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STRENGTH
DISCIPLINE
EXCELLENCE
Kinross Gold 2018 Annual Report
Kinross Gold 2018 Annual Report
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Letter to Shareholders 1
2018 Achievements 4
Corporate Governance Highlights 6
Directors + Senior Leadership 6
Financial Summary 7
Financial Review 7
Cautionary Statement on Forward-Looking Information 73
TSX: K
Toronto Stock
Exchange
NYSE: KGC
New York
Stock Exchange
Dvoinoye
Fort Knox
Kupol
Toronto
Bald Mountain
Round Mountain
Operating mine
Development projects
Tasiast
Chirano
Paracatu
La Coipa
Lobo-Marte
Kinross is a global mining company with strong and consistent
operating results driven by a high performance culture. With a
balanced portfolio of mines and projects in three regions, our focus
is delivering value based on the core principles of operational
excellence, financial discipline and responsible mining.
All figures in U.S. dollars unless otherwise stated. Endnotes can be found on page 75.
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LETTER TO SHAREHOLDERS
For the past seven years, Kinross’ strategy has
been grounded in the core principles we believe are
fundamental to delivering long-term value in our
business: operational excellence, financial discipline,
balance sheet strength, and responsible mining.
In 2018, our continued focus on these principles
drove strong results at our operations and organic
development projects.
We delivered solid performance across our portfolio
of mines, meeting our production and cost guidance
for the seventh consecutive year. Notably, we did
so while maintaining the best safety record in
the Company’s history, and one of the best safety
records in the industry. Our balance sheet remained
strong as we funded our development projects
and made strategic investments in our future. Finally,
we maintained a record of strong environmental
performance across our operations and beneficial
partnerships in the communities where we work.
In 2019, we will continue to focus on our core
principles and delivering steady, dependable results.
We are anticipating another strong year at our
operations, with production and costs expected to
be largely in line with 2018. We also expect to meet a
number of key milestones as we further advance our
projects and development opportunities.
J. PAUL ROLLINSON
President and Chief Executive Officer
DELIVERING ON COMMITMENTS
AT OUR OPERATIONS
The consistent performance of our portfolio year after
year testifies both to the strength of our culture and
the technical depth of our global operations team.
Performance was strong overall in our Americas
region, including outstanding results at two sites.
Paracatu set a new production record while also
reducing costs year-over-year. In Nevada, Bald
Mountain also had record output and reduced costs
by 15%, while Round Mountain continued to deliver
2018 HIGHLIGHTS
Set a new Kinross record for safety performance and
remained one of the safest companies in our sector
Advanced projects in the Americas region at Bald
Mountain Vantage Complex, Round Mountain Phase W,
Fort Knox Gilmore, La Coipa Restart and Lobo-Marte
Met or exceeded production, cost and capital
spending guidance for the seventh consecutive year
Extended mine life at Kupol and Chirano by an
additional year
Produced 2.45 million gold equivalent ounces (Au eq. oz.)
Acquired two hydroelectric dams in Brazil that are
expected to substantially lower costs at Paracatu
Set new production records at Paracatu and
Bald Mountain
Generated $3.2 billion in revenue, $874 million in
adjusted operating cash flow1, and ended the year with
total liquidity of $1.9 billion
Successfully commissioned Tasiast Phase One expansion
with record quarterly production in Q4 2018
Carried out 94,000+ stakeholder interactions and
supported programs with 834,000+ beneficiaries in
our host communities
Received third-party reviews confirming the safety at
100% of Kinross’ active and inactive tailings facilities
in past three years
Achieved highest industry sector score in annual review
of governance practices of Canadian companies
KINROSS GOLD 2018 ANNUAL REPORT
1
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strong and consistent results. Fort Knox experienced
temporary challenges during the year, as production
and costs were affected by a pit wall slide in the first
quarter and an unseasonable amount of rainfall in
the third quarter. In 2019, production in the Americas
is expected to be largely in line with 2018, with the
region continuing to represent 58% of the Company’s
total production.
In West Africa, completion of the Phase One
expansion led to record production at Tasiast in the
fourth quarter, with strong performance expected to
continue into 2019 as throughput exceeds nameplate
capacity. Chirano continued to show improvements
in mine performance and cost structure. In 2019, we
expect production from West Africa to increase by
approximately 17%, reflecting the positive impact of
the Tasiast expansion.
The Russia region continues to deliver strong and
consistent performance. We commenced production
at the Moroshka satellite deposit in the third quarter,
and mining has gone well and is meeting expectations.
We expect 2019 to be another solid year at our
Russian operations, with production expected to be
in line with 2018.
FINANCIAL STRENGTH TO INVEST
IN OUR FUTURE
Maintaining financial strength and flexibility has been,
and will continue to be, a key priority.
In 2018, our operations generated $874 million in
adjusted operating cash flow.1 Our capital expenditures
were approximately $1 billion, at the low end of our
guidance and included approximately $665 million of
growth capital mainly related to our organic projects.
During the year, we acquired two hydroelectric power
plants in Brazil that are expected to reduce costs and
provide a reliable source of sustainable low-cost power
at Paracatu.
Our capital expenditures in 2019 are expected to be
in-line with 2018 at approximately $1 billion (+/- 5%)3,
as we continue to advance our project portfolio.
With total available liquidity of approximately $1.9
billion and no debt maturities until 2021, we remain
in a strong financial position to continue building for
our future.
2019E Gold Production 2,3
2.5 million Au eq. oz. (+/– 5%)
20%
Russia
22%
West Africa
58%
Americas
ADVANCING OUR ORGANIC
DEVELOPMENT PORTFOLIO
Our portfolio of organic development projects
offers the benefits of established infrastructure and
reduced execution risk given familiar permitting and
operating jurisdictions. 2018 was an important year
at our projects, and we look forward to achieving a
number of key milestones in 2019.
At Tasiast, we completed and
successfully
commissioned our Phase One expansion project. The
impressive ramp up and smooth transfer of this large
and complex project highlighted the strength of our
Project and Operations teams. By the fourth quarter,
throughput was averaging over 14,000 tonnes per
day, approximately 20% above the nameplate capacity
of the Phase One design.
The Project team is incorporating this better-than-
expected performance into its evaluation of alternatives
to further increase throughput, with the aim of lowering
capital costs while preserving Tasiast’s overall value
proposition. The Phase Two expansion remains a viable
option, and considerations for next steps include:
alternative throughput approaches; capital priorities
across the Company’s portfolio; ongoing discussions
with the Government of Mauritania; and, acceptable
project financing terms. We made good progress
during the year advancing project financing for Tasiast,
with mandate letters signed with the International
Finance Corporation, a member of the World Bank
Group, and Export Development Canada, as well as
expressions of interest from two commercial banks.
The Phase W project at Round Mountain is well
advanced with initial low-grade ore encountered
ahead of schedule. Construction of mine infrastructure,
new leach pad, and vertical carbon-in-column (VCIC)
plant are all on schedule, and we expect to start
commissioning the process circuit in the second
quarter of 2019.
2
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KINROSS GOLD 2018 ANNUAL REPORT The Vantage Complex project at Bald Mountain,
which includes a new heap leach pad, new VCIC plant,
and support infrastructure, is proceeding well. The
processing circuit is on track to begin commissioning
by the end of the first quarter of 2019.
At the Gilmore project at Fort Knox, construction
is expected to ramp up in the spring and continue
through 2020. Stripping is expected to commence in
the third quarter of 2019. The project is on schedule
to begin stacking ore in late 2020.
In Chile, we acquired the remaining 50% in the
Phase 7 deposit for the La Coipa Restart project and
expect to complete a project feasibility study in the
third quarter. We also expect to complete a scoping
study for the Lobo-Marte project in the first quarter.
EXTENDING MINE LIFE
THROUGH EXPLORATION
Additions to estimated mineral reserves in 2018
largely offset depletion and engineering changes
during the year, and our brownfields exploration
program was once again successful in extending the
life of our existing operations.
In Russia, we continued to have success with our
drilling programs at Kupol and Dvoinoye, which
helped extend the mill life of our high-margin Kupol
operation by yet another year, to 2023. At Chirano,
exploration success extended mine life by another
year, while, at Bald Mountain, we made significant
additions to our resource base. We also acquired the
50% of the Bald Mountain Exploration Joint Venture
we did not already own, giving us full ownership of
the Bald Mountain property, the largest private mining
land package in the U.S. Russia, Chirano, and Bald
Mountain will all remain key areas of focus for our
2019 drilling program.
BUILDING ON A HISTORY OF
RESPONSIBLE MINING
A deep commitment to environmental and social
responsibility is a core cultural value at Kinross and a
key strength of our business.
In 2018, we successfully met all our environmental
targets and the rigorous requirements of our
tailings management protocol, which meet or exceed
regulatory and international standards of best practice.
This includes a regular and comprehensive review of
all of our active and inactive tailings facilities by a panel
of three independent geotechnical tailings experts.
In 2018, 98% of the workers in our operations came
from the host community or country, and Kinross
representatives engaged in over 94,000 interactions
with community stakeholders where we operate. As
an employer and community partner, we have made
a tangible impact on the quality of life in communities
around our operations, such as Tasiast, where poverty
rates dropped by 20% between 2011 and 2017.
We take a best practice approach to corporate
governance, and, in 2018, we achieved the highest
score among all Canadian mining companies in
the annual Globe and Mail “Board Games”
survey, reflecting our strong governance practices
and policies.
THE KINROSS VALUE PROPOSITION
We believe Kinross represents a compelling value
opportunity, based on our valuation relative to our
peers in 2018 and our fundamental strengths as a
mining company. We believe these strengths help
to define Kinross as one of the most consistent and
most reliable operators in the gold sector:
• Annual gold production2 of approximately 2.5
million ounces, and an unbroken seven-year
history of consistently delivering on production,
cost, and capital spending targets;
• An unwavering focus on balance sheet strength,
with $1 billion in debt repaid over the past seven
years, nearly $2 billion in liquidity, and no debt
maturities until 2021;
• A diverse portfolio of
low-risk
organic development projects and additional
development opportunities located at or near
existing operations; and
relatively
• A history of strong environmental performance,
beneficial partnerships with our host communities,
and one of the industry’s best safety records.
We are firmly committed to continue delivering
dependable, consistent performance, and executing
our strategy for the benefit of our shareholders and
all stakeholders. On behalf of our entire global team,
I thank you for your support.
J. Paul Rollinson
President and Chief Executive Officer
3
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KINROSS GOLD 2018 ANNUAL REPORT 2018 ACHIEVEMENTS
Operational Excellence
M E T G U I DA N C E
R E C O R D P R O D U C T I O N
D E L I V E R E D O N C O S T
7th consecutive year of meeting
or outperforming production and
cost targets
Delivered record annual
production at Paracatu and
Bald Mountain
All-in sustaining cost per ounce
and capital expenditures at low
end of guidance
Financial Discipline
$1.9
BILLION IN
LIQUIDITY
S T R O N G L I Q U I D I T Y
Z E R O D E B T M A T U R I T I E S
S T R O N G C A S H F LO W
Maintained a strong balance
sheet and financial flexibility
to fund growth
Manageable debt schedule with
no significant debt maturities
prior to 2021
Portfolio of mines generated
$874 million of adjusted operating
cash flow1
Organic Growth
D E L I V E R E D P H A S E O N E
A D V A N C I N G P R OJ E C T S
E X T E N D E D M I N E L I F E
Successfully delivered Tasiast
Phase One, followed by record
production at site in Q4 2018
On track to deliver project
milestones in the Americas
region at Bald Mountain Vantage
Complex, Round Mountain Phase
W, Fort Knox Gilmore, La Coipa
Restart and Lobo-Marte in 2019
Extended mine life for an
additional year at both
Kupol and Chirano
STRONG 2019 OUTLOOK2, 3 FORECASTING PRODUCTION OF
2.5 MILLION AU EQ. OZ. AND COSTS IN LINE WITH 2018
4
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KINROSS GOLD 2018 ANNUAL REPORT Corporate Responsibility
R E C O R D S A F E T Y P E R F O R M A N C E
4 S I T E S Z E R O LT I
T O P E M P LO Y E R
Achieved best safety performance
in Company’s history reporting
0.27 TRIFR* per 200,000 hours
worked, an 18% improvement
over 2017
Delivered exemplary safety
performance with zero lost-time
incidents and zero restricted days
at Fort Knox, Dvoinoye, Maricunga,
and Kettle River-Buckhorn
Recognized as one of the best
150 companies to work for in
Brazil for the 4th consecutive year
and as a top employer in the
Greater Toronto Area
98% H O S T C O U N T R Y W O R K F O R C E
C O M M U N I T Y S U P P O R T
P O V E R T Y R E D U C T I O N
Maintained 98% host country
workforce, including 85% of
management hires from within
host countries
Contributed to over 288 local
community programs, initiatives and
events to 834,000+ beneficiaries
in our local communities
2018 socio-economic impact
assessment measured a 20%
reduction in poverty levels in
communities near Tasiast from 2011
to 2017
S T A K E H O L D E R E N G A G E M E N T
1 0 0 % T A I L I N G S R E V I E W
M E T T A R G E T S
Carried out 94,000+ stakeholder
interactions through community
consultation and dialogue
Received third-party reviews at
100% of active and inactive
tailings facilities in past three years.
Review includes third-party panel of
three geotechnical tailings experts
Delivered on all site-level targets
for permitting, water management
and concurrent reclamation
LAUNCHED 8 PEOPLE COMMITMENTS ACROSS OUR
GLOBAL WORKFORCE TO STRENGTHEN KINROSS’ CULTURE
*Total reportable injury frequency rate
5
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KINROSS GOLD 2018 ANNUAL REPORT CORPORATE GOVERNANCE HIGHLIGHTS
The board met eight times in 2018. The board met
independent of management at all of the meetings
All directors were independent, except the Chief
Executive Officer
All committees were comprised entirely of
independent directors
Maintained board gender diversity target of 33%
women directors
Appointed new board Chair, Catherine McLeod-Seltzer
Kinross was the top ranked mining company
in the Globe and Mail 2018 annual corporate
governance survey, placing 19th out of 242
companies with a score of 92 out of 100 points
Scored 144 out of 150 points on the Board
Shareholder Confidence Index of the Clarkson Center
for Business Ethics and Board Effectiveness
Continued our board refresh program with five
new directors since 2012
Board of Directors
(left to right)
Catherine McLeod-Seltzer
Independent Chair 1 CR, H
Kerry D. Dyte
Corporate Director A, CGN
Kelly J. Osborne
Corporate Director CGN, CR
Ian Atkinson
Corporate Director CGN,CR, H
Ave G. Lethbridge
Corporate Director CR, H
Una M. Power*
Corporate Director A, CR
John A. Brough
Corporate Director A, CGN
John Oliver*
Corporate Director2 H
1 From January 1, 2019
2 Independent Chair until December 31, 2018
* John Oliver and Una M. Power will not be standing for re-election.
J. Paul Rollinson
President and Chief
Executive Officer
A
Audit and Risk Committee
CGN Corporate Governance and
Nominating Committee
CR
H
Corporate Responsibility and
Technical Committee
Human Resource and
Compensation Committee
Senior Leadership Team
(left to right)
J. Paul Rollinson
President and Chief
Executive Officer
Andrea S. Freeborough
Senior Vice-President
and Chief Financial Officer 3
Geoffrey P. Gold
Executive Vice-President,
Corporate Development,
External Relations and Chief
Legal Officer
Gina M. Jardine
Senior Vice-President,
Human Resources
Lauren M. Roberts
Senior Vice-President and
Chief Operating Officer
Paul B. Tomory
Senior Vice-President and
Chief Technical Officer
3 To replace Tony S. Giardini as of May 1, 2019
6
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KINROSS GOLD 2018 ANNUAL REPORT FINANCIAL SUMMARY
(In millions of United States dollars, except ounces, per share amounts, gold price and per ounce amounts)
Revenue
Net cash flow provided from operating activities
Adjusted operating cash flow 1
Impairment, net of reversals 4
Net earnings (loss) attributable to common shareholders 4
Net earnings (loss) per share attributable to common shareholders 4
Basic
Diluted
Adjusted net earnings (loss) attributable to common shareholders 1
Adjusted net earnings (loss) per share 1
Attributable production cost of sales per equivalent ounce sold 1,2
All-in sustaining cost per gold equivalent ounce sold 1,2
Capital expenditures
Average realized gold price per ounce 7
Attributable gold equivalent ounces produced 2
2018
3,212.6
788.7
874.2
–
(23.6)
(0.02)
(0.02)
128.1
0.10
734
965
1,043.4
1,268
$
$
$
$
$
$
$
$
$
$
$
$
2017
3,303.0
951.6
1,166.7
21.5
445.4
0.36
0.35
178.7
0.14
669
954
897.6
1,260
$
$
$
$
$
$
$
$
$
$
$
$
$
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
$
$
$
$
$
$
$
$
$
$
$
$
$
2,452,398
2,673,533
2,789,150
FINANCIAL REVIEW
Management’s Discussion and Analysis
Management’s Responsibility for Financial Statements
Report of Independent 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
67
72
72
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KINROSS GOLD 2018 ANNUAL REPORT
7
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
This management's discussion and analysis ("MD&A"), prepared as of February 13, 2019, relates to the financial condition and results
of operations of Kinross Gold Corporation together with its wholly owned subsidiaries, as at December 31, 2018 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, 2018 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 2018 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, 2018, 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 57 - 58 of this MD&A. For additional discussion of risk
factors please refer to the Company's Annual Information Form for the year ended December 31, 2017, which is available on the
Company's website www.kinross.com and on www.sedar.com. In certain instances, references are made to relevant notes in the
financial statements for additional information.
Where we say "we", "us", "our", the "Company" or "Kinross", we mean Kinross Gold Corporation or Kinross Gold Corporation and/or
one or more or all of its subsidiaries, as it may apply. Where we refer to the "industry", we mean the gold mining industry.
1. DESCRIPTION OF THE BUSINESS
Kinross is engaged in gold mining and related activities, including exploration and acquisition of gold-bearing properties, the extraction
and processing of gold-containing ore, and reclamation of gold mining properties. Kinross’ gold production and exploration activities
are carried out principally in Canada, the United States, the Russian Federation, Brazil, Chile, Ghana and Mauritania. Gold is produced
in the form of doré, which is shipped to refineries for final processing. Kinross also produces and sells a quantity of silver.
The profitability and operating cash flow of Kinross are affected by various factors, including the amount of gold and silver produced,
the market prices of gold and silver, operating costs, interest rates, regulatory and environmental compliance, the level of exploration
activity and capital expenditures, general and administrative costs, and other discretionary costs and activities. Kinross is also exposed
to fluctuations in currency exchange rates, political risks, and varying levels of taxation that can impact profitability and cash flow.
Kinross seeks to manage the risks associated with its business operations; however, many of the factors affecting these risks are
beyond the Company’s control.
Commodity prices continue to be volatile as economies around the world continue to experience economic challenges along with
political changes and uncertainty. Volatility in the price of gold and silver impacts the Company's revenue, while volatility in the price
of input costs, such as oil, and foreign exchange rates, particularly the Brazilian real, Chilean peso, Russian rouble, Mauritanian ouguiya,
Ghanaian cedi, and Canadian dollar, may have an impact on the Company's operating costs and capital expenditures.
Segment Profile
Each of the Company's significant operating mines is generally considered to be a separate segment. The reportable segments are
those operations whose operating results are reviewed by the chief operating decision maker to make decisions about resources to
be allocated to the segment and assess its performance.
Ownership percentage at December 31,
Operating Segments
Operator
Location
Fort Knox
Round Mountain
Bald Mountain
Paracatu
Maricunga
Kupol(a)
Tasiast
Chirano
Kinross
Kinross
Kinross
Kinross
Kinross
Kinross
Kinross
Kinross
USA
USA
USA
Brazil
Chile
Russian Federation
Mauritania
Ghana
(a) The Kupol segment includes the Kupol and Dvoinoye mines.
2018
100%
100%
100%
100%
100%
100%
100%
90%
2017
100%
100%
100%
100%
100%
100%
100%
90%
1
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
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
Depreciation, depletion and amortization
Impairment, net of reversals
Operating earnings
Years ended December 31,
2018
2017
2016
2018 vs. 2017
Change % Change(e)
2017 vs. 2016
Change % Change(e)
2,475,068
2,698,136
2,810,345
(223,068)
2,532,912
2,621,875
2,778,902
(88,963)
(8%)
(3%)
(112,209)
(157,027)
2,452,398
2,673,533
2,789,150
(221,135)
2,510,419
2,596,754
2,758,306
(86,335)
(8%)
(3%)
(115,617)
(161,552)
$
3,212.6
$
3,303.0
$
3,472.0
$
(90.4)
(3%)
$
(169.0)
$
1,860.5
$
1,757.4
$
1,983.8
$
103.1
6%
$
(226.4)
$
772.4
$
819.4
$
855.0
$
(47.0)
(6%)
$
(35.6)
$
-
$
21.5
$
139.6
$
(21.5)
nm
$
(118.1)
$
200.5
$
336.5
$
46.3
$
(136.0)
(40%)
$
290.2
(4%)
(6%)
(4%)
(6%)
(5%)
(11%)
(4%)
(85%)
nm
nm
nm
nm
92%
75%
Net (loss) earnings attributable to common shareholders
$
(23.6)
$
445.4
$
(104.0)
$
(469.0)
(105%)
$
549.4
Basic (loss) earnings per share attributable to common shareholders
$
(0.02)
$
0.36
$
(0.08)
$
(0.38)
(106%)
$
0.44
Diluted (loss) earnings per share attributable to common shareholders
Adjusted net earnings attributable to common shareholders (b)
Adjusted net earnings per share (b)
Net cash flow provided from operating activities
Adjusted operating cash flow(b)
Capital expenditures
Average realized gold price per ounce (d)
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)
$
$
(0.02)
128.1
$
$
0.35
178.7
$
$
(0.08)
93.0
$
$
(0.37)
(50.6)
(106%)
(28%)
$
$
0.43
85.7
$
0.10
$
0.14
$
0.08
$
(0.04)
(29%)
$
0.06
$
788.7
$
951.6
$
1,099.2
$
(162.9)
(17%)
$
(147.6)
(13%)
$
874.2
$
1,166.7
$
926.7
$
(292.5)
(25%)
$
240.0
$
1,043.4
$
897.6
$
633.8
$
145.8
16%
$
263.8
$
1,268
$
1,260
$
1,249
$
8
1%
$
11
$
735
$
670
$
714
$
65
10%
$
(44)
$
734
$
669
$
712
$
65
$
723
$
653
$
696
$
70
$
959
$
946
$
975
$
13
$
965
$
954
$
984
$
11
$
$
1,275
1,274
$
$
1,164
1,166
$
$
1,073
1,079
$
$
111
108
10%
11%
1%
1%
$
(43)
$
(43)
$
(29)
$
(30)
10%
9%
$
$
91
87
26%
42%
1%
(6%)
(6%)
(6%)
(3%)
(3%)
8%
8%
"Total" includes 100% of Chirano production. "Attributable" includes Kinross' share of Chirano (90%) production.
(a)
(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 2018 was 80.74:1 (2017 - 73.72:1 and 2016 - 72.95:1).
“Average realized gold price per ounce” is a non-GAAP financial measure and is defined in Section 11.
"nm" means not meaningful.
(d)
(e)
k.4.242 KinrossAR2018_MDAMar14B.pdf - p2 (March 15, 2019 22:53:41)
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2
MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
Consolidated Financial Performance
2018 vs. 2017
Kinross’ attributable production decreased by 8% compared to 2017, primarily due to lower production at Kupol due to a decrease in
grades, lower production at Fort Knox as a result of a pit wall slide in the first quarter of 2018 and higher than average rainfall in the
second half of 2018, and the completion of mining activities at Kettle River-Buckhorn during the second quarter of 2017. These
decreases were partially offset by higher production at Paracatu due to 2017 results being impacted by the curtailment of mining and
processing activities in the third quarter of 2017 due to lower than average rainfall in the region.
Metal sales decreased by 3% in 2018 compared to 2017 due to a decrease in gold equivalent ounces sold, partially offset by an increase
in average metal prices realized. The average realized gold price increased to $1,268 per ounce in 2018 from $1,260 per ounce in 2017.
Gold equivalent ounces sold in 2018 decreased to 2,532,912 ounces from 2,621,875 ounces in 2017, primarily due to the decrease in
production as described above.
Production cost of sales increased by 6% in 2018 compared to 2017, primarily due to increases in gold equivalent ounces sold at
Paracatu and Maricunga, and an increase in operating waste mined and higher fuel, reagent, and maintenance costs at Tasiast. The
increase was partially offset by decreases at Kettle River-Buckhorn due to the completion of mining activities in the second quarter of
2017, and at Chirano, primarily due to the completion of open pit mining at the end of the second quarter of 2017. The increase in
production cost of sales resulted in a 10% increase in attributable production cost of sales per equivalent ounce sold compared to
2017.
In 2018, depreciation, depletion and amortization decreased by 6% compared to 2017, primarily due to decreases at Round Mountain
and Kupol as a result of decreases in gold equivalent ounces sold and the additions of mineral reserves in the second half of 2017. The
decrease was partially offset by an increase at Paracatu primarily due to an increase in gold equivalent ounces sold, and increases at
Fort Knox and Tasiast due to increases in their depreciable asset bases. The depreciable asset bases at Fort Knox and Tasiast increased
as a result of impairment reversals recognized in the fourth quarter of 2017. The completion of the Phase One project also contributed
to the increase in the depreciable asset base at Tasiast.
Operating earnings decreased to $200.5 million in 2018 from $336.5 million in 2017. The change in operating earnings was primarily
due to a decrease in margins (metal sales less production cost of sales), partially offset by a decrease in depreciation, depletion and
amortization.
In 2018, net loss attributable to common shareholders was $23.6 million, or $0.02 per share, compared to net earnings attributable
to common shareholders of $445.4 million, or $0.36 per share, in 2017. The change was primarily a result of the decrease in operating
earnings as described above, a reversal of impairment charges of $97.0 million recognized in 2017 in connection with the sale of the
Company’s interest in the Cerro Casale project in Chile, and an increase in income tax expense in 2018.
In addition, an income tax expense of $138.8 million was recorded in 2018, compared with an income tax recovery of $23.2 million in
2017. The $138.8 million income tax expense recorded in 2018 includes $62.0 million of deferred tax expense resulting from the
devaluation in US dollar terms of the tax deductions of the Company’s operations in Brazil and Russia as compared to a nominal net
impact during 2017. The $23.2 million income tax recovery recognized in 2017 included a net tax recovery of $83.6 million related to
the impairment charge at Paracatu and the impairment reversal at Fort Knox, and an estimated net benefit of $93.4 million due to the
enactment of U.S. Tax Reform legislation on December 22, 2017. The estimated 2017 net benefit included a benefit of $124.4 million
in respect of the collectability of the Alternative Minimum Tax (“AMT”) credit, which is partially offset by the write-down of net
deferred tax assets to reflect the reduction in the U.S. corporate tax rate from 35% to 21% beginning January 1, 2018. In 2018 the
estimated AMT benefit was increased by $8.7 million, as a result of an IRS announcement that the AMT refunds payable to companies
in respect of taxation years beginning after December 31, 2017 would no longer be subject to sequestration. Further guidance on the
implementation and application of the U.S. Tax Reform legislation has been released on a systematic basis through regulations issued
by the Department of Treasury, legislation and directions from the Office of Management and Budget, and guidance from the states
in which the Company operates. Such legislation, regulations, directions and additional guidance may require changes to the estimated
net benefit recorded to date and the impact of such changes will be accounted for in the period in which the legislation, regulations,
directions, and additional guidance are enacted or released by the relevant authorities. 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. Kinross' combined federal and
provincial statutory tax rate for both 2018 and 2017 was 26.5%.
3
k.4.242 KinrossAR2018_MDAMar14B.pdf - p3 (March 15, 2019 22:53:41)
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
Adjusted net earnings attributable to common shareholders was $128.1 million, or $0.10 per share, for 2018 compared to adjusted
net earnings attributable to common shareholders of $178.7 million, or $0.14 per share, in 2017. The decrease in adjusted net earnings
was mainly due to the decrease in margins described above.
In 2018, net cash flow provided from operating activities decreased to $788.7 million from $951.6 million in 2017 primarily due to the
decrease in margins, partially offset by lower taxes paid and favourable working capital movements. Adjusted operating cash flow
decreased to $874.2 million from $1,166.7 million in 2017, primarily due to the decrease in margins described above.
Capital expenditures increased by 16% in 2018 compared to 2017, primarily due to increased spending at Round Mountain, Bald
Mountain and Tasiast, partially offset by lower spending at Paracatu and Chirano.
In 2018, attributable all-in sustaining cost per equivalent ounce sold and per ounce sold on a by-product basis increased from 2017,
primarily due to an increase in attributable cost of sales per equivalent ounce sold and per ounce sold on a by-product basis.
Attributable all-in cost per equivalent ounce sold and per ounce sold on a by-product basis increased compared to 2017, primarily due
to an increases in attributable production cost of sales per equivalent ounce sold and per ounce sold on a by-product basis and non-
sustaining capital expenditures.
2017 vs. 2016
Kinross’ attributable production decreased by 4% compared to 2016, primarily due to a decrease in production at Kupol due to lower
grades, at Paracatu due to a temporary curtailment as a result of lower than average rainfall in the area, and at Maricunga due to the
suspension of mining and crushing activities in 2016. These decreases were offset by higher production at Bald Mountain as a result
of more ounces recovered from the heap leach pads and higher grades, as well as at Round Mountain and Tasiast due to higher grades.
Metal sales decreased by 5% in 2017 compared to 2016 due to a decrease in gold equivalent ounces sold, slightly offset by an increase
in average metal prices realized. The average realized gold price increased to $1,260 per ounce in 2017 from $1,249 per ounce in 2016.
Gold equivalent ounces sold in 2017 decreased to 2,621,875 ounces from 2,778,902 ounces in 2016, primarily due to the decrease in
production as described above.
Production cost of sales decreased by 11% compared to 2016, primarily due to the decrease in gold equivalent ounces sold as described
above, as well as a decrease in operating waste mined at Fort Knox. These decreases were partially offset by higher production cost
of sales at Bald Mountain due to an increase in gold equivalent ounces sold. The decrease in production cost of sales resulted in a 6%
decrease in attributable production cost of sales per equivalent ounce sold compared to 2016.
In 2017, depreciation, depletion and amortization decreased by 4% compared to 2016, primarily due to the decrease in gold equivalent
ounces sold at Kupol, Paracatu and Maricunga. This decrease was slightly offset by an increase in depreciation, depletion and
amortization at Bald Mountain and Round Mountain due to an increase in gold equivalent ounces sold, as well as at Chirano due to an
increase in gold equivalent ounces sold and a decrease in the mineral reserves as at December 31, 2016.
At December 31, 2017, upon completion of its annual assessment of the carrying value of its Cash Generating Units (“CGUs”), the
Company recorded a net, after-tax, impairment reversal of $62.1 million. The impairment reversal was entirely related to property,
plant and equipment and included after-tax impairment reversals at Tasiast and Fort Knox of $142.9 million and $86.2 million,
respectively, partially offset by an after-tax impairment charge at Paracatu of $167.0 million. The impairment reversals at Tasiast and
Fort Knox were mainly due to an increase in the Company’s short-term and long-term gold price estimates, as well as Tasiast Phase
Two and additions to Fort Knox’s mineral reserve estimates. The impairment charge at Paracatu was mainly a result of changes in the
fiscal regime in Brazil that were considered in the cash flow analysis used to assess its recoverable amount. The impairment charge at
Paracatu is net of a tax recovery of $86.0 million and the impairment reversal at Fort Knox is net of a tax expense of $2.4 million. There
was no tax impact on the impairment reversal at Tasiast. During 2016, the Company recorded impairment charges at Maricunga of
$68.3 million against property, plant and equipment and $71.3 million against metals and supplies inventory as a result of the
suspension of mining and crushing activities during the year.
Operating earnings increased to $336.5 million in 2017 from $46.3 million in 2016. The change in operating earnings was primarily due
to lower impairment charges as well as increased margins (metal sales less production cost of sales).
On March 28, 2017, the Company announced that it had entered into an agreement with Goldcorp Inc. (“Goldcorp”) to sell its 25%
interest in the Cerro Casale project and its 100% interest in the Quebrada Seca exploration project in Chile. In connection with the
sale, the Company recorded a reversal of previously recorded impairment charges of $97.0 million during the three months ended
k.4.242 KinrossAR2018_MDAMar14B.pdf - p4 (March 15, 2019 22:53:41)
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4
MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
March 31, 2017 within other income (expense). On June 9, 2017, the Company completed the sale and recognized a gain on disposition
of $12.7 million in other income (expense).
On May 18, 2017, the Company entered into an agreement with White Gold Corp. to sell its 100% interest in the White Gold exploration
project in the Yukon Territory. On June 14, 2017, the Company completed the sale and recognized a loss on disposition of $1.7 million
in other income (expense).
On September 18, 2017, the Company entered into an agreement with Integra Resources Corp. (“Integra”) to sell its 100% interest in
the DeLamar reclamation property (“DeLamar”). On November 3, 2017, the Company completed the sale and recognized a gain on
disposition of $44.2 million in other income (expense).
In 2017, net earnings attributable to common shareholders were $445.4 million, or $0.36 per share, compared to a net loss attributable
to common shareholders of $104.0 million, or $0.08 per share, in 2016. The change was primarily a result of the increase in operating
earnings, the impairment reversal recorded in relation to the sale of Cerro Casale, and gains recognized upon disposition of DeLamar,
Cerro Casale and Quebrada Seca, as described above.
In addition, an income tax recovery of $23.2 million was recorded in 2017, compared to an income tax expense of $49.6 million in
2016. The $23.2 million income tax recovery recognized in 2017 included a net tax recovery of $83.6 million related to the impairment
charge at Paracatu and the impairment reversal at Fort Knox, and an estimated net benefit of $93.4 million due to the enactment of
U.S. Tax Reform legislation on December 22, 2017. The estimated net benefit included a benefit of $124.4 million in respect of the
collectability of the Alternative Minimum Tax (“AMT”) credit, which is partially offset by the write-down of net deferred tax assets to
reflect the reduction in the U.S. corporate tax rate from 35% to 21% beginning January 1, 2018. Further guidance on the
implementation and application of the U.S. Tax Reform legislation will be forthcoming in regulations to be issued by the Department
of Treasury, legislation or guidance from the states in which the Company operates and directions from the Office of Management
and Budget. Such legislation, regulations, directions and additional guidance may require changes to the estimated net benefit
recorded and the impact of such changes will be accounted for in the period in which the legislation, regulations, directions, and
additional guidance are enacted or released by the relevant authorities. 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 of Bald Mountain and the remaining 50% of Round Mountain. 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 2017 was 26.5% (2016 - 26.5%).
Adjusted net earnings attributable to common shareholders was $178.7 million, or $0.14 per share, for 2017 compared to adjusted
net earnings attributable to common shareholders of $93.0 million, or $0.08 per share, in 2016. The increase in adjusted net earnings
was mainly due to the increase in margins described above.
In 2017, net cash flow provided from operating activities decreased to $951.6 million from $1,099.2 million in 2016 primarily due to
less favourable working capital movements and higher taxes paid, partially offset by higher margins. Adjusted operating cash flow
increased to $1,166.7 million from $926.7 million in 2016, primarily due to the increase in margins described above.
Capital expenditures increased by 42% in 2017 compared to 2016, primarily due to increased spending at Tasiast, Bald Mountain and
Fort Knox, offset by lower spending at Kupol.
In 2017, attributable all-in sustaining cost per equivalent ounce sold and per ounce sold on a by-product basis decreased from 2016
largely due to lower production cost of sales. Attributable all-in cost per equivalent ounce sold and per ounce sold on a by-product
basis increased compared to 2016, primarily due to an increase in non-sustaining capital expenditures.
5
k.4.242 KinrossAR2018_MDAMar14B.pdf - p5 (March 15, 2019 22:53:42)
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
Mineral Reserves1
Kinross’ total estimated proven and probable gold reserves at year-end 2018 were approximately 25.5 million ounces. The decrease
of 0.4 million ounces in estimated gold reserves compared to year-end 2017 was mainly a result of production depletion, significantly
offset by reserve additions, particularly at Fort Knox.
Proven and probable silver reserves at year-end 2018 were estimated at approximately 53.9 million ounces, an increase of 1.3 million
ounces compared with year-end 2017, primarily due to reserve additions at Kupol.
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 13, 2019.
6
k.4.242 KinrossAR2018_MDAMar14B.pdf - p6 (March 15, 2019 22:53:42)
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
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 2018, the price of gold fluctuated between a high of $1,358 per ounce in January to a low of $1,174 per
ounce in August, based on daily closing prices. The average price for the year based on the London Bullion Market Association PM Fix
was $1,268 per ounce, an $11 per ounce increase over the 2017 average price of $1,257 per ounce. Major influences to the gold price
during 2018 included financial market volatility, elevated geopolitical and trade risks, equity market declines in the fourth quarter and
an overall uncertain global economic outlook.
7
k.4.242 KinrossAR2018_MDAMar14B.pdf - p7 (March 15, 2019 22:53:43)
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
Source: London Bullion Marketing Association London PM Fix
1 Average realized gold price per ounce is a non-GAAP financial measure and is defined in Section 11.
In 2018, the Company realized an average gold price of $1,268 per ounce compared to the average PM Fix of $1,268 per ounce.
k.4.242 KinrossAR2018_MDAMar14B.pdf - p8 (March 15, 2019 22:53:43)
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8
MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
Gold Supply and Demand Fundamentals
Source: GFMS 2018 Gold Survey Q4 Update
Total gold supply in 2018 remains relatively unchanged compared to 2017. Global gold mine production and recycled gold increased
by approximately 1.6%. Mine production and recycled gold remain the dominant sources of gold supply, and in 2018 they represented
approximately 72% and 28% of total supply, respectively.
9
k.4.242 KinrossAR2018_MDAMar14B.pdf - p9 (March 15, 2019 22:53:44)
DT
MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
Source: GFMS 2018 Gold Survey Q4 Update
Total demand for gold in 2018 increased by 6% relative to 2017. As a result of the Emerging Market countries building their gold
reserves, there was an increase of 50% in net purchases by central banks. Jewellery consumption and fabrication makes up 61% of
gold demand and remains relatively unchanged from 2017. Retail investment increased by 3%, mainly supported by the increase of
14% in coins investment.
k.4.242 KinrossAR2018_MDAMar14B.pdf - p10 (March 15, 2019 22:53:45)
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10
MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
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 fuel price increases in 2018, as global fuel supply and demand move
towards equilibrium. 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.
11
k.4.242 KinrossAR2018_MDAMar14B.pdf - p11 (March 15, 2019 22:53:45)
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
Currency Fluctuations
Source: Bloomberg
At the Company’s non-U.S. mining operations and exploration activities, which are primarily located in Brazil, Chile, the Russian
Federation, Ghana, Mauritania, and Canada, a portion of operating costs and capital expenditures are denominated in their respective
local currencies. Generally, as the U.S. dollar strengthens, these currencies weaken, and as the U.S. dollar weakens, these foreign
currencies strengthen. These currencies were subject to high market volatility over the course of the year. Approximately 64% of the
Company’s expected attributable production in 2019 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.
k.4.242 KinrossAR2018_MDAMar14B.pdf - p12 (March 15, 2019 22:53:46)
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12
MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
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 2019, Kinross expects to produce 2.5 million gold equivalent ounces (+/- 5%) from its operations, in line with 2018 production.
Production is expected to be higher in the second half of 2019 than the first half mainly as a result of the expected Bald Mountain
Vantage Complex project ramp up and lower production from Fort Knox in the first quarter as per the mining and milling strategy.
Production cost of sales per gold equivalent ounce is expected to be $730 (+/- 5%) for 2019, which is in line with full-year 2018 cost of
sales. The Company expects all-in sustaining cost to be $995 (+/- 5%) per ounce sold on both a gold equivalent and by-product basis
for 2019, which is largely in line with full-year 2018 all-in sustaining cost per ounce.
Material assumptions used to forecast 2019 production costs are: a gold price of $1,200 per ounce, a silver price of $16 per ounce, an
oil price of $65 per barrel, and foreign exchange rates of 3.50 Brazilian reais to the U.S. dollar, 1.30 Canadian dollars to the U.S. dollar,
60 Russian roubles to the U.S. dollar, 650 Chilean pesos to the U.S. dollar, 4.50 Ghanaian cedi to the U.S. dollar, 35 Mauritanian ouguiya
to the U.S. dollar, and 1.11 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 these exchange rates would be expected to result in an impact of
approximately $19 and $27 on 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 $3 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 $5 impact on our production cost of sales per ounce as a result of a
change in royalties owing.
Total capital expenditures for 2019 are forecast to be approximately $1,050 million (+/- 5%) (including capitalized interest of
approximately $65 million). Of this amount, sustaining capital expenditures are expected to be approximately $445 million, with non-
sustaining capital expenditures of approximately $540 million for the Tasiast West Branch stripping and expansion project, the Round
Mountain Phase W project, and other development projects and studies.
The 2019 forecast for exploration is approximately $75 million, none of which is expected to be capitalized, with 2019 overhead
(general and administrative and business development expenses) forecast to be approximately $165 million, both of which are
consistent with last year’s guidance.
Other operating costs expected to be incurred in 2019 are approximately $100 million, which includes approximately $40 million of
care and maintenance costs in Chile and at Kettle River-Buckhorn.
Based on our assumed gold price of $1,200 and other inputs, tax expense is expected to be negligible and taxes paid are expected to
be $95 million, with tax expense increasing at 16% of any profit resulting from higher gold prices and taxes paid increasing at a lower
rate of 5%. With a $100 increase in the realized gold price, tax expense and taxes paid are expected to be $40 million and $105 million,
respectively.
Depreciation, depletion and amortization is forecast to be approximately $330 (+/- 5%) per gold equivalent ounce.
13
k.4.242 KinrossAR2018_MDAMar14B.pdf - p13 (March 15, 2019 22:53:46)
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
4. PROJECT UPDATES AND NEW DEVELOPMENTS
Tasiast Expansion Update
Tasiast continues to perform strongly, achieving record quarterly production in the fourth quarter of 2018. The site is currently
exceeding throughput and recovery expectations. The Phase One expansion has been completed successfully and the new Semi-
Autogenous Grinding (“SAG”) mill is performing very well. In addition, continuous improvement initiatives have been undertaken
which are expected to result in meaningful cost and operational improvements. The Company expects Tasiast to continue to deliver
strong operational performance in 2019.
The Phase Two expansion continues to be a viable option as the Company completes its evaluation of alternative approaches to further
increase throughput at Tasiast. The evaluation is seeking ways to reduce capital expenditures, while preserving the overall value
proposition, and incorporates strong Phase One performance results, including throughput averaging above nameplate capacity.
Phase Two expansion considerations include, among other matters: results from the Company’s evaluation of alternative throughput
approaches; acceptable project financing terms; capital priorities across the Company’s portfolio; and, the ongoing discussions with
the Government of Mauritania.
These discussions with the Government have focused on matters that arise occasionally and are generally common to the mining
sector. These matters include tax issues, expatriate work permits, and increasing opportunities for local suppliers, in accordance with
the Company’s policy and applicable laws. In addition, the parties have engaged in an ongoing dialogue regarding the Company’s
exemption from importation duties on fuel under the Tasiast Mining Convention. More specifically, the Government has questioned
whether some of the fuel purchased by the Company in the past under the exemption was used for non-exempt purposes and, since
the first quarter of 2018, has not processed the paperwork necessary for the Company to purchase tax exempt fuel. The Company has
reviewed the matter, including its onsite fuel usage, and based on its clear exemption right, does not agree with the Government’s
non-exemption of fuel. Further, the Company continues to seek from the Government an exploitation license for Tasiast Sud.
The Government has not expressed an intention to re-open the Tasiast Mining Convention, and in any event, the Company remains
protected by its rights under the Mining Convention, which includes international arbitration provisions. The existing Tasiast operation
is also covered under the Company’s political risk insurance policy with the Multilateral Investment Guarantee Agency (“MIGA”), a
member of the World Bank Group.
The Company continues to advance discussions to obtain approximately $300 million in project financing for Tasiast. In addition to the
previously signed mandate letters with Export Development Canada (“EDC”) and the International Finance Corporation (“IFC”), which
indicated their interest in the financing, subject to completing due diligence, two commercial banks have also expressed interest in
the financing and are now engaged in the due diligence process. The financing is progressing and completion is targeted for mid-2019.
There are Presidential elections expected in Mauritania in 2019. The Company will continue to focus on operating and optimizing
Tasiast, while at the same time, advancing the proactive discussions with the Government. The Presidential elections may impact on
the timing and substance of such discussions.
Round Mountain Phase W
The Round Mountain Phase W project continues to progress on schedule and on budget, with pre-stripping advancing well. Initial low
grade Phase W ore has been encountered and is being placed on the existing heap leach pads. Construction of the new heap leach
pad is now approximately 80% complete, while construction of the vertical carbon-in-column (VCIC) plant is approximately 50%
complete, with commissioning for both expected to start in the second quarter of 2019. Construction of mine infrastructure such as
the truck shop, warehouse, wash bay and fuel island are all proceeding as planned and are approximately 35% complete.
Fort Knox Gilmore
The Fort Knox Gilmore project is progressing well, on schedule and on budget, with initial ore expected in early 2020. Construction of
the heap leach has begun and will continue during the 2019 and 2020 construction seasons. Expansion of the dewatering system will
continue throughout the year in anticipation of stripping that is expected to commence in the third quarter of 2019.
k.4.242 KinrossAR2018_MDAMar14B.pdf - p14 (March 15, 2019 22:53:47)
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14
MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
Bald Mountain Vantage Complex
The Bald Mountain Vantage Complex project is proceeding well, with construction of the heap leach approximately 85% complete,
and the VCIC approximately 30% complete. Some challenges due to weather and a tight labour market have been encountered, but
commissioning of the heap leach and processing facilities remain on track to begin later in the first quarter of 2019. Support
infrastructure including the truck shop, warehouse, and wash bay is approximately 25% complete. Stacking of economic but previously
leached ore on the new heap leach pad is underway with approximately 50% of the material moved onto a segregated portion. Mining
activities at the Vantage Complex have commenced and initial ore is now being mined and stockpiled in preparation for placement on
the new heap.
Chile Projects
On February 2, 2018, Compania Minera Mantos de Oro (“MDO”), a subsidiary of the Company, agreed to purchase the remaining 50%
interest in the Phase 7 concessions surrounding the Company’s La Coipa mine that it did not already own from Salmones de Chile
Alimentos S.A. On March 19, 2018, the Company completed the acquisition. The purchase price of $65.1 million was comprised of
$65.0 million in cash, of which $35.0 million was paid on closing and the balance of $30.0 million was paid on January 30, 2019, and
transaction costs of $0.1 million. The Company now has the Phase 7 mining rights contemplated in the project pre-feasibility study
completed in 2015 and fully owns the Phase 7 deposit.
The feasibility study for the La Coipa Restart project and the scoping study for the Lobo-Marte project are both proceeding well, and
are expected to conclude in the third quarter of 2019 and first quarter of 2019, respectively. Permitting is in place for the La Coipa
Restart project and permitting strategy planning has begun at Lobo-Marte.
Recent Transactions
Acquisition of power plants in Brazil
On February 14, 2018, Kinross Brasil Mineração, a subsidiary of the Company, signed an agreement to acquire two hydroelectric power
plants in the State of Goias, Brazil from a subsidiary of Gerdau SA for $253.7 million (R$835.0 million). The two plants are expected to
secure a long-term supply of power and lower production costs over the life of the mine at Paracatu. On July 31, 2018, the Company
completed the transaction. The Company funded the transaction with cash while continuing to consider future debt financing to fund
the initial capital used for the acquisition.
Acquisition of remaining 50% interest in Bald Mountain exploration joint venture
On completion of the acquisition of the Bald Mountain mine in 2016, KG Mining (Bald Mountain) Inc. (“KGBM”), a subsidiary of the
Company, entered into a 50/50 exploration joint venture with Barrick Gold Corporation (“Barrick”). On October 2, 2018, KGBM signed
and completed a transaction with Barrick to acquire the remaining 50% interest in the exploration joint venture that it did not already
own for consideration including $15.5 million in cash and a 1.25% net smelter royalty. The Company now owns 100% of the Bald
Mountain property, the largest private mining land package in the U.S.
Other Developments
Board of Directors update
Mr. John Oliver, Kinross’ independent Board Chair since 2002, announced his retirement from his role as Board Chair effective
December 31, 2018. Ms. Catherine McLeod-Seltzer, a Board member since 2005, has been appointed the new independent Chair of
Kinross, effective January 1, 2019.
15
k.4.242 KinrossAR2018_MDAMar14B.pdf - p15 (March 15, 2019 22:53:48)
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
5. CONSOLIDATED RESULTS OF OPERATIONS
Operating Highlights
(in millions, except ounces and per ounce amounts)
Years ended December 31,
2018
2017
2016
2018 vs. 2017
Change % Change(d)
2017 vs. 2016
Change % Change(d)
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)
Average realized gold price per ounce (c)
Financial data
Metal sales
Production cost of sales
Depreciation, depletion and amortization
Impairment, net of reversals
Operating earnings
Net (loss) earnings attributable to common shareholders
2,475,068
2,698,136
2,810,345
(223,068)
2,532,912
2,621,875
2,778,902
(88,963)
(8%)
(3%)
(112,209)
(157,027)
(4%)
(6%)
2,452,398
2,673,533
2,789,150
(221,135)
2,510,419
2,596,754
2,758,306
(86,335)
(8%)
(3%)
(115,617)
(161,552)
2,480,529
4,232
2,553,178
5,058
2,697,912
5,913
(72,649)
(826)
(3%)
(16%)
(144,734)
(855)
$
1,268
$
1,260
$
1,249
$
8
1%
$
11
3,212.6
$
1,860.5
$
772.4
$
$
-
$
200.5
$
(23.6)
$
$
$
$
$
$
3,303.0
1,757.4
819.4
21.5
336.5
445.4
$
$
$
$
$
$
3,472.0
1,983.8
855.0
139.6
46.3
(104.0)
$
$
$
$
$
$
(90.4)
103.1
(47.0)
(21.5)
(136.0)
(469.0)
(3%)
6%
(6%)
nm
(40%)
(105%)
$
$
$
$
$
$
(169.0)
(226.4)
(35.6)
(118.1)
290.2
549.4
(4%)
(6%)
(5%)
(14%)
1%
(5%)
(11%)
(4%)
(85%)
nm
nm
(a)
(b)
(c)
(d)
"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 2018 was 80.74:1 (2017 - 73.72:1 and 2016 - 72.95:1).
“Average realized gold price per ounce” is a non-GAAP financial measure and is defined in Section 11.
"nm" means not meaningful.
k.4.242 KinrossAR2018_MDAMar14B.pdf - p16 (March 15, 2019 22:53:48)
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16
MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
Operating Earnings (Loss) by Segment
(in millions)
Operating segments
Fort Knox
Round Mountain
Bald Mountain
Paracatu
Maricunga
Kupol(a)
Tasiast
Chirano
Non-operating segment
Corporate and other(b)
Total
Years ended December 31,
2018 vs. 2017
2018
2017
2016
Change
% Change
2017 vs. 2016
Change % Change(c)
$
(41.5)
154.1
110.7
69.9
45.1
187.2
(85.9)
(6.2)
$
224.7
139.7
68.5
(263.3)
21.3
225.0
118.8
(27.5)
$
110.0
85.8
(37.4)
36.2
(150.6)
345.3
(119.9)
(58.0)
$
(266.2)
14.4
42.2
333.2
23.8
(37.8)
(204.7)
21.3
(118%)
10%
62%
127%
112%
(17%)
(172%)
77%
114.7
53.9
105.9
(299.5)
171.9
(120.3)
238.7
30.5
(232.9)
200.5
$
(170.7)
336.5
$
(165.1)
46.3
$
(62.2)
(136.0)
$
(36%)
(40%)
(5.6)
290.2
$
104%
63%
nm
nm
114%
(35%)
199%
53%
(3%)
nm
(a) The Kupol segment includes the Kupol and Dvoinoye mines.
(b)
"Corporate and other" includes operating costs which are not directly related to individual mining properties such as overhead expenses, gains
and losses on disposal of assets and investments, and other costs relating to non-operating assets (including Kettle River-Buckhorn, La Coipa, Lobo-
Marte, Cerro Casale until its disposal on June 9, 2017 and White Gold until its disposal on June 14, 2017).
"nm" means not meaningful.
(c)
17
k.4.242 KinrossAR2018_MDAMar14B.pdf - p17 (March 15, 2019 22:53:49)
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
Mining Operations
Fort Knox (100% ownership and operator) – USA
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 reversal
Other
Exploration and business development
Segment operating (loss) earnings
Years ended December 31,
2018
2017
Change
% Change(c)
24,646
28,097
0.50
81.5%
26,362
32,736
0.84
82.5%
(1,716)
(4,639)
(0.34)
(1.0%)
255,569
256,037
381,115
381,779
(125,546)
(125,742)
$
$
$
325.5
214.4
109.7
-
1.4
38.2
4.7
(41.5)
481.1
239.9
86.6
(88.6)
243.2
9.5
9.0
224.7
(155.6)
(25.5)
23.1
88.6
(241.8)
28.7
(4.3)
(266.2)
$
$
$
(7%)
(14%)
(40%)
(1%)
(33%)
(33%)
(32%)
(11%)
27%
nm
(99%)
nm
(48%)
(118%)
Includes 16,307,000 tonnes placed on the heap leach pads during 2018 (2017 - 20,267,000 tonnes).
(a)
(b) Amount represents mill grade and recovery only. Ore placed on the heap leach pads had an average grade of 0.19 grams per tonne during 2018
(2017 - 0.25 grams per tonne). Due to the nature of heap leach operations, point-in-time recovery rates are not meaningful.
"nm" means not meaningful.
(c)
The Company has been operating the Fort Knox mine, located near Fairbanks, Alaska, since it was acquired in 1998.
2018 vs. 2017
In 2018, tonnes of ore mined decreased by 7% compared to 2017, largely due to the impact of the pit wall slide in the first quarter of
2018, higher than average rainfall in the second half of 2018, and an increase in capital development activity related to Phase 8 East.
Mining activities in 2018 were primarily focused on mining a higher proportion of lower grade leachable ore from Phase 8 South and
West. Tonnes of ore processed decreased by 14% in 2018 compared to 2017, primarily due to a decrease in tonnes of ore mined and
placed on the heap leach pads. Mill grades were 40% lower in 2018 compared to 2017, mainly due to the pit wall slide in the first
quarter of 2018 that restricted access to higher grade ore. Gold equivalent ounces produced and sold decreased by 33% compared to
2017, primarily due to the decreases in grades and tonnes of ore processed, partially offset by the timing of ounces processed through
the mill.
Metal sales decreased by 32% in 2018 compared to 2017, due to the decrease in gold equivalent ounces sold, partially offset by an
increase in average metal prices realized. During 2018, production cost of sales was lower by 11% compared to 2017, due to the
decrease in gold equivalent ounces sold, partially offset by an increase in operating waste mined. Depreciation, depletion and
amortization increased by 27% compared to 2017, mainly due to an increase in the depreciable asset base related to the impairment
reversal recognized in the fourth quarter of 2017, partially offset by the decrease in gold equivalent ounces sold.
At December 31, 2017, the Company recognized a reversal of previously recorded impairment charges of $88.6 million. The non-cash
impairment reversal related to property, plant and equipment was primarily due to an increase in the Company’s estimates of future
metal prices and additions to Fort Knox’s mineral reserve estimates. No such impairment reversal was recognized in 2018.
In 2018, other operating costs of $38.2 million includes $37.9 million of costs as a result of production issues associated with the pit
wall slide.
k.4.242 KinrossAR2018_MDAMar14B.pdf - p18 (March 15, 2019 22:53:50)
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18
MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
Round Mountain (100% ownership and operator) – USA
Years ended December 31,
2018
2017
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
Financial Data (in millions)
Metal sales
Production cost of sales
Depreciation, depletion and amortization
Exploration and business development
Segment operating earnings
22,023
24,770
1.46
83.8%
26,418
23,270
1.41
81.2%
(4,395)
1,500
0.05
2.6%
385,601
381,478
436,932
438,051
(51,331)
(56,573)
$
$
$
483.9
277.6
51.0
155.3
1.2
154.1
552.2
302.5
107.4
142.3
2.6
139.7
(68.3)
(24.9)
(56.4)
13.0
(1.4)
14.4
$
$
$
(17%)
6%
4%
3%
(12%)
(13%)
(12%)
(8%)
(53%)
9%
(54%)
10%
Includes 21,118,000 tonnes placed on the heap leach pads during 2018 (2017 - 19,611,000 tonnes).
(a)
(b) Amounts represent mill grade and recovery only. Ore placed on the heap leach pads had an average grade of 0.36 grams per tonne during 2018
(2017 - 0.50 grams per tonne). Due to the nature of heap leach operations, point-in-time recovery rates are 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.
2018 vs. 2017
In 2018, tonnes of ore mined decreased by 17% compared to 2017, largely due to an increase in capital development activity related
to the Phase W project. Tonnes of ore processed increased by 6% compared to 2017, primarily due to a higher proportion of leach
grade material mined and stacked on the heap leach pads. Gold equivalent ounces produced and sold decreased by 12% and 13%,
respectively, compared to 2017, primarily due to fewer ounces recovered from the heap leach pads.
Metal sales decreased by 12% in 2018 compared to 2017, due to the decrease in gold equivalent ounces sold, partially offset by the
increase in average metal prices realized. Production cost of sales decreased by 8% in 2018 compared to 2017, mainly due to the
decrease in gold equivalent ounces sold and a decrease in operating waste mined. Depreciation, depletion and amortization decreased
by 53% compared to 2017, primarily due to the decrease in gold equivalent ounces sold and an increase in mineral reserves in the
third quarter of 2017.
19
k.4.242 KinrossAR2018_MDAMar14B.pdf - p19 (March 15, 2019 22:53:50)
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
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
Other
Exploration and business development
Segment operating earnings
Years ended December 31,
2018
2017
Change
% Change(b)
24,477
23,654
0.43
21,615
21,615
0.80
2,862
2,039
(0.37)
284,646
318,091
282,715
262,916
1,931
55,175
$
$
$
403.9
174.1
99.7
130.1
7.9
11.5
110.7
331.5
168.9
83.5
79.1
1.1
9.5
68.5
72.4
5.2
16.2
51.0
6.8
2.0
42.2
$
$
$
13%
9%
(46%)
1%
21%
22%
3%
19%
64%
nm
21%
62%
(a) Due to the nature of heap leach operations, point-in-time recovery rates are not meaningful.
(b)
"nm" means not meaningful.
The Company completed the acquisition of 100% of the Bald Mountain open pit mine on January 11, 2016 from Barrick, which includes
a large associated land package. On October 2, 2018, the Company acquired the remaining 50% interest in the Bald Mountain
exploration joint venture that it did not already own from Barrick, giving Kinross 100% ownership of the Bald Mountain land package.
2018 vs. 2017
In 2018, tonnes of ore mined and processed increased by 13% and 9%, respectively, compared to 2017, as mining activities were
primarily focused on the Poker pit. Mining in a lower grade portion of the Poker pit resulted in a 46% decrease in grade compared to
2017. Gold equivalent ounces sold in 2018 were higher than production due to the timing of sales.
In 2018, metal sales increased by 22%, due to the increase in gold equivalent ounces sold and an increase in average metal prices
realized. Production cost of sales increased by 3% compared to 2017 due to the increase in gold equivalent ounces sold, largely offset
by less operating waste mined. Depreciation, depletion and amortization increased by 19% compared to 2017, primarily due to the
increase in gold equivalent ounces sold.
k.4.242 KinrossAR2018_MDAMar14B.pdf - p20 (March 15, 2019 22:53:51)
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20
MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
Paracatu (100% ownership and operator) – Brazil
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 charge
Other
Segment operating earnings (loss)
(a)
"nm" means not meaningful.
Years ended December 31,
2018
2017
Change
% Change(a)
47,910
54,141
0.39
77.7%
27,770
37,623
0.41
74.6%
20,140
16,518
(0.02)
3.1%
521,575
523,417
359,959
356,251
161,616
167,166
$
$
$
663.1
430.5
148.9
-
83.7
13.8
69.9
447.0
310.2
127.0
253.0
(243.2)
20.1
(263.3)
216.1
120.3
21.9
(253.0)
326.9
(6.3)
333.2
$
$
$
73%
44%
(5%)
4%
45%
47%
48%
39%
17%
nm
134%
(31%)
127%
The Company acquired a 49% ownership interest in the Paracatu open pit mine, located in the State of Minas Gerais, Brazil, upon the
acquisition of TVX Gold Inc. on January 31, 2003. On December 31, 2004, the Company purchased the remaining 51% of Paracatu from
Rio Tinto Plc.
2018 vs. 2017
In 2018, tonnes of ore mined and processed increased by 73% and 44%, respectively, compared to 2017, primarily due to a curtailment
of such activities in the third quarter of 2017 as a result of lower than average rainfall in the area. Mining and processing activities
resumed in the fourth quarter of 2017 upon receiving sufficient rainfall. Grades decreased by 5% in 2018 compared to 2017, largely
due to mining in lower grade areas, as per the mine plan. Recoveries increased by 4% due to plant efficiencies achieved through
continued optimization. Gold equivalent ounces produced and sold increased by 45% and 47%, respectively, compared to 2017,
primarily due to the temporary curtailment of mining and processing activities in the third quarter of 2017.
Metal sales increased by 48% in 2018, due to the increase in gold equivalent ounces sold and an increase in metal prices realized.
Production cost of sales increased by 39% in 2018 compared to 2017, primarily due to the increase in gold equivalent ounces sold,
partially offset by decreases in power and contractor costs and favourable foreign exchange movements. Depreciation, depletion and
amortization increased by 17% in 2018, primarily due to the increase in gold equivalent ounces sold, partially offset by a decrease in
the depreciable asset base related to an impairment charge recognized in the fourth quarter of 2017.
At December 31, 2017, the Company recorded a non-cash impairment charge of $253.0 million related to property, plant and
equipment. The impairment charge at Paracatu was mainly a result of changes in the fiscal regime in Brazil that were considered in
the cash flow analysis used to assess Paracatu’s recoverable amount. No such impairment charge was recognized in 2018.
In 2018, other operating costs of $13.8 million includes $3.4 million of costs related to the acquisition of the two hydroelectric power
plants in July 2018. Other operating costs of $20.1 million in 2017 includes $23.6 million of costs related to the temporary curtailment,
offset by revenues of $9.0 million related to the sale of excess energy that became available as a result of the curtailment.
21
k.4.242 KinrossAR2018_MDAMar14B.pdf - p21 (March 15, 2019 22:53:52)
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
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
Other
Exploration and business development
Segment operating earnings
Years ended December 31,
2018
2017
Change
% Change(b)
-
-
-
-
-
-
-
-
-
-
-
-
60,066
89,959
91,127
41,316
(31,061)
48,643
(34%)
118%
$
$
$
113.6
65.7
4.0
43.9
(1.3)
0.1
45.1
52.0
19.9
4.6
27.5
6.1
0.1
21.3
61.6
45.8
(0.6)
16.4
(7.4)
-
23.8
118%
nm
(13%)
60%
(121%)
0%
112%
$
$
$
(a) Due to the nature of heap leach operations, point-in-time recovery rates are not meaningful.
(b)
"nm" means 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 2016, 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”).
2018 vs. 2017
As a result of the suspension of mining and crushing activities at Maricunga since 2016, there was no ore mined and processed in 2018
and 2017. Gold equivalent ounces produced decreased by 34% compared to 2017 as rinsing of ore placed on the heap leach pads prior
to the suspension of mining activities continued to ramp down during 2018. Gold equivalent ounces sold in 2018 increased by 118%
due to timing of sales.
Metal sales increased by 118% compared to 2017, due to the increase in gold equivalent ounces sold as well as an increase in average
metal prices realized. Production cost of sales increased by $45.8 million compared to 2017, primarily due to the increase in gold
equivalent ounces sold.
k.4.242 KinrossAR2018_MDAMar14B.pdf - p22 (March 15, 2019 22:53:52)
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22
MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
Kupol (100% ownership and operator) – Russian Federation(a)
Years ended December 31,
2018
2017
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)
Financial Data (in millions)
Metal sales
Production cost of sales
Depreciation, depletion and amortization
Other
Exploration and business development
Segment operating earnings
1,636
1,721
8.61
70.94
94.6%
83.5%
1,915
1,733
10.01
81.11
94.8%
84.8%
(279)
(12)
(1.40)
(10.17)
(0.2%)
(1.3%)
489,947
494,835
580,451
577,007
(90,504)
(82,172)
3,306
3,218
3,879
3,873
(573)
(655)
$
$
$
627.7
288.2
133.5
206.0
(0.4)
19.2
187.2
726.9
300.9
184.2
241.8
(0.3)
17.1
225.0
(99.2)
(12.7)
(50.7)
(35.8)
(0.1)
2.1
(37.8)
$
$
$
(15%)
(1%)
(14%)
(13%)
(0%)
(2%)
(16%)
(14%)
(15%)
(17%)
(14%)
(4%)
(28%)
(15%)
(33%)
12%
(17%)
(a) The Kupol segment includes the Kupol and Dvoinoye mines.
(b)
(c)
Includes 447,000 tonnes of ore mined from Dvoinoye during 2018 (2017 - 668,000).
"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 2018 was 80.74:1 (2017 - 73.72:1).
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.
2018 vs. 2017
In 2018, tonnes of ore mined decreased by 15%, compared to 2017, primarily due to mining in deeper and narrower parts of the ore
bodies, as per the mine plan, and the completion of mining of the September Northeast deposit in December 2017. Mill grades were
lower compared to 2017, largely due to an increase in the proportion of ore processed from the low-grade stopes at Dvoinoye, as per
the mine plan. Gold equivalent ounces produced and sold decreased by 16% and 14%, respectively, compared to 2017, primarily as a
result of the decrease in grades. In 2018, gold equivalent ounces sold were higher than production due to timing of sales.
Metal sales decreased by 14% in 2018 compared to 2017 due to the decrease in gold equivalent ounces sold, partially offset by higher
average metal prices realized. In 2018, production cost of sales decreased by 4% compared with 2017, primarily due to the decrease
in gold equivalent ounces sold and favourable foreign exchange movements, partially offset by higher plant maintenance, contractor,
and fuel costs. Depreciation, depletion and amortization decreased by 28% compared to 2017, largely due to the decrease in gold
equivalent ounces sold and the addition of mineral reserves at Dvoinoye at the end of 2017.
23
k.4.242 KinrossAR2018_MDAMar14B.pdf - p23 (March 15, 2019 22:53:53)
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
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 reversal
Other
Exploration and business development
Segment operating (loss) earnings
Years ended December 31,
2018
2017
Change
% Change(c)
8,206
5,692
2.02
92.6%
6,685
4,101
2.36
92.3%
250,965
243,241
243,240
236,256
1,521
1,591
(0.34)
0.3%
7,725
6,985
$
$
$
307.8
237.3
95.5
-
(25.0)
52.4
8.5
(85.9)
298.4
178.2
78.6
(142.9)
184.5
60.0
5.7
118.8
9.4
59.1
16.9
142.9
(209.5)
(7.6)
2.8
(204.7)
$
$
$
23%
39%
(14%)
0%
3%
3%
3%
33%
22%
nm
(114%)
(13%)
49%
(172%)
Includes 1,958,000 tonnes placed on the dump leach pads during 2018 (2017 - 1,056,000 tonnes).
(a)
(b) Amount represents mill grade and recovery only. Ore placed on the dump leach pads had an average grade of 0.36 grams per tonne during 2018
(2017 - 0.65 grams per tonne). Due to the nature of heap leach operations, point-in-time recovery rates are not meaningful.
"nm" means not meaningful.
(c)
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.
2018 vs. 2017
Tonnes of ore mined increased by 23% compared to 2017, consistent with the mine plan that involved mining a higher proportion of
lower grade leachable ore. In 2018, tonnes of ore processed increased by 39% compared to 2017, primarily due to an increase in mill
throughput upon completion of the Phase One project and the commissioning of the SAG mill, as well as an increase in tonnes placed
on the dump leach pads. Mill grades decreased by 14% compared to 2017, mainly due to planned mine sequencing. In 2018, gold
equivalent ounces produced and sold increased by 3% compared to 2017, primarily due to the increase in mill throughput, partially
offset by the decrease in grades.
Metal sales increased by 3% compared with 2017 due to the increase in gold equivalent ounces sold and an increase in average metal
prices realized. In 2018, production cost of sales increased by 33% compared to 2017, primarily due to the increase in gold equivalent
ounces sold as well as an increase in operating waste mined and higher fuel, reagent, and maintenance costs. Depreciation, depletion
and amortization increased by 22% in 2018, primarily due to an increase in the depreciable asset base largely primarily related to the
completion of the Phase One project and the impairment reversal recognized in the fourth quarter of 2017.
At December 31, 2017, the Company recognized a reversal of previously recorded impairment charges of $142.9 million. The non-cash
impairment reversal related to property, plant and equipment was primarily as a result of an increase in the Company’s estimates of
future metal prices and Tasiast Phase Two. No such impairment reversal was recognized in 2018.
k.4.242 KinrossAR2018_MDAMar14B.pdf - p24 (March 15, 2019 22:53:53)
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24
MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
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
Other
Exploration and business development
Segment operating loss
Years ended December 31,
2018
2017
Change
% Change(b)
2,013
3,506
2.18
92.1%
2,410
3,438
2.44
92.2%
(397)
68
(0.26)
(0.1%)
226,699
224,927
246,027
251,212
(19,328)
(26,285)
$
$
$
286.0
172.7
123.8
(10.5)
(10.3)
6.0
(6.2)
317.6
200.1
138.6
(21.1)
(1.8)
8.2
(27.5)
(31.6)
(27.4)
(14.8)
10.6
(8.5)
(2.2)
21.3
$
$
$
(16%)
2%
(11%)
(0%)
(8%)
(10%)
(10%)
(14%)
(11%)
50%
nm
(27%)
77%
(a) Operating statistics and financial data are at 100% for all periods.
(b)
"nm" means not meaningful.
Kinross acquired its 90% interest in the Chirano mine on September 17, 2010 upon completing its acquisition of Red Back. Chirano is
located in southwestern Ghana, approximately 100 kilometres southwest of Kumasi, Ghana's second largest city. A 10% carried
interest is held by the government of Ghana.
2018 vs. 2017
Tonnes of ore mined in 2018 decreased by 16% compared to 2017, primarily due to the completion of open pit mining at the end of
the second quarter of 2017, partially offset by increased mining activities at the Akoti and Akwaaba underground deposits. Tonnes of
ore processed were higher compared to 2017, largely due to increased mill availability as a result of a more stable power supply. Mill
grade decreased by 11% in 2018 due to planned mine sequencing which saw greater reliance on stockpiled material. Gold equivalent
ounces produced and sold decreased by 8% and 10%, respectively, compared with 2017, primarily due to the decrease in mill grade.
In 2018, metal sales decreased by 10% compared to 2017, due to the decrease in gold equivalent ounces sold, partially offset by an
increase in metal prices realized. Production cost of sales decreased by 14% compared to 2017, primarily due to the decrease in gold
equivalent ounces sold, and lower overhead, maintenance, and power costs. Depreciation, depletion and amortization decreased by
11% compared to 2017, largely due to the decrease in gold equivalent ounces sold, and a lower depreciable asset base.
25
k.4.242 KinrossAR2018_MDAMar14B.pdf - p25 (March 15, 2019 22:53:54)
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
Impairment, Net of Reversals
(in millions)
Property, plant and equipment (i)
(a)
"nm" means not meaningful.
i.
Property, plant and equipment
Years ended December 31,
2018
$
-
2017
$
21.5
Change
% Change(a)
$
(21.5)
nm
No impairment charges or impairment reversals were recognized in 2018.
At December 31, 2017, upon completion of its annual assessment of the carrying value of its CGUs, the Company recorded a net, after-
tax, impairment reversal of $62.1 million. The impairment reversal was entirely related to property, plant and equipment and included
after-tax impairment reversals at Tasiast and Fort Knox of $142.9 million and $86.2 million, respectively, partially offset by an after-
tax impairment charge at Paracatu of $167.0 million. The impairment reversals at Tasiast and Fort Knox were mainly due to an increase
in the Company’s short-term and long-term gold price estimates, as well as Tasiast Phase Two and additions to Fort Knox’s mineral
reserve estimates. For Tasiast, the reversal represents a partial reversal of the total impairment charges previously recorded. For Fort
Knox, the reversal represented a full reversal of the remaining impairment charge recorded in 2015. The impairment charge at
Paracatu was mainly a result of changes in the fiscal regime in Brazil that were considered in the cash flow analysis used to assess its
recoverable amount. The impairment charge at Paracatu was net of a tax recovery of $86.0 million and the impairment reversal at
Fort Knox was net of a tax expense of $2.4 million. The net tax recovery of $83.6 million was recorded within income tax expense.
There was no tax impact on the impairment reversal at Tasiast.
Impairment charges recognized against property, plant and equipment may be reversed if there are changes in the assumptions or
estimates used in determining the recoverable amount of a CGU which indicate that a previously recognized impairment loss may no
longer exist or may have decreased.
Other Operating Expense
(in millions)
Other operating expense
Years ended December 31,
2018
$
137.0
2017
$
129.6
Change
$
7.4
% Change
6%
In 2018, other operating expense included $37.9 million of costs as a result of production issues associated with the pit wall slide at
Fort Knox, and environmental and other operating expenses for closed mining sites of $28.7 million.
In 2017, other operating expense included $23.6 million in costs related to the temporary curtailment of mining activities at Paracatu
which were not forecasted, $17.5 million related to a write-off of VAT receivables and settlement of VAT disputes, $9.5 million related
to the Fort Knox Gilmore Feasibility study, reclamation expenses related to properties where mining activities have ceased or are in
reclamation, as well as care and maintenance and other costs.
Exploration and Business Development
(in millions)
Exploration and business development
Years ended December 31,
2018
$
109.2
2017
$
106.0
Change
$
3.2
% Change
3%
In 2018, exploration and business development expenses were $109.2 million compared to $106.0 million in 2017. Of the total
exploration and business development expense, expenditures on exploration totaled $77.5 million in 2018 compared to $75.6 million
in 2017. Capitalized exploration expenses, including capitalized evaluation expenditures, totaled $3.1 million compared to $1.9 million
during 2017.
Kinross was active on more than 19 mine sites, near-mine and greenfield initiatives in 2018, with a total 323,062 metres drilled. In
2017, Kinross was active on more than 22 mine sites, near-mine and greenfield initiatives, with a total of 326,244 metres drilled.
k.4.242 KinrossAR2018_MDAMar14B.pdf - p26 (March 15, 2019 22:53:55)
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26
MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
General and Administrative
(in millions)
General and administrative
Years ended December 31,
2018
$
133.0
2017
$
132.6
Change
0.4
$
% Change
0%
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,
the Netherlands, and the Canary Islands.
Other Income (Expense) – Net
(in millions)
Gain on disposition of associate and other interests - net
(Loss) gain on disposition of other assets - net
Reversal of impairment charges
Foreign exchange losses
Net non-hedge derivative (losses) gains
Other - net
Other income (expense) - net
(a)
"nm" means not meaningful.
Years ended December 31,
2018
$
2017
$
$
Change
% Change(a)
2.1
(2.9)
-
(4.3)
(1.2)
9.5
3.2
55.2
1.9
97.0
(4.9)
0.3
38.6
188.1
(53.1)
(4.8)
(97.0)
0.6
(1.5)
(29.1)
(184.9)
$
$
$
(96%)
nm
nm
12%
nm
(75%)
(98%)
In 2018, other income decreased to $3.2 million from $188.1 million in 2017. The discussion below details the significant changes in
other income (expense) - net for 2018 compared to 2017.
Gains on disposition of associate and other interests - net
In the fourth quarter of 2017, the Company completed the sale of its 100% interest in DeLamar and recognized a gain of $44.2 million.
In the second quarter of 2017, the Company completed the sale of its interests in Cerro Casale, Quebrada Seca, and the White Gold
exploration project. A gain of $12.7 million was recognized in connection with the sale of Cerro Casale and Quebrada Seca and a loss
of $1.7 million was recognized in connection with the sale of White Gold.
Reversal of Impairment Charges
As a result of the agreement entered into in the first quarter of 2017 to sell Cerro Casale at a price higher than the carrying value, the
Company recognized a reversal of previously recorded impairment charges of $97.0 million.
Other - net
Other - net in 2017 included the receipt of insurance recoveries of $17.5 million, of which $15.1 million was related to Maricunga, and
$9.9 million related to a settlement of a royalty agreement.
Finance Expense
(in millions)
Finance expense
Years ended December 31,
2018
$
101.2
2017
$
117.8
Change
% Change
$
(16.6)
(14%)
Finance expense includes accretion on reclamation and remediation obligations and interest expense.
Finance expense decreased by $16.6 million compared to 2017, primarily due to a decrease in interest expense. In 2018, interest
expense was $72.1 million compared to $86.5 million in 2017, with the decrease primarily due to an increase in interest capitalized.
Interest capitalized was $41.5 million in 2018 compared to $25.1 million in 2017, with the increase mainly due to higher qualifying
capital expenditures.
27
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
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 2018 was $138.8 million, compared to an income tax recovery of $23.2 million in 2017. The $138.8 million
income tax expense recorded in 2018 includes $62.0 million of deferred tax expense resulting from the devaluation in US dollar terms
of the tax deductions of the Company’s operations in Brazil and Russia as compared to a nominal net impact during 2017. The $23.2
million recovery recognized in 2017 includes a net tax recovery of $83.6 million related to the impairment charge at Paracatu and
impairment reversal at Fort Knox, and an estimated net benefit of $93.4 million due to the enactment of U.S. Tax Reform legislation
on December 22, 2017. The estimated 2017 net benefit includes a benefit of $124.4 million in respect of the collectability of the
Alternative Minimum Tax (“AMT”) credit, which is partially offset by the write-down of net deferred tax assets to reflect the reduction
in the U.S. corporate tax rate from 35% to 21% beginning January 1, 2018. In 2018 the estimated AMT benefit was increased by $8.7
million, as a result of an IRS announcement that the AMT refunds payable to companies in respect of taxation years beginning after
December 31, 2017 would no longer be subject to sequestration. 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. Further guidance on the implementation and application
of the U.S. Tax Reform legislation has been released on a systematic basis through regulations issued by the Department of Treasury,
legislation and directions from the Office of Management and Budget, and guidance from the states in which the Company operates.
Kinross' combined federal and provincial statutory tax rate for both 2018 and 2017 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, mining specific taxes, foreign
currency exchange rate movements, changes in tax laws, and the impact of specific transactions and assessments.
On July 26, 2018, the Ministry of Finance of the Government of Mauritania circulated for industry comment draft revisions of the
country’s tax code. These revisions were drafted with technical assistance from the French tax administration, as financed by the
European Union, to update the country’s 1982 Tax Code. The Company has analyzed the document and provided comments on the
draft to the Ministry of Finance. It is uncertain as to whether some or all of the draft revisions will be enacted or when any tax code
revisions will be made. The Company notes that its Mining Conventions with the Government of Mauritania contain tax stability
provisions applicable to its current operations and mining concessions.
Kinross’ tax records, transactions and filing positions may be subject to examination by the tax authorities in the countries in which
the Company has operations. The tax authorities may review the Company’s transactions in respect of the year, or multiple years,
which they have chosen for examination. The tax authorities may interpret the tax implications of a transaction in form or in fact,
differently from the interpretation reached by the Company. In circumstances where the Company and the tax authority cannot reach
a consensus on the tax impact, there are processes and procedures which both parties may undertake in order to reach a resolution,
which may span many years in the future. The Company assesses the expected outcome of examination of transactions by the tax
authorities, and accrues the expected outcome in accordance with IFRS principles. Uncertainty in the interpretation and application
of applicable tax laws, regulations or the relevant sections of Mining Conventions by the tax authorities, or the failure of relevant
Governments or tax authorities to honour tax laws, regulations or the relevant sections of Mining Conventions could adversely affect
Kinross.
Due to the number of factors that can potentially impact the effective tax rate and the sensitivity of the tax provision to these factors,
as discussed above, it is expected that the Company's effective tax rate will fluctuate in future periods.
k.4.242 KinrossAR2018_MDAMar14B.pdf - p28 (March 15, 2019 22:53:56)
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28
MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
6. LIQUIDITY AND CAPITAL RESOURCES
The following table summarizes Kinross’ cash flow activity:
(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
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
(a)
"nm" means not meaningful.
Years ended December 31,
2018
2017
Change
% Change(a)
$
$
$
788.7
(1,387.0)
(72.6)
(5.9)
(676.8)
1,025.8
349.0
951.6
(687.2)
(69.0)
3.4
198.8
827.0
1,025.8
(162.9)
(699.8)
(3.6)
(9.3)
(875.6)
198.8
(676.8)
$
$
$
(17%)
(102%)
(5%)
nm
nm
24%
(66%)
Cash and cash equivalent balances decreased by $676.8 million in 2018 compared to an increase of $198.8 million in 2017. Detailed
discussions regarding cash flow movements are noted below.
Operating Activities
2018 vs. 2017
Net cash flow provided from operating activities decreased by $162.9 million in 2018 compared to 2017, with the decrease largely due
to lower margins, partially offset by lower taxes paid and favourable working capital movements.
Investing Activities
2018 vs. 2017
Net cash flow used in investing activities was $1,387.0 million in 2018 compared to $687.2 million in 2017. The primary uses of cash
in 2018 were for capital expenditures of $1,043.4 million, the acquisition of the two hydroelectric power plants in Brazil for $253.7
million, and the acquisition of the remaining 50% interest in the La Coipa Phase 7 mining concessions for an initial payment and
transaction costs totaling $35.1 million.
The primary uses of cash in 2017 were for capital expenditures of $897.6 million. This was partially offset by net cash proceeds of
$269.6 million from the sale of Kinross’ interests in Cerro Casale, Quebrada Seca, the White Gold exploration project, and DeLamar.
29
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
The following table presents a breakdown of capital expenditures on a cash basis:
(in millions)
Operating segments
Fort Knox
Round Mountain
Bald Mountain
Paracatu
Maricunga
Kupol(a)
Tasiast
Chirano
Non-operating segment
Corporate and other(b)
Total
Years ended December 31,
2018
2017
Change % Change(c)
$
89.5
185.1
149.9
97.6
-
63.4
428.4
24.0
$
102.1
95.8
90.5
122.4
1.5
54.3
379.4
46.6
$
(12.6)
89.3
59.4
(24.8)
(1.5)
9.1
49.0
(22.6)
5.5
1,043.4
$
5.0
897.6
$
0.5
145.8
$
(12%)
93%
66%
(20%)
nm
17%
13%
(48%)
10%
16%
(a)
(b)
(c)
Includes $15.6 million of capital expenditures at Dvoinoye during 2018 (2017 - $10.4 million).
"Corporate and other" includes corporate and other non-operating assets (including Kettle River-Buckhorn, La Coipa, Lobo-Marte, Cerro Casale
until its disposal on June 9, 2017 and White Gold until its disposal on June 14, 2017).
“nm” means not meaningful.
In 2018, capital expenditures increased by $145.8 million compared to 2017, primarily due to increased spending at Round Mountain
for the Phase W project, at Bald Mountain for to the Vantage Complex project, and at Tasiast related to the Phase One expansion
project. The increases were partially offset by decreased spending at Paracatu as a result of the purchase of new trucks and increased
spending related to the Eustaquio Dam raise during 2017, at Chirano related to the tailings expansion in 2017, and at Fort Knox due
to decrease in capitalized stripping activities compared to 2017.
Financing Activities
2018 vs. 2017
Net cash flow used in financing activities was $72.6 million in 2018 compared to cash used of $69.0 million in 2017.
Interest paid in 2018 was $96.1 million, of which $57.9 million was included in financing activities. Interest paid in 2017 was $80.9
million, of which $62.9 million was included in financing activities.
In 2018, the Company drew and repaid in full $80.0 million on the revolving credit facility.
In 2017, the Company completed a $500.0 million offering of debt securities consisting of 4.50% senior notes due 2027. Kinross
received net proceeds of $494.7 million from the offering, after payment of related fees and expenses. The proceeds received in this
transaction were then used to fully repay the outstanding balance of the $500.0 million term loan.
k.4.242 KinrossAR2018_MDAMar14B.pdf - p30 (March 15, 2019 22:53:57)
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30
MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
Balance Sheet
(in millions)
Cash and cash equivalents
Current assets
Total assets
Current liabilities
Total long-term financial liabilities (a)
Total debt
Total liabilities
Common shareholders' equity
Non-controlling interest
Statistics
Working capital (b)
Working capital ratio(c)
2018
As at December 31,
2017
2016
$
349.0
$
1,025.8
$
827.0
$
1,597.9
$
2,284.4
$
2,080.7
$
8,063.8
$
8,157.2
$
7,979.3
$
612.4
$
585.3
$
637.7
$
2,551.4
$
2,563.3
$
2,594.4
$
1,735.0
$
1,732.6
$
1,733.2
$
3,536.5
$
3,538.0
$
3,795.0
$
4,506.7
$
4,583.6
$
4,145.5
$
20.6
$
35.6
$
38.8
$
985.5
$
1,699.1
$
1,443.0
2.61:1
3.90:1
3.26:1
Includes long-term debt and provisions.
(a)
(b) Calculated as current assets less current liabilities.
(c) Calculated as current assets divided by current liabilities.
At December 31, 2018, Kinross had cash and cash equivalents of $349.0 million, a decrease of $676.8 million from the balance as at
December 31, 2017, primarily due to capital expenditures of $1,043.4 million, and the acquisition of the two hydroelectric power
plants in Brazil for $253.7 million, partially offset by net operating cash inflows of $788.7 million. Current assets decreased to $1,597.9
million, mainly due to the decrease in cash and cash equivalents and inventories, partially offset by an increase in current income tax
recoverable. Total assets decreased by $93.4 million to $8,063.8 million, due to the decreases in current assets, partially offset by an
increase in property, plant and equipment. Current liabilities increased by $27.1 million to $612.4 million, mainly due to a $30.0 million
deferred payment obligation related to the completion of the acquisition of the La Coipa Phase 7 mining concessions, and an increase
in the current portion of unrealized fair value of derivative liabilities, partially offset by decreases in accounts payable and accrued
liabilities and current income tax payable. Total liabilities were lower by $1.5 million, primarily due to a decrease in other long-term
liabilities, offset by an increase in current liabilities.
At December 31, 2017, Kinross had cash and cash equivalents of $1,025.8 million, an increase of $198.8 million from the balance as at
December 31, 2016, primarily due to net operating cash inflows of $951.6 million and the receipt of net cash proceeds of $269.6
million related to the sale of Cerro Casale, Quebrada Seca, the White Gold exploration project, and DeLamar. These inflows were offset
by cash outflows of $897.6 million related to capital expenditures and $73.8 million for additions to long-term investments and other
assets. Current assets increased to $2,284.4 million, mainly due to the increase in cash and cash equivalents and inventories, partially
offset by a decrease in current income tax recoverable, trade receivables and VAT receivables. Total assets increased by $177.9 million
to $8,157.2 million, largely due to increases in current assets, long-term investments and long term receivables offset by a decrease
in investments in associate and joint ventures as a result of the sale of Cerro Casale. Current liabilities decreased to $585.3 million,
primarily due to the decrease in current income taxes payable and the current portion of provisions, partially offset by an increase in
accounts payable and accrued liabilities. Total long-term financial liabilities were lower by $31.3 million, primarily due to a decrease
in other long-term liabilities.
As of February 12, 2019, there were 1,250.3 million common shares of the Company issued and outstanding. In addition, at the same
date, the Company had 12.2 million share purchase options outstanding under its share option plan.
31
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
Financings and Credit Facilities
Senior notes
The Company’s $1,750.0 million of senior notes consist of $500.0 million principal amount of 5.125% notes due 2021, $500.0 million
principal amount of 5.950% notes due 2024, $500.0 million principal amount of 4.50% notes due 2027 and $250.0 million principal
amount of 6.875% notes due 2041.
Corporate revolving credit and term loan facilities
As at December 31, 2018, the Company had utilized $19.7 million (December 31, 2017 - $21.0 million) of its $1,500.0 million revolving
credit facility. The amount utilized was entirely for letters of credit. In 2018, the Company drew and repaid in full $80.0 million on the
revolving credit facility. Subsequent to December 31, 2018, the Company drew $60.0 million on the revolving credit facility.
On July 23, 2018, the Company amended its $1,500.0 million revolving credit facility to extend the maturity date by one year from
August 10, 2022 to August 10, 2023.
On July 12, 2017, the Company fully repaid the outstanding term loan balance with proceeds from a $500.0 million offering of debt
securities completed on July 6, 2017.
Loan interest on the revolving credit facility is variable, set at LIBOR plus an interest rate margin which is dependent on the Company’s
credit rating. Based on the Company’s credit rating at December 31, 2018, interest charges and fees are as follows:
Type of credit
Dollar based LIBOR loan:
Revolving credit facility
Letters of credit
Standby fee applicable to unused availability
LIBOR plus 1.70%
1.13-1.70%
0.34%
The revolving credit facility’s credit agreement contains various covenants including limits on indebtedness, asset sales and liens. The
Company is in compliance with its financial covenant in the credit agreement at December 31, 2018.
Other
The maturity date for the Company’s $300.0 million Letter of Credit guarantee facility with EDC was extended by two years to June
30, 2020, effective July 1, 2018. 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 0.95%. As at December 31, 2018, $227.4
million (December 31, 2017 - $215.2 million) was utilized under this facility.
In addition, at December 31, 2018, the Company had $161.5 million (December 31, 2017 - $230.2 million) in letters of credit and surety
bonds outstanding in respect of its operations in Brazil, Mauritania, Ghana and Chile. These have been issued pursuant to
arrangements with international banks.
As at December 31, 2018, $264.4 million (December 31, 2017 - $254.7 million) of surety bonds were outstanding with respect to
Kinross’ operations in the United States. These surety bonds were issued pursuant to arrangements with international insurance
companies and incur fees of 0.70%.
k.4.242 KinrossAR2018_MDAMar14B.pdf - p32 (March 15, 2019 22:53:59)
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32
MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
The following table outlines the credit facility utilization and availability:
(in millions)
Utilization of revolving credit facility
Utilization of EDC facility
Borrowings
Available under revolving credit facility
Available under EDC credit facility
Available credit
As at December 31,
2018
2017
$
(19.7)
$
(21.0)
(227.4)
(215.2)
$
(247.1)
$
(236.2)
$
1,480.3
$
1,479.0
72.6
84.8
$
1,552.9
$
1,563.8
Total debt of $1,735.0 million at December 31, 2018 consists solely of the senior notes. The current portion of this debt at December
31, 2018 is $nil.
Liquidity Outlook
As at December 31, 2018, the Company had no scheduled debt repayments until 2021.
We believe that the Company’s existing cash and cash equivalents balance of $349.0 million, available credit of $1,552.9 million, and
expected operating cash flows based on current assumptions (noted in Section 3 - Outlook) will be sufficient to fund operations, our
forecasted exploration and capital expenditures (noted in Section 3 - Outlook), and reclamation and remediation obligations currently
estimated for 2019. Prior to any capital investments, consideration is given to the cost and availability of various sources of capital
resources.
With respect to longer term capital expenditure funding requirements, the Company continues to have discussions with lending
institutions that have been active in the jurisdictions in which the Company’s development projects are located. Some of the
jurisdictions in which the Company operates have seen the participation of lenders including export credit agencies, development
banks and multi-lateral agencies. The Company believes the capital from these institutions combined with traditional bank loans and
capital available through debt capital market transactions may fund a portion of the Company’s longer term capital expenditure
requirements. Another possible source of capital could be proceeds from the sale of non-core assets. These capital sources together
with operating cash flow and the Company’s active management of its operations and development activities will enable the Company
to maintain an appropriate overall liquidity position.
Contractual Obligations and Commitments
The following table summarizes our long-term financial liabilities and off-balance sheet contractual obligations as at December 31,
2018:
(in millions)
Long-term debt obligations (a)
Operating lease obligations
Purchase obligations (b)
Reclamation and remediation obligations
Interest and other fees (a)
Total
Total
2019
2020
2021
2022
2023
2024 &
thereafter
$
1,750.0
$
-
$
-
$
500.0
$
-
$
-
$
1,250.0
70.3
737.3
1,206.2
871.2
11.4
416.3
65.8
103.7
9.1
135.6
57.3
102.5
8.5
67.0
126.4
101.3
5.0
86.2
67.6
75.7
5.0
1.5
83.5
73.6
31.3
30.7
805.6
414.4
$
4,635.0
$
597.2
$
304.5
$
803.2
$
234.5
$
163.6
$
2,532.0
(a) Debt repayments are based on amounts due pursuant to the terms of existing indebtedness.
(b)
Includes both capital and operating commitments, of which $101.9 million relates to commitments for capital expenditures.
33
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
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, 2018:
Foreign currency
2019
2020
2021
Brazilian real forward buy contracts
(in millions of U.S. dollars)
Average price (Brazilian reais)
Brazilian real zero cost collar contracts
(in millions of U.S. dollars)
Average put strike (Brazilian reais)
Average call strike (Brazilian reais)
Canadian dollar forward buy contracts
(in millions of U.S. dollars)
Average rate (Canadian dollars)
Russian rouble zero cost collar contracts
(in millions of U.S. dollars)
Average put strike (Russian roubles)
Average call strike (Russian roubles)
Energy
WTI oil swap contracts (barrels)
Average price (U.S. dollars)
$
36.0
3.66
-
$
-
-
$
-
$
134.4
3.45
3.75
$
95.6
3.73
4.18
$
12.4
4.10
5.10
$
58.5
1.28
$
14.4
1.31
-
$
-
$
54.0
58.9
69.6
$
13.5
65.0
78.4
$
-
-
-
864,451
51.73
$
590,400
56.21
$
174,000
58.84
$
The following new derivative contracts were entered into during the year ended December 31, 2018:
$71.7 million Canadian dollar forward buy contracts at an average rate of 1.29 maturing from 2018 to 2020;
$288.9 million Brazilian real forward buy contracts at an average rate of 3.35 maturing in 2018 and 2019;
$212.4 million Brazilian real zero cost collar contracts with an average put strike of 3.59 and an average call strike of 4.05 maturing
from 2018 to 2021;
$27.0 million Russian rouble forward buy contracts with an average rate of 61.2 that matured in 2018;
$67.5 million Russian rouble zero cost collar contracts with an average put strike of 60.2 and an average call strike of 71.4 maturing
from 2019 to 2020; and
944,400 barrels of WTI oil swap contracts at an average rate of $56.95 per barrel maturing from 2019 to 2021.
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, 2018, 5,695,000 TRS units were outstanding.
Fair values of derivative instruments
The fair values of derivative instruments are noted in the table below:
(in millions)
Asset (liability)
As at December 31,
2018
2017
Foreign currency forward and collar contracts
$
(21.8)
$
6.1
Energy swap contracts
Total return swap contracts
(8.6)
3.2
12.9
0.6
$
(27.2)
$
19.6
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34
MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
Other legal matters
The Company is from time to time involved in legal proceedings, arising in the ordinary course of its business. Typically, the amount
of ultimate liability with respect to these actions will not, in the opinion of management, materially affect Kinross’ financial position,
results of operations or cash flows.
Maricunga regulatory proceedings
In May 2015, the Chile environmental enforcement authority (“the SMA”) commenced an administrative proceeding against Compania
Minera Maricunga (“CMM”) alleging that pumping of groundwater to support the Maricunga operation had impacted area wetlands
and, on March 18, 2016, issued a resolution alleging that CMM’s pumping was impacting the “Valle Ancho” wetland. Beginning in May
2016, the SMA issued a series of resolutions ordering CMM to temporarily curtail pumping from its wells. In response, CMM suspended
mining and crushing activities and reduced water consumption to minimal levels. CMM contested these resolutions, but its efforts
were unsuccessful and, except for a short period of time in July 2016, CMM’s operations have remained suspended. On June 24, 2016,
the SMA amended its initial sanction (the “Amended Sanction”) and effectively required CMM to cease operations and close the mine,
with water use from its wells curtailed to minimal levels. On July 9, 2016, CMM appealed the sanctions and, on August 30, 2016,
submitted a request to the Environmental Tribunal that it issue an injunction suspending the effectiveness of the Amended Sanction
pending a final decision on the merits of CMM’s appeal. On September 16, 2016, the Environmental Tribunal rejected CMM’s
injunction request and on August 7, 2017, upheld the SMA’s Amended Sanction and curtailment orders on procedural grounds. On
October 9, 2018, the Supreme Court affirmed the Environmental Tribunal’s ruling on procedural grounds and dismissed CMM’s appeal.
On June 2, 2016, CMM was served with two separate lawsuits filed by the Chilean State Defense Counsel (“CDE”). Both lawsuits, filed
with the Environmental Tribunal, alleged that pumping from the Maricunga groundwater wells caused environmental damage to area
wetlands. One action relates to the “Pantanillo” wetland and the other action relates to the Valle Ancho wetland (described above).
Hearings on the CDE lawsuits took place in 2016 and 2017, and on November 23, 2018, the Tribunal ruled in favor of CMM in the
Pantanillo case and against CMM in the Valle Ancho case. In the Valle Ancho case, the Tribunal is requiring CMM to, among other
things, submit a restoration plan to the SMA for approval. CMM has appealed the Valle Ancho ruling to the Supreme Court. The CDE
has appealed to the Supreme Court in both cases and is asserting in the Valle Ancho matter that the Environmental Tribunal erred by
not ordering a complete shutdown of Maricunga’s groundwater wells. The Supreme Court has the discretion to decide whether it will
hear any of the appeals. Prior to the November 23, 2018 rulings, CMM and the CDE were pursuing potential settlement. CMM expects
to continue pursuing settlement discussions notwithstanding the Environmental Tribunal’s rulings.
On May 19, 2017, a release of diesel fuel occurred from a power generation area of the Rancho del Gallo Camp. The release occurred
when a pipe valve attached to a fuel tank was opened by an unknown party, effectively draining the tank. CMM estimates that
approximately 15,000 litres of diesel escaped containment affecting the surrounding soil and a nearby stream. After discovering the
release, CMM commenced actions designed to contain the release, including mobilization of a third-party response team, and has
addressed both localized and downstream impacts of the release. CMM notified the relevant authorities of the release, and has kept
them informed of its response activities. Various agencies have reviewed, or are reviewing the situation and have requested
information from CMM. The SMA has concluded that CMM took appropriate actions to address environmental harm and health risks.
Further, the SEC (Superintendencia de Electridad y Combustibles), the agency that regulates fuel facilities and electrical power, has
concluded an administrative action against CMM for regulatory non-compliances at the facility resulting in a fine equivalent to
approximately $35 thousand. Other legal actions relating to the release could result in the imposition of fines or other sanctions against
CMM or its employees.
La Coipa permit proceedings
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
monitoring wells at or near its downstream property boundary at which exceedance of the permitted standards have not been
detected.
In 2015, the SMA conducted an inspection of the WTP and monitoring wells and requested certain information regarding those
facilities and their performance, with which MDO fully cooperated. On March 16, 2016, the SMA issued a resolution alleging violations
under the WTP. 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, WTP effluent samples from 2013 above the permitted standard, and WTP monitoring well
35
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
samples from 2013 and 2014 above the permitted standard. 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 (five in total) and $15.4 million per alleged serious violation (two in total).
Sunnyside litigation
The Sunnyside Mine is an inactive mine situated in the so-called Bonita Peak Mining District (“District”) near Silverton, Colorado. A
subsidiary of Kinross, Sunnyside Gold Corporation ("SGC"), was involved in operations at the mine from 1985 through 1991 and
subsequently conducted various reclamation and closure activities at the mine and in the surrounding area. On August 5, 2015, while
working in another mine in the District known as the Gold King, the Environmental Protection Agency (the “EPA”) caused a release of
approximately three million gallons of contaminated water into a tributary of the Animas River. In the third quarter of 2016, the EPA
listed the District, including areas impacted by SGC’s operations and closure activities, on the National Priorities List pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”). SGC challenged portions of the CERCLA listing
in the United States Court of Appeals for District of Columbia Circuit, but SGC’s petition for review was denied, as was its subsequent
petition for rehearing. The EPA has notified SGC that SGC is a potentially responsible party under CERCLA and may be jointly and
severally liable for cleanup of the District or cleanup costs incurred by the EPA in the District. The EPA may in the future provide similar
notification to Kinross, as the EPA contends that Kinross has liability in the District under CERCLA and other statutes. In the second
quarter of 2018, the EPA issued to SGC a modified Unilateral Administrative Order for Remedial Investigation (“the Order”). Failure to
comply with the Order may subject SGC to penalties and damages, and SGC is undertaking to comply. 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. In the third quarter of 2017,
the State of Utah filed a Complaint, which has been amended to name the EPA, SGC, Kinross and others, alleging negligence, gross
negligence, public nuisance, trespass, and violation of the Utah Water Quality Act and the Utah Solid and Hazardous Waste Act. The
Complaint seeks cost recovery, compensatory, consequential and punitive damages, penalties, disgorgement of profits, declaratory,
injunctive and other relief under CERCLA, attorney’s fees, and costs. In the third quarter of 2018, numerous members of the Navajo
Nation initiated litigation against the EPA, SGC and Kinross, alleging negligence, gross negligence and injury, including great spiritual
and emotional distress. The Complaint seeks compensatory and consequential damages, interest, punitive damages, attorneys’ fees
and expenses. The New Mexico, Navajo, Utah and Navajo member cases have been centralized for coordinated or consolidated pretrial
proceedings in the United States District Court for the District of New Mexico, and it is expected that additional claims will be made
against SGC and Kinross in the course of the centralized proceeding.
Kettle River-Buckhorn regulatory proceedings
Crown Resources Corporation (“Crown”) is the holder of a waste discharge permit (the “Permit”) in respect of the Buckhorn Mine,
which authorizes and regulates mine-related discharges from the mine and its water treatment plant. On February 27, 2014, the
Washington Department of Ecology (the “WDOE”) renewed the Buckhorn Mine’s National Pollution Discharge Elimination System
Permit (the “Renewed Permit”), with an effective date of March 1, 2014. The Renewed Permit contained conditions that were more
restrictive than the original discharge permit. In addition, the Crown felt that the Renewed Permit was internally inconsistent,
technically unworkable and inconsistent with existing agreements in place with the WDOE, including a settlement agreement
previously entered into by Crown and the WDOE in June 2013 (the “Settlement Agreement”). On February 28, 2014, Crown filed an
appeal of the Renewed Permit with the Washington Pollution Control Hearings Board (“PCHB”). In addition, on January 15, 2015,
Crown filed a lawsuit against the WDOE in Ferry County Superior Court, Washington, claiming that the WDOE breached the Settlement
Agreement by including various unworkable compliance terms in the Renewed Permit (the “Crown Action”). On July 30, 2015, the
PCHB upheld the Renewed Permit. Crown filed a Petition for Review in Ferry County Superior Court, Washington, on August 27, 2015,
seeking to have the PCHB decision overturned. On March 13, 2017, the Ferry County Superior Court upheld the PCHB’s decision. On
April 12, 2017, Crown appealed the Ferry County Superior Court’s ruling to the State of Washington Court of Appeals, where the
matter remains pending.
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
k.4.242 KinrossAR2018_MDAMar14B.pdf - p36 (March 15, 2019 22:54:01)
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36
MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
deadlines in the fourth quarter 2016. The companies timely made the required submittals. On August 17, 2016, the companies filed
an appeal of the AO with the PCHB (the “AO Appeal”). Because the AO Appeal raises many of the same issues that have been raised
in the Appeal and Crown Action, the companies and WDOE agreed to stay the AO Appeal indefinitely to allow these matters to be
resolved. The PCHB granted the request for stay on August 26, 2016. The stay is affirmed by the PCHB upon receipt of applicable filings.
The stay was most recently affirmed on January 30, 2018.
On November 30, 2017, the WDOE issued a Notice of Violation (“NOV”) to Crown and Kinross asserting that the companies had
exceeded the discharge limits in the Permit a total of 113 times during the 3rd quarter of 2017 and also failed to maintain the capture
zone as required under the Permit. The NOV ordered the companies to file a report with WDOE identifying the steps which have been
and are being taken to “control such waste or pollution or otherwise comply with this determination,” which report was timely filed.
Following its review of this report, WDOE may issue an AO or other directives to the Company. The NOV is not immediately appealable,
but any subsequent AO or other directive relating to the NOV may be appealed, as appropriate.
On April 10, 2018, August 20, 2018, November 5, 2018, and January 22, 2019, the WDOE issued NOVs to Crown and, as to the April 10
NOV also to Kinross, asserting that the companies had exceeded the discharge limits in the Permit a total of 118 times during the
fourth quarter of 2017, 289 times during the 1st and 2nd quarters of 2018, 129 times during the 3rd quarter of 2018, and 126 times
during the 4th quarter of 2018, and also failed to maintain the capture zone as required under the Permit. The NOVs ordered the
companies to file a report with WDOE within 30 days identifying the steps which have been and are being taken to “control such waste
or pollution or otherwise comply with this determination,” which reports were timely filed or, in the case of the January 22, 2019 NOV,
will be timely filed. Following its review of these reports, WDOE may issue an AO or other directives to the Company. The NOV is not
immediately appealable, but any subsequent AO or other directive relating to the NOV may be appealed, as appropriate.
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 Notice of Intent to Sue letters 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 the Permit, renewed 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 and renewed Permit. OHA’s notice letters further recite 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.
7. SUMMARY OF QUARTERLY INFORMATION
(in millions, except per share amounts)
Metal sales
Q4
786.5
$
Q3
753.9
$
Q2
775.0
$
Q1
897.2
$
Q4
810.3
$
Q3
828.0
$
Q2
868.6
$
Q1
796.1
$
2018
2017
Net (loss) earnings attributable to
common shareholders
Basic (loss) earnings per share
attributable to common shareholders
Diluted (loss) earnings per share
attributable to common shareholders
Net cash flow provided from operating
activities
$
(27.7)
$
(104.4)
$
2.4
$
106.1
$
217.6
$
60.1
$
33.1
$
134.6
$
(0.02)
$
(0.08)
$
0.00
$
0.09
$
0.17
$
0.05
$
0.03
$
0.11
$
(0.02)
$
(0.08)
$
0.00
$
0.08
$
0.17
$
0.05
$
0.03
$
0.11
$
183.5
$
127.2
$
184.5
$
293.5
$
366.4
$
197.7
$
179.7
$
207.8
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 also affect results.
During the fourth quarter of 2018, revenue decreased to $786.5 million on total gold equivalent ounces sold of 641,101 compared to
$810.3 million on sales of 634,762 total gold equivalent ounces during the fourth quarter of 2017. The average gold price realized in
the fourth quarter of 2018 was $1,226 per ounce compared to $1,276 per ounce in the fourth quarter of 2017.
Production cost of sales increased by 15% in the fourth quarter of 2018 compared to the same period in 2017, primarily due to an
increase in gold equivalent ounces sold as well as increases in operating waste mined and fuel costs at Tasiast.
Fluctuations in foreign exchange rates have also affected results.
37
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
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 and impairment charges and reversals during each of these
years affected depreciation, depletion and amortization for quarters in the subsequent year.
On February 14, 2018, Kinross Brasil Mineração, a subsidiary of the Company, signed an agreement to acquire two hydroelectric power
plants in the State of Goias, Brazil from a subsidiary of Gerdau SA for $253.7 million (R$835.0 million). The two plants are expected to
secure a long-term supply of power and lower production costs over the life of the mine at Paracatu. On July 31, 2018, the Company
closed the transaction. The Company funded the transaction with cash while continuing to consider future debt financing to fund the
initial capital used for the acquisition.
On February 2, 2018, MDO, a subsidiary of the Company, agreed to purchase the remaining 50% interest in the Phase 7 concessions
surrounding Kinross’ La Coipa mine that it did not already own from Salmones de Chile Alimentos S.A. On March 19, 2018, the Company
closed the acquisition. The purchase price of $65.1 million was comprised of $65.0 million in cash, of which $35.0 million was paid on
closing and the balance of $30.0 million was payable and was paid on January 30, 2019, and transaction costs of $0.1 million.
In the fourth quarter of 2017, the Company recorded a net, after-tax, impairment reversal of $62.1 million related to impairment
reversals at the Tasiast and Fort Knox CGUs, offset by an impairment charge at the Paracatu CGU.
On September 18, 2017, the Company entered into an agreement with Integra to sell its 100% interest in the DeLamar reclamation
property. On November 3, 2017, the Company completed the sale and recognized a gain of $44.2 million.
On May 18, 2017, the Company entered into an agreement with White Gold Corp. to sell its 100% interest in the White Gold
exploration project in the Yukon Territory. On June 14, 2017, the Company completed the sale and recognized a loss on disposition of
$1.7 million.
On March 28, 2017, the Company announced that it entered into an agreement with Goldcorp to sell its 25% interest in the Cerro
Casale project and 100% interest in the Quebrada Seca exploration project in Chile. In connection with the sale, the Company
recognized a reversal of previously recorded impairment charges of $97.0 million during the three months ended March 31, 2017. On
June 9, 2017, the Company completed the sale for gross cash proceeds of $260.0 million (which included $20.0 million for Quebrada
Seca) and recognized a gain on disposition of $12.7 million during the three months ended September 30, 2017.
Net operating cash flows decreased to $183.5 million in the fourth quarter of 2018, compared to $366.4 million in the same period of
2017, primarily due to a decrease in margins.
8. DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL REPORTING
Pursuant to regulations adopted by the U.S. Securities and Exchange Commission, under the Sarbanes-Oxley Act of 2002 and those of
the Canadian Securities Administrators, Kinross' management evaluates the effectiveness of the design and operation of the
Company's disclosure controls and procedures, and internal control over financial reporting. This evaluation is done under the
supervision of, and with the participation of, the Chief Executive Officer and the Chief Financial Officer.
As of the end of the period covered by this MD&A and the accompanying financial statements, Kinross’ management evaluated the
effectiveness of its internal control over financial reporting. In making this assessment, management used the criteria specified in
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that Kinross’ internal control over
financial reporting was effective as at December 31, 2018.
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.
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38
MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
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 for the year ended
December 31, 2018.
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, 2017, 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, 2018, which will be filed on SEDAR on or about March 31, 2019.
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 price declines could cause continued commercial production to be impractical.
Depending on the prices of gold and silver, cash flow from mining operations may not be sufficient to cover costs of production and
capital expenditures. If, as a result of a decline in gold and/or silver prices, revenues from metal sales were to fall below cash operating
costs, production may be discontinued. The factors that may affect the price of gold and silver include industry factors such as:
industrial and jewelry demand; the level of demand for the metal as an investment; central bank lending, sales and purchases of the
metal; speculative trading; and costs of and levels of global production by producers of the metal. Gold and silver prices may also be
affected by macroeconomic factors, including: expectations of the future rate of inflation; the strength of, and confidence in, the U.S.
dollar, the currency in which the price of the metal is generally quoted, and other currencies; interest rates; and global or regional
political or economic uncertainties.
In 2018, the Company’s average realized gold price increased to $1,268 per ounce from $1,260 per ounce in 2017. If the world market
price of gold and/or silver were to drop and the prices realized by Kinross on gold and/or silver sales were to decrease substantially
and remain at such a level for any substantial period, Kinross’ profitability and cash flow would be negatively affected. In such
circumstances, Kinross may determine that it is not economically feasible to continue commercial production at some or all of its
operations or the development of some or all of its current projects, which could have an adverse impact on Kinross’ financial
performance and results of operations, possibly material. Kinross may curtail or suspend some or all of its exploration activities, with
the result that depleted mineral reserves are not replaced. In addition, the market value of Kinross’ gold and/or silver inventory may
be reduced and existing mineral reserves and resource estimates may be reduced to the extent that ore cannot be mined and
processed economically at the prevailing prices.
Nature of Mineral Exploration and Mining
The exploration and development of mineral deposits involves significant financial and other risks over an extended period of time
which may not be eliminated even with careful evaluation, experience and knowledge. While discovery of gold-bearing geological
structures may result in substantial rewards, few properties explored are ultimately developed into producing mines. Major
expenditures are required to establish reserves by drilling and to construct mining and processing facilities at a site. It is impossible to
ensure that the current or proposed exploration programs on properties in which Kinross has an interest will result in profitable
commercial mining operations.
The operations of Kinross are subject to the hazards and risks normally incidental to exploration, development and production 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
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
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 appropriate and cost-effective
coverage is obtained.
Environmental Impact and Related Regulatory Risk
Mining, like many other extractive natural resource industries, is subject to potential risks and liabilities associated with the effects on
the environment resulting from mineral exploration and production. The Company may be held responsible for the costs of addressing
contamination at, or arising from, current or former activities. Environmental liability may result from activities conducted by others
prior to the ownership of a property by Kinross. In addition, Kinross may be liable to third parties for exposure to hazardous materials
or substances, or may otherwise be involved in civil litigation related to environmental claims. The costs associated with such
responsibilities and liabilities may be substantial. The payment of such liabilities would reduce funds otherwise available and could
have a material adverse effect on Kinross. Should Kinross be unable to fully fund the cost of remedying an environmental problem,
Kinross might be required to suspend operations or enter into interim compliance measures pending completion of the required
remedy, which could have a material adverse effect on the operations and business of Kinross.
Kinross’ operations and exploration activities are subject to various laws and regulations governing the protection of the environment,
exploration, development, production, imports/exports, taxes, labour standards, occupational health, waste disposal, toxic
substances, mine closure, mine safety, public health and other matters. The legal and political circumstances outside of North America
cause these risks to be different from, and in many cases, greater than, comparable risks associated with operations within North
America. New laws and regulations, amendments to existing laws and regulations, or more stringent enforcement of existing laws and
regulations could have a material adverse impact on Kinross, increase costs, cause a reduction in levels of production and/or delay or
prevent the development of new mining properties. Changes in laws and regulations, or enforcement may arise in response to past
environmental incidents, such as the recent tailings storage facility incidents in Brazil. Compliance with these laws and regulations is
part of the business and requires significant expenditures. Changes in laws and regulations, or enforcement 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 and Financial Assurance
In certain jurisdictions, the Company is required, or may be required in the future, to provide financial assurances covering reclamation
costs, cleanup costs or other actual or potential liabilities arising out of its activities or ownership. These costs and liabilities may be
significant and may exceed the provisions the Company has made in respect of these costs and liabilities. In some jurisdictions bonds,
letters of credit or other forms of financial assurance are required, or may be required in the future, as security for these costs and
liabilities. The amount and nature of financial assurance are dependent upon a number of factors, including the Company’s financial
condition, cost estimates and thresholds set by applicable governments or legislation. Kinross may be required to replace or
supplement existing financial assurances, or source new financial assurances with more expensive forms, which might include cash
deposits, which would reduce its cash available for operations and financing activities. There can be no guarantee that Kinross will be
able to maintain or add to its current level of financial assurance or meet the requirements set by regulatory authorities in the future.
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
These new requirements may include, but are not limited to, financial assurances intended to cover potential environmental cleanup
costs or potential liabilities associated with the Company’s mine sites, including its tailings facilities and other infrastructure. To the
extent that Kinross is or becomes unable to post and maintain sufficient financial assurance covering these requirements, it could
potentially result in closure of one or more of the Company’s operations, which could have a material adverse effect on the financial
condition of the Company.
Internal Controls
Kinross has invested resources to document and assess its system of internal control over financial reporting and undertakes
continuous evaluation of such internal controls. Internal control over financial reporting are procedures designed to provide
reasonable assurance that transactions are properly authorized, assets are safeguarded against unauthorized or improper use, and
transactions are properly recorded and reported. A control system, no matter how well designed and operated, can provide only
reasonable, not absolute, safeguards with respect to the reliability of financial reporting and financial statement preparation.
Kinross is required to satisfy the requirement of Section 404 of 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
control over financial reporting in accordance with SOX. Kinross’ failure to satisfy SOX requirements on an ongoing, timely basis could
result in the loss of investor confidence in the reliability of its financial statements, which in turn could harm Kinross’ business and
negatively impact the trading price of its common shares. In addition, any failure to implement required new or improved controls, or
difficulties encountered in their implementation, could harm Kinross’ operating results or cause it to fail to meet its reporting
obligations.
Although Kinross is committed to ensure ongoing compliance, Kinross cannot be certain that it will be successful in complying with
SOX.
Indebtedness and an Inability to Satisfy Repayment Obligations
Although Kinross has been successful in repaying debt historically, there can be no assurance that it can continue to do so. Kinross’
level of indebtedness could have important and potentially adverse consequences for its operations and the value of its common
shares including: (a) limiting Kinross’ ability to borrow additional amounts for working capital, capital expenditures, debt service
requirements, execution of Kinross’ growth strategy or other purposes; (b) limiting Kinross’ ability to use operating cash flow in other
areas because of its obligations to service debt; (c) increasing Kinross’ vulnerability to general adverse economic and industry
conditions, including increases in interest rates; (d) limiting Kinross’ ability to capitalize on business opportunities and to react to
competitive pressures and adverse changes in government regulation; and (e) limiting Kinross’ ability or increasing the costs to
refinance indebtedness.
Kinross expects to obtain the funds to pay its expenses and to pay principal and interest on its debt by utilizing cash flow from
operations. Kinross’ ability to meet these payment obligations will depend on its future financial performance, which will be affected
by financial, business, economic, legal and other factors. Kinross will not be able to control many of these factors, such as economic
conditions in the markets in which it operates. Kinross cannot be certain that its future cash flow from operations will be sufficient to
allow it to pay principal and interest on Kinross’ debt and meet its other obligations. If cash flow from operations is insufficient or if
there is a contravention of its debt covenant(s), Kinross may be required to refinance all or part of its existing debt, sell assets, borrow
more money or issue additional equity. There can be no assurance that Kinross will be able to refinance all or part of its existing debt
on terms that are commercially reasonable.
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.
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
Proven and probable mineral reserves at Kinross’ mines and development projects were estimated as of December 31, 2018, based
upon an assumed gold price of $1,200 per ounce.
Prolonged declines in the market price of gold below this level may render mineral reserves containing relatively lower grades of gold
mineralization uneconomic to exploit and could materially reduce Kinross’ mineral reserve estimates. Should such reductions occur,
material write-downs of Kinross’ investments in mining properties or the discontinuation of development or production might be
required, and there could be material delays in the development of new projects and reduced income and cash flow.
Mineral resources that are not mineral reserves do not have demonstrated economic viability. Due to the uncertainty of measured,
indicated or inferred mineral resources, these mineral resources may never be upgraded to proven and probable mineral reserves.
Measured, indicated and inferred mineral resources are not recognized by the U.S. Securities and Exchange Commission and U.S.
investors are cautioned not to assume that any part of mineral deposits in these categories will ever be converted into reserves or
recovered.
There are numerous uncertainties inherent in estimating proven and probable mineral reserves. The estimates in this document are
based on various assumptions relating to metal prices and exchange rates during the expected life of production and the results of
additional planned development work. Actual future production rates and amounts, revenues, taxes, operating expenses,
environmental and regulatory compliance expenditures, development expenditures and recovery rates may vary substantially from
those assumed in the estimates. Any significant change in these assumptions, including changes that result from variances between
projected and actual results, could result in a material downward or upward revision of current estimates.
Development Projects
Kinross must continually replace and expand its mineral reserves as they are depleted by production at its operations in order to
maintain or grow its total mineral reserve base. Similarly, the Company’s ability to increase or maintain present gold and silver
production levels is dependent in part on the successful development of new mines and/or expansion of existing mining operations.
Kinross is dependent on future growth from development projects. Development projects rely on the accuracy of predicted factors
including: capital and operating costs; metallurgical recoveries; mineral reserve estimates; and future metal prices. Once a site with
mineralization is discovered, it may take several years from the initial phases of drilling until production is possible. Development
projects are subject to accurate feasibility studies, the acquisition of surface or land rights and the issuance of necessary governmental
permits. 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
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
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
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. 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.
Uncertainty in Mauritania
Kinross is subject to political, economic and security risks which, should they materialize, may adversely affect the Company’s ability
to operate its Tasiast mine in Mauritania. These risks include but are not limited to the following: (1) the potential that the government
may attempt to renegotiate current mining conventions, revoke existing stability provisions in those conventions or breach those
conventions; (2) potential political instability due to upcoming presidential elections; (3) the security situation in the country may
deteriorate; (4) a lack of transparency in the operation of the government and development of new laws; (5) the potential for laws
and regulations to be inconsistently applied; (6) disputes under the application of the mining convention; and (7) potential legal and
practical difficulties with enforcement of the mining convention. These issues include, but are not limited to, a process and timetable
for payment or offset of VAT refunds owed by the government to the Company, the long-term stability in the Company’s relationship
with the workers’ union, the availability of duty exonerations for fuel, the application of a clear, comprehensive, legally certain and
enforceable VAT exemption for the mining industry, labour force management and flexible labour practices and the timely issuance
of work permits for the non-national workforce.
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. RCRA and state law equivalents, are currently exempt from certain U.S. Environmental Protection Agency
regulations governing hazardous waste. If mine wastes from the Company’s U.S. mining operations, including those at the Sunnyside
Mine (see Section 6 - Other legal matters), are not exempt, and are treated as hazardous waste under the RCRA, material expenditures
could be required for waste management and/or the construction of additional waste disposal facilities. In addition, the Company’s
activities and ownership interests potentially expose the Company to liability under the 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
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
cleanup costs and may be forced to undertake remedial cleanup actions or to pay for the cleanup efforts in response to unpermitted
releases of hazardous substances. Such parties may also be liable to governmental entities for the cost of damages to natural
resources, which may be substantial. Additional regulations or requirements may also be imposed upon the Company’s operations,
tailings, and waste disposal areas as well as upon mine closure under federal and state environmental laws and regulations, including,
without limitation, the U.S. Clean Water Act and state law equivalents. Air emissions in the U.S. are subject to the Clean Air Act and its
state equivalents as well. Additionally, the Company is subject to other federal and state environmental laws, and potential claims
existing under common law, relating to the operation and closure of the Company’s U.S. mine sites.
Political, Security, Legal and Economic Risk
The Company has mining and exploration operations in various regions of the world, including the United States, Brazil, Chile, the
Russian Federation, Mauritania, Ghana, and Canada and such operations are exposed to various levels of political, security, legal,
economic, 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 (as occur at
Paracatu and Tasiast from time to time) which illegal incursions could result in serious security and operational issues, including the
endangerment of life and property; 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, conventions, 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.
Anti-bribery Legislation
The Foreign Corrupt Practices Act (United States) and the Corruption of Foreign Public Officials Act (Canada) and similar anti-bribery
legislation prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining
business or other commercial advantage. Company policies mandate strict compliance with applicable anti-bribery legislation. Kinross
operates in jurisdictions that have experienced governmental and private sector corruption to some degree. There can be no assurance
that Kinross’ internal control policies and procedures will always protect it from reckless or other inappropriate acts committed by the
Company’s affiliates, employees or agents. Allegations of any violations of anti-bribery legislation may result in costly and time
consuming investigations. Violations of such legislation could result in fines or penalties and have a material adverse effect on Kinross’
reputation and social license to operate.
Licenses and Permits
The development projects and operations of Kinross require licenses and permits from various governmental authorities. However,
such licenses and permits are subject to challenge and change in various circumstances. Applicable governmental authorities may
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
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.
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
2019, sensitivity to a 10% change in the gold price is estimated to have an approximate $227 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 2019, sensitivity to a 10% change in the silver price is estimated to have an approximate $5 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. Some of the Company’s cash and cash
equivalents, as well as corporate revolving credit facility 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, 2018, there were no metal derivative financial instruments outstanding. In addition, Kinross is
not subject to margin requirements on any of its hedging lines.
45
k.4.242 KinrossAR2018_MDAMar14B.pdf - p45 (March 15, 2019 22:54:05)
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
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
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, 2018.
Litigation Risk
Legal proceedings may be brought against Kinross, for example, litigation based on its business activities, environmental laws, tax
matters, volatility in its stock price or failure to comply with its disclosure obligations, which could have a material adverse effect on
Kinross’ financial condition or prospects. Regulatory and government agencies may bring legal proceedings in connection with the
enforcement of applicable laws and regulations, and as a result Kinross may be subject to expenses of investigations and defense,
fines or penalties for violations if proven, and potentially cost and expense to remediate, increased operating costs or changes to
operations, and cessation of operations if ordered to do so or required in order to resolve such proceedings. The Company may also
become party to disputes governed by the rules of international arbitration. In the event of a dispute arising at Kinross’ foreign
operations, Kinross may be subject to the exclusive jurisdiction of foreign courts or may not be successful in subjecting foreign persons
to the jurisdiction of courts in Canada. Kinross’ inability to enforce its rights could have an adverse effect on its future cash flows,
earnings, results of operations and financial condition.
Counterparty and Liquidity Risk
Credit risk relates to cash and cash equivalents, accounts receivable, and derivative contracts and arises from the possibility that a
counterparty to an instrument fails to perform. Counterparty risk is the risk that a third party might fail to fulfill its performance
obligations under the terms of a financial instrument. The Company is subject to counterparty risk and may be affected, in the event
that a counterparty becomes insolvent. To manage both counterparty and credit risk, the Company proactively manages its exposure
to individual counterparties. The Company only transacts with highly-rated counterparties. A limit on contingent exposure has been
established for each counterparty based on the counterparty’s credit rating, and the Company monitors the financial condition of each
counterparty.
As at December 31, 2018, the Company’s gross credit exposure, including cash and cash equivalents, was $585.8 million and at
December 31, 2017, the gross credit exposure, including cash and cash equivalents, was $1,358.7 million.
Liquidity risk is the risk that the Company may not have sufficient cash resources available to meet its payment obligations. To manage
liquidity risk, the Company maintains cash positions and has financing in place that the Company expects will be sufficient to meet its
operating and capital expenditure requirements. Potential sources for liquidity could include, but are not limited to: the Company’s
current cash position, existing credit facilities, future operating cash flow, and potential private and public financing. Additionally, the
Company reviews its short-term operational forecasts regularly and long-term budgets to determine its cash requirements.
Credit Ratings and Debt Markets
The mining, processing, development, and exploration of Kinross’ properties may require substantial additional financing. Failure to
obtain sufficient financing may result in the delay or indefinite postponement of exploration, development or production on any or all
of Kinross’ properties, or even a loss of property interest. Additional capital or other types of financing may not be available if needed
or, if available, the terms of such financing may be unfavourable to Kinross.
The Company’s ability to access debt markets and the related cost of debt financing is dependent upon its credit ratings. The Company
has a BBB- rating from Fitch Ratings, a Ba1 rating from Moody’s and a BBB- rating from Standard Poor’s. There is no assurance that
k.4.242 KinrossAR2018_MDAMar14B.pdf - p46 (March 15, 2019 22:54:05)
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46
MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
these credit ratings will remain in effect for any given period of time or that such ratings will not be revised or withdrawn entirely by
the rating agencies. Real or anticipated changes in credit ratings can affect the price of the Company’s existing debt as well as the
Company’s ability to access the capital markets and the cost of such debt financing.
If the Company is unable to maintain its indebtedness and financial ratios at levels acceptable to its credit rating agencies, or should
the Company’s business prospects deteriorate, the ratings currently assigned to the Company by the rating agencies could be
downgraded, which could adversely affect the value of the Company’s outstanding securities and existing debt, its ability to obtain
new financing on favourable terms, and increase the Company’s borrowing costs.
Potential for Incurring Unexpected Costs or Liabilities as a Result of Acquisitions
Although the Company conducts investigations in connection with acquisitions, risks remain regarding any undisclosed or unknown
liabilities associated with any such acquisitions, and the Company may discover that it has acquired substantial undisclosed liabilities.
The Company may have little recourse against the seller if any of the representations or warranties provided in connection with an
acquisition proves to be inaccurate. Such liabilities could have an adverse impact on the Company’s business, financial condition,
results of operations and cash flows.
Global Financial Condition
The volatility and challenges that economies continue to experience around the world continues to affect the profitability and liquidity
of businesses in many industries, which in turn has resulted in the following conditions that may have an effect on the profitability
and cash flows of the Company:
Volatility in commodity prices and foreign exchange rates;
Tightening of credit markets;
Counterparty risk; and
Volatility in the prices of publicly traded entities.
The volatility in commodity prices and foreign exchange rates directly impact the Company’s revenues, earnings and cash flows, as
noted above in the sections titled “Gold Price and Silver Price” and “Foreign Currency Exchange Risk”.
Although 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 extended the maturity date of its revolving credit facility by one year to August 2023. As at December 31, 2018, the
Company had $1,552.9 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.
47
k.4.242 KinrossAR2018_MDAMar14B.pdf - p47 (March 15, 2019 22:54:06)
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
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
assumptions, some of which may be subjective, and it is possible that actual fair value could be significantly different than those
estimates.
Water Supply and Use
The Company is dependent on access to sufficient water supply to carry out its mining operations. Insufficient access to a consistent
water supply may negatively affect the Company’s operations and financial performance. Conversely, flooding or excess water at
operations may have a negative effect on the cost of operations and production.
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.
Excessive rainfall or flooding may adversely affect operations at Fort Knox. Fort Knox has experienced several consecutive years of
higher than average rainfall and experienced unusually high rainfall in the second half of 2018. Excess rainfall can result in operational
difficulties including geotechnical instability, increased dewatering demands, and additional water management requirements.
Extended periods of above average rainfall at Fort Knox may result in increased costs or production disruptions that could have a
material effect on Kinross’ financial performance, liquidity and results of operations.
Human Resources
Production at Kinross’ mines is dependent upon the efforts of, and maintaining good relationships with, employees of Kinross.
Relations between Kinross and its employees may be impacted by changes in labour relations which may be introduced by, among
others, employee groups, unions, and the relevant governmental authorities in whose jurisdictions Kinross carries on business.
Adverse changes in such legislation or in the relationship between Kinross and its employees may have a material adverse effect on
Kinross’ business, results of operations, and financial condition.
In order to operate successfully, Kinross must find and retain qualified employees. Kinross and other companies in the mining industry
compete for personnel and Kinross is not always able to fill positions in a timely manner. One factor that has contributed to an
increased turnover rate is the 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.
k.4.242 KinrossAR2018_MDAMar14B.pdf - p48 (March 15, 2019 22:54:06)
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48
MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
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.
Brazilian Power Plants
The ownership and operation of our Brazilian power plants carry an inherent risk of liability related to public safety, health, safety,
security and the environment, including the risk of government imposed orders to remedy unsafe conditions and/or to remediate or
otherwise address environmental contamination or damage. We may also be exposed to potential penalties for contravention of
health, safety, security and environmental laws and potential civil liability. We may become subject to government orders,
investigations, inquiries or other proceedings (including civil claims) relating to health, safety, security and environmental matters as
a result of which our operations may be limited or suspended. The occurrence of any of these events or any changes, additions to or
more rigorous enforcement of health, safety, security and environmental laws could impact the operation of the power plants and
result in additional expenditures. Additional environmental, health and safety issues relating to presently known or unknown matters
may require unanticipated expenditures, or result in fines, penalties or other consequences (including changes to operations) that
may be adverse to our business and results of operations.
49
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
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 (loss) Attributable to Common Shareholders and Adjusted Net Earnings per Share
Adjusted net earnings attributable to common shareholders and adjusted net earnings per share are non-GAAP measures which
determine the performance of the Company, excluding certain impacts which the Company believes are not reflective of the
Company’s underlying performance for the reporting period, such as the impact of foreign exchange gains and losses, reassessment
of prior year taxes and/or taxes otherwise not related to the current period, impairment charges (reversals), gains and losses and
other one-time costs related to acquisitions, dispositions and other transactions, and non-hedge derivative gains and losses. Although
some of the items are recurring, the Company believes that they are not reflective of the underlying operating performance of its
current business and are not necessarily indicative of future operating results. Management believes that these measures, which are
used internally to assess performance and in planning and forecasting future operating results, provide investors with the ability to
better evaluate underlying performance, particularly since the excluded items are typically not included in public guidance. However,
adjusted net earnings and adjusted net earnings per share measures are not necessarily indicative of net earnings and earnings per
share measures as determined under IFRS.
The following table provides a reconciliation of net (loss) earnings to adjusted net earnings for the periods presented:
(in millions, except per share amounts)
Net (loss) earnings attributable to common shareholders - as reported
Adjusting items:
Foreign exchange losses
Losses (gains) on disposition of associate and other assets - net
Foreign exchange losses (gains) on translation of tax basis and foreign exchange on deferred income taxes
within income tax expense
Brazil power plant acquisition related costs
Impairment, net of reversals (a)
Taxes in respect of prior periods
Mine curtailment and suspension related costs (b)
Reclamation and remediation (recovery) expense
Tasiast Phase One commissioning costs
Fort Knox pit wall slide related costs
Chile weather event related costs
Insurance recoveries
Settlement of a royalty agreement
U.S. Tax Reform impact
Other(c)
Tax effect of the above adjustments (d)
Adjusted net earnings attributable to common shareholders
Weighted average number of common shares outstanding - Basic
Adjusted net earnings per share
Years ended December 31,
2018
$
(23.6)
2017
$
445.4
4.3
0.8
4.9
(57.1)
62.0
3.4
-
59.9
-
(3.5)
6.4
37.9
-
-
-
(8.7)
0.9
(11.7)
151.7
128.1
1,249.5
0.10
-
-
(75.5)
41.7
16.6
9.5
-
-
3.3
(17.5)
(9.9)
(93.4)
1.2
(90.5)
(266.7)
178.7
1,246.6
0.14
$
$
$
$
(a) During the year ended December 31, 2017, the Company recognized an impairment charge related to Paracatu of $253.0 million and reversal of
impairment charges of $231.5 million related to property, plant and equipment at Tasiast and Fort Knox. The Company also recognized a reversal
of impairment charges related to the disposal of its 25% interest in Cerro Casale of $97.0 million during the year ended December 31, 2017. No
impairment charges or impairment reversals were recognized in 2018.
Includes costs related to the temporary curtailment at Paracatu during the year-ended December 31, 2017 of $16.6 million.
(b)
(c) Other includes non-hedge derivatives losses.
(d)
Includes a net tax recovery of $83.6 million related to the impairment charge at Paracatu and impairment reversal at Fort Knox recognized during
the year ended December 31, 2017.
k.4.242 KinrossAR2018_MDAMar14B.pdf - p50 (March 15, 2019 22:54:07)
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50
MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
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 operating 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 income taxes paid
Adjusted operating cash flow
Years ended December 31,
2018
2017
$
788.7
$
951.6
22.7
5.7
57.1
85.5
(108.6)
86.7
237.0
215.1
$
874.2
$
1,166.7
51
k.4.242 KinrossAR2018_MDAMar14B.pdf - p51 (March 15, 2019 22:54:08)
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
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)
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
Years ended December 31,
2018
2017
$
1,860.5
$
1,757.4
(17.3)
(20.0)
$
1,843.2
$
1,737.4
2,532,912
2,621,875
(22,493)
(25,121)
2,510,419
2,596,754
$
735
$
670
$
734
$
669
k.4.242 KinrossAR2018_MDAMar14B.pdf - p52 (March 15, 2019 22:54:08)
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52
MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
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
Attributable production cost of sales net of silver by-product revenue
Gold ounces sold
Less: portion attributable to Chirano non-controlling interest
Attributable gold ounces sold
Attributable production cost of sales per ounce sold on a by-product basis
Years ended December 31,
2018
2017
$
1,860.5
$
1,757.4
(17.3)
(66.4)
(20.0)
(86.5)
$
1,776.8
$
1,650.9
2,480,529
2,553,178
(22,460)
(25,070)
2,458,069
2,528,108
$
723
$
653
53
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
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,
2018
2017
$
1,860.5
$
1,757.4
(17.3)
(66.4)
(20.0)
(86.5)
$
1,776.8
$
1,650.9
133.0
6.2
52.2
53.2
335.0
132.6
43.3
82.9
59.4
421.5
$
2,356.4
$
2,390.6
48.7
7.5
55.4
665.0
39.5
17.4
45.8
448.7
$
3,133.0
$
2,942.0
2,480,529
(22,460)
2,458,069
2,553,178
(25,070)
2,528,108
$
959
$
946
$
1,275
$
1,164
54
k.4.242 KinrossAR2018_MDAMar14B.pdf - p54 (March 15, 2019 22:54:08)
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
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,
2018
2017
$
1,860.5
$
1,757.4
(17.3)
(20.0)
$
1,843.2
$
1,737.4
133.0
6.2
52.2
53.2
335.0
132.6
43.3
82.9
59.4
421.5
$
2,422.8
$
2,477.1
48.7
7.5
55.4
665.0
39.5
17.4
45.8
448.7
$
3,199.4
$
3,028.5
2,532,912
(22,493)
2,510,419
2,621,875
(25,121)
2,596,754
$
965
$
954
$
1,274
$
1,166
55
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
(a) The portion attributable to Chirano non-controlling interest represents the non-controlling interest (10%) in the production cost of sales for the
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
Chirano mine.
“Attributable” includes Kinross' share of Chirano (90%) production.
“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.
“General and administrative” expenses is as reported on the consolidated statement of operations. 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.
“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.
“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.
“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.
“Additions to property, plant and equipment - sustaining” represents the majority of capital expenditures at existing operations including
capitalized exploration costs, capitalized stripping and underground mine development costs, ongoing replacement of mine equipment and other
capital facilities and other capital expenditures and is calculated as total additions to property, plant and equipment (as reported on the
consolidated statements of cash flows), less capitalized interest and non-sustaining capital. Non-sustaining capital represents capital expenditures
for major growth projects as well as enhancement capital for significant infrastructure improvements at existing operations. Non-sustaining
capital expenditures during year ended December 31, 2018, primarily relate to projects at Tasiast, Round Mountain, and Bald Mountain.
“Portion attributable to Chirano non-controlling interest” represents the non-controlling interest (10%) in the ounces sold from the Chirano mine.
“Average realized gold price per ounce” is a non-GAAP financial measure and is defined as gold metal sales divided by the total number of gold
ounces sold. This measure is intended to enable Management to better understand the price realized in each reporting period. The realized price
measure does not have any standardized definition under IFRS and should not be considered a substitute for measure of performance prepared in
accordance with IFRS.
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56
MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
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): “Project Updates and New Developments” and “Outlook” and include, without
limitation, statements with respect to our guidance for production;, production costs of sales, all-in sustaining cost and capital expenditures; the schedules and
budgets for the Company’s development projects; mine life; 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, estimates and the realization of such estimates (such as mineral or gold reserves and resources or mine life), success of exploration,
development and mining activities, currency fluctuations, capital requirements, project studies, mine life extensions, government regulation permit applications
and conversions, restarting suspended or disrupted operations; continuous improvement initiatives; environmental risks and proceedings; and resolution of
pending litigation. The words “advance”, “anticipate”, “assumption”, “believe”, “estimates”, ‘‘expects’’, “forecast”, “focus”, “forward”, “guidance”, “initiative”,
“measures”, “on budget”, “on schedule”, “outlook”, “plan”, “potential”, “progress”, “project”, “projection”, “promising”, or variations of or similar such words
and phrases or statements that certain actions, events or results may, could, should or will be achieved, received or taken, or will occur or result and similar such
expressions identify forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while
considered reasonable by Kinross as of the date of such statements, are inherently subject to significant business, economic and competitive uncertainties and
contingencies. The estimates, models and assumptions of Kinross referenced, contained or incorporated by reference in this MD&A, which may prove to be
incorrect, include, but are not limited to, the various assumptions set forth herein and in our most recently filed Annual Information Form and our Management’s
Discussion and Analysis as well as: (1) there being no significant disruptions affecting the operations of the Company, whether due to extreme weather events
(including, without limitation, excessive or lack of rainfall, in particular, the potential for further production curtailments at Paracatu resulting from insufficient
rainfall and the potential for operational challenges at Fort Knox resulting from excessive rainfall, which can impact costs and/or production) and other or related
natural disasters, labour disruptions (including but not limited to workforce reductions), supply disruptions, power disruptions, damage to equipment, pit wall
slides (in particular that the effects of the pit wall slides at Fort Knox and Round Mountain are consistent with the Company’s expectations) or otherwise; (2)
permitting, development, operations and production from the Company’s operations and development projects being consistent with Kinross’ current expectations
including, without limitation; the maintenance of existing permits and approvals and the timely receipt of all permits and authorizations necessary for the
development and operation of the Tasiast Phase One and Phase Two expansions or any such alternate expansion that the Company decides to pursue and the
Round Mountain Phase W expansion including, without limitation, work permits, necessary import authorizations for goods and equipment; operation of the SAG
mill at Tasiast; exploration license conversions at Tasiast; 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 renewal of the Chirano mining lease; (3) political and legal developments
in any jurisdiction in which the Company operates being consistent with its current expectations including, without limitation, the impact of any political tensions
and uncertainty in the Russian Federation 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 amendments to the mining laws, and potential power rationing and tailings facility regulations in Brazil, potential
amendments to water laws and/or other water use restrictions and regulatory actions in Chile, new dam safety regulations, and potential amendments to minerals
and mining laws and energy levies laws, and the enforcement of labour laws in Ghana, new regulations relating to work permits, potential amendments to
customs and mining laws (including but not limited amendments to the VAT) and the potential implementation of a new tax code, in Mauritania, and satisfactory
resolution of the discussions with the Mauritanian government regarding the Company’s activities in Mauritania, the potential passing of Environmental
Protection Agency regulations in the US relating to the provision of financial assurances under the Comprehensive Environmental Response, Compensation and
Liability Act, the European Union’s General Data Protection Regulation 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), and the impact of any trade tariffs being
consistent with Kinross’ current expectations; (4) the completion of studies, including optimization studies, scoping studies and prefeasibility and feasibility studies,
on the timelines currently expected and the results of those studies being consistent with Kinross’ current expectations; (5) the exchange rate between the
Canadian dollar, Brazilian real, Chilean peso, Russian rouble, Mauritanian ouguiya, Ghanaian cedi and the U.S. dollar being approximately consistent with current
levels; (6) certain price assumptions for gold and silver; (7) prices for diesel, natural gas, fuel oil, electricity and other key supplies being approximately consistent
with current levels; (8) production and cost of sales forecasts for the Company meeting expectations; (9) the accuracy of the current mineral reserve and mineral
resource estimates of the Company (including but not limited to ore tonnage and ore grade estimates), mine plans for the Company’s mining operations (including
but not limited to throughput and recoveries being affected by metallurgical characteristics at Paracatu), and the Company’s internal models; (10) labour and
materials costs increasing on a basis consistent with Kinross’ current expectations; (11) the terms and conditions of the legal and fiscal stability agreements for
the Tasiast and Chirano operations being interpreted and applied in a manner consistent with their intent and Kinross’ expectations and without amendment or
formal dispute (including without limitation the application of tax, customs and duties exemptions); (12) goodwill and/or asset impairment potential; (13) the
regulatory and legislative regime regarding mining, electricity production and transmission (including rules related to power tariffs) in Brazil being consistent with
Kinross’ current expectations; (14) access to capital markets, including but not limited to maintaining an investment grade rating consistent with the Company’s
current expectations; (15) that the Brazilian power plants will operate in a manner consistent with our current expectations; (16) that the Tasiast project financing
will proceed in a manner consistent with our current expectations; and (17) litigation and regulatory proceedings and the potential ramifications thereof being
concluded in a manner consistent with the Company’s expectations (including without limitation the ongoing litigation in Chile relating to the alleged damage of
wetlands and the scope of any remediation plan or other environmental obligations arising therefrom) . 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
57
k.4.242 KinrossAR2018_MDAMar14B.pdf - p57 (March 15, 2019 22:54:09)
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MDAKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2018
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, environmental litigation or regulatory proceedings or any investigations, enforcement actions and/or sanctions under any applicable anti-corruption,
international sanctions and/or anti-money laundering laws and regulations in Canada, the United States or any other applicable jurisdiction; the speculative
nature of gold exploration and development including, but not limited to, the risks of obtaining necessary licenses and permits; diminishing quantities or grades
of reserves; adverse changes in our credit rating; and contests over title to properties, particularly title to undeveloped properties. In addition, there are risks and
hazards associated with the business of gold exploration, development and mining, including environmental hazards, industrial accidents, unusual or unexpected
formations, pressures, cave-ins, flooding and gold bullion losses (and the risk of inadequate insurance, or the inability to obtain insurance, to cover these risks).
Many of these uncertainties and contingencies can directly or indirectly affect, and could cause, Kinross’ actual results to differ materially from those expressed
or implied in any forward-looking statements made by, or on behalf of, Kinross, including but not limited to resulting in an impairment charge on goodwill and/or
assets. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those
anticipated in such statements. Forward-looking statements are provided for the purpose of providing information about management’s expectations and plans
relating to the future. All of the forward-looking statements made in this MD&A are qualified by these cautionary statements and those made in our other filings
with the securities regulators of Canada and the United States including, but not limited to, the cautionary statements made in the ‘‘Risk Factors’’ section of our
most recently filed Annual Information Form 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.
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 ounce2.
Specific to the Russian rouble, a 10% change in the exchange rate would be expected to result in an approximate $19 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 $27 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 $3 impact on production cost of sales per ounce.
A $100 change in the price of gold would be expected to result in an approximate $5 impact on production cost of sales per ounce as a result of a change in
royalties owing.
Other information
Where we say ‘‘we’’, ‘‘us’’, ‘‘our’’, the ‘‘Company’’, or ‘‘Kinross’’ in this MD&A, we mean Kinross Gold Corporation and/or one or more or all of its subsidiaries, as
may be applicable.
The technical information about the Company’s mineral properties contained in this MD&A has been prepared under the supervision of Mr. John Sims, 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.
58
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MDAKINROSS GOLD ANNUAL REPORT 2018
MANAGEMENT’S RESPONSIBILITY FOR
FINANCIAL STATEMENTS
The consolidated financial statements, the notes thereto, and other financial information contained in the Management’s Discussion and Analysis have
been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and are the
responsibility of the management of Kinross Gold Corporation (the “Company”). The financial information presented elsewhere in the Management’s
Discussion and Analysis is consistent with the data that is contained in the consolidated financial statements. The consolidated financial statements,
where necessary, include amounts which are based on the best estimates and judgment of management.
In order to discharge management’s responsibility for the integrity of the financial statements, the Company maintains a system of internal accounting
controls. These controls are designed to provide reasonable assurance that the Company’s assets are safeguarded, transactions are executed and
recorded in accordance with management’s authorization, proper records are maintained and relevant and reliable financial information is produced.
These controls include maintaining quality standards in hiring and training of employees, policies and procedures manuals, a corporate code of conduct
and ensuring that there is proper accountability for performance within appropriate and well-defined areas of responsibility. The system of internal controls
is further supported by a compliance function, which is designed to ensure that we and our employees comply with securities legislation and conflict of
interest rules.
The Board of Directors is responsible for overseeing management’s performance of its responsibilities for financial reporting and internal control. The
Audit Committee, which is composed of non-executive directors, meets with management as well as the external auditors to ensure that management is
properly fulfilling its financial reporting responsibilities to the Directors who approve the consolidated financial statements. The external auditors have full
and unrestricted access to the Audit Committee to discuss the scope of their audits, the adequacy of the system of internal controls and review financial
reporting issues.
The consolidated financial statements have been audited by KPMG LLP, the independent registered public accounting firm, in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
J. PAUL ROLLINSON
President and Chief Executive Officer
Toronto, Canada
February 13, 2019
TONY S. GIARDINI
Executive Vice-President and Chief Financial Officer
Toronto, Canada
February 13, 2019
1
k.4.242 KinrossAR2018_FINMar14B.pdf - p1 (March 15, 2019 23:01:44)
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FSKINROSS GOLD ANNUAL REPORT 2018
MANAGEMENT’S REPORT ON
INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Kinross Gold Corporation (“Kinross”) is responsible for establishing and maintaining adequate internal control over financial reporting,
and have designed such internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with International Financial Reporting Standards (“IFRS”) as issued by the
International Accounting Standards Board.
Management has used the Internal Control—Integrated Framework (2013) to evaluate the effectiveness of internal control over financial reporting, which
is a recognized and suitable framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Management has evaluated the design and operation of Kinross’ internal control over financial reporting as of December 31, 2018, 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, 2018 has been audited by KPMG LLP, the independent
registered public accounting firm, as stated in their report that appears herein.
J. PAUL ROLLINSON
President and Chief Executive Officer
Toronto, Canada
February 13, 2019
TONY S. GIARDINI
Executive Vice-President and Chief Financial Officer
Toronto, Canada
February 13, 2019
k.4.242 KinrossAR2018_FINMar14B.pdf - p2 (March 15, 2019 23:01:44)
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2
FSKINROSS GOLD ANNUAL REPORT 2018
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of Kinross Gold Corporation:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Kinross Gold Corporation (the Company) as of December 31, 2018 and 2017, the
related consolidated statements of operations, comprehensive income (loss), cash flows, and equity for each of the years then ended, and the related
notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years then
ended, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s
internal control over financial reporting as of December 31, 2018, based on the criteria established in Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 13, 2019 expressed an unqualified
opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits
included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable
basis for our opinion.
Chartered Professional Accountants, Licensed Public Accountants
We have served as the Company’s auditor since 2005.
Toronto, Canada
February 13, 2019
3
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FSKINROSS GOLD ANNUAL REPORT 2018
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of Kinross Gold Corporation:
Opinion on Internal Control Over Financial Reporting
We have audited Kinross Gold Corporation’s internal control over financial reporting as of December 31, 2018, based on the criteria established in Internal
Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, Kinross Gold
Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on
criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated
balance sheets of the Company as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive income (loss),
cash flows, and equity for each of the years then ended, and the related notes (collectively, the consolidated financial statements), and our report dated
February 13, 2019 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness
of internal control over financial reporting, included in the accompanying management’s report on internal control over financial reporting. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over
financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such
other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures
of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material
effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Chartered Professional Accountants, Licensed Public Accountants
Toronto, Canada
February 13, 2019
k.4.242 KinrossAR2018_FINMar14B.pdf - p4 (March 15, 2019 23:01:45)
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4
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
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 joint ventures and associate
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 provisions
Current portion of unrealized fair value of derivative liabilities
Deferred payment obligation
Non-current liabilities
Long-term debt
Provisions
Unrealized fair value of derivative liabilities
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
Subsequent events
Total liabilities and equity
Common shares
Authorized
Issued and outstanding
As at
December 31,
2018
December 31,
2017
$
349.0
12.7
101.4
79.0
1,052.0
3.8
1,597.9
$
1,025.8
12.1
91.3
43.9
1,094.3
17.0
2,284.4
5,519.1
162.7
155.9
18.3
0.8
564.1
45.0
8,063.8
$
4,887.2
162.7
188.0
23.7
3.9
574.0
33.3
8,157.2
$
$
465.9
21.7
72.6
22.2
30.0
$
482.6
35.1
66.5
1.1
-
612.4
585.3
1,735.0
816.4
9.6
97.9
265.2
3,536.5
1,732.6
830.5
0.2
133.8
255.6
3,538.0
$
14,913.4
239.8
(10,548.0)
(98.5)
4,506.7
20.6
4,527.3
$
14,902.5
240.7
(10,580.7)
21.1
4,583.6
35.6
4,619.2
$
8,063.8
$
8,157.2
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 13
Note 10
Note 6i
Note 12
Note 13
Note 10
Note 17
Note 14
Note 7
Note 19
Notes 6i and 12
Unlimited
Note 14 1,250,228,821
Unlimited
1,247,003,940
The accompanying notes are an integral part of these consolidated financial statements.
Signed on behalf of the Board:
John A. Brough Kerry D. Dyte
Director Director
5
k.4.242 KinrossAR2018_FINMar14B.pdf - p5 (March 15, 2019 23:01:45)
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FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
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, net of reversals
Total cost of sales
Gross profit
Other operating expense
Exploration and business development
General and administrative
Operating earnings
Other income (expense) - net
Equity in losses of joint ventures and associate
Finance income
Finance expense
Earnings before tax
Income tax (expense) recovery - net
Net (loss) earnings
Net (loss) earnings attributable to:
Non-controlling interest
Common shareholders
(Loss) earnings per share attributable to common shareholders
Basic
Diluted
Weighted average number of common shares outstanding
(millions)
Basic
Diluted
The accompanying notes are an integral part of these consolidated financial statements.
Years ended
December 31,
December 31,
2018
2017
$
3,212.6
$
3,303.0
1,860.5
772.4
-
2,632.9
579.7
137.0
109.2
133.0
200.5
3.2
(0.3)
11.0
(101.2)
113.2
(138.8)
1,757.4
819.4
21.5
2,598.3
704.7
129.6
106.0
132.6
336.5
188.1
(1.3)
13.5
(117.8)
419.0
23.2
$
(25.6)
$
442.2
$
(2.0)
$
(3.2)
$
(23.6)
$
445.4
$
$
(0.02)
(0.02)
$
$
0.36
0.35
1,249.5
1,249.5
1,246.6
1,257.0
Note 8
Note 7
Note 7
Note 9
Note 7
Note 17
Note 16
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6
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(expressed in millions of United States dollars)
Years ended
December 31,
December 31,
2018
2017
Net (loss) earnings
$
(25.6)
$
442.2
Other comprehensive income (loss), net of tax:
Items that will not be reclassified to profit or loss:
Note 7
Equity investments at fair value through other comprehensive income ("FVOCI") - net change
in fair value (a)
(25.8)
(16.7)
Items that are or may be reclassified to profit or loss in subsequent periods:
Cash flow hedges - effective portion of changes in fair value (b)
Cash flow hedges - reclassified to profit or loss (c)
Total comprehensive (loss) income
Attributable to non-controlling interest
Attributable to common shareholders
(a) Net of tax expense (recovery) of $(0.3) million (2017 - $0.3 million).
(b) Net of tax expense (recovery) of $(20.9) million (2017 - $4.8 million).
(c) Net of tax expense (recovery) of $0.2 million (2017 - $(5.9) million).
The accompanying notes are an integral part of these consolidated financial statements.
(47.9)
(9.1)
(82.8)
11.9
(13.2)
(18.0)
$
(108.4)
$
424.2
$
(2.0)
$
(3.2)
$
(106.4)
$
427.4
7
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FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
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) earnings
Adjustments to reconcile net (loss) earnings to net cash provided from
operating activities:
Depreciation, depletion and amortization
Gain on disposition of associate and other interests - net
Impairment, net of reversals
Equity in losses of joint ventures and associate
Share-based compensation expense
Finance expense
Deferred tax expense (recovery)
Foreign exchange losses (gains) and other
Reclamation (recovery) expense
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
Acquisitions
Net additions to long-term investments and other assets
Net proceeds from the sale of property, plant and equipment
Net proceeds from disposition of associate and other interests
Increase in restricted cash
Interest received and other
Net cash flow used in investing activities
Financing:
Net proceeds from issuance/drawdown of debt
Repayment of debt
Interest paid
Issuance of common shares on exercise of options
Dividend paid to non-controlling interest
Other
Net cash flow used in financing activities
Effect of exchange rate changes on cash and cash equivalents
(Decrease) increase 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.
Years ended
December 31,
December 31,
2018
2017
$
(25.6)
$
442.2
772.4
(2.1)
-
0.3
14.6
101.2
8.9
12.5
(8.0)
(22.7)
(5.7)
69.8
915.6
(126.9)
788.7
(1,043.4)
(304.2)
(52.9)
6.4
-
(0.6)
7.7
(1,387.0)
80.0
(80.0)
(57.9)
0.5
(13.0)
(2.2)
(72.6)
(5.9)
(676.8)
1,025.8
819.4
(55.2)
(75.5)
1.3
13.6
117.8
(76.4)
(31.9)
11.4
108.6
(86.7)
(48.5)
1,140.1
(188.5)
951.6
(897.6)
-
(73.8)
8.5
269.6
(0.5)
6.6
(687.2)
494.7
(500.0)
(62.9)
0.8
-
(1.6)
(69.0)
3.4
198.8
827.0
$ 349.0
$ 1,025.8
k.4.242 KinrossAR2018_FINMar14B.pdf - p8 (March 15, 2019 23:01:45)
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8
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
CONSOLIDATED STATEMENTS OF EQUITY
(expressed in millions of United States dollars)
Common share capital
Balance at the beginning of the period
Transfer from contributed surplus on exercise of 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
Adjustment on initial application of IFRS 9
Adjusted balance at the beginning of the period
Net (loss) earnings attributable to common shareholders
Balance at the end of the period
Accumulated other comprehensive income (loss)
Balance at the beginning of the period
Adjustment on initial application of IFRS 9
Adjusted balance at the beginning of the period
Other comprehensive income (loss)
Losses on cash flow hedges transferred to cost of non-financial assets
Balance at the end of the period
Non-controlling interest
Balance at the beginning of the period
Net loss attributable to non-controlling interest
Dividend paid to non-controlling interest
Balance at the end of the period
Years ended
December 31,
December 31,
2018
2017
$
$
14,902.5
10.0
0.9
14,913.4
14,894.2
7.2
1.1
14,902.5
$
$
$
240.7
14.6
(15.5)
239.8
$
$
$
238.3
13.6
(11.2)
240.7
$
(10,580.7)
$
(11,026.1)
Note 4
56.3
-
$
(10,524.4)
$
(11,026.1)
(23.6)
445.4
$
(10,548.0)
$
(10,580.7)
$
$
Note 4
$
$
$
$
21.1
(56.3)
(35.2)
(82.8)
19.5
(98.5)
35.6
(2.0)
(13.0)
20.6
39.1
-
39.1
(18.0)
-
21.1
38.8
(3.2)
-
35.6
$
$
$
$
Total accumulated deficit and accumulated other comprehensive income (loss)
$
(10,646.5)
$
(10,559.6)
Total common shareholders' equity
$
4,506.7
$
4,583.6
Total equity
$
4,527.3
$
4,619.2
The accompanying notes are an integral part of these consolidated financial statements.
9
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FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
1.
DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS
Kinross Gold Corporation and its subsidiaries and joint arrangements (collectively, "Kinross" or the "Company") are engaged
in gold mining and related activities, including exploration and acquisition of gold-bearing properties, extraction and
processing of gold-containing ore and reclamation of gold mining properties. Kinross Gold Corporation, the ultimate parent,
is a public company incorporated and domiciled in Canada with its registered office at 25 York Street, 17th floor, Toronto,
Ontario, Canada, M5J 2V5. Kinross' gold production and exploration activities are carried out principally in Canada, the
United States, the Russian Federation, Brazil, Chile, Ghana and Mauritania. Gold is produced in the form of doré, which is
shipped to refineries for final processing. Kinross also produces and sells a quantity of silver. The Company is listed on the
Toronto Stock Exchange and the New York Stock Exchange.
The consolidated financial statements of the Company for the year ended December 31, 2018 were authorized for issue in
accordance with a resolution of the Board of Directors on February 13, 2019.
2.
BASIS OF PRESENTATION
These consolidated financial statements for the year ended December 31, 2018 (“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 Company’s significant accounting policies are presented
in Note 3 and have been consistently applied in each of the periods presented other than as noted in Note 4(a). Significant
accounting estimates, judgments and assumptions used or exercised by management in the preparation of these financial
statements are presented in Note 5.
k.4.242 KinrossAR2018_FINMar14B.pdf - p10 (March 15, 2019 23:01:46)
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10
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
i. Principles of consolidation
The significant mining properties and entities of Kinross are listed below. All operating activities involve gold mining and
exploration. Each of the significant entities has a December 31 year end.
Entity
Subsidiaries:
(Consolidated)
Fairbanks Gold Mining, Inc.
Kinross Brasil Mineração S.A. ("KBM")
Compania Minera Maricunga ("CMM")
Compania Minera Mantos de Oro ("MDO")
Echo Bay Minerals Company
Chukotka Mining and Geological
Company
Northern Gold LLC
Tasiast Mauritanie Ltd. S.A.
Chirano Gold Mines Ltd. (a)
KG Mining (Bald Mountain) Inc.
Round Mountain Gold Corporation /
KG Mining (Round Mountain) Inc.
Interests in joint ventures:
(Equity accounted)
Sociedad Contractual Minera Puren
Bald Mountain Exploration LLC
Property/ Segment
Location
2018
2017
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
Tasiast
Chirano
Bald Mountain
Round Mountain
USA
Brazil
Chile
Chile
USA
Russian
Federation
Russian
Federation
Mauritania
Ghana
USA
USA
100%
100%
100%
100%
100%
100%
100%
100%
90%
100% (b)
100%
Puren/ Corporate and
Other
Bald Mountain Exploration
Joint Venture/Bald
Mountain
Chile
65%
USA
- (b)
100%
100%
100%
100%
100%
100%
100%
100%
90%
100%
100%
65%
50%
(a)
The Company holds a 90% interest in Chirano Gold Mines Ltd. with the Government of Ghana having the right to the remaining 10%
interest.
(b) On October 2, 2018, the Company acquired the remaining 50% interest in the Bald Mountain exploration joint venture. See Note 6iii
and Note 9. Bald Mountain Exploration LLC was merged with KG Mining (Bald Mountain) Inc. prior to December 31, 2018.
11
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FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
(a) Subsidiaries
Subsidiaries are entities controlled by the Company. Control exists when an investor is exposed, or has rights, to variable
returns from its involvement with an investee and has the ability to affect those returns through its power over the investee.
Subsidiaries are included in the consolidated financial statements from the date control is obtained until the date control
ceases. Where the Company’s interest in a subsidiary is less than 100%, the Company recognizes non-controlling interests.
All intercompany balances, transactions, income, expenses, profits and losses, including unrealized gains and losses have
been eliminated on consolidation.
(b) Joint Arrangements
The Company conducts a portion of its business through joint arrangements where the parties are bound by contractual
arrangements establishing joint control and requiring unanimous consent of each of the parties regarding those activities
that significantly affect the returns of the arrangement. The Company’s interest in a joint arrangement is classified as either
a joint operation or a joint venture depending on its rights and obligations in the arrangement. In a joint operation, the
Company has rights to its share of the assets, and obligations for its share of the liabilities, of the joint arrangement, while
in a joint venture, the Company has rights to its share of the net assets of the joint arrangement. For a joint operation, the
Company recognizes in the consolidated financial statements, its share of the assets, liabilities, revenue, and expenses of
the joint arrangement, while for a joint venture, the Company recognizes its investment in the joint arrangement using the
equity method of accounting 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 and measured at FVOCI,
is recognized in other comprehensive income (“OCI”), the related translation differences are also recognized in OCI.
k.4.242 KinrossAR2018_FINMar14B.pdf - p12 (March 15, 2019 23:01:48)
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12
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
iii. Cash and cash equivalents
Cash and cash equivalents include cash and highly liquid investments with a maturity of three months or less at the date of
acquisition. Restricted cash is cash held in banks that is not available for general corporate use. Cash and cash equivalents,
and restricted cash are classified as and measured at amortized cost.
iv. Short-term investments
Short-term investments include short-term money market instruments with terms to maturity at the date of acquisition of
between three and twelve months. The carrying value of short-term investments is equal to cost and accrued interest. Short-
term investments are classified as and measured at amortized cost.
v. Long-term investments
Investments in entities that are not subsidiaries, joint operations, joint ventures or investments in associates are designated
as financial assets at FVOCI. These equity investments are measured at fair value on acquisition and at each reporting date,
with all realized and unrealized gains and losses recorded permanently in AOCI.
vi. Inventories
Inventories consisting of metal in circuit ore, metal in-process and finished metal are valued at the lower of cost or net
realizable value (“NRV”). NRV is calculated as the difference between the estimated gold prices based on prevailing and long-
term metal prices and estimated costs to complete production into a saleable form and estimated costs to sell.
Metal in circuit is comprised of ore in stockpiles and ore on heap leach pads. Ore in stockpiles is coarse ore that has been
extracted from the mine and is available for further processing. Costs are added to stockpiles based on the current mining
cost per tonne and removed at the average cost per tonne. Costs are added to ore on the heap leach pads based on current
mining costs and removed from the heap leach pads as ounces are recovered, based on the average cost per recoverable
ounce of gold on the leach pad. Ore in stockpiles not expected to be processed in the next twelve months is classified as
long-term.
The quantities of recoverable gold placed on the leach pads are reconciled by comparing the grades of ore placed on the
leach pads to the quantities of gold actually recovered (metallurgical balancing); however, the nature of the leaching process
inherently limits the ability to precisely monitor inventory levels. As a result, the metallurgical balancing process is constantly
monitored and the engineering estimates are refined based on actual results over time. Variances between actual and
estimated quantities resulting from changes in assumptions and estimates that do not result in write downs to NRV are
accounted for on a prospective basis. The ultimate actual recovery of gold from a leach pad will not be known until the
leaching process has concluded. In the event that the Company determines, based on engineering estimates, that a quantity
of gold contained in ore on leach pads is to be recovered over a period exceeding twelve months, that portion is classified
as long-term.
In-process inventories represent materials that are in the process of being converted to a saleable product.
Materials and supplies are valued at the lower of average cost and NRV.
Write-downs of inventory are recognized in the consolidated statement of operations in the current period. The Company
reverses inventory write downs in the event that there is a subsequent increase in NRV.
vii. Borrowing costs
Borrowing costs are generally expensed as incurred except where they relate to the financing of qualifying assets that require
a substantial period of time to get ready for their intended use. Qualifying assets include the cost of developing mining
properties and constructing new facilities. Borrowing costs related to qualifying assets are capitalized up to the date when
the asset is ready for its intended use.
Where funds are borrowed specifically to finance a project, the amount capitalized represents the actual borrowing costs
incurred net of any investment income earned on the investment of those borrowings. Where the funds used to finance a
project form part of general borrowings, the amount capitalized is calculated using a weighted average of rates applicable
to relevant general borrowings of the Company during the period.
13
k.4.242 KinrossAR2018_FINMar14B.pdf - p13 (March 15, 2019 23:01:48)
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FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
viii. Business combinations
A business combination is a transaction or other event in which control over one or more businesses is obtained. 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.
k.4.242 KinrossAR2018_FINMar14B.pdf - p14 (March 15, 2019 23:01:49)
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14
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
x. Exploration and evaluation (“E&E”) costs
Exploration and evaluation costs are those costs required to find a mineral property and determine its commercial viability.
E&E costs include costs to establish an initial mineral resource and determine whether inferred mineral resources can be
upgraded to measured and indicated mineral resources and whether measured and indicated mineral resources can be
converted to proven and probable reserves.
E&E costs consist of:
gathering exploration data through topographical and geological studies;
exploratory drilling, trenching and sampling;
determining the volume and grade of the resource;
test work on geology, metallurgy, mining, geotechnical and environmental; and
conducting engineering, marketing and financial studies.
Project costs in relation to these activities are expensed as incurred until such time as the Company expects that mineral
resources will be converted to mineral reserves within a reasonable period. Thereafter, costs for the project are capitalized
prospectively as capitalized 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 the fair value of:
estimated potential ounces, and
exploration properties.
Acquired or capitalized E&E costs for a project are classified as such until the project demonstrates technical feasibility and
commercial viability. Upon demonstrating technical feasibility and commercial viability, and subject to an impairment
analysis, capitalized E&E costs are transferred to capitalized development costs within property, plant and equipment.
Technical feasibility and commercial viability generally coincides with the establishment of proven and probable mineral
reserves; however, this determination may be impacted by management’s assessment of certain modifying factors including:
legal, environmental, social and governmental factors.
xi. Property, plant and equipment
Property, plant and equipment are recorded at cost and carried net of accumulated depreciation, depletion and amortization
and accumulated impairment losses. The initial cost of an asset comprises its purchase price or construction cost, any costs
directly attributable to bringing the asset into operation, the estimate of reclamation and remediation costs, and, for
qualifying assets, capitalized borrowing costs.
Costs to acquire mineral properties are capitalized and represent the property’s fair value at the time it was acquired, either
as an individual asset purchase or as part of a business combination.
Interest expense attributable to the cost of developing mining properties and to constructing new facilities is capitalized
until assets are ready for their intended use.
Acquired or capitalized E&E costs may be included within mineral interests in development and operating properties or pre-
development properties depending upon the nature of the property to which the costs relate.
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.
15
k.4.242 KinrossAR2018_FINMar14B.pdf - p15 (March 15, 2019 23:01:49)
DT
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Mineral interests consist of:
Development and operating properties, which include capitalized development and stripping costs, cost of assets
under construction, E&E costs and mineral interests for those properties currently in operation, for which
development has commenced, or for which proven and probable reserves have been declared; and
Pre-development properties, which include E&E costs and mineral interests for those properties for which
development has not commenced.
(b) Depreciation, depletion and amortization
For plant and other facilities, stripping costs, reclamation and remediation costs, production stage mineral interests and
plant expansion costs, the Company uses the units-of-production (“UOP”) method for determining depreciation, depletion
and amortization. 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 E&E costs and assets under construction are not depreciated. These assets are depreciated when
they are ready for their intended use.
(c) Derecognition
The carrying amount of an item of property, plant and equipment is derecognized on disposal of the asset or when no future
economic benefits are expected to accrue to the Company from its continued use. Any gain or loss arising on derecognition
is included in the consolidated statement of operations in the period in which the asset is derecognized. The gain or loss is
determined as the difference between the carrying value and the net proceeds on the sale of the assets, if any, at the time
of disposal.
xii. Valuation of Goodwill and Long-lived Assets
Goodwill is tested for impairment on an annual basis as at December 31, and at any other time if events or changes in
circumstances indicate that the recoverable amount of a CGU containing goodwill has been reduced below its carrying
amount.
The carrying value of property, plant and equipment is reviewed each reporting period to determine whether there is any
indication of impairment or reversal of impairment. If any such indication exists, then the asset’s recoverable amount is
estimated. In addition, capitalized E&E costs are assessed for impairment upon demonstrating the technical feasibility and
commercial viability of a project. For such non-current assets, the recoverable amount is determined for an individual asset
unless the asset does not generate cash inflows that are independent of those generated from other assets or groups of
assets, in which case, the individual assets are grouped together into CGUs for impairment testing purposes.
If the carrying amount of the CGU or asset exceeds its recoverable amount, an impairment is considered to exist and an
impairment loss is recognized in the consolidated statement of operations to reduce the CGU or asset’s carrying value to its
recoverable amount.
For property, plant and equipment and other long-lived assets, a previously recognized impairment loss is reversed if there
has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was
k.4.242 KinrossAR2018_FINMar14B.pdf - p16 (March 15, 2019 23:01:50)
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16
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
recognized. The reversal is limited to the carrying value that would have been determined, net of any applicable
depreciation, had no impairment charge been recognized previously.
The recoverable amount of a CGU or asset is the higher of its fair value less cost of disposal and its value in use.
Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction
between knowledgeable and willing parties. Fair value for mineral assets is generally determined as the present value of the
estimated future cash flows expected to arise from the continued use of the asset, including any expansion prospects, and
its eventual disposal, using assumptions that an independent market participant may take into account. These cash flows
are discounted by an appropriate discount rate to arrive at a net present value or net asset value (“NAV”) of the asset.
Value in use is determined as the present value of the estimated future cash flows expected to arise from the continued use
of the asset in its present form and its eventual disposal. Value in use is determined by applying assumptions specific to the
Company’s continued use of the asset and does not take into account assumptions of significant future enhancements of an
asset’s performance or capacity to which the Company is not committed.
Estimates of expected future cash flows reflect estimates of future revenues, cash costs of production and capital
expenditures contained in the Company’s long-term life of mine (“LOM”) plans, which are updated for each CGU on an
annual basis. 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 7 year to 25 year period.
Projected future revenues reflect the forecast future production levels at each of the Company’s CGUs as detailed in the
LOM plans. These forecasts may include the production of mineralized material that does not currently qualify for inclusion
in mineral reserve or mineral resource classification. This is consistent with the methodology used to measure value beyond
proven and probable reserves when allocating the purchase price of a business combination to acquired mining assets. The
fair value arrived at as described above, is the Company’s estimate of fair value for accounting purposes and is not a
“preliminary assessment” as defined in Canadian Securities Administrators’ National Instrument 43-101 “Standards of
Disclosure for Mineral Projects”.
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 2018 annual analysis, estimated 2019, 2020 and long-term prices of gold and silver of $1,300 per
ounce and $18.00 per ounce, respectively, were used. For the 2017 annual analysis, estimated 2018, 2019 and long-term
prices of gold and silver of $1,300 per ounce and $19.00 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 2018 annual analysis, estimated short-term and long-
term oil prices of $65 and $55 per barrel respectively, were used. For the 2017 annual analysis, an estimated short-term and
long-term oil price of $55 per barrel was used.
The discount rate applied to present value the net future cash flows is based on a real weighted average cost of capital by
country to account for geopolitical risk. For the 2018 annual analysis, real discount rates of between 4.86% and 7.12% were
used for the CGUs tested. For the CGUs tested in the 2017 annual analysis, real discount rates of between 4.35% and 7.10%
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, 2018 in respect of the fair value determinations at that date, which
17
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FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
ranged from 0.9 to 1.4. NAV multiples observed at December 31, 2017 were in the range of 0.8 to 1.6. 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.
xiii. Financial instruments and hedging activity
(a) Financial instrument classification and measurement
Financial assets are classified according to their contractual cash flow characteristics and the business models under which
they are held. On initial recognition, a financial asset is classified as: amortized cost, fair value through profit and loss (“FVPL”)
or FVOCI.
A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as FVPL:
it is held with the objective of collecting contractual cash flows; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest
on the principal amount outstanding.
On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to measure
the investment at FVOCI whereby changes in the investment’s fair value (realized and unrealized) will be recognized
permanently in OCI with no reclassification to profit or loss. The election is made on an investment-by-investment basis.
All financial assets not classified as amortized cost or FVOCI are classified as and measured at FVPL. This includes all derivative
assets. On initial recognition, a financial asset that otherwise meets the requirements to be measured at amortized cost or
FVOCI may be irrevocably designated as FVPL if doing so eliminates or significantly reduces an accounting mismatch that
would otherwise arise.
Financial instruments are measured on initial recognition at fair value, plus, in the case of financial instruments other than
those classified as FVPL, directly attributable transaction costs. Measurement of financial assets in subsequent periods
depends on whether the financial asset has been classified as amortized cost, FVPL or FVOCI. Measurement of financial
liabilities subsequent to initial recognition depends on whether they are classified as amortized cost or FVPL. Financial assets
and financial liabilities classified as amortized cost are measured subsequent to initial recognition using the effective interest
method.
Loss allowances for ‘expected credit losses’ are recognized on financial assets measured at amortized cost, contract assets
and investments in debt instruments measured at FVOCI, but not to equity investments. A loss event is not required to have
occurred before a credit loss is recognized.
The Company has classified and measured its financial instruments as described below:
Cash and cash equivalents, restricted cash and short-term investments are classified as and measured at amortized
cost.
Trade receivables and certain other assets are classified as and measured at amortized cost.
Long-term investments in equity securities, where the Company cannot exert significant influence, are classified
as and measured at FVOCI.
Accounts payable and accrued liabilities and long-term debt are classified as and measured at amortized cost.
Derivative assets and liabilities including derivative financial instruments that do not qualify as hedges, or are not
designated as hedges, and are classified as and measured at FVPL.
(b) Hedges
The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk
management objectives and strategies for undertaking hedge transactions. This process includes linking all derivatives to
specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. Hedge
effectiveness is assessed based on the degree to which the cash flows from the derivative contracts are expected to offset
the cash flows of the underlying position or transaction being hedged. At the time of inception of the hedge and on an
ongoing basis, the Company assesses whether the derivatives that are used in hedging transactions are highly effective in
offsetting changes in fair values or cash flows of hedged items.
k.4.242 KinrossAR2018_FINMar14B.pdf - p18 (March 15, 2019 23:01:51)
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18
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Derivative contracts that have been designated as cash flow hedges have been entered into in order to effectively establish
prices for future production of metals, to hedge exposure to exchange rate fluctuations of foreign currency denominated
settlement of capital and operating expenditures, to establish prices for future purchases of energy or to hedge exposure to
interest rate fluctuations. Unrealized gains or losses arising from changes in the fair value of these contracts are recorded in
OCI, net of tax, and are included in earnings when the underlying hedged transaction, identified at the contract inception, is
completed, unless such hedged transaction results in the recognition of a non-financial asset. Any ineffective portion of a
hedge relationship is recognized immediately in earnings. The Company matches the realized gains or losses on contracts
designated as cash flow hedges with the hedged expenditures at the maturity of the contracts.
When derivative contracts designated as cash flow hedges have been terminated or cease to be effective prior to maturity
and no longer qualify for hedge accounting, any gains or losses recorded in OCI up until the time the contracts do not qualify
for hedge accounting, remain in OCI. These amounts recorded in OCI are recognized in earnings in the period in which the
underlying hedged transaction is completed. Gains or losses arising subsequent to the derivative contracts not qualifying for
hedge accounting are recognized in earnings in the period in which they occur.
For hedges that do not qualify for hedge accounting, gains or losses are recognized in earnings in the current period.
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 recorded at fair value based on the market value of the shares at the grant date. The Company’s compensation
expense is recognized over the vesting period based on the number of units estimated to vest. Management estimates
the number of awards likely to vest on grant and at each reporting date up to the vesting date. The estimated forfeiture
rate is adjusted for actual forfeitures in each reporting period. On vesting of 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 recorded at fair value as follows: The portion of the RPSUs related to market conditions are
recorded at fair value based on the application of a Monte Carlo pricing model at the date of grant and the portion
related to non-market conditions is fair valued based on the market value of the shares at the date of grant. The
Company’s compensation expense is recognized over the vesting period based on the number of units estimated to
vest. Management estimates the number of awards likely to vest on grant and at each reporting date up to the vesting
date. The estimated forfeiture rate is adjusted for actual forfeitures in each reporting period. On vesting of RPSUs,
shares are generally issued from treasury.
Deferred Share Unit Plan: Deferred share units (“DSUs”) are cash-settled and accounted for as a liability at fair value which
is based on the market value of the shares at the grant date. The fair value of the liability is re-measured each period based
on the current market value of the underlying stock at period end and any changes in the liability are recorded as
compensation expense each period.
Employee Share Purchase Plan: The Company’s contribution to the employee Share Purchase Plan (“SPP”) is recorded as
compensation expense on a payroll cycle basis as the employer’s obligation to contribute is incurred. The cost of the common
shares purchased under the SPP are either based on the weighted average closing price of the last twenty trading sessions
prior to the end of the period for shares issued from treasury, or are based on the price paid for common shares purchased
in the open market.
19
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FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
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 control over the metal is transferred to the customer. Transfer of control generally occurs when
the refined gold, silver or doré has been accepted by the customer. Once the customer has accepted the metals, the
significant risks and rewards of ownership have typically been transferred and the customer is able to direct the use of and
obtain substantially all of the remaining benefits from the metals. On transfer of control, revenue and related costs can be
measured reliably and it is probable that the economic benefits associated with the transaction will flow to the Company as
payment is received on the date of or within a few days of transfer of control.
The Company manages and reviews its operations by geographical location and managerial structure. For detailed
information about reportable segments and disaggregated revenue, see Note 18. All segments principally generate revenue
from metal sales.
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 activities where the liability is more likely than not to exist
and a reasonable estimate can be made of the obligation. The estimated present value of the obligation is reassessed on an
annual basis or when new material information becomes available. Increases or decreases to the obligation usually arise due
to changes in legal or regulatory requirements, the extent of environmental remediation required, methods of reclamation,
cost estimates, or discount rates. Changes to the provision for reclamation and remediation obligations related to operating
mines, which are not the result of current production of inventory, are recorded with an offsetting change to the related
asset. For properties where mining activities have ceased or are in reclamation, changes are charged directly to earnings.
The present value is determined based on current market assessments of the time value of money using discount rates
specific to the country in which the asset or reclamation site is located and is determined as the risk-free rate of borrowing
approximated by the yield on sovereign debt for that country, with a maturity approximating the end of mine life. The
periodic unwinding of the discounted obligation 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.
k.4.242 KinrossAR2018_FINMar14B.pdf - p20 (March 15, 2019 23:01:52)
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20
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
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.
CHANGES IN SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING
PRONOUNCEMENTS
a) Changes in Significant Accounting Policies
The Company adopted the following new standards and interpretations issued by the IASB or International Financial
Reporting Interpretation Committee (“IFRIC”) as of January 1, 2018.
IFRS 15 Revenue from Contracts with Customers
On January 1, 2018, the Company adopted IFRS 15 using the modified retrospective approach. 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”. Under the modified retrospective approach, the Company recognizes transition adjustments,
if any, in retained earnings on the date of initial application (January 1, 2018), without restating the financial statements on
a retrospective basis. Accordingly, the comparative information for prior periods have not been restated and the information
presented for 2017 reflects the requirements of IAS 18, IAS 11, and the related interpretations.
IFRS 15 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. Under IFRS 15, revenue is recognized when a customer obtains control of the
goods or services. Determining the timing of the transfer of control requires judgment.
The Company’s 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. The
Company reviewed its contracts with customers using the five-step analysis required under IFRS 15. Transfer of control
generally occurs when the refined gold and silver and doré has been accepted by the customer. Once the customer has
accepted the metals, the significant risks and rewards of ownership have been transferred and the customer is able to direct
the use of and obtain substantially all of the remaining benefits from the metals. On transfer of control, revenue and related
costs can be measured reliably and it is probable that the economic benefits associated with the transaction will flow to the
Company as payment is received on the date of or within a few days of transfer of control.
The Company determined there were no material differences to the amount and timing of revenue recognized under IFRS
15 compared to IAS 18 as the transfer of control under IFRS 15 occurs at the same time the revenue recognition criteria
under IAS 18 are satisfied. No adjustment to the Company’s financial statements was therefore recognized on transition to
IFRS 15.
The Company manages and reviews its operations by geographical location and managerial structure. For detailed
information about reportable segments and disaggregated revenue, see Note 18. All segments principally generate revenue
from metal sales.
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FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
IFRS 9 Financial Instruments
On January 1, 2018, the Company adopted IFRS 9, which replaced IAS 39 “Financial Instruments: Recognition and
Measurement” (“IAS 39”), on a retrospective basis using certain available transitional provisions. In accordance with the
transitional provisions, the comparative information for prior periods have not been restated and the information presented
for 2017 reflects the requirements of IAS 39 rather than IFRS 9.
The following table summarizes the impact of transition to IFRS 9:
Accumulated other comprehensive income (loss)
$
21.1
$
(56.3)
$
(35.2)
Accumulated deficit
$
(10,580.7)
$
56.3
$
(10,524.4)
As at December 31, 2017
IFRS 9 Adjustments
As at January 1, 2018
The nature and effect of the changes to IFRS 9 are as follows:
i)
Financial instrument classification and measurement
IFRS 9 largely retains the existing requirements in IAS 39 for the classification and measurement of financial liabilities.
The adoption of IFRS 9 did not have a significant effect on the Company’s accounting policies related to financial
liabilities and derivative financial instruments (for derivatives that are used as hedging instruments see (iii) below).
IFRS 9 provides a revised model for the classification and measurement of financial assets that eliminates the previous
categories of financial assets under IAS 39 of “available-for-sale”, “held-to-maturity”, or “loans and receivables.” Under
IFRS 9, on initial recognition, a financial asset is classified as and measured at: amortized cost, FVPL, or FVOCI. The
revised model for classifying financial assets results in classification according to their contractual cash flow
characteristics and the business models under which they are held.
A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as
FVPL:
it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
On initial recognition of an equity investment that is not held for trading, an irrevocable election is available to measure
the investment at FVOCI whereby changes in the investment’s fair value (realized and unrealized) will be recognized
permanently in OCI with no reclassification to profit or loss. The election is available on an investment-by-investment
basis.
All financial assets not classified as amortized cost or FVOCI are classified as and measured at FVPL. This includes all
derivative assets. On initial recognition, a financial asset that otherwise meets the requirements to be measured at
amortized cost or FVOCI may be irrevocably designated as FVPL if doing so eliminates or significantly reduces an
accounting mismatch that would otherwise arise.
Under IFRS 9, the Company has classified and measured its financial assets as described below:
Cash and cash equivalents, restricted cash and short-term investments are classified as and measured at
amortized cost. Previously under IAS 39, these assets were classified as FVPL.
Trade receivables and certain other assets are classified as and measured at amortized cost. Previously under
IAS 39, these assets were classified as loans and receivables and measured at amortized cost.
Long-term investments in equity securities, where the Company cannot exert significant influence, are
designated as financial assets at FVOCI and are measured at fair value. Previously under IAS 39, the
investments were classified as available-for-sale and measured at FVOCI. On transition to IFRS 9, the Company
made the irrevocable election available under the standard to designate its long-term investments as FVOCI.
As a result, on initial application of IFRS 9, an adjustment to opening accumulated deficit of $56.3 million was
recognized with a corresponding adjustment to accumulated other comprehensive income (loss) (“AOCI”).
k.4.242 KinrossAR2018_FINMar14B.pdf - p22 (March 15, 2019 23:01:54)
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22
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Accounts payable and accrued liabilities and long-term debt are classified as and measured at amortized cost.
Derivative assets and liabilities include derivative financial instruments that do not qualify as hedges, or are
not designated as hedges, and are classified as FVPL.
The adoption of IFRS 9 did not result in a change in the carrying values of any of the Company’s financial instruments
on the transition date.
ii)
Impairment of financial assets
IFRS 9 replaced the ‘incurred loss’ model in IAS 39 with an ‘expected credit loss’ (“ECL”) model. The new impairment
model applies to financial assets classified as and measured at amortized cost, contract assets and investments in debt
instruments measured at FVOCI, but not to investments in equity instruments. Under IFRS 9, credit losses are
recognized earlier than under IAS 39. The adoption of the ECL model under IFRS 9 did not have an impact on the carrying
values of any of the Company’s financial assets on the transition date.
iii) Hedges
IFRS 9 introduces a reformed approach to hedge accounting. The new general hedge accounting model in IFRS 9
requires an entity to ensure that hedge accounting relationships are aligned with its risk management objectives and
strategy to apply a more qualitative and forward-looking approach to assessing hedge effectiveness. The Company has
elected to adopt the new model.
All hedging relationships designated under IAS 39 at December 31, 2017 met the criteria for hedge accounting under
IFRS 9 at January 1, 2018 and accordingly, were considered continuing hedging relationships at the date of transition.
The Company’s derivative contracts that have been designated as cash flow hedges have been entered into 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.
Under IAS 39, for all cash flow hedges, the amounts accumulated in AOCI were reclassified to earnings in the same
period the underlying hedged transaction affected earnings. Under IFRS 9, when a hedged forecast transaction results
in the recognition of a non-financial asset, the amounts accumulated in AOCI are reclassified to the carrying amount of
the non-financial asset. The adoption of IFRS 9 did not have a material impact on the Company’s financial statements
and therefore, an adjustment was not recognized on transition.
IFRIC 22 Foreign Currency Transactions and Advance Consideration
On January 1, 2018, the Company adopted IFRIC 22, which clarifies the date that 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 the advance consideration.
The adoption of IFRIC 22 did not have a material impact on the Company’s financial statements and therefore an adjustment
was not recognized on transition.
b) Recent Accounting Pronouncements
Leases
In January 2016, the IASB issued IFRS 16 “Leases” (“IFRS 16”), which replaces IAS 17 “Leases”, and is effective for annual
periods beginning on or after January 1, 2019, and permits early adoption.
IFRS 16 requires a lessee to recognize assets and liabilities for most leases on its balance sheet, as well as corresponding
depreciation and interest expense. The Company will adopt IFRS 16 for the annual period beginning January 1, 2019 using
the modified retrospective approach. Under the modified retrospective approach, the Company recognizes transition
adjustments, if any, in retained earnings on the date of initial application (January 1, 2019), without restating the financial
statements on a retrospective basis.
23
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FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
The Company has assessed the estimated impact of the initial application of IFRS 16 will have on the consolidated financial
statements. The Company will recognize additional assets and lease liabilities on its balance sheet on the date of initial
application of IFRS 16, and a corresponding increase in depreciation and interest expense in future periods. Cash flow from
operating activities will also increase under IFRS 16, as lease payments for most leases will be recorded as cash flows from
financing activities in the consolidated statements of cash flows.
The Company will elect not to recognize assets and lease liabilities for short-term leases, that have a lease term of 12 months
or less, and leases of low-value assets. Lease payments associated with these leases will be recognized as an expense over
the lease term. The Company will elect to apply the practical expedient to account for each lease component and any non-
lease components as a single lease component.
Based on information currently available, the Company estimates that it will recognize additional lease liabilities of between
$35 and $55 million as at January 1, 2019 for qualifying leases of buildings, land, vehicles and equipment. The nature of
expenses related to those leases will change because the Company will recognize a depreciation charge for assets and
interest expense on lease liabilities. Previously, the Company recognized an operating lease expense over the term of the
lease.
5.
SIGNIFICANT JUDGMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the Company’s financial statements in conformity with IFRS requires management to make judgments,
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Estimates and assumptions are continually evaluated and are based on management’s experience and
other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual
results could differ from these estimates.
i.
Significant Judgments in Applying Accounting Policies
The areas which require management to make significant judgments in applying the Company’s accounting policies in
determining carrying values include, but are not limited to:
(a) Mineral Reserves and Mineral Resources
The information relating to the geological data on the size, depth and shape of the ore body requires complex geological
judgments to interpret the data. Changes in the proven and probable mineral reserves or measured and indicated and
inferred mineral resources estimates may impact the carrying value of property, plant and equipment, goodwill, reclamation
and remediation obligations, recognition of deferred tax amounts and depreciation, depletion and amortization.
(b) Depreciation, depletion and amortization
Significant judgment is involved in the determination of useful lives and residual values for the computation of depreciation,
depletion and amortization and no assurance can be given that actual useful lives and residual values will not differ
significantly from current assumptions.
(c) Taxes
The Company is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the
provision for income taxes, due to the complexity of legislation. There are many transactions and calculations for which the
ultimate tax determination is uncertain during the ordinary course of business.
k.4.242 KinrossAR2018_FINMar14B.pdf - p24 (March 15, 2019 23:01:55)
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24
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
ii.
Significant Accounting Estimates and Assumptions
The areas which require management to make significant estimates and assumptions in determining carrying values include,
but are not limited to:
(a) Mineral Reserves and Mineral Resources
Proven and probable mineral reserves are the economically mineable parts of the Company’s measured and indicated
mineral resources demonstrated by at least a preliminary feasibility study. The Company estimates its proven and probable
mineral reserves and measured and indicated and inferred mineral resources based on information compiled by
appropriately qualified persons. The estimation of future cash flows related to proven and probable mineral reserves is
based upon factors such as estimates of commodity prices, foreign exchange rates, future capital requirements and
production costs along with geological assumptions and judgments made in estimating the size and grade of the ore body.
Changes in the proven and probable mineral reserves or measured and indicated and inferred mineral resources estimates
may impact the carrying value of property, plant and equipment, goodwill, reclamation and remediation obligations,
recognition of deferred tax amounts and depreciation, depletion and amortization.
(b) Purchase Price Allocation
Applying the acquisition method to business combinations requires each identifiable asset and liability to be measured at its
acquisition-date fair value. The excess, if any, of the fair value of consideration over the fair value of the net identifiable
assets acquired is recognized as goodwill. The determination of the acquisition-date fair values often requires management
to make assumptions and estimates about future events. The assumptions and estimates relating to determining the fair
value of property, plant and equipment acquired generally require a high degree of judgment, and include estimates of
mineral reserves acquired, future metal prices and discount rates. Changes in any of the assumptions or estimates used in
determining the fair value of acquired assets and liabilities could affect the amounts assigned to assets, liabilities and
goodwill in the purchase price allocation.
(c) Depreciation, depletion and amortization
Plants and other facilities used directly in mining activities are depreciated using the UOP method over a period not to exceed
the estimated life of the ore body based on recoverable ounces to be mined from proven and probable reserves. Mobile and
other equipment is depreciated, net of residual value, on a straight-line basis, over the useful life of the equipment but does
not exceed the related estimated life of the mine based on proven and probable reserves.
The calculation of the UOP rate, and therefore the annual depreciation, depletion and amortization expense, could be
materially affected by changes in the underlying estimates. Changes in estimates can be the result of actual future
production differing from current forecasts of future production, expansion of mineral reserves through exploration
activities, differences between estimated and actual costs of mining and differences in gold price used in the estimation of
mineral reserves.
(d) Valuation of goodwill and long-lived assets
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 or reversal 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. For property, plant and
equipment and other long-lived assets, a reversal of previously recognized impairment losses is recognized in the
consolidated statement of operations if there has been a change in the estimates used to determine the asset’s recoverable
amount since the last impairment loss was recognized. The assessment of fair values, including those of the CGUs for
purposes of testing goodwill and long-lived assets, require the use of estimates and assumptions for recoverable production,
future capital requirements and operating performance, as contained in the Company’s LOM plans, as well as future and
long-term commodity prices, discount rates, NAV multiples, and foreign exchange rates. Changes in any of the assumptions
or estimates used in determining the fair value of goodwill or other long-lived assets could impact the impairment analysis.
(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,
25
k.4.242 KinrossAR2018_FINMar14B.pdf - p25 (March 15, 2019 23:01:55)
DT
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
in-process and finished metal inventories resulting from NRV impairments are reported as a component of current period
costs. The primary factors that influence the need to record write-downs include prevailing and long-term metal prices and
prevailing costs for production inputs such as labour, fuel and energy, materials and supplies, as well as realized ore grades
and actual production levels.
Costs are attributed to the leach pads based on current mining costs, including applicable depreciation, depletion and
amortization relating to mining operations incurred up to the point of placing the ore on the pad. Costs are removed from
the leach pad based on the average cost per recoverable ounce of gold on the leach pad as the gold is recovered. Estimates
of recoverable gold on the leach pads are calculated from the quantities of ore placed on the pads, the grade of ore placed
on the leach pads and an estimated percentage of recovery. Timing and ultimate actual recovery of gold contained on leach
pads can vary significantly from the estimates. The quantities of recoverable gold placed on the leach pads are reconciled to
the quantities of gold actually recovered (metallurgical balancing), by comparing the grades of ore placed on the leach pads
to actual ounces recovered. The nature of the leaching process inherently limits the ability to precisely monitor inventory
levels. As a result, the metallurgical balancing process is constantly monitored and the engineering estimates are refined
based on actual results over time. The ultimate actual recovery of gold from a pad will not be known until the leaching
process is completed.
The allocation of costs to ore in stockpiles, ore on leach pads and in-process inventories and the determination of NRV
involve the use of estimates. There is a high degree of judgment in estimating future costs, future production levels,
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.
k.4.242 KinrossAR2018_FINMar14B.pdf - p26 (March 15, 2019 23:01:56)
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26
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
6.
i.
ACQUISITIONS
Acquisition of La Coipa Phase 7 mining concessions
On February 2, 2018, MDO, a subsidiary of the Company, agreed to purchase the remaining 50% interest in the Phase 7
concessions surrounding Kinross’ La Coipa mine that it did not already own from Salmones de Chile Alimentos S.A. On March
19, 2018, the Company completed the acquisition. The purchase price of $65.1 million was comprised of $65.0 million in
cash, of which $35.0 million was paid on closing and the balance of $30.0 million was paid on January 30, 2019, and
transaction costs of $0.1 million. The acquisition was accounted for as an asset acquisition, and the purchase price of $65.1
million was allocated to development and operating properties within mineral interests in property, plant and equipment.
ii.
Acquisition of power plants in Brazil
On February 14, 2018, KBM, a subsidiary of the Company, signed an agreement to acquire two hydroelectric power plants
in the State of Goias, Brazil from a subsidiary of Gerdau SA (“Gerdau”) for $253.7 million (R$835.0 million). On July 31, 2018,
the Company completed the transaction. The Company funded the transaction with cash. Transaction costs associated with
the acquisition totaling $3.4 million were expensed and included within other operating expense.
The acquisition, which has been accounted for as a business combination as at July 31, 2018, is expected to secure a long-
term supply of power and lower production costs over the life of the mine at Paracatu.
The purchase price of $253.7 million has been allocated to property, plant and equipment on a preliminary basis based on
initial estimates of fair value.
Final valuations of the identifiable net assets are not yet complete due to the timing of the acquisition and the inherent
complexity associated with the valuations. The allocation of the purchase price is preliminary and therefore subject to
adjustment over the period to the completion of the valuation process and analysis of resulting tax effects.
The pro forma consolidated net loss of the Company for the year ended December 31, 2018 would have been $9.7 million
had the acquisition of the power plants occurred at January 1, 2018. Certain adjustments have been reflected in the pro
forma consolidated net loss to illustrate the effects of purchase accounting where the impact could be reasonably estimated.
The adjustments are as follows:
a) To adjust production cost of sales based on the Company’s usage of the acquired power plant assets as a source
of power;
b) To increase depreciation expense to reflect depreciation on the power plant assets acquired; and
c)
To record the tax effect of the above listed adjustments.
The pro forma consolidated net loss is not intended to be indicative of the result that would have actually occurred, or the
result expected in future periods, had the events reflected herein occurred on the dates indicated. Any integration costs that
have or may continue to be incurred have been excluded from the pro forma consolidated net loss, including transaction
costs.
iii.
Acquisition of remaining 50% interest in Bald Mountain exploration joint venture
On completion of the acquisition of the Bald Mountain mine in January 2016, KG Mining (Bald Mountain) Inc. (“KGBM”), a
subsidiary of the Company, entered into a 50/50 exploration joint venture with Barrick Gold Corporation (“Barrick”). On
October 2, 2018, KGBM signed and completed a transaction with Barrick to acquire the remaining 50% interest in the
exploration joint venture that it did not already own for consideration including $15.5 million in cash and a 1.25% net smelter
royalty. Transaction costs associated with the acquisition were $0.1 million.
27
k.4.242 KinrossAR2018_FINMar14B.pdf - p27 (March 15, 2019 23:01:57)
DT
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
iv.
Disposition of Interest in Cerro Casale
On March 28, 2017, the Company announced that it had entered into an agreement with Goldcorp Inc. (“Goldcorp”) to sell
its 25% interest in the Cerro Casale project and its 100% interest in the Quebrada Seca exploration project in Chile.
On June 9, 2017, the Company completed the sale for gross cash proceeds of $260.0 million (which includes $20.0 million
for Quebrada Seca), a contingent payment of $40.0 million following a construction decision for Cerro Casale, the assumption
by Goldcorp of a $20.0 million contingent payment obligation payable to Barrick Gold Corporation when production at Cerro
Casale commences, and a 1.25% royalty on 25% of gross revenues from all metals sold at the properties (with the Company
foregoing the first $10.0 million). Additionally on closing, the Company entered into a water supply agreement with the
Cerro Casale joint venture to have certain rights to access, up to a fixed amount, water not required by the Cerro Casale joint
venture.
In connection with the sale, the Company recognized, in other income (expense), an impairment reversal of $97.0 million
related to its investment in Cerro Casale, and a gain on disposition of $12.7 million. See Note 7xi.
v.
Disposition of Interest in White Gold
On May 18, 2017, the Company entered into an agreement with White Gold Corp. to sell its 100% interest in the White Gold
exploration project in the Yukon Territory.
On June 14, 2017, the Company completed the sale for gross cash proceeds of $7.6 million (CDN$10.0 million), 17.5 million
common shares of White Gold Corp. representing 19.9% of the issued and outstanding shares of White Gold Corp., and
deferred payments of $11.4 million (CDN$15.0 million), payable in three equal payments of $3.8 million (CDN$5.0 million)
upon completion of specific milestones. The Company recognized a loss on disposition of $1.7 million in other income
(expense) in connection with the sale. See Note 7xi.
The investment in White Gold Corp. was accounted for as an available-for-sale investment in 2017 as the Company
determined it does not have significant influence over White Gold Corp.
vi.
Disposition of interest in DeLamar
On September 18, 2017, the Company entered into an agreement with Integra Resources Corp. (“Integra”) to sell its 100%
interest in the DeLamar reclamation property.
On November 3, 2017, the Company completed the sale for cash consideration and a non-interest bearing promissory note,
payable 18 months after closing, totaling $5.6 million (CDN$7.2 million), common shares representing 9.9% of the issued
and outstanding shares of Integra, and a 2.5% net smelter return royalty that will be reduced to 1% when royalty payments
have accumulated to $7.8 million (CDN$10.0 million). In connection with the sale, the Company recognized a gain on
disposition of $44.2 million in other income (expense). See Note 7xi.
k.4.242 KinrossAR2018_FINMar14B.pdf - p28 (March 15, 2019 23:01:57)
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28
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
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,
2018
$
December 31,
2017
$
207.9
141.1
349.0
600.8
425.0
1,025.8
$
$
December 31,
2018
December 31,
2017
$
12.7
$
12.1
(a) Restricted cash relates to loan escrow judicial deposits and environmental indemnity deposits.
ii.
Accounts receivable and other assets:
December 31,
December 31,
2018
2017
Trade receivables
Prepaid expenses
VAT receivable
Deposits
Other
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)
$
$
3.6
21.3
48.4
8.5
19.6
101.4
4.5
19.8
36.2
11.1
19.7
91.3
$
$
December 31,
2018
December 31,
2017
$
299.9
$
242.6
375.0
113.5
50.5
540.7
1,379.6
358.5
122.3
91.5
519.3
1,334.2
$
(327.6)
1,052.0
$
(239.9)
1,094.3
(a) Ore in stockpiles relates to the Company’s operating mines. Low-grade material not scheduled for processing within the next 12 months
is included in other long-term assets on the consolidated balance sheets. See Note 7vii.
(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 2020, Bald Mountain in 2023, Round Mountain in 2025
and Fort Knox in 2027. Material not scheduled for processing within the next 12 months is included in other long-term assets on the
consolidated balance sheets. See Note 7vii.
29
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FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
iv.
Property, plant and equipment:
Cost
Balance at January 1, 2018
Additions
Acquisitions (b)
Capitalized interest
Disposals
Other
Balance at December 31, 2018
Accumulated depreciation, depletion,
amortization
Balance at January 1, 2018
Depreciation, depletion and amortization
Disposals
Other
Balance at December 31, 2018
Mineral Interests
Land, plant and
equipment
Development and
operating
properties (a)
Pre-development
properties
Total
$
8,374.7
629.4
$
8,311.5
457.1
$
15.5
-
$
16,701.7
1,086.5
274.8
23.8
(115.7)
(2.8)
9,184.2
65.1
17.7
(39.9)
5.1
8,816.6
-
-
(2.1)
-
13.4
339.9
41.5
(157.7)
2.3
18,014.2
$
(5,308.4)
(508.5)
106.5
8.3
(5,702.1)
$
(6,506.1)
(317.0)
39.9
(9.8)
(6,793.0)
-
$
-
-
-
-
$
(11,814.5)
(825.5)
146.4
(1.5)
(12,495.1)
Net book value
$
3,482.1
$
2,023.6
$
13.4
$
5,519.1
Amount included above as at December 31, 2018:
Assets under construction
Assets not being depreciated (c)
$
495.0
$
288.5
$
-
$
783.5
$
719.1
$
584.3
$
13.4
$
1,316.8
(a) At December 31, 2018, the significant development and operating properties include projects at Fort Knox, Round Mountain, Bald
Mountain, Paracatu, Kupol, Tasiast, Chirano and Lobo-Marte.
(b) During the year ended December 31, 2018, the Company completed the acquisitions of the remaining 50% interest in the La Coipa
Phase 7 mining concessions that it did not already own, two hydroelectric power plants in Brazil and the remaining 50% interest in the
Bald Mountain exploration joint venture. See Notes 6i, 6ii and 6iii.
(c) Assets not being depreciated relate to land, capitalized E&E costs, assets under construction, which relate to expansion projects, and
other assets that are in various stages of being readied for use.
k.4.242 KinrossAR2018_FINMar14B.pdf - p30 (March 15, 2019 23:01:58)
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30
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Cost
Balance at January 1, 2017
Additions
Capitalized interest
Disposals
Other
Balance at December 31, 2017
Mineral Interests
Land, plant and
equipment
Development and
operating
properties (a)
Pre-development
properties
Total
$
7,791.3
626.9
13.8
(44.5)
(12.8)
8,374.7
$
7,970.2
298.5
11.3
-
31.5
8,311.5
$
164.3
-
-
(133.2)
(15.6)
15.5
$
15,925.8
925.4
25.1
(177.7)
3.1
16,701.7
Accumulated depreciation, depletion, amortization
and impairment
Balance at January 1, 2017
Depreciation, depletion and amortization
Impairment, net of reversals (b)
Disposals
Other
Balance at December 31, 2017
$
(5,076.4)
(529.3)
260.9
38.8
(2.4)
(5,308.4)
$
(5,852.4)
(371.5)
(282.4)
-
0.2
(6,506.1)
$
(79.4)
-
-
79.2
0.2
-
$
(11,008.2)
(900.8)
(21.5)
118.0
(2.0)
(11,814.5)
Net book value
$
3,066.3
$
1,805.4
$
15.5
$
4,887.2
Amount included above as at December 31, 2017:
Assets under construction
Assets not being depreciated (c)
$
$
534.2
723.3
$
$
116.4
342.8
$
-
$
15.5
$
$
650.6
1,081.6
(a) At December 31, 2017, the significant development and operating properties include Fort Knox, Round Mountain, Bald Mountain,
Paracatu, Kupol, Tasiast, Chirano and Lobo-Marte.
(b) At December 31, 2017, an impairment charge was recorded at Paracatu and impairment reversals were recorded at Fort Knox and
Tasiast, entirely related to property, plant and equipment. See Note 8.
(c) Assets not being depreciated relate to land, capitalized E&E costs, assets under construction, which relate to expansion projects, and
other assets that are in various stages of being readied for use.
Capitalized interest primarily relates to qualifying capital expenditures at Tasiast, Round Mountain, Bald Mountain, Fort Knox
and Paracatu and had a weighted average borrowing rate of 5.62% and 5.54% during the years ended December 31, 2018
and 2017, respectively.
At December 31, 2018, $230.7 million of E&E assets were included in mineral interests (December 31, 2017 - $164.4 million).
During the year ended December 31, 2018, the Company acquired $65.1 million of E&E assets, disposed of $2.0 million of
E&E assets and transferred $nil of E&E assets to capitalized development (year ended December 31, 2017 - $nil, $54.1 million
and $0.2 million, respectively). During the year ended December 31, 2018, the Company capitalized $3.1 million and
expensed $11.5 million of E&E costs, respectively (year ended December 31, 2017 - $1.9 million and $6.7 million,
respectively). Expensed E&E costs are included as operating cash flows in the consolidated statements of cash flows.
31
k.4.242 KinrossAR2018_FINMar14B.pdf - p31 (March 15, 2019 23:01:59)
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FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
v.
Goodwill:
As at December 31, 2018 and December 31, 2017, goodwill of $162.7 million is comprised of goodwill for Kupol of $158.8
million and for other operations of $3.9 million.
vi.
Long-term investments:
Unrealized gains and losses on equity investments classified as financial assets at FVOCI were as follows:
December 31, 2018
December 31, 2017
Investments in an unrealized gain position
Investments in an unrealized loss position
Fair value
76.1
79.8
155.9
$
$
$
Gains (losses) in
AOCI (a)
5.1
(80.3)
(75.2)
$
Fair value
$ 125.1
62.9
$
188.0
Gains (losses) in
AOCI (a)
$ 26.6
(19.7)
$
6.9
(a)
See the consolidated statements of comprehensive income (loss) and Note 7ix. for details of net gains or losses recognized in OCI
during the years ended December 31, 2018 and 2017.
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 (b)
Advances for the purchase of capital equipment
Other
December 31,
2018
December 31,
2017
$
327.6
9.7
$
239.9
8.9
182.5
3.0
41.3
564.1
$
272.8
6.4
46.0
574.0
$
(a)
Long-term portion of ore in stockpiles and ore on leach pads represents low-grade material not scheduled for processing within the
next twelve months. As at December 31, 2018, 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, Round Mountain, and Tasiast mines.
(b) As at December 31, 2018, Long-term receivables includes an estimated benefit of $66.1 million (December 31, 2017 - $124.4 million)
related to the enactment of U.S Tax Reform legislation in December 2017. Of the original estimate of $124.4 million from 2017, $58.3
million has been reclassified to Current income tax recoverable. See Note 17 for additional information regarding U.S. Tax Reform
impacts.
viii.
Accounts payable and accrued liabilities:
December 31,
2018
December 31,
2017
Trade payables
Accrued liabilities
Employee related accrued liabilities
$
$
89.1
260.6
116.2
465.9
77.4
274.2
131.0
482.6
$
$
k.4.242 KinrossAR2018_FINMar14B.pdf - p32 (March 15, 2019 23:02:00)
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32
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
ix.
Accumulated other comprehensive income (loss):
Long-term
Investments
Derivative
Contracts
Balance at December 31, 2016
Other comprehensive loss before tax
Tax
Balance at December 31, 2017
Adjustment on initial application of IFRS 9 (a)
Other comprehensive loss before tax
Tax
Losses on cash flow hedges transferred to cost of non-
financial assets (b)
$
$
$
23.6
(16.4)
(0.3)
6.9
15.5
(2.4)
1.1
14.2
$
$
$
Total
39.1
(18.8)
0.8
21.1
(56.3)
(26.1)
0.3
-
-
(77.7)
20.7
19.5
(56.3)
(103.8)
21.0
19.5
Balance at December 31, 2018
$
(75.2)
$
(23.3)
$
(98.5)
(a) See Note 4(a) for details of the Company’s initial application of IFRS 9.
(b) Net of tax recovery of $10.0 million.
Consolidated Statements of Operations
x.
Other operating expense:
Other operating expense
Years ended December 31,
2017
2018
$
$
$
$
137.0
137.0
129.6
129.6
Other operating expense of $137.0 million for the year ended December 31, 2018 includes $37.9 million of costs as a result
of production issues associated with the pit wall slide at Fort Knox, and environmental and other operating expenses for
closed mining sites of $28.7 million.
Other operating expense of $129.6 million for the year ended December 31, 2017 includes the write-off of value-added tax
(“VAT”) receivables and settlement of VAT disputes, costs related to the temporary curtailment of mining activities at
Paracatu, costs related to the Fort Knox Gilmore Feasibility study, reclamation expenses related to properties where mining
activities have ceased or are in reclamation, and care and maintenance and other costs.
xi.
Other income (expense) – net:
Gain on disposition of associate and other interests - net (a)
(Loss) gain on disposition of other assets - net
Reversal of impairment charges (b)
Foreign exchange losses
Net non-hedge derivative (losses) gains
Other - net (c)
Years ended December 31,
2018
2017
$
$
2.1
(2.9)
-
(4.3)
(1.2)
9.5
3.2
55.2
1.9
97.0
(4.9)
0.3
38.6
188.1
$
$
(a) During the year ended December 31, 2017, the Company recognized a gain on disposition of its interests in Cerro Casale and Quebrada
Seca of $12.7 million, a loss on disposition of its interest in White Gold of $1.7 million, and a gain on disposition of its interest in DeLamar
of $44.2 million. See Note 6.
(b) During the year ended December 31, 2017, the Company recognized a reversal of impairment charges related to the sale of its interest
in Cerro Casale. See Note 6iv.
(c) During the year ended December 31, 2017, the Company recognized $17.5 million of insurance recoveries, and $9.9 million related to
a settlement of a royalty agreement.
33
k.4.242 KinrossAR2018_FINMar14B.pdf - p33 (March 15, 2019 23:02:00)
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FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
xii.
Finance expense:
Accretion on reclamation and remediation obligations
Interest expense, including accretion on debt (a)
Years ended December 31,
2017
2018
$
(29.1)
$
(31.3)
$
(72.1)
(101.2)
$
(86.5)
(117.8)
(a) During the years ended December 31, 2018 and 2017, $41.5 million and $25.1 million, respectively, of interest was capitalized to
property, plant and equipment. See Note 7iv.
Total interest paid, including interest capitalized, during the year ended December 31, 2018 was $96.1 million (year ended
December 31, 2017 - $80.9 million).
xiii.
Employee benefits expenses:
The following employee benefits expenses are included in production cost of sales, general and administrative, and
exploration and business development expenses:
Years ended December 31,
2018
2017
Salaries, short-term incentives, and other benefits
Share-based payments
Other
8.
IMPAIRMENT, NET OF REVERSALS
Property, plant and equipment (i)
Property, plant and equipment
$
$
668.6
21.3
9.6
699.5
678.5
25.9
11.2
715.6
$
$
Years ended December 31,
2017
2018
$
-
$
-
$
$
21.5
21.5
At December 31, 2017, upon completion of the annual assessment of the carrying values of its CGUs, the Company recorded
a net impairment charge of $21.5 million. The impairment charge was entirely related to property, plant and equipment and
included an impairment charge of $253.0 million at Paracatu, partially offset by impairment reversals at Tasiast and Fort
Knox of $142.9 million and $88.6 million, respectively. The impairment reversals at Tasiast and Fort Knox were mainly due
to an increase in the Company’s short-term and long-term gold price estimates, as well as Tasiast Phase Two and additions
to Fort Knox’s mineral reserve estimates. For Tasiast, the reversal represented a partial reversal of the total impairment
charges previously recorded. For Fort Knox, the reversal represented a full reversal of the remaining impairment charge
recorded in 2015. The impairment charge at Paracatu was mainly a result of changes in the fiscal regime in Brazil that were
considered in the cash flow analysis used to assess its recoverable amount. The tax impact on the impairment reversal at
Paracatu was a recovery of $86.0 million. The tax impact on the impairment reversal at Fort Knox was an expense of $2.4
million. There was no tax impact on the impairment reversal at Tasiast. The net tax recovery of $83.6 million was recorded
within income tax expense. After giving effect to the impairment charge and impairment reversals, the carrying values of
Paracatu, Tasiast, and Fort Knox were $1,275.6 million, $1,417.5 million, and $420.2 million, respectively, as at December
31, 2017.
k.4.242 KinrossAR2018_FINMar14B.pdf - p34 (March 15, 2019 23:02:01)
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34
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Key assumptions and sensitivity
The significant estimates and assumptions used in the Company’s annual impairment assessments are disclosed in Note 3
and Note 5 to the financial statements. The Company performed a sensitivity analysis on all key assumptions and determined
that no reasonably possible change in any of the key assumptions would cause the carrying value of any CGU carrying
goodwill to exceed its recoverable amount.
9.
INVESTMENTS IN JOINT VENTURES AND ASSOCIATE
The investments in joint ventures and associate are accounted for under the equity method and had the following carrying
values:
Puren
Bald Mountain Exploration Joint Venture (a)
December 31,
2018
December 31,
2017
18.3
-
18.3
$
18.2
5.5
23.7
$
(a) On October 2, 2018, the Company acquired the remaining 50% interest in the Bald Mountain exploration joint venture it did not already
own. See Note 6iii.
There are no publicly quoted market prices for Puren.
The equity in losses of joint ventures and associate is as follows:
Puren (a)
Bald Mountain Exploration Joint Venture (a), (b)
Cerro Casale (a), (c)
Years ended December 31,
2018
2017
0.1
(0.4)
(0.1)
(0.7)
$
-
(0.3)
$
(0.5)
(1.3)
(a) Represents Kinross’ share of the net earnings (loss) and other comprehensive income (loss).
(b) On October 2, 2018, the Company acquired the remaining 50% interest in the exploration joint venture it did not already own. See Note
6iii.
(c) On June 9, 2017, the Company completed the sale of its interest in Cerro Casale project in Chile to Goldcorp. See Note 6iv.
35
k.4.242 KinrossAR2018_FINMar14B.pdf - p35 (March 15, 2019 23:02:01)
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FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
10.
(a)
FAIR VALUE MEASUREMENT
Recurring fair value measurement:
Carrying values for financial instruments carried at amortized cost, including cash and cash equivalents, restricted cash,
short-term investments, accounts receivable, and accounts payable and accrued liabilities, approximate fair values due to
their short-term maturities.
Fair value estimates for derivative contracts are based on quoted market prices for comparable contracts and represent the
amount the Company would have received from, or paid to, a counterparty to unwind the contract at the market rates in
effect at the consolidated balance sheet date.
The Company categorizes each of its fair value measurements in accordance with a fair value hierarchy. The fair value
hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. Level 1 inputs are
quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices in markets
that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are
observable for the asset or liability (for example, interest rate and yield curves observable at commonly quoted intervals,
forward pricing curves used to value currency and commodity contracts and volatility measurements used to value option
contracts), or inputs that are derived principally from or corroborated by observable market data or other means. Level 3
inputs are unobservable (supported by little or no market activity). The fair value hierarchy gives the highest priority to Level
1 inputs and the lowest priority to Level 3 inputs.
For financial instruments that are recognized at fair value on a recurring basis, the Company determines whether transfers
have occurred between levels in the hierarchy by re-assessing their classification (based on the lowest level input that is
significant to the fair value measurement as a whole) at the end of each reporting period.
Assets (liabilities) measured at fair value on a recurring basis as at December 31, 2018 include:
Equity investments at FVOCI
Derivative contracts:
Foreign currency forward and collar contracts
Energy swap contracts
Total return swap contracts
$
Level 1
155.9
Level 2
Level 3
$
-
$
-
Aggregate
Fair Value
155.9
$
(21.8)
-
(8.6)
-
-
3.2
$ 155.9 $ (27.2)
-
-
-
$
-
(21.8)
(8.6)
3.2
$ 128.7
During the year ended December 31, 2018, there were no transfers between Level 1 and Level 2 fair value measurements,
and no transfers into or out of Level 3 fair value measurements.
The valuation techniques that are used to measure fair value are as follows:
Equity investments at FVOCI:
Equity investments at FVOCI include shares in publicly traded companies listed on a stock exchange. The fair value of equity
investments at FVOCI is determined based on a market approach reflecting the closing price of each particular security at
the consolidated balance sheet date. The closing price is a quoted market price obtained from the exchange that is the
principal active market for the particular security, and therefore equity investments at FVOCI are classified within Level 1 of
the fair value hierarchy.
Derivative contracts:
The Company’s derivative contracts are valued using pricing models and the Company generally uses similar models to value
similar instruments. Such pricing models require a variety of inputs, including contractual cash flows, quoted market prices,
applicable yield curves and credit spreads. The fair value of derivative contracts is based on quoted market prices for
comparable contracts and represents the amount the Company would have received from, or paid to, a counterparty to
k.4.242 KinrossAR2018_FINMar14B.pdf - p36 (March 15, 2019 23:02:02)
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36
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
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.
The following table summarizes information about derivative contracts outstanding at December 31, 2018 and 2017:
Currency contracts
Foreign currency forward and collar
contracts (a) (i)
Commodity contracts
Energy swap contracts (b) (ii)
Other contracts
Total return swap contracts (iii)
December 31, 2018
December 31, 2017
Asset / (Liability)
Fair Value
Asset / (Liability)
AOCI
Fair Value
AOCI
$
(21.8)
$
(15.8)
$ 6.1 $ 4.4
(8.6)
3.2
(7.5)
12.9
-
0.6
9.8
-
Total all contracts
$ (27.2) $ (23.3) $ 19.6 $ 14.2
Unrealized fair value of derivative assets
Current
Non-current
Unrealized fair value of derivative liabilities
Current
Non-current
Total net fair value
$ 3.8
0.8
$ 4.6
$ (22.2)
(9.6)
$ (31.8)
$ (27.2)
$ 17.0
3.9
$ 20.9
$ (1.1)
(0.2)
$ (1.3)
$
19.6
(a) Of the total amount recorded in AOCI at December 31, 2018, $(13.3) 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, 2018, $(2.9) million will be reclassified to net earnings within the next 12 months
as a result of settling the contracts.
37
k.4.242 KinrossAR2018_FINMar14B.pdf - p37 (March 15, 2019 23:02:03)
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FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
(i)
Foreign currency forward and collar contracts
The following table provides a summary of foreign currency forward and collar contracts outstanding at December 31, 2018,
maturing in 2019, 2020 and 2021:
Foreign currency
2019
2020
2021
Brazilian real forward buy contracts
(in millions of U.S. dollars)
Average price (Brazilian reais)
Brazilian real zero cost collar contracts
(in millions of U.S. dollars)
Average put strike (Brazilian reais)
Average call strike (Brazilian reais)
Canadian dollar forward buy contracts
(in millions of U.S. dollars)
Average rate (Canadian dollars)
Russian rouble zero cost collar contracts
(in millions of U.S. dollars)
Average put strike (Russian roubles)
Average call strike (Russian roubles)
$
36.0
3.66
$
-
-
$
-
-
$
134.4
3.45
3.75
$
95.6
3.73
4.18
$
12.4
4.10
5.10
$
58.5
1.28
$
14.4
1.31
-
$
-
$
54.0
58.9
69.6
$
13.5
65.0
78.4
$
-
-
-
The following new derivative contracts were entered into during the year ended December 31, 2018:
$71.7 million Canadian dollar forward buy contracts at an average rate of 1.29 maturing from 2018 to 2020;
$288.9 million Brazilian real forward buy contracts at an average rate of 3.35 maturing in 2018 and 2019;
$212.4 million Brazilian real zero cost collar contracts with an average put strike of 3.59 and an average call strike of
4.05 maturing from 2018 to 2021;
$27.0 million Russian rouble forward buy contracts with an average rate of 61.2 matured in 2018; and
$67.5 million Russian rouble zero cost collar contracts with an average put strike of 60.2 and an average call strike of
71.4 maturing from 2019 to 2020; and
At December 31, 2018, the unrealized gain or loss on the derivative contracts recorded in AOCI is as follows:
Brazilian real forward buy contracts – unrealized loss of $1.7 million (December 31, 2017 - $0.7 million loss);
Brazilian real zero cost collar contracts – unrealized loss of $7.5 million (December 31, 2017 - $1.8 million gain);
Canadian dollar forward buy contracts – unrealized loss of $3.5 million (December 31, 2017 - $2.6 million gain); and
Russian rouble zero cost collar contracts – unrealized loss of $3.3 million (December 31, 2017 - $0.7 million gain).
(ii)
Energy swap contracts
The Company is exposed to changes in energy prices through its consumption of diesel and other fuels, and the price of
electricity in some electricity supply contracts. The Company 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, 2018, maturing in 2019,
2020 and 2021:
Energy
WTI oil swap contracts (barrels)
Average price (U.S. dollars)
2019
2020
2021
864,451
51.73
$
590,400
56.21
$
174,000
58.84
$
k.4.242 KinrossAR2018_FINMar14B.pdf - p38 (March 15, 2019 23:02:03)
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38
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
During 2018, the following new commodity derivative contracts were entered into:
944,400 barrels of WTI oil swap contracts at an average rate of $56.95 per barrel maturing from 2019 to 2021.
At December 31, 2018, the unrealized gain or loss on these derivative contracts recorded in AOCI is as follows:
WTI oil swap contracts – unrealized loss of $7.5 million (December 31, 2017 - $9.8 million gain).
(iii)
Total return swap contracts
The Company enters into total return swaps (“TRS”) as economic hedges of the Company’s DSUs and cash-settled RSUs.
Under the terms of the TRS, a bank has the right to purchase Kinross shares in the marketplace as a hedge against the returns
in the TRS. At December 31, 2018, 5,695,000 TRS units were outstanding.
At December 31, 2018, 89.5% of the combined DSU and RSU exposures were economically hedged (December 31, 2017 -
94.8%). Hedge accounting is not applied under the DSU/RSU hedging program.
(b)
Fair value measurements related to non-financial assets:
Property, plant and equipment was written down to its recoverable amount at Paracatu during the year ended December
31, 2017. In addition, the Company recognized a reversal of impairment charges during the year ended December 31, 2017
related to the property, plant and equipment at Tasiast and Fort Knox due to changes in the estimates used to determine
the recoverable amount of the Tasiast and Fort Knox CGUs since their last impairment losses were recognized. Certain
assumptions used in the calculation of the recoverable amount were categorized as Level 3 in the fair value hierarchy.
(c)
Fair value of financial assets and liabilities not measured and recognized at fair value:
Long-term debt is measured at amortized cost. The fair value of long-term debt is primarily measured using market
determined variables, and therefore was classified within Level 2 of the fair value hierarchy. See Note 12.
39
k.4.242 KinrossAR2018_FINMar14B.pdf - p39 (March 15, 2019 23:02:04)
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FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
11.
CAPITAL AND FINANCIAL RISK MANAGEMENT
The Company manages its capital to ensure that it will be able to continue to meet its financial and operational strategies
and obligations, while maximizing the return to shareholders through the optimization of debt and equity financing. The
Board of Directors has established a number of quantitative measures related to the management of capital. Management
continuously monitors its capital position and periodically reports to the Board of Directors.
The Company’s operations are sensitive to changes in commodity prices, foreign exchange and interest rates. The Company
manages its exposure to changes in currency exchange rates and energy 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 2018 and 2017.
December 31,
2018
$ 1,735.0
December 31,
2017
$ 1,732.6
-
1,735.0
4,506.7
27.8%
0 – 30%
-
1,732.6
4,583.6
27.4%
0 – 30%
k.4.242 KinrossAR2018_FINMar14B.pdf - p40 (March 15, 2019 23:02:04)
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40
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
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 and Mauritanian ouguiya. This risk is reduced, from time
to time, through the use of foreign currency hedging contracts to lock in the exchange rates on future non-U.S. denominated
currency cash outflows. The Company has entered into hedging contracts to purchase Canadian dollars, Brazilian reais, and
Russian roubles as part of this risk management strategy. The Company is also exposed to the impact of currency fluctuations
on its monetary assets and liabilities. The Company may from time to time manage the exposure on the net monetary items.
At December 31, 2018, 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, and other.
Canadian dollars
Brazilian reais
Chilean pesos
Russian roubles
Mauritanian ouguiya
Other (b)
Foreign currency net
working capital
10% strengthening in
U.S. dollar
Effect on earnings before
taxes, gain (loss) (a)
10% weakening in
U.S. dollar
Effect on earnings before
taxes, gain (loss) (a)
(13.9)
(41.8)
(32.1)
22.2
(27.6)
(2.0)
1.3
3.8
2.9
(2.0)
2.5
0.2
(1.5)
(4.6)
(3.6)
2.5
(3.1)
(0.2)
(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 Euros, Ghanaian cedi, British pounds, Australian dollars and South African rand.
(b)
At December 31, 2018, 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.
Canadian dollars
Brazilian reais
Russian roubles
10% strengthening in
U.S. dollar
Effect on OCI before
taxes, gain (loss) (a)
$
$
$
(6.1)
(18.9)
(4.0)
10% weakening in
U.S. dollar
Effect on OCI before
taxes, gain (loss) (a)
$
$
$
7.6
21.8
3.5
(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.
41
k.4.242 KinrossAR2018_FINMar14B.pdf - p41 (March 15, 2019 23:02:05)
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FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
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, 2018, with other variables unchanged, the following represents the effect of the Company's energy swap
contracts on OCI before taxes from a 10% change in WTI oil prices.
WTI oil
10% increase in
price
Effect on OCI before
taxes, gain (loss) (a)
$
7.5
10% decrease in
price
Effect on OCI before
taxes, gain (loss) (a)
$
(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, 2018 -
$349.0 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, 2018 are as follows:
Long-term debt (a)
$
2,588.4
Total
2019
Within 1 year (b)
$
95.1
2020, 2021
2 to 3 years
2022, 2023
2024+
4 to 5 years
More than 5 years
$
690.1
$
138.9
$
1,664.3
Includes long-term debt, interest and the full face value of the senior notes.
(a)
(b) Represents interest on long-term debt, due within the next 12 months.
vi.
Credit risk management
Credit risk relates to cash and cash equivalents, accounts receivable and derivative contracts and arises from the possibility
that any counterparty to an instrument fails to perform. The Company generally transacts with highly-rated counterparties
and a limit on contingent exposure has been established for counterparties based on their credit ratings. As at December 31,
2018, the Company’s maximum exposure to credit risk was the carrying value of cash and cash equivalents, accounts
receivable and derivative contracts.
k.4.242 KinrossAR2018_FINMar14B.pdf - p42 (March 15, 2019 23:02:06)
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42
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
12.
LONG-TERM DEBT AND CREDIT FACILITIES
Interest Rates
Nominal
Amount
December 31, 2018
Deferred
Financing
Costs
Carrying
Amount (a)
December 31, 2017
Fair
Value (b)
Carrying
Amount (a)
Fair
Value (b)
Senior notes
Long-term debt
(ii) 4.50%-6.875%
$
$
1,746.3
1,746.3
$
$
(11.3)
(11.3)
$
$
1,735.0
1,735.0
$
$
1,668.8
1,668.8
$
$
1,732.6
1,732.6
$
$
1,848.4
1,848.4
Includes transaction costs on debt financings.
(a)
(b) The fair value of debt is primarily determined using quoted market determined variables. See Note 10(c).
Scheduled debt repayments
Senior notes
Total debt payable
2019
$
-
$
-
2020
$
-
$
-
2021
$
$
500.0
500.0
2022
$
-
$
-
2023
$
-
$
-
2024 and
thereafter
$
1,250.0
$
1,250.0
Total
1,750.0
1,750.0
$
$
(i)
Corporate revolving credit and term loan facilities
As at December 31, 2018, the Company had utilized $19.7 million (December 31, 2017 - $21.0 million) of its $1,500.0 million
revolving credit facility. The amount utilized was entirely for letters of credit. In 2018, the Company drew and repaid in full
$80.0 million on the revolving credit facility. Subsequent to December 31, 2018, the Company drew $60.0 million on the
revolving credit facility.
On July 23, 2018, the Company amended its $1,500.0 million revolving credit facility to extend the maturity date by one year
from August 10, 2022 to August 10, 2023.
On July 12, 2017, the Company fully repaid the outstanding term loan balance with proceeds from a $500.0 million offering
of debt securities completed on July 6, 2017.
Loan interest on the revolving credit facility is variable, set at LIBOR plus an interest rate margin which is dependent on the
Company’s credit rating. Based on the Company’s credit rating at December 31, 2018, interest charges and fees are
as follows:
Type of credit
Dollar based LIBOR loan:
Revolving credit facility
Letters of credit
Standby fee applicable to unused availability
LIBOR plus 1.70%
1.13-1.70%
0.34%
The revolving credit facility’s credit agreement contains various covenants including limits on indebtedness, asset sales and
liens. The Company is in compliance with its financial covenant in the credit agreement at December 31, 2018.
43
k.4.242 KinrossAR2018_FINMar14B.pdf - p43 (March 15, 2019 23:02:06)
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FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
(ii)
Senior notes
As at December 31, 2018 and 2017, the Company’s $1,750.0 million of senior notes consisted of $500.0 million principal
amount of 5.125% notes due 2021, $500.0 million principal amount of 5.950% notes due 2024, $500.0 million principal
amount of 4.50% notes due 2027 and $250.0 million principal amount of 6.875% notes due 2041.
On July 6, 2017, the Company completed a $500.0 million offering of debt securities consisting of 4.50% senior notes due
2027. The Company received net proceeds of $494.7 million from the offering, after payment of related fees and expenses.
The notes rank equally with the Company’s existing senior notes.
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, 2024 and
2027, and within six months of maturity of the notes due in 2041, the Company can only redeem the notes in whole at 100%
of the principal amount plus accrued interest, if any. In addition, the Company is required to make an offer to repurchase
the notes prior to maturity upon certain fundamental changes at a repurchase price equal to 101% of the principal amount
of the notes plus accrued and unpaid interest to the repurchase date, if any.
(iii)
Other
The maturity date for the Company’s $300.0 million Letter of Credit guarantee facility with Export Development Canada
(“EDC”) was extended by two years to June 30, 2020, effective July 1, 2018. 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 0.95% of the drawn amount. As at December 31, 2018, $227.4 million (December 31, 2017 -
$215.2 million) was utilized under this facility.
In addition, at December 31, 2018, the Company had $161.5 million (December 31, 2017 - $230.2 million) in letters of credit
and surety bonds outstanding in respect of its operations in Brazil, Mauritania, Ghana and Chile. These have been issued
pursuant to arrangements with international banks.
As at December 31, 2018, $264.4 million (December 31, 2017 - $254.7 million) of surety bonds were outstanding with respect
to Kinross’ operations in the United States. These surety bonds were issued pursuant to arrangements with international
insurance companies and incur fees of 0.70% of the drawn amount.
(iv)
Changes in liabilities arising from financing activities
Changes from financing cash flows
Other changes
Year ended December 31, 2018
Balance as at
January 1, 2018
Debt
issued
Debt
repayments
Interest
paid Other
Interest
expense
Capitalized
interest
Capitalized
interest paid
Other cash
changes
Other non-
cash changes
Balance as at
December 31, 2018
Long-term debt
Accrued interest payable (a)
$
1,732.6
$
80.0
$
(80.0)
$
-
33.8
-
-
(57.9)
$
1,766.4
Included in Accounts payable and accrued liabilities.
$
$
(80.0)
$
80.0
(57.9)
(a)
-$
-
-$
$
-
$
-
$
-
$
-
$
2.4
$
1,735.0
72.1
41.5
(38.2)
(9.9)
(8.1)
33.3
$
72.1
$
41.5
$
(38.2)
$
(9.9)
$
(5.7)
$
1,768.3
k.4.242 KinrossAR2018_FINMar14B.pdf - p44 (March 15, 2019 23:02:07)
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44
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Year ended December 31, 2017
Balance as at
January 1, 2017
Changes from financing cash flows
Debt
issued
Debt
repayments
Interest
paid
Other
Interest
expense
Capitalized
interest
Other changes
Capitalized
interest paid
Other cash
changes
Other non-
cash changes
Balance as at
December 31, 2017
Long-term debt
Accrued interest payable (a)
$
1,733.2
$
494.7
$
(500.0)
$
-
-$
$
-
$
-
$
-
$
-
$
4.7
$
1,732.6
23.4
-
-
(62.9)
-
86.5
25.1
(18.0)
(12.0)
(8.3)
33.8
1,756.6
$
Included in Accounts payable and accrued liabilities.
$
(500.0)
$
494.7
$
(62.9)
(a)
13.
PROVISIONS
Balance at January 1, 2018
Additions
Reductions
Reclamation spending
Accretion
Reclamation recovery
Balance at December 31, 2018
Current portion
Non-current portion
-$
$
86.5
$
25.1
$
(18.0)
$
(12.0)
$
(3.6)
$
1,766.4
$
Reclamation and
remediation
obligations (i)
861.4
53.7
(24.0)
(58.1)
29.1
(8.0)
$
Other
35.6
12.2
(12.9)
-
-
-
$
Total
897.0
65.9
(36.9)
(58.1)
29.1
(8.0)
$
854.1
$
34.9
$
889.0
63.6 9.0 72.6
790.5 25.9 816.4
$ 854.1 $ 34.9 $ 889.0
(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, 2018 is an $8.0 million recovery (year ended December
31, 2017 - $11.4 million expense) 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 2019 and 2044. The discount rates used in estimating the site restoration cost obligation were between 2.5% and
12.3% for the year ended December 31, 2018 (year ended December 31, 2017 - 1.8% and 11.6%), and the inflation rate used
was between 2.1% and 5.1% for the year ended December 31, 2018 (year ended December 31, 2017 - 1.8% and 5.0%).
Regulatory authorities in certain jurisdictions require that security be provided to cover the estimated reclamation and
remediation obligations. As at December 31, 2018, letters of credit totaling $366.7 million (December 31, 2017 - $411.5
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, 2018, $264.4 million (December 31, 2017 - $254.7 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.
45
k.4.242 KinrossAR2018_FINMar14B.pdf - p45 (March 15, 2019 23:02:07)
DT
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
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, 2018 and 2017 is as follows:
Year ended
Year ended
December 31, 2018
December 31, 2017
Number of shares
(000's)
Amount Number of shares
(000's)
Amount
Common shares
Balance at January 1,
Issued under share option and restricted share plans
Balance at end of period
Total common share capital
1,247,004
3,225
1,250,229
$
$
14,902.5
10.9
14,913.4
1,245,050
1,954
1,247,004
$
$
14,894.2
8.3
14,902.5
$
14,913.4
$
14,902.5
15.
SHARE-BASED PAYMENTS
Share-based compensation recorded during the years ended December 31, 2018 and 2017 was as follows:
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 expense
(i)
Share option plan
Years ended December 31,
2017
2018
$ 2.7
18.6
1.1
2.1
$ 24.5
$
$
2.4
23.4
1.2
2.0
29.0
The Company has a share option plan for officers, employees, and contractors enabling them to purchase common shares.
Under the share option plan, the aggregate number of shares reserved for issuance may not exceed 31.2 million common
shares. Additionally, the aggregate number of Common Shares reserved for issuance under the share option plan to insiders,
at any one time upon the exercise of Options and pursuant to all other compensation arrangements of the Company shall
not exceed 10% of the total number of Common Shares then outstanding. Each option granted under the plan on or after
February 16, 2011 is for a maximum term of seven years. One-third of the options granted are exercisable each year
commencing one year after the date of grant. The exercise price is determined by the Company's Board of Directors at the
time the option is granted, and may not be less than the closing market price of the common shares on the last trading day
prior to the grant date of the option. The stock options outstanding at December 31, 2018 expire at various dates to 2025.
The number of common shares available for the granting of options as at December 31, 2018 was 12.1 million.
k.4.242 KinrossAR2018_FINMar14B.pdf - p46 (March 15, 2019 23:02:08)
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46
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
The following table summarizes the status of the share option plan and changes during the years ended December 31, 2018
and 2017:
2018
2017
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
Exercisable at end of period
12,173
1,950
(301)
(238)
(1,240)
12,344
8,861
6.52
4.95
3.65
4.87
12.58
5.77
6.13
$
$
12,429
1,669
(265)
(1,567)
(93)
12,173
8,539
$
$
$
6.95
5.06
4.09
8.74
7.38
6.52
7.41
For the year ended December 31, 2018, the weighted average share price at the date of exercise was CDN$4.87.
The following table summarizes information about the stock options outstanding and exercisable at December 31, 2018:
Exercise price range in CDN$:
$ 2.96 $ 4.56
4.57 5.19
5.20 7.97
7.98 10.99
Options outstanding
Options exercisable
Number of
options
(000’s)
3,764
3,512
2,019
3,049
12,344
Weighted
average
exercise price
(CDN$)
$
3.89
5.00
5.80
8.96
5.77
$
Weighted
average
remaining
contractual life
(years)
3.18
5.58
2.05
0.73
3.07
Number of
options
(000’s)
3,265
529
2,019
3,048
8,861
Weighted
average
exercise price
(CDN$)
$
3.85
5.10
5.80
8.96
6.13
$
Weighted
average
remaining
contractual life
(years)
3.05
5.02
2.05
0.73
2.14
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, 2018 and 2017:
Weighted average share price (CDN$)
Expected dividend yield
Expected volatility
Risk-free interest rate
Expected option life (in years)
Weighted average fair value per stock option granted (CDN$)
2018
$
2017
$ 5.06
0.0%
49.3%
1.1%
4.5
$ 2.09
4.95
0.0%
47.5%
2.1%
4.5
2.05
$
The expected volatility used in the Black-Scholes option pricing model is based primarily on the historical volatility of the
Company’s shares.
(ii)
Restricted Share Unit 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 10.1 million.
47
k.4.242 KinrossAR2018_FINMar14B.pdf - p47 (March 15, 2019 23:02:08)
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FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
(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 and related changes during the years ended at December 31,
2018 and 2017:
Balance at January 1
Granted
Redeemed
Forfeited
Outstanding at end of period
2018
2017
Number of units
(000's)
Weighted average
fair value
(CDN$/unit)
Number of units
(000's)
Weighted average
fair value
(CDN$/unit)
8,277
$
4.63
9,219
$
4.01
4,258
(4,247)
(662)
7,626
4.85
4.37
$
4.86
4.88
5,128
(4,847)
(1,223)
8,277
5.07
4.01
$
4.24
4.63
As at December 31, 2018, the Company had recognized a liability of $8.7 million (December 31, 2017 - $11.3 million) in
respect of its cash-settled RSUs.
(b) Restricted performance share units
The RPSUs are subject to certain vesting requirements and vest at the end of three years. The vesting requirements are
based on certain performance criteria over the vesting period established by the Company.
The following table summarizes information about the RPSUs and related changes during the years ended at December 31,
2018 and 2017:
2018
2017
Balance at January 1
Granted
Redeemed
Forfeited
Outstanding at end of period
(iii)
Deferred share unit plan
Number of units
(000's)
4,886
2,807
(2,523)
(180)
4,990
$
Weighted average
fair value
(CDN$/unit)
4.52
4.77
3.56
4.75
5.14
$
Number of units
(000's)
4,993
1,209
(889)
(427)
4,886
$
Weighted average
fair value
(CDN$/unit)
4.51
5.32
5.39
4.81
4.52
$
The Company has a DSU plan for its outside directors which provides that each outside director receives, on the last date in
each quarter a number of DSUs having a value equal to a minimum of 50% of the compensation of the outside director for
the current quarter. Each outside director can elect to receive a greater percentage of their compensation in DSUs. The
number of DSUs granted to an outside director is based on the closing price of the Company's common shares on the Toronto
Stock Exchange on the business day immediately preceding the DSU issue date. At such time as an outside director ceases
to be a director, the Company will make a cash payment on the outstanding DSUs to the outside director in accordance with
the redemption election made by the departing director or in the absence of an election to defer redemption, in accordance
with the default redemption provisions provided in the Deferred Share Unit Plan.
k.4.242 KinrossAR2018_FINMar14B.pdf - p48 (March 15, 2019 23:02:09)
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48
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
The number of DSUs granted by the Company and the weighted average fair value per unit issued for the years ended
December 31, 2018 and 2017 are as follows:
DSUs granted (000's)
Weighted average grant-date fair value (CDN$/ unit)
Years ended December 31,
2017
2018
297
$ 4.39 $ 5.15
312
There were 1,701,799 DSUs outstanding, for which the Company had recognized a liability of $5.5 million, as at December
31, 2018 (December 31, 2017 - $7.0 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, 2018 was $2.1 million (year ended
December 31, 2017 - $2.0 million).
16.
EARNINGS (LOSS) PER SHARE
Basic and diluted net earnings (loss) attributable to common shareholders of Kinross for the year ended December 31, 2018
was $(23.6) million (year ended December 31, 2017 - $445.4 million).
Earnings (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: (a)
Stock options (b)
Restricted shares
Restricted performance shares
Years ended December 31,
2018
1,249,495
2017
1,246,619
-
-
-
1,249,495
1,606
3,905
4,915
1,257,045
8,819
2,777
4,708
7,199
-
-
(a) These adjustments were excluded, as they are anti-dilutive.
(b) Anti-dilutive stock options were determined using the Company’s average share price for the year. For the years ended December 31,
2018 and 2017, the average share price used was $3.44 and $4.00, respectively.
49
k.4.242 KinrossAR2018_FINMar14B.pdf - p49 (March 15, 2019 23:02:10)
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FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
17.
INCOME TAX EXPENSE (RECOVERY)
The following table shows the components of the current and deferred tax expense:
Current tax expense (recovery)
Current period
Adjustment for prior periods
Deferred tax expense (recovery)
Origination and reversal of temporary differences
Impact of changes in tax rate
Change in unrecognized deductible temporary differences
Recognition of previously unrecognized tax losses
Total tax expense (recovery)
Years ended December 31,
2018
2017
$
137.8
(7.9)
$
63.2
(10.0)
55.8
(0.1)
(35.6)
(11.2)
$
138.8
(83.0)
(0.1)
7.5
(0.8)
(23.2)
$
In 2017 the Company recognized a net income tax benefit of $93.4 million due to the enactment of U.S. Tax Reform
legislation passed on December 22, 2017. The 2017 net benefit included a benefit of $124.4 million in respect of the
collectability of the Alternative Minimum Tax (“AMT”) credit, which was partially offset by the write-down of the net
deferred tax assets to reflect the reduction in the U.S. corporate tax rate from 35% to 21% beginning January 1, 2018.
Further guidance on the implementation and application of the U.S. Tax Reform legislation was released during 2018. The
IRS released guidance that the AMT refunds would no longer be subject to sequestration for taxation years commencing
after December 31, 2017. The Company recognized an additional $8.7 million income tax benefit in 2018 as a result.
Further guidance on the implementation and application of the U.S. Tax Reform legislation will be forthcoming in regulations
to be issued by the Department of the Treasury, legislation or guidance for the states in which the Company operates, and
directions from the Office of Management and Budget. Such legislation, regulations, directions, and additional guidance may
require changes to the estimated net benefit recorded and the impact of such changes will be accounted for in the period
in which the legislation, regulations, directions, and additional guidance are enacted or released by the relevant authorities.
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
Percentage of depletion
Difference in foreign tax rates and foreign exchange on deferred income taxes within income
tax expense
Change in unrecognized deferred tax assets
Under (over) provided in prior periods
Income not subject to tax
Effect of non-deductible impairment/(reversals)
Enacted rate change
Accounting expenses disallowed for tax
Taxes on repatriation of foreign earnings
AMT credit receivable due to US Tax Reform
Other
Effective tax rate
2018
2017
26.5%
26.5%
8.0%
(3.4%)
42.1%
59.2%
(34.4%)
(17.1%)
0.2%
0.0%
17.8%
12.4%
(7.8%)
19.1%
122.6%
5.0%
0.0%
(19.1%)
30.4%
(8.9%)
(3.0%)
(17.6%)
0.1%
9.8%
3.8%
(29.7%)
(2.8%)
(5.5%)
k.4.242 KinrossAR2018_FINMar14B.pdf - p50 (March 15, 2019 23:02:10)
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50
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
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
Non-capital loss
Deferred tax liabilities
Accrued expenses and other
Property, plant and equipment
Inventory capitalization
Deferred tax liabilities - net
December 31,
2018
December 31,
2017
$
39.5
25.5
69.5
4.3
19.3
158.1
$
28.3
43.3
50.2
3.4
6.2
131.4
2.4
340.2
35.7
220.2
$
4.9
316.8
32.0
222.3
$
For balance sheet disclosure purposes, deferred tax assets and liabilities have been offset where they relate to income taxes
levied by the same taxation authority and the Company has the legal right and intent to offset.
Movement in net deferred tax liabilities:
Balance at the beginning of the period
Recognized in profit/loss
Recognized in OCI
Other
Balance at the end of the period
222.3
December 31,
2017
$
December 31,
2018
296.2
$
8.9 (76.4)
(0.8)
3.3
222.3
(11.1)
0.1
220.2
$
$
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, 2018 is $6.7 billion (December 31, 2017 - $6.5 billion).
Deferred tax assets have not been recognized in respect of the following items:
Deductible temporary differences
Tax losses
December 31,
2018
$
746.4
551.2
December 31,
2017
$
777.0
505.4
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.
51
k.4.242 KinrossAR2018_FINMar14B.pdf - p51 (March 15, 2019 23:02:11)
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FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
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
Brazil
Barbados
Mauritania
Other
Type
Net operating losses
Net operating losses
Net operating losses
Net operating losses
Net operating losses
Net operating losses
Net operating losses
Amount
$ 801.0
66.1
206.4
35.7
927.8
70.8
60.4
Expiry Date
2019 - 2038
2019 - 2037
No expiry
No expiry
2019 - 2025
2019 - 2023
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.
18.
SEGMENTED INFORMATION
The Company operates primarily in the gold mining industry and its major product is gold. Its activities include gold
production, acquisition, exploration and development of gold properties. The Company’s primary mining operations are in
the United States, the Russian Federation, Brazil, Chile, Ghana and Mauritania.
The reportable segments are those operations whose operating results are reviewed by the chief operating decision maker
to make decisions about resources to be allocated to the segment and assess its performance provided those operations
pass certain quantitative thresholds. Operations whose revenues, earnings or losses or assets exceed 10% of the total
consolidated revenue, earnings or losses or assets are reportable segments.
In order to determine reportable operating segments, management reviews various factors, including geographical location
and managerial structure. It was determined by management that a reportable operating segment generally consists of an
individual mining property managed by a single general manager and management team.
The Kupol segment includes the Kupol and Dvoinoye mines. These two mines have been aggregated into one reportable
segment as they have integrated cost structures, due to the processing of Dvoinoye ore at the Kupol mill, and other shared
infrastructure such as the purchasing function.
The Corporate and other segment includes corporate, shutdown and other non-operating assets (including Kettle River-
Buckhorn, La Coipa, Lobo-Marte and White Gold until its disposal on June 14, 2017) and non-mining and other operations.
These have been aggregated into one reportable segment as they do not generate revenues.
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.
k.4.242 KinrossAR2018_FINMar14B.pdf - p52 (March 15, 2019 23:02:11)
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52
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
i.
Operating segments
The following tables set forth operating results by reportable segment for the following years:
Year ended December 31, 2018:
Revenue
Metal sales
Cost of sales
Production cost of sales
Depreciation, depletion and amortization
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 losses of joint ventures
Finance income
Finance expense
Earnings before tax
Year ended December 31, 2017:
Revenue
Metal sales
Cost of sales
Production cost of sales
Depreciation, depletion and amortization
Impairment, net of reversals
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 losses of joint ventures and associate
Finance income
Finance expense
Earnings before tax
Operating segments
Fort Knox
Round
Mountain
Bald
Mountain
Paracatu
Maricunga
Kupol
Tasiast
Chirano
Non-operating
segments (a)
Corporate and
other (b), (c)
Total
$
325.5
483.9
403.9
663.1
113.6
627.7
307.8
286.0
1.1
$
3,212.6
214.4
109.7
324.1
1.4
38.2
$
4.7
-
(41.5)
$
277.6
51.0
328.6
155.3
-
1.2
-
154.1
174.1
99.7
273.8
130.1
7.9
11.5
-
110.7
430.5
148.9
579.4
83.7
13.8
-
-
69.9
65.7
4.0
69.7
43.9
(1.3)
0.1
-
45.1
288.2
133.5
421.7
206.0
(0.4)
19.2
-
187.2
237.3
95.5
332.8
(25.0)
52.4
8.5
-
(85.9)
172.7
123.8
296.5
(10.5)
(10.3)
6.0
-
(6.2)
Operating segments
Fort Knox
Round
Mountain
Bald
Mountain
Paracatu
Maricunga
Kupol
Tasiast
Chirano
-
6.3
6.3
(5.2)
36.7
58.0
133.0
(232.9)
1,860.5
772.4
2,632.9
579.7
137.0
$
109.2
$
133.0
200.5
3.2
(0.3)
11.0
(101.2)
$
113.2
Non-operating
segments (a)
Corporate and
other (b), (c)
Total
$
481.1
552.2
331.5
447.0
239.9
86.6
(88.6)
237.9
243.2
$
9.5
9.0
-
224.7
$
302.5
107.4
-
409.9
142.3
-
2.6
-
139.7
168.9
83.5
-
252.4
79.1
1.1
9.5
-
68.5
310.2
127.0
253.0
690.2
(243.2)
20.1
-
-
(263.3)
52.0
19.9
4.6
-
24.5
27.5
6.1
0.1
-
21.3
726.9
298.4
317.6
96.3
$
3,303.0
300.9
184.2
-
485.1
241.8
(0.3)
17.1
-
225.0
178.2
78.6
(142.9)
113.9
184.5
60.0
5.7
-
118.8
200.1
138.6
-
338.7
(21.1)
(1.8)
8.2
-
(27.5)
36.8
8.9
-
45.7
50.6
34.9
53.8
132.6
(170.7)
1,757.4
819.4
21.5
2,598.3
704.7
$
129.6
$
106.0
132.6
336.5
188.1
(1.3)
13.5
(117.8)
$
419.0
53
k.4.242 KinrossAR2018_FINMar14B.pdf - p53 (March 15, 2019 23:02:12)
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FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Operating segments
Round
Mountain
Bald
Mountain
Fort Knox
Paracatu
Maricunga
Kupol
Tasiast
Chirano
Non-operating
segments(a)
Corporate and
other (b), (c)
Total
$
363.3
433.9
513.5
1,585.8
39.5
418.4
1,591.6
232.2
340.9
$
5,519.1
$
590.1
583.9
686.1
1,832.8
126.6
1,054.9
1,940.6
334.0
914.8
$
8,063.8
Property, plant and equipment at:
December 31, 2018
Total assets at:
December 31, 2018
Capital expenditures for year ended December 31, 2018 (d)
$
95.1
196.5
161.1
96.0
-
63.6
454.7
25.5
5.8
$
1,098.3
Operating segments
Round
Mountain
Bald
Mountain
Fort Knox
Paracatu
Maricunga
Kupol
Tasiast
Chirano
Non-operating
segments(a)
Corporate and
other (b), (c)
Total
$
354.1
286.2
422.2
1,383.1
39.5
474.7
1,296.0
332.6
298.8
$
4,887.2
$
559.1
460.2
612.2
1,646.5
171.3
1,164.5
1,580.3
516.4
1,446.7
$
8,157.2
Property, plant and equipment at:
December 31, 2017
Total assets at:
December 31, 2017
Capital expenditures for year ended December 31, 2017 (d)
$
110.2
97.1
90.4
121.6
1.4
54.1
434.5
46.0
5.0
$
960.3
(a) Non-operating segments include development properties.
(b) Corporate and other includes corporate, Cerro Casale until its disposal on June 9, 2017, shutdown and other non-operating assets
(c)
(including Kettle River - Buckhorn, La Coipa, Lobo-Marte and White Gold until its disposal on June 14, 2017).
In 2017, the Kettle River - Buckhorn mine came to the end of its life and mining activities were completed. The Kettle River - Buckhorn
segment has been reclassified to Corporate and other for 2018, as well as the 2017 comparative figures, for segment reporting
purposes. Accordingly, Corporate and other includes metal sales and operating earnings (loss) of Kettle River - Buckhorn of $1.1 million
and $(8.4) million, respectively (2017 - $96.3 million and $43.4 million, respectively).
(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
The following table shows metal sales and property, plant and equipment by geographic region:
Geographic information (a)
United States
Russian Federation
Brazil
Chile
Mauritania
Ghana
Canada
Metal sales
Property, plant and equipment
Years ended December 31,
2017
2018
As at December 31,
2018
2017
$
1,214.4
627.7
663.1
113.6
307.8
286.0
$
1,461.1
726.9
447.0
52.0
298.4
317.6
$
1,315.6
423.9
1,585.5
358.2
1,594.8
241.1
$
1,067.4
482.3
1,383.1
308.8
1,302.1
343.5
-
-
-
-
Total
$
3,212.6
$
3,303.0
$
5,519.1
$
4,887.2
(a) Geographic location is determined based on location of the mining assets.
k.4.242 KinrossAR2018_FINMar14B.pdf - p54 (March 15, 2019 23:02:13)
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54
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
iii.
Significant customers
The following table represents sales to individual customers exceeding 10% of annual metal sales for the following periods:
Year ended December
31, 2018:
Fort Knox
Round
Mountain
Bald
Mountain Paracatu Maricunga
Kupol
Tasiast
Chirano
Corporate
and other
Total
Customer
1
2
3
4
% of total metal sales
$ 38.4 96.2 70.4 46.2 18.1
- 119.4 116.4
- - - - - 376.3
56.1 38.8 19.8 75.3 38.7
-
- - -
-
- 75.5 56.6
17.5 5.6 3.6 186.4 5.5
- 62.0 71.3
-
Year ended December
31, 2017:
Fort Knox
Round
Mountain
Bald
Mountain Paracatu Maricunga
Kupol
Tasiast
Chirano
Corporate
and other
Customer
1
2
3
% of total metal sales
$
- - - - - 694.5
- - -
54.4 60.2 64.8 48.8 6.8 16.4 146.9 116.3 16.9
-
6.4 19.0 16.4 157.9 11.6
- 31.7 99.1
505.1
376.3
360.8
351.9
1,594.1
49.6%
Total
694.5
531.5
342.1
1,568.1
47.5%
$
$
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
i.
Commitments
Operating leases
The Company has a number of operating lease agreements involving office space and equipment. The operating leases for
equipment provide that the Company may, after the initial lease term, renew the lease for successive yearly periods or may
purchase the equipment at its fair market value. The operating leases for certain office facilities contain escalation clauses
for increases in operating costs and property taxes. A majority of these leases are cancelable and are renewable on a yearly
basis. Future minimum lease payments required to meet obligations that have initial or remaining non-cancelable lease
terms in excess of one year are $11.4 million, $9.1 million, $8.5 million, $5.0 million and $5.0 million for each year from 2019
to 2023, respectively, and $31.3 million thereafter.
Purchase commitments
At December 31, 2018, the Company had future commitments of approximately $101.9 million (December 31, 2017 - $192.7
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.
55
k.4.242 KinrossAR2018_FINMar14B.pdf - p55 (March 15, 2019 23:02:13)
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FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Other legal matters
The Company is from time to time involved in legal proceedings, arising in the ordinary course of its business. Typically, the
amount of ultimate liability with respect to these actions will not, in the opinion of management, materially affect Kinross’
financial position, results of operations or cash flows.
Maricunga regulatory proceedings
In May 2015, the Chile environmental enforcement authority (“the SMA”) commenced an administrative proceeding against
Compania Minera Maricunga (“CMM”) alleging that pumping of groundwater to support the Maricunga operation had
impacted area wetlands and, on March 18, 2016, issued a resolution alleging that CMM’s pumping was impacting the “Valle
Ancho” wetland. Beginning in May 2016, the SMA issued a series of resolutions ordering CMM to temporarily curtail
pumping from its wells. In response, CMM suspended mining and crushing activities and reduced water consumption to
minimal levels. CMM contested these resolutions, but its efforts were unsuccessful and, except for a short period of time in
July 2016, CMM’s operations have remained suspended. On June 24, 2016, the SMA amended its initial sanction (the
“Amended Sanction”) and effectively required CMM to cease operations and close the mine, with water use from its wells
curtailed to minimal levels. On July 9, 2016, CMM appealed the sanctions and, on August 30, 2016, submitted a request to
the Environmental Tribunal that it issue an injunction suspending the effectiveness of the Amended Sanction pending a final
decision on the merits of CMM’s appeal. On September 16, 2016, the Environmental Tribunal rejected CMM’s injunction
request and on August 7, 2017, upheld the SMA’s Amended Sanction and curtailment orders on procedural grounds. On
October 9, 2018, the Supreme Court affirmed the Environmental Tribunal’s ruling on procedural grounds and dismissed
CMM’s appeal.
On June 2, 2016, CMM was served with two separate lawsuits filed by the Chilean State Defense Counsel (“CDE”). Both
lawsuits, filed with the Environmental Tribunal, alleged that pumping from the Maricunga groundwater wells caused
environmental damage to area wetlands. One action relates to the “Pantanillo” wetland and the other action relates to the
Valle Ancho wetland (described above). Hearings on the CDE lawsuits took place in 2016 and 2017, and on November 23,
2018, the Tribunal ruled in favor of CMM in the Pantanillo case and against CMM in the Valle Ancho case. In the Valle Ancho
case, the Tribunal is requiring CMM to, among other things, submit a restoration plan to the SMA for approval. CMM has
appealed the Valle Ancho ruling to the Supreme Court. The CDE has appealed to the Supreme Court in both cases and is
asserting in the Valle Ancho matter that the Environmental Tribunal erred by not ordering a complete shutdown of
Maricunga’s groundwater wells. The Supreme Court has the discretion to decide whether it will hear any of the appeals.
Prior to the November 23, 2018 rulings, CMM and the CDE were pursuing potential settlement. CMM expects to continue
pursuing settlement discussions notwithstanding the Environmental Tribunal’s rulings.
On May 19, 2017, a release of diesel fuel occurred from a power generation area of the Rancho del Gallo Camp. The release
occurred when a pipe valve attached to a fuel tank was opened by an unknown party, effectively draining the tank. CMM
estimates that approximately 15,000 litres of diesel escaped containment affecting the surrounding soil and a nearby stream.
After discovering the release, CMM commenced actions designed to contain the release, including mobilization of a third-
party response team, and has addressed both localized and downstream impacts of the release. CMM notified the relevant
authorities of the release, and has kept them informed of its response activities. Various agencies have reviewed, or are
reviewing the situation and have requested information from CMM. The SMA has concluded that CMM took appropriate
actions to address environmental harm and health risks. Further, the SEC (Superintendencia de Electridad y Combustibles),
the agency that regulates fuel facilities and electrical power, has concluded an administrative action against CMM for
regulatory non-compliances at the facility resulting in a fine equivalent to approximately $35 thousand. Other legal actions
relating to the release could result in the imposition of fines or other sanctions against CMM or its employees.
Sunnyside litigation
The Sunnyside Mine is an inactive mine situated in the so-called Bonita Peak Mining District (“District”) near Silverton,
Colorado. A subsidiary of Kinross, Sunnyside Gold Corporation ("SGC"), was involved in operations at the mine from 1985
through 1991 and subsequently conducted various reclamation and closure activities at the mine and in the surrounding
area. On August 5, 2015, while working in another mine in the District known as the Gold King, the Environmental Protection
Agency (the “EPA”) caused a release of approximately three million gallons of contaminated water into a tributary of the
Animas River. In the third quarter of 2016, the EPA listed the District, including areas impacted by SGC’s operations and
closure activities, on the National Priorities List pursuant to the Comprehensive Environmental Response, Compensation,
k.4.242 KinrossAR2018_FINMar14B.pdf - p56 (March 15, 2019 23:02:14)
DT
56
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
and Liability Act (“CERCLA”). SGC challenged portions of the CERCLA listing in the United States Court of Appeals for District
of Columbia Circuit, but SGC’s petition for review was denied, as was its subsequent petition for rehearing. The EPA has
notified SGC that SGC is a potentially responsible party under CERCLA and may be jointly and severally liable for cleanup of
the District or cleanup costs incurred by the EPA in the District. The EPA may in the future provide similar notification to
Kinross, as the EPA contends that Kinross has liability in the District under CERCLA and other statutes. In the second quarter
of 2018, the EPA issued to SGC a modified Unilateral Administrative Order for Remedial Investigation (“the Order”). Failure
to comply with the Order may subject SGC to penalties and damages, and SGC is undertaking to comply. 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. In the third quarter of 2017, the State of Utah filed a Complaint, which has been
amended to name the EPA, SGC, Kinross and others, alleging negligence, gross negligence, public nuisance, trespass, and
violation of the Utah Water Quality Act and the Utah Solid and Hazardous Waste Act. The Complaint seeks cost recovery,
compensatory, consequential and punitive damages, penalties, disgorgement of profits, declaratory, injunctive and other
relief under CERCLA, attorney’s fees, and costs. In the third quarter of 2018, numerous members of the Navajo Nation
initiated litigation against the EPA, SGC and Kinross, alleging negligence, gross negligence and injury, including great spiritual
and emotional distress. The Complaint seeks compensatory and consequential damages, interest, punitive damages,
attorneys’ fees and expenses. The New Mexico, Navajo, Utah and Navajo member cases have been centralized for
coordinated or consolidated pretrial proceedings in the United States District Court for the District of New Mexico, and it is
expected that additional claims will be made against SGC and Kinross in the course of the centralized proceeding.
Income taxes
The Company operates in numerous countries around the world and accordingly is subject to, and pays taxes under the
various regimes in countries in which it operates. These tax regimes are determined under general corporate tax laws of the
country. The Company has historically filed, and continues to file, all required tax returns and to pay the taxes reasonably
determined to be due. The tax rules and regulations in many countries are complex and subject to interpretation. Changes
in tax law or changes in the way that tax law is interpreted may also impact the Company’s effective tax rate as well as its
business and operations.
Kinross’ tax records, transactions and filing positions may be subject to examination by the tax authorities in the countries
in which the Company has operations. The tax authorities may review the Company’s transactions in respect of the year, or
multiple years, which they have chosen for examination. The tax authorities may interpret the tax implications of a
transaction in form or in fact, differently from the interpretation reached by the Company. In circumstances where the
Company and the tax authority cannot reach a consensus on the tax impact, there are processes and procedures which both
parties may undertake in order to reach a resolution, which may span many years in the future. Uncertainty in the
interpretation and application of applicable tax laws, regulations or the relevant sections of Mining Conventions by the tax
authorities, or the failure of relevant Governments or tax authorities to honour tax laws, regulations or the relevant sections
of Mining Conventions could adversely affect Kinross.
57
k.4.242 KinrossAR2018_FINMar14B.pdf - p57 (March 15, 2019 23:02:15)
DT
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
20.
RELATED PARTY TRANSACTIONS
There were no material related party transactions in 2018 and 2017 other than compensation of key management personnel.
The Company received no dividends from Puren during the years ended December 31, 2018 and 2017.
Key management personnel
Compensation of key management personnel of the Company is as follows:
Cash compensation - Salaries, short-term incentives, and other benefits
Long-term incentives, including share-based payments
Total compensation paid to key management personnel
Years ended December 31,
2017
2018
$
$
8.6
9.3
17.9
9.1
8.7
17.8
$
$
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.
The following tables contain separate financial information related to the guarantor subsidiaries as set out in the
consolidating balance sheets as at December 31, 2018 and 2017 and the consolidating statements of operations, statements
of comprehensive income (loss) and statements of cash flows for the years ended December 31, 2018 and 2017. 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.
k.4.242 KinrossAR2018_FINMar14B.pdf - p58 (March 15, 2019 23:02:15)
DT
58
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Consolidating balance sheet as at December 31, 2018
Assets
Current assets
Cash and cash equivalents
Restricted cash
Accounts receivable and other assets
Intercompany receivables
Current income tax recoverable
Inventories
Unrealized fair value of derivative assets
Non-current assets
Property, plant and equipment
Goodw ill
Long-term investments
Investments in joint ventures and associate
Intercompany investments
Unrealized fair value of derivative assets
Other long-term assets
Long-term intercompany receivables
Deferred tax assets
Total assets
Liabilities
Current liabilities
Kinross Gold
Corp.
Guarantor
Subsidiaries
Guarantor
Adjustm ents
Total
Guarantors
Guarantors
Non-
guarantors
Elim inations
Consolidated
$
29.7
$
103.8
$
-
$
133.5
$
215.5
$
-
$
349.0
-
9.7
558.9
-
2.6
3.3
604.2
31.5
-
145.9
-
3,557.8
-
11.7
3,215.3
-
6.2
30.4
-
-
6.2
40.1
6.5
61.3
-
-
1,098.0
(275.8)
1,381.1
4,283.2
(5,664.3)
2.3
478.3
0.5
-
-
-
2.3
480.9
3.8
76.7
571.1
-
-
-
-
12.7
101.4
-
79.0
1,052.0
3.8
1,719.5
(275.8)
2,047.9
5,214.3
(5,664.3)
$
1,597.9
2,931.4
158.8
-
-
-
-
-
-
2,962.9
2,556.2
158.8
145.9
-
3.9
10.0
18.3
-
-
-
-
3,983.5
(6,213.0)
1,328.3
15,167.0
(16,495.3)
0.8
187.3
-
-
0.8
199.0
2,421.7
(1,981.0)
3,656.0
-
-
-
-
365.1
3,576.0
45.0
-
-
(7,232.0)
-
5,519.1
162.7
155.9
18.3
-
0.8
564.1
-
45.0
$
7,566.4
$
11,403.0
$
(8,469.8)
$
10,499.6
$
26,955.8
$
(29,391.6)
$
8,063.8
Accounts payable and accrued liabilities
Intercompany payables
Current income tax payable
Current portion of provisions
Current portion of unrealized fair value of derivative liabilities
Deferred payment obligation
$
74.5
$
207.9
$
-
$
282.4
$
183.5
$
-
$
465.9
131.0
687.3
(275.8)
542.5
5,121.8
(5,664.3)
-
-
7.1
-
14.1
23.6
12.3
-
-
-
-
-
14.1
23.6
19.4
-
7.6
49.0
2.8
30.0
-
-
-
-
-
21.7
72.6
22.2
30.0
212.6
945.2
(275.8)
882.0
5,394.7
(5,664.3)
612.4
Non-current liabilities
Long-term debt
Provisions
Unrealized fair value of derivative liabilities
Other long-term liabilities
Long-term intercompany payables
Deferred tax liabilities
Total liabilities
Equity
Common shareholders' equity
Common share capital
Contributed surplus
Accumulated deficit
Accumulated other comprehensive income (loss)
Total com m on shareholders' equity
Non-controlling interest
Total equity
Total liabilities and equity
1,735.0
10.9
3.9
-
1,097.3
-
3,059.7
-
403.0
3.6
54.7
3,589.4
194.1
5,190.0
-
-
-
-
(1,981.0)
-
(2,256.8)
1,735.0
413.9
7.5
54.7
2,705.7
194.1
5,992.9
-
402.5
2.1
43.2
4,526.3
71.1
-
-
-
-
(7,232.0)
-
10,439.9
(12,896.3)
1,735.0
816.4
9.6
97.9
-
265.2
3,536.5
$
14,913.4
$
1,795.3
$
(1,795.3)
$
14,913.4
$
19,217.6
$
(19,217.6)
$
14,913.4
239.8
(10,548.0)
(98.5)
4,506.7
-
4,506.7
3,442.6
1,001.6
(26.5)
6,213.0
-
(3,442.6)
(1,001.6)
26.5
239.8
(10,548.0)
(98.5)
6,415.6
(9,078.2)
(59.7)
(6,415.6)
239.8
9,078.2
(10,548.0)
59.7
(6,213.0)
4,506.7
16,495.3
(16,495.3)
-
-
20.6
-
6,213.0
(6,213.0)
4,506.7
16,515.9
(16,495.3)
(98.5)
4,506.7
20.6
4,527.3
$
7,566.4
$
11,403.0
$
(8,469.8)
$
10,499.6
$
26,955.8
$
(29,391.6)
$
8,063.8
59
k.4.242 KinrossAR2018_FINMar14B.pdf - p59 (March 15, 2019 23:02:16)
DT
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Consolidating balance sheet as at December 31, 2017
Assets
Current assets
Cash and cash equivalents
Restricted cash
Accounts receivable and other assets
Intercompany receivables
Current income tax recoverable
Inventories
Unrealized fair value of derivative assets
Non-current assets
Property, plant and equipment
Goodw ill
Long-term investments
Investments in joint ventures and associate
Intercompany investments
Unrealized fair value of derivative assets
Other long-term assets
Long-term intercompany receivables
Deferred tax assets
Total assets
Liabilities
Current liabilities
Kinross Gold
Corp.
Guarantor
Subsidiaries
Guarantor
Adjustm ents
Total
Guarantors
Guarantors
Non-
guarantors
Elim inations
Consolidated
$
267.6
$
122.7
$
-
$
390.3
$
635.5
$
-
$
1,025.8
-
10.4
518.6
-
2.1
23.0
821.7
27.6
-
180.8
-
3,535.2
14.8
11.7
3,206.4
-
5.6
26.6
-
-
5.6
37.0
6.5
54.3
-
-
1,297.9
(245.7)
1,570.8
4,256.8
(5,827.6)
17.1
560.6
(10.7)
-
-
-
17.1
562.7
12.3
26.8
531.6
4.7
-
-
-
2,019.8
(245.7)
2,595.8
5,516.2
(5,827.6)
2,506.5
2,380.7
2,478.9
158.8
-
5.5
-
-
-
-
3,269.1
(6,202.6)
(12.3)
133.2
-
-
158.8
180.8
5.5
601.7
2.5
144.9
2,414.3
(1,819.9)
3,800.8
0.1
-
0.1
3.9
7.2
18.2
-
-
-
-
14,693.0
(15,294.7)
1.4
429.1
3,171.3
33.2
-
-
(6,972.1)
-
12.1
91.3
-
43.9
1,094.3
17.0
2,284.4
4,887.2
162.7
188.0
23.7
-
3.9
574.0
-
33.3
$
7,798.2
$
10,467.4
$
(8,268.2)
$
9,997.4
$
26,254.2
$
(28,094.4)
$
8,157.2
Accounts payable and accrued liabilities
Intercompany payables
Current income tax payable
Current portion of provisions
Current portion of unrealized fair value of derivative liabilities
Deferred payment obligation
$
88.5
$
218.0
$
-
$
306.5
$
176.1
$
-
$
482.6
184.4
643.0
(245.7)
581.7
5,245.9
(5,827.6)
-
-
-
-
19.5
13.5
1.1
-
-
-
-
-
19.5
13.5
1.1
-
15.6
53.0
-
-
-
-
-
-
-
35.1
66.5
1.1
-
272.9
895.1
(245.7)
922.3
5,490.6
(5,827.6)
585.3
Non-current liabilities
Long-term debt
Provisions
Unrealized fair value of derivative liabilities
Other long-term liabilities
Long-term intercompany payables
Deferred tax liabilities
Total liabilities
Equity
Common shareholders' equity
Common share capital
Contributed surplus
Accumulated deficit
Accumulated other comprehensive income (loss)
Total com m on shareholders' equity
Non-controlling interest
Total equity
Total liabilities and equity
1,732.6
9.8
-
-
1,199.3
-
3,214.6
-
367.5
0.2
67.4
2,777.2
157.4
4,264.8
-
-
-
-
(1,819.9)
-
(2,065.6)
1,732.6
377.3
0.2
67.4
2,156.6
157.4
5,413.8
-
453.2
-
66.4
4,815.5
98.2
-
-
-
-
(6,972.1)
-
10,923.9
(12,799.7)
1,732.6
830.5
0.2
133.8
-
255.6
3,538.0
$
14,902.5
$
1,713.3
$
(1,713.3)
$
14,902.5
$
18,702.5
$
(18,702.5)
$
14,902.5
240.7
(10,580.7)
21.1
4,583.6
-
4,583.6
3,464.9
1,038.6
(14.2)
6,202.6
-
(3,464.9)
(1,038.6)
14.2
240.7
(10,580.7)
21.1
6,271.9
(9,660.3)
(19.4)
(6,271.9)
240.7
9,660.3
(10,580.7)
19.4
(6,202.6)
4,583.6
15,294.7
(15,294.7)
-
-
35.6
-
6,202.6
(6,202.6)
4,583.6
15,330.3
(15,294.7)
21.1
4,583.6
35.6
4,619.2
$
7,798.2
$
10,467.4
$
(8,268.2)
$
9,997.4
$
26,254.2
$
(28,094.4)
$
8,157.2
k.4.242 KinrossAR2018_FINMar14B.pdf - p60 (March 15, 2019 23:02:16)
DT
60
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Consolidating statement of operations for the year ended December 31, 2018
Revenue
Metal sales
Cost of sales
Production cost of sales
Depreciation, depletion and amortization
Impairment, net of reversals
Total cost of sales
Gross profit
Other operating expense
Exploration and business development
General and administrative
Operating earnings (loss)
Other income (expense) - net
Equity in earnings (losses) of joint ventures, associate and
intercompany investments
Finance income
Finance expense
Earnings (loss) before tax
Income tax (expense) recovery - net
Net (loss) earnings
Net (loss) earnings attributable to:
Non-controlling interest
Common shareholders
Guarantors
Kinross Gold
Corp.
Guarantor
Subsidiaries
Guarantor
Adjustm ents
Total
Guarantors
Non-
guarantors
Elim inations Consolidated
$
1,936.0
$
1,837.2
$
(1,784.0)
$
1,989.2
$
1,223.4
$
-
$
3,212.6
1,897.7
1,091.6
(1,784.0)
1,205.3
3.7
-
409.3
-
-
-
413.0
-
1,901.4
1,500.9
(1,784.0)
1,618.3
34.6
7.6
26.1
76.0
(75.1)
12.9
41.4
64.7
(64.6)
(20.7)
(2.9)
336.3
59.9
17.4
4.5
254.5
(57.9)
1.0
59.8
(104.5)
152.9
(74.8)
-
-
-
-
-
-
(78.1)
(8.1)
8.1
(78.1)
-
370.9
67.5
43.5
80.5
179.4
(45.0)
(35.7)
116.4
(161.0)
54.1
(77.7)
655.2
359.4
-
1,014.6
208.8
69.5
65.7
52.5
21.1
-
-
-
-
-
-
-
-
-
460.1
(411.9)
0.1
123.0
(168.6)
435.7
(61.1)
35.3
(228.4)
228.4
(376.6)
-
1,860.5
772.4
-
2,632.9
579.7
137.0
109.2
133.0
200.5
3.2
(0.3)
11.0
(101.2)
113.2
(138.8)
$
(23.6)
$
78.1
$
(78.1)
$
(23.6)
$
374.6
$
(376.6)
$
(25.6)
$
-
$
-
$
-
$
-
$
(2.0)
$
-
$
(2.0)
$
(23.6)
$
78.1
$
(78.1)
$
(23.6)
$
376.6
$
(376.6)
$
(23.6)
61
k.4.242 KinrossAR2018_FINMar14B.pdf - p61 (March 15, 2019 23:02:17)
DT
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Consolidating statement of operations for the year ended December 31, 2017
Revenue
Metal sales
Cost of sales
Production cost of sales
Depreciation, depletion and amortization
Impairment, net of reversals
Total cost of sales
Gross profit
Other operating expense
Exploration and business development
General and administrative
Operating earnings (loss)
Other income (expense) - net
Equity in earnings (losses) of joint ventures, associate and
intercompany investments
Finance income
Finance expense
Earnings (loss) before tax
Income tax (expense) recovery - net
Net (loss) earnings
Net (loss) earnings attributable to:
Non-controlling interest
Common shareholders
Guarantors
Kinross Gold
Corp.
Guarantor
Subsidiaries
Guarantor
Adjustm ents
Total
Guarantors
Non-
guarantors
Elim inations Consolidated
$
1,945.9
$
1,781.1
$
(1,771.4)
$
1,955.6
$
1,347.4
$
-
$
3,303.0
1,918.8
4.9
1,019.9
(1,772.0)
1,166.7
404.0
0.6
409.5
164.4
-
164.4
-
1,923.7
1,588.3
(1,771.4)
1,740.6
22.2
3.4
21.8
75.1
(78.1)
(127.9)
679.4
50.6
(80.1)
443.9
1.5
192.8
30.7
22.1
4.7
135.3
(22.3)
232.9
27.1
(45.9)
327.1
65.4
-
-
-
-
-
-
(392.5)
(1.9)
1.9
(392.5)
-
215.0
34.1
43.9
79.8
57.2
(150.2)
519.8
75.8
(124.1)
378.5
66.9
590.7
409.9
-
-
(142.9)
-
857.7
489.7
95.5
62.1
52.8
279.3
654.4
(0.6)
79.5
(135.5)
877.1
(43.7)
-
-
-
-
-
-
(316.1)
(520.5)
(141.8)
141.8
(836.6)
-
1,757.4
819.4
21.5
2,598.3
704.7
129.6
106.0
132.6
336.5
188.1
(1.3)
13.5
(117.8)
419.0
23.2
$
445.4
$
392.5
$
(392.5)
$
445.4
$
833.4
$
(836.6)
$
442.2
$
-
$
-
$
-
$
-
$
(3.2)
$
-
$
(3.2)
$
445.4
$
392.5
$
(392.5)
$
445.4
$
836.6
$
(836.6)
$
445.4
k.4.242 KinrossAR2018_FINMar14B.pdf - p62 (March 15, 2019 23:02:18)
DT
62
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Consolidating statement of comprehensive income (loss) for the year ended December 31, 2018
Kinross Gold
Corp.
Guarantor
Subsidiaries
Guarantor
Adjustm ents
Total
Guarantors
Guarantors
Non-
guarantors
Elim inations
Consolidated
Net (loss) earnings
$
(23.6)
$
78.1
$
(78.1)
$
(23.6)
$
374.6
$
(376.6)
$
(25.6)
Other com prehensive incom e (loss), net of tax:
Items that w ill not be reclassified to profit or loss:
Equity investments at fair value through other
comprehensive income ("FVOCI") - net change in fair
value (a)
Items that are or may be reclassified to profit or loss in
subsequent periods:
Cash flow hedges - effective portion of changes in
fair value (b)
Cash flow hedges - reclassified to profit or loss (c)
Equity in other comprehensive income (loss) of
intercompany investments
Total com prehensive incom e (loss)
Attributable to non-controlling interest
Attributable to com m on shareholders
(a) Net of tax of
(b) Net of tax of
(c) Net of tax of
$
$
$
$
$
$
(24.2)
-
(12.1)
(6.7)
(43.0)
(39.8)
(35.8)
(2.4)
(38.2)
-
-
-
-
-
38.2
(24.2)
(1.6)
(47.9)
(9.1)
(81.2)
(1.6)
-
-
(1.6)
-
-
-
-
-
1.6
(25.8)
(47.9)
(9.1)
(82.8)
-
(106.4)
$
39.9
$
(39.9)
$
(106.4)
$
373.0
$
(375.0)
$
(108.4)
-
(106.4)
-
(3.0)
-
$
$
$
$
$
-
39.9
-
(17.9)
0.2
$
$
$
$
$
-
(39.9)
-
-
-
$
$
$
$
$
-
(106.4)
-
(20.9)
0.2
$
$
$
$
$
(2.0)
375.0
(0.3)
-
-
$
$
$
$
$
-
(375.0)
-
-
-
$
$
$
$
$
(2.0)
(106.4)
(0.3)
(20.9)
0.2
63
k.4.242 KinrossAR2018_FINMar14B.pdf - p63 (March 15, 2019 23:02:19)
DT
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Consolidating statement of comprehensive income (loss) for the year ended December 31, 2017
Kinross Gold
Corp.
Guarantor
Subsidiaries
Guarantor
Adjustm ents
Total
Guarantors
Guarantors
Non-
guarantors
Elim inations
Consolidated
Net (loss) earnings
$
445.4
$
392.5
$
(392.5)
$
445.4
$
833.4
$
(836.6)
$
442.2
Other com prehensive incom e (loss), net of tax:
Items that w ill not be reclassified to profit or loss:
Equity investments at fair value through other
comprehensive income ("FVOCI") - net change in fair
value (a)
Items that are or may be reclassified to profit or loss in
subsequent periods:
Cash flow hedges - effective portion of changes in
fair value (b)
Cash flow hedges - reclassified to profit or loss (c)
Equity in other comprehensive income (loss) of
intercompany investments
Total com prehensive incom e (loss)
Attributable to non-controlling interest
Attributable to com m on shareholders
(a) Net of tax of
(b) Net of tax of
(c) Net of tax of
$
$
$
$
$
$
(18.5)
-
6.8
(2.6)
(14.3)
(3.7)
5.1
(10.6)
(5.5)
-
-
-
-
-
5.5
(18.5)
1.8
11.9
(13.2)
(19.8)
1.8
-
-
1.8
-
-
-
-
-
(1.8)
427.4
$
387.0
$
(387.0)
$
427.4
$
835.2
$
(838.4)
$
-
427.4
-
2.5
(1.0)
$
$
$
$
$
-
387.0
-
2.3
(4.9)
$
$
$
$
$
-
(387.0)
-
-
-
$
$
$
$
$
-
427.4
-
4.8
(5.9)
$
$
$
$
$
(3.2)
838.4
0.3
-
-
$
$
$
$
$
-
(838.4)
-
-
-
$
$
$
$
$
(16.7)
11.9
(13.2)
(18.0)
-
424.2
(3.2)
427.4
0.3
4.8
(5.9)
k.4.242 KinrossAR2018_FINMar14B.pdf - p64 (March 15, 2019 23:02:19)
DT
64
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Consolidating statement of cash flows for the year ended December 31, 2018
Net inflow (outflow ) of cash related to the follow ing
activities:
Operating:
Net (loss) earnings
Adjustments to reconcile net (loss) earnings to net cash provided
from (used in) operating activities:
Depreciation, depletion and amortization
(Gain) loss on disposition of associate and other interests - net
Impairment, net of reversals
Equity in losses (earnings) of joint ventures, associate and
intercompany investments
Share-based compensation expense
Finance expense
Deferred tax expense (recovery)
Foreign exchange losses (gains) and other
Reclamation (recovery) expense
Changes in operating assets and liabilities:
Accounts receivable and other assets
Inventories
Accounts payable and accrued liabilities
Cash flow provided from (used in) operating activities
Income taxes paid
Net cash flow provided from (used in) operating activities
Investing:
Additions to property, plant and equipment
Acquisitions
Net additions to long-term investments and
other assets
Net proceeds from the sale of property, plant and
equipment
Net proceeds from disposition of associate and other interests
(Increase) decrease in restricted cash
Interest received and other
Net cash flow provided from (used in) from investing
activities
Financing:
Proceeds from issuance/draw dow n of debt
Repayment of debt
Interest paid
Issuance of common shares on exercise of options
Dividends received from (paid to) common shareholders and
subsidiaries
Dividend paid to non-controlling interest
Intercompany advances
Other
Net cash flow provided from (used in) financing activities
Effect of exchange rate changes on cash and cash
equivalents
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
Guarantors
Kinross Gold
Corp.
Guarantor
Subsidiaries
Guarantor
Adjustm ents
Total
Guarantors
Non-
guarantors
Elim inations
Consolidated
$
(23.6)
$
78.1
$
(78.1)
$
(23.6)
$
374.6
$
(376.6)
$
(25.6)
3.7
-
-
(41.4)
14.6
64.6
3.0
5.4
-
(1.6)
(0.5)
(23.9)
0.3
0.1
0.4
(7.4)
-
10.7
-
-
-
2.2
5.5
80.0
(80.0)
(57.9)
0.5
0.1
-
(185.1)
(1.4)
(243.8)
-
(237.9)
267.6
409.3
-
-
(1.0)
-
104.5
42.0
(8.4)
-
7.9
18.0
12.8
663.2
(28.5)
634.7
(523.7)
(269.2)
(23.5)
0.5
-
(0.6)
1.4
(815.1)
-
-
-
-
0.4
-
161.1
-
161.5
-
(18.9)
122.7
-
-
-
78.1
-
(8.1)
-
-
-
-
-
-
(8.1)
-
(8.1)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8.1
-
8.1
-
-
-
413.0
-
-
35.7
14.6
161.0
45.0
(3.0)
6.3
17.5
(11.1)
655.4
(28.4)
627.0
(531.1)
(269.2)
359.4
(2.1)
-
(0.1)
-
168.6
(36.1)
15.5
(8.0)
(29.0)
(23.2)
80.9
900.5
(98.5)
802.0
(512.3)
(35.0)
(12.8)
(40.1)
0.5
-
(0.6)
3.6
5.9
-
-
4.1
(809.6)
(577.4)
80.0
(80.0)
(57.9)
0.5
0.5
-
(15.9)
(1.4)
(74.2)
-
(256.8)
390.3
-
-
-
-
(412.4)
(13.0)
(212.5)
(0.8)
(638.7)
(5.9)
(420.0)
635.5
-
-
-
(35.3)
-
(228.4)
-
-
-
-
-
-
(640.3)
-
(640.3)
-
-
-
-
-
-
-
-
-
-
-
-
411.9
-
228.4
-
640.3
-
-
-
772.4
(2.1)
-
0.3
14.6
101.2
8.9
12.5
(8.0)
(22.7)
(5.7)
69.8
915.6
(126.9)
788.7
(1,043.4)
(304.2)
(52.9)
6.4
-
(0.6)
7.7
(1,387.0)
80.0
(80.0)
(57.9)
0.5
-
(13.0)
-
(2.2)
(72.6)
(5.9)
(676.8)
1,025.8
Cash and cash equivalents, end of period
$
29.7
$
103.8
$
-
$
133.5
$
215.5
$
-
$
349.0
65
k.4.242 KinrossAR2018_FINMar14B.pdf - p65 (March 15, 2019 23:02:20)
DT
FSKINROSS GOLD ANNUAL REPORT 2018
KINROSS GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
(Tabular amounts in millions of United States dollars, unless otherwise noted)
Consolidating statement of cash flows for the year ended December 31, 2017
Guarantors
Kinross Gold
Corp.
Guarantor
Subsidiaries
Guarantor
Adjustm ents
Total
Guarantors
Non-
guarantors
Elim inations
Consolidated
$
445.4
$
392.5
$
(392.5)
$
445.4
$
833.4
$
(836.6)
$
442.2
Net inflow (outflow ) of cash related to the follow ing
activities:
Operating:
Net (loss) earnings
Adjustments to reconcile net (loss) earnings to net cash provided
from (used in) operating activities:
Depreciation, depletion and amortization
(Gain) loss on disposition of associate and other interests - net
Impairment, net of reversals
Equity in losses (earnings) of joint ventures, associate and
intercompany investments
Share-based compensation expense
Finance expense
Deferred tax expense (recovery)
Foreign exchange losses (gains) and other
Reclamation (recovery) expense
Changes in operating assets and liabilities:
Accounts receivable and other assets
Inventories
Accounts payable and accrued liabilities
Cash flow provided from (used in) operating activities
Income taxes paid
Net cash flow provided from (used in) operating activities
Investing:
Additions to property, plant and equipment
Acquisitions
Net additions to long-term investments and
other assets
Net proceeds from the sale of property, plant and
equipment
Net proceeds from disposition of associate and other interests
(Increase) decrease in restricted cash
Interest received and other
4.9
5.4
-
404.0
-
164.4
(679.4)
(232.9)
13.6
80.1
(1.5)
132.8
-
(1.7)
3.5
(4.9)
(1.8)
-
(1.8)
(5.7)
-
-
45.9
(69.3)
(1.3)
-
3.0
(69.1)
23.0
660.2
(10.9)
649.3
(410.8)
-
(26.2)
(24.2)
-
7.5
-
1.5
1.8
-
(0.9)
1.9
Net cash flow provided from (used in) investing activities
(22.9)
(432.2)
Financing:
Proceeds from issuance/draw dow n of debt
Repayment of debt
Interest paid
Issuance of common shares on exercise of options
Dividends received from (paid to) common shareholders and
subsidiaries
Dividend paid to non-controlling interest
Intercompany advances
Other
Net cash flow provided from (used in) financing activities
Effect of exchange rate changes on cash and cash
equivalents
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
494.7
(500.0)
(62.9)
0.8
-
-
235.1
(1.6)
166.1
-
141.4
126.2
-
-
-
-
-
-
(240.0)
-
(240.0)
-
(22.9)
145.6
0.6
-
-
392.5
-
(1.9)
-
-
-
-
(0.6)
-
(1.9)
-
(1.9)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1.9
-
1.9
-
-
-
409.5
5.4
164.4
409.9
(60.6)
(239.9)
(519.8)
0.6
13.6
-
124.1
(70.8)
131.5
-
1.3
(66.2)
18.1
656.5
(10.9)
645.6
135.5
(5.6)
(163.4)
11.4
107.3
(20.5)
(66.6)
941.5
(177.6)
763.9
(416.5)
(481.1)
-
-
(50.4)
(23.4)
1.8
7.5
(0.9)
3.4
6.7
262.1
0.4
3.2
(455.1)
(232.1)
494.7
-
(500.0)
-
(62.9)
-
0.8
-
-
-
(316.1)
-
(3.0)
(138.8)
(1.6)
-
(72.0)
(454.9)
-
118.5
271.8
3.4
80.3
555.2
-
-
-
520.5
-
(141.8)
-
-
-
-
-
-
(457.9)
-
(457.9)
-
-
-
-
-
-
-
-
-
-
-
-
316.1
-
141.8
-
457.9
-
-
-
819.4
(55.2)
(75.5)
1.3
13.6
117.8
(76.4)
(31.9)
11.4
108.6
(86.7)
(48.5)
1,140.1
(188.5)
951.6
(897.6)
-
(73.8)
8.5
269.6
(0.5)
6.6
(687.2)
494.7
(500.0)
(62.9)
0.8
-
-
-
(1.6)
(69.0)
3.4
198.8
827.0
Cash and cash equivalents, end of period
$
267.6
$
122.7
$
-
$
390.3
$
635.5
$
-
$
1,025.8
k.4.242 KinrossAR2018_FINMar14B.pdf - p66 (March 15, 2019 23:02:21)
DT
66
FSKINROSS GOLD ANNUAL REPORT 2018
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, 2018
Property
Location
Kinross
Interest
(%)
Proven
Probable
Proven and Probable
Tonnes
(kt)
Grade
(g/t)
Ounces
(koz)
Tonnes
(kt)
Grade
(g/t)
Ounces
(koz)
Tonnes
(kt)
Grade
(g/t)
Ounces
(koz)
NORTH AMERICA
Bald Mountain
Fort Knox
Round Mountain
Subtotal
SOUTH AMERICA
La Coipa 8
Paracatu
USA
USA
USA
100.0%
100.0%
100.0%
Chile
Brazil
100.0%
100.0%
Subtotal
AFRICA
Chirano
Tasiast
Subtotal
RUSSIA
Dvoinoye
Kupol
Subtotal
Total Gold
Ghana
Mauritania
90.0%
100.0%
Russia
Russia
100.0%
100.0%
2,666
45,729
31,595
79,990
59
470,953
471,012
2,255
34,749
37,004
1,537
845
2,382
590,388
1.0
0.4
0.5
0.5
1.6
0.4
0.4
1.1
1.2
1.2
5.0
8.6
6.3
0.5
84
588
533
63,984
221,844
82,298
1,205
368,126
3
6,162
15,630
119,675
6,165
135,305
76
1,335
3,798
85,168
1,411
88,966
246
235
481
751
4,255
5,006
9,262
597,403
0.6
0.3
0.8
0.5
1.7
0.5
0.6
2.8
2.2
2.3
9.0
8.3
8.4
0.8
1,263
2,448
2,135
66,650
267,573
113,893
5,846
448,116
842
1,776
15,689
590,628
2,618
606,317
339
6,105
6,053
119,917
6,444
125,970
216
1,135
1,351
2,288
5,100
7,388
16,259
1,187,791
0.6
0.4
0.7
0.5
1.7
0.4
0.5
2.1
1.9
1.9
6.3
8.4
7.7
0.7
1,347
3,036
2,668
7,051
845
7,938
8,783
415
7,440
7,855
462
1,370
1,832
25,521
Silver
Proven and Probable Mineral Reserves (1, 3, 4, 5, 6, 8)
Kinross Gold Corporation’s Share at December 31, 2018
Property
Location
Kinross
Interest
(%)
Proven
Probable
Proven and Probable
Tonnes
(kt)
Grade
(g/t)
Ounces
(koz)
Tonnes
(kt)
Grade
(g/t)
Ounces
(koz)
Tonnes
(kt)
Grade
(g/t)
Ounces
(koz)
NORTH AMERICA
Round Mountain
Subtotal
SOUTH AMERICA
La Coipa 8
Subtotal
RUSSIA
Dvoinoye
Kupol
Subtotal
Total Silver
USA
100.0%
Chile
100.0%
Russia
Russia
100.0%
100.0%
0
0
59
59
1,537
845
2,382
2,441
0.0
0.0
277.2
277.2
9.3
93.4
39.2
44.9
0
0
8,226
8,226
6.3
6.3
1,669
1,669
8,226
8,226
6.3
6.3
1,669
1,669
527
527
460
2,539
2,999
15,630
71.3
35,852
15,689
72.1
36,379
15,630
71.3
35,852
15,689
72.1
36,379
751
4,255
5,006
12.9
91.8
311
12,563
80.0
12,874
2,288
5,100
7,388
10.5
92.1
771
15,102
66.8
15,873
3,526
28,862
54.3
50,395
31,303
53.6
53,921
67 KINROSS GOLD 2018 ANNUAL REPORT
k.4.242 KinrossAR2018_MineralReserveMar15.pdf - p1 (March 15, 2019 22:44:18)
DT
MEASURED AND INDICATED MINERAL RESOURCES
Gold
Measured and Indicated Mineral Resources (2, 3, 4, 5, 6, 7, 8)
Kinross Gold Corporation’s Share at December 31, 2018
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
Bald Mountain
Fort Knox
Round Mountain
Subtotal
SOUTH AMERICA
La Coipa 8
Lobo Marte
Maricunga
Paracatu
Subtotal
AFRICA
Chirano
Tasiast
Subtotal
RUSSIA
Dvoinoye
Kupol
Subtotal
Total Gold
USA
USA
USA
100.0%
100.0%
100.0%
Chile
Chile
Chile
Brazil
100.0%
100.0%
100.0%
100.0%
Ghana
Mauritania
90.0%
100.0%
Russia
Russia
100.0%
100.0%
14,985
6,460
–
21,445
2,612
96,646
35,908
123,629
258,795
3,043
4,576
7,619
3
58
61
0.6
0.4
–
0.6
2.2
1.1
0.8
0.3
0.7
1.9
0.7
1.2
7.0
10.2
10.0
310
74
–
161,913
149,219
95,831
384
406,963
186
3,525
937
1,250
12,825
88,720
209,097
144,211
5,898
454,853
191
106
297
1
19
20
7,455
70,109
77,564
33
1,345
1,378
287,920
0.7
6,599
940,758
0.6
0.4
0.7
0.5
1.7
1.2
0.7
0.4
0.7
2.4
1.2
1.4
6.4
7.7
7.7
0.7
2,984
1,723
2,281
176,898
155,679
95,831
6,988
428,408
719
3,489
4,492
1,763
15,437
185,366
245,005
267,840
10,463
713,648
574
2,815
10,498
74,685
3,389
85,183
7
335
342
36
1,403
1,439
21,182
1,228,678
0.6
0.4
0.7
0.5
1.8
1.2
0.7
0.3
0.7
2.3
1.2
1.3
6.4
7.8
7.8
0.7
3,294
1,797
2,281
7,372
905
7,014
5,429
3,013
16,361
765
2,921
3,686
8
354
362
27,781
Silver
Measured and Indicated Mineral Resources (2, 3, 4, 5, 6, 7, 8)
Kinross Gold Corporation’s Share at December 31, 2018
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
Subtotal
SOUTH AMERICA
La Coipa 8
Subtotal
RUSSIA
Dvoinoye
Kupol
Subtotal
Total Silver
USA
100.0%
Chile
100.0%
Russia
Russia
100.0%
100.0%
0
0
2,612
2,612
3
58
61
0.0
0.0
38.3
38.3
10.5
113.2
108.6
0
0
5,435
5,435
7.8
7.8
1,359
1,359
5,435
5,435
7.8
7.8
1,359
1,359
3,214
12,825
59.8
24,658
15,437
56.2
27,872
3,214
12,825
59.8
24,658
15,437
56.2
27,872
1
212
213
33
1,345
8.7
108.9
9
4,711
36
1,403
8.8
109.1
10
4,923
1,378
106.5
4,720
1,439
106.6
4,933
2,673
39.9
3,427
19,638
48.7
30,737
22,311
47.6
34,164
k.4.242 KinrossAR2018_MineralReserveMar15.pdf - p2 (March 15, 2019 22:44:18)
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68
KINROSS GOLD 2018 ANNUAL REPORT INFERRED MINERAL RESOURCES
Gold
Inferred Mineral Resources (2, 3, 4, 5, 6, 7, 8)
Kinross Gold Corporation’s Share at December 31, 2018
Property
NORTH AMERICA
Bald Mountain
Fort Knox
Round Mountain
Subtotal
SOUTH AMERICA
La Coipa 8
Lobo Marte
Maricunga
Paracatu
Subtotal
AFRICA
Chirano
Tasiast
Subtotal
RUSSIA
Dvoinoye
Kupol
Subtotal
Total Gold
Silver
Inferred Mineral Resources (2, 3, 4, 5, 6, 7, 8)
Kinross Gold Corporation’s Share at December 31, 2018
Property
NORTH AMERICA
Round Mountain
Subtotal
SOUTH AMERICA
La Coipa 8
Subtotal
RUSSIA
Dvoinoye
Kupol
Subtotal
Total Silver
69
Kinross
Interest
(%)
Location
Inferred
Tonnes
(kt)
Grade
(g/t)
Ounces
(koz)
USA
USA
USA
100.0%
100.0%
100.0%
Chile
Chile
Chile
Brazil
100.0%
100.0%
100.0%
100.0%
Ghana
Mauritania
90.0%
100.0%
Russia
Russia
100.0%
100.0%
62,982
88,652
82,086
233,720
2,130
2,003
53,133
48,107
105,373
3,690
5,984
9,674
87
1,828
1,915
350,682
0.4
0.3
0.8
0.5
1.5
1.1
0.6
0.2
0.5
2.7
2.2
2.4
21.8
7.8
8.4
0.6
845
808
2,058
3,711
102
69
1,044
350
1,565
325
420
745
61
458
519
6,540
Inferred
Tonnes
(kt)
Grade
(g/t)
Ounces
(koz)
Kinross
Interest
(%)
Location
USA
100.0%
758
758
Chile
100.0%
2,130
Russia
Russia
100.0%
100.0%
2,130
87
1,828
1,915
4,803
2.9
2.9
45.4
45.4
17.4
98.2
94.5
58.3
72
72
3,111
3,111
49
5,770
5,819
9,002
k.4.242 KinrossAR2018_MineralReserveMar15.pdf - p3 (March 15, 2019 22:44:18)
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KINROSS GOLD 2018 ANNUAL REPORT
Mineral Reserve and Mineral Resource Statement Notes
(1) Unless otherwise noted, the Company’s mineral reserves are estimated using appropriate cut-off grades based on an assumed gold price of $US 1,200
per ounce and a silver price of $US 17.00 per ounce. Mineral reserves are estimated using appropriate process recoveries, operating costs and mine
plans that are unique to each property and include estimated allowances for dilution and mining recovery. Mineral reserve estimates are reported in
contained units and are estimated based on the following foreign exchange rates:
Russian Ruble to $US 60
Chilean Peso to $US 650
Brazilian Real to $US 3.40
Ghanaian Cedi to $US 4.00
Mauritanian Ouguiya to $US 33
(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
and a silver price of $US 20.00 per ounce. 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, 2018 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) 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.
(6)
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)
Includes mineral resources from the Puren deposit in which the Company holds a 65% interest.
k.4.242 KinrossAR2018_MineralReserveMar15.pdf - p4 (March 15, 2019 22:44:18)
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70
KINROSS GOLD 2018 ANNUAL REPORT 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.
71
k.4.242 KinrossAR2018_MineralReserveMar15.pdf - p5 (March 15, 2019 22:44:18)
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KINROSS GOLD 2018 ANNUAL REPORT Summarized Five-Year Review (2, 4, 5, 7)
(in millions, except per share amounts)
Operating results from continuing operations
2018
2017
2016
2015
2014
Production (attributable) (Au eq. oz.)
2,452,398
2,673,533 2,789,150
2,594,652
2,710,390
Metal sales
Attributable production cost of sales per Au eq. oz.
Net earnings (loss) from continuing operations attributable
to common shareholders
Net cash flow provided from operating activities
Capital expenditures
Financial position
Cash, cash equivalents and short-term investments
Total assets
Long-term debt (including current portion)
Common shareholders’ equity
Per share data
Net earnings (loss) from continuing operations attributable to
common shareholders – basic
Market
$
$
$
$
$
$
$
$
$
$
3,212.6
734
(23.6)
788.7
1,043.4
349.0
8,063.8
1,735.0
4,506.7
$
$
$
$
$
$
$
$
$
3,303.0 $
3,472.0
$ 3,052.2
$ 3,466.3
669 $
712
445.4 $
(104.0)
951.6 $
1,099.2
897.6 $
633.8
1,025.8 $
827.0
8,157.2 $
7,979.3
1,732.6 $
1,733.2
4,583.6 $
4,145.5
$
$
$
$
$
$
$
$
696
$
720
(984.5)
$ (1,400.0)
831.6
610.0
1,043.9
7,735.4
1,981.4
$
$
$
$
$
858.1
631.8
983.5
8,951.4
2,058.1
3,889.3
$ 4,843.0
(0.02)
$
0.36 $
(0.08)
$
(0.86)
$
(1.22)
Average realized gold price per ounce
$
1,268
$
1,260 $
1,249
$
1,159
$
1,263
2018 Kinross Share Trading Data
TSX (Cdn dollars)
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
NYSE (U.S. dollars)
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
Low
$
$
$
$
$
$
$
$
5.90
5.34
5.20
4.54
4.78
4.12
3.98
3.37
$
$
$
$
$
$
$
$
4.44
4.48
3.48
3.15
3.48
3.50
2.67
2.38
k.4.242 KinrossAR2018_MineralReserveMar15.pdf - p6 (March 15, 2019 22:44:18)
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72
KINROSS GOLD 2018 ANNUAL REPORT
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):
“2018 achievements”, “2019 outlook”, “Organic development projects”, “Letter to Shareholders”, “Operating results”,
“Organic development projects”, “Outlook”, “2018 Mineral Reserves and Mineral Resources update” and “Exploration
Update” and include, without limitation, statements with respect to our guidance for production, production costs of sales,
all-in sustaining cost and capital expenditures; the schedules and budgets for the Company’s development projects; mine life;
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, estimates and the realization of such estimates (such as mineral or gold reserves
and resources or mine life), success of exploration, development and mining activities, currency fluctuations, capital
requirements, project studies, mine life extensions, government regulation permit applications and conversions, restarting
suspended or disrupted operations; continuous improvement initiatives; environmental risks and proceedings; and resolution of
pending litigation. The words “advance”, “anticipate”, “assumption”, “believe”, “estimates”, ‘‘expects’’, “forecast”, “focus”,
“forward”, “guidance”, “initiative”, “measures”, “on budget”, “on schedule”, “outlook”, “plan”, “potential”, “progress”,
“project”, “projection”, “promising”, 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 as well as: (1) there being no significant disruptions affecting the operations of the
Company, whether due to extreme weather events (including, without limitation, excessive or lack of rainfall, in particular, the
potential for further production curtailments at Paracatu resulting from insufficient rainfall and the potential for operational
challenges at Fort Knox resulting from excessive rainfall, which can impact costs and/or production) and other or related natural
disasters, labour disruptions (including but not limited to workforce reductions), supply disruptions, power disruptions, damage
to equipment, pit wall slides (in particular that the effects of the pit wall slides at Fort Knox and Round Mountain are consistent
with the Company’s expectations) or otherwise; (2) permitting, development, operations and production from the Company’s
operations and development projects being consistent with Kinross’ current expectations including, without limitation; the
maintenance of existing permits and approvals and the timely receipt of all permits and authorizations necessary for the
development and operation of the Tasiast Phase One and Phase Two expansions or any such alternate expansion that the
Company decides to pursue and the Round Mountain Phase W expansion including, without limitation, work permits, necessary
import authorizations for goods and equipment; operation of the SAG mill at Tasiast; exploration license conversions at Tasiast;
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 renewal of the Chirano mining lease; (3) political and legal
developments in any jurisdiction in which the Company operates being consistent with its current expectations including,
without limitation, the impact of any political tensions and uncertainty in the Russian Federation 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 amendments to the mining laws, and potential power rationing and tailings facility regulations in Brazil, potential
amendments to water laws and/or other water use restrictions and regulatory actions in Chile, new dam safety regulations, and
potential amendments to minerals and mining laws and energy levies laws, and the enforcement of labour laws in Ghana, new
regulations relating to work permits, potential amendments to customs and mining laws (including but not limited amendments
to the VAT) and the potential implementation of a new tax code, in Mauritania, and satisfactory resolution of the discussions
with the Mauritanian government regarding the Company’s activities in Mauritania, the potential passing of Environmental
Protection Agency regulations in the US relating to the provision of financial assurances under the Comprehensive
Environmental Response, Compensation and Liability Act, the European Union’s General Data Protection Regulation 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), and the impact of any trade tariffs
being consistent with Kinross’ current expectations; (4) the completion of studies, including optimization studies, scoping
studies and prefeasibility and feasibility studies, on the timelines currently expected and the results of those studies being
73
k.4.242 KinrossAR2018_MineralReserveMar15.pdf - p7 (March 15, 2019 22:44:18)
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KINROSS GOLD 2018 ANNUAL REPORT consistent with Kinross’ current expectations; (5) the exchange rate between the Canadian dollar, Brazilian real, Chilean peso,
Russian rouble, Mauritanian ouguiya, Ghanaian cedi and the U.S. dollar being approximately consistent with current levels; (6)
certain price assumptions for gold and silver; (7) prices for diesel, natural gas, fuel oil, electricity and other key supplies being
approximately consistent with current levels; (8) production and cost of sales forecasts for the Company meeting expectations;
(9) the accuracy of the current mineral reserve and mineral resource estimates of the Company (including but not limited to ore
tonnage and ore grade estimates), mine plans for the Company’s mining operations (including but not limited to throughput
and recoveries being affected by metallurgical characteristics at Paracatu), and the Company’s internal models; (10) labour and
materials costs increasing on a basis consistent with Kinross’ current expectations; (11) the terms and conditions of the legal and
fiscal stability agreements for the Tasiast and Chirano operations being interpreted and applied in a manner consistent with
their intent and Kinross’ expectations and without amendment or formal dispute (including without limitation the application of
tax, customs and duties exemptions); (12) goodwill and/or asset impairment potential; (13) the regulatory and legislative regime
regarding mining, electricity production and transmission (including rules related to power tariffs) in Brazil being consistent with
Kinross’ current expectations; (14) access to capital markets, including but not limited to maintaining an investment grade rating
consistent with the Company’s current expectations; (15) that the Brazilian power plants will operate in a manner consistent with
our current expectations;(16) that the Tasiast project financing will proceed in a manner consistent with our current expectations;
and (17) litigation and regulatory proceedings and the potential ramifications thereof being concluded in a manner consistent
with the Company’s expectations (including without limitation the ongoing litigation in Chile relating to the alleged damage of
wetlands and the scope of any remediation plan or other environmental obligations arising therefrom) . 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, environmental litigation or regulatory proceedings or any investigations, enforcement actions and/or sanctions under
any applicable anti-corruption, international sanctions and/or anti-money laundering laws and regulations in Canada, the United
States or any other applicable jurisdiction; the speculative nature of gold exploration and development including, but not
limited to, the risks of obtaining necessary licenses and permits; diminishing quantities or grades of reserves; adverse changes
in our credit rating; and contests over title to properties, particularly title to undeveloped properties. In addition, there are risks
and hazards associated with the business of gold exploration, development and mining, including environmental hazards,
industrial accidents, unusual or unexpected formations, pressures, cave-ins, flooding and gold bullion losses (and the risk of
inadequate insurance, or the inability to obtain insurance, to cover these risks). Many of these uncertainties and contingencies
can directly or indirectly affect, and could cause, Kinross’ actual results to differ materially from those expressed or implied in
any forward-looking statements made by, or on behalf of, Kinross, including but not limited to resulting in an impairment charge
on goodwill and/or assets. There can be no assurance that forward-looking statements will prove to be accurate, as actual
results and future events could differ materially from those anticipated in such statements. Forward-looking statements are
provided for the purpose of providing information about management’s expectations and plans relating to the future. All of the
forward-looking statements made in this Annual Report are qualified by these cautionary statements and those made in our
k.4.242 KinrossAR2018_MineralReserveMar15.pdf - p8 (March 15, 2019 22:44:18)
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74
KINROSS GOLD 2018 ANNUAL REPORT hinge - >
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 2018 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.
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 ounce6. Specific to the Russian
rouble, a 10% change in the exchange rate would be expected to result in an approximate $19 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 $27 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 $3 impact on production cost of sales per ounce. A $100 change in the price of gold
would be expected to result in an approximate $5 impact on production cost of sales per ounce as a result of a change in
royalties owing.
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 These figures are non-GAAP financial measures and are defined and reconciled in Section 11, Supplemental Information
of Management’s Discussion and Analysis.
2 Unless otherwise stated, production figures in this Annual Report are based on Kinross’ 90% share of Chirano production.
3 Kinross’ guidance and outlook for 2019 represents forward-looking information and users are cautioned that actual
results may vary. Forecasts for production, production cost of sales, all-in sustaining costs and capital expenditures are
+ or – 5%. Please refer to the Cautionary Statement on page 73, as well as the Company’s News Release of February 13,
2019 available on our website at Kinross.com.
4 Reported net earnings include a non-cash impairment charge, net of reversals (2017: $21.5 million; 2016: $139.6 million).
5 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. The
comparative results exclude FDN.
6 Refers to all 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.
7 Average realized gold price is a non-GAAP financial measure and is defined as metal sales divided by the total number
of ounces sold. This measure is intended to enable management to better understand the price realized in each
reporting period. The realized price does not have any standardized definition under IFRS and should not be considered
a substitute for measures of performance prepared in accordance with IFRS.
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KINROSS GOLD 2018 ANNUAL REPORT < - hinge
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 2019, we will publish our
2018 Corporate Responsibility
Supplement online at
Kinross.com/corporateresponsibility.
To read our most recent full
report, see the 2017 Corporate
Responsibility Report at
2017corporateresponsibility
report.kinross.com.
CORPORATE INFORMATION
Corporate Information
Transfer Agent and Registrar
Computershare
Investor Services Inc.
Toronto, Ontario, Canada
Toll-free: 1-800-564-6253
Proxy Solicitation Agent
Kingsdale Advisors
Toronto, Ontario, Canada
Annual and Special Meeting
of Shareholders
Wednesday, May 8th, 2019
at 10:00 a.m. EDT at the
Glenn Gould Studio,
250 Front Street West,
Toronto, Ontario, Canada
Legal Counsel
Osler, Hoskin & Harcourt LLP
Toronto, Ontario, Canada
Sullivan & Cromwell LLP
New York, New York, United States
Auditors
KPMG LLP
Toronto, Ontario, Canada
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
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, Senior Director,
Corporate Communications
Telephone: 416-369-6469
Email: louie.diaz@kinross.com
Corporate Responsibility
Ed Opitz, Vice-President,
Safety and Sustainability
Telephone: 1-866-561-3636
Email: sustainability@kinross.com
Shareholder Inquiries
Computershare Investor Services Inc.
8th Floor, 100 University Avenue
Toronto, Ontario, Canada M5J 2Y1
Toll-free: 1-800-564-6253
Toll-free facsimile: 1-888-453-0330
@KinrossGold
k.4.242 KinrossAR2018_Mar15.pdf - p11 (March 15, 2019 22:41:24)
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hinge - >
KINROSS GOLD CORPORATION
25 York Street, 17th Floor
Toronto, Ontario M5J 2V5
Canada
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