Kinross reports record free cash flow, 2020 results in line with guidance

Toronto-based gold major Kinross Gold (TSX: K; NYSE: KGC) has released its fourth-quarter and year-end 2020 financial results. Production of 2.4 million gold-equivalent oz. for the year (624,032 oz. in the fourth quarter) at all-in sustaining costs of US$987 per oz. (US$1,013 per oz. in the last quarter) was in line with prior guidance for 2.4 million oz. at AISC of US$970 per ounce.

Free cash flow numbers of US$382.8 million and US$1 billion for the fourth quarter and 2020, respectively, are both records for the company. Adjusted net earnings of US$335.1 million and US$966.8 million for the quarter and full year “more than doubled quarter-over-quarter and year-over-year.”

The producer closed out 2020 with US$1.2 billion of cash and equivalents (compared with US$575.1 million at year-end 2019) and total available liquidity of US$2.8 billion. The cash increase was driven by the strong cash flow and also boosted by a US$200-million drawdown on the Tasiast project financing.

Next year, Kinross expects production to hold steady at 2.4 million gold-equivalent oz., at AISCs of US$1,025 per oz., increasing to 2.7 million oz. by 2022 and to 2.9 million gold-equivalent oz. by 2023. The gold-equivalent output is expected to average 2.5 million oz. a year through to 2029.

“Kinross delivered an excellent year in 2020, generating record free cash flow of more than $1 billion from our diversified portfolio of mines. We met our original guidance for the ninth consecutive year despite the impacts of the global pandemic,” J. Paul Rollinson, Kinross president and CEO, said in a news release on Feb. 10. “Tasiast was a standout performer and achieved record annual production and low costs for the second consecutive year.”

The executive added that, in 2020, adjusted net earnings more than doubled and margins increased by 53% to US$1,051 per oz., outpacing growth in the average realized gold price.

The company’s three largest operations – Paracatu in Brazil, Kupol in Russia and Tasiast in Mauritania – churned out 62% of 2020 production and were Kinross’ lowest-cost mines for the second year running. Tasiast reported a record year, both in terms of production and costs; throughputs are expected to increase to 21,000 tonnes per day by the end of the year (compared with approximately 16,000 tonnes per day in the fourth quarter) with the Tasiast 24k project. Throughputs are expected to increase to 23,000 tonnes per day by mid-2023.

Last year, Kinross spent US$916 million on capital expenditures. This amount is expected to hold steady at approximately US$900 million this year. An additional US$120 million is budgeted this year for exploration, focused on Russia and around the Chirano mine in Ghana.

Looking at growth, Kinross has started a prefeasibility study for the Udinsk heap leach project in Russia with results expected in the fourth quarter.

In Chile, following a February 2020 restart announcement, pre-stripping started in January with first production expected in mid-2022. A feasibility is also underway for the Lobo-Marte project that is also on track for completion in the fourth quarter.

Kinross poured first gold from a new heap leach pad at the Fort Knox Gilmore project in Alaska in January. Drilling and permitting is also underway at the 70%-held Peak project, which could be a potential add-on to the Fort Knox heap leach mine; a scoping study for this asset is expected in the second quarter.

Last year, Kinross added 5.7 million oz. to reserves after mining depletion.