SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of March 2003
Commission File Number: __________
KINROSS GOLD CORPORATION
(Translation of registrant's name into English)
52ND FLOOR, SCOTIA PLAZA, 40 KING STREET WEST
TORONTO, ONTARIO M5H 3Y2
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40F:
Form 20-F Form 40-F X
----- -----
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(1):_____
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of
a Form 6-K if submitted only to provide an attached annual report to security
holders.
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted y Regulation S-T Rule 101(b)(7):_____
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of
a Form 6-K if submitted to furnish a report or other document that the
registrant foreign private issuer must furnish and make public under the laws of
the jurisdiction in which the registrant is incorporated, domiciled or legally
organized (the registrant's "home country"), or under the rules of the home
country exchange on which the registrant's securities are graded, as long as the
report or other document is not a press release, is not required to be and has
not been distributed to the registrant's security holders, and, if discussing a
material event, has already been the subject of a Form 6-K submission or other
Commission filing on EDGAR.
Indicate by check mark whether by furnishing the information contained in
this Form, the registrant is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
----- -----
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2b: __________
This Current Report on Form 6-K, dated February 21, 2003, is specifically
incorporated by reference into Kinross Gold Corporation's Registration Statement
on Form F-10 (Registration No. 333-102660), filed on January 22, 2003, as
amended on January 29, 2003.
INDEX
Material Change Report dated March 6, 2003
Which includes press release dated March 4, 2003. 3 - 33
Signature Page 34
This Current Report on Form 6-K, dated March 7, 2003, is specifically
incorporated by reference into Kinross Gold Corporation's Registration Statement
on Form F-10 (Registration No. 333-102660), filed on January 22, 2003, as
amended on January 29, 2003.
2
MATERIAL CHANGE REPORT
ITEM 1. REPORTING ISSUER
The reporting issuer filing this material change report is Kinross Gold
Corporation ("Kinross").
ITEM 2. DATE OF MATERIAL CHANGE
March 4, 2003
ITEM 3. PRESS RELEASE
Press release was issued by Kinross in Toronto on March 4, 2003 with respect to
the material change and filed via SEDAR.
ITEM 4. SUMMARY OF MATERIAL CHANGE
Kinross announced the results for the three months and year ended December 31,
2002.
ITEM 5. FULL DESCRIPTION OF MATERIAL CHANGE
See attached press release dated March 4 2003.
ITEM 6. RELIANCE ON SECTION 75(3) OF THE SECURITIES ACT (ONTARIO) AND ANALOGOUS
SECURITIES LEGISLATION OF EACH OF THE OTHER PROVINCES OF CANADA.
N/A
ITEM 7. OMITTED INFORMATION
N/A
ITEM 8. SENIOR OFFICER
Ms. Shelley M. Riley
Corporate Secretary
Telephone: (416) 365-5198
Facsimile: (416) 365-0237
3
ITEM 9. STATEMENT OF SENIOR OFFICER
The foregoing accurately discloses the material change referred to herein.
DATED at Toronto this 6th day of March, 2003.
KINROSS GOLD CORPORATION
PER: Shelley M. Riley/
-----------------
Shelley M. Riley
Corporate Secretary
4
Press Release MARCH 4, 2003
Toronto, Ontario - KINROSS GOLD CORPORATION (TSX-K; NYSE-KGC) ("Kinross" or the
"Company") announced today the results for the three months and year ended
December 31, 2002 are as follows:
All results are expressed in United States dollars unless otherwise stated.
Since the combination of Kinross, TVX Gold Inc. ("TVX") and Echo Bay Mines Ltd.
("Echo Bay") became effective on January 31, 2003, this press release relates to
Kinross prior to the combination and as such, the financial statements are not
inclusive of TVX and Echo Bay financial results. Certain information about the
combination is presented in various sections of this press release and the notes
to the financial statements. 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, the per share losses for
the three months and years ended December 31, 2002 and 2001 are three times
larger than they would have been without the retroactive impact of the share
consolidation.
THE COMPANY
The Company is engaged in the mining and processing of gold and silver ore and
the exploration for and acquisition of gold-bearing properties, principally in
the Americas, Russia, Australia and Africa. The Company's products are gold and
silver produced in the form of dore that is shipped to refineries for final
processing.
FULL YEAR
The Company's share of attributable gold equivalent production was 888,634
ounces in 2002, a decrease of 6% when compared to 944,803 ounces in 2001.
Average total cash costs per attributable gold equivalent ounce were $201 in
2002, compared to $193 in 2001. Cash flow provided from operating activities in
2002 was $62.9 million, compared to $74.5 million in 2001. Cash flow provided
from operating activities decreased in 2002 when compared to 2001 due to lower
gold equivalent production, and 2001 results included $21.6 million of proceeds
from the restructuring of the gold forward sales contracts. In 2002, a $7.7
million non-cash charge was recorded to increase the estimated cost to reclaim
certain previously closed mines. This, combined with the results of operations
from the portfolio of mines, resulted in a net loss for the year 2002 of $30.9
million, or $0.32 per share. The 2002 loss compares to a $36.3 million, or $0.42
per share loss in 2001. The loss in 2001 included non-cash charges of $16.1
million.
FOURTH QUARTER
The Company's share of attributable gold equivalent production was 231,238
ounces in 2002, a decrease of 3% when compared to 238,244 ounces in 2001.
Average total cash costs per attributable gold equivalent ounce were $198 in
2002, compared to $200 in 2001. Cash flow provided from operating activities in
2002 was $14.4 million, compared to $15.8 million in 2001. Cash flow provided
from operating activities decreased in 2002 due to lower gold equivalent
production and increased reclamation spending. In 2002, a $7.7 million non-cash
charge was recorded to increase the estimated cost to reclaim certain previously
closed mines. This, combined with the results of operations from the portfolio
of mines, resulted in a net loss for the fourth quarter of 2002 of $12.9
million, or $0.12 per share. The 2002 loss compares to a $17.5 million, or $0.18
per share, loss in 2001. The loss in 2001 included non-cash charges of $16.1
million.
5
MERGERS AND ACQUISITIONS
TVX , ECHO BAY AND THE PURCHASE OF NEWMONT MINING CORPORATION'S INTEREST IN THE
TVX NEWMONT AMERICAS JOINT VENTURE
The Company, TVX and Echo Bay entered into a combination agreement dated June
10, 2002, as amended as of July 12, 2002 and November 19, 2002, for the purpose
of combining the ownership of their respective businesses. The combination was
effected by way of a plan of arrangement under the Canada Business Corporations
Act ("CBCA") with an effective date of January 31, 2003.
In a separate transaction, TVX and a subsidiary of TVX entered into two
agreements dated June 10, 2002, each as amended as of November 19, 2002, with a
subsidiary of Newmont Mining Corporation ("Newmont"). Pursuant to these
agreements, TVX acquired Newmont's 50% non-controlling interest in the TVX
Newmont Americas joint venture ("TVX Newmont J/V") for an aggregate purchase
price of $180.0 million with an effective date of January 31, 2003.
Pursuant to the arrangement, TVX amalgamated with a newly formed, wholly owned
subsidiary of the Company on January 31, 2003, and each holder of TVX common
shares received 2.1667 common shares of the Company. Also pursuant to the
arrangement, shareholders of Echo Bay (other than shares owned by the Company)
received 0.1733 common shares of the Company for each Echo Bay common share. The
exchange ratio reflects the three for one consolidation of the Company's common
shares that was completed on January 31, 2003 prior to the arrangement. The
Company issued 177.8 million common shares with an aggregate fair value of
$1,269.5 million with respect to the TVX and Echo Bay acquisitions.
In 2002 the TVX Newmont J/V held interests in various operating mines located in
Canada, Brazil and Chile. The production from the TVX Newmont J/V in 2002 was
approximately 474,000 ounces of gold equivalent. Echo Bay held interests in
various operating mines in Canada and the United States. Echo Bay's share of
production from these mines in 2002 was approximately 520,000 ounces of gold
equivalent.
The acquisitions are being accounted for using the purchase method of accounting
in accordance with both sections 1581 "Business Combinations", of the CICA
Handbook for the purposes of Canadian generally accepted accounting principles
("Canadian GAAP") and Statement of Accounting Standards ("SFAS") 141, "Business
Combinations", for the purposes of United States generally accepted accounting
principles ("U.S. GAAP"). Pursuant to the purchase method of accounting under
both Canadian and United States GAAP, the TVX and Echo Bay assets acquired and
liabilities assumed will be recorded at their fair values as of the effective
date of the combination. The excess of the purchase price over such fair value
will be recorded as goodwill. In accordance with Section 3062, "Goodwill and
Other Intangible Assets", of the CICA Handbook, for purposes of Canadian GAAP,
and SFAS 142, "Goodwill and Other Intangible Assets", for purposes of U.S. GAAP,
goodwill will be assigned to specific reporting units and will not be amortized.
REVENUES
GOLD AND SILVER SALES
The Company's primary source of revenue is from the sale of its gold production.
The Company sold 848,513 ounces of gold in 2002, compared to 907,149 ounces in
2001. Revenue from gold and silver sales was $261.0 million in 2002 compared to
$270.1 million in 2001. Revenue from gold and silver sales in 2002 decreased as
a result of lower gold sales due to the suspension of mining operations at the
Refugio mine in 2001. In 2002, the Company realized $306 per ounce of gold,
compared to $296 in 2001. The average London market spot price for gold was $310
per ounce in 2002 compared to $271 in 2001.
6
YEARS ENDED DECEMBER 31,
2002 2001
-----------------------------
Attributable gold equivalent production - ounces 888,643 944,803
Gold sales - ounces (excluding equity accounted ounces) 848,513 907,149
Gold sales revenue (millions) $ 254.5 $ 251.1
Gold deferred revenue realized (millions) 5.1 17.7
-----------------------------
Total gold revenue realised (millions) $ 259.6 $ 268.8
=============================
Average sales price per ounce of gold $ 300 $ 277
Deferred revenue realized per ounce of gold 6 20
-----------------------------
Average realized price per ounce of gold sold $ 306 $ 296
=============================
Average spot gold price per ounce $ 310 $ 271
Silver sales revenue (millions) $ 1.4 $ 1.3
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 67.24:1 in 2002 and 62.00:1 in 2001.
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 2002 totaled $16.9 million
compared to $9.3 million in 2001. Interest and other income in 2002 was
comprised of 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. This compares to 2001 interest on cash deposits of $4.9 million,
joint venture management fees of $2.2 million and insurance settlements of $1.3
million and $0.9 million of other items. Interest income decreased in 2002 due
to substantially lower interest rates, while arbitration settlement income
increased since the Refugio arbitration claims were settled in 2002. There are
no material insurance or arbitration claims outstanding at December 31, 2002.
MARK-TO-MARKET GAIN (LOSS) ON WRITTEN CALL OPTIONS
The Company retroactively adopted the change in Canadian Institute of Chartered
Accountants recommendations for the accounting for written call options in 2000.
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 loss of $2.7 million in 2002. This compared to a gain of $3.5
million in 2001. The Company plans to reduce its written call position in 2003
by delivering gold production into any contracts that are exercised in 2003.
7
COSTS AND EXPENSES
OPERATING COSTS
Gold equivalent production in 2002, (excluding equity accounted ounces)
decreased by 5% when compared to 2001 production, while operating costs
decreased by 3%. Consolidated operating costs were $174.8 million in 2002
compared to $180.7 million in 2001. Total cash costs per ounce of gold
equivalent were $201 in 2002 compared to $193 in 2001. Total cash costs per
ounce of gold equivalent in 2002 improved at the Kubaka and the Refugio mines
and increased at the Porcupine Joint Venture and the Fort Knox mines.
CONSOLIDATED PRODUCTION COSTS PER
EQUIVALENT OUNCE OF ATTRIBUTABLE GOLD PRODUCTION YEARS ENDED DECEMBER 31,
2002 2001
---------------------------
Cash operating costs $ 194 $ 186
Royalties 7 7
---------------------------
Total cash costs 201 193
---------------------------
Reclamation 4 2
Depreciation, depletion and amortization 101 94
---------------------------
Total production costs $ 306 $ 289
---------------------------
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,
2002 2001
----------------------------
Operating costs per financial statements $ 174.8 $ 180.7
Operating costs for attributable production 13.4 7.4
Site restoration cost accruals (3.0) (1.9)
Change in bullion inventory (2.0) 1.5
Operating costs not related to gold production (4.4) (5.2)
----------------------------
Operating costs for per ounce calculation purposes $ 178.8 $ 182.5
----------------------------
Gold equivalent production - ounces 888,643 944,803
Total cash costs per equivalent ounce of gold $ 201 $ 193
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.
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 metal producers.
8
Total cash costs per ounce of gold equivalent increased by 4% during 2002.
Details of the individual mine performance are discussed in the following
sections.
PRODUCTION DATA
ATTRIBUTABLE GOLD EQUIVALENT PRODUCTION - OUNCES
FOR THE YEAR ENDED DECEMBER 31, 2002 2001
----------------------------
PRIMARY OPERATIONS:
Fort Knox 410,519 411,221
Porcupine Joint Venture 189,464 156,581
Kubaka 220,972 237,162
----------------------------
820,955 804,964
----------------------------
OTHER OPERATIONS:
Refugio 13,047 67,211
Blanket 41,612 39,592
Denton-Rawhide 11,162 17,713
Andacollo 1,858 11,718
Hayden Hill - 1,887
Guanaco - 1,718
----------------------------
67,679 139,839
----------------------------
888,634 944,803
----------------------------
TOTAL CASH COSTS PER OUNCE OF ATTRIBUTABLE GOLD EQUIVALENT PRODUCTION
FOR THE YEAR ENDED DECEMBER 31,
(DOLLARS PER EQUIVALENT OUNCE OF GOLD) 2002 2001
----------------------------
PRIMARY OPERATIONS:
Fort Knox 232 207
Porcupine Joint Venture 201 182
Kubaka 133 140
OTHER OPERATIONS:
Refugio 186 242
Blanket 243 279
Denton-Rawhide 249 248
Andacollo 295 259
Hayden Hill - 277
Guanaco - 436
----------------------------
201 193
----------------------------
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 computing operating
costs under U.S. GAAP. Therefore, total cash costs per ounce computed in
accordance with U.S. GAAP are unchanged from the Canadian GAAP amounts.
9
PRIMARY OPERATIONS
FORT KNOX MINE
The Company acquired the Fort Knox open pit mine, located near Fairbanks, Alaska
in 1998. The Fort Knox open pit mine consists of the main Fort Knox open pit and
the True North open pit located approximately 15 kilometers Northwest of Fort
Knox. Gold equivalent production in 2002 was 410,519 ounces compared to 411,221
in 2001. In 2002, total cash costs were $232 per ounce of gold equivalent
compared to $207 in 2001.
RECONCILIATION OF THE FORT KNOX 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,
2002 2001
----------------------------
Operating costs per financial statements $ 99.2 $ 82.9
Site restoration cost accruals (1.0) (1.2)
Change in bullion inventory (2.9) 3.3
----------------------------
Operating costs for per ounce calculation purposes $ 95.3 $ 85.0
----------------------------
Gold equivalent production - ounces 410,519 411,221
Total cash costs per equivalent ounce of gold $ 232 $ 207
The Fort Knox mine 2002-business plan called for 440,000 ounces of gold
equivalent production at total cash costs of $220 per ounce. The plan was
predicated on production from the Fort Knox open pit and supplemental feed from
the True North deposit. For 2002, production was lower than planned as a higher
percentage of lower grade Fort Knox ore was milled in the first half of the
year, as planned production from the higher grade True North mine was impacted
by poor availability of the haulage fleet and harder than expected ore impacted
production in the fourth quarter. In addition, cash production costs were $2.9
million higher than planned primarily due to additional maintenance costs
incurred to increase equipment availability of the Fort Knox fleet and
additional contract haulage costs incurred to haul ore from the True North mine
to the Fort Knox mill. Unfortunately, production losses incurred in the first
half of 2002 due to unacceptable performance of the haulage fleet was not
recovered during the second half of the year. A new fleet of haulage trucks has
been delivered to the mine, which should eliminate future equipment performance
issues hauling ore from the True North mine to the Fort Knox mill. Estimated
gold equivalent production for 2003 is 410,000 ounces at total cash costs of
approximately $220 per ounce.
Capital expenditures at the Fort Knox operations in 2002 were $15.0 million
compared to $20.2 million during 2001. The majority of capital expenditures for
2002 were required to construct a tailings thickener for a cost of $6.9 million,
construct an additional lift on the tailings dam totaling $3.2 million and
capitalized exploration at the True North and Fort Knox mines of $2.7 million.
Planned capital expenditures for 2003 are estimated to be $16.2 million.
10
PORCUPINE JOINT VENTURE
On July 1, 2002, the Company formed a joint venture with a wholly owned
subsidiary of Placer Dome Inc. ("Placer"). The formation of the joint venture
combined the two companies' gold mining operations in the Porcupine district in
Timmins, Ontario. The ownership of this unincorporated joint venture is 51%
Placer and 49% by the Company. The joint venture operates pursuant to a
contractual agreement and both parties receive their share of gold output in
kind. Future capital, exploration and operating costs will be funded in
proportion to each party's ownership interest. Placer contributed the Dome mine
and mill and the Company contributed the Hoyle Pond, Nighthawk Lake, and Pamour
mines, exploration properties in the Porcupine district as well as the Bell
Creek mill.
The formation of the joint venture has been accounted for as an exchange of
non-monetary assets that does not represent the culmination of the earnings
process, and accordingly, has been recorded at the carrying value of the assets
contributed. Comparative production and cost information represent the Company's
results from the Hoyle Pond mine.
The Company's share of gold equivalent production was 189,464 ounces in 2002
compared to 156,581 in 2001. Total cash costs were $201 per ounce of gold
equivalent in 2002, compared to $182 in 2001. The Company's share of gold
equivalent production for the year increased due to higher than planned ore
grade of the tonnage processed at the Bell Creek mill before the formation of
the joint venture. In addition, the Company's 49% share of production from the
joint venture in the second half of 2002 exceeded the comparative production in
2001. Operating costs were higher than planned in the second half of 2002 due to
unplanned maintenance on the Dome open pit equipment, higher than planned
reagent and grinding media consumption and unplanned costs associated with the
new collective bargaining agreement. Exploration expenditures totaled $2.3
million in 2002.
The joint venture continues to assess the development of the former Pamour
mineral properties as they will form a significant part of the future production
once the current Dome mine open pit reserves have been depleted. A feasibility
study is underway and the permitting process has commenced. The Company
anticipates that the construction and pre-production development will commence
in 2004 after the required permits have been received.
The Company's share of estimated gold equivalent production for 2003 is 219,000
ounces at total cash costs of approximately $210 per ounce.
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)
YEARS ENDED DECEMBER 31,
2002 2001
----------------------------
Operating costs per financial statements $ 38.6 $ 29.1
Site restoration cost accruals (1.5) (0.2)
Change in bullion inventory 1.5 0.7
Operating costs not related to gold production (0.6) (1.1)
----------------------------
Operating costs for per ounce calculation purposes $ 38.0 $ 28.5
----------------------------
Gold equivalent production - ounces 189,464 156,581
Total cash costs per equivalent ounce of gold $ 201 $ 182
The Company's share of capital expenditures at the Porcupine Joint Venture in
2002 was $6.7 million compared to $7.9 million during 2001. The majority of
capital expenditures for 2002 were required to further advance the 1060 ramp at
the Hoyle Pond mine, underground development drilling at the Hoyle Pond mine,
surface fleet additions and
11
plant modifications. The Company's share of planned capital expenditures for
2003 are estimated to be $6.8 million.
KUBAKA MINE
The Company acquired its 54.7% ownership interest in the Kubaka open pit mine,
located in the Magadan Oblast in far eastern Russia in three transactions during
1998 and 1999. The Company's share of gold equivalent production in 2002 was
220,972 ounces compared to 237,162 in 2001. Total cash costs were $133 per gold
equivalent ounce in 2002, compared to $140 in 2001. The Kubaka mine continues to
perform exceptionally well, having achieved the lowest total cash costs per
ounce of the Company's primary operations. Operating costs decreased during
2002, as open pit mining operations ended in October of 2002. The Company has
commenced processing of the low-grade stockpiles and will supplement this with
underground ore from the North High Wall, Centre Zone and the North Vein in
2003. Based on current plans the majority of the low-grade stockpiled ore will
be processed in 2003. However, the Company continues to actively explore the
nearby Birkachan and Tsokol deposits for additional mineralization that will
hopefully extend the life of Kubaka into 2005 and beyond.
On December 3, 2002, the Company entered into purchase agreements with four of
the five Russian shareholders (holding, in aggregate 44.17% of the shares of
Omolon Gold Mining Corporation ("Omolon")). The four shareholders agreed to
tender their shares in Omolon and Omolon agreed to pay them $43.5 million for
said shares. As at February 25, 2003, 38.17% of the shares have been tendered
leaving 6.0% remaining. Once all of the shares described above have been
tendered and cancelled, the Company will own 98.10% of Omolon.
After reflecting the above transactions, estimated gold equivalent production
for the Company from the Kubaka mine in 2003 is 188,000 ounces at total cash
costs of approximately $190 per ounce.
RECONCILIATION OF THE KUBAKA 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,
2002 2001
----------------------------
Operating costs per financial statements $ 28.6 $ 34.1
Site restoration cost accruals (0.8) (0.4)
Change in bullion inventory (0.1) (1.6)
Management fees 1.6 1.0
----------------------------
Operating costs for per ounce calculation purposes $ 29.3 $ 33.1
----------------------------
Gold equivalent production - ounces 220,972 237,162
Total cash costs per equivalent ounce of gold $ 133 $ 140
The Company's share of capital expenditures at the Kubaka operations in 2002
were $0.1 million compared to $0.4 million during 2001. The Company's share of
planned capital expenditures for 2003 are estimated to be $1.5 million that will
be utilized to acquire underground mining equipment for the underground mining
program.
12
REFUGIO MINE
The Company acquired a 50% interest in the Refugio open pit mine, located in
Chile in 1998. The Company's share of gold equivalent production was 13,047
ounces in 2002 compared to 67,211 in 2001. In 2002, total cash costs were $186
per ounce of gold equivalent compared to $242 in 2001. Production decreased in
2002 as no new ore was added to the leachpad and the only production came from
residual leaching. In late 2002, the Company began an exploration program at the
Refugio mine. The purpose of the program is to increase the reserves at Refugio
to allow the Company to revisit the project economics in light of higher spot
gold prices. Initial drilling has been successful and the Company and its joint
venture partner will spend the next few months completing further drilling,
analyzing the data generated and preparing a reopening study decision document.
A decision to reopen is expected to be made during the third quarter of 2003,
which if approved, should allow production to resume in 2004.
RECONCILIATION OF THE REFUGIO 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,
2002 2001
----------------------------
Operating costs per financial statements $ 3.9 $ 17.4
Site restoration cost accruals - -
Change in bullion inventory (0.5) (0.9)
Management fees 0.1 0.2
Operating costs not related to gold production (1.1) (0.3)
----------------------------
Operating costs for per ounce calculation purposes $ 2.4 $ 16.4
----------------------------
Gold equivalent production - ounces 13,047 67,211
Total cash costs per equivalent ounce of gold $ 186 $ 242
BLANKET MINE
The Blanket mine, located in Zimbabwe, was acquired in 1993. Gold equivalent
production in 2002 was 41,612 ounces compared to 39,592 ounces in 2001. Total
cash costs were $243 per ounce of gold equivalent in 2002, compared to $279 in
2001. Gold equivalent production increased in 2002 as milling of historic
tailings that were purchased, subject to a tonnage royalty, from a nearby mine
continued for the entire year. Inflationary pressures within Zimbabwe continued
in 2002. The mine continues to operate and is self-sustaining at present. The
Company continues to believe that conditions will improve in Zimbabwe. The
Company commenced equity accounting of this investment in 2002 following the
write-down in 2001. Estimated 2002 production is 35,000 gold equivalent ounces
at total cash costs similar to those incurred in 2002.
RECONCILIATION OF THE BLANKET 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,
2002 2001
Operating costs per financial statements $ - $ 11.2
Operating costs for attributable production 10.1 -
Site restoration cost accruals - (0.1)
Change in bullion inventory - -
Operating costs not related to gold production - -
Operating costs for per ounce calculation purposes $ 10.1 $ 11.1
Gold equivalent production - ounces 41,612 39,592
Total cash costs per equivalent ounce of gold $ 243 $ 279
13
OTHER OPERATIONS
In late 1999, the Company entered into an agreement, whereby it would contribute
cash while its partner would contribute technology and the required patents to
construct an Autoclaved Aerated Concrete ("AAC") plant near Phoenix, Arizona.
Construction of the plant was completed 2001. AAC is a lightweight, high
strength building block manufactured from silica mine tailings. Activities in
2002 were primarily marketing and engineering related, plant modifications and
manufacturing of AAC. The plan for 2003 is to continue to establish demand for
the product, with the expectation of earnings and positive cash flow from this
venture in 2004.
The Company has expensed start-up activities, including pre-production losses
and organizational costs as incurred.
ADMINISTRATION
Administration costs include corporate office expenses related to the overall
management of the business which are not part of direct mine operating costs.
Administration costs include the costs incurred at two offices. These offices
are the corporate office in Toronto and the United States office in Salt Lake
City. Administration expenses totaled $11.3 million in 2002, compared to $10.1
million in 2001. The 2002 administrative expenses increased due to increased
staffing in anticipation of completing the combination with TVX and Echo Bay.
Due to completion of the combination, annual administration expenses in 2003 are
expected to be approximately $17.0 million.
EXPLORATION AND BUSINESS DEVELOPMENT
Total expensed exploration and business development expenditures were $11.6
million in 2002 compared to $7.9 million in 2001. In 2002, exploration
activities increased as the flow through funds raised in late 2001 and committed
for exploration were spent. Exploration activities in 2002 primarily focused
around Fort Knox, the Porcupine Joint Venture, Kubaka (Birkachan and Tsokol),
and George/Goose Lake. Upon completion of the combination, and as a result of
higher spot gold prices, 2003 planned exploration expenditures are estimated at
$20.0 million
DEPRECIATION, DEPLETION AND AMORTIZATION
Depreciation, depletion and amortization totaled $85.3 million in 2002 compared
to $85.8 million in 2001. Depreciation, depletion and amortization have
increased per equivalent ounce of gold to $101 in 2002, from $94 in 2001. The
2002 increase per equivalent ounce of gold compared to 2001 was primarily due to
the reduced production at Refugio in 2002 since the Refugio mine carried a low
depreciable basis. Based on the preliminary purchase equation, depreciation,
depletion and amortization on a per ounce basis are expected to remain at
current levels in 2003.
INTEREST EXPENSE
Interest expense totaled $5.0 million in 2002, compared to $9.1 million in 2001.
Interest expense in 2002 is comprised of $0.3 million relating to the Company's
proportionate share of interest on the Kubaka project loans, $1.5 million of
interest on the Alaskan industrial revenue bonds and the Fort Knox capital
leases, $2.6 million of interest on the debt component of the convertible
debentures and $0.6 million on other items. Interest expense decreased in 2002
due to lower debt balances outstanding and lower interest rates. Interest
expense will continue to decrease since rates remain low and debt balances
continue to decrease as scheduled repayments are made.
14
SHARE OF LOSS OF INVESTEE COMPANIES
Share of loss of investee companies totaled $0.6 million in 2002, compared to
$2.2 million in 2001. The Company equity accounts investments where it owns more
than 20% and exercises control. During 2002, the Company's share of the losses
of these equity accounted investments was $0.6 million, substantially less than
recorded amounts in 2001. Future statements of operations should have no
reported share of loss of investee companies as the only remaining equity
accounted investment, Pacific Rim, has been equity accounted to a zero basis.
WRITE-DOWN OF PROPERTY PLANT AND EQUIPMENT AND OTHER NON-CASH CHARGES
Impairment analysis for the operating assets consisted of comparing the
estimated undiscounted future net cash flows on an area of interest basis with
its carrying value, and when the future net cash flows are less, a non-cash
write-down is recorded. Over the past three years gold has averaged $287 per
ounce and closed the year at $343 per ounce. Subsequent to the end of 2002, gold
has continued to trade above $340 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 $325 per
ounce for gold for impairment analysis in 2002, compared to $300 per ounce in
2001.
Non-cash property, plant and equipment write-downs and other non-cash charges
totaled $7.7 million in 2002 compared to $16.1 million in 2001. The 2002
write-down and other non-cash charges was required to increase reclamation
provisions at the closure properties to revised year-end estimates. The 2001
write-down was comprised of $11.8 million relating to the Blanket mine due to
the extreme inflationary pressures within Zimbabwe, difficulty in accessing
foreign currency to pay for imported goods and services, and civil unrest. The
balance of the 2001 write-down was on other non-core closure properties.
INCOME AND MINING TAXES
The Company is subject to tax in various jurisdictions including Canada, the
United States, Russia, Zimbabwe and Chile. However, the Company has substantial
operating losses and other tax deductions to shelter future taxable income. The
2002 liability arises from income taxes in Russia and federal large corporations
tax in Canada.
LIQUIDITY AND FINANCIAL RESOURCES
OPERATING ACTIVITIES
Cash flow provided from operating activities was $62.9 million in 2002 compared
to $74.5 million in 2001. The 2001 cash flow from operating activities was
positively affected by higher sales prices per ounce of gold sold. The 2002 cash
flow from operating activities was used to finance capital expenditures and
service existing debt.
FINANCING ACTIVITIES
During 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. During 2001, the Company issued 8.1 million
post-consolidation common shares valued at $23.2 million to acquire 945,400
convertible preferred shares of subsidiary company. In addition, in 2001, the
Company issued 1.4 million post-consolidation common shares for cash
consideration of $4.6 million pursuant to a private placement, issued 1.3
million post-consolidation common shares valued at $3.8 million to acquire
mining properties, and issued 0.4 million post-consolidation common shares
valued at $0.9 million pursuant to the employee share incentive plan. All of the
share amounts have been retroactively adjusted for the three for one
consolidation that was completed on January 31, 2003.
The debt component of convertible debentures was reduced by $5.1 million during
2002 compared to $5.4 million during 2001. Long-term debt repayments were $28.5
million in 2002 compared to $46.5 million during 2001.
15
The Company did not declare nor pay any dividends to the holders of the
convertible preferred shares of subsidiary company in 2002 or 2001.
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 owned by non-affiliated shareholders. The tender offer
process closed on April 4, 2002 with 670,722 convertible preferred shares of
subsidiary company tendered leaving 223,878 or 12.2% outstanding to
non-affiliated shareholders. In 2001, the Company acquired 945,000 convertible
preferred shares of subsidiary company by issuing from treasury 8.1 million
post-consolidation common shares of the Company valued at $23.2 million.
Included in the carrying value of the Kinam preferred shares, as at December 31,
2001, is an accrual of $2.2 million that represents the cumulative unpaid
dividends to the minority holders.
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.
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 is currently in the process of issuing
new letters of credit under this facility to replace outstanding surety bonds.
The Company anticipates that this credit facility will be available to replace
all of the surety bonds issued by TVX, Echo Bay, and the Company and, as a
result, releasing all remaining restricted cash.
As at December 31, 2002, the Company's long-term debt consists of $2.6 million
relating to the Kubaka project financing, $25.0 million of IRB's and various
capital leases, and other debt of $8.6 million. The current portion of the
long-term debt is $23.3 million.
INVESTING ACTIVITIES
Capital expenditures decreased by 26% in 2002 as $22.6 million was spent on
capital additions, compared to $30.4 million in 2001. The 2002 capital
expenditures focused primarily on the Porcupine Joint Venture and Fort Knox
operations, with 96% of total capital expenditures incurred at these two mines.
Capital expenditures at the Porcupine Joint Venture in 2002 were required to
further advance the 1060 ramp at the Hoyle Pond mine, underground development
drilling at the Hoyle Pond mine, surface fleet additions, and plant
modifications at the Dome Mine. At the Fort Knox mine, the majority of capital
expenditures for 2002 were required to construct a tailings thickener for a cost
of $6.9 million, construct an additional lift on the tailings impoundment dam
totaling $3.2 million, and capitalized exploration at the True North and Fort
Knox mines of $2.7 million. Capital expenditures were financed out of cash flow
from operating activities. Planned capital expenditures including additions to
the newly acquired TVX and Echo Bay mines are estimated at $74.0 million in 2003
and are to be funded from cash flow from operating activities.
16
MINERAL RESERVE ESTIMATES
The following tables provide the Company's proforma share of reserves as at
December 31, 2002, calculated at a gold price of $300 per ounce. Excluding the
effect of the combination with TVX and Echo Bay, and excluding the TVX Newmont
JV purchase, proven and probable reserves declined by 356,000 ounces of gold
compared to 2001. Mining activity consumed 891,200 ounces of gold from reserves
to produce 888,634 ounces of attributable gold equivalent in 2002. Reserve
depletion was partially offset by proven and probable reserve additions at both
Fort Knox and the Porcupine Joint Venture
At Fort Knox and area, proven and probable reserves were reduced by 405,000
ounces, primarily as a result of consumption 417,000 ounces of gold from
reserves to produce 410,519 ounces of gold in 2002. In addition, 225,000 ounces
of gold contained in proven and probable reserves at Ryan Lode were
re-classified to measured and indicated resources. Pit design changes reduced
reserves by 76,000 ounces of gold, while new drilling added 313,000 ounces of
gold to reserves at Fort Knox.
At the Porcupine Joint Venture, production consumed 207,300 ounces of gold from
proven and probable reserves, producing 189,464 ounces of attributable gold for
2002. Proven and probable reserves increased by 325,000 ounces of gold, a result
of upgrading 853,000 ounces of gold from measured and indicated resources to
proven and probable reserves. The Company's share adds 418,000 ounces of gold as
proven and probable reserves. In addition to the reserve increase at Pamour, the
Company also added 521,000 ounces of gold to reserves as a result of the new
equity position in the Dome mine.
Production at the Kubaka mine removed 223,200 ounces of proven and probable
reserves resulting in a total of 220,972 ounces of attributable gold equivalent
for 2002, depleting the available open pit reserves. Remaining production at the
Kubaka Mine will originate primarily from milling of the low grade stockpiles
augmented by limited underground reserves.
At the Blanket mine, proven and probable reserves decreased by 55,700 ounces
producing 41,612 ounces of gold.
As a result of the successful combination of the Company with TVX and Echo Bay,
and the TVX Newmont JV purchase, proforma proven and probable reserves at
December 31, 2002 have increased by 7,861,000 ounces to 13,166,000 ounces of
gold. At the Skouries project in Greece, 3,715,000 ounces of gold were removed
from reserves.
17
MINERAL RESERVE STATEMENT
PROVEN AND PROBABLE MINERAL RESERVES (1,2,3,4,5)
KINROSS GOLD CORPORATION'S PRO-FORMA SHARE AT DECEMBER 31, 2002
-----------------------------------------------------------------------------------------------------------------------------
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 (5) USA 100.0% 58,414 0.84 1,571 38,744 0.89 1,107 97,158 0.86 2,678
Round Mtn USA 50.0% 42,893 0.59 815 44,247 0.74 1,060 87,141 0.67 1,874
Porcupine JV (5,7) Canada 49.0% 7,995 1.39 357 20,855 1.68 1,128 28,850 1.60 1,485
Aquarius (5) Canada 100.0% - - - 15,900 2.33 1,189 15,900 2.33 1,189
Musselwhite (7) Canada 32.0% 2,804 5.67 511 1,008 4.81 156 3,812 5.44 667
Lupin Mine Canada 100.0% 765 8.09 199 440 9.40 133 1,205 8.57 332
New Britannia (6) Canada 50.0% 139 4.59 21 1,082 4.34 151 1,221 4.37 172
Kettle River USA 100.0% 17 7.22 4 - - - 17 7.22 4
-----------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 113,028 0.96 3,477 122,276 1.25 4,923 235,304 1.11 8,400
-----------------------------------------------------------------------------------------------------------------------------
SOUTH AMERICA
-----------------------------------------------------------------------------------------------------------------------------
Brasilia (8) Brazil 49.0% 156,457 0.43 2,163 24,402 0.43 337 180,859 0.43 2,500
La Coipa (7) Chile 50.0% 14,037 1.15 518 3,766 1.05 127 17,802 1.13 645
Refugio Chile 50.0% 11,275 0.96 347 12,280 0.91 359 23,555 0.93 706
Crixas (9) Brazil 50.0% 1,392 7.64 342 526 8.04 136 1,918 7.75 478
-----------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 183,161 0.57 3,370 40,974 0.73 959 224,134 0.60 4,329
-----------------------------------------------------------------------------------------------------------------------------
ASIA
-----------------------------------------------------------------------------------------------------------------------------
Kubaka (5) Russia 54.7% 920 4.48 132 33 22.44 24 953 5.10 156
-----------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 920 4.48 132 33 22.44 24 953 5.10 156
-----------------------------------------------------------------------------------------------------------------------------
AFRICA
-----------------------------------------------------------------------------------------------------------------------------
Blanket Zimbabwe 100.0% 1,054 3.25 110 1,628 3.25 170 2,682 3.25 280
-----------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 1,054 3.25 110 1,628 3.25 170 2,682 3.25 280
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
TOTAL GOLD 298,163 0.74 7,089 164,911 1.15 6,077 463,074 0.88 13,166
-----------------------------------------------------------------------------------------------------------------------------
SILVER
SOUTH AMERICA
-----------------------------------------------------------------------------------------------------------------------------
La Coipa (7) Chile 50.0% 14,037 58.3 26,295 3,766 47.4 5,743 17,802 56.0 32,038
-----------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 14,037 58.3 26,295 3,766 47.4 5,743 17,802 56.0 32,038
-----------------------------------------------------------------------------------------------------------------------------
ASIA
-----------------------------------------------------------------------------------------------------------------------------
Kubaka (5) Russia 54.7% 920 11.0 327 33 22.9 25 953 11.5 351
-----------------------------------------------------------------------------------------------------------------------------
SUBTOTAL 920 11.0 327 33 22.9 25 953 11.5 351
-----------------------------------------------------------------------------------------------------------------------------
TOTAL SILVER 14,957 55.4 26,622 3,799 47.2 5,767 18,755 53.7 32,389
-----------------------------------------------------------------------------------------------------------------------------
18
MINERAL RESERVE STATEMENT
(1) Unless otherwise noted, the Company's reserves are estimated using
appropriate cut-off grades derived from an assumed gold price of $US 300
per oz and a silver price of $US 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 actual and/or assumed
allowances for dilution and mining recovery.
(2) The Company's reserves as at December 31, 2002 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.
(3) Individuals supervising, preparing and otherwise responsible for the
Company's reserve estimates meet the definition of a "qualified person" as
described by the Instrument.
(4) The Company's normal data verification procedures have been used in
collecting, compiling, interpreting and processing the data used to
estimate reserves. Independent data verification has not been performed.
(5) Reserve estimates assume successful permitting. Properties awaiting permits
include those identified above as well as Porcupine Joint Venture with the
exception of Dome and Hoyle Pond mines.
(6) Reserves at New Britannia estimated using an assumed gold price of US$325
per ounce. (7) Operated by Placer Dome Inc. (8) Operated by Rio Tinto plc.
(9) Operated by AngloGold Ltd.
COMMODITY PRICE RISKS
The Company 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. The Company does
not hold these financial instruments for speculative or trading purposes. The
Company 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, 2002
are as follows:
OUNCES CALL OPTIONS AVERAGE
HEDGED AVERAGE SOLD STRIKE
YEAR PRICE PRICE
--------------------------------------------------------------------------------
2003 137,500 277 100,000 320
2004 137,500 277 50,000 340
2005 37,500 296 - -
--------------- ---------------
Total 312,500 150,000
=============== ===============
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, 2002 was negative $20.3
million. The Company will continue to deliver into these contracts as they
mature and not replace them with new contracts.
OUTLOOK
As at December 31, 2002, the Company had $170.6 million of unrestricted cash.
These cash reserves combined with TVX's and Echo Bay's year-end cash reserves
and the restricted cash released early in 2003, provided ample cash to pay for
the TVX Newmont J/V, the outstanding transaction costs and the increase in
ownership of Omolon. As a result of the completion of the Combination on January
31, 2003, the Company plans to produce 1.7 million ounces of gold in 2003 at
total cash costs of approximately $210 per ounce. Estimated production in 2003
reflects production from the TVX and Echo Bay mines commencing February 1, 2003.
The Company's prudent fiscal management over the past few years of low gold
prices has positioned the Company to be a beneficiary of the improved gold price
environment. The Company has a strong balance sheet with low debt and ample cash
to fund exploration and capital programs that will allow the Company to continue
on its growth path. The Company's current plans include the recommencement of
operations at Refugio, if approved, the recommencement of operations at Kettle
River and the development of the Birkachan satellite deposit near the
19
Kubaka processing plant in Russia. All of this is expected to be accomplished
without incurring any additional long-term debt.
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.
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
Carl Hansen
Director Investor Relations
Tel. (416) 365-5673
Kinross will host a conference call at 11:00 EST on March 5, 2003 to discuss 4th
quarter and year-end results. The audio will be available at WWW.KINROSS.COM and
the conference call will be archived at WWW.KINROSS.COM. In addition, the
Company expects to provide an up-date on relevant exploration activities and
results thereof in late March 2003, by way of our 4th Annual Exploration Up-date
Conference Call. For participation in Kinross conference calls e-mail
INFO@KINROSS.COM or call Tracey Thom at (416) 365-1362.
20
GOLD EQUIVALENT PRODUCTION - OUNCES
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
-------------------------------------------------------
2002 2001 2002 2001
------------- ------------ ------------ -----------
PRIMARY OPERATIONS:
Fort Knox 114,357 104,521 410,519 411,221
Porcupine Joint Venture (4) 53,577 46,051 189,464 156,581
Kubaka (1) 47,125 62,415 220,972 237,162
------------- ------------ ------------ -----------
215,059 212,987 820,955 804,964
------------- ------------ ------------ -----------
OTHER OPERATIONS:
Refugio (2) 4,145 10,130 13,047 67,211
Blanket 9,829 8,879 41,612 39,592
Denton-Rawhide (3) 2,205 4,168 11,162 17,713
Andacollo (3) - 2,080 1,858 11,718
Hayden Hill - - - 1,887
Guanaco - - - 1,718
------------- ------------ ------------ -----------
16,179 25,257 67,679 139,839
------------- ------------ ------------ -----------
Total gold equivalent ounces 231,238 238,244 888,634 944,803
============= ============ ============ ===========
CONSOLIDATED PRODUCTION COSTS
($ per ounce of gold equivalent)
Cash operating costs $ 191 $ 192 $ 194 $ 186
Royalties 7 8 7 7
------------- ------------ ------------ -----------
Total cash costs 198 200 201 193
Reclamation 3 3 4 2
Depreciation and amortization 101 92 101 94
------------- ------------ ------------ -----------
Total production costs $ 302 $ 295 $ 306 $ 289
============= ============ ============ ===========
(1) Represents the Company's 54.7% ownership interest
(2) Represents the Company's 50% ownership interest.
(3) Includes proportionate share of Denton-Rawhide and Andacollo production attributable to the Pacific Rim
(formerly Dayton) ownership interest.
(4) Fourth quarter production reflects the Company's 49% ownership interest in the Porcupine Joint Venture.
Prior production reflects the Company's 100% ownership interest in the Hoyle Pond mine.
21
CASH OPERATING COSTS
($ per ounce of gold equivalent)
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
-----------------------------------------------------------------
2002 2001 2002 2001
--------------- --------------- -------------- ---------------
PRIMARY OPERATIONS:
Fort Knox $ 207 $ 236 $ 231 $ 207
Porcupine Joint Venture 224 169 200 181
Kubaka 97 106 111 118
--------------- --------------- -------------- ---------------
187 183 191 176
--------------- --------------- -------------- ---------------
OTHER OPERATIONS:
Refugio 180 183 170 229
Blanket 264 385 240 275
Denton-Rawhide 228 234 244 248
Andacollo - 269 287 254
Hayden Hill - - - 267
Guanaco - - - 413
--------------- --------------- -------------- ---------------
238 270 228 249
--------------- --------------- -------------- ---------------
$ 191 $ 192 $ 194 $ 186
=============== =============== ============== ===============
TOTAL CASH COSTS
($ per ounce of gold equivalent)
PRIMARY OPERATIONS:
Fort Knox $ 210 $ 236 $ 232 $ 207
Porcupine Joint Venture 224 169 201 182
Kubaka 123 133 133 140
--------------- --------------- -------------- ---------------
195 191 198 182
--------------- --------------- -------------- ---------------
OTHER OPERATIONS:
Refugio 195 196 186 242
Blanket 268 393 243 279
Denton-Rawhide 228 234 249 248
Andacollo - 275 295 259
Hayden Hill - - - 277
Guanaco - - - 436
--------------- --------------- -------------- ---------------
244 278 234 258
--------------- --------------- -------------- ---------------
$ 198 $ 200 $ 201 $ 193
=============== =============== ============== ===============
22
GOLD PRODUCTION AND COST SUMMARY
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
--------------------------------------------------------
2002 2001 2002 2001
-------------- ------------ ------------ -------------
FORT KNOX
Tonnes milled/crushed (000's) (1) 3,397.1 3,795.5 13,842.9 14,209.1
Grade (grams per tonne) 1.25 1.00 1.09 1.05
Recovery 84% 85% 84% 86%
Gold equivalent production to dore (2) 114,357 104,521 410,519 411,221
Per ounce:
Total cash costs $ 210 $ 236 $ 232 $ 207
Depreciation, depletion and amortization 109 107 107 104
Site restoration cost accruals 6 3 4 3
-------------- ------------ ------------ -------------
Total production costs $ 325 $ 346 $ 343 $ 314
============== ============ ============ =============
PORCUPINE JOINT VENTURE
Tonnes milled/crushed (000's) (1) 1,078.8 127.6 2,390.7 443.9
Grade (grams per tonne) 3.47 12.91 5.00 12.40
Recovery 91% 90% 91% 88%
Gold equivalent production to dore (2) 53,577 46,051 189,464 156,581
Per ounce:
Total cash costs $ 224 $ 169 $ 201 $ 182
Depreciation, depletion and amortization 76 64 87 82
Site restoration cost accruals 6 3 6 1
-------------- ------------ ------------ -------------
Total production costs $ 306 $ 236 $ 294 $ 265
============== ============ ============ =============
KUBAKA (3)
Tonnes milled/crushed (000's) (1) 213.9 223.3 849.9 889.3
Grade (grams per tonne) 12.56 16.05 14.93 15.28
Recovery 98% 98% 98% 98%
Gold equivalent production to dore (2) 47,125 62,415 220,972 237,162
Per ounce:
Total cash costs $ 123 $ 133 $ 133 $ 140
Depreciation, depletion and amortization 91 98 91 101
Site restoration cost accruals 4 3 3 2
-------------- ------------ ------------ -------------
Total production costs $ 218 $ 234 $ 227 $ 243
============== ============ ============ =============
REFUGIO (4)
Tonnes milled/crushed (000's) (1) - - - 4,643.9
Grade (grams per tonne) - - - 0.95
Recovery - - - 64%
Gold equivalent production to dore (2) 4,145 10,130 13,047 67,211
Per ounce:
Total cash costs $ 195 $ 196 $ 186 $ 242
Depreciation, depletion and amortization - - - -
Site restoration cost accruals - - - -
-------------- ------------ ------------ -------------
Total production costs $ 195 $ 196 $ 186 $ 242
============== ============ ============ =============
BLANKET
Tonnes milled/crushed (000's) (1) 294.3 295.5 1,179.7 1,200.3
Grade (grams per tonne) 1.61 1.40 1.64 1.64
Recovery 72% 67% 69% 63%
Gold equivalent production to dore (2) 9,829 8,879 41,612 39,592
Per ounce:
Total cash costs $ 268 $ 393 $ 243 $ 279
============== ============ ============ =============
(1) Tonnes milled/crushed represents 100% of mine production
(2) Gold equivalent to dore represents the Company's share
(3) 54.7% ownership interest
(4) 50% ownership interest
23
CONSOLIDATED BALANCE SHEETS
(expressed in millions of U.S. dollars) (unaudited)
AS AT AS AT
DECEMBER 31 DECEMBER 31
2002 2001
-------------- ---------------
(Restated
- Note 2)
ASSETS
Current assets
Cash and cash equivalents $ 170.6 $ 81.0
Restricted cash 21.1 -
Accounts receivable and other assets 15.5 13.8
Inventories 38.9 42.4
Marketable securities 0.1 1.5
-------------- ---------------
246.2 138.7
Property, plant and equipment (Note 4) 330.0 415.0
Long - term investments 11.8 12.9
Deferred charges and other assets 10.0 11.0
-------------- ---------------
$ 598.0 $ 577.6
============== ===============
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities $ 35.5 $ 31.0
Current portion of long - term debt 23.3 33.1
Current portion of site restoration cost accruals 15.0 12.6
-------------- ---------------
73.8 76.7
Long-term debt 12.9 31.0
Site restoration cost accruals 42.0 43.0
Future income and mining taxes 3.3 3.3
Deferred revenue 4.5 9.6
Other long-term liabilities 5.5 6.0
Debt component of convertible debentures 21.7 26.0
Redeemable retractable preferred shares 2.5 2.4
-------------- ---------------
166.2 198.0
-------------- ---------------
CONVERTIBLE PREFERRED SHARES OF SUBSIDIARY COMPANY (NOTE 4) 12.9 48.0
-------------- ---------------
COMMON SHAREHOLDERS' EQUITY
Common share capital and common share purchase warrants 1,058.5 945.7
Contributed surplus 12.9 12.9
Equity component of convertible debentures 132.3 124.8
Deficit (761.4) (723.2)
Cumulative translation adjustments (23.4) (28.6)
-------------- ---------------
418.9 331.6
-------------- ---------------
$ 598.0 $ 577.6
============== ===============
CONTINGENCIES (NOTE 8)
24
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31
(expressed in millions of U.S. dollars except per share amounts) (unaudited)
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
--------------------------------------------------
2002 2001 2002 2001
--------- ----------- ------------ ------------
(Restated (Restated
- Note 2) - Note 2)
REVENUE
Mining revenue $ 76.5 $ 70.3 $ 261.0 $ 270.1
Interest and other income 3.2 2.4 16.9 9.3
Mark-to-market (loss) gain on call options (0.8) 3.9 (2.7) 3.5
--------- ----------- ------------ ------------
78.9 76.6 275.2 282.9
--------- ----------- ------------ ------------
EXPENSES
Operating 47.9 46.8 174.8 180.7
General and administrative 3.3 2.5 11.3 10.1
Exploration and business development 5.1 1.6 11.6 7.9
Depreciation, depletion and amortization 24.0 21.4 85.3 85.8
Gain on sale of assets (0.7) (1.2) (2.7) (1.2)
Foreign exchange loss 1.3 0.7 4.3 0.5
Interest expense on long-term liabilities 1.0 2.6 5.0 9.1
Write-down of marketable securities and long-term investments 0.2 - 0.2 -
Write-down of property, plant and equipment and other non-cash
charges 7.7 16.1 7.7 16.1
--------- ----------- ------------ ------------
89.8 90.5 297.5 309.0
--------- ----------- ------------ ------------
(10.9) (13.9) (22.3) (26.1)
Share in loss of investee companies - (1.3) (0.6) (2.2)
--------- ----------- ------------ ------------
LOSS FOR THE PERIOD BEFORE TAXES AND DIVIDENDS ON CONVERTIBLE
PREFERRED SHARES OF SUBSIDIARY COMPANY (10.9) (15.2) (22.9) (28.3)
PROVISION FOR INCOME AND MINING TAXES (1.8) (1.5) (6.5) (2.9)
--------- ----------- ------------ ------------
LOSS FOR THE PERIOD BEFORE DIVIDENDS ON CONVERTIBLE
PREFERRED SHARES OF SUBSIDIARY COMPANY (12.7) (16.7) (29.4) (31.2)
DIVIDENDS ON CONVERTIBLE PREFERRED SHARES OF SUBSIDIARY COMPANY (0.2) (0.8) (1.5) (5.1)
--------- ----------- ------------ ------------
NET LOSS FOR THE PERIOD (12.9) (17.5) (30.9) (36.3)
INCREASE IN EQUITY COMPONENT OF CONVERTIBLE DEBENTURES (1.8) (2.0) (7.3) (7.7)
--------- ----------- ------------ ------------
NET LOSS ATTRIBUTABLE TO COMMON SHARES $ (14.7) $ (19.5) $ (38.2) $ (44.0)
========= =========== ============ ============
NET LOSS PER SHARE
Basic and fully diluted $ (0.12) $ (0.18) $ (0.32) $ (0.42)
WEIGHTED AVERAGE NUMBER COMMON SHARES OUTSTANDING 124.2 107.4 119.7 104.5
TOTAL OUTSTANDING AND ISSUED COMMON SHARES AT DECEMBER 31 136.2 111.6
25
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31
(expressed in millions of U.S. dollars) (unaudited)
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31
----------------------------------------------------
2002 2001 2002 2001
------------ ------------ ----------- -----------
NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING ACTIVITIES: (Restated (Restated
OPERATING: - Note 2) - Note 2)
Loss for the period before dividends on convertible preferred
shares of subsidiary company $ (12.7) $ (16.7) $ (29.4) $ (31.2)
Items not affecting cash:
Depreciation, depletion and amortization 24.0 21.4 85.3 85.8
Write-down of marketable securities and long-term investments 0.2 - 0.2 -
Write-down of property, plant and equipment and other non-cash
charges 7.7 14.6 7.7 14.6
Deferred revenue realized (1.3) (4.8) (5.1) (17.7)
Site restoration cost accruals 0.7 0.7 3.0 1.9
Other (0.4) 0.3 (1.2) 0.4
------------ ------------ ----------- -----------
18.2 15.5 60.5 53.8
Proceeds on restructuring of gold forward sale contracts - 0.5 - 21.6
Site restoration cash expenditures (4.8) (2.6) (9.8) (7.1)
Changes in non-cash working capital items
Accounts receivable and other assets (7.5) 4.3 (1.6) 5.1
Inventories 5.1 1.5 2.4 9.6
Marketable securities 0.3 - 2.8 -
Accounts payable and accrued liabilities 2.5 (3.9) 5.6 (8.0)
Effect of exchange rate changes on cash 0.6 0.5 3.0 (0.5)
------------ ------------ ----------- -----------
CASH FLOW PROVIDED FROM OPERATING ACTIVITIES 14.4 15.8 62.9 74.5
------------ ------------ ----------- -----------
FINANCING:
Issuance of common shares and common share purchase warrants 93.3 2.6 112.8 5.4
Acquisition of preferred shares of subsidiary company - - (11.4) -
Reduction of debt component of convertible debentures (1.3) (1.4) (5.1) (5.4)
Repayment of debt (16.1) (6.6) (28.5) (46.5)
------------ ------------ ----------- -----------
CASH FLOW USED IN FINANCING ACTIVITIES 75.9 (5.4) 67.8 (46.5)
------------ ------------ ----------- -----------
INVESTING:
Additions to property, plant and equipment (4.5) (5.1) (22.6) (30.4)
Business acquisitions, net of cash acquired (0.1) (1.2) (0.1) (1.2)
Long-term investments and other assets (0.7) 4.7 1.4 2.1
Proceeds from the sale of property, plant and equipment 0.7 0.2 1.3 1.8
(Increase) decrease in restricted cash 0.4 - (21.1) 2.9
------------ ------------ ----------- -----------
CASH FLOW USED IN INVESTING ACTIVITIES (4.2) (1.4) (41.1) (24.8)
------------ ------------ ----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 86.1 9.0 89.6 3.2
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 84.5 72.0 81.0 77.8
------------ ------------ ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 170.6 $ 81.0 $ 170.6 $ 81.0
============ ============ =========== ===========
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for: Interest $ 3.9 $ 4.5 $ 8.8 $ 13.1
Income Taxes $ 3.1 $ 2.5 $ 6.8 $ 3.9
26
1. BASIS OF PRESENTATION
The interim consolidated financial statements (the "financial statements") of
Kinross Gold Corporation (the "Company") have been prepared in accordance with
the accounting principles and methods of application disclosed in the
consolidated financial statements for the year ended December 31, 2001, except
for those indicated below.
The accompanying interim unaudited consolidated financial statements include all
adjustments that are, in the opinion of management, necessary for a fair
presentation. These financial statements do not include all disclosures required
by Canadian Generally Accepted Accounting Principles for annual financial
statements and accordingly the financial statements should be read in
conjunction with the financial statements and notes thereto contained in the
Company's annual report for the year ended December 31, 2001.
Under a special resolution of the shareholders of the Company on January 28,
2003, the shareholders authorized the consolidation of the issued and
outstanding common shares of the Company on the basis of our consolidation
common share for each three old common shares. All share capital, share and
option data have been retroactively restated to reflect the share consolidation.
2. NEW PRONOUNCEMENTS
Effective January 1, 2002, the Company adopted the new Canadian Institute of
Chartered Accountants ("CICA") recommendations for foreign currency translation.
This standard eliminates the practice of deferring and amortizing unrealized
translation gains and losses on foreign currency denominated monetary items that
have a fixed or ascertainable life extending beyond the end of the fiscal year
following the current reporting period. Foreign exchange gains and losses
arising on translation of these monetary items are now included in the
determination of current period losses. The Company previously had unrealized
foreign exchange gains and losses on converting the debt component of Canadian
dollar dominated convertible debentures to U.S. dollars. In addition, the
Canadian dollar denominated redeemed retractable preferred shares were
translated to U.S dollars at the historical rate on the date of issue. The
adoption of this new standard has been applied retroactively with prior year
comparative amounts restated. The effects on the consolidated financial
statements are as follows:
---------------------------------------------------------------------------------------------
Change in Statement of Operations and Deficit amounts:
($ millions)
2001
---------------------------------------------------------------------------------------------
Decrease in foreign exchange gain for the year ended December 31, 2001 $ 0.6
Decrease in net loss for the year ended December 31, 2001 $ 0.6
Decrease in deficit - December 31, 2000 $ 2.2
Decrease in deficit - December 31, 2001 $ 2.8
3. FINANCIAL INSTRUMENTS
The Company manages its exposure to fluctuations in commodity prices, foreign
exchange rates and interest rates by entering into derivative financial
instrument contracts in accordance with the formal risk management policy
approved by the Company's Board of Directors. The Company does not hold or issue
derivative contracts for speculative or trading purposes.
Realized and unrealized gains or losses on derivative contracts, that qualify
for hedge accounting, are deferred and recorded in income when the underlying
hedged transaction is recognized. Gains on the early settlement of gold hedging
contracts are recorded as deferred revenue on the balance sheet and included in
income over the original delivery schedule of the hedged production.
27
Premiums received at the inception of written call options are recorded as a
liability. Changes in the fair value of the liability are recognized currently
in earnings. In 2002, the mark-to-market adjustments increased the liability by
$2.7 million.
4. ACQUISITION OF CONVERTIBLE PREFERRED SHARES OF SUBSIDIARY COMPANY
During 2001, the Company acquired 945,000 Kinam Preferred Shares with a carrying
value of $48.9 million in exchange for 8,062,164 common shares of the Company
valued at $23.2 million. The $25.7 million difference in value associated with
this transaction was applied against the carrying value of certain property,
plant and equipment.
The Company completed an equity offering in February, 2002, and issued 7,666,667
common shares from treasury for gross proceeds before costs of the issue of
$19.5 million. The majority of funds raised were used to complete a $16.00 per
share cash tender offer for the Kinam Preferred Shares owned by non-affiliated
shareholders. On March 28, 2002, 652,992 Kinam Preferred Shares were tendered
under the cash tender offer and after extending the offer an additional 17,730
Kinam Preferred Shares were tendered on April 4, 2002. During 2002, 350 Kinam
Preferred Shares were tendered in exchange for 566 common shares of the Company,
leaving 223,528 held by non-affiliated shareholders.
The Kinam Preferred Shares tendered had a book value of $36.5 million and were
purchased by the Company for $10.7 million ($11.4 million including costs of the
tender offer). The $25.1 million difference in value associated with these
transactions was applied against the carrying value of certain property, plant
and equipment.
5. STOCK OPTIONS
Effective January 1, 2002, the Company adopted the recommendations of the CICA
for stock-based compensation and other stock-based payments. This recommendation
establishes standards for the recognition, measurement and disclosure of
stock-based compensation and other stock-based payments made in exchange for
goods and services. The standard requires that all stock-based awards made to
non-employees be measured and recognized using a fair value based method. The
standard encourages the use of a fair value based method for all awards granted
to employees, but only requires the use of a fair value based method for direct
awards of stock, stock appreciation rights, and awards that call for settlement
in cash or other assets. Awards that the Company has the ability to settle in
stock are recorded as equity, whereas awards that the Company is required to or
has a practice of settling in cash are recorded as liabilities.
The Company's stock option plan is described in note 14 of the consolidated
financial statements for the year ended December 31, 2001. The Company has
elected not to use the fair value method of accounting for stock options. As a
result it does not recognize compensation expense nor the fair value of the
options issued to its employees. No stock-based awards are made available to
non-employees.
Had compensation expense for the stock-based compensation plans been determined
based upon the fair value method of accounting for awards granted on or after
January 1, 2002, the pro forma net loss attributed to common shares would have
amounted to $40.2 million and pro forma loss per share would have been $0.34 per
share for 2002 twelve month period ended December 31, 2002. The fair value of
the options granted during 2002 is estimated to be $2.0 million. The fair value
of each option grant is estimated on the date of grant using the Black-Scholes
option pricing model with the following weighted average assumptions used for
grants: dividend yield of 0%, expected volatility of 70%, risk-free interest
rate varying from 2.9% to 4.7% and expected lives of 5 years. The Company has
not included those options outstanding on the date of adoption of this new
recommendation in the calculation if its proforma earnings per share for the
period.
28
6. (LOSS) EARNINGS PER SHARE
(Loss) earnings per share ("EPS") has been calculated using the weighted average
number of shares outstanding during the period. Diluted EPS is calculated using
the treasury stock method in 2001. The calculation of diluted earnings per share
assumes that employee stock options were exercised at the beginning of the
period, or time of issue, if later. Employee stock options with an exercise
price greater than the average market price of the common shares were not
included in the calculation of diluted earnings per share as the effect is
anti-dilutive. The average price of the post-consolidated common shares during
the year was $5.22 (2001 - $2.17).
2002 2001
---- ----
Weighted average number of common shares outstanding at December 31st 119,690 104,477
Add: Options, warrants and participating securities as if issued, exercised
and outstanding at January 1st
Options 3,319 538
Restricted shares - 13
Convertible debentures (a) 4,884 4,884
Redeemable retractable preferred shares (b) 1,058 1,058
Convertible preferred shares of subsidiary company (c) 362 1,447
------------- --------------
Weighted average number of common shares used for diluted earnings
per share. 129,313 112,417
============= ==============
(a) Convertible debentures - $123.8 million (Cdn. $195.6 million) principal
issued and outstanding
(b) Redeemable retractable preferred shares - 384,613 shares issued and
outstanding
(c) Convertible preferred shares of subsidiary company - 223,578 shares issued
and outstanding to non-affiliated shareholders as at December 31, 2002.
7. SEGMENTED INFORMATION
The Company operates four gold mines: Fort Knox, located in Alaska; Kubaka
(54.7% ownership), located in Russia; Blanket, located in Zimbabwe; and Refugio,
located in Chile. In addition the Company has a 49% interest in the Porcupine
Joint Venture - located in Ontario, an 88.8% interest in E-Crete, a producer of
aerated concrete, and several other gold mining assets in various stages of
reclamation, closure, care and maintenance and development and two corporate
offices in Canada and the United States. As of December 31, 2001, the Company no
longer consolidates the Zimbabwe operation as a result of the political
situation in that country. As the products and services in each of the
reportable segments, except for the corporate activities, are essentially the
same, reportable segments have been determined at the level where decisions are
made on the allocation of resources and capital, and where complete internal
financial statements are available.
29
REPORTABLE OPERATING SEGMENTS
-----------------------------------------------------------------------------------
Porcupine
Joint Fort Corporate
Venture Kubaka Knox Blanket Refugio E-Crete and Other Total
--------- ---------- -------- --------- --------- --------- ----------- -------
AS AT DECEMBER 31, 2002 AND THE YEAR ENDED DECEMBER 31, 2002: (c)
Mining revenue $ 58.2 $ 69.2 $ 131.6 $ - $ 4.3 $ - $ (2.3) $ 261.0
Operating costs 38.6 28.6 99.2 - 3.9 3.2 1.3 174.8
Interest revenue - 0.2 - - - - 1.3 1.5
Interest expense - 0.3 1.5 - 0.3 0.4 2.5 5.0
Depreciation, depletion and amortization 16.4 20.1 54.9 - - 1.1 (7.2) 85.3
Write-down of mineral properties - - - - - - (7.7) (7.7)
Segment profit (loss) (a) 1.3 21.3 (25.6) - 12.3 (4.1) (30.0) (24.8)
Segment assets 83.1 64.4 264.4 - 3.1 8.3 174.7 (b) 598.0
Capital expenditures 6.7 0.1 15.0 - - 0.3 0.5 22.6
AS AT DECEMBER 31, 2001 AND THE YEAR ENDED DECEMBER 31, 2001: (c)
Mining revenue $ 41.7 $ 67.8 $ 109.0 $ 13.3 $ 18.4 $ - $ 19.9 $ 270.1
Operating costs 29.1 34.1 82.9 11.2 17.4 2.6 3.4 180.7
Interest revenue - 2.2 - 0.1 - - 2.9 5.2
Interest expense - 2.0 3.6 - 0.4 0.3 2.8 9.1
Depreciation, depletion and amortization 13.2 24.0 42.9 2.3 - 1.1 2.3 85.8
Write-down of mineral properties - - - (11.8) - - (4.3) (16.1)
Segment profit (loss) (a) (0.7) 8.7 (20.9) (10.8) 1.7 (3.9) (1.4) (27.3)
Segment assets 86.6 70.3 324.3 - 7.0 8.5 80.9 (b) 577.6
Capital expenditures 7.9 0.4 20.2 1.1 - 0.1 0.7 30.4
FOR THE THREE MONTHS ENDED DECEMBER 31, 2002: (c)
Mining revenue $ 14.5 $ 22.1 $ 39.0 $ - $ 1.3 $ - $ (0.4) $ 76.5
Operating costs 10.7 8.0 26.4 - 1.6 1.0 0.2 47.9
Interest revenue - - - - - - 0.3 0.3
Interest expense - 0.1 0.3 - 0.2 - 0.4 1.0
Depreciation, depletion and amortization 3.4 6.2 17.8 - - 0.1 (3.5) 24.0
Write-down of mineral properties - - - - - - (7.7) (7.7)
Segment profit (loss) (a) (0.2) 8.1 (6.2) - 1.4 (0.8) (13.7) (11.4)
Capital expenditures 1.6 - 2.9 - - - - 4.5
FOR THE THREE MONTHS ENDED DECEMBER 31, 2001: (c)
Mining revenue $ 10.9 $ 20.5 $ 27.3 $ 3.6 $ 2.6 $ - $ 5.4 $ 70.3
Operating costs 6.3 9.7 23.6 3.6 1.9 0.9 0.8 46.8
Interest revenue - 1.2 - - - - 0.5 1.7
Interest expense - 1.1 0.7 - 0.1 0.1 0.6 2.6
Depreciation, depletion and amortization 2.8 6.1 11.2 0.5 - 0.8 - 21.4
Write-down of mineral properties - - - (11.8) - - (4.3) (16.1)
Segment profit (loss) (a) 1.5 5.0 (8.4) (12.1) 0.3 (1.7) 0.3 (15.1)
Capital expenditures 1.5 - 3.2 0.4 - - - 5.1
(a) Segment profit (loss) includes the write-down of mineral properties
(b) includes $155.4 million (2001 - $64.4 million) in cash and cash equivalents held at the Corporate level
(c) includes Corporate and other non core mining operations
30
Reconciliation of reportable operating segment (loss) profit to net loss for the
period:
THREE MONTHS YEAR ENDED
ENDED DECEMBER 31 DECEMBER 31
------------------------- ------------------------
2001 2002 2002 2001
----------- ---------- ---------- ---------
Segment loss $ 2.3 $ (15.4) $ 5.2 $ (25.9)
Add (deduct) items not included in segment (loss) profit:
Corporate and other (13.7) 0.3 (30.0) (1.4)
----------- ---------- ---------- ---------
(11.4) (15.1) (24.8) (27.3)
Gain on sale of assets 0.7 1.2 2.7 1.2
Share in income (loss) of investee companies - (1.3) (0.6) (2.2)
Write-down of marketable securities and long-term investments (0.2) - (0.2) -
(Provision for) recovery of income taxes (1.8) (1.5) (6.5) (2.9)
Dividends on convertible preferred shares of subsidiary company (0.2) (0.8) (1.5) (5.1)
----------- ---------- ---------- ---------
Net loss for the period $ (12.9) $ (17.5) $ (30.9) $ (36.3)
=========== ========== ========== =========
MINING REVENUE
--------------------------------------------------
THREE MONTHS YEAR MINERAL PROPERTIES,
ENDED DECEMBER 31 ENDED DECEMBER 31 PLANT AND EQUIPMENT
----------------------- ----------------------- AS AT DECEMBER 31
2002 2001 2002 2001 2002 2001
---------- ---------- ----------- ---------- ---------- ----------
United States $37.8 $ 31.0 $128.0 $ 123.3 $ 234.7 $ 289.8
Russia 22.2 20.5 69.2 67.8 11.2 31.0
Chile 1.2 2.6 4.3 18.7 - -
Other - 3.6 - 13.3 5.2 5.3
---------- ---------- ----------- ---------- ---------- ----------
Total foreign 61.2 57.7 201.5 223.1 251.1 326.1
Canada 15.3 12.6 59.5 47.0 78.9 88.9
---------- ---------- ----------- ---------- ---------- ----------
Total $76.5 $ 70.3 $261.0 $ 270.1 $ 330.0 $ 415.0
========== ========== =========== ========== ========== ==========
8. CONTINGENCIES
The Company has been named as a defendant in a class action complaint filed on
or about April 26, 2002 entitled Robert A. Brown, et al v. Kinross Gold U.S.A.,
Inc., at al., Case No. CV-S-02-0605-KJD-RJJ, brought in the United States
District Court for the District of Nevada. The complaint names as defendants the
Company, its subsidiary, Kinross Gold U.S.A., Inc., its subsidiary Kinam Gold
Inc., and Robert M. Buchan. The complaint is based on claims arising out of the
purchase of the Kinam Preferred Shares by the Company. The complaints seeks
damages in cash or by the issuance of common shares of the Company. The Company
believes this claim is without merit and plans to vigorously defend the
litigation.
The Company conducts business in Russia through its joint venture, Omolon Gold
Mining Corporation ("Omolon") which is owned 45.3% by Russian shareholders. Two
Russian shareholders and the Magadan Administration on behalf of a third Russian
shareholder have launched lawsuits against Omolon alleging that the shares they
received were flawed as a result of registration deficiencies, which, therefore,
entitles such shareholders to return of their original investments with interest
compounded thereon. In mid September, the Company announced that Omolon was at
an advanced stage of negotiating a settlement of this dispute. Draft language of
an agreement was being settled when one of the Russian shareholders obtained an
order to freeze Omolon's bank accounts and gold inventory in the total amount of
the ruble equivalent of approximately $47 million pending final resolution of
its lawsuit. In the face of the inability of these shareholders to repay the
loans, there has been an effort to shift the burden of repayment to Omolon.
Underlying the lawsuits are unpaid loans made by the Magadan Administration to
certain of Omolon's Russian shareholders at the time Omolon was capitalized.
These lawsuits have been encouraged by the Magadan Administration as the major
creditor of these shareholders. Omolon continues to defend these lawsuits and
its advised by counsel that it has good defences available to it. Omolon's
appeal of the court decision which froze its bank accounts, resulted, on October
14, 2002, in the court ruling that the amount of
31
the assets covered by the arrest order should be lowered to the ruble equivalent
of approximately $22.1 million. Subsequently, Omolon's accounts in four banks
and all of its gold inventory were released from the arrest order on January 8,
2003.
On December 3, 2002, Omolon entered into purchase agreements with four of the
five Russian shareholders (holding, in aggregate 44.17% of the shares of
Omolon). The four shareholders agreed to tender their shares in Omolon and
Omolon agreed to pay them $43.5 million for said shares. As part of the
implementation of each of the share purchase agreements, all pending lawsuits
against Omolon will be withdrawn.
9. 2001 FIGURES
Certain of the 2001 figures have been reclassified to conform to the 2002
presentation.
10. SUBSEQUENT EVENTS
On January 28, 2003, the shareholders of the Company approved the consolidation
of the issued and outstanding common shares of the Company on the basis of one
consolidated common share for each three old common shares and the reduction of
the Company's stated capital account maintained for its common shares by
approximately $761.4 million.
On January 28, 2003, the Company approved the issuance of that number of common
shares of the Company necessary to effect a Combination with Echo Bay Mines Ltd.
and TVX Gold Inc. The Combination was carried out as a plan of arrangement
whereby each holder of TVX common shares receives 2.1667 common shares of the
Company. Also pursuant to the arrangement, shareholders of Echo Bay will receive
0.1733 common shares of the Company for each Echo Bay common share. The exchange
ratio reflects the three for one consolidation of the Company's common shares
described above. The Company is in the process of issuing 177.8 million common
shares with a fair value of $1,269.5 million with respect to these acquisitions.
In a separate transaction, TVX has acquired Newmont's 50% non-controlling
interest in the TVX Newmont Americas joint venture ("TVX Newmont J/V") for an
aggregate purchase of $180.0 million.
Upon completion of the arrangement and the purchase of Newmont's interest in the
TVX Newmont J/V, the Company owns all of the outstanding TVX common shares and
Echo Bay common shares and owns, indirectly, all of the TVX Newmont J/V. TVX
holds interests in various operating mines around the world, including, through
its 50% controlling interest in the TVX Newmont J/V. The underlying operating
mines in the TVX Newmont J/V are located in Canada, Brazil and Chile. TVX's and
Newmont's share of production from the TVX Newmont J/V in 2002 was approximately
237,000 ounces of gold equivalent, each, respectively.
Echo Bay holds interests in various operating mines in Canada and the United
States. Echo Bay's share of production from these mines in 2002 was
approximately 520,000 ounces of gold equivalent.
The acquisitions are being accounted for using the purchase method of accounting
in accordance with both sections 1581 "Business Combinations", of the CICA
Handbook for the purposes of Canadian generally accepted accounting principles
("Canadian GAAP") and Statement of Accounting Standards ("SFAS") 141, "Business
Combinations", for the purposes of United States generally accepted accounting
principles ("U.S. GAAP"). Pursuant to the purchase method of accounting under
both Canadian and United States GAAP, the TVX and Echo Bay assets acquired and
liabilities assumed will be recorded at their fair values as of the effective
date of the combination. The excess of the purchase price over such fair value
will be recorded as goodwill. In accordance with Section 3062, "Goodwill and
Other Intangible Assets", of the CICA Handbook, for purposes of Canadian GAAP,
and SFAS 142, "Goodwill and Other Intangible Assets", for purposes of U.S. GAAP,
goodwill will be assigned to specific reporting units and will not be amortized.
On December 3, 2002, the Company entered into purchase agreements with four of
the five Russian shareholders (holding, in aggregate 44.17% of the shares of
Omolon). The four shareholders agreed to tender their shares in Omolon and
Omolon agreed to pay them $43.5 million for said shares. As at February 25,
2003, 38.17% of the shares have been tendered leaving 6.0% remaining to be
tendered. It is anticipated that the remaining 6.0% will be
32
tendered shortly. Once all of the shares described above have been tendered and
cancelled, the Company will own 98.10% of Omolon.
33
SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
KINROSS GOLD CORPORATION
Signed:/s/ Shelley M. Riley
--------------------
Corporate Secretary
March 7, 2003
34