Kinross Gold

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Kinross Gold Corporation
Public
Traded as TSXK
NYSEKGC
Industry Mining
Founded 1993
Founder Robert Buchan
Headquarters Toronto, Canada
Key people
J. Paul Rollinson, CEO
Products Gold
Revenue $US 3.47 billion (2014)
-$US 1.193 billion (2014)
Number of employees
9,000 (2013)
Website www.kinross.com

Kinross Gold Corporation ranks seventh in the list of largest gold companies. The Canadian-based gold mining company with mines and projects in the United States, Brazil, Chile, Russia, Ghana and Mauritania. Kinross began from the amalgamation of three companies in 1993, initially owning a mine in British Columbia and royalties on a mine in Nevada. Following a series of takeovers and mergers, Kinross now owns ten active gold mines on four continents.

History[edit]

Kinross' merger with Echo Bay Mines resulted in ownership of Lupin Mine, which was sold in 2006.

Kinross Gold Corporation was founded in 1993 following the amalgamation of three companies:Plexus Resources Corporation, CMP Resources and the numbered company 1021105 Ontario Corp. This resulted in the new company owning a stake and royalties on a mining property in Fallon, Nevada and the QR Mine in British Columbia.[1] Kinross was listed on June 1, 1993 on the TSX and NASDAQ.

Kinross merged with Amax Gold (formerly known as Kinam Gold)[2] in 1998, which gave Kinross the Fort Knox Gold Mine.[3] In 2002 Kinross, TVX Gold (TVX), and Echo Bay Mines proposed a $3-billion merger, which would combine the three companies, while retaining the name Kinross Gold. The merger was delayed from its original closing due to Kinross' inability to raise the necessary funds,[4] but was approved by shareholders in January 2003.[5] In 2006 Kinross sold the Lupin Mine (in Canada) and the Blanket Mine (in Zimbabwe), and bought Crown Resources Corporation, which gave them ownership of the mineral resource Buckhorn Mountain (later Buckhorn Gold Mine) and the associated mineral processing facilities.[6] Kinross also sold the Aquarius Project (acquired as part of the Echo Bay merger[7]) in 2006 to St. Andrews Goldfields (who operated the nearby Stock Gold Mine).[8] In 2002 Kinross and Placer Dome combined their assets in Timmins, Ontario and formed the Porcupine Joint Venture (51% Placer Dome, 49% Kinross).[9] In 2007 Kinross traded assets with Goldcorp; Kinross received $200-million and the remaining portion of the La Coipa Gold Mine it had acquired with the TVX merger, in exchange for giving up its 49% of the Porcupine Joint Venture and 31.9% of the Musselwhite Mine.[10] In 2010 Kinross purchased the remaining shares (91%) of Red Back Mining for $7.1-billion. The purchase brought with it the two gold mines in Africa (Chirano and Tasiast).[11]

Decline[edit]

Over $US 10 billion of losses incurred from 2011 to 2015[edit]

The reported income (losses) were:

  • 2011 ($US 2.013 billion) [12]
  • 2012 ($US 2.509 billion)
  • 2013 ($US 3.742 billion) [13]
  • 2014 ($US 1.193 billion)
  • 2015 ($US 0.984 billion) [14]

The losses are primarily related to the Tasiast gold mine. Kinross acquired Tasiast in 2010. See discussion below.

Dividend Payments Suspended[edit]

On July 31, 2013, Kinross announced it would no longer be paying semi-annual dividends. [15]

Falling Gold Prices[edit]

Kinross has been adversely impacted by falling gold prices. The realized gold prices were:

  • 2011 $US 1,500 per ounce
  • 2012 $US 1,643 per ounce [16]
  • 2013 $US 1,402 per ounce
  • 2014 $US 1,263 per ounce
  • 2015 $US 1,159 per ounce [17]

Operations[edit]

Kinross Gold operates mining projects in North and South America, Russia, and Africa. In 2013 the company's gold production was 2,631,092 gold equivalent ounces.[18] In 2013 the company's silver production was 9 million ounces, making the company the 18th largest silver producer in the world.[19]

Fort Knox Gold Mine[edit]

Main article: Fort Knox Gold Mine

Kinross has a 100% stake in the Fort Knox Gold Mine, which operates as an open pit in Alaska. The area was prospected as early as 1913, but no mining took place until 1996. In 1998 the owner of Fort Knox (Amex Gold) merged with Kinross.[3][20] The Fort Knox complex has two open pits (Fort Knox, and the now closed True North),[21] with ore from the Fort Knox pit being processed on site at the Fort Knox mill.[3] In 2013 the mine produced 421,641 ounces of gold.[20]

Kettle River - Buckhorn Mine[edit]

Main article: Buckhorn Gold Mine

Kinross operates the Buckhorn mine and Kettle River mill in the US State of Washington.[22]

Expected Closure in 2016[edit]

Kettle River - Buckhorn had only 47,000 ounces of proven and probable reserves as at December 31, 2015. [23] The mine is expected to close in 2016. [24]

Round Mountain Gold Mine[edit]

Round Mountain Gold Mine

Kinross operates the Round Mountain Gold Mine in Nye County, Nevada. Round Mountain is a joint venture with Barrick Gold. Round Mountain is located in an area where mining has taken place since 1906, having produced 350,000 ounces of gold over a sixty-year period.[25] Kinross' merger with Echo Bay Mines gave them a 50% share of Round Mountain, with Barrick retaining the remainder.[26] As of 2011 the mine was undergoing expansion to increase the size of the pit and related infrastructure. The expansion has been subject to opposition by various non-governmental organizations.[27][28]

2014 Operations and Results[edit]

As of December 31, 2014, Round Mountain had 689,000 ounces of proven and probable reserves (Kinross Gold's 50% portion). [29] In 2014, Round Mountain produced 169,000 ounces of gold which suggests the economically mineable reserves will be fully depleted by 2018. [30]

The all-in sustaining costs were $US 1,170 ounce in 2014 ($US 1,345 ounce in 2013). [31]

Paracatu Gold Mine[edit]

Main article: Paracatu mine

Kinross received their original stake in the Brazilian mine when they merged with TVX, and purchased the remainder from Rio Tinto in 2004.[32] In 2013, Paracatu produced 500,380 gold equivalent ounces.

Maricunga Gold Mine[edit]

Main article: Maricunga Gold Mine

Kinross first acquired 50% ownership in the properter with the merger with Amax Gold (which changed its name to Kinam).[33] The 2007 purchase of Bema Gold brought the other 50%.[34]

La Coipa Gold Mine[edit]

Main article: La Coipa Gold Mine

Acquisition in 2007[edit]

The TVX merger resulted in Kinross' stake in the La Coipa open pit mine, the remainder was purchased from Goldcorp in 2007.[35]

Production Suspended in 2013[edit]

Gold production was suspended at La Coipa in October 2013. [36] An impairment charge of $124 million was recorded in 2014.

Fruta del Norte[edit]

Acquisition of Aurelian in 2008[edit]

Kinross acquired Aurelian Resources Inc. in 2008 for total consideration of $US 705 million. [37] Aurelian owned the Fruta del Norte deposit in Ecuador. Kinross described Fruta del Norte as "arguably the premier gold discovery in a generation." [38]

Sold in 2014 and $US 496 Million Loss Incurred[edit]

On June 20, 2013, Kinross announced it would not proceed with further development of the Fruta del Norte project. The carrying value of its investment was $US 736 million. On October 21, 2014, Kinross sold its interest for $US 233 million and Kinross realized a loss of $US 496 million. [39]

Kupol Mine[edit]

Main article: Kupol Gold Mine

The Kupol Gold Mine is a combination open-pit and underground gold mine in Chukotka Autonomous Okrug, Russia, in an area originally mined in the 1930s by prisoners of the Gulag.[40] Bema Gold Corporation financed the $425-million project through various international banks, agencies, and equipment companies, plus the Chukotka government. Kinross acquired the property (at the time 75% of the mine) through the acquisition of Bema Gold, and a subsidiary purchased the remaining 25% from the government in 2011.[41][42]

Dvoinoye Gold Mine[edit]

Main article: Dvoinoye Gold Mine

The Dvoinoye Gold Mine is located approximately 100 kilometres (60 mi) from Kupol, and opened in 2013. Dvoinoye is an underground mine which produces 1000 tonnes of gold ore per day. Ore from the mine is processed at Kupol.[43]

Tasiast Gold Mine[edit]

Main article: Tasiast Gold Mine

Red Back Mining began production at Tasiast in 2008 in Mauritania. In 2010, Kinross purchased Red Back to acquire the mine.

$US 6.6 Billion Acquisition of Tasiast in 2010[edit]

On May 4, 2010, Kinross acquired 9% of Red Back's common shares pursuant to a private placement for $US 0.789 billion. Subsequently, Kinross offered to acquire the remaining 91% of Red Back common shares in exchange for $US 7.93 billion of Kinross shares and warrants.[44] Consequently, Kinross would become the owner of 100% of the Tasiast mine and 90% of the Chirano mine. The acquisition price for Tasiast was approximately $US 6.6 billion.[45] Shareholder approval was required for the Red Back transaction. A Management Information Circular was published on August 16, 2010 to provide shareholders with information regarding the proposed acquisition. In the Management Information Circular Kinross represented the acquisition of the remaining 91% of Red Back would result in a $7.1 billion increase in the assets of Kinross.[46]

Six Positive Recommendations to Acquire Tasiast for $US 6.6 Billion[edit]

Morgan Stanley Canada Limited, B.M.O. Nesbitt Burns Inc., G.M.P Securities L.P., and Rothschild Inc. all stated in their opinion letters the consideration to be paid by Kinross to acquire Red Back was fair to Kinross from a financial point of view.[47] Glass Lewis & Co. and PROXY Governance, Inc. also provided positive recommendations.[48] [49]

$US 248 Million of Operating Losses from 2010 to 2015[edit]

Tasiast has incurred significant operating losses since being acquired by Kinross. Operating incomes (losses) excluding impairment charges by year were:

  • 2010 ($US 14 million)
  • 2011 $US 70 million
  • 2012 ($US 50 million)
  • 2013 ($US 86 million)
  • 2014 ($US 66 million)
  • 2015 ($US 101 million) [50]

$US 8.2 Billion of Impairment Charges Related to Tasiast from 2011 to 2015[edit]

Beginning in 2011, the carrying value of the Tasiast assets exceeded their fair value and impairment charges were recorded in the financial statements. During the five years after the acquisition, Kinross recorded impairment charges related to Tasiast as follows:

  • 2011 $US 2.490 billion
  • 2012 $US 3.416 billion [51]
  • 2013 $US 1.488 billion
  • 2014 $US 0.505 billion [52]
  • 2015 $US 0.259 billion [53]

Consequently, the carrying value of Tasiast was reduced from $US6.9 billion as at December 31, 2010 to $US 0.736 billion as at December 31, 2015. [54]

The impairment charges recorded in 2011 and 2012 were surprising given $US gold prices were at historically high levels in 2011 and 2012. The realized gold price was $US 1,500 per ounce in 2011 and $US 1,643 per ounce in 2012. [55]

Employee Layoffs[edit]

In September 2015, Kinross announced the layoff of 222 Tasiast employees. [56]

Proposed Expansion Delayed[edit]

In its 2010 and 2011 Annual Reports, Kinross discussed a proposed plant expansion with a design throughput of 60,000 tonnes per day.[57][58] Subsequently, Kinross decided "to pursue a smaller mill option" in the range of 30,000 tonnes per day.[59] A pre-feasibility study was expected to be completed in Q1 2013. [60]

On April 29, 2013, Kinross announced a new feasibility study for an expansion of the Tasiast operation with a 38,000 tonne per day mill. In early 2014, the feasibility study was completed [61] but on February 10, 2015 Kinross announced it was not proceeding with the expansion.[62]

Another feasibility study regarding an expansion to increase throughput from 8,000 tonnes per day to 12,000 tonnes per day is expected to be completed in Q1 2016.[63]

Chirano Gold Mine[edit]

Main article: Chirano Gold Mine

The Red Back Mining purchase gave Kinross a 90% stake in the Chirano Gold Mine, while the remainder is held by the Government of Ghana. The mine produced nearly a quarter million ounces of gold in 2011.[11] The mine is made up of multiple open pits and an underground operation called Akwaaba.[64]

$729 Million of Impairment Charges in 2013 and 2014[edit]

Kinross recorded impairment charges related to the Chirano mine as follows:

  • 2013 - $US 359 million
  • 2014 - $US 370 million [65]

Significant Losses in 2015[edit]

During the first 9 months of 2015, Chicano incurred losses of $US 43 million.[66]

Bald Mountain Gold Mine Acquisition[edit]

On January 11, 2016, Kinross acquired 100% of the Bald Mountain gold mine and 50% of the Round Mountain gold mine for $US 610 million in cash from Barrick Gold Corporation. [67]

According to Barrick Gold's 2014 financial statements, as of Dec 31, 2014 the value of Bald Mountain was $US 538 million and the value of its 50% interest in Round Mountain was $US 140 million. Barrick's valuations assume a gold price of $US 1,300 per ounce. [68] The gold price as at January 11, 2016 was $US 1,095 per ounce. [69]

Corporate responsibility[edit]

Kinross claims a strong commitment to responsible mining, as outlined on its corporate website via their Ten Guiding Principles for Corporate Responsibility.[70] In 2007, Kinross achieved an A− ranking in Maclean's magazine's annual assessment of socially responsible companies,[71] the highest ranking of any Canadian mining company.

For Kinross' cooperation with an environmental group in Washington state, and for five out of eight mines being in compliance with the International Cyanide Management Code (as of May 2013, the Company has eight of its nine mines in compliance with the International Cyanide Management Code),[72] Kinross was recognized as one of Canada's Top 50 Most Responsible Corporations by Maclean's magazine and Jantzi Research in 2009.[73]

In October 2008, Kinross was named one of Greater Toronto's Top Employers by Mediacorp Canada Inc., which was announced by the Toronto Star newspaper.[74] In 2011, Kinross was named to the Dow Jones Sustainability World Index (DJSI) and to the Dow Jones Sustainability North America Index for the second consecutive year.[75]

In 2013, Kinross was named to the Dow Jones Sustainability World Index for the third consecutive year, as well as the DJSI North American Index, the Ethibel Excellence Investment Register, and the Ethical Global Equity and ECPI Global Carbon Indices. For the fifth consecutive year, the Company was named to the Jantzi Social Index, and as one of Canada’s Best 50 Corporate Citizens by Corporate Knights magazine for the fourth year.[76]

See also[edit]

References[edit]

  1. ^ "Shareholders back merger forming Kinross Gold". Deseret News. 31 May 1993. Retrieved 2 September 2011. 
  2. ^ Kinross Gold (23 June 2006). "Walter Creek Valley Fill Heap Leach Facility Project Description" (PDF). Alaska DNR. p. 4. Retrieved 3 September 2011. 
  3. ^ a b c Scales, Marilyn (June 2003). "How to Get Gold Out of Fort Knox". Canadian Mining Journal. Retrieved 31 August 2011. 
  4. ^ "COMPANY NEWS – Kinross, Echo Bay, TVX Delay Merger". Canadian Mining Journal. 20 November 2002. Retrieved 2 September 2011.  C1 control character in |title= at position 14 (help)
  5. ^ "Newmont increases dividend". 31 January 2003. Retrieved 2 September 2011. 
  6. ^ Leng Yeong, Cheng (4 August 2006). "Kinross Has Record $65.6 Million Profit on Gold Rally (Update4)". Bloomberg. Retrieved 2 September 2011. 
  7. ^ "Merger improves viability of gold deposit project". Northern Ontario Business. 26 June 2002. Retrieved 2 September 2011. 
  8. ^ "Kinross To Sell Aquarius Project". thestreet.com. 29 December 2005. Retrieved 2 September 2011. 
  9. ^ Vieira, Paul (12 April 2002). "Placer Dome, Kinross to join forces in Ontario gold operation: Kinross gains mill access". National Post. p. FP7. 
  10. ^ "Analysts see Goldcorp, Kinross asset swap gains". Bloomberg. 26 Sep 2007. Retrieved 2 September 2011. 
  11. ^ a b "In Canada, a Merger for Miners of Gold". The New York Times (AP). August 2, 2010. Retrieved August 2, 2010. 
  12. ^ Per page F61 - 2011 financial statements - http://s2.q4cdn.com/496390694/files/doc_financials/annual/2011/kinross-2011-annual-report-final.pdf
  13. ^ See page FS5 2013 financial statements - http://s2.q4cdn.com/496390694/files/doc_financials/annual/2013/kinross-2013-annual-report.pdf
  14. ^ See page 4 of 2015 financial statements http://s2.q4cdn.com/496390694/files/doc_financials/quarterly_reports/2015/q4/Q42015_FS_Eng.pdf
  15. ^ See page MDA14 2013 financial statements - http://s2.q4cdn.com/496390694/files/doc_financials/annual/2013/kinross-2013-annual-report.pdf
  16. ^ http://s2.q4cdn.com/496390694/files/doc_financials/annual/2012/kinross-gold-annual-report-2012.pdf
  17. ^ http://s2.q4cdn.com/496390694/files/doc_financials/quarterly_reports/2015/q4/Q42015_MD-A_Eng.pdf
  18. ^ http://2013annualreport.kinross.com/#/performance-highlights/performance-page-5/
  19. ^ "Silver Institute largest silver producer rankings". Retrieved 16 July 2014. 
  20. ^ a b "Fort Knox, Alaska, USA". Kinross Gold. Retrieved 27 August 2011. 
  21. ^ "Kinross Gold Corp (KGC)". Reuters. Retrieved 31 August 2011. 
  22. ^ "Kettle River-Buckhorn, USA". Kinross Gold. Retrieved 27 August 2011. 
  23. ^ See page 27 - Kinross 4th Quarter Report http://s2.q4cdn.com/496390694/files/doc_news/2016/jan/Q4-year-end-2015-news-release_final.pdf
  24. ^ http://www.kinross.com/operations/default.aspx#americas-kettleriver
  25. ^ Hardrock Mining on Federal Lands. National Research Council (U.S.). p. 136. ISBN 0-309-06596-8. 
  26. ^ "Round Mountain, USA". Kinross Gold. Retrieved 27 August 2011. 
  27. ^ Harding, Adella (7 July 2010). "BLM OKs Round Mountain expansion". Elko Daily Free Press. Retrieved 31 August 2011. 
  28. ^ Harding, Adella (22 Aug 2010). "Appeals filed against Round Mountain". Elko Daily Free Press. Retrieved 31 August 2011. 
  29. ^ Per page 67 of 2014 Kinross Gold Annual Report
  30. ^ Per page MDA 18 of 2014 Kinross Gold Annual Report
  31. ^ Per page 42 of the 2014 Barrick Gold Annual Report
  32. ^ "Paracatu, Brazil". Kinross Gold. Retrieved 27 August 2011. 
  33. ^ "Glossary". Kinross Gold. Retrieved 3 September 2011. 
  34. ^ "Maricunga, Chile". Kinross Gold. Retrieved 27 August 2011. 
  35. ^ "La Coipa, Chile". Kinross Gold. Retrieved 27 August 2011. 
  36. ^ See page MDA 26 - 2014 Annual Report
  37. ^ See page 99 of 2009 Kinross Gold Annual Report
  38. ^ See 2009 Kinross Gold Annual Report
  39. ^ See page FS23 2014 Kinross Annual Report
  40. ^ Paxton, Robin (11 August 2009). "Russia revives gold mining in the Gulags". Reuters. Retrieved 28 August 2011. 
  41. ^ "Kupol, Russia". Kinross Gold. Retrieved 27 August 2011. 
  42. ^ "Kupol Gold and Silver Mine, Russia". Mining-Technology.com. Retrieved 2 September 2011. 
  43. ^ Koven, Peter (9 October 2013). "Kinross opens Dvoinoye mine in Russia". Financial Post. Retrieved 1 June 2014. 
  44. ^ See page F83 of 2011 Kinross Annual Report
  45. ^ see pages F89 and F119 of the 2011 Annual Report - Total Assets of $US 6.717 billion as at Dec 31, 2010 less $US 0.054 billion of capital expenditures - http://s2.q4cdn.com/496390694/files/doc_financials/annual/2011/kinross-2011-annual-report-final.pdf
  46. ^ see page C-2 - Ontario Securities Commission www.sedar.com Increase from $8.4 billion pre-acquisition to $15.5 billion post-acquisition http://sedar.com/GetFile.do?lang=EN&docClass=10&issuerNo=00002968&issuerType=03&projectNo=01620988&docId=2711128
  47. ^ Per Kinross Management Information Circular - August 16, 2010 http://sedar.com/GetFile.do?lang=EN&docClass=10&issuerNo=00002968&issuerType=03&projectNo=01620988&docId=2711128
  48. ^ September 1, 2010 Kinross News Release http://www.sedar.com/GetFile.do?lang=EN&docClass=8&issuerNo=00002968&issuerType=03&projectNo=01632148&docId=2724823
  49. ^ September 8, 2010 Kinross News Release http://www.sedar.com/GetFile.do?lang=EN&docClass=8&issuerNo=00002968&issuerType=03&projectNo=01633420&docId=2727005
  50. ^ $361 loss less $259 million impairment - per page 23 - 2015 MD&A http://s2.q4cdn.com/496390694/files/doc_financials/quarterly_reports/2015/q4/Q42015_MD-A_Eng.pdf
  51. ^ http://www.sedar.com/GetFile.do?lang=EN&docClass=2&issuerNo=00002968&issuerType=03&projectNo=02042523&docId=3306422
  52. ^ 2014 Annual Report - page MDA 23 http://www.sedar.com/GetFile.do?lang=EN&docClass=2&issuerNo=00002968&issuerType=03&projectNo=02332950&docId=3709071
  53. ^ Page 23 of 2015 MD&A http://s2.q4cdn.com/496390694/files/doc_financials/quarterly_reports/2015/q4/Q42015_MD-A_Eng.pdf
  54. ^ Per page 54 of 2015 financial statements - http://s2.q4cdn.com/496390694/files/doc_financials/quarterly_reports/2015/q4/Q42015_FS_Eng.pdf
  55. ^ http://s2.q4cdn.com/496390694/files/doc_financials/annual/2012/kinross-gold-annual-report-2012.pdf
  56. ^ http://www.kinross.com/news-and-investors/news-releases/press-release-details/2015/Kinross-Reports-2015-Third-Quarter-Results/default.aspx
  57. ^ See page 42 of 2010 Kinross Gold Annual Report
  58. ^ See page F13 of 2011 Kinross Annual Report
  59. ^ Per page vi of 2012 Kinross Annual Report
  60. ^ See page MDA16 of 2012 Annual Report
  61. ^ [>http://kinross.com/media/252046/033114%20kinross%20releases%20tasiast%20expansion%20feasibility%20study.pdf "Tasiast feasibility report"] Check |url= value (help) (PDF). Kinross Gold. Retrieved 31 March 2014. 
  62. ^ 2014 Kinross Gold Annual Report - page 2 http://2014annualreport.kinross.com
  63. ^ http://www.kinross.com/news-and-investors/news-releases/press-release-details/2015/Kinross-Reports-2015-Third-Quarter-Results/default.aspx
  64. ^ "Kinross Agrees to Acquire Red Back". Engineering & Mining Journal. 14 September 2010. Retrieved 1 September 2011. 
  65. ^ See page FS 54 of 2014 Annual Report - Kinross Gold
  66. ^ See page 23 of Q3 2015 Management Discussion and Analysis
  67. ^ See Jan 11, 2016 Kinross Press Release http://www.kinross.com/news-and-investors/news-releases/press-release-details/2016/Kinross-Completes-Acquisition-of-Strategic-Nevada-Assets/default.aspx
  68. ^ See pages 137 and 138 of 2014 Annual Report http://s1.q4cdn.com/808035602/files/annual-report/Barrick-Annual-Report-2014.pdf
  69. ^ http://goldprice.org
  70. ^ "Kinross Corporate Responsibility Page". Kinross Gold. 
  71. ^ "Doing business the right way". Macleans. November 30, 2007. Retrieved 27 August 2011. [dead link]
  72. ^ "2012 CR Data Supplement" (PDF). Kinross Gold Corporation. 
  73. ^ "Jantzi-Macleans 50 Most Socially Responsible Corporations 2009". Maclean's. June 18, 2009. Retrieved 27 August 2011. 
  74. ^ "Reasons for Selection, 2009 Greater Toronto's Top Employers Competition". 
  75. ^ "Kinross named to Dow Jones Sustainability World Index". 
  76. ^ =http://2013annualreport.kinross.com/#/

External links[edit]