FILED BY KINROSS GOLD CORPORATION
[LOGO] KINROSS PURSUANT TO RULE 425 UNDER THE SECURITIES ACT OF 1933
GOLD CORPORATION AND DEEMED FILED PURSUANT TO RULE 14d-2
OF THE SECURITIES EXCHANGE ACT OF 1934
SUBJECT COMPANY: CROWN RESOURCES CORPORATION
COMMISSION REGISTRATION NO. 333-11516
================================================================================
KINROSS RETURNS TO PROFITABILITY AND EXPANDS RESERVES
MARCH 1, 2004...TORONTO, ONTARIO - KINROSS GOLD CORPORATION (TSX-K; NYSE-KGC)
("Kinross" or "the Company") announced today the unaudited results for the three
months and year ended December 31, 2003, as follows:
ALL RESULTS ARE EXPRESSED IN UNITED STATES DOLLARS, UNLESS OTHERWISE STATED, AND
ARE UNAUDITED. ALL PER SHARE INFORMATION HAS BEEN ADJUSTED TO GIVE RETROACTIVE
EFFECT FOR THE THREE FOR ONE CONSOLIDATION OF THE COMMON SHARES, WHICH WAS
COMPLETED ON JANUARY 31, 2003. ACCORDINGLY, LOSS PER SHARE FOR THE THREE MONTHS
AND YEAR ENDED DECEMBER 31, 2002, HAS BEEN ADJUSTED TO GIVE RETROACTIVE EFFECT
TO THE SHARE CONSOLIDATION. THE COMBINATION WITH TVX GOLD INC. ("TVX") AND ECHO
BAY MINES LTD. ("ECHO BAY") WAS ACCOUNTED FOR AS A PURCHASE WITH AN EFFECTIVE
DATE OF JANUARY 31, 2003. ACCORDINGLY, THE FINANCIAL STATEMENTS AND GOLD
EQUIVALENT PRODUCTION STATISTICS REFLECT OPERATING RESULTS FOR THE ACQUIRED
PROPERTIES FOR THE MONTHS OF FEBRUARY TO DECEMBER ONLY.
HIGHLIGHTS
o Earnings per share of $0.09 for the fourth quarter and $0.06 for the
full year in 2003
o Production of 1.62 million gold equivalent ounces at total cash costs
of $222 per ounce
o Cash flow from operating activities of $106.4 million in 2003
o Increased proven and probable reserves by 7.5% to 14.1 million ounces
of gold and by 19% to 38.6 million ounces of silver
o TVX and Echo Bay have been fully integrated into Kinross
o Growing pipeline of advanced exploration and development projects to
sustain and grow future production
o Year end cash balance of $245.8 million
o Long-term debt virtually eliminated
o Gold hedge book less than 2% of reserves, will be eliminated by early
2005
Bob Buchan, President & CEO, stated that, "2003 was a very important
transitional year for Kinross with the completion of the merger and subsequent
integration of TVX and Echo Bay into Kinross. We have accomplished much in the
last year, including: returning the Company to a position of financial strength,
growing our reserves, returning to profitability, achieving record annual
production and being on the verge of eliminating our gold hedge book. We enter
2004 as a senior global gold producer with a strong North American platform.
Approximately 50% of our expected 2004 production is based in the US and about
70% in North America. This platform has allowed us to pursue global
opportunities to position the Company for future growth. We have a robust
pipeline of advanced exploration and development projects that will sustain our
production and we are now very focused on those opportunities that will allow us
to return to the growing production profile that has been the hallmark of
Kinross since inception. We are confident that 2004 will be an excellent year
for Kinross and we look forward to our share price reflecting this reality."
FULL YEAR
The Company's share of attributable gold equivalent production was 1,620,410
ounces in 2003, an increase of 82% when compared to the 888,634 ounces produced
in 2002. Average total cash costs per attributable gold equivalent ounce were
$222 in 2003, compared to $201 in 2002. Cash flow provided from operating
activities in 2003 was $106.4 million, compared to $62.6 million in 2002. The
Company's unrestricted cash and cash equivalents have increased from $170.6
million in 2002 to $245.8 million in 2003. The Company realized earnings
attributable to common shares of $19.7 million in 2003 and earnings per share of
$0.06 compared to a net loss for 2002 of $30.9 million, or $0.32 per share.
FOURTH QUARTER
The Company's share of attributable gold equivalent production was 406,535
ounces in the fourth quarter of 2003, an increase of 76% when compared to
231,238 ounces in 2002. Average total cash costs per attributable gold
equivalent ounce were $215 in the fourth quarter 2003, compared to $198 in 2002.
Cash flow provided from operating activities in 2003 was $24.7 million, compared
to $14.1 million in 2002. The Company had earnings attributable to common shares
of $32.2 million or $0.09 per share for the fourth quarter of 2003 compared with
a loss attributable to common shares of $14.7 million, or $0.12 per share in
2002. During the fourth quarter of 2003 the Company realized a gain on sale of
assets of $29.7 million partially offset by asset write downs and other non-cash
charges of $9.8 million.
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
2003 2002 2003 2002
---------------------------------------------------
Net earnings (loss) for the period $ 32.2 $ (12.9) $ 9.7 $ (30.9)
Increase in equity component of convertible debentures - (1.8) (6.5) (7.3)
Gain on redemption of convertible debentures - - 16.5 -
---------------------------------------------------
NET EARNINGS (LOSS) ATTRIBUTABLE TO COMMON SHARES $ 32.2 $ (14.7) $ 19.7 $ (38.2)
---------------------------------------------------
Weighted average number of common shares outstanding 341.8 124.2 308.6 119.7
---------------------------------------------------
EARNINGS (LOSS) PER SHARE $ 0.09 $ (0.12) $ 0.06 $ (0.32)
---------------------------------------------------
REVENUES
GOLD AND SILVER SALES
The Company's primary source of revenue is from the sale of its gold production.
The Company sold 1,541,575 ounces of gold in 2003, compared to 848,513 ounces in
2002. Revenue from gold and silver sales was $571.9 million in 2003 compared to
$261.0 million in 2002. In 2003, the Company realized $357 per ounce of gold,
compared to $306 in 2002. The average London market spot price for gold was $364
per ounce in 2003 compared to $310 in 2002.
2
YEARS ENDED DECEMBER 31,
2003 2002
------------------------------
Attributable gold equivalent production - ounces 1,620,410 888,634
Gold sales - ounces (excluding equity accounted ounces) 1,541,575 848,513
Gold sales revenue (millions) $ 547.6 $ 254.5
Gold deferred revenue realized (millions) 2.3 5.1
------------------------------
Total gold revenue realized (millions) $ 549.9 $ 259.6
==============================
Average sales price per ounce of gold $ 355 $ 300
Deferred revenue realized per ounce of gold 2 6
------------------------------
Average realized price per ounce of gold sold $ 357 $ 306
==============================
Average spot gold price per ounce $ 364 $ 310
Silver sales revenue (millions) $ 22.0 $ 1.4
Included in gold equivalent production is silver production converted to gold
production using a ratio of the average spot market prices for the two
comparative years. The resulting ratios are 74.79:1 in 2003 and 67.24:1 in 2002.
The above non-GAAP measure of average realized price per ounce of gold sold has
been calculated on a consistent basis in each period.
The calculation of average realized price per ounce of gold sold might not be
comparable to similarly titled measures of other companies.
Average realized price per ounce of gold sold is used by management to assess
profitability and cash flow of individual operations as well as to compare with
other precious metal producers.
INTEREST AND OTHER INCOME
The Company invests its surplus cash in high quality, interest-bearing cash
equivalents. Interest and other income during 2003 totaled $12.3 million
compared to $16.9 million in 2002. Interest and other income in 2003 was
comprised of interest on cash deposits of $4.6 million, Sleeper mine reclamation
recovery of $4.0 million, $1.3 million from the sale of Echo Bay's Mexican
companies and $2.4 million of other items. This compares to 2002 interest on
cash deposits of $1.5 million, joint venture management fees of $2.4 million,
arbitration settlements of $10.3 million and $2.7 million of other items. There
are no material insurance or arbitration claims outstanding at December 31,
2003.
MARK-TO-MARKET GAIN (LOSS) ON WRITTEN CALL OPTIONS
In accordance with recommendations from the Canadian Institute of Chartered
Accountants in 2000 on accounting for written call options, the premiums
received at the inception of written call options are recorded as a liability.
Changes in the fair value of the liability are recognized in earnings. The
change in fair value of the written call options resulted in a mark-to-market
gain of $0.4 million in 2003. This compared to a loss of $2.7 million in 2002.
The remaining positions expire by June 2004.
3
COSTS AND EXPENSES
OPERATIONS SUMMARY
Gold equivalent production in 2003, (excluding equity accounted ounces)
increased by 82% when compared to 2002 production, while operating costs
increased by 122%. Consolidated operating costs were $387.3 million in 2003
compared to $174.8 million in 2002. Total cash costs per ounce of gold
equivalent were $222 in 2003 compared to $201 in 2002. Total cash costs per
ounce of gold equivalent in 2003 increased at Kubaka as low-grade stockpiles
were being milled. Costs increased at the Porcupine Joint Venture as the
Canadian dollar strengthened during the year. Costs also increased at the Fort
Knox mine due primarily to the lower gold production from the True North mine.
CONSOLIDATED PRODUCTION COSTS PER
EQUIVALENT OUNCE OF ATTRIBUTABLE GOLD PRODUCTION YEARS ENDED DECEMBER 31,
2003 2002
---------------------------
Cash operating costs $ 211 $ 194
Royalties 11 7
---------------------------
Total cash costs 222 201
---------------------------
Reclamation 6 4
Depreciation, depletion and amortization 91 101
---------------------------
Total production costs $ 319 $ 306
===========================
The following table provides a reconciliation of operating costs per the
consolidated financial statements to operating costs for per ounce calculation
of total cash costs pursuant to gold industry guidelines.
RECONCILIATION OF TOTAL CASH COSTS PER
EQUIVALENT OUNCE OF GOLD TO CONSOLIDATED FINANCIAL STATEMENTS
(MILLIONS EXCEPT PRODUCTION IN OUNCES AND PER OUNCE AMOUNTS)
YEARS ENDED DECEMBER 31,
2003 2002
------------------------------
Operating costs included in financial statements $ 387.3 $ 174.8
Operating costs for attributable production 0.4 13.4
Site restoration cost accruals (9.4) (3.0)
Change in bullion inventory (2.5) (2.0)
Operating costs not related to gold production (16.4) (4.4)
------------------------------
Operating costs for per ounce calculation purposes $ 359.4 $ 178.8
Gold equivalent production - ounces 1,620,410 888,634
------------------------------
Total cash costs per equivalent ounce of gold $ 222 $ 201
------------------------------
The above non-GAAP measure of total cash costs per ounce has been calculated on
a consistent basis in each period.
For reasons of comparability, total cash costs do not include certain items such
as property write downs, which do not occur in all periods but are included
under GAAP in the determination of net earnings or loss.
Total cash costs per ounce are calculated in accordance with gold industry
guidelines. Total cash costs per ounce may not be comparable to similarly titled
measures of other companies.
4
Total cash costs per ounce information is used by management to assess
profitability and cash flow of individual operations, as well as to compare with
other precious metals producers.
Total cash costs per ounce of gold equivalent increased by 10% during 2002.
Details of the individual mine performance are discussed in the following
sections.
The item total cash cost per ounce is furnished to provide additional
information and is a non-GAAP measure. This measure should not be considered in
isolation as a substitute for a measure of performance prepared in accordance
with generally accepted accounting principles and is not necessarily indicative
of operating profit or cost from operations as determined under generally
accepted accounting principles. There are no differences in computing operating
costs under U.S. GAAP.
OPERATIONS - INDIVIDUAL MINE DISCLOSURE
FORT KNOX (100% OWNERSHIP INTEREST), USA
Production at the Fort Knox operation during the fourth quarter of 2003 was
100,674 gold equivalent ounces, down from the 114,357 ounces produced during the
same period last year, and 13% less than plan, due primarily to lower gold
grades and lower metallurgical recoveries from the True North deposits. Gold
equivalent production for 2003 was 391,831 ounces compared to 410,519 ounces in
2002. The processing of lower grade True North ore that was slightly more
refractory due to the presence of sulphides, adversely impacted gold recoveries
in 2003. Fourth quarter total cash costs were $223 per gold equivalent ounce, a
6% rise over the same period last year and 9% higher than forecast. Total cash
costs per gold equivalent ounce for 2003 increased 5% to $243 compared to the
same period last year. Total cash costs were higher as a result of lower than
plan gold production caused primarily by the lower than expected contribution
from True North.
The recently revised expectation for the Fort Knox mine is for 2004 gold
production of approximately 340,000 ounces at total cash costs of $220 per
ounce. This revision reflects the intent to suspend mining of the True North
mine for several months in early 2004 and use the True North mining fleet to
complete the next phase of the tailings dam lift at Fort Knox rather than rely
on more expensive contractors. Under this scenario mining of True North would be
reactivated later in 2004 and would extend into mid-2005.
RECONCILIATION OF THE FORT KNOX MINE TOTAL CASH COSTS PER
EQUIVALENT OUNCE OF GOLD TO CONSOLIDATED FINANCIAL STATEMENTS
(MILLIONS EXCEPT PRODUCTION IN OUNCES AND PER OUNCE AMOUNTS)
YEAR ENDED
DECEMBER 31,
2003 2002
--------------------------------------------------------------------------------------------------
Operating costs included in financial statements $ 92.8 $ 99.2
Site restoration cost accruals (2.5) (1.0)
Change in bullion inventory 4.9 (2.9)
--------------------------------------------------------------------------------------------------
Operating costs for per ounce calculation purposes $ 95.2 $ 95.3
--------------------------------------------------------------------------------------------------
Gold equivalent production - ounces 391,831 410,519
Total cash costs per equivalent ounce of gold $ 243 $ 232
Total cash costs are non-GAAP measures. For further information on this non-GAAP
measure, please refer to the disclosure under the heading "Costs and Expenses -
Operations Summary".
5
Capital expenditures at the Fort Knox operations in 2003 were $26.6 million
compared to $15.0 million in the same period last year. Phase 5 mine development
was $3.2 million with the remainder of capital directed towards equipment
purchases and rebuilds, the drilling of pit de-watering wells and exploration.
During 2003, exploration was conducted within the Fort Knox pit, at the True
North mine, on the Gil project and at Ryan Lode. Results from the Fort Knox
in-pit work confirmed the continuity of the mineralized zones to justify the
Phase 6 layback at an assumed gold price of $325 per ounce. At Gil, 10
kilometers east of the Fort Knox mine site, an engineering scoping study was
completed. Reserves at year-end 2003 for Fort Knox and area deposits increased
by approximately 10% to 2,945,000 ounces at an estimated gold price of $325 per
ounce compared to the previous year.
ROUND MOUNTAIN (50% OWNERSHIP INTEREST), USA
Kinross acquired its ownership interest in the Round Mountain mine, located in
Nye County, Nevada, USA, upon completion of the combination with Echo Bay on
January 31, 2003. Round Mountain continues to perform well in spite of a power
problem that limited mill production in the second half of 2003. Kinross' share
of fourth quarter gold equivalent production totaled 86,433 ounces and
eleven-month production, ended December 31, 2003, totaled 364,271 ounces. Gold
equivalent production was positively impacted by higher gold recoveries due to
the installation of new carbon columns during the second quarter and the
implementation of side slope leaching of the historic dedicated leach pad.
Due to the failure of an electrical transformer, production activities in the
second half of the year focused on accelerating ore placement on the dedicated
leach pads to offset crushing and milling limitations. Higher-grade ore, which
would have been milled during a portion of the third and fourth quarters, was
stockpiled. As a result of the flexibility provided by having three separate
processing streams, the lower mill throughput did not severely impact production
for the second half of 2003. The transformer repairs have been completed and the
mill was back at full production in February 2004.
Total cash costs per gold equivalent ounce were $238 per ounce during the fourth
quarter and $201 per ounce for the eleven-month period ended December 31, 2003.
Kinross' expectation for Round Mountain is to produce approximately 367,000
ounces to the Company's account at total cash costs of $223 per ounce in 2004.
RECONCILIATION OF THE ROUND MOUNTAIN MINE TOTAL CASH COSTS PER
EQUIVALENT OUNCE OF GOLD TO CONSOLIDATED FINANCIAL STATEMENTS
(MILLIONS EXCEPT PRODUCTION IN OUNCES AND PER OUNCE AMOUNTS)
ELEVEN MONTHS ENDED
DECEMBER 31,
2003
------------------------------------------------------------------------------------------------
Operating costs included in financial statements $ 76.7
Site restoration cost accruals (1.8)
Change in bullion inventory (1.5)
------------------------------------------------------------------------------------------------
Operating costs for per ounce calculation purposes $ 73.3
------------------------------------------------------------------------------------------------
Gold equivalent production - ounces 364,271
Total cash costs per equivalent ounce of gold $ 201
TOTAL CASH COSTS ARE NON-GAAP MEASURES. FOR FURTHER INFORMATION ON THIS NON-GAAP MEASURE, PLEASE
REFER TO THE DISCLOSURE UNDER THE HEADING "COSTS AND EXPENSES - OPERATIONS SUMMARY".
6
Kinross' share of capital expenditures at the Round Mountain mine in 2003 was
$5.7 million. Pit dewatering and dedicated leach pad construction accounted for
the majority of the capital expenditures.
At the Gold Hill project, reverse circulation and diamond drilling was completed
during 2003 in order to verify the block models. As a result of exploration
activity at Round Mountain and Gold Hill, the Company's gold reserves at Round
Mountain and area were 1,850,000 ounces at an estimated gold price of $325 per
ounce, essentially unchanged at the end of 2003 compared to the pro forma
reserves at year-end 2002.
PORCUPINE (49% OWNERSHIP INTEREST), CANADA
Kinross' share of fourth quarter gold production from the Porcupine Joint
Venture was 58,637 ounces, a 9% improvement over the 53,577 ounces produced
during the same period last year. Total cash cost per ounce was $197, a 12%
improvement over the $224 per ounce achieved during the fourth quarter 2002.
Kinross' share of gold production in 2003 increased to 223,960 ounces at a total
cash cost of $211 per ounce as compared to 189,464 ounces during 2002. Kinross'
share of comparable production includes only 100% of Hoyle Pond mine production
for the first six months of 2002, whereas, 2003 production figures reflect
Kinross' 49% ownership share in the Porcupine Joint Venture formed on July 1,
2002.
Production in 2003 was 2% greater than plan and total cash costs per ounce were
essentially on plan in spite of the strengthening Canadian dollar relative to
the US dollar. These improvements were achieved despite power outages and
associated power constraints during August.
Kinross' expectation for Porcupine is to produce approximately 200,000 ounces
for the Company's account at total cash costs of $230 per ounce in 2004.
RECONCILIATION OF THE PORCUPINE JOINT VENTURE TOTAL CASH COSTS PER
EQUIVALENT OUNCE OF GOLD TO CONSOLIDATED FINANCIAL STATEMENTS
(MILLIONS EXCEPT PRODUCTION IN OUNCES AND PER OUNCE AMOUNTS)
YEAR ENDED
DECEMBER 31,
2003 2002
------------------------------------------------------------------------------------------
Operating costs included in financial statements $ 53.4 $ 38.6
Site restoration cost accruals (1.6) (1.5)
Change in bullion inventory (1.5) 1.5
Operating costs not related to gold production (2.9) (0.6)
------------------------------------------------------------------------------------------
Operating costs for per ounce calculation purposes $ 47.4 $ 38.0
------------------------------------------------------------------------------------------
Gold equivalent production - ounces 223,960 189,464
Total cash costs per equivalent ounce of gold $ 211 $ 201
TOTAL CASH COSTS ARE NON-GAAP MEASURES. FOR FURTHER INFORMATION ON THIS NON-GAAP MEASURE, PLEASE
REFER TO THE DISCLOSURE UNDER THE HEADING "COSTS AND EXPENSES - OPERATIONS SUMMARY".
Kinross' share of capital expenditures at the Porcupine Joint Venture in 2003
was $8.3 million. This amount included expenditures on the tailings dam lifts
and the development of the Pamour project.
The Pamour open pit feasibility study was finalized in late 2003 and permitting
work was initiated. Demolition of the old Pamour headframe and associated
infrastructure was completed in preparation for the development of the open pit
operations.
An aggressive exploration program continued during 2003 with 88,090 metres of
exploration diamond drilling completed. These activities resulted in the
Porcupine Joint Venture replacing its reserves
7
consumed in 2003, such that reserves estimated at $325 per ounce were 1,489,000
ounces for Kinross' account at year-end 2003.
KUBAKA (98.1% OWNERSHIP INTEREST), RUSSIA
During the fourth quarter of 2003, Kinross' share of gold equivalent production
from the Kubaka mine was 43,236 ounces (98.1% ownership) at a total cash cost of
$194 per ounce, compared with the 47,125 ounces (54.7% ownership) produced at a
total cash cost of $123 per ounce achieved during the same three month period in
2002. Comparable production was lower due to the completion of mining activities
at the Kubaka pit at the end of 2002 and the commencement of processing of
relatively lower grade ore stockpiles which was partially offset by the
increased ownership interest in 2003. The processing of stockpiled ore, combined
with underground mining activities, continued in the fourth quarter.
Production in 2003 was similarly impacted by the closure of the Kubaka open pit
with Kinross' share of gold equivalent production totaling 164,006 ounces (54.7%
ownership to February 28, 2003, 98.1% thereafter) at a total cash cost of $194
per ounce down from the 220,972 ounces (54.7% ownership) at a total cash cost of
$133 per ounce achieved during 2002.
Gold equivalent production in 2003 was 13% less than plan due to lower
underground production partially offset by higher than plan mill throughput.
Underground production is expected to continue well into 2004 to supplement
low-grade stockpiles and initial ore from a test pit at the Birkachan property
located 28 kilometres north of Kubaka.
Kinross' expectation for Kubaka is to produce approximately 137,000 gold
equivalent ounces to the Company's account at total cash costs of $260 per ounce
in 2004.
RECONCILIATION OF THE KUBAKA MINE TOTAL CASH COSTS PER
EQUIVALENT OUNCE OF GOLD TO CONSOLIDATED FINANCIAL STATEMENTS
(MILLIONS EXCEPT PRODUCTION IN OUNCES AND PER OUNCE AMOUNTS) YEAR ENDED
DECEMBER 31,
2003 2002
---------------------------------------------------------------------------------------------
Operating costs included in financial statements $ 30.6 $ 28.6
Site restoration cost accruals (0.5) (0.8)
Change in bullion inventory 0.3 (0.1)
Management fees and other 1.6 1.6
---------------------------------------------------------------------------------------------
Operating costs for per ounce calculation purposes $ 32.0 $ 29.3
---------------------------------------------------------------------------------------------
Gold equivalent production - ounces 164,006 220,972
Total cash costs per equivalent ounce of gold $ 194 $ 133
TOTAL CASH COSTS ARE NON-GAAP MEASURES. FOR FURTHER INFORMATION ON THIS NON-GAAP MEASURE,
PLEASE REFER TO THE DISCLOSURE UNDER THE HEADING "COSTS AND EXPENSES - OPERATIONS SUMMARY".
Kinross' share of 2003 capital expenditures at Kubaka was $1.7 million.
Exploration drilling during the second half of 2003, assisted in further
defining mineralization at Birkachan and the Tsokol deposits. Kinross' share of
gold reserves at Kubaka and area, estimated at $325 per ounce of gold, increased
to 410,000 ounces at year-end 2003 due to the inclusion of initial reserves at
Birkachan and Tsokol, exploration success on the underground portion of Kubaka
and the increase in ownership year-over-year.
8
PARACATU (ALSO KNOWN AS BRASILIA - 49% OWNERSHIP INTEREST), BRAZIL
Kinross acquired its ownership interest in the Paracatu open pit mine, located
in the State of Minas Gerais, Brazil, upon completion of the combination with
TVX on January 31, 2003. During the three months and eleven months ended
December 31, 2003, the Company's share of gold production was 24,934 ounces at a
total cash cost of $203 per ounce and 91,176 ounces at a total cash cost of $193
per ounce, respectively. In the second half of 2003, harder than anticipated
ore, which reduced mill throughput, and the higher sulphide content of the ore
processed, which lowered recoveries, combined to negatively impact gold
production as compared to plan. The lower gold production in addition to higher
electricity, fuel and maintenance costs resulted in fourth quarter total cash
costs per ounce being 20% above plan.
The economics of the Calha Mill expansion prefeasibility study, completed during
the second quarter, were favourable and, as a result, work is well advanced on a
full feasibility study that is to be completed during the second quarter 2004.
The study envisions the installation of a SAG mill to increase mill throughput
by approximately 50% to 30 million tonnes per annum.
Kinross' expectation for the Paracatu mine is to produce approximately 95,000
ounces to the Company's account at total cash costs of $228 per ounce in 2004.
RECONCILIATION OF THE PARACATU MINE TOTAL CASH COSTS PER
EQUIVALENT OUNCE OF GOLD TO CONSOLIDATED FINANCIAL STATEMENTS
(MILLIONS EXCEPT PRODUCTION IN OUNCES AND PER OUNCE AMOUNTS)
ELEVEN MONTHS ENDED
DECEMBER 31,
2003
------------------------------------------------------------------------------------------
Operating costs included in financial statements $ 19.9
Site restoration cost accruals (0.8)
Change in bullion inventory (0.4)
Operating costs not related to gold mining (1.1)
------------------------------------------------------------------------------------------
Operating costs for per ounce calculation purposes $ 17.6
------------------------------------------------------------------------------------------
Gold equivalent production - ounces 91,176
Total cash costs per equivalent ounce of gold $ 193
TOTAL CASH COSTS ARE NON-GAAP MEASURES. FOR FURTHER INFORMATION ON THIS NON-GAAP MEASURE,
PLEASE REFER TO THE DISCLOSURE UNDER THE HEADING "COSTS AND EXPENSES - OPERATIONS SUMMARY".
Kinross' share of capital expenditures at the Paracatu mine in 2003 was $5.2
million. Capital expenditures were mainly related to additions to the mining
fleet and work related to the tailings dam.
In 2003, Kinross' share of reserves at Paracatu increased by almost 5% to
2,613,000 ounces of gold, at an estimated gold price of $325 per ounce, compared
to Kinross' pro forma reserves the previous year. In addition, the economies of
scale resulting from the proposed expansion could lower the cut-off grade and
consequently could have a significant positive further impact on reserves in the
future.
LA COIPA (50% OWNERSHIP INTEREST), CHILE
Kinross acquired its ownership interest in the La Coipa mine, Chile, upon
completion of the combination with TVX on January 31, 2003. The Company's share
of gold equivalent production for the three months ended December 31, 2003 of
44,454 ounces was 48% above plan at total cash costs of $204 per equivalent
ounce or 34% below plan. The much higher production and much lower costs were a
result of a positive grade variance caused by a change in the sequencing of ore
from Phase 3 at Coipa Norte rather
9
than Phase 5. In addition, a planned maintenance shutdown in December was
deferred to January 2004 causing throughput to exceed plan for the quarter. For
the eleven-month period ended December 31, 2003, gold equivalent production was
144,125 ounces at total cash costs of $234 per ounce.
Kinross' expectation for the La Coipa mine is to produce approximately 145,000
gold equivalent ounces to the Company's account at total cash costs of $288 per
ounce in 2004.
RECONCILIATION OF THE LA COIPA MINE TOTAL CASH COSTS PER
EQUIVALENT OUNCE OF GOLD TO CONSOLIDATED FINANCIAL STATEMENTS
(MILLIONS EXCEPT PRODUCTION IN OUNCES AND PER OUNCE AMOUNTS)
ELEVEN MONTHS ENDED
DECEMBER 31,
2003
-----------------------------------------------------------------------------------------------
Operating costs included in financial statements $ 34.9
Site restoration cost accruals (0.6)
Change in bullion inventory (0.6)
-----------------------------------------------------------------------------------------------
Operating costs for per ounce calculation purposes $ 33.7
-----------------------------------------------------------------------------------------------
Gold equivalent production - ounces 144,125
Total cash costs per equivalent ounce of gold $ 234
TOTAL CASH COSTS ARE NON-GAAP MEASURES. FOR FURTHER INFORMATION ON THIS NON-GAAP MEASURE,
PLEASE REFER TO THE DISCLOSURE UNDER THE HEADING "COSTS AND EXPENSES - OPERATIONS SUMMARY".
Kinross' share of capital expenditures at La Coipa during 2003 was $0.5 million.
Exploration activity in 2003 at La Coipa focused on the Puren Norte deposit that
has a significant silver component. Compared to Kinross pro forma reserves of
the previous year, Kinross' share of gold reserves at La Coipa declined by 9% to
584,000 ounces while silver reserves increased by 18% to 37,837,000 ounces,
estimated at a gold price of $325 per ounce and a silver price of $4.75 per
ounce.
CRIXAS (50% OWNERSHIP INTEREST), BRAZIL
Kinross acquired its ownership interest in the Crixas mine, located in the State
of Goias, Brazil upon completion of the combination with TVX on January 31,
2003. The mine continues to perform well with the Company's share of gold
production during the fourth quarter 2003 totaling 22,775 ounces at total cash
costs of $128 per ounce. For the eleven months ended December 31, 2003, Kinross'
share of production was 86,698 ounces of gold at a total cash cost of $109 per
ounce.
Kinross' expectation for the Crixas mine is to produce approximately 94,000
ounces to the Company's account at total cash costs of $129 per ounce in 2004.
RECONCILIATION OF THE CRIXAS MINE TOTAL CASH COSTS PER
EQUIVALENT OUNCE OF GOLD TO CONSOLIDATED FINANCIAL STATEMENTS
(MILLIONS EXCEPT PRODUCTION IN OUNCES AND PER OUNCE AMOUNTS)
ELEVEN MONTHS ENDED
DECEMBER 31,
2003
----------------------------------------------------------------------------------------------
Operating costs included in financial statements $ 10.5
Site restoration cost accruals (0.2)
Change in bullion inventory (0.8)
----------------------------------------------------------------------------------------------
Operating costs for per ounce calculation purposes $ 9.5
----------------------------------------------------------------------------------------------
Gold equivalent production - ounces 86,698
Total cash costs per equivalent ounce of gold $ 109
10
Total cash costs are non-GAAP measures. For further information on this non-GAAP
measure, please refer to the disclosure under the heading "Costs and Expenses -
Operations Summary".
Kinross' share of capital expenditures at the Crixas mine in 2003 was $3.2
million.
Exploration work on the Forquilha Sul ore zone, which overlies the principle
Mina III ore body, has confirmed continuity of mineralization over a strike
length of approximately 400m and a down-plunge length of 300m. The zone remains
open down plunge and exploration drilling in 2004 will target extensions along
strike. Kinross' share of 2003 gold reserves at Crixas was essentially unchanged
at 470,000 ounces, estimated at a gold price of $325 per ounce, compared to pro
forma reserves the previous year of 478,000 ounces.
MUSSELWHITE (31.93% OWNERSHIP INTEREST), CANADA
Kinross acquired its ownership interest in the Musselwhite underground mine,
located in northwestern Ontario, Canada, upon completion of the combination with
TVX on January 31, 2003. The Company's share of fourth quarter gold production
of 18,821 ounces at total cash costs of $256 per ounce was on plan.
For the eleven-month period ended December 31, 2003, gold production was 64,978
ounces at total cash costs of $257 per ounce. Operational shortfalls in the
first quarter of 2003 were largely responsible for the lower than plan gold
production and higher total cash costs for the year.
Kinross' expectation for the Musselwhite mine is to produce approximately 75,000
ounces to the Company's account at total cash costs of $251 per ounce in 2004.
RECONCILIATION OF THE MUSSELWHITE MINE TOTAL CASH COSTS PER
EQUIVALENT OUNCE OF GOLD TO CONSOLIDATED FINANCIAL STATEMENTS
(MILLIONS EXCEPT PRODUCTION IN OUNCES AND PER OUNCE AMOUNTS)
ELEVEN MONTHS ENDED
DECEMBER 31,
2003
--------------------------------------------------------------------------------------------
Operating costs included in financial statements $ 16.6
Site restoration cost accruals (0.4)
Change in bullion inventory 0.7
Operating costs not related to gold mining (0.2)
--------------------------------------------------------------------------------------------
Operating costs for per ounce calculation purposes $ 16.7
--------------------------------------------------------------------------------------------
Gold equivalent production - ounces 64,978
Total cash costs per equivalent ounce of gold $ 257
TOTAL CASH COSTS ARE NON-GAAP MEASURES. FOR FURTHER INFORMATION ON THIS NON-GAAP MEASURE,
PLEASE REFER TO THE DISCLOSURE UNDER THE HEADING "COSTS AND EXPENSES - OPERATIONS SUMMARY".
Kinross' share of capital expenditures at the Musselwhite mine in 2003 was $2.7
million.
During 2003 over 80,000m of drilling was completed at Musselwhite. Positive
results continue to be obtained from infill diamond drilling of the PQ Deeps
zone. Kinross' share of gold reserves in 2003, estimated at a gold price of $325
per ounce, was essentially unchanged at 658,000 ounces compared to pro forma
reserves containing 667,000 ounces in 2002.
11
NEW BRITANNIA (50% OWNERSHIP INTEREST), CANADA
Kinross operates and owns a 50% interest in the New Britannia underground mine,
located in northern Manitoba, acquired in the combination with TVX on January
31, 2003. During the fourth quarter 2003, Kinross' share of gold production was
a disappointing 6,567 ounces at total cash costs of $408 per ounce. The
Company's share of gold production for the eleven months ended December 31, 2003
was 31,627 ounces at total cash costs of $327 per ounce.
Kinross and its joint venture partner, High River Gold Mines Limited, have
concluded an initial evaluation of the future of the mine. Due to the escalating
unit costs and rapidly declining gold reserves, it is currently projected that
gold production from New Britannia will be suspended in the first half of 2005.
Kinross' revised expectation for the New Britannia mine is to produce
approximately 34,000 ounces to the Company's account at total cash costs of $320
per ounce in 2004. Kinross continues to evaluate various mining options at New
Britannia and is closely monitoring progress towards achieving the targets in
the revised plan.
RECONCILIATION OF THE NEW BRITANNIA MINE TOTAL CASH COSTS PER
EQUIVALENT OUNCE OF GOLD TO CONSOLIDATED FINANCIAL STATEMENTS
(MILLIONS EXCEPT PRODUCTION IN OUNCES AND PER OUNCE AMOUNTS)
ELEVEN MONTHS ENDED
DECEMBER 31,
2003
----------------------------------------------------------------------------------------------
Operating costs included in financial statements $ 11.3
Site restoration cost accruals (0.1)
Change in bullion inventory (0.8)
Operating costs not related to gold mining (0.1)
----------------------------------------------------------------------------------------------
Operating costs for per ounce calculation purposes $ 10.3
----------------------------------------------------------------------------------------------
Gold equivalent production - ounces 31,627
Total cash costs per equivalent ounce of gold $ 327
TOTAL CASH COSTS ARE NON-GAAP MEASURES. FOR FURTHER INFORMATION ON THIS NON-GAAP MEASURE,
PLEASE REFER TO THE DISCLOSURE UNDER THE HEADING "COSTS AND EXPENSES - OPERATIONS SUMMARY".
Kinross' share of capital expenditures at the New Britannia mine in 2003 was
$1.0 million.
LUPIN (100% OWNERSHIP INTEREST), CANADA
In August 2003, Kinross Gold Corporation announced the immediate suspension of
operations at the Lupin mine in Canada due to the poor economic performance of
the operation over a protracted period of time. As a result, there was no gold
production during the fourth quarter of 2003 and gold production for the full
year was 56,008 ounces at total cash costs of $407 per ounce. The plant and
equipment was placed on care and maintenance pending the results of the review
of future alternatives for the property. Personnel have remained on site to
continue with environmental management programs to ensure compliance with all
regulatory requirements.
Kinross' review of alternatives for the property concluded that the development
of a mine plan to extract the shaft and crown pillars and previously developed
remnant ore was appropriate. Consequently, during the first quarter of 2004,
Kinross has been preparing to reactivate Lupin with the objective of producing
79,000 ounces in 2004 at total cash costs of $319 per ounce with additional
potential production to mid-2005. Mill operations and gold production are to
commence in March.
12
RECONCILIATION OF THE LUPIN MINE TOTAL CASH COSTS PER
EQUIVALENT OUNCE OF GOLD TO CONSOLIDATED FINANCIAL STATEMENTS
(MILLIONS EXCEPT PRODUCTION IN OUNCES AND PER OUNCE AMOUNTS)
ELEVEN MONTHS ENDED
DECEMBER 31,
2003
------------------------------------------------------------------------------------------
Operating costs included in financial statements $ 35.6
Site restoration cost accruals (0.8)
Change in bullion inventory (2.9)
Operating costs not related to gold mining (9.1)
------------------------------------------------------------------------------------------
Operating costs for per ounce calculation purposes $ 22.8
------------------------------------------------------------------------------------------
Gold equivalent production - ounces 56,008
Total cash costs per equivalent ounce of gold $ 407
TOTAL CASH COSTS ARE NON-GAAP MEASURES. FOR FURTHER INFORMATION ON THIS NON-GAAP MEASURE,
PLEASE REFER TO THE DISCLOSURE UNDER THE HEADING "COSTS AND EXPENSES - OPERATIONS SUMMARY".
Capital expenditures at the Lupin mine in 2003 were $1.1 million.
GENERAL AND ADMINISTRATIVE
General and administrative costs include corporate office expenses related to
the overall management of the business which are not part of direct mine
operating costs. General and administrative costs include the costs incurred at
three offices. These offices are the corporate office in Toronto, our United
States office in Reno, Nevada, and our office in Rio de Janeiro. Corporate and
administrative expenses totaled $25.0 million in 2003, compared to $11.3 million
in 2002. The 2003 corporate and administrative expenses increased due to
increased staffing as a result of the combination with TVX and Echo Bay.
EXPLORATION AND BUSINESS DEVELOPMENT
A critical goal for the Company is the creation of value through the investment
in quality projects and the consummation of accretive acquisitions. This is a
very important segment of the Company's activities which has and will continue
to require senior management attention. Total exploration and business
development expenditures in 2003 were $24.3 million, compared with $11.6 million
in 2002. Exploration activities in 2003 focused primarily at and around existing
operating mines and on the Kettle River - Emanuel Creek project in Washington
State and the exploration of Refugio in Chile early in the year. During 2003,
the Company spent $11.3 million on exploration at Kinross operated mines,
including $2.7 million at Kettle, $2.4 million on the Fort Knox and True North
in-pit programs as well as the Gil and Ryan Lode projects, $2.1 million on
district exploration and advancing the Gold Hill project at Round Mountain and
$1.3 million in the Kubaka area. At Kinross' joint venture properties operated
by other companies, Kinross' portion of exploration expenditures in 2003 totaled
$6.0 million including $2.5 million at Porcupine and $2.1 million at
Musselwhite. Project exploration was $2.7 million for the year with $1.4 million
of this total spent at Refugio early in 2003. Generative exploration and general
and administrative cost for exploration was $1.1 million for the year. As a
result of this exploration activity and the use of a gold price assumption of
$325 per ounce compared to $300 per ounce the previous year, gold reserves
increased by 978,000 ounces, an increase of 7.5% during 2003. Taking into
account reserve depletion by production, reserve growth including depletion was
2,742,000 ounces of gold and consequently, Kinross' reserve discovery cost per
ounce is estimated to be just over $7 per ounce.
13
In 2003, Kinross entered into agreements to farm-out or divest of certain gold
exploration properties. The objectives of these transactions are to maximize
near-term exploration expenditures funded by other parties while retaining
certain back-in rights (George/Goose Lake) or to realize value from
non-strategic exploration assets (Ulu and Youga). These transactions closed in
early 2004.
THE ACQUISITION OF CROWN RESOURCES
On November 20, 2003, Kinross announced that it had executed a definitive
acquisition agreement with Crown Resources Corporation ("Crown") whereby Kinross
will acquire Crown and its 100%-owned Buckhorn Mountain gold deposit located in
north central Washington State, USA, approximately 67 kilometres by road from
Kinross' Kettle River gold milling facility. The Buckhorn Mountain gold deposit
is a high-grade skarn gold deposit located 240 kilometres northwest of Spokane,
Washington. On December 16, 2003, Crown reported total proven and probable
reserves for the Buckhorn Mountain deposit of 2.79 million tonnes grading 11.05
grams of gold per tonne containing 991,300 ounces of gold.
The current plan, which contemplates the development of an underground mine
rather than an open pit mine, positively addresses major environmental concerns
identified during previous permitting efforts. Kinross is confident that by
working in conjunction with Federal, State and local agencies as well as other
stakeholders, the permitting process, initiated by Crown, will be successful in
obtaining the necessary regulatory approvals to develop an underground mine in a
timely manner. Documentation to be mailed to Crown shareholders concerning the
proposed acquisition of Crown by Kinross is currently involved in the regulatory
review process and assuming the timely conclusion of this review process, the
closing of the transaction is anticipated in the second quarter of 2004.
DEPRECIATION, DEPLETION AND AMORTIZATION
Depreciation, depletion and amortization totaled $140.9 million in 2003 compared
to $85.3 million in 2002. Depreciation, depletion and amortization have
decreased per equivalent ounce of gold to $91 in 2003, from $101 in 2002. The
2003 decrease per equivalent ounce of gold was largely due to the combination
with TVX and Echo Bay, and due to an increase in the reserve base of the
Company.
EQUITY INVESTMENTS SOLD
During the fourth quarter of 2003, Kinross sold several of its equity interests
and portfolio investments which were deemed non-strategic including Minefinders
Corporation Ltd., Pacific Rim Mining Corp. and Endeavour Mining Capital
Corporation. Proceeds from the sale of investments totaled $56.2 million. The
Company realized after-tax gains of $26.0 million on the sale of these
investments in the fourth quarter of 2003.
INTEREST EXPENSE
Interest expense totaled $5.1 million in 2003, compared to $5.0 million in 2002.
Interest expense in 2003 is comprised of $0.2 million relating to the Company's
proportionate share of interest on the Kubaka project loans, $1.2 million of
interest on the Alaskan industrial revenue bonds and the Fort Knox capital
leases, $2.4 million of interest on the debt component of the convertible
debentures and $1.3 million on other items. Interest expense is expected to
decrease in 2004 as the convertible debentures and the industrial revenue bonds
have been fully repaid.
14
SHARE OF LOSS OF INVESTEE COMPANIES
Share of gain or loss of investee companies was nil in 2003, compared to a loss
of $0.6 million in 2002. The Company equity accounts investments where it owns
more than 20% and exercises significant influence. The only remaining equity
accounted investment, Pacific Rim, was equity accounted to a zero basis at the
end of 2002. As discussed above, during 2003 the interest in Pacific Rim was
sold.
WRITE DOWN OF PROPERTY, PLANT AND EQUIPMENT AND OTHER NON-CASH CHARGES
Impairment analysis for the operating assets consists of comparing the estimated
undiscounted future net cash flows on an area of interest basis with the assets
carrying value, and when the future net cash flows are less than the carrying
value of any particular asset, a write down is recorded. Over the past three
years gold has averaged $315 per ounce and closed the year at $417 per ounce.
Subsequent to the end of 2003, gold has continued to trade above $390 per ounce.
In addition to current and historical spot gold prices, the Company reviewed
analysts' reports and participated in external surveys. As a result of this
trend, and external survey expectations for spot gold prices, the Company used
an assumption of $350 per ounce for gold for impairment analysis in 2003,
compared to $325 per ounce in 2002.
Non-cash property, plant and equipment write downs and other non-cash charges
totaled $9.9 million in 2003 compared to $7.9 million in 2002. The 2003 write
downs related to a reduction in the carrying value of E-Crete of $5.2 million
and $4.0 million of other write downs. The 2002 write down and other non-cash
charges were principally as a result of increases in reclamation provisions at
the closure properties.
INCOME AND MINING TAXES
The Company is subject to tax in various jurisdictions including Canada, the
United States, Russia, Brazil and Chile. However, the Company has substantial
operating losses and other tax deductions to shelter future taxable income. The
2003 liability arises from income taxes in Russia, Brazil, Chile and federal
large corporations tax and provincial mining taxes in Canada.
LIQUIDITY AND FINANCIAL RESOURCES
OPERATING ACTIVITIES
Cash flow provided from operating activities was $106.4 million in 2003 compared
to $62.6 million in 2002. The 2003 cash flow from operating activities was
positively affected by higher sales prices per ounce of gold sold. During the
fourth quarter the Company raised a further $61.0 million principally through
the sale of long term investments and other assets, including holdings in
Minefinders and Pacific Rim.
FINANCING ACTIVITIES
EQUITY ISSUES
The Company completed an equity offering in February 2002, resulting in the
issue of 7.7 million post-consolidation common shares from treasury for net
proceeds of $18.5 million. The majority of funds raised were used to complete a
$16.00 per share cash tender offer for the convertible preferred shares of a
subsidiary company. The tender offer process closed on April 4, 2002, with
670,722 convertible preferred
15
shares of subsidiary company tendered leaving 223,878 convertible preferred
shares or 12.2% outstanding to non-affiliated shareholders.
In December 2002, the Company issued 24.3 million post-consolidation common
shares and 25.0 million common share purchase warrants (3 warrants to purchase
one post-consolidation share) for net proceeds of $111.6 million, and 0.3
million post-consolidation common shares for net proceeds of $1.2 million
pursuant to the employee share incentive plan.
On August 28, 2003, Kinross issued 23 million common shares for gross proceeds
of Cdn.$213 million. After giving effect to the closing of the offering, the
total number of common shares outstanding was approximately 338.4 million. The
net proceeds from the offering were used to redeem Kinross' outstanding 5.5%
convertible unsecured subordinated debentures. The principal amount of the
convertible debentures was Cdn.$195.6 million. The convertible debentures were
redeemed on September 29, 2003.
On November 14, 2003, the Company issued 6.8 million shares as Echo Bay warrants
were exercised on expiry. The terms of the warrants were modified to allow Echo
Bay warrant holders to convert into Kinross stock as a result of the January 31,
2003 merger of Kinross, Echo Bay and TVX. Total proceeds of $35.3 million were
realized.
During the fourth quarter of 2003, Kinross issued 31,561 common shares for net
proceeds of $0.23 million pursuant to the employee share incentive plan. Kinross
also issued 445,681 common shares for net proceeds of $2.16 million pursuant to
the employee stock option plan.
CREDIT FACILITY
As at December 31, 2002, the Company had a $30.0 million operating line of
credit in place with a bank syndicate, which is utilized for letters of credit
purposes. As at December 31, 2002, $38.5 million of letters of credit were
issued under this facility, requiring the Company to restrict $8.9 million of
cash. On February 27, 2003, the Company entered into a new credit facility for
$125.0 million with a maturity date of December 31, 2005. The credit facility is
secured by the Company's Fort Knox mine and shares in various wholly owned
subsidiaries. The purpose of the credit facility is to issue letters of credit
to various regulatory agencies to satisfy financial assurance requirements to
which the Company is subject. The Company has issued new letters of credit under
this facility to replace outstanding surety bonds and cash deposits.
The Company had restricted cash of $21.1 million at December 31, 2002. The
restricted cash is derived from two sources, the first being $8.9 million of
cash securing letters of credit issued in excess of the maximum allowable under
the credit facility. The remaining $12.2 million represents the Company's share
of restricted cash subject to a court ordered freeze in Russia. The court
ordered freeze was as a result of challenges brought to Omolon alleging that the
original issuance of shares was flawed and therefore, null and void. On January
8, 2003, the claim was dismissed and the restrictions on cash were released.
Kinross has unrestricted cash and cash equivalents of $245.8 million and
restricted cash of $5.1 million at December 31, 2003. This restricted cash is
associated with cash deposits that were made by Echo Bay to secure letters of
credit for various financial assurance requirements. At the end of the year
letters of credit had been issued to replace all of the old financial assurance.
Some state agencies have not released the old financial assurance they were
holding, causing restricted cash to remain high for longer than had been
anticipated. The remaining restricted cash is expected to be released in 2004.
16
DEBT
The convertible debentures were fully repaid during the third quarter of 2003 at
par using the proceeds of the equity issue, which closed on August 28, 2003.
Other long-term debt of $10.5 million was repaid during the year including $4.7
of capital leases, $3.8 million of debt at E-Crete and $2.0 million of debt to
EBRD in Russia.
No dividends were declared nor paid to the holders of the convertible preferred
shares of subsidiary company Kinam Gold Inc. in 2003 or 2002.
As at December 31, 2003, Kinross' long-term debt was $0.7 million consisting of
various capital leases. The current portion of the long-term debt is $29.4
million, which includes $25.0 million of repayments on the industrial revenue
bonds, which was completed on January 7, 2004.
INVESTING ACTIVITIES
Additions to property, plant and equipment were $73.4 million in 2003 compared
to $22.6 million in 2002. Capital expenditures at Fort Knox were $26.6 million,
the remainder of the capital expenditures were spread fairly evenly across the
other operating mines. Capital expenditures were financed out of cash flow from
operating activities.
INVESTMENT IN TVX HELLAS
Since January 2003, the Stratoni lead/zinc mine located in Greece, owned by TVX
Hellas, a subsidiary of Kinross, has been shut down. The Company has worked with
the Greek government and potential investors to find a solution to reopen the
mine under a revised ownership structure in which the Company will hold a
minority interest. The Company has achieved this goal and the Olympias and
Skouries gold projects have undergone similar changes in ownership. The Greek
government has passed legislation that protects TVX Hellas from any future
liability related to the Stratoni, Skouries, and Olympias properties. In January
2004, Kinross contributed $13.6 million (11 million euros) to TVX Hellas to
enable TVX Hellas to pay labour and trade payables.
MINERAL RESERVE AND RESOURCE ESTIMATES
The following tables provide the Company's share of reserves as at December 31,
2003, estimated at an estimated gold price of $325 per ounce. This price is
based on the three year trailing average gold price, rounded to the appropriate
$25 increment.
At producing properties where the unit-of-production method of amortizing
property, plant and equipment is employed, the Company intends to base this
amortization in 2004 on proven and probable reserves as estimated at a gold
price of $325 per ounce. In order to provide the sensitivity of proven and
probable reserves to current gold prices a complete tabulation of proven and
probable reserves is also provided at an estimated gold price of $400 per ounce.
The Blanket mine in Zimbabwe continues to operate, however, due to the economic
and political uncertainties in Zimbabwe, the carrying value of the Blanket
operation was written off in 2001. Total proven and probable reserves for the
Company are presented both including and excluding Blanket reserves.
17
Total measured and indicated resources (excluding proven and probable reserves)
are summarized below the following tables of proven and probable reserves.
Detailed tables of measured and indicated resources and additional information
about inferred resources are available at www.kinross.com.
----------------
MINERAL RESERVE STATEMENT - ESTIMATED AT AN ASSUMED GOLD PRICE OF $325 PER OUNCE
PROVEN AND PROBABLE MINERAL RESERVES (1a,3,5,6,7)
KINROSS GOLD CORPORATION'S SHARE AT DECEMBER 31, 2003
--------------------------------------------------------------------------------------------------------------------------------
Property Location Kinross PROVEN PROBABLE PROVEN AND PROBABLE
Interest Tonnes Grade Ounces Tonnes Grade Ounces Tonnes Grade Ounces
(%) (,000) (g/t) (000s) (,000) (g/t) (000s) (,000) (g/t) (000s)
--------------------------------------------------------------------------------------------------------------------------------
GOLD
NORTH AMERICA
--------------------------------------------------------------------------------------------------------------------------------
Fort Knox and area (14) USA 100.0% 54,913 0.83 1,464 48,026 0.96 1,481 102,939 0.89 2,945
--------------------------------------------------------------------------------------------------------------------------------
Round Mtn and area (15) USA 50.0% 59,660 0.57 1,099 35,393 0.66 751 95,053 0.61 1,850
--------------------------------------------------------------------------------------------------------------------------------
Porcupine JV (9,13) Canada 49.0% 9,129 1.39 409 18,033 1.86 1,080 27,162 1.70 1,489
--------------------------------------------------------------------------------------------------------------------------------
Aquarius (10) Canada 100.0% - - - 15,017 2.16 1,042 15,017 2.16 1,042
--------------------------------------------------------------------------------------------------------------------------------
Musselwhite (13) Canada 31.9% 2,366 5.63 428 1,231 5.81 230 3,596 5.69 658
--------------------------------------------------------------------------------------------------------------------------------
Lupin Mine Canada 100.0% 310 7.37 73 248 10.25 82 558 8.64 155
--------------------------------------------------------------------------------------------------------------------------------
New Britannia Canada 50.0% 33 4.80 5 167 5.07 27 200 4.98 32
--------------------------------------------------------------------------------------------------------------------------------
Kettle River USA 100.0% 405 12.22 159 75 9.09 22 480 11.73 181
--------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 126,815 0.89 3,636 118,190 1.24 4,715 245,005 1.06 8,350
--------------------------------------------------------------------------------------------------------------------------------
SOUTH AMERICA
--------------------------------------------------------------------------------------------------------------------------------
Paracatu (Brasilia) (11) Brazil 49.0% 163,971 0.42 2,225 31,829 0.38 388 195,800 0.42 2,613
--------------------------------------------------------------------------------------------------------------------------------
La Coipa (13,16) Chile 50.0% 11,358 1.20 440 4,327 1.04 145 15,685 1.16 584
--------------------------------------------------------------------------------------------------------------------------------
Refugio Chile 50.0% 39,747 0.89 1,138 9,819 0.78 248 49,566 0.87 1,386
--------------------------------------------------------------------------------------------------------------------------------
Crixas (12) Brazil 50.0% 1,569 6.39 323 577 7.92 147 2,146 6.81 470
--------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 216,644 0.59 4,125 46,551 0.62 927 263,195 0.60 5,052
--------------------------------------------------------------------------------------------------------------------------------
ASIA
--------------------------------------------------------------------------------------------------------------------------------
Kubaka and area (17,18) Russia 98.1% 903 3.92 114 720 12.80 296 1,623 7.86 410
--------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 903 3.92 114 720 12.80 296 1,623 7.86 410
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
TOTAL GOLD (exc. Blanket) 344,362 0.71 7,874 165,461 1.12 5,938 509,823 0.84 13,812
--------------------------------------------------------------------------------------------------------------------------------
AFRICA
--------------------------------------------------------------------------------------------------------------------------------
Blanket Zimbabwe 100.0% 1,300 3.71 155 1,221 4.18 164 2,521 3.94 319
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
TOTAL GOLD (inc. Blanket) 345,661 0.72 8,029 166,682 1.14 6,102 512,344 0.86 14,131
--------------------------------------------------------------------------------------------------------------------------------
SILVER
SOUTH AMERICA
--------------------------------------------------------------------------------------------------------------------------------
La Coipa (13,16) Chile 50.0% 11,358 69.5 25,384 4,327 89.5 12,454 15,685 75.0 37,837
--------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 11,358 69.5 25,384 4,327 89.5 12,454 15,685 75.0 37,837
--------------------------------------------------------------------------------------------------------------------------------
ASIA
--------------------------------------------------------------------------------------------------------------------------------
Kubaka and area (17,18) Russia 98.1% 903 10.8 313 720 19.1 442 1,623 14.5 755
--------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 903 10.8 313 720 19.1 442 1,623 14.5 755
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
TOTAL SILVER 12,260 65.2 25,696 5,047 79.5 12,896 17,307 69.4 38,592
--------------------------------------------------------------------------------------------------------------------------------
MEASURED AND INDICATED MINERAL RESOURCE SUMMARY (excluding reserves)(2a,3,4,6,7,8)
--------------------------------------------------------------------------------------------------------------------------------
MEASURED INDICATED MEASURED AND INDICATED
Tonnes Grade Ounces Tonnes Grade Ounces Tonnes Grade Ounces
(,000) (g/t) (000s) (,000) (g/t) (000s) (,000) (g/t) (000s)
--------------------------------------------------------------------------------------------------------------------------------
TOTAL GOLD (inc. Blanket) 16,154 1.13 588 157,032 1.12 5,655 173,186 1.12 6,244
--------------------------------------------------------------------------------------------------------------------------------
TOTAL SILVER 833 57.1 1,527 1,893 39.0 2,375 2,725 44.5 3,902
--------------------------------------------------------------------------------------------------------------------------------
18
MINERAL RESERVE STATEMENT - ESTIMATED AT AN ASSUMED GOLD PRICE OF $400 PER OUNCE
PROVEN AND PROBABLE MINERAL RESERVES (1b,3,5,6,7)
Kinross Gold Corporation's Share at December 31, 2003
--------------------------------------------------------------------------------------------------------------------------------
Property Location Kinross PROVEN PROBABLE PROVEN AND PROBABLE
Interest Tonnes Grade Ounces Tonnes Grade Ounces Tonnes Grade Ounces
(%) (,000) (g/t) (000s) (,000) (g/t) (000s) (,000) (g/t) (000s)
--------------------------------------------------------------------------------------------------------------------------------
GOLD
NORTH AMERICA
--------------------------------------------------------------------------------------------------------------------------------
Fort Knox and area (14) USA 100.0% 59,669 0.82 1,564 64,222 0.87 1,800 123,891 0.84 3,364
--------------------------------------------------------------------------------------------------------------------------------
Round Mtn and area (15) USA 50.0% 59,836 0.57 1,102 39,561 0.65 823 99,397 0.60 1,925
--------------------------------------------------------------------------------------------------------------------------------
Porcupine JV (9,13,20) Canada 49.0% 9,168 1.39 410 18,569 1.83 1,093 27,737 1.68 1,502
--------------------------------------------------------------------------------------------------------------------------------
Aquarius (10,20) Canada 100.0% - - - 15,017 2.16 1,042 15,017 2.16 1,042
--------------------------------------------------------------------------------------------------------------------------------
Musselwhite (13,21) Canada 31.9% 2,662 5.32 456 1,395 5.44 244 4,057 5.37 700
--------------------------------------------------------------------------------------------------------------------------------
Lupin Mine Canada 100.0% 345 7.21 80 270 9.99 87 615 8.45 167
--------------------------------------------------------------------------------------------------------------------------------
New Britannia Canada 50.0% 81 4.15 11 322 4.46 46 403 4.40 57
--------------------------------------------------------------------------------------------------------------------------------
Kettle River USA 100.0 415 12.07 161 78 8.77 22 493 11.55 183
--------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 132,176 0.89 3,783 139,434 1.15 5,157 271,610 1.02 8,941
--------------------------------------------------------------------------------------------------------------------------------
SOUTH AMERICA
--------------------------------------------------------------------------------------------------------------------------------
Paracatu (Brasilia) (11) Brazil 49.0% 166,995 0.42 2,266 37,913 0.37 455 204,909 0.41 2,721
--------------------------------------------------------------------------------------------------------------------------------
La Coipa (13,16,20) Chile 50.0% 11,769 1.18 447 4,589 1.01 149 16,357 1.13 596
--------------------------------------------------------------------------------------------------------------------------------
Refugio Chile 50.0% 69,420 0.85 1,895 32,315 0.77 798 101,735 0.82 2,693
--------------------------------------------------------------------------------------------------------------------------------
Crixas (12,20) Brazil 50.0% 1,645 6.17 327 610 7.59 149 2,255 6.56 476
--------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 249,828 0.61 4,933 75,427 0.64 1,551 325,255 0.62 6,484
--------------------------------------------------------------------------------------------------------------------------------
ASIA
--------------------------------------------------------------------------------------------------------------------------------
Kubaka and area (17,18) Russia 98.1% 903 3.92 114 787 12.10 306 1,689 7.73 420
--------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 903 3.92 114 787 12.10 306 1,689 7.73 420
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
TOTAL GOLD (exc. Blanket) 382,907 0.72 8,830 215,648 1.01 7,015 598,555 0.82 15,845
--------------------------------------------------------------------------------------------------------------------------------
AFRICA
--------------------------------------------------------------------------------------------------------------------------------
Blanket Zimbabwe 100.0% 1,312 3.72 157 1,236 4.18 166 2,548 3.94 323
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
TOTAL GOLD (inc. Blanket) 384,219 0.73 8,987 216,884 1.03 7,181 601,103 0.84 16,168
--------------------------------------------------------------------------------------------------------------------------------
SILVER
SOUTH AMERICA
--------------------------------------------------------------------------------------------------------------------------------
La Coipa (13,16) Chile 50.0% 11,769 68.3 25,855 4,589 56.2 12,718 16,357 73.3 38,573
--------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 11,769 68.3 25,855 4,589 86.2 12,718 16,357 73.3 38,573
--------------------------------------------------------------------------------------------------------------------------------
ASIA
--------------------------------------------------------------------------------------------------------------------------------
Kubaka and area (17,18) Russia 98.1% 903 10.8 313 787 18.3 464 1,689 14.3 777
--------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 903 10.8 313 787 18.3 464 1,689 14.3 777
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
TOTAL SILVER 12,671 64.2 26,168 5,375 76.3 13,182 18,046 67.8 39,349
--------------------------------------------------------------------------------------------------------------------------------
MEASURED AND INDICATED MINERAL RESOURCE SUMMARY (excluding reserves)(2b,3,4,6,7,8)
--------------------------------------------------------------------------------------------------------------------------------
MEASURED INDICATED MEASURED AND INDICATED
Tonnes Grade Ounces Tonnes Grade Ounces Tonnes Grade Ounces
(,000) (g/t) (000s) (,000) (g/t) (000s) (,000) (g/t) (000s)
--------------------------------------------------------------------------------------------------------------------------------
TOTAL GOLD (inc. Blanket) 49,677 1.08 1,728 272,591 1.18 8,668 227,269 1.17 10,396
--------------------------------------------------------------------------------------------------------------------------------
TOTAL SILVER 10,237 31.7 10,441 8,728 18.7 5,238 18,965 25.7 15,678
--------------------------------------------------------------------------------------------------------------------------------
19
MINERAL RESERVE AND RESOURCE STATEMENT
(1) Unless otherwise noted, the Company's reserves are estimated using
appropriate cut-off grades derived from:
(a) an estimated gold price of $325 per oz, and a silver price
of $4.75 per oz; and
(b) an estimated gold price of $400 per oz, and a silver price
of $4.75 per oz. Reserves are estimated using current and/or
projected process recoveries, operating costs and mine plans
that are unique to each property and include estimated
allowances for dilution and mining recovery.
(2) Unless otherwise noted, the Company's resources are estimated using
appropriate cut-off grades derived from:
(a) an estimated gold price of $350 per oz, and a silver price
of $4.75 per oz; and
(b) an estimated gold price of $450 per oz, and a silver price
of $4.75 per oz.
(3) The Company's reserves and resources as at December 31, 2003 are
classified in accordance with the Canadian Institute of Mining
Metallurgy and Petroleum's "CIM Standards on Mineral Resources and
Reserves, Definition and Guidelines" as per Canadian Securities
Administrator's National Instrument 43-101 ("the Instrument")
requirements.
(4) CAUTIONARY NOTE TO US INVESTORS CONCERNING ESTIMATES OF MEASURED,
INDICATED AND INFERRED RESOURCES. US Investors are advised that use of
the terms "measured resource", "indicated resource "and "inferred
resource" are recognized and required by Canadian Securities
regulations. These terms are not recognized by the U.S. Securities and
Exchange Commission. U.S. INVESTORS ARE CAUTIONED NOT TO ASSUME THAT
ALL OR ANY PART OF MINERAL DEPOSITS IN THESE CATEGORIES WILL EVER BE
CONVERTED INTO RESERVES.
(5) The mineral reserves presented herein comply with the reserve
categories of Industry Guide 7 applied in the United States by the
Securities and Exchange Commission.
(6) Individuals supervising, preparing and otherwise responsible for the
Company's reserve and resource estimates presented in this disclosure
are listed in a separate table and meet the definition of a "qualified
person" as described by the Instrument.
(7) The Company's normal data verification procedures have been used in
collecting, compiling, interpreting and processing the data used to
estimate reserves and resources. Independent data verification has not
been performed.
(8) Resources, unlike reserves, do not have demonstrated economic
viability.
(9) Includes the undeveloped Pamour deposit, which is subject to
permitting from Canadian authorities. The permits necessary to
commence mining of the mineral reserves contained in the existing
Pamour pit, north of highway 101, referred to as the phase one mine
plan, have been maintained in good standing and require administrative
reactivation. Additional permits are required to mine south of highway
101, which is outside the phase one mine plan. There is a high level
of assurance that the project will receive all required permits for
development.
(10) Undeveloped property, development assumes successful permitting
allowing mining operations to be conducted.
(11) Operated by Rio Tinto plc.
(12) Operated by AngloGold Ltd.
(13) Operated by Placer Dome Inc.
(14) Includes mineral reserves from the undeveloped Gil and Ryan Lode
deposits, both are part of the Fort Knox and area. The Company holds a
100% interest in the properties forming the Fort Knox and area except
for the Gil property in which the Company holds an 80% interest.
(15) Includes mineral reserves and resources from the undeveloped Gold Hill
deposit, development is dependent on successful permitting.
(16) Includes mineral reserves and resources from the undeveloped Puren
Norte deposit, development is dependent on successful permitting.
(17) Includes mineral reserves from the Birkachan deposit. Open pit mining
at Birkachan has been approved, underground mining remains to be
permitted by Russian authorities.
(18) Includes mineral reserves and resources from the undeveloped Tsokol
deposit, development is dependent on successful permitting.
(19) Reserves estimated at a gold price of $325 per ounce, resources
estimated at a gold price of $350 per ounce.
(20) Reserves estimated at a gold price of $350 per ounce.
(21) Reserves estimated at a gold price of $375 per ounce
20
QUALIFIED PERSONS TABLE
---------------------------------------------------------------------------------------------------------------------
Property Primary Company Quals Secondary Company Quals
QP QP
---------------------------------------------------------------------------------------------------------------------
Fort Knox R.Cooper Kinross P.Eng W.Hanson Kinross P.Geo
Round Mtn R.Cooper Kinross P.Eng W.Hanson Kinross P.Geo
Porcupine JV A.Still Placer Dome P.Geo S.Taylor Placer Dome P.Eng
Aquarius R.Cooper Kinross P.Eng W.Hanson Kinross P.Geo
Musselwhite A.Cheatle Placer Dome P.Geo B. MacDonald Placer Dome P.Eng
Lupin R.Cooper Kinross P.Eng W.Hanson Kinross P.Geo
New Britannia R.Cooper Kinross P.Eng W.Hanson Kinross P.Geo
Kettle River R.Cooper Kinross P.Eng W.Hanson Kinross P.Geo
George Lake R.Cooper Kinross P.Eng W.Hanson Kinross P.Geo
Goose Lake R.Cooper Kinross P.Eng W.Hanson Kinross P.Geo
Delamar R.Cooper Kinross P.Eng W.Hanson Kinross P.Geo
Paracatu
(Brasilia) M. Sharrat RTZ Geologist R. Peroni RTZ Geologist
La Coipa J. Ochoa Placer Dome Chief Engineer AusIMM M.Rubio Placer Dome Geologist AusIMM
Refugio R.Cooper Kinross P.Eng W.Hanson Kinross P.Geo
Crixas W. Yamaoka AngloGold Geologist CREA M G de Simoni AngloGold Engineer CREA
Gurupi A.Schneider TVX Consultant
Kubaka R.Cooper Kinross P.Eng W.Hanson Kinross P.Geo
Blanket R.Cooper Kinross P.Eng W.Hanson Kinross P.Geo
Norseman R.Cooper Kinross P.Eng W.Hanson Kinross P.Geo
Proven and probable pro forma reserves were 13.153 million ounces at December
31, 2002, including the assets from TVX and Echo Bay. During 2003, 2.742 million
ounces were added to reserves, 1.764 million ounces were mined out, to give a
net addition to reserves after mining of 0.978 million ounces for the year.
2002 PRO-FORMA PRODUCTION RESERVE GROWTH 2003 RESERVES
MINING OPERATION RESERVES DEPLETION (OZS. AU X 1,000) @$US 325/OZ
@$US 300/OZ (OZS AU X 1,000) (OZS AU X 1,000)
(OZS AU X 1,000)
---------------------------- ----------------- ----------------- ------------------ ------------------
Fort Knox 2,678 (431) 698 2,945
Kubaka 156 (137) 391 410
Refugio 706 0 679 1,386
Round Mountain 1,875 (436) 410 1,850
Kettle River 4 0 177 181
Lupin 332 (60) (117) 155
New Britannia 158 (37) (89) 32
Porcupine Joint Venture 1,485 (252) 256 1489
Musselwhite 667 (91) 82 658
La Coipa 645 (63) 2 584
Crixas 478 (99) 90 470
Paracatu (Brasillia) 2,500 (120) 233 2613
Aquarius 1,189 0 (147) 1,042
Blanket 280 (38) 77 319
----------------- ----------------- ------------------ ------------------
Total 13,153 (1,764) 2,742 14,131
21
COMMODITY PRICE RISKS
Kinross has entered into gold forward sales contracts, spot deferred forward
sales contracts and written call options for some portion of expected future
production to mitigate the risk of adverse price fluctuations. Kinross does not
hold these financial instruments for speculative or trading purposes. Kinross is
not subject to margin requirements on any of its hedging lines.
The outstanding number of ounces, average expected realized prices and
maturities for the gold commodity derivative contracts as at December 31, 2003
are as follows:
OUNCES HEDGED AVERAGE CALL OPTIONS AVERAGE STRIKE
YEAR PRICE SOLD PRICE
---- ----- ---- -----
2004 137,500 $ 277 50,000 $ 340
2005 37,500 296 - -
-------------- ----------- -------------- ----------------
Total 175,000 $ 281 50,000 $ 340
============== =========== ============== ================
The fair value of the call options sold is recorded in the financial statements
at each measurement date. The fair value of the gold forward sales and spot
deferred forward sales contracts, as at December 31, 2003 was negative $27.9
million based on a gold price of $417 per ounce. Kinross will continue to
deliver into these contracts as they mature and not replace them with new
contracts.
OUTLOOK
The Company has a robust pipeline of new projects at various stages of
exploration and development and is well positioned financially through strong
cash flow from operations and significant cash balances to advance these
projects towards production. The first of these projects achieved commercial
production in January 2004 with the development of the Emanuel Creek orebody and
the restart of the Kettle mill where gold production of approximately 100,000
ounces is anticipated in 2004. As a result of major projects such as the restart
of an expanded Refugio, the development of the Pamour pit and the potential
expansion of Paracatu, the capital expenditure program in 2004 is currently
budgeted at approximately $165 million. This capital expenditure program, the
largest in the Company's history, can be funded entirely from cash flow from
operations at current gold prices. During 2004, the Company will deliver into
essentially all remaining gold hedges and in the first quarter of 2005 will
become totally unhedged.
A key focus in 2004 will be to continue to expand the reserve base of the
Company through exploration, optimization of producing assets and accretive
acquisitions such as the Crown transaction. Planned production for Kinross in
2004 is 1.70 to 1.75 million ounces of gold equivalent at total cash costs in
the range of $225 to $235 per ounce. A primary objective is to meet or exceed
expectations in this regard and although our goal of ultimately reaching an
annual production rate of two million ounces is a "stretch" goal for the future
we believe it is a realistic target.
22
--------------------------------------------------------------------------------
THIS PRESS RELEASE INCLUDES CERTAIN "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF SECTION 21E OF THE UNITED STATES SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED. ALL STATEMENTS, OTHER THAN STATEMENTS OF HISTORICAL FACT, INCLUDED
HEREIN, INCLUDING WITHOUT LIMITATION, STATEMENTS REGARDING POTENTIAL
MINERALIZATION AND RESERVES, EXPLORATION RESULTS AND FUTURE PLANS AND OBJECTIVES
OF KINROSS GOLD CORPORATION, ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE VARIOUS
RISKS AND UNCERTAINTIES. THERE CAN BE NO ASSURANCE THAT SUCH STATEMENTS WILL
PROVE TO BE ACCURATE AND ACTUAL RESULTS AND FUTURE EVENTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN SUCH STATEMENTS. IMPORTANT FACTORS THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM KINROSS' EXPECTATIONS ARE
DISCLOSED UNDER THE HEADING "RISK FACTORS" AND ELSEWHERE IN KINROSS' DOCUMENTS
FILED FROM TIME TO TIME WITH THE TORONTO STOCK EXCHANGE, THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION AND OTHER REGULATORY AUTHORITIES.
--------------------------------------------------------------------------------
WHERE TO FIND ADDITIONAL INFORMATION ABOUT THE CROWN ACQUISITION:
This press release is not, and is not intended to be, a solicitation of proxies
or an offer of securities. Kinross intends to file with the Securities and
Exchange Commission ("SEC") a registration statement that will include a proxy
statement on behalf of Crown and a prospectus on behalf of Kinross, and other
relevant documents in connection with the proposed acquisition. Investors and
security holders of Kinross and Crown are urged to read the proxy
statement/prospectus and other relevant materials, when they become available,
as they will contain important information about Kinross, Crown and the proposed
acquisition. The proxy statement/prospectus and other relevant materials, and
any other documents filed by Kinross or Crown with the SEC, may be obtained free
of charge at the SEC's website at www.sec.gov, when filed. A free copy of the
joint proxy statement/prospectus and other relevant materials may also be
obtained from Kinross, when available.
Crown and its officers and directors may be deemed to be participants in the
solicitation of proxies from its stockholders with respect to the transactions
contemplated by the proposed acquisition. A description of the interests of the
directors and executive officers of Crown will be contained in the definitive
proxy statement/ prospectus and the other relevant documents filed with the SEC.
For additional information, e-mail info@kinross.com or contact:
----------------
ROBERT M. BUCHAN GORDON A. MCCREARY BRIAN W. PENNY
PRESIDENT AND VICE PRESIDENT VICE PRESIDENT FINANCE
CHIEF EXECUTIVE OFFICER CORPORATE AFFAIRS AND CHIEF FINANCIAL OFFICER
Tel. (416) 365-5650 Tel. (416) 365-5132 Tel. (416) 365-5662
CHRISTOPHER T. HILL
VICE PRESIDENT INVESTOR
RELATIONS
Tel. (416) 365-7254
Kinross will host a conference call at 11:30am EDT on Tuesday, March 2, 2004, to
discuss fourth quarter and year end results. The audio webcast will be available
and archived at WWW.KINROSS.COM and the conference call will be archived at
www.kinross.com. For participation in the conference call, e-mail
INFO@KINROSS.COM or call Tracey Thom, Manager Investor Relations, at (416)
365-1362.
23
KINROSS GOLD CORPORATION
GOLD PRODUCTION AND COST SUMMARY
YEAR ENDED
DECEMBER 31,
---------------------------
2003 2002
------------- ------------
FORT KNOX
Tonnes milled/crushed (000's) (1) 13,684.6 13,842.9
Grade (grams per tonne) 1.07 1.09
Recovery 83% 84%
Gold equivalent production to dore (2) 391,831 410,519
Per ounce:
Total cash costs $ 243 $ 232
Depreciation, depletion and amortization 97 107
Site restoration cost accruals 6 4
------------- ------------
Total production costs $ 346 $ 343
============= ============
ROUND MOUNTAIN (5) (8)
Tonnes milled/crushed (000's) (1) 51,204.3 -
Grade (grams per tonne) 0.65 -
Recovery 0.66% -
Gold equivalent production to dore (2) 364,271 -
Per ounce:
Total cash costs $ 201 $ -
Depreciation, depletion and amortization 94 -
Site restoration cost accruals 5 -
------------- ------------
Total production costs $ 300 $ -
============= ============
PORCUPINE (3)
Tonnes milled/crushed (000's) (1) 4,130.0 2,390.7
Grade (grams per tonne) 3.73 5.00
Recovery 92% 91%
Gold equivalent production to dore (2) 223,960 189,464
Per ounce:
Total cash costs $ 211 $ 201
Depreciation, depletion and amortization 107 87
Site restoration cost accruals 7 6
------------- ------------
Total production costs $ 325 $ 294
============= ============
24
KUBAKA (4)
Tonnes milled/crushed (000's) (1) 883.0 849.9
Grade (grams per tonne) 6.42 14.93
Recovery 97% 98%
Gold equivalent production to dore (2) 164,006 220,972
Per ounce:
Total cash costs $ 194 $ 133
Depreciation, depletion and amortization 103 91
Site restoration cost accruals 3 3
------------- ------------
Total production costs $ 300 $ 227
============= ============
PARACATU (6) (8)
Tonnes milled/crushed (000's) (1) 16,891.4 -
Grade (grams per tonne) 0.44 -
Recovery 77% -
Gold equivalent production to dore (2) 91,176 -
Per ounce:
Total cash costs $ 193 $ -
Depreciation, depletion and amortization 70 -
Site restoration cost accruals 9 -
------------- ------------
Total production costs $ 272 $ -
============= ============
LA COIPA (5) (8)
Tonnes milled/crushed (000's) (1) 5,928.0 -
Grade (grams per tonne) 1.17 -
Recovery 84% -
Gold equivalent production to dore (2) 144,125 -
Per ounce:
Total cash costs $ 234 $ -
Depreciation, depletion and amortization 45 -
Site restoration cost accruals 4 -
------------- ------------
Total production costs $ 283 $ -
============= ============
CRIXAS (5) (8)
Tonnes milled/crushed (000's) (1) 684.1 -
Grade (grams per tonne) 8.24 -
Recovery 96% -
Gold equivalent production to dore (2) 86,698 -
Per ounce:
Total cash costs $ 109 $ -
Depreciation, depletion and amortization 104 -
Site restoration cost accruals 2 -
------------- ------------
Total production costs $ 215 $ -
============= ============
25
MUSSELWHITE (7) (8)
Tonnes milled/crushed (000's) (1) 1,228.7 -
Grade (grams per tonne) 5.39 -
Recovery 96% -
Gold equivalent production to dore (2) 64,978 -
Per ounce:
Total cash costs $ 257 $ -
Depreciation, depletion and amortization 126 -
Site restoration cost accruals 6 -
------------- ------------
Total production costs $ 389 $ -
============= ============
NEW BRITANNIA (5) (8)
Tonnes milled/crushed (000's) (1) 543.3 -
Grade (grams per tonne) 3.80 -
Recovery 95% -
Gold equivalent production to dore (2) 31,627 -
Per ounce:
Total cash costs $ 327 $ -
Depreciation, depletion and amortization 82 -
Site restoration cost accruals - -
------------- ------------
Total production costs $ 409 $ -
============= ============
LUPIN (8)
Tonnes milled/crushed (000's) (1) 278.1 -
Grade (grams per tonne) 6.69 -
Recovery 93% -
Gold equivalent production to dore (2) 56,008 -
Per ounce:
Total cash costs $ 407 $ -
Depreciation, depletion and amortization 37 -
Site restoration cost accruals 14 -
------------- ------------
Total production costs $ 458 $ -
============= ============
(1) Tonnes milled/crushed represents 100% of mine production
(2) Gold equivalent to dore represents the Company's share
(3) 100% of Hoyle Pond mine in 2002, 49% of Porcupine in 2003
(4) 54.7% ownership interest to February 28, 2003, 100% thereafter
(5) 50% ownership interest
(6) 49% ownership interest
(7) 32% ownership interest
(8) Production and cost data is for eleven months from February to December,
2003.
26
GOLD EQUIVALENT PRODUCTION - OUNCES
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
-------------- -------------- -------------- -------------
2003 2002 2003 2002
-------------- -------------- -------------- -------------
PRIMARY OPERATIONS:
Fort Knox 100,674 114,357 391,831 410,519
Round Mountain (1) (4) 86,433 - 364,271 -
Porcupine Joint Venture (2) 58,637 53,577 223,960 189,464
Kubaka (3) 43,236 47,125 164,006 220,972
Paracatu (1) (5) 24,934 - 91,176 -
La Coipa (1) (4) 44,458 - 144,125 -
Crixas (1) (4) 22,775 - 86,698 -
Musselwhite (1) (6) 18,821 - 64,978 -
New Britannia (1) (4) 6,567 - 31,627 -
Lupin (1) - - 56,008 -
-------------- -------------- -------------- -------------
406,535 215,059 1,618,680 820,955
-------------- -------------- -------------- -------------
OTHER OPERATIONS:
Blanket - 9,829 - 41,612
Refugio (4) - 4,145 - 13,047
Denton-Rawhide (7) - 2,205 1,730 11,162
Andacollo (7) - - - 1,858
-------------- -------------- -------------- -------------
- 16,179 1,730 67,679
-------------- -------------- -------------- -------------
Total gold equivalent ounces 406,535 231,238 1,620,410 888,634
============== ============== ============== =============
CONSOLIDATED PRODUCTION COSTS
($ per ounce of gold equivalent)
Cash operating costs $ 202 $ 191 $ 211 $ 194
Royalties 13 7 11 7
-------------- -------------- -------------- -------------
Total cash costs 215 198 222 201
Reclamation 9 3 6 4
Depreciation and amortization 89 101 91 101
-------------- -------------- -------------- -------------
Total production costs $ 313 $ 302 $ 318 $ 306
============== ============== ============== =============
1. Production data is for eleven months from February to December, 2003.
2. 2003 production reflects the Company's 49% ownership interest in the
Porcupine Joint Venture. 2002 production reflects the Company's 100%
ownership interest in the Hoyle Pond mine to June 30, 49% ownership
interest in the Porcupine Joint Venture thereafter.
3. Represents the Company's 54.7% ownership interest to February 28,
2003, 100% thereafter.
4. Represents the Company's 50% ownership interest.
5. Represents the Company's 49% ownership interest.
6. Represents the Company's 32% ownership interest.
7. Includes proportionate share of Denton-Rawhide and Andacollo
production attributable to the Pacific Rim (formerly Dayton) ownership
interest.
27
CASH OPERATING COSTS
($ PER OUNCE OF GOLD EQUIVALENT)
DECEMBER 31 DECEMBER 31
--------------------------- ---------------------------
2003 2002 2003 2002
------------ ------------ ------------- -----------
PRIMARY OPERATIONS:
Fort Knox $ 221 $ 207 $ 241 $ 231
Round Mountain (1) 191 - 167 -
Porcupine 197 224 211 200
Kubaka 171 97 172 111
Paracatu (1) 198 - 188 -
La Coipa (1) 204 - 234 -
Crixas (1) 125 - 106 -
Musselwhite (1) 255 - 256 -
New Britannia (1) 408 - 327 -
Lupin (1) - - 407 -
------------ ------------ ------------- -----------
202 187 211 191
------------ ------------ ------------- -----------
OTHER OPERATIONS:
Blanket - 264 - 240
Refugio - 180 - 170
Denton-Rawhide - 228 218 244
Andacollo - - - 287
------------ ------------ ------------- -----------
- 238 218 228
------------ ------------ ------------- -----------
$ 202 $ 191 $ 211 $ 194
============ ============ ============== ===========
TOTAL CASH COSTS
($ per ounce of gold equivalent)
PRIMARY OPERATIONS:
Fort Knox $ 223 $ 210 $ 243 $ 232
Round Mountain (1) 238 - 201 -
Porcupine 197 224 211 201
Kubaka 195 123 194 133
Paracatu (1) 203 - 193 -
La Coipa (1) 204 - 234 -
Crixas (1) 128 - 109 -
Musselwhite (1) 256 - 257 -
New Britannia (1) 408 - 327 -
Lupin (1) - - 407 -
------------ ------------ ------------- -----------
215 195 222 198
------------ ------------ ------------- -----------
OTHER OPERATIONS:
Blanket - 268 - 243
Refugio - 195 - 186
Denton-Rawhide - 228 221 249
Andacollo - - - 295
------------ ------------ ------------- -----------
- 244 221 234
------------ ------------ ------------- -----------
$ 215 $ 198 $ 222 $ 201
============ ============ ============= ===========
(1) Cost data is for eleven months from February to December, 2003.
28
CONSOLIDATED BALANCE SHEETS
(expressed in millions of U.S. dollars) (unaudited) AS AT AS AT
DECEMBER 31 DECEMBER 31
2003 2002
--------------- --------------
Assets
Current assets
Cash and cash equivalents $ 245.8 $ 170.6
Restricted cash 5.1 21.1
Accounts receivable and other assets 42.1 15.5
Inventories 109.2 38.9
Marketable securities 0.1 0.1
--------------- --------------
402.3 246.2
Property, plant and equipment 514.8 330.0
Mineral interests and other intangible assets, net 267.9 -
Goodwill 918.0 -
Long - term investments 2.1 11.8
Deferred charges and other assets 37.4 10.0
--------------- --------------
$ 2,142.5 $ 598.0
=============== ==============
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 103.1 $ 35.5
Current portion of long - term debt 29.4 23.3
Current portion of site restoration cost accruals 19.2 15.0
=============== ==============
151.7 73.8
Long-term debt 0.7 12.9
Site restoration cost accruals 100.5 42.0
Future income and mining taxes 55.6 3.3
Deferred revenue 2.2 4.5
Other long-term liabilities 3.2 5.5
Debt component of convertible debentures - 21.7
Redeemable retractable preferred shares 3.0 2.5
--------------- --------------
316.9 166.2
--------------- --------------
Convertible preferred shares of subsidiary company 12.6 12.9
Common shareholders' equity
Common share capital 1,782.3 1,058.5
Contributed surplus 29.5 12.9
Equity component of convertible debentures - 132.3
Retained earnings (deficit) 3.2 (761.4)
Cumulative translation adjustments (2.0) (23.4)
--------------- --------------
1,813.0 418.9
--------------- --------------
$ 2,142.5 $ 598.0
=============== ==============
29
CONSOLIDATED STATEMENTS OF OPERATIONS
(expressed in millions of U.S. dollars except per share amounts) (unaudited)
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
2003 2002 2003 2002
--------------------------------------------
Revenue
Mining revenue $ 143.3 $ 76.5 $ 571.9 $ 261.0
Interest and other income 7.1 3.2 12.3 16.9
Mark-to-market (loss) gain on call options 0.1 (0.8) 0.4 (2.7)
---------- ---------- ---------- -----------
150.5 78.9 584.6 275.2
---------- ---------- ---------- -----------
Expenses
Operating 85.9 47.9 387.3 174.8
General and administrative 8.5 3.3 25.0 11.3
Exploration and business development 5.6 5.1 24.3 11.6
Depreciation, depletion and amortization 32.4 24.0 140.9 85.3
Gain on sale of assets (29.7) (0.7) (29.5) (2.7)
Loss on redemption of convertible debentures - - 1.1 -
Foreign exchange (gain) loss (2.5) 1.3 (3.3) 4.3
Interest expense on long-term liabilities 2.0 1.0 5.1 5.0
Write down of property, plant and equipment and other non-cash charges 9.2 7.7 9.2 7.7
Write down of marketable securities and long-term investments 0.6 0.2 0.7 0.2
---------- ---------- ---------- -----------
112.0 89.8 560.8 297.5
---------- ---------- ---------- -----------
38.5 (10.9) 23.8 (22.3)
Minority interest (0.1) - (0.2) -
Share in loss of investee companies - - - (0.6)
---------- ---------- ---------- -----------
Earnings (loss) before taxes and dividends on convertible
preferred shares of subsidiary company 38.4 (10.9) 23.6 (22.9)
Provision for income and mining taxes (6.0) (1.8) (13.1) (6.5)
---------- ---------- ---------- -----------
Earnings (loss) for the period before dividends on convertible
preferred shares of subsidiary company 32.4 (12.7) 10.5 (29.4)
Dividends on convertible preferred shares of subsidiary company (0.2) (0.2) (0.8) (1.5)
---------- ---------- ---------- -----------
Net earnings (loss) for the period $ 32.2 $ (12.9) $ 9.7 $ (30.9)
========== ========== ========== ===========
Attributable to common shareholders:
Net earnings (loss) for the period $ 32.2 $ (12.9) $ 9.7 $ (30.9)
Increase in equity component of convertible debentures - (1.8) (6.5) (7.3)
Gain on redemption of convertible debentures - - 16.5
---------- ---------- ---------- -----------
Net earnings (loss) attributable to common shares $ 32.2 $ (14.7) $ 19.7 $ (38.2)
========== ========== ========== ===========
Earnings (loss) per share
Basic $ 0.09 $ (0.12) $ 0.06 $ (0.32)
Diluted $ 0.09 $ - $ 0.06 $ -
Weighted average number common shares outstanding
Basic 341.8 124.2 308.6 119.7
Diluted 343.8 - 309.6 -
Total outstanding and issued common shares at December 31 345.6 136.2
30
Consolidated Statements of Cash Flows
(expressed in millions of U.S. dollars) (unaudited)
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
------------------------- ------------------------
2003 2002 2003 2002
------------ ------------ ----------- ------------
NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING ACTIVITIES:
OPERATING:
Earnings (loss) for the period before dividends on convertible preferred
Shares of subsidiary company $ 30.4 $ (12.7) $ 10.5 $ (29.4)
Items not affecting cash:
Depreciation, depletion and amortization 32.4 24.0 140.9 85.3
Write down of property, plant and equipment and other non-cash charges 9.2 7.7 9.2 7.7
Write down of marketable securities and long-term investments 0.6 0.2 0.7 0.2
Future income and mining taxes 3.4 - (1.3) -
Deferred revenue realized (0.6) (1.3) (2.3) (5.1)
Site restoration cost accruals 3.3 0.7 9.4 3.0
Gain on sale of assets (29.7) (0.7) (29.5) (2.7)
Other - - 5.7 1.2
------------ ------------ ----------- ------------
51.9 17.9 143.3 60.2
Site restoration cash expenditures (9.5) (4.8) (19.3) (9.8)
Changes in non-cash working capital items
Accounts receivable and other assets (20.4) (7.5) (1.5) (1.6)
Inventories (4.0) 5.1 (11.3) 2.4
Marketable securities 3.4 0.3 4.5 2.8
Accounts payable and accrued liabilities 3.3 2.5 (18.3) 5.6
Effect of exchange rate changes on cash 1.0 0.6 9.1 3.0
------------ ------------ ----------- ------------
CASH FLOW PROVIDED FROM OPERATING ACTIVITIES 24.7 14.1 106.4 62.6
------------ ------------ ----------- ------------
FINANCING:
Issuance of common shares 35.3 93.3 186.2 112.8
Redemption of convertible debentures - - (144.8) -
Acquisition of preferred shares of subsidiary company (0.1) - (0.3) (11.4)
Reduction of debt component of convertible debentures - (1.3) (4.2) (5.1)
Repayment of debt (0.5) (16.1) (10.5) (28.5)
------------ ------------ ----------- ------------
CASH FLOW PROVIDED FROM FINANCING ACTIVITIES 34.7 75.9 26.4 67.8
------------ ------------ ----------- ------------
INVESTING:
Additions to property, plant and equipment (21.1) (4.5) (73.4) (22.6)
Business acquisitions, net of cash acquired (0.5) (0.1) (81.9) (0.1)
Long-term investments and other assets 61.0 (0.4) 54.3 1.7
Proceeds from the sale of property, plant and equipment 5.7 0.7 5.9 1.3
Decrease (increase) in restricted cash 0.1 0.4 37.5 (21.1)
------------ ------------ ----------- ------------
CASH FLOW PROVIDED FROM (USED IN) INVESTING ACTIVITIES 45.2 (3.9) (57.6) (40.8)
------------ ------------ ----------- ------------
INCREASE IN CASH AND CASH EQUIVALENTS 104.6 86.1 75.2 89.6
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 141.2 84.5 170.6 81.0
------------ ------------ ----------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 245.8 $ 170.6 $ 245.8 $ 170.6
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