Bald Mountain Mine Achieves Record Full-Year Production
TORONTO, ON - J. Paul Rollinson, President and CEO of Kinross Gold Corporation said, “Bald Mountain Mine in Nevada, continued to perform well, achieving record full-year production in 2018. Production in Q4 2018 was lower compared with Q3 2018 mainly as a result of timing of recoveries from the heap leach pads. Cost of sales per ounce for 2018 was lower than full-year 2017 mainly as a result of less operating waste mined and the timing of gold equivalent ounces sold. Cost of sales per ounce in Q4 2018 increased compared with the previous quarter mainly due to fewer ounces recovered from the heap leach pads.
The company once again delivered on its commitments in 2018, as we met our production, cost and capital guidance for the seventh consecutive year. Our portfolio of mines produced solid results, with standout performances from Paracatu in Brazil, and Bald Mountain both of which delivered record annual production. Following successful completion of the Tasiast Phase One expansion in West Africa, the mine achieved record production in the fourth quarter, with throughput and recoveries exceeding expectations. Kinross also generated approximately $790 million in operating cash flow and maintained its strong balance sheet, with $1.9 billion in liquidity and no debt maturities until 2021.
We expect to deliver another strong year in 2019, producing approximately 2.5 million gold equivalent ounces at costs similar to 2018. Our development projects are proceeding well, and we look forward to a number of milestones this year, including: the start of commissioning of the Bald Mountain Vantage Complex processing circuit and completion of the Lobo-Marte in Chile, scoping study in the first quarter; the start of commissioning in Nevada, of the Round Mountain Phase W processing circuit in the second quarter; and, the completion in Chile, of the La Coipa Restart feasibility study and in Alaska, the start of stripping at Fort Knox Gilmore in the third quarter. At Tasiast, we continue to evaluate alternative approaches to further increase throughput and reduce capital while preserving the overall value of the project. The project financing is progressing well and we are targeting completion mid-year.”
Kinross produced 610,152 attributable Au eq. oz. in the fourth quarter of 2018, compared with 652,710 in the fourth quarter of 2017, mainly due to lower production at Fort Knox and Bald Mountain, partially offset by record production at Tasiast and Paracatu. The company produced 2,452,398 attributable Au eq. oz. for full-year 2018, which was in line with the Company’s 2018 guidance range. This compares with production of 2,673,533 Au eq. oz. for full-year 2017.
The company’s revenue from metal sales was $786.5 million in the fourth quarter of 2018, compared with $810.3 million during the same period in 2017.
Revenue was $3,212.6 million for full-year 2018, which was largely in line with revenue of $3,303.0 million for full-year 2017. The Americas region, which represented 61% of Kinross’ 2018 production, delivered strong results during the year. Paracatu and Bald Mountain achieved record annual production, while Round Mountain continued to perform well.
Paracatu performed strongly in 2018, with production increasing 45% compared with full-year 2017. The record annual production was mainly as a result of record recoveries in Plant 2, and significant increases in tonnes of ore mined and processed. Production in Q4 2018 was higher compared with the previous quarter mainly due to an increase in grades and higher recoveries. Cost of sales per ounce in 2018 was lower compared with 2017 primarily as a result of lower power costs due to the acquisition of the power plants in the third quarter and favourable foreign exchange movements. Higher grades also contributed to the lower cost of sales per ounce in Q4 2018 versus the previous quarter.
2018 production at Round Mountain met expectations but was lower compared with 2017 primarily due to fewer ounces recovered from the heap leach pads, partially offset by the timing of ounces processed through the mill. Production in Q4 2018 was largely consistent compared with the previous quarter. Full-year cost of sales per ounce was higher year-over-year mainly due to lower heap leach grades and higher fuel and power costs. Cost of sales per ounce increased in Q4 2018 compared with the previous quarter mainly due to higher processing costs.
The Round Mountain Phase W project continues to progress on schedule and on budget, with pre-stripping advancing well. Initial low grade Phase W ore has been encountered and is being placed on the existing heap leach pads. Construction of the new heap leach pad is now approximately 80% complete, while construction of the vertical carbon-in-column (VCIC) plant is approximately 50% complete, with commissioning for both expected to start in Q2 2019. Construction of mine infrastructure such as the truck shop, warehouse, wash bay and fuel island are all proceeding as planned and are approximately 35% complete.
Full-year production at Fort Knox decreased year-over-year largely due to a decrease in grades and tonnes of ore processed in the mill and placed on the heap leach pads. The pit wall failure in Q1 2018 also limited access to higher-grade ore and higher than average rainfall in the second half of 2018 affected geotechnical stability. Production in the fourth quarter was largely consistent with the third quarter of 2018. Full-year cost of sales per ounce was higher compared with 2017 mainly due to a decline in grades and an increase in operating waste mined. Cost of sales per ounce in Q4 2018 was lower versus Q3 2018 mainly due to lower processing costs.
The Bald Mountain Vantage Complex project is proceeding well, with construction of the heap leach approximately 85% complete, and the VCIC approximately 30% complete. Some challenges due to weather and a tight labour market have been encountered, but commissioning of the heap leach and processing facilities remain on track to begin in late Q1 2019. Support infrastructure including the truck shop, warehouse, and wash bay is approximately 25% complete. Stacking of economic but previously leached ore on the new heap leach pad is underway with approximately 50% of the material moved onto a segregated portion. Mining activities at the Vantage Complex have commenced and initial ore is now being mined and stockpiled in preparation for placement on the new heap.
The Fort Knox Gilmore project is progressing well, on schedule and on budget, with initial ore expected in early 2020. Construction of the heap leach has begun and will continue during the 2019 and 2020 construction seasons. Expansion of the dewatering system will continue throughout the year in anticipation of stripping that is expected to commence in Q3 2019.
The feasibility study for the La Coipa Restart project and the scoping study for the Lobo-Marte project are both proceeding well, and are expected to conclude in the third quarter of 2019 and first quarter of 2019, respectively. Permitting is in place for the La Coipa Restart project and permitting strategy planning has begun at Lobo-Marte.
The Maricunga delivered strong results during the year, as production from the rinsing of heap materials placed on the pads prior to the suspension of mining activities was better than expected. Cost of sales per ounce for full-year 2018 was higher than 2017 mainly due to timing of sales.
The Russia region continued its strong and consistent performance, as Kupol and Dvoinoye’s combined full-year production met expectations, while cost of sales per ounce outperformed. Full-year production was lower than the previous year mainly due to the expected decrease in grades and the completion of mining of the September Northeast deposit at the end of 2017. Production quarter-over-quarter was largely consistent.
Full-year cost of sales per ounce was slightly higher versus 2017 mainly due to lower grades at Dvoinoye and increased maintenance costs. Q4 2018 cost of sales per ounce was lower quarter-over-quarter mainly due to less operating waste mined and lower labour costs at Dvoinoye. At the Dvoinoye Zone 1 deposit, development is continuing as scheduled and production is expected to commence in mid-2019.
In West Africa, full-year production at Tasiast was slightly higher compared with 2017 mainly due to the completion of the Phase One expansion in the third quarter. The site achieved record quarterly production in Q4 2018 mainly due to higher than expected throughput at the new mill and better mill grades and recoveries. Cost of sales per ounce for the full year was higher compared with 2017 mainly due to higher fuel and maintenance costs and an increase in operating waste mined. Cost of sales per ounce was lower in Q4 2018 compared with Q3 2018 mainly due to higher mill grades and lower operating waste mined.
Production at Chirano was slightly lower for the full-year compared with 2017 mainly due to anticipated lower grades, and was lower quarter-over-quarter primarily as a result of lower mill throughput. Cost of sales per ounce for full-year 2018 decreased compared with 2017 mainly due to lower overhead, maintenance and power costs, as open pit mining was suspended in Q3 2017. Cost of sales per ounce was higher in Q4 2018 versus Q3 2018 mainly due to lower mill throughput, partially offset by lower power costs and favourable foreign exchange movements.
Tasiast continues to perform strongly, achieving record quarterly production in Q4 2018. The site is currently exceeding throughput and recovery expectations. The Phase One expansion has been completed successfully and the new SAG mill is performing very well. In addition, continuous improvement initiatives have been undertaken which are expected to result in meaningful cost and operational improvements. The Company expects Tasiast to continue to deliver strong operational performance in 2019.
The Phase Two expansion continues to be a viable option as the Company completes its evaluation of alternative approaches to further increase throughput at Tasiast. The evaluation is seeking ways to reduce capital expenditures, while preserving the overall value proposition, and incorporates strong Phase One performance results, including throughput averaging above nameplate capacity. Phase Two expansion considerations include, among other matters: results from the Company’s evaluation of alternative throughput approaches; acceptable project financing terms; capital priorities across the Company’s portfolio; and, the ongoing discussions with the Government of Mauritania.
These discussions with the Government have focused on matters that arise occasionally and are generally common to the mining sector. These matters include tax issues, expatriate work permits, and increasing opportunities for local suppliers, in accordance with Kinross policy and applicable laws. In addition, the parties have engaged in an ongoing dialogue regarding the Company’s exemption from importation duties on fuel under the Tasiast Mining Convention. Further, the Company continues to seek from the Government an exploitation license for Tasiast Sud.
The Government has not expressed an intention to re-open the Tasiast Mining Convention, and in any event, Kinross remains protected by its rights under the Mining Convention, which includes international arbitration provisions. The existing Tasiast operation is also covered under the Company’s political risk insurance policy with the Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group.
Kinross continues to advance discussions to obtain the approximately $300 million in project financing for Tasiast. In addition to the previously signed mandate letters with Export Development Canada (EDC) and the International Finance Corporation (IFC), which indicated their interest in the financing, subject to completing due diligence, two commercial banks have also expressed interest in the financing and are now engaged in the due diligence process. The financing is progressing and completion is targeted for mid-2019.
The 2019 forecast for exploration is approximately $75 million, none of which is expected to be capitalized, with 2019 overhead (general and administrative and business development expenses) forecast to be approximately $165 million, both of which are consistent with last year’s guidance.
Other operating costs expected to be incurred in 2019 are approximately $100 million, which includes approximately $40 million of care and maintenance costs in Chile and at Kettle River-Buckhorn.
Kinross’ total proven and probable gold reserve estimates were 25.5 million Au oz. at year-end 2018, largely in line with reserve estimates of 25.9 million Au oz. at year-end 2017. The addition of approximately 1.9 million ounces of estimated mineral reserves from Fort Knox Gilmore and approximately 343 Au koz. from exploration mostly offset depletion and engineering changes during the year. The company’s total estimated measured and indicated mineral resources at year-end 2018 were 27.8 million Au oz. compared with mineral resource estimates of 29.6 million Au oz. at year-end 2017. The slight reduction was mostly due to the conversion of 1.9 million ounces of estimated resources from Fort Knox Gilmore to estimated mineral reserves. Total estimated inferred gold resources at year-end 2018 increased to approximately 6.5 million Au oz., compared with 6.4 million Au oz. at year-end 2017. Exploration gains at Kupol, Bald Mountain and Chirano, and engineering changes at Paracatu, offset the loss of ounces at Tasiast Sud after the Company was not granted an exploitation license at the project.
While brownfields exploration remains Kinross’ core exploration focus, it also continues to pursue greenfields opportunities. In 2018, the company focused on targets in Nevada, Alaska, the Abitibi region in Quebec and Ontario, Manitoba, areas of Eastern Russia, and northern Finland’s greenstone belts. Kinross also pursues greenfields opportunities and high margin types of deposits through strategic investments and partnerships. In North America, it explored 11 projects in both JV and 100%-owned Kinross claims. Kinross and its JV partners undertook geochemical sampling, ground and airborne geophysical surveys and drilling programs. Indications of mineralization and prospective targets were generated at several projects, and first and second phase drilling programs were undertaken in 2018. The company and its JV partners have also identified new opportunities in Nevada, Quebec, Ontario, Manitoba, the Yukon, and Finland, and are assessing potential drilling programs at these projects for 2019.
The company’s address is 25 York Street 17th Floor, Toronto, ON M5J 2V5, (416) 365-5123, fax: (416) 363-6622, www.kinross.com.