq uity
Common share capital
Contributed surplus
Accumulated deficit
Accumulated other comprehensive income (loss)
Total com m on sharehold ers' eq
ity
N on-controlling interest
Total eq
ity
Total liab
ilities and
eq
ity
FS
60
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
60
S
u
A
d
j
G
L
E
q
u
u
u
u
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
Consolidating balance sheet as at December 31, 2016
Consolidating balance sheet as at December 31, 2015
K
inross G old
G
u arantor
G
u arantor
Total
Corp.
b sid
iaries
u stm ents
u arantors
G
u arantors
Non-
gu arantors
E lim inations
Consolid ated
inross G old
Corp.
u arantor
iaries
b sid
u arantor
u stm ents
Total
u arantors
u arantors
Non-
gu arantors
E lim inations Consolid ated
$
72.9
$
207.0
$
-
$
279.9
$
184.9
$
-
$
464.8
Accounts payable and accrued liabilities
$
65.9
$
100.8
$
-
$
166.7
$
212.9
$
-
$
379.6
A ssets
Current assets
Cash and cash eq uivalents
Restricted cash
Accounts receivable and other assets
Intercompany receivables
Current income tax recoverable
Inventories
U nrealiz ed fair value of derivative assets
N on-current assets
Property, plant and eq uipment
Goodw
ill
Long-term investments
Investments in associate and j oint ventures
Intercompany investments
U nrealiz ed fair value of derivative assets
Other long-term assets
Long-term intercompany receivables
Deferred tax assets
Total assets
iab
ilities
Current liabilities
6.4
541.5
5.7
12.6
692.4
26.8
141.5
3,150.2
19.0
8.6
3,250.6
-
-
-
-
-
-
-
-
-
-
7.1
200.1
1,733.2
11.1
1,199.2
3,143.6
238.3
(11,026.1)
39.1
4,145.5
-
4,145.5
$
126.2
$
145.6
$
-
$
271.8
$
555.2
$
-
$
827.0
1,277.3
(175.5)
1,643.3
4,384.9
(6,028.2)
1,699.7
(4,360.2)
11,787.5
(12,277.2)
2,084.3
(1,758.8)
3,576.1
(6,973.0)
$
7,289.1
$
8,653.6
$
(6,294.5)
$
9,648.2
$
23,609.5
$
(25,278.4)
$
7,979.3
1,920.5
(175.5)
2,437.4
5,671.5
(6,028.2)
2,080.7
2,704.0
2,213.6
4.6
42.3
12.0
440.3
(1.6)
2,677.2
158.8
-
5.5
(14.7)
121.6
0.7
601.0
10.9
13.2
-
-
-
367.4
85.0
2,779.0
229.9
4,293.4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4.6
48.7
12.0
446.0
11.0
158.8
141.5
5.5
489.7
4.3
130.2
0.7
545.6
10.9
-
13.2
7.1
856.7
1,733.2
378.5
85.0
2,219.4
229.9
5,502.7
7.0
78.6
99.9
540.8
5.1
3.9
1.4
158.1
1.7
281.1
3,396.9
93.8
5,482.6
61.7
80.0
-
-
-
482.7
87.2
4,753.6
160.8
(1,758.8)
(1,934.3)
(6,973.0)
11,293.5
(13,001.2)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
120.1
(175.5)
(6,028.2)
$
14,894.2
$
1,713.3
$
(1,713.3)
$
14,894.2
$
18,053.2
$
(18,053.2)
$
14,894.2
2,396.0
(2,396.0)
238.3
4,402.0
(4,402.0)
238.3
243.5
7.4
(243.5)
(11,026.1)
(10,157.4)
10,157.4
(11,026.1)
(7.4)
39.1
(20.6)
20.6
4,360.2
(4,360.2)
4,145.5
12,277.2
(12,277.2)
-
-
-
38.8
-
4,360.2
(4,360.2)
4,145.5
12,316.0
(12,277.2)
$
7,289.1
$
8,653.6
$
(6,294.5)
$
9,648.2
$
23,609.5
$
(25,278.4)
$
7,979.3
11.6
127.3
-
111.9
986.8
16.1
4,917.6
162.7
142.9
163.6
6.0
411.3
94.5
72.6
93.2
7.1
637.7
1,733.2
861.2
172.2
-
390.7
3,795.0
-
-
-
-
39.1
4,145.5
38.8
4,184.3
A ssets
Current assets
Cash and cash eq uivalents
Restricted cash
Accounts receivable and other assets
Intercompany receivables
Current income tax recoverable
Inventories
U nrealiz ed fair value of derivative assets
N on-current assets
Property, plant and eq uipment
Goodw
ill
Long-term investments
Investments in associate and j oint ventures
Intercompany investments
U nrealiz ed fair value of derivative assets
Other long-term assets
Long-term intercompany receivables
Deferred tax assets
Total assets
iab
ilities
Current liabilities
Accounts payable and accrued liabilities
Intercompany payables
Current income tax payable
Current portion of long-term debt
Current portion of provisions
N on-current liabilities
Long-term debt
Provisions
Other long-term liabilities
Long-term intercompany payables
Deferred tax liabilities
Total liab
ilities
ity
Common shareholders' eq uity
Common share capital
Contributed surplus
Accumulated deficit
Accumulated other comprehensive income (loss)
Total com m on sharehold ers' eq
ity
N on-controlling interest
Total eq
ity
Total liab
ilities and
eq
ity
FS
60
Kinross Gold Annual Report 2016
Current portion of unrealiz ed fair value of derivative liabilities
Current portion of unrealiz ed fair value of derivative liabilities
832.1
(175.5)
5,809.2
(6,028.2)
Intercompany payables
Current income tax payable
Current portion of long-term debt
Current portion of provisions
N on-current liabilities
Long-term debt
Provisions
Other long-term liabilities
Long-term intercompany payables
Deferred tax liabilities
Total liab
ilities
ity
Common shareholders' eq uity
Common share capital
Contributed surplus
Accumulated deficit
Accumulated other comprehensive loss
Total com m on sharehold ers' eq
ity
N on-controlling interest
Total eq
ity
Total liab
ilities and
eq
ity
$
113.8
$
127.0
$
-
$
240.8
$
803.1
$
-
$
1,043.9
-
4.8
541.2
-
1.5
1.5
662.8
29.3
-
82.7
-
3,306.1
-
10.2
3,056.2
-
3.0
24.0
982.7
10.0
294.1
(0.5)
1,440.3
2,132.7
158.8
-
-
-
-
3.0
28.8
7.5
79.4
-
-
(111.6)
1,412.3
4,800.6
(6,212.9)
-
-
-
10.0
295.6
1.0
113.3
709.6
-
-
-
-
10.5
108.2
-
123.3
1,005.2
1.0
(111.6)
1,991.5
6,513.5
(6,212.9)
2,292.1
-
-
-
-
2,162.0
2,431.7
158.8
82.7
-
930.8
-
126.0
3,458.2
0.8
3.9
0.4
157.1
8,841.5
-
244.2
3,023.5
75.7
-
-
-
-
(9,772.3)
-
-
(6,481.7)
-
4,593.7
162.7
83.1
157.1
-
-
370.2
-
76.5
405.7
(2,781.0)
-
115.8
2,675.1
0.8
-
-
(2,273.1)
-
$
7,147.3
$
6,929.2
$
(5,165.7)
$
8,910.8
$
21,291.5
$
(22,466.9)
$
7,735.4
196.6
-
249.5
-
3.8
515.8
1,731.9
9.9
-
1,000.4
-
3,258.0
494.7
(111.6)
3.0
-
6.6
6.6
-
-
-
-
579.7
3.0
249.5
6.6
10.4
5,633.2
(6,212.9)
3.4
-
43.7
5.6
-
-
-
-
611.7
(111.6)
1,015.9
5,898.8
(6,212.9)
-
232.1
78.6
2,957.5
268.3
4,148.2
-
-
-
(2,273.1)
-
(2,384.7)
1,731.9
242.0
78.6
1,684.8
268.3
5,021.5
-
478.8
70.1
4,796.9
230.7
-
-
-
(6,481.7)
-
11,475.3
(12,694.6)
-
6.4
249.5
50.3
16.0
701.8
1,731.9
720.8
148.7
-
499.0
3,802.2
$
14,603.5
$
1,398.3
$
(1,398.3)
$
14,603.5
$
18,460.7
$
(18,460.7)
$
14,603.5
239.2
(10,922.1)
(31.3)
3,889.3
-
3,889.3
936.0
450.7
(4.0)
(936.0)
(450.7)
4.0
2,781.0
(2,781.0)
-
-
239.2
2,360.8
(2,360.8)
239.2
(10,922.1)
(11,018.2)
11,018.2
(10,922.1)
(31.3)
3,889.3
-
(31.0)
9,772.3
43.9
9,816.2
31.0
(9,772.3)
-
(9,772.3)
(31.3)
3,889.3
43.9
3,933.2
2,781.0
(2,781.0)
3,889.3
$
7,147.3
$
6,929.2
$
(5,165.7)
$
8,910.8
$
21,291.5
$
(22,466.9)
$
7,735.4
FS
61
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
61
S
u
A
d
j
G
L
E
q
u
u
u
u
K
G
S
u
G
A
d
j
G
L
E
q
u
u
u
u
G
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
Consolidating statement of operations for the year ended December 31, 2016
R ev enu e
Metal sales
Cost of sales
Production cost of sales
Depreciation, depletion and amortiz ation
Impairment charges
Total cost of sales
G ross prof it
Other operating expense
E xploration and business development
General and administrative
Operating earnings (loss)
Other income (expense) - net
q uity in earnings (losses) of associate, j oint ventures and
intercompany investments
Finance income
Finance expense
E arnings (loss) b ef ore tax
Income tax expense - net
Net earnings (loss)
Net earnings (loss) attrib
u tab
le to:
N on-controlling interest
Common shareholders
G
u arantors
K
inross G old
Corp.
G
u arantor
iaries
b sid
G
u arantor
u stm ents
Total
u arantors
Non-
gu arantors
E lim inations Consolid ated
$
2,036.4
$
1,699.8
$
(1,653.3)
$
2,082.9
$
1,389.1
$
-
$
3,472.0
1,999.1
1,075.4
(1,652.7)
1,421.8
8.2
-
365.4
-
(0.6)
-
373.0
-
562.0
482.0
139.6
2,007.3
1,440.8
(1,653.3)
1,794.8
1,183.6
29.1
7.5
20.9
93.0
(92.3)
94.6
(44.4)
25.8
(89.1)
(105.4)
1.4
259.0
77.3
18.5
4.0
159.2
3.6
36.6
16.0
(47.5)
167.9
4.8
-
-
-
-
-
-
(172.7)
(5.7)
5.7
(172.7)
-
288.1
84.8
39.4
97.0
66.9
98.2
(180.5)
36.1
(130.9)
(110.2)
6.2
205.5
124.5
54.9
46.7
(20.6)
234.2
(0.8)
74.2
(106.5)
180.5
(55.8)
-
-
-
-
-
-
-
-
-
(309.9)
180.1
(102.8)
102.8
(129.8)
-
1,983.8
855.0
139.6
2,978.4
493.6
209.3
94.3
143.7
46.3
22.5
(1.2)
7.5
(134.6)
(59.5)
(49.6)
$
(104.0)
$
172.7
$
(172.7)
$
(104.0)
$
124.7
$
(129.8)
$
(109.1)
$
-
$
-
$
-
$
-
$
(5.1)
$
-
$
(5.1)
$
(104.0)
$
172.7
$
(172.7)
$
(104.0)
$
129.8
$
(129.8)
$
(104.0)
FS
62
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
62
S
u
A
d
j
G
E
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
Consolidating statement of operations for the year ended December 31, 2016
Consolidating statement of operations for the year ended December 31, 2015
R ev enu e
Metal sales
Cost of sales
Production cost of sales
Depreciation, depletion and amortiz ation
Impairment charges
Total cost of sales
G ross prof it
Other operating expense
E xploration and business development
General and administrative
Operating earnings (loss)
Other income (expense) - net
intercompany investments
Finance income
Finance expense
E arnings (loss) b ef ore tax
Income tax expense - net
Net earnings (loss)
Net earnings (loss) attrib
u tab
le to:
N on-controlling interest
Common shareholders
q uity in earnings (losses) of associate, j oint ventures and
G
u arantors
K
inross G old
G
u arantor
G
u arantor
Total
Corp.
b sid
iaries
u stm ents
u arantors
Non-
gu arantors
E lim inations Consolid ated
$
2,036.4
$
1,699.8
$
(1,653.3)
$
2,082.9
$
1,389.1
$
-
$
3,472.0
1,999.1
1,075.4
(1,652.7)
1,421.8
2,007.3
1,440.8
(1,653.3)
1,794.8
1,183.6
8.2
-
29.1
7.5
20.9
93.0
(92.3)
94.6
(44.4)
25.8
(89.1)
(105.4)
1.4
365.4
-
259.0
77.3
18.5
4.0
159.2
3.6
36.6
16.0
(47.5)
167.9
4.8
(0.6)
-
-
-
-
-
-
-
-
(172.7)
(5.7)
5.7
(172.7)
373.0
-
288.1
84.8
39.4
97.0
66.9
98.2
(180.5)
36.1
(130.9)
(110.2)
6.2
562.0
482.0
139.6
205.5
124.5
54.9
46.7
(20.6)
234.2
(0.8)
74.2
(106.5)
180.5
(55.8)
-
-
-
-
-
-
-
-
-
-
(309.9)
180.1
(102.8)
102.8
(129.8)
1,983.8
855.0
139.6
2,978.4
493.6
209.3
94.3
143.7
46.3
22.5
(1.2)
7.5
(134.6)
(59.5)
(49.6)
$
(104.0)
$
172.7
$
(172.7)
$
(104.0)
$
124.7
$
(129.8)
$
(109.1)
$
-
$
-
$
-
$
-
$
(5.1)
$
-
$
(5.1)
$
(104.0)
$
172.7
$
(172.7)
$
(104.0)
$
129.8
$
(129.8)
$
(104.0)
R ev enu e
Metal sales
Cost of sales
Production cost of sales
Depreciation, depletion and amortiz ation
Impairment charges
Total cost of sales
G ross prof it (loss)
Other operating expense
E xploration and business development
General and administrative
Operating loss
Other income (expense) - net
q uity in earnings (losses) of associate, j oint venture and
intercompany investments
Finance income
Finance expense
E arnings (loss) b ef ore tax
Income tax expense - net
Net (loss) earnings
Net (loss) earnings attrib
u tab
le to:
N on-controlling interest
Common shareholders
u arantors
inross G old
Corp.
u arantor
iaries
b sid
u arantor
u stm ents
Total
u arantors
Non-
gu arantors
E lim inations Consolid ated
$
1,603.8
$
1,225.4
$
(1,217.9)
$
1,611.3
$
1,440.9
$
-
$
3,052.2
1,572.5
6.8
-
772.0
322.4
299.9
(1,218.2)
1,126.3
0.3
-
329.5
299.9
708.5
568.2
399.1
1,579.3
1,394.3
(1,217.9)
1,755.7
1,675.8
(144.4)
(234.9)
24.5
4.6
20.8
127.8
(128.7)
246.3
(168.9)
11.7
12.4
3.4
(196.4)
(71.4)
-
-
-
-
-
-
(1,076.3)
(346.1)
700.4
41.0
(65.0)
(982.7)
(1.8)
39.7
(25.0)
(599.2)
(101.2)
-
-
700.4
-
16.3
33.2
131.2
(325.1)
174.9
(722.0)
80.7
(90.0)
(881.5)
(103.0)
59.9
74.8
48.2
(417.8)
1,034.4
(1,229.6)
3.2
53.9
(132.3)
541.4
(38.7)
722.0
(126.3)
126.3
(507.6)
-
-
-
-
-
-
-
-
-
-
1,834.8
897.7
699.0
3,431.5
(379.3)
76.2
108.0
179.4
(742.9)
(20.3)
3.2
8.3
(96.0)
(847.7)
(141.7)
$
(984.5)
$
(700.4)
$
700.4
$
(984.5)
$
502.7
$
(507.6)
$
(989.4)
$
-
$
-
$
-
$
-
$
(4.9)
$
-
$
(4.9)
$
(984.5)
$
(700.4)
$
700.4
$
(984.5)
$
507.6
$
(507.6)
$
(984.5)
FS
62
Kinross Gold Annual Report 2016
FS
63
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
63
S
u
A
d
j
G
E
K
G
S
u
G
A
d
j
G
E
G
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
Consolidating statement of comprehensive income (loss) for the year ended December 31, 2016
Net earnings (loss)
$
(104.0)
172.7
(172.7)
(104.0)
124.7
(129.8)
(109.1)
inross G old
Corp.
u arantor
iaries
b sid
u arantor
u stm ents
Total
u arantors
u arantors
Non-
gu arantors
E lim inations
Consolid ated
Other com prehensiv e incom e (loss), net of tax
:
Items to be reclassified to profit or loss in subseq uent
periods:
Changes in fair value of investments (a)
Reclassification to earnings for impairment charges
Accumulated other comprehensive (income) loss
related to investments sold (b)
Changes in fair value of derivative financial
instruments designated as cash flow
hedges (c)
Accumulated other comprehensive (income) loss
related to derivatives settled (d)
q uity in other comprehensive income (loss) of
intercompany investments
Total com prehensiv e incom e (loss)
ttrib
u tab
le to non-controlling interest
ttrib
u tab
le to com m on sharehold ers
(a) N et of tax of
(b) N et of tax of
(c) N et of tax of
(d) N et of tax of
49.8
-
(8.5)
7.4
0.5
49.2
21.2
-
-
-
20.4
(2.7)
17.7
-
-
-
-
-
-
-
(17.7)
49.8
-
(8.5)
27.8
(2.2)
66.9
3.5
1.0
-
-
1.4
1.1
3.5
-
-
-
-
-
-
-
(3.5)
(33.6)
$
190.4
$
(190.4)
$
(33.6)
$
128.2
$
(133.3)
$
-
(33.6)
-
-
1.3
0.2
$
$
$
$
$
$
-
190.4
-
-
8.9
(1.7)
$
$
$
$
$
$
-
(190.4)
-
-
-
-
$
$
$
$
$
$
-
(33.6)
-
-
10.2
(1.5)
$
$
$
$
$
$
(5.1)
133.3
-
-
0.4
0.4
$
$
$
$
$
$
-
(133.3)
-
-
-
-
$
$
$
$
$
$
$
$
$
$
$
$
$
50.8
-
(8.5)
29.2
(1.1)
70.4
-
(38.7)
(5.1)
(33.6)
-
-
10.6
(1.1)
FS
64
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
64
K
G
S
u
G
A
d
j
G
E
A
A
G
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
Consolidating statement of comprehensive income (loss) for the year ended December 31, 2016
Consolidating statement of comprehensive income (loss) for the year ended December 31, 2015
Net earnings (loss)
$
(104.0)
172.7
(172.7)
(104.0)
124.7
(129.8)
(109.1)
Net earnings (loss)
$
(984.5)
$
(700.4)
$
700.4
$
(984.5)
$
502.7
$
(507.6)
$
(989.4)
inross G old
Corp.
u arantor
b sid
iaries
u arantor
u stm ents
Total
u arantors
u arantors
Non-
gu arantors
E lim inations
Consolid ated
inross G old
Corp.
u arantor
iaries
b sid
u arantor
u stm ents
Total
u arantors
u arantors
Non-
gu arantors
E lim inations
Consolid ated
Other com prehensiv e incom e (loss), net of tax
:
Items to be reclassified to profit or loss in subseq uent
periods:
Changes in fair value of investments (a)
Reclassification to earnings for impairment charges
Accumulated other comprehensive (income) loss
related to investments sold (b)
Changes in fair value of derivative financial
instruments designated as cash flow
hedges (c)
Accumulated other comprehensive (income) loss
related to derivatives settled (d)
q uity in other comprehensive income (loss) of
intercompany investments
Total com prehensiv e incom e (loss)
ttrib
u tab
le to non-controlling interest
ttrib
u tab
le to com m on sharehold ers
(a) N et of tax of
(b) N et of tax of
(c) N et of tax of
(d) N et of tax of
$
$
$
$
$
$
$
49.8
-
(8.5)
7.4
0.5
49.2
21.2
-
-
-
1.3
0.2
$
$
$
$
$
$
-
-
-
-
-
-
-
20.4
(2.7)
17.7
$
$
$
$
$
$
8.9
(1.7)
-
-
-
-
-
-
-
-
-
-
-
$
$
$
$
$
$
49.8
-
(8.5)
27.8
(2.2)
66.9
3.5
-
-
-
10.2
(1.5)
$
$
$
$
$
$
1.0
1.4
1.1
3.5
-
-
-
-
-
0.4
0.4
(5.1)
133.3
$
$
$
$
$
$
-
-
-
-
-
-
-
-
-
-
-
$
$
$
$
$
$
50.8
-
(8.5)
29.2
(1.1)
70.4
-
-
-
(5.1)
(33.6)
10.6
(1.1)
(33.6)
$
190.4
$
(190.4)
$
(33.6)
$
128.2
$
(133.3)
$
(38.7)
(17.7)
(3.5)
(33.6)
190.4
(190.4)
(33.6)
(133.3)
Other com prehensiv e incom e (loss), net of tax
:
Items to be reclassified to profit or loss in subseq uent
periods:
Change in fair value of investments (a)
Reclassification to earnings for impairment charges
Accumulated other comprehensive (income) loss related
to investments sold (b)
Changes in fair value of derivative financial instruments
designated as cash flow
hedges (c)
Accumulated other comprehensive income related to
derivatives settled (d)
q uity in other comprehensive income (loss) of
intercompany investments
Total com prehensiv e incom e (loss)
ttrib
u tab
le to non-controlling interest
ttrib
u tab
le to com m on sharehold ers
(a) N et of tax of
(b) N et of tax of
(c) N et of tax of
(d) N et of tax of
(28.3)
7.6
-
(8.2)
24.8
(4.1)
18.9
-
-
-
(24.6)
37.6
13.0
-
-
-
-
-
-
-
(13.0)
(28.3)
7.6
-
0.2
-
-
(32.8)
(5.3)
62.4
8.9
5.9
11.0
5.9
-
-
-
-
-
-
-
(5.9)
(28.1)
7.6
-
(38.1)
73.4
14.8
-
(969.7)
$
(687.4)
$
687.4
$
(969.7)
$
508.6
$
(513.5)
$
(974.6)
-
(969.7)
-
-
-
-
$
$
$
$
$
$
-
(687.4)
-
-
(11.7)
17.9
$
$
$
$
$
$
-
687.4
-
-
-
-
$
$
$
$
$
$
-
(969.7)
-
-
(11.7)
17.9
$
$
$
$
$
$
(4.9)
513.5
-
-
(1.4)
3.4
$
$
$
$
$
$
-
(513.5)
-
-
-
-
$
$
$
$
$
$
(4.9)
(969.7)
-
-
(13.1)
21.3
$
$
$
$
$
$
$
FS
64
Kinross Gold Annual Report 2016
FS
65
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
65
K
G
S
u
G
A
d
j
G
E
A
A
G
K
G
S
u
G
A
d
j
G
E
A
A
G
K
inross G old
Corp.
G
u arantors
G
u arantor
iaries
b sid
G
u arantor
u stm ents
Total
u arantors
Non-
gu arantors
E lim inations
Consolid ated
$
(104.0)
$
172.7
$
(172.7)
$
(104.0)
$
124.7
$
(129.8)
$
(109.1)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
Consolidating statement of cash flows for the year ended December 31, 2016
(ou tf low
) of cash related
to the f ollow
ing
Net inf low
activ ities:
Operating:
N et earnings (loss)
Adj ustments to reconcile net earnings (loss) to net cash provided
from (used in) operating activities:
Depreciation, depletion and amortiz ation
Impairment charges
q uity in losses (earnings) of associate, j oint ventures and
E
intercompany investments
S hare-based compensation expense
Finance expense
Deferred tax expense (recovery)
Foreign exchange losses (gains) and other
Reclamation expense (recovery)
Changes in operating assets and liabilities:
Accounts receivable and other assets
Inventories
Accounts payable and accrued liabilities
Cash f low
prov id ed
f rom (u sed
in) operating activ ities
Income taxes paid
Net cash f low
prov id ed
f rom (u sed
in) operating activ ities
I nv esting:
Additions to property, plant and eq uipment
Business acq uisition
N et additions to long-term investments and
other assets
N et proceeds from the sale of property, plant and
eq uipment
Decrease (increase) in restricted cash
Interest received and other
8.2
-
44.4
13.5
89.1
(1.5)
(60.3)
-
(2.3)
(4.1)
0.5
(16.5)
-
(16.5)
(5.5)
-
(8.7)
-
-
0.7
365.4
-
(36.6)
-
47.5
(57.5)
63.2
-
(23.3)
(22.6)
112.3
621.1
(20.5)
600.6
(291.2)
(588.0)
(28.5)
0.6
(1.6)
1.2
Net cash f low
u sed
in inv esting activ ities
(13.5)
(907.5)
F inancing:
Issuance of common shares on exercise of options
Proceeds from issuance of eq uity
Proceeds from issuance of debt
Repayment of debt
Interest paid
Dividends received from (paid to) common shareholders and
subsidiaries
Intercompany advances
Other
Net cash f low
prov id ed
f rom (u sed
in) f inancing activ ities
f ect of ex change rate changes on cash and
cash
eq
iv alents
I ncrease (d ecrease) in cash and
cash eq
iv alents
Cash and
cash eq
iv alents, b eginning of period
2.8
275.7
-
(250.0)
(73.5)
-
90.7
(3.3)
42.4
-
12.4
113.8
-
-
-
-
-
-
325.5
-
325.5
-
18.6
127.0
(0.6)
-
172.7
-
(5.7)
-
-
-
-
0.6
-
(5.7)
-
(5.7)
-
-
-
-
-
-
-
-
-
-
-
-
-
5.7
-
5.7
-
0.0
-
373.0
-
180.5
13.5
130.9
(59.0)
2.9
-
(25.6)
(26.1)
112.8
598.9
(20.5)
578.4
(296.7)
(588.0)
482.0
139.6
0.8
-
106.5
(90.7)
11.5
27.2
4.4
105.6
127.1
1,038.7
(105.2)
933.5
(337.1)
-
(37.2)
(22.6)
0.6
(1.6)
1.9
8.5
0.5
1.6
(921.0)
(349.1)
2.8
275.7
-
(250.0)
(73.5)
-
421.9
(3.3)
373.6
-
31.0
240.8
-
-
-
-
-
(309.9)
(524.7)
-
(834.6)
2.3
(247.9)
803.1
-
-
(180.1)
-
(102.8)
-
-
-
-
-
-
(412.7)
-
(412.7)
-
-
-
-
-
-
-
-
-
-
-
-
309.9
102.8
-
412.7
-
-
-
855.0
139.6
1.2
13.5
134.6
(149.7)
14.4
27.2
(21.2)
79.5
239.9
1,224.9
(125.7)
1,099.2
(633.8)
(588.0)
(59.8)
9.1
(1.1)
3.5
(1,270.1)
2.8
275.7
-
(250.0)
(73.5)
-
(0.0)
(3.3)
(48.3)
2.3
(216.9)
1,043.9
Cash and
cash eq
iv alents, end
of period
$
126.2
$
145.6
$
0.0
$
271.8
$
555.2
$
-
$
827.0
FS
66
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
66
S
u
A
d
j
G
E
f
u
u
u
u
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2016 and 2015
(Tabular amounts in millions of United States dollars)
Consolidating statement of cash flows for the year ended December 31, 2016
Consolidating statement of cash flows for the year ended December 31, 2015
K
inross G old
G
u arantor
G
u arantor
Total
Corp.
b sid
iaries
u stm ents
u arantors
G
u arantors
Non-
gu arantors
E lim inations
Consolid ated
inross G old
Corp.
u arantor
iaries
b sid
u arantor
u stm ents
Total
u arantors
u arantors
Non-
gu arantors
E lim inations
Consolid ated
Adj ustments to reconcile net earnings (loss) to net cash provided
$
(104.0)
$
172.7
$
(172.7)
$
(104.0)
$
124.7
$
(129.8)
$
(109.1)
Net inf low
(ou tf low
) of cash related
to the f ollow
ing
E
q uity in losses (earnings) of associate, j oint ventures and
activ ities:
Operating:
N et earnings (loss)
from (used in) operating activities:
Depreciation, depletion and amortiz ation
Impairment charges
intercompany investments
S hare-based compensation expense
Finance expense
Deferred tax expense (recovery)
Foreign exchange losses (gains) and other
Reclamation expense (recovery)
Changes in operating assets and liabilities:
Accounts receivable and other assets
Inventories
Accounts payable and accrued liabilities
Cash f low
prov id ed
f rom (u sed
in) operating activ ities
Income taxes paid
I nv esting:
Net cash f low
prov id ed
f rom (u sed
in) operating activ ities
Additions to property, plant and eq uipment
Business acq uisition
N et additions to long-term investments and
other assets
eq uipment
N et proceeds from the sale of property, plant and
Decrease (increase) in restricted cash
Interest received and other
Net cash f low
u sed
in inv esting activ ities
F inancing:
Issuance of common shares on exercise of options
Proceeds from issuance of eq uity
Proceeds from issuance of debt
Dividends received from (paid to) common shareholders and
Repayment of debt
Interest paid
subsidiaries
Intercompany advances
Other
Net cash f low
prov id ed
f rom (u sed
in) f inancing activ ities
f ect of ex change rate changes on cash and
cash
eq
iv alents
I ncrease (d ecrease) in cash and
cash eq
iv alents
Cash and
cash eq
iv alents, b eginning of period
365.4
(0.6)
(36.6)
172.7
8.2
-
44.4
13.5
89.1
(1.5)
(60.3)
(2.3)
(4.1)
0.5
(16.5)
(16.5)
(5.5)
0.7
(13.5)
2.8
275.7
(250.0)
(73.5)
90.7
(3.3)
42.4
12.4
113.8
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
47.5
(57.5)
63.2
(23.3)
(22.6)
112.3
621.1
(20.5)
600.6
(291.2)
(588.0)
0.6
(1.6)
1.2
(907.5)
325.5
325.5
18.6
127.0
(5.7)
0.6
(5.7)
(5.7)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5.7
5.7
0.0
482.0
139.6
0.8
-
106.5
(90.7)
11.5
27.2
4.4
105.6
127.1
1,038.7
(105.2)
933.5
(337.1)
8.5
0.5
1.6
-
-
-
-
-
-
-
373.0
-
180.5
13.5
130.9
(59.0)
2.9
-
(25.6)
(26.1)
112.8
598.9
(20.5)
578.4
(296.7)
(588.0)
0.6
(1.6)
1.9
2.8
275.7
(250.0)
(73.5)
421.9
(3.3)
373.6
31.0
240.8
-
-
-
(180.1)
(102.8)
(412.7)
(412.7)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
855.0
139.6
1.2
13.5
134.6
(149.7)
14.4
27.2
(21.2)
79.5
239.9
1,224.9
(125.7)
1,099.2
(633.8)
(588.0)
(59.8)
9.1
(1.1)
3.5
2.8
275.7
(250.0)
(73.5)
-
-
(0.0)
(3.3)
(48.3)
2.3
(216.9)
1,043.9
(309.9)
(524.7)
309.9
102.8
(834.6)
412.7
2.3
(247.9)
803.1
(8.7)
(28.5)
(37.2)
(22.6)
(ou tf low
) of cash related
to the f ollow
ing
Net inf low
activ ities:
Operating:
N et earnings (loss)
Adj ustments to reconcile net earnings (loss) to net cash provided
from (used in) operating activities:
Depreciation, depletion and amortiz ation
Impairment charges
q uity in losses (earnings) of associate, j oint venture and
E
intercompany investments
S hare-based compensation expense
Finance E xpense
Deferred tax expense (recovery)
Foreign exchange losses (gains) and other
Reclamation expense (recovery)
Changes in operating assets and liabilities:
Accounts receivable and other assets
Inventories
Accounts payable and accrued liabilities
Cash f low
prov id ed
f rom (u sed
in) operating activ ities
Income taxes paid
Net cash f low
prov id ed
f rom (u sed
in) operating activ ities
I nv esting:
Additions to property, plant and eq uipment
Business acq uisitions
N et additions to long-term investments and
other assets
N et proceeds from the sale of property, plant and
eq uipment
Decrease in restricted cash
Interest received and other
$
(984.5)
$
(700.4)
$
700.4
$
(984.5)
$
502.7
$
(507.6)
$
(989.4)
6.8
-
322.4
299.9
0.3
-
1,076.3
346.1
(700.4)
17.1
65.0
-
(240.1)
-
2.0
2.1
(16.1)
(71.4)
-
(71.4)
(16.8)
-
-
25.0
79.3
25.1
-
35.8
13.9
13.9
461.0
(9.9)
451.1
(302.1)
-
(0.3)
(29.1)
1.0
-
0.3
0.8
0.5
1.9
329.5
299.9
722.0
17.1
90.0
79.3
(215.0)
-
37.8
15.7
(2.2)
389.6
(9.9)
379.7
568.2
399.1
(3.2)
-
132.3
(26.3)
239.3
(7.9)
53.2
47.8
30.1
1,935.3
(127.5)
1,807.8
(318.9)
(291.1)
-
-
(29.4)
(30.3)
1.8
0.5
2.2
1.5
30.3
1.8
(343.8)
(287.8)
-
22.5
(22.5)
(47.6)
(16.3)
(314.7)
(2.9)
(381.5)
-
(345.6)
-
-
(80.0)
(1.2)
(1,213.3)
188.4
-
(7.9)
406.0
586.4
397.1
-
-
(722.0)
-
(126.3)
-
-
-
-
-
-
(1,355.9)
-
(1,355.9)
-
-
-
-
-
-
-
-
-
-
-
1,229.6
126.3
-
-
-
-
(1,106.1)
1,355.9
897.7
699.0
(3.2)
17.1
96.0
53.0
24.3
(7.9)
91.0
63.5
27.9
969.0
(137.4)
831.6
(610.0)
-
(59.7)
3.3
30.8
4.0
(631.6)
-
22.5
(102.5)
(48.8)
-
-
(2.9)
(131.7)
(7.9)
60.4
983.5
-
-
-
-
-
-
(0.3)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(921.0)
(349.1)
(1,270.1)
Net cash f low
u sed
in inv esting activ ities
(15.8)
(328.0)
F inancing:
Issuance of common shares on exercise of options
Proceeds from issuance of debt
Repayment of debt
Interest paid
Dividends received from (paid to) common shareholders and
subsidiaries
Intercompany advances
Other
Net cash f low
u sed
in f inancing activ ities
f ect of ex change rate changes on cash and
cash
eq
iv alents
I ncrease (d ecrease) in cash and
cash eq
iv alents
-
-
-
(47.6)
-
(63.6)
(2.9)
(114.1)
-
22.5
(22.5)
-
(16.3)
(251.1)
-
(267.4)
-
-
(201.3)
(144.3)
Cash and
cash eq
iv alents, b eginning of period
315.1
271.3
Cash and
cash eq
iv alents, end
of period
$
126.2
$
145.6
$
0.0
$
271.8
$
555.2
$
-
$
827.0
Cash and
cash eq
iv alents, end
of period
$
113.8
$
127.0
$
-
$
240.8
$
803.1
$
-
$
1,043.9
FS
66
Kinross Gold Annual Report 2016
FS
67
Kinross Gold Annual Report 2016
FS
KINROSS GOLD ANNUAL REPORT 2016
67
S
u
A
d
j
G
E
f
u
u
u
u
K
G
S
u
G
A
d
j
G
E
f
u
u
u
u
G
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, 2016
Property
Location
Kinross
Interest
(%)
100.0%
100.0%
100.0%
100.0%
USA
USA
USA
USA
Chile
Brazil
25.0%
100.0%
Ghana
Mauritania
90.0%
100.0%
Russia
Russia
100.0%
100.0%
NORTH AMERICA
Bald Mountain
Fort Knox Area
Kettle River
Round Mountain Area
Subtotal
SOUTH AMERICA
Cerro Casale 8
Paracatu
Subtotal
AFRICA
Chirano
Tasiast
Subtotal
RUSSIA
Dvoinoye
Kupol
Subtotal
Total Gold
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)
10,332
26,981
18
33,551
70,882
57,425
383,487
440,912
5,017
28,858
33,875
1,039
978
2,017
547,686
0.8
0.5
8.6
0.7
0.6
0.6
0.4
0.4
1.1
1.3
1.3
6.6
7.2
6.9
0.5
271
406
5
727
100,154
77,708
72
23,554
1,409
201,488
1,195
5,044
241,975
260,159
6,239
502,134
180
1,238
6,176
100,639
1,418
106,815
220
228
448
1,251
5,323
6,574
9,514
817,011
0.6
0.4
8.4
0.7
0.5
0.6
0.5
0.5
3.5
2.1
2.2
9.9
8.5
8.8
0.8
1,862
1,100
20
540
110,486
104,689
90
57,105
3,522
272,370
4,616
3,990
299,400
643,646
8,606
943,046
692
6,777
11,193
129,497
7,469
140,690
399
1,455
1,854
2,290
6,301
8,591
21,451
1,364,697
0.6
0.4
8.4
0.7
0.6
0.6
0.4
0.5
2.4
1.9
2.0
8.4
8.3
8.3
0.7
2,133
1,506
25
1,267
4,931
5,811
9,034
14,845
872
8,015
8,887
619
1,683
2,302
30,965
68 KINROSS GOLD ANNUAL REPORT 2016
Silver
Proven and Probable Mineral Reserves (1, 3, 4, 5, 6, 8)
Kinross Gold Corporation’s Share at December 31, 2016
Property
Location
Kinross
Interest
(%)
NORTH AMERICA
Round Mountain Area
Subtotal
SOUTH AMERICA
Cerro Casale 8
USA
100.0%
Chile
25.0%
Subtotal
RUSSIA
Dvoinoye
Kupol
Subtotal
Total Silver
Russia
Russia
100.0%
100.0%
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)
679
679
57,425
57,425
1,039
978
2,017
10.2
10.2
1.9
1.9
11.5
95.6
52.3
222
222
3,770
3,770
3,522
241,975
3,522
241,975
8.3
8.3
1.4
1.4
1,010
1,010
4,449
4,449
11,150
299,400
11,150
299,400
8.6
8.6
1.5
1.5
1,232
1,232
14,672
14,672
386
3,006
3,392
1,251
5,323
6,574
16.1
102.2
646
17,483
85.8
18,129
2,290
6,301
8,591
14.0
101.1
1,032
20,489
77.9
21,521
60,121
3.7
7,136
252,319
3.7
30,289
312,440
3.7
37,425
Copper
Proven and Probable Mineral Reserves (1, 3, 4, 5, 6, 8)
Kinross Gold Corporation’s Share at December 31, 2016
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
240
241,975
240
241,975
0.23
0.23
0.23
1,204
299,400
1,204
299,400
1,204
299,400
0.22
0.22
0.22
1,444
1,444
1,444
KINROSS GOLD ANNUAL REPORT 2016
69
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, 2016
Property
Location
NORTH AMERICA
Bald Mountain
Fort Knox Area
Kettle River
Round Mountain Area
White Gold
Subtotal
SOUTH AMERICA
Cerro Casale 8
La Coipa 9
Lobo Marte
Maricunga
Paracatu
USA
USA
USA
USA
Yukon
Chile
Chile
Chile
Chile
Brazil
Kinross
Interest
(%)
100.0%
100.0%
100.0%
100.0%
100.0%
25.0%
100.0%
100.0%
100.0%
100.0%
Ghana
Mauritania
90.0%
100.0%
Subtotal
AFRICA
Chirano
Tasiast
Subtotal
RUSSIA
Dvoinoye
Kupol
Subtotal
Total Gold
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)
24,881
7,321
–
23,593
–
55,795
5,739
5,364
96,646
35,908
137,307
280,964
3,565
6,555
10,120
0.6
0.5
–
0.5
–
0.6
0.3
1.8
1.1
0.8
0.3
0.7
1.9
0.9
1.3
517
114
–
403
–
176,056
87,703
245
52,441
9,788
1,034
326,233
56
307
3,525
937
1,264
68,423
25,452
88,720
209,097
178,201
6,089
569,893
217
197
414
1
11
12
7,906
65,821
73,727
37
915
952
0.5
0.5
4.7
0.9
2.7
0.6
0.4
1.8
1.2
0.7
0.3
0.7
2.3
1.4
1.5
3,031
1,326
37
1,529
840
200,937
95,024
245
76,034
9,788
6,763
382,028
787
1,440
3,489
4,492
2,003
74,162
30,816
185,366
245,005
315,508
12,211
850,857
581
2,947
11,471
72,376
3,528
83,847
34.5
6.4
7.5
0.7
41
188
229
40
942
982
22,731
1,317,714
0.5
0.5
4.7
0.8
2.7
0.6
0.4
1.8
1.2
0.7
0.3
0.7
2.2
1.4
1.5
32.2
6.6
7.6
0.7
3,548
1,440
37
1,932
840
7,797
843
1,747
7,014
5,429
3,267
18,300
798
3,144
3,942
42
199
241
30,280
Russia
Russia
100.0%
100.0%
3
27
30
6.4
12.5
11.9
346,909
0.7
7,549
970,805
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, 2016
Property
Location
Kinross
Interest
(%)
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)
NORTH AMERICA
Round Mountain Area
Subtotal
SOUTH AMERICA
Cerro Casale 8
La Coipa 9
Subtotal
RUSSIA
Dvoinoye
Kupol
Subtotal
Total Silver
USA
100.0%
Chile
Chile
25.0%
100.0%
Russia
Russia
100.0%
100.0%
612
612
5,739
5,364
11,103
8.7
8.7
1.2
40.0
19.9
172
172
5,896
5,896
6.6
6.6
1,252
1,252
6,508
6,508
6.8
6.8
1,424
1,424
220
6,893
68,423
25,452
1.1
70.1
2,328
57,341
74,162
30,816
1.1
64.8
2,548
64,234
7,113
93,875
19.8
59,669
104,978
19.8
66,782
3
27
30
19.6
153.8
139.7
2
134
136
37
915
952
20.2
85.2
82.7
24
2,508
2,532
40
942
982
20.2
87.2
84.5
26
2,642
2,668
11,745
19.7
7,421
100,723
19.6
63,453
112,468
19.6
70,874
70 KINROSS GOLD ANNUAL REPORT 2016
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, 2016
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
5,739
0.13
0.13
0.13
17
17
17
68,423
68,423
68,423
0.16
0.16
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, 2016
Property
NORTH AMERICA
Bald Mountain
Fort Knox Area
Kettle River
Round Mountain Area
White Gold
Subtotal
SOUTH AMERICA
Cerro Casale 8
La Coipa 9
Lobo Marte
Maricunga
Paracatu
Subtotal
AFRICA
Chirano
Tasiast
Subtotal
RUSSIA
Dvoinoye
Kupol
Subtotal
Total Gold
Kinross
Interest
(%)
100.0%
100.0%
100.0%
100.0%
100.0%
25.0%
100.0%
100.0%
100.0%
100.0%
Location
USA
USA
USA
USA
Yukon
Chile
Chile
Chile
Chile
Brazil
Ghana
Mauritania
90.0%
100.0%
Russia
Russia
100.0%
100.0%
Tonnes
(kt)
49,472
13,036
23
99,784
2,166
Inferred
Grade
(g/t)
Ounces
(koz)
0.4
0.5
14.4
0.6
1.8
648
193
11
1,863
125
164,481
0.5
2,840
123,860
2,121
2,003
53,133
20,846
201,963
1,590
5,575
7,165
329
571
900
374,509
0.4
1.5
1.1
0.6
0.3
0.4
3.0
1.9
2.2
10.2
7.1
8.2
0.5
1,498
101
69
1,044
185
2,897
152
345
497
108
131
239
6,473
KINROSS GOLD ANNUAL REPORT 2016
71
Silver
Inferred Mineral Resources (2, 3, 4, 5, 6, 7, 8, 9)
Kinross Gold Corporation’s Share at December 31, 2016
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, 2016
Property
SOUTH AMERICA
Cerro Casale 8
Subtotal
Total Copper
Kinross
Interest
(%)
Tonnes
(kt)
Inferred
Grade
(g/t)
Ounces
(koz)
Location
USA
100.0%
2,301
2,301
5.8
5.8
428
428
Chile
Chile
25.0%
100.0%
123,860
2,121
1.0
45.2
4,126
3,081
125,981
1.8
7,207
Russia
Russia
100.0%
100.0%
329
571
900
12.7
104.4
135
1,918
70.9
2,053
129,182
2.3
9,688
Kinross
Interest
(%)
Tonnes
(kt)
Inferred
Grade
(%)
Pounds
(Mlb)
Location
Chile
25.0%
123,860
123,860
123,860
0.19
0.19
0.19
523
523
523
72 KINROSS GOLD ANNUAL REPORT 2016
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 17.00 per ounce and a copper price of $US 2.40 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 Ruble to $US
Chilean Peso to $US
Brazilian Real to $US
Ghanaian Cedi to $US
60
650
3.25
4.00
Mauritanian Ouguiya to $US 330
(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 20.00 per ounce, and a copper price of $US 3.00 per pound. Foreign exchange rates for estimating mineral resources were the same
as for mineral reserves.
(3)
The Company’s mineral reserve and mineral resource estimates as at December 31, 2016 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 for 2017-2020, $US 1,200 per ounce after; Silver price of $US 13.75 per ounce for 2017-2020,
$US 16.50 per ounce after; Copper price of $US 2.25 per pound for 2017-2020, $US 2.75 per pound after; 675 Chilean Peso to the $US dollar
Mineral resources – Gold price of $US 1,500 per ounce, Silver price of $US 18.75 per ounce, Copper price of $US 3.50 per pound, 675 Chilean Peso
to the $US dollar
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. Mineral resources for the Phase 7 project are reported at
100% ownership; however, Kinross has a 75% interest in the Phase 7 project.
KINROSS GOLD ANNUAL REPORT 2016
73
MINERAL RESERVE AND MINERAL RESOURCE DEFINITIONS
A ‘Mineral Resource’ is a concentration or occurrence of solid material of economic interest in or on the Earth’s crust in
such form, grade or quality and quantity that there are reasonable prospects for eventual economic extraction. The location,
quantity, grade or quality, continuity and other geological characteristics of a Mineral Resource are known, estimated or
interpreted from specific geological evidence and knowledge, including sampling.
An ‘Inferred Mineral Resource’ is that part of a Mineral Resource for which quantity and grade or quality are estimated on
the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological and
grade or quality continuity. An Inferred Mineral Resource has a lower level of confidence than that applying to an Indicated
Mineral Resource and must not be converted to a Mineral Reserve. It is reasonably expected that the majority of Inferred
Mineral Resources could be upgraded to Indicated Mineral Resources with continued exploration.
An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which quantity, grade or quality, densities, shape and
physical characteristics are estimated with sufficient confidence to allow the application of Modifying Factors in sufficient
detail to support mine planning and evaluation of the economic viability of the deposit. Geological evidence is derived from
adequately detailed and reliable exploration, sampling and testing and is sufficient to assume geological and grade or quality
continuity between points of observation. An Indicated Mineral Resource has a lower level of confidence than that applying to
a Measured Mineral Resource and may only be converted to a Probable Mineral Reserve.
A ‘Measured Mineral Resource’ is that part of a Mineral Resource for which quantity, grade or quality, densities, shape, and
physical characteristics are estimated with confidence sufficient to allow the application of Modifying Factors to support
detailed mine planning and final evaluation of the economic viability of the deposit. Geological evidence is derived from
detailed and reliable exploration, sampling and testing and is sufficient to confirm geological and grade or quality continuity
between points of observation. A Measured Mineral Resource has a higher level of confidence than that applying to either an
Indicated Mineral Resource or an Inferred Mineral Resource. It may be converted to a Proven Mineral Reserve or to a Probable
Mineral Reserve.
A ‘Mineral Reserve’ is the economically mineable part of a Measured and/or Indicated Mineral Resource. It includes diluting
materials and allowances for losses, which may occur when the material is mined or extracted and is defined by studies at
Pre-Feasibility or Feasibility level as appropriate that include application of Modifying Factors. Such studies demonstrate that,
at the time of reporting, extraction could reasonably be justified. The reference point at which Mineral Reserves are defined,
usually the point where the ore is delivered to the processing plant, must be stated. It is important that, in all situations where
the reference point is different, such as for a saleable product, a clarifying statement is included to ensure that the reader
is fully informed as to what is being reported. The public disclosure of a Mineral Reserve must be demonstrated by a Pre-
Feasibility Study or Feasibility Study.
A ‘Probable Mineral Reserve’ is the economically mineable part of an Indicated, and in some circumstances, a Measured
Mineral Resource. The confidence in the Modifying Factors applying to a Probable Mineral Reserve is lower than that applying
to a Proven Mineral Reserve.
A ‘Proven Mineral Reserve’ is the economically mineable part of a Measured Mineral Resource. A Proven Mineral Reserve
implies a high degree of confidence in the Modifying Factors.
74 KINROSS GOLD ANNUAL REPORT 2016
SUMMARIZED FIVE-YEAR REVIEW (5, 6)
(in millions, except per share amounts)
Operating results from continuing operations
2016
2015
2014
2013
2012
Production (attributable) (Au. eq. oz.)
2,789,150
2,594,652
2,710,390
2,631,092
2,617,813
Revenue
Production cost of sales (per Au. eq. oz.)
Net loss from continuing operations attributable
to common shareholders
Net cash flow provided from operating activities
Capital expenditures
Financial position
$
$
3,472.0
712.0
(104.0)
1,099.2
633.8
$
$
3,052.2
696.0
(984.5)
$
$
3,466.3
720.0
$
$
3,779.5
743.0
$
$
4,307.3
705.0
(1,400.0)
(3,012.6)
(2,546.2)
831.6
610.0
858.1
631.8
796.6
1,262.4
1,317.3
1,858.3
Cash, cash equivalents and short-term investments
$
827.0
$
1,043.9
$
983.5
$
734.5
$
1,982.5
Working capital
Total assets
Long-term debt (including current portion)
Common shareholders’ equity
Per share data
Net loss from continuing operations
attributable to common shareholders – basic
Market
1,443.0
7,979.3
1,733.2
4,145.5
1,590.3
7,735.4
1,981.4
3,889.3
1,982.7
8,951.4
2,058.1
4,843.0
1,692.9
10,286.7
2,119.6
6,014.0
2,281.8
14,882.6
2,632.6
9,850.2
$
(0.08)
$
(0.86)
$
(1.22)
$
(2.64)
$
(2.24)
Average realized gold price per ounce
$
1,249.0
$
1,159.0
$
1,263.0
$
1,402.0
$
1,643.0
2016 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
$
$
$
$
$
$
$
$
4.64
7.49
7.56
5.75
3.58
5.82
5.81
4.27
$
$
$
$
$
$
$
$
1.90
4.20
5.16
3.87
1.31
3.21
3.93
2.88
KINROSS GOLD ANNUAL REPORT 2016
75
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 harbor’’ under the United States Private Securities Litigation Reform Act of
1995 and are based on expectations, estimates and projections as of the date of this annual report. Forward-looking
statements contained in this annual report include, but are not limited to, those under the headings (or headings that include):
“CEO letter to shareholders” and “2016 Achievements”, and include, without limitation, statements with respect to our
guidance for production; production costs of sales, all-in sustaining cost and capital expenditures; and continuous
improvement initiatives, as well as references to other possible events, the future price of gold and silver, the timing and
amount of estimated future production, costs of production, capital expenditures, costs and timing of the development of
projects and new deposits, success of exploration, development and mining activities, currency fluctuations, capital
requirements, project studies, mine life extensions, restarting suspended or disrupted operations; continuous improvement
initiatives; and resolution of pending litigation. The words “estimated”, “expected”, “forecast”, “forward”, “intend”,
“optimize”, “opportunity”, “phased”, “potential”, “promising”, “projection”, 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 (MD&A) as well as: (1) there being no significant
disruptions affecting the operations of the Company whether due to extreme weather events (including, without limitation,
excessive or lack of rainfall) and other or related natural disasters, labour disruptions (including but not limited to following
workforce reductions), supply disruptions, power disruptions, damage to equipment or otherwise; (2) permitting,
development, operations and production from the Company’s operations being consistent with Kinross’ current expectations,
including, without limitation, land acquisitions and permitting for the construction and operation of the new tailings facility,
water and power supply and launch of the new tailings reprocessing facility at Paracatu; (3) political and legal developments in
any jurisdiction in which the Company operates being consistent with its current expectations, including, without limitation,
the impact of any 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, including, but not limited to,
potential power rationing, tailings facility regulation and amendments to mining laws in Brazil, potential amendments to water
laws and/or other water use restrictions and regulatory actions in Chile, potential amendments to minerals and mining laws
and dam safety regulation in Ghana, potential amendments to customs and mining laws (including, but not limited to,
amendments to the VAT) in Mauritania, and potential amendments to and enforcement of tax laws in Russia (including, but not
limited to, the interpretation, implementation, application and enforcement of any such laws and amendments thereto), 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 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) and mine plans for the Company’s mining operations (including, but not limited to,
throughput and recoveries being affected by metallurgical characteristics at Paracatu); (9) labour and materials costs increasing
on a basis consistent with Kinross’ current expectations; (10) 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; (11) goodwill and/or asset impairment potential; and (12) access to capital markets, including, but not
limited to, maintaining credit ratings 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, 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;
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
76 KINROSS GOLD ANNUAL REPORT 2016
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, Mauritania, Ghana, or other countries in which Kinross does business or may carry on business; business
opportunities that may be presented to, or pursued by, us; our ability to successfully integrate acquisitions and complete
divestitures; operating or technical difficulties in connection with mining 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-corruption,
international sanctions and/or anti-money laundering laws and regulations in Canada, the United States or any other
applicable jurisdiction; the speculative nature of gold exploration and development, including, but not limited to, the risks of
obtaining necessary licences 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, tailings dam failures,
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 the “Risk Analysis” section of our full year 2016 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 ANNUAL REPORT 2016
77
Key Sensitivities
Approximately 70%-80% of the Company’s costs are denominated in U.S. dollars. A 10% change in foreign currency exchange
rates would be expected to result in an approximate $15 impact on production cost of sales per ounce.7 Specific to the Russian
rouble, a 10% change in the exchange rate would be expected to result in an approximate $16 impact on Russian production
cost of sales per ounce. Specific to the Brazilian real, a 10% change in the exchange rate would be expected to result in an
approximate $32 impact on Brazilian production cost of sales per ounce. A $10 per barrel change in the price of oil would be
expected to result in an approximate $2 impact on production cost of sales per ounce. A $100 change in the price of gold would
be expected to result in an approximate $4 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 contained in this annual report 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.
ENDNOTES
1 “Attributable” includes Kinross’ 90% share of Chirano production.
2 “Adjusted net earnings (loss) attributable to common shareholders”, “Adjusted net earnings (loss) per share”, “Adjusted operating cash flow”, “production cost
of sales per equivalent ounce sold” and “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.
3 Kinross’ guidance and outlook for 2017 represents forward-looking information and users are cautioned that actual results may vary. Please refer to
the Cautionary Statement on page 76, as well as the Company’s news release dated February 15, 2017, available on our website at www.kinross.com.
4 See Mineral Reserve and Mineral Resource Statement in this 2016 Annual Report, page 68, and news release dated February 15, 2017 titled “Kinross
provides update on organic development projects and exploration.”
5 Reported net loss includes an after-tax non-cash impairment charge of $139.6 million in 2016 (2015: $699.0 million; 2014: $932.2 million).
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 sold 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 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.
78 KINROSS GOLD ANNUAL REPORT 2016
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Corporate Information
Corporate Information
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Annual Shareholders Meeting
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at 10:00 a.m. EDT
at the Glenn Gould Studio,
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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
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Publications
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 report
every two years. In 2016, we
published our 2015 Corporate
Responsibility Report online at
2015corporateresponsibilityreport.kinross.com.
A printed 2015 Corporate
Responsibility Summary Report
is also available by contacting
Kinross. Our next comprehensive
Corporate Responsibility Report will
be published in 2018.
Corporate Responsibility Report
Kinross’ 2015 Corporate Responsibility Report chronicles
our progress over the past two years in delivering
on our commitment to responsible mining.
Contact Information
General
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
Investor Relations
Tom Elliott, Senior Vice-President,
Investor Relations and
Corporate Development
Telephone: 416-365-3390
Email: tom.elliott@kinross.com
Media Relations
Louie Diaz, Director,
Corporate Communications
Telephone: 416-369-6469
Email: louie.diaz@kinross.com
Corporate Responsibility
Ed Opitz, Vice-President,
Safety and Sustainability
Telephone: 416-369-6476
Email: ed.opitz@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
25 York Street, 17th Floor
Toronto, Ontario, Canada M5J 2V5
www.kinross.com