-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DubB/dFYqz7uUiaeD+E6qMUFAuLErfwr8i0/TI0vSFgUlbYAEfFoz4DCdjdKC1y/ aQL3+cxE4ovv+2vpqFUx0g== 0001188112-03-000533.txt : 20030820 0001188112-03-000533.hdr.sgml : 20030820 20030820145951 ACCESSION NUMBER: 0001188112-03-000533 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030831 FILED AS OF DATE: 20030820 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KINROSS GOLD CORP CENTRAL INDEX KEY: 0000701818 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 650430083 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13382 FILM NUMBER: 03857888 BUSINESS ADDRESS: STREET 1: 185 SOUTH STATE STREET STREET 2: STE 400 CITY: SALT LAKE CITY STATE: UT ZIP: 84111 BUSINESS PHONE: 8013639152 FORMER COMPANY: FORMER CONFORMED NAME: PLEXUS RESOURCES CORP DATE OF NAME CHANGE: 19920703 6-K 1 t6k-30225.txt 6-K 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 August, 2003 Commission File Number: 001-13382 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 solely 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 by 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 traded, 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: - ---------- Page 2 INDEX Table of Contents SIGNATURES - ---------- EXHIBIT INDEX - ------------- INTERIM FINANCIAL STATEMENTS FOR THE PERIOD ENDED - ------------------------------------------------- JUNE 30, 2003. - ---------------- PRESS RELEASE DATED AUGUST 13, 2003. - ------------------------------------ This Current Report on Form 6-K, dated August 19, 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. Page 3 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 August 19, 2003. EX-99.1 3 tex99_1-30225.txt EX-99.1 KINROSS Gold Corporation ------------------ - -------------------------------------------------------------------------------- [PICTURE] GOLD EQUIVALENT PRODUCTION INCREASES AND TOTAL CASH COSTS DECLINE COMPARED TO FIRST QUARTER 2003 ON IMPROVEMENTS FROM KEY OPERATIONS - -------------------------------------------------------------------------------- 2003 SECOND QUARTER REPORT 2003 SECOND QUARTER HIGHLIGHTS (ALL DOLLAR AMOUNTS, EXCEPT PER SHARE AND PER OUNCE AMOUNTS EXPRESSED IN US$ MILLIONS) THREE MONTHS SIX MONTHS ENDED ENDED JUNE 30 JUNE 30 2003 2002 2003 2002 - -------------------------------------------------------------------------------- NET LOSS FOR THE PERIOD $ (5.2) $ (4.3) $ (16.4) $ (12.2) NET LOSS PER SHARE1 $ (0.02) $ (0.05) $ (0.07) $ (0.14) REVENUE $ 158.7 $ 65.1 $ 278.8 $ 134.1 CASH FLOW PROVIDED FROM OPERATING ACTIVITIES $ 20.7 $ 11.1 $ 39.7 $ 31.0 CAPITAL EXPENDITURES $ 12.1 $ 6.1 $ 24.9 $ 9.2 - -------------------------------------------------------------------------------- GOLD EQUIVALENT PRODUCTION (OUNCES) 470,177 204,148 806,068 429,450 AVERAGE REALIZED PRICE PER OUNCE OF GOLD SOLD $ 345 $ 303 $ 344 $ 299 AVERAGE SPOT GOLD PRICE PER OUNCE $ 347 $ 313 $ 350 $ 302 TOTAL CASH COSTS PER OUNCE $ 216 $ 209 $ 225 $ 202 TOTAL PRODUCTION COSTS PER OUNCE $ 312 $ 314 $ 318 $ 303 1 adjusted to give retroactive effect for the three for one share consolidation which was completed on January 31, 2003 Total cash costs are non-GAAP measures. For further information on this non-GAAP measure, please refer to the disclosure under the heading "Costs and Expenses - Operations Summary". CAUTIONARY STATEMENT: - -------------------------------------------------------------------------------- THIS DOCUMENT 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 ("KINROSS"), 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. KINROSS Gold Corporation MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL AND OPERATING RESULTS SECOND QUARTER CONSOLIDATED RESULTS Kinross' attributable gold equivalent production was 470,177 ounces in the second quarter of 2003, an increase of 130% over the 20 4,148 ounces produced in the same period for 2002. Average total cash cost per attributable gold equivalent ounce was $216 in the second quarter of 2003, compared to $209 in 2002. Cash flow provided from operating activities in the second quarter of 2003 was $20.7 million, compared to $11.1 million in 2002. Cash flow provided from operating activities was positively affected by higher gold equivalent production as a result of the business combination with TVX and Echo Bay, and by higher realized prices on gold sales.This was offset by slightly higher total cash costs per equivalent ounce of gold produced and by the payment of $9.4 million to Newmont, the final payment in conjunction with the business combination completed in January. The net loss for the second quarter of 2003 was $5.2 million, or $0.02 per share.That compares to a net loss of $4.3 million or $0.05 per share in the same period last year. The quarterly results were positively affected by a 9% decline in average total cash costs per equivalent ounce of gold produced. Unfortunately, high production costs at the Lupin and New Britannia mines, primarily due to a strengthening Canadian dollar, negatively impacted second quarter 2003 earnings as did expenditures related to our Greek asset, which is in the process of being resolved. FIRST HALF CONSOLIDATED RESULTS Gold equivalent production of 806,068 ounces at a total cash cost of $225 per ounce, combined with changes in working capital, resulted in cash flow provided from operating activities of $39.7 million during the first half of 2003.This compares to gold equivalent production of 429,450 ounces at a total cash cost of $202 per ounce that resulted in cash flow provided from operating activities of $31.0 million during the first half of 2002. The Company recorded a net loss of $16.4 million or $0.07 per share for the first half of 2003, compared to a net loss of $12.2 million or $0.14 per share in 2002. - -------------------------------------------------------------------------------- ALL RESULTS ARE EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED.ALL PER SHARE INFORMATION HAS BEEN ADJUSTED TO GIVE RETROACTIVE EFFECT FOR THE THREE FOR ONE CONSOLIDATION OF THE COMMON SHARES,WHICH WAS COMPLETED ON JANUARY 31,2003. ACCORDINGLY, LOSS PER SHARE FOR THE SIX MONTHS ENDED JUNE 30, 2002 HAS BEEN ADJUSTED TO GIVE RETROACTIVE IMPACT OF THE SHARE CONSOLIDATION.THE COMBINATION WITH TVX GOLD INC. ("TVX") AND ECHO BAY MINES LTD. ("ECHO BAY") WAS ACCOUNTED FOR AS A PURCHASE WITH AN EFFECTIVE DATE OF JANUARY 31, 2003. ACCORDINGLY, THE FIRST HALF FINANCIAL STATEMENTS AND GOLD EQUIVALENT PRODUCTION STATISTICS REFLECT OPERATING RESULTS FOR THE ACQUIRED PROPERTIES FOR THE MONTHS OF FEBRUARY,MARCH,APRIL,MAY,AND JUNE ONLY. 2003 Second Quarter Report 1
GOLD EQUIVALENT PRODUCTION AND COST SUMMARY THREE MONTHS SIX MONTHS ENDED JUNE 30 ENDED JUNE 30 2003 2002 2003 2002 - -------------------------------------------------------------------------------------------------------------- FORT KNOX Tonnes milled/crushed (000'S) (1) 3,457.4 3,237.3 6,526.8 6,782.7 Grade (GRAMS PER TONNE) 1.00 1.01 1.11 0.99 Recovery 83% 85% 83% 84% Gold equivalent production to dore (2) 101,425 89,553 192,639 182,713 Per ounce: Total cash costs $ 241 $ 253 $ 250 $ 255 Depreciation, depletion and amortization 99 115 104 112 Site restoration cost accruals - 2 1 3 - -------------------------------------------------------------------------------------------------------------- Total production costs $ 340 $ 370 $ 355 $ 370 ============================================================================================================== ROUND MOUNTAIN (5) (8) Tonnes milled/crushed (000'S) (1) 6,081.1 - 10,751.1 - Grade (GRAMS PER TONNE) 0.66 - 0.66 - Recovery 66% - 66% - Gold equivalent production to dore (2) 116,336 - 180,370 - Per ounce: Total cash costs $ 167 $ - $ 176 $ - Depreciation, depletion and amortization 82 - 86 - Site restoration cost accruals 6 - 6 - - -------------------------------------------------------------------------------------------------------------- Total production costs $ 255 $ - $ 268 $ - ============================================================================================================== PORCUPINE (3) Tonnes milled/crushed (000'S) (1) 1,061.5 120.8 2,048.2 243.5 Grade (GRAMS PER TONNE) 3.88 11.15 3.62 13.00 Recovery 92% 88% 92% 90% Gold equivalent production to dore (2) 59,964 38,067 107,544 91,543 Per ounce: Total cash costs $ 196 $ 191 $ 223 $ 163 Depreciation, depletion and amortization 95 63 93 78 Site restoration cost accruals 7 8 7 7 - -------------------------------------------------------------------------------------------------------------- Total production costs $ 298 $ 262 $ 323 $ 248 ============================================================================================================== KUBAKA (4) Tonnes milled/crushed (000'S) (1) 214.0 221.3 434.0 430.3 Grade (GRAMS PER TONNE) 7.11 15.67 6.65 15.61 Recovery 97% 98% 97% 98% Gold equivalent production to dore (2) 47,576 60,396 77,626 117,041 Per ounce: Total cash costs $ 188 $ 139 $ 187 $ 140 Depreciation, depletion and amortization 112 84 106 84 Site restoration cost accruals 2 3 3 3 - -------------------------------------------------------------------------------------------------------------- Total production costs $ 302 $ 226 $ 296 $ 227 ============================================================================================================== BRASILIA (6) (8) Tonnes milled/crushed (000'S) (1) 4,495.4 - 7,596.9 - Grade (GRAMS PER TONNE) 0.46 - 0.46 - Recovery 77% - 77% - Gold equivalent production to dore (2) 25,707 - 42,665 - Per ounce: Total cash costs $ 181 $ - $ 175 $ - Depreciation, depletion and amortization 58 - 59 - Site restoration cost accruals 4 - 5 - - -------------------------------------------------------------------------------------------------------------- Total production costs $ 243 $ - $ 239 $ - ============================================================================================================== 2 KINROSS Gold Corporation
THREE MONTHS SIX MONTHS ENDED JUNE 30 ENDED JUNE 30 2003 2002 2003 2002 - --------------------------------------------------------------------------------------------------- LA COIPA (5) (8) Tonnes milled/crushed (000'S) (1) 1,547.0 - 2,586.0 - Grade (GRAMS PER TONNE) 0.86 - 0.94 - Recovery 85% - 86% - Gold equivalent production to dore (2) 32,854 - 56,777 - Per ounce: Total cash costs $ 291 $ - $ 271 $ - Depreciation, depletion and amortization 64 - 56 - Site restoration cost accruals - - 2 - - --------------------------------------------------------------------------------------------------- Total production costs $ 355 $ - $ 329 $ - =================================================================================================== CRIXAS (5) (8) Tonnes milled/crushed (000'S) (1) 188.7 - 311.7 - Grade (GRAMS PER TONNE) 8.27 - 8.26 - Recovery 96% - 96% - Gold equivalent production to dore (2) 24,103 - 39,707 - Per ounce: Total cash costs $ 105 $ - $ 104 $ - Depreciation, depletion and amortization 116 - 116 - Site restoration cost accruals - - - - - --------------------------------------------------------------------------------------------------- Total production costs $ 221 $ - $ 220 $ - =================================================================================================== MUSSELWHITE (7) (8) Tonnes milled/crushed (000'S) (1) 342.1 - 533.8 - Grade (GRAMS PER TONNE) 5.40 - 5.27 - Recovery 95% - 95% - Gold equivalent production to dore (2) 18,089 - 27,564 - Per ounce: Total cash costs $ 225 $ - $ 257 $ - Depreciation, depletion and amortization 116 - 123 - Site restoration cost accruals - - - - - --------------------------------------------------------------------------------------------------- Total production costs $ 341 $ - $ 380 $ - =================================================================================================== NEW BRITANNIA (5) (8) Tonnes milled/crushed (000'S) (1) 169.9 - 272.7 - Grade (GRAMS PER TONNE) 3.62 - 4.05 - Recovery 95% - 95% - Gold equivalent production to dore (2) 9,365 - 16,825 - Per ounce: Total cash costs $ 317 $ - $ 297 $ - Depreciation, depletion and amortization 149 - 137 - Site restoration cost accruals - - - - - --------------------------------------------------------------------------------------------------- Total production costs $ 466 $ - $ 434 $ - =================================================================================================== LUPIN (8) Tonnes milled/crushed (000'S) (1) 133.0 - 227.5 - Grade (GRAMS PER TONNE) 5.86 - 5.99 - Recovery 92% - 92% - Gold equivalent production to dore (2) 25,534 - 44,318 - Per ounce: Total cash costs $ 409 $ - $ 410 $ - Depreciation, depletion and amortization 47 - 47 - Site restoration cost accruals 16 - 16 - - --------------------------------------------------------------------------------------------------- Total production costs $ 472 $ - $ 473 $ - =================================================================================================== (1) Tonnes milled/crushed represents 100% of mine production (2) Gold equivalent to dore represents the Company's share (3) 100% of Hoyle Pond mine in 2002, 49% of Porcupine Joint Venture in 2003 (4) 54.7% ownership interest to February 28, 2003, 98.1% thereafter (5) 50% ownership interest (6) 49% ownership interest (7) 32% ownership interest (8) Production and cost data is for five months from February to June, 2003 2003 Second Quarter Report 3
GOLD EQUIVALENT PRODUCTION OUNCES THREE MONTHS SIX MONTHS ENDED JUNE 30 ENDED JUNE 30 2003 2002 2003 2002 - -------------------------------------------------------------------------------- PRIMARY OPERATIONS: Fort Knox 101,425 89,553 192,639 182,713 Round Mountain (1) (4) 116,336 - 180,370 - Porcupine (2) 59,964 38,067 107,544 91,543 Kubaka (3) 47,576 60,396 77,626 117,041 Brasilia (1) (5) 25,707 - 42,665 - La Coipa (1) (4) 32,854 - 56,777 - Crixas (1) (4) 24,103 - 39,707 - Musselwhite (1) (6) 18,089 - 27,564 - New Britannia (1) (4) 9,365 - 16,825 - Lupin (1) 25,534 - 44,318 - - -------------------------------------------------------------------------------- 460,953 188,016 786,035 391,297 - -------------------------------------------------------------------------------- OTHER OPERATIONS: Blanket 9,224 10,956 18,303 20,653 Refugio (4) - 2,312 - 8,902 Denton-Rawhide (7) - 2,864 1,730 6,740 Andacollo (7) - - - 1,858 - -------------------------------------------------------------------------------- 9,224 16,132 20,033 38,153 - -------------------------------------------------------------------------------- Total gold equivalent ounces 470,177 204,148 806,068 429,450 ================================================================================ (1) Production data is for five months from February to June, 2003. (2) 2003 production reflects the Company's 49% ownership interest in the Porcupine Joint Venture. 2002 production reflects the Company's 100% ownership interest in the Hoyle Pond mine. (3) Represents the Company's 54.7% ownership 2003, 98.1% interest to February 28, thereafter. (4) Represents the Company's 50% ownership interest. (5) Represents the Company's 49% ownership interest. (6) Represents the Company's 32% ownership interest. (7) Includes proportionate share of Denton-Rawhide and Andacollo production attributable to the Pacific Rim (formerly Dayton) ownership interest. 4 KINROSS Gold Corporation CASH OPERATING COSTS ($ PER OUNCE OF GOLD EQUIVALENT) THREE MONTHS SIX MONTHS ENDED JUNE 30 ENDED JUNE 30 2003 2002 2003 2002 - -------------------------------------------------------------------------------- PRIMARY OPERATIONS: Fort Knox $239 $253 $248 $255 Round Mountain (1) 143 - 151 - Porcupine 196 190 223 162 Kubaka 167 117 166 119 Brasilia (1) 177 - 171 - La Coipa (1) 291 - 271 - Crixas (1) 96 - 97 - Musselwhite (1) 225 - 257 - New Britannia (1) 317 - 297 - Lupin (1) 409 - 410 - - -------------------------------------------------------------------------------- 205 197 215 192 - -------------------------------------------------------------------------------- OTHER OPERATIONS: Blanket 260 267 265 253 Refugio - 302 - 165 Denton-Rawhide - 244 218 238 Andacollo - - - 287 - -------------------------------------------------------------------------------- 260 268 261 232 - -------------------------------------------------------------------------------- $206 $202 $216 $196 ================================================================================ TOTAL CASH COSTS ($ PER OUNCE OF GOLD EQUIVALENT) PRIMARY OPERATIONS: Fort Knox $ 241 $ 253 $250 $255 Round Mountain (1) 167 - 176 - Porcupine 196 191 223 163 Kubaka 188 139 187 140 Brasilia (1) 181 - 175 - La Coipa (1) 291 - 271 - Crixas (1) 105 - 104 - Musselwhite (1) 225 - 257 - New Britannia (1) 317 - 297 - Lupin (1) 409 - 410 - - -------------------------------------------------------------------------------- 214 204 224 199 - -------------------------------------------------------------------------------- OTHER OPERATIONS: Blanket 273 271 274 258 Refugio - 320 - 182 Denton-Rawhide - 251 221 243 Andacollo - - - 295 - -------------------------------------------------------------------------------- 273 274 270 239 - -------------------------------------------------------------------------------- $216 $209 $225 $202 ================================================================================ (1) Cost data is for five months from February to June, 2003. 2003 Second Quarter Report 5 REVENUES GOLD AND SILVER SALES Kinross' primary source of revenue is from the sale of its gold production. Kinross sold 440,990 ounces of gold in the second quarter of 2003, compared to 194,447 ounces in the second quarter of 2002. Revenue from gold and silver sales was $157.8 million in the second quarter of 2003 compared to $59.2 million in 2002. Revenue from gold and silver sales in 2003 increased as a result of higher gold sales due to the completion of the combination with TVX and Echo Bay on January 31, 2003 and from higher realized gold prices. In the second quarter of 2003, Kinross realized $345 per ounce of gold, compared to $303 in 2002. The average London market spot price for gold in the second quarter of 2003 was $347 per ounce compared to $313 in 2002. The Company sold 771,012 ounces of gold during the first half of 2003, compared with 426,120 in 2002. Revenue from gold and silver sales was $274.8 million in the first half of 2003, compared with $128.0 million in 2002. Revenue from gold and silver sales in the first half of 2003 was 115% higher than the revenue in 2002 due to the increased production levels and higher realized prices. In the first half of 2003, the Company realized $344 per ounce of gold, compared with $299 in 2002. The average spot price for gold was $350 per ounce in the first half of 2003 compared with $302 in 2002.
THREE MONTHS SIX MONTHS ENDED ENDED JUNE 30 JUNE 30 2003 2002 2003 2002 - ------------------------------------------------------------------------------------------- Attributable gold equivalent production - ounces 470,177 204,148 806,068 429,450 Gold sales - ounces (excluding equity 440,990 194,447 771,012 426,120 accounted ounces) Gold sales revenue (millions) $ 151.6 $ 57.4 $ 264.0 $ 124.7 Gold deferred revenue realized (millions) 0.5 1.4 1.1 2.5 - ------------------------------------------------------------------------------------------- Total gold revenue realized (millions) $ 152.1 $ 58.8 $ 265.1 $ 127.2 =========================================================================================== Average sales price per ounce of gold $ 344 $ 296 $ 343 $ 293 Deferred revenue realized per ounce of gold 1 7 1 6 - ------------------------------------------------------------------------------------------- Average realized price per ounce of gold sold $ 345 $ 303 $ 344 $ 299 =========================================================================================== Average spot gold price per ounce $ 347 $ 313 $ 350 $ 302 Silver sales revenue (millions) $ 5.7 $ 0.4 $ 9.7 $ 0.8
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 quarters.The resulting ratios are 76.6:1 in the second quarter of 2003 and 66.2:1 in 2002. The above non-GAAP measure of average realized price per ounce of gold sold has been calculated on a consistent basis in each period.The calculation of average realized price per ounce of gold sold might not be comparable to similarly titled measures of other companies. Average realized price per ounce of gold sold is used by management to assess profitability and cash flow of individual operations as well as to compare with other precious metal producers. 6 KINROSS Gold Corporation INTEREST AND OTHER INCOME Kinross invests its surplus cash in high quality, interest-bearing cash equivalents. Interest and other income totaled $1.8 million in the second quarter and $2.8 in the first half of 2003 compared to $6.5 million in the second quarter and $7.7 in the first half of 2002. Interest and other income in 2003 was comprised of interest of $1.9 million, $0.2 million of joint venture management fees and $0.7 million of other items.The 2002 second quarter results included a $5.5 million accrual of the Refugio arbitration award. MARK-TO-MARKET (LOSS) GAIN ON WRITTEN CALL OPTIONS Premiums received at the inception of written call options are recorded as a liability. Changes in the fair market value of the liability are recognized in earnings each quarter.The change in fair market value of the written call options resulted in a mark-to-market loss of $0.9 million in the second quarter and gain of $1.2 million in the first half of 2003 compared to a loss of $0.6 million in the second quarter and a loss of $1.6 in the first half of 2002.The Company plans to reduce its written call position in 2003 by delivering gold production into any contracts that are exercised in 2003. Details on the outstanding written call options at June 30, 2003 are discussed in the section entitled "Commodity Price Risks". COSTS AND EXPENSES OPERATIONS - SUMMARY Gold equivalent production in the second quarter of 2003 (excluding equity accounted ounces) increased by 145% compared to second quarter 2002 production, while operating costs increased by 162%. Consolidated operating costs were $107.6 million in the second quarter and $194.3 million in the first half of 2003 compared to $41.1 million in the second quarter and $87.9 in the first half of 2002. CONSOLIDATED PRODUCTION COSTS PER THREE MONTHS SIX MONTHS EQUIVALENT OUNCE OF ENDED ENDED ATTRIBUTABLE GOLD PRODUCTION JUNE 30 JUNE 30 2003 2002 2003 2002 - -------------------------------------------------------------------------------- Cash operating costs $ 206 $ 202 $ 216 $ 196 Royalties 10 7 9 6 - -------------------------------------------------------------------------------- Total cash costs 216 209 225 202 Reclamation 5 4 5 4 Depreciation, depletion and amortization 91 101 89 97 ================================================================================ Total production costs $ 312 $ 314 $ 318 $ 303 ================================================================================ Kinross' accounting policy is to expense stripping costs as incurred, one of the most conservative policies in the industry. Had Kinross deferred stripping costs in excess of mine averages, as a number of the North America senior gold producers do, total cash costs per equivalent ounce would have been $213 and $223 for the three and six months ended June 30, 2003, respectively. 2003 Second Quarter Report 7 Similarly, unlike some senior North American producers, Kinross' policy is to include gains (losses) on foreign exchange forward sales contracts as part of foreign exchange gains (losses) on the statement of operations and not treat the gains as by-product credits. Had Kinross treated the gains as a by-product credit, total cash costs per equivalent ounce would have been $4 and $3 less for the three and six months ended June 30, 2003, respectively. 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 THREE MONTHS SIX MONTHS EQUIVALENT OUNCE OF GOLD ENDED ENDED TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30 JUNE 30 (MILLIONS EXCEPT PRODUCTION IN OUNCES AND PER OUNCE AMOUNTS) 2003 2002 2003 2002 - ---------------------------------------------------------------------------------------------------- Operating costs per financial statements $ 107.6 $ 41.1 $ 194.3 $ 87.9 Operating costs for attributable production 2.5 3.5 5.5 7.5 Site restoration cost accruals (2.3) (0.8) (3.7) (1.6) Change in bullion inventory (1.0) (0.8) (9.1) (4.8) Operating costs not related to gold production (5.1) (0.4) (5.5) (2.2) - ---------------------------------------------------------------------------------------------------- Operating costs for per ounce calculation purposes $ 101.7 $ 42.6 $ 181.5 $ 86.8 ==================================================================================================== Gold equivalent production - ounces 470,177 204,148 806,068 429,450 Total cash costs per equivalent ounce of gold 216 209 225 202
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.Total cash costs per ounce of gold equivalent decreased by 9% during the second quarter of 2003 compared to the first quarter of 2003. Details of the individual mine performance are discussed in the following sections. The item total cash cost per ounce is furnished to provide additional information and is a non-GAAP measure.This measure should not be considered in isolation as a substitute for a measure of performance prepared in accordance with generally accepted accounting principles and is not necessarily indicative of operating profit or cost from operations as determined under generally accepted accounting principles.There are no differences in computing operating costs under U.S. GAAP.Therefore, total cash costs per ounce computed from operating costs in accordance with U.S. GAAP are unchanged from the Canadian GAAP amounts. 8 KINROSS Gold Corporation OPERATIONS - INDIVIDUAL MINE DISCLOSURE FORT KNOX (100% Ownership Interest) - USA Gold production at the Fort Knox operation during the second quarter 2003 was 101,425 gold equivalent ounces, a 13.3% improvement over the 89,553 ounces produced during the same period last year and 11.2% improvement over first quarter 2003. Despite lower than plan gold recoveries, production during the period was 6.4% better than budget as a result of initiatives taken during the first quarter to increase mill throughput combined with higher than plan gold grades. Second quarter total cash costs of $241 per ounce, although 4.7% lower than similar period last year, were slightly above budget as a result of higher power, reagent and grinding media costs. Over the first six months of 2003, gold equivalent production was 192,639 ounces, a 5% improvement over the 182,713 ounces achieved during the first half of 2002. Total cash costs per ounce improved by 7.3% in the second quarter compared to the first quarter due primarily to increased mill throughput. During the second half of 2003, continued improvements in mill throughput are forecasted such that gold production and total cash costs estimates for the full year remain unchanged at 410,000 ounces and $230 per ounce, respectively.
RECONCILIATION OF THE FORT KNOX MINE THREE MONTHS SIX MONTHS TOTAL CASH COSTS PER EQUIVALENT OUNCE OF GOLD ENDED ENDED TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30 JUNE 30 (MILLIONS EXCEPT PRODUCTION IN OUNCES AND PER OUNCE AMOUNTS) 2003 2002 2003 2002 - ----------------------------------------------------------------------------------------------------------- Operating costs per financial statements $ 24.5 $ 24.1 $ 48.3 $ 52.1 Site restoration cost accruals (0.5) (0.2) (0.6) (0.5) Change in bullion inventory 0.4 (1.2) 0.5 (5.0) - ----------------------------------------------------------------------------------------------------------- Operating costs for per ounce calculation purposes $ 24.4 $ 22.7 $ 48.2 $ 46.6 - ----------------------------------------------------------------------------------------------------------- Gold equivalent production - ounces 101,425 89,553 192,639 182,713 Total cash costs per equivalent ounce of gold $ 241 $ 253 $ 250 $ 255
Total cash costs are non-GAAP measures. For further information on this non-GAAP measure, please refer to the disclosure under the heading "Costs and Expenses - Operations Summary". Capital expenditures at the Fort Knox operations in the second quarter of 2003 were $2.0 million compared to $3.5 million in the same period last year. The majority of capital expenditures incurred during the second quarter of 2003 were incurred to drill pit dewatering wells. During the second quarter, drilling outside the western boundary of the Fort Knox ultimate pit shell returned very encouraging results. Follow-up drilling is in progress with the objective of establishing the viability of a revision to the ultimate pit boundary in this area. 2003 Second Quarter Report 9 ROUND MOUNTAIN (50% Ownership Interest) - USA Kinross acquired its ownership interest in the Round Mountain mine, located in Nye County, Nevada, USA upon completion of the combination with Echo Bay on January 31, 2003.The mine had a very good second quarter with Kinross' share of gold equivalent production totaling 116,336 ounces, a 28.5% improvement over plan. The Company's share of gold equivalent production during for the five months ending June 30, 2003, of 180,370 ounces was 15% higher than plan. Gold equivalent production was positively impacted by better than planned gold recoveries due to the installation of new carbon columns and the implementation of side slope leaching of the historic dedicated leach pad. The success of side slope leaching has the potential to significantly improve ultimate heap leach recoveries. Total cash costs per gold equivalent ounce were $167 per ounce during the second quarter and $176 per ounce for the five month period ending June 30, 2003, 18.5% and 12% below plan, respectively, largely as a result of the higher gold production.
RECONCILIATION OF THE ROUND MOUNTAIN MINE THREE MONTHS SIX MONTHS TOTAL CASH COSTS PER EQUIVALENT OUNCE OF GOLD ENDED ENDED TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30 JUNE 30 (MILLIONS EXCEPT PRODUCTION IN OUNCES AND PER OUNCE AMOUNTS) 2003 2002 2003 2002 - ------------------------------------------------------------------------------------------------------- Operating costs per financial statements $ 20.6 $ - $ 34.7 $ - Site restoration cost accruals (0.7) - (1.0) - Change in bullion inventory (0.5) - (2.0) - - ------------------------------------------------------------------------------------------------------- Operating costs for per ounce calculation purposes $ 19.4 $ - $ 31.7 $ - - ------------------------------------------------------------------------------------------------------- Gold equivalent production - ounces 116,336 - 180,370 - Total cash costs per equivalent ounce of gold $ 167 $ - $ 176 $ -
Total cash costs are non-GAAP measures. For further information on this non-GAAP measure, please refer to the disclosure under the heading "Costs and Expenses - Operations Summary". Kinross' share of capital expenditures at the Round Mountain mine in the second quarter of 2003 was $0.9 million. Metallurgical test work is currently in progress on mineralization from the nearby Gold Hill deposit and a new resources model is being generated. During the quarter, a Plan of Operations to develop a mine at Gold Hill was filed with Nevada Bureau of Land Management. Exploration drilling continued to focus on the high-grade underground vein targets along the margins of the caldera that hosts the Round Mountain open pit. One reverse circulation drill hole returned 70.6 grams per tonne gold over a width of 16.8 metres on the deep northwest vein.A diamond drill hole, drilled to confirm the high-grade results, cut numerous sections with visible gold and assays are pending. Considering the continued encouraging drill results, a preliminary feasibility study for the underground mining of the high-grade vein system has been initiated. 10 KINROSS Gold Corporation PORCUPINE (49% Ownership Interest) - Canada On July 1, 2002, Kinross and a wholly owned subsidiary of Placer Dome Inc. ("Placer") formed the Porcupine Joint Venture through the combination of their respective gold mining operations and exploration properties in the Porcupine District, Timmins, Ontario. Ownership of the unincorporated joint venture is 49% Kinross and 51% Placer with Placer as the operator. The quarter and six-month 2002 comparative production figures related to results from the Hoyle Pond mine, 100% owned by Kinross during those periods, whereas, 2003 production figures reflect Kinross' 49% ownership share in the Porcupine Joint Venture. Kinross' share of gold equivalent production during the second quarter 2003 was 59,964 ounces at a total cash cost of $196 per ounce compared to the 38,067 ounces at a total cash cost of $191 per ounce achieved during the same period last year. Kinross' share of gold equivalent production for the first six months of 2003 was 107,544 ounces, a 17.5% increase over the 91,543 ounces produced during the first six months of 2002. As a result of the increased strength of the Canadian dollar, it is anticipated that the total cash costs per gold equivalent ounce for the year will increase to $220 from the previous guidance of $210. Guidance on gold production remains unchanged at 219,000 ounces. Production during the second quarter was 9% better than budget as a result of higher than plan gold grades (+6.3%), milled throughput (+2.6%) and recoveries (+1.1%). Mechanical difficulties at the Dome mill, which negatively impacted production during the first quarter 2003, were resolved and year-to-date gold production has essentially returned to plan.
RECONCILIATION OF THE PORCUPINE JOINT VENTURE THREE MONTHS SIX MONTHS TOTAL CASH COSTS PER EQUIVALENT OUNCE OF GOLD ENDED ENDED TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30 JUNE 30 (MILLIONS EXCEPT PRODUCTION IN OUNCES AND PER OUNCE AMOUNTS) 2003 2002 2003 2002 - -------------------------------------------------------------------------------------------------------- Operating costs per financial statements $ 13.6 $ 7.8 $ 27.3 $ 16.9 Site restoration cost accruals (0.4) (0.3) (0.7) (0.6) Change in bullion inventory - (0.1) (1.2) (1.1) Operating costs not related to gold production (1.4) (0.2) (1.4) (0.3) - -------------------------------------------------------------------------------------------------------- Operating costs for per ounce calculation purposes $ 11.8 $ 7.2 $ 24.0 $ 14.9 - -------------------------------------------------------------------------------------------------------- Gold equivalent production - ounces 59,964 38,067 107,544 91,543 Total cash costs per equivalent ounce of gold $ 196 $ 191 $ 223 $ 163
Total cash costs are non-GAAP measures. For further information on this non-GAAP measure, please refer to the disclosure under the heading "Costs and Expenses - Operations Summary". Kinross' share of capital expenditures at the Porcupine Joint Venture in the second quarter of 2003 was $1.9 million. 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 and permitting and engineering activities on the Pamour mine. In the first half of 2003, the Porcupine Joint Venture completed over 44,000 metres of exploration diamond drilling. The most significant exploration efforts are currently in progress at the Hoyle Pond Mine, the Pamour area, the McIntyre area and the Paymaster 36 zone. 2003 Second Quarter Report 11 KUBAKA (98.1% Ownership Interest) - Russia During the second quarter 2003, Kinross' share of gold equivalent production from the Kubaka Mine was 47,576 ounces at a total cash cost of $188 per ounce lower in comparison to the 60,396 ounces produced at a total cash cost of $139 per ounce achieved during the same three month period in 2002. Comparable production was lower and associated total cash costs higher due to the completion of mining activities at the Kubaka pit at the end of 2002 and the commencement of processing of relatively lower grade stockpile. Six-month 2003 production figures were similarly impacted by the closure of the Kubaka open pit with Kinross' share of gold equivalent production totaling 77,626 ounces at a total cash cost of $187 per ounce down from the 117,041 ounces at a total cash cost of $140 per ounce achieved during the first half of 2002. Second quarter 2003 gold equivalent production was 2.4% higher than plan while total cash costs were $23 per ounce or 10.9% below plan as a result of higher than plan gold grades and recoveries slightly offset by lower than plan silver grades.
RECONCILIATION OF THE KUBAKA MINE THREE MONTHS SIX MONTHS TOTAL CASH COSTS PER EQUIVALENT OUNCE OF GOLD ENDED ENDED TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30 JUNE 30 (MILLIONS EXCEPT PRODUCTION IN OUNCES AND PER OUNCE AMOUNTS) 2003 2002 2003 2002 - --------------------------------------------------------------------------------------------------------- Operating costs per financial statements $ 8.5 $ 7.4 $ 14.2 $ 14.0 Site restoration cost accruals (0.1) (0.2) (0.2) (0.4) Change in bullion inventory 0.2 0.5 0.2 1.4 Management fees 0.3 0.7 0.3 1.4 - --------------------------------------------------------------------------------------------------------- Operating costs for per ounce calculation purposes $ 8.9 $ 8.4 $ 14.5 $ 16.4 - --------------------------------------------------------------------------------------------------------- Gold equivalent production - ounces 47,576 60,396 77,626 117,041 Total cash costs per equivalent ounce of gold $ 188 $ 139 $ 187 $ 140
Total cash costs are non-GAAP measures. For further information on this non-GAAP measure, please refer to the disclosure under the heading "Costs and Expenses - Operations Summary". Kinross' share of second quarter 2003 capital expenditures at the Kubaka mine was $0.4 million. Underground development activities on the North High Wall, Centre Zone and North Vein, which are extensions of the main vein system at the mined out Kubaka mine, are progressing slowly due to lower than plan equipment availability, however, it is anticipated that development rates will return to plan during the third quarter.The Kubaka underground veins will provide high-grade mill feed to supplement the stockpile mill feed presently being processed. During the quarter, a 39-hole drill program was approved on the Birkachan deposit to provide further geological and technical information on the open-pittable resources. The Birkachan mine approval process has been initiated and authorization to commence open pit mining is expected to be received in the second half of 2003. At the Tsokol vein, preliminary underground mining plans are being developed to aid in technical and economics studies. 12 KINROSS Gold Corporation BRASILIA (49% Ownership Interest) - Brazil Kinross acquired its ownership interest in the Brasilia open pit mine, located in the State of Minas Gerais, Brazil upon completion of the combination with TVX on January 31, 2003. During the three months and five months ending June 30, 2003, the Company's share of gold production was 25,707 ounces at a total cash cost of $181 per ounce and 42,665 ounces at a total cash cost of $175 per ounce, respectively. Higher than budgeted power consumption combined with increased fuel prices, lower than plan gold production and a minor negative impact of the stronger Brazilian currency resulted in total cash cost being 6% higher than plan. The Calha Mill Expansion project prefeasibility study, which was initiated to examine the potential of increasing mill throughput by up to 50%, was completed and is in the process of being examined by the joint venture partners.
RECONCILIATION OF THE BRASILIA MINE THREE MONTHS SIX MONTHS TOTAL CASH COSTS PER EQUIVALENT OUNCE OF GOLD ENDED ENDED TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30 JUNE 30 (MILLIONS EXCEPT PRODUCTION IN OUNCES AND PER OUNCE AMOUNTS) 2003 2002 2003 2002 - ------------------------------------------------------------------------------------------------------ Operating costs per financial statements $ 4.7 $ - $ 8.4 $ - Site restoration cost accruals (0.1) - (0.2) - Change in bullion inventory 0.1 - (0.7) - - ------------------------------------------------------------------------------------------------------ Operating costs for per ounce calculation purposes $ 4.7 $ - $ 7.5 $ - - ------------------------------------------------------------------------------------------------------ Gold equivalent production - ounces 25,707 - 42,665 - Total cash costs per equivalent ounce of gold $ 181 $ - $ 175 $ -
Total cash costs are non-GAAP measures. For further information on this non-GAAP measure, please refer to the disclosure under the heading "Costs and Expenses - Operations Summary". Kinross' share of capital expenditures at the Brasilia mine in the second quarter of 2003 was $0.8 million. LA COIPA (50% Ownership Interest) - Chile Kinross acquired its ownership interest in the La Coipa mine, located in Chile, upon completion of the combination with TVX on January 31, 2003. Kinross' share of gold equivalent production for the three months ending June 30, 2003 was 32,854 ounces at total cash costs of $291 per equivalent ounce. Production for the five-month period ending June 30, 2002 totaled 56,777 gold equivalent ounces at total cash costs of $271 per equivalent ounce.Total cash costs per ounce were relatively higher than historic levels due to Kinross' policy of expensing not capitalizing stripping cost. If stripping costs had been capitalized, second quarter and five-month total cash costs per gold equivalent ounce would have been $246 and $233, respectively. 2003 Second Quarter Report 13 Second quarter 2003 gold and silver production was above plan, 11.8% and 1.3% respectively, as the result of higher than plan gold grades and gold and silver recoveries offset by slightly lower milled silver grades. Over the five-month period ending June 30, gold and silver production has exceeded plan by 8.7% and 1.9% respectively. Higher grades and better recoveries are the result of changes to the mining plan as mining activities focused on the Brecha Norte pit while remediation work continued on the Coipa Norte pit. Measures have been successfully developed to control Coipa Norte stability issues and pit development is continuing. On a gold equivalent basis, second quarter and five-month 2003 production were 2.1% and 2.4% lower than budget, respectively, as a result of a higher than plan gold equivalent conversion ratio as the gold price remained above plan and the silver price remained relatively flat.
RECONCILIATION OF THE LA COIPA MINE THREE MONTHS SIX MONTHS TOTAL CASH COSTS PER EQUIVALENT OUNCE OF GOLD ENDED ENDED TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30 JUNE 30 (MILLIONS EXCEPT PRODUCTION IN OUNCES AND PER OUNCE AMOUNTS) 2003 2002 2003 2002 - ------------------------------------------------------------------------------------------------------ Operating costs per financial statements $ 9.5 $ - $ 17.8 $ - Site restoration cost accruals (0.1) - (0.1) - Change in bullion inventory 0.1 - (2.3) - - ------------------------------------------------------------------------------------------------------ Operating costs for per ounce calculation purposes $ 9.5 $ - $ 15.4 $ - - ------------------------------------------------------------------------------------------------------ Gold equivalent production - ounces 32,854 - 56,777 - Total cash costs per equivalent ounce of gold $ 291 $ - $ 271 $ -
Total cash costs are non-GAAP measures. For further information on this non-GAAP measure, please refer to the disclosure under the heading "Costs and Expenses - Operations Summary". Kinross' share of capital expenditures at La Coipa during the second quarter 2003 was $0.4 million. CRIXAS (50% Ownership Interest) - Brazil Kinross acquired its ownership interest in the Crixas mine, located in the State of Goias, Brazil upon completion of the combination with TVX on January 31, 2003. The Company's share of gold production during the second quarter 2003 totaled 24,103 ounces at a total cash cost of $105 per ounce. For the five-months ending June 30, 2003, Kinross' share of production was 39,707 ounces of gold at a total cash cost of $104 per ounce. Despite the strengthening Brazilian currency, operating costs were $0.5 million below plan. 14 KINROSS Gold Corporation
RECONCILIATION OF THE CRIXAS MINE THREE MONTHS SIX MONTHS TOTAL CASH COSTS PER EQUIVALENT OUNCE OF GOLD ENDED ENDED TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30 JUNE 30 (MILLIONS EXCEPT PRODUCTION IN OUNCES AND PER OUNCE AMOUNTS) 2003 2002 2003 2002 - ------------------------------------------------------------------------------------------------------ Operating costs per financial statements $ 2.6 $ - $ 5.2 $ - Site restoration cost accruals - - (0.1) - Change in bullion inventory (0.1) - (0.9) - - ------------------------------------------------------------------------------------------------------ Operating costs for per ounce calculation purposes $ 2.5 $ - $ 4.2 $ - - ------------------------------------------------------------------------------------------------------ Gold equivalent production - ounces 24,103 - 39,707 - Total cash costs per equivalent ounce of gold $ 105 $ - $ 104 $ -
Total cash costs are non-GAAP measures. For further information on this non-GAAP measure, please refer to the disclosure under the heading "Costs and Expenses - Operations Summary". Kinross' share of capital expenditures at the Crixas mine in the second quarter of 2003 was $0.9 million. Exploration drilling south of Mina III has intersected the upper Corpo V zone at 350m yielding 5.9m at 10.71 g/t.The intersection is approximately 140m down-plunge of the previous deepest intersection. Follow-up drilling will continue to confirm the strike and continuity of the zone. MUSSELWHITE (31.93% Ownership Interest) - Canada Kinross acquired its ownership interest in the Musselwhite underground mine, located in northwestern Ontario, Canada upon completion of the combination with TVX on January 31, 2003. During the second quarter 2003, Kinross' share of gold production was 18,089 ounces at a total cash cost of $225 per ounce. The Company's share of gold production for the five months ending June 30, 2003 was 27,564 ounces at a total cash cost of $257 per ounce. Despite the strengthening Canadian dollar, second quarter results showed a significant improvement of $94 per ounce over first quarter results. Mine production surpassed budget as improvement in stope flexibility, equipment availability and production drilling positively impacted tonnes mined.
RECONCILIATION OF THE MUSSELWHITE MINE THREE MONTHS SIX MONTHS TOTAL CASH COSTS PER EQUIVALENT OUNCE OF GOLD ENDED ENDED TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30 JUNE 30 (MILLIONS EXCEPT PRODUCTION IN OUNCES AND PER OUNCE AMOUNTS) 2003 2002 2003 2002 - ------------------------------------------------------------------------------------------------------ Operating costs per financial statements $ 4.1 $ - $ 7.0 $ - Site restoration cost accruals - - - - Change in bullion inventory (0.1) - 0.1 - - ------------------------------------------------------------------------------------------------------ Operating costs for per ounce calculation purposes $ 4.0 $ - $ 7.1 $ - - ------------------------------------------------------------------------------------------------------ Gold equivalent production - ounces 18,089 - 27,564 - Total cash costs per equivalent ounce of gold $ 225 $ - $ 257 $ -
2003 Second Quarter Report 15 Total cash costs are non-GAAP measures. For further information on this non-GAAP measure, please refer to the disclosure under the heading "Costs and Expenses - Operations Summary". Kinross' share of capital expenditures at the Musselwhite mine in the second quarter of 2003 was $0.6 million.These capital expenditures will be primarily incurred on underground development and additions to the underground fleet. Diamond drilling of the PQ Deep zone was initiated during May from a barge on Opapimiskin Lake. The drill program will test the continuity of the zone up to 400 metres north of the existing drill intersections. NEW BRITANNIA (50% Ownership Interest) - Canada Kinross operates and owns a 50% interest in the New Britannia underground mine, located in northern Manitoba, acquired in the combination with TVX on January 31, 2003. During the second quarter 2003, Kinross' share of gold production was 9,365 ounces at a total cash cost of $317 per ounce.The Company's share of gold production for the five months ending June 30, 2003 was 16,825 ounces at a total cash cost of $297 per ounce. Lower than planned mill throughput and lower realized head grades resulted in the 27% decrease in anticipated production for the quarter and, combined with the stronger Canadian dollar, contributed to higher than budgeted realized total cash costs.The mine introduced a strict cost control program in mid-May.
RECONCILIATION OF THE NEW BRITANNIA MINE THREE MONTHS SIX MONTHS TOTAL CASH COSTS PER EQUIVALENT OUNCE OF GOLD ENDED ENDED TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30 JUNE 30 (MILLIONS EXCEPT PRODUCTION IN OUNCES AND PER OUNCE AMOUNTS) 2003 2002 2003 2002 - ------------------------------------------------------------------------------------------------------- Operating costs per financial statements $ 3.7 $ - $ 5.9 $ - Site restoration cost accruals - - - - Change in bullion inventory (0.7) - (0.9) - - ------------------------------------------------------------------------------------------------------- Operating costs for per ounce calculation purposes $ 3.0 $ - $ 5.0 $ - - ------------------------------------------------------------------------------------------------------- Gold equivalent production - ounces 9,365 - 16,825 - Total cash costs per equivalent ounce of gold $ 317 $ - $ 297 $ -
Total cash costs are non-GAAP measures. For further information on this non-GAAP measure, please refer to the disclosure under the heading "Costs and Expenses - Operations Summary". Kinross' share of capital expenditures at the New Britannia mine in the second quarter of 2003 was $0.5 million. 16 KINROSS Gold Corporation LUPIN (100% Ownership Interest) - Canada Kinross acquired its ownership in the Lupin underground mine, located in the Nunavut Territory, Canada upon completion of the combination with Echo Bay on January 31, 2003. During the second quarter 2003, Kinross' share of gold production was 25,534 ounces at a total cash cost of $409 per ounce.The Company's share of gold production for the five months ending June 30, 2003 was 44,318 ounces at a total cash cost of $410 per ounce. Total cash costs at the operation are unacceptable and the Company is reviewing all options with respect to the future of the mine. The aggressive cost containment measures implemented at the mine in the second quarter were successful in reducing operating costs, unfortunately the strengthened Canadian dollar more than offset these savings on a US dollar basis.
RECONCILIATION OF THE LUPIN MINE THREE MONTHS SIX MONTHS TOTAL CASH COSTS PER EQUIVALENT OUNCE OF GOLD ENDED ENDED TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30 JUNE 30 (MILLIONS EXCEPT PRODUCTION IN OUNCES AND PER OUNCE AMOUNTS) 2003 2002 2003 2002 - ------------------------------------------------------------------------------------------------------- Operating costs per financial statements $ 11.5 $ - $ 20.7 $ - Site restoration cost accruals (0.4) - (0.6) - Change in bullion inventory (0.6) - (1.9) - - ------------------------------------------------------------------------------------------------------- Operating costs for per ounce calculation purposes $ 10.5 $ - $ 18.2 $ - - ------------------------------------------------------------------------------------------------------- Gold equivalent production - ounces 25,534 - 44,318 - Total cash costs per equivalent ounce of gold $ 409 $ - $ 410 $ -
Total cash costs are non-GAAP measures. For further information on this non-GAAP measure, please refer to the disclosure under the heading "Costs and Expenses - Operations Summary". Kinross' share of capital expenditures at the Lupin mine in the second quarter of 2003 was $0.5 million. 2003 Second Quarter Report 17 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 expenses totaled $6.0 million in the second quarter and $11.8 million in the first half of 2003, compared to $2.5 million in the second quarter and $4.8 million in the first half of 2002.Administrative expenses increased in 2003 due to the completion of the combination with TVX and Echo Bay. Administrative costs per ounce of equivalent production were $13 per ounce in the second quarter 2003 compared with $12 in 2002. EXPLORATION AND BUSINESS DEVELOPMENT Total exploration and business development expenditures in the second quarter and first half of 2003 were $7.1 million and $13.3 million, respectively, compared to $2.0 million in the second quarter and $4.1 million in the first half of 2002. Exploration activities in the second quarter focused on Porcupine Joint Venture ($1.0 million), Fort Knox ($0.6 million), Musselwhite ($0.7 million), and Round Mountain ($0.6 million). At Kettle River, a crosscut from the exploration drift was developed through the Emanuel Creek orebody to provide future mining access. Approximately 300 metres north and along trend of the Emanuel Creek deposit, a new zone of the gold mineralization, the North Emanuel Creek zone, was intersected by five diamond drill holes over a strike length of approximately 200 metres. Results from the five holes were as follows: 60.4 metres grading 31.0 grams per tonne gold; 71.3 metres grading 2.4 grams per tonne gold; 7.4 metres grading 14.7 grams per tonne gold; 16.4 metres grading 10.7 grams per tonne gold; and 6.7 metres grading 9.1 grams per tonne gold. Further work is being planned to define the extent and geometry of the mineralized body.A map of the results can be viewed in the operations section of the Kinross website at www.kinross.com. DEPRECIATION, DEPLETION AND AMORTIZATION Depreciation, depletion and amortization totaled $40.3 million in the second quarter and $68.5 million in the first half 2003 compared to $19.6 million in the second quarter and $41.4 million in the first half of 2002. Depreciation, depletion and amortization have decreased per equivalent ounce of gold sold to $91 in the second quarter and $89 in the first half of 2003, from $101 in the second quarter and $97 in the first half of 2002. The 2003 decrease per equivalent ounce of gold sold is due to the cost of the newly acquired assets of TVX and Echo Bay and the associated production from those assets. 18 KINROSS Gold Corporation INTEREST EXPENSE Interest expense totaled $1.4 million in the second quarter and $2.5 million in the first half of 2003, compared to $1.3 million in the second quarter and $2.8 million in the first half of 2002. Interest expense in the first half of 2003 was comprised of $1.4 million of interest on the debt component of the convertible debentures, $0.6 million of interest on the Alaskan Industrial Revenue Bonds and the Fort Knox capital leases, $0.1 million relating to the Company's proportionate share of interest on the Kubaka project loans, and $0.4 million on other items. Interest expense should remain low if interest rates continue at their current low levels and debt balances continue to decrease as scheduled repayments are made. INCOME AND MINING TAXES Kinross is subject to tax in various jurisdictions including Canada, the United States, Brazil, Russia and Chile. However, the Company has operating losses and other tax deductions to shelter future taxable income in Canada and the United States. The second quarter 2003 liability arises from income taxes in Russia, Brazil, and Chile.The effective tax rate incurred during the first half of 2003 was 38% in Russia, 60% in Chile and 41% in Brazil. For details on the operating losses and other tax deductions available to shelter future taxable income please see Note 16 to the 2002 Audited Consolidated Financial Statements of Kinross. LIQUIDITY AND FINANCIAL RESOURCES OPERATING ACTIVITIES Cash flow provided from operating activities in the second quarter of 2003 was $20.7 million compared to $11.1 million in 2002. Cash flow provided from operating activities increased in the second quarter of 2003 due to higher gold equivalent production as a result of the completion of the business combination with TVX and Echo Bay, higher realized gold prices, and was offset by a reduction in accounts payable and other liabilities of $23.8 million. During the second quarter a payment of $9.4 million was made to Newmont, the final payment of the $180 million acquisition price for the TVX NA ownership of TVX assets.The cash flow from operating activities was used to finance expenditures and to service existing debt. FINANCING ACTIVITIES During the second quarter of 2003, Kinross issued 40,000 common shares for net proceeds of $0.3 million pursuant to the employee share incentive plan. Kinross also issued 600,000 common shares for net proceeds of $1.2 million pursuant to the employee stock option plan. The debt component of convertible debentures was reduced by $1.4 million during the second quarter and by $2.8 million during the first half of 2003 compared to $1.2 million during the second quarter and $2.5 million during the first half of 2002. Long-term debt repayments were $8.2 million during the second quarter of 2003 compared to $1.7 million during 2002. Long-term debt repayments consisted of scheduled repayments under various capital leases, as well as a small repayment of the Kubaka project debt, and repayment of a $3.8 million loan for E-Crete. 2003 Second Quarter Report 19 Kinross did not declare nor pay any dividends to the holders of the convertible preferred shares of subsidiary company Kinam Gold Inc. in 2003 or 2002. Kinross has unrestricted cash and cash equivalents of $125.0 million and restricted cash of $5.2 million at June 30, 2003.This restricted cash is associated with cash deposits that were made by Echo Bay to secure letters of credit for various financial assurance requirements. On February 27, 2003, Kinross entered into a credit facility for $125.0 million with a maturity date of December 31, 2005.At the end of the second quarter, letters of credit had been issued to replace all of the old financial assurance. Some state agencies have not released the old financial assurance they were holding, causing restricted cash for longer than had been anticipated.The remaining restricted cash is expected to be released during the third quarter of 2003. As at June 30, 2003, Kinross' long-term debt was $31.4 million consisting of $25.0 million of Fort Knox industrial revenue bonds, $2.7 million relating to the Kubaka project financing, and various capital leases and other debt of $3.7 million.The current portion of the long-term debt is $19.7 million, which includes $15.0 million of repayments on the industrial revenue bonds which is not mandatory but planned. INVESTING ACTIVITIES Capital expenditures were $12.1 million in the second quarter and $24.9 million in the first half of 2003 compared to $6.1 in the second quarter and $9.2 million in the first half of 2002. Capital expenditures were spread fairly evenly across all of the operating mines. Capital expenditures were financed out of cash flow from operating activities. INVESTMENT IN TVX HELLAS Since January 2003, the Stratoni lead/zinc mine located in Greece, owned by TVX Hellas, a subsidiary of the Company, has been shut down. The Company has been working with the Greek government and potential investors to determine whether this mine can be reopened under a revised ownership structure in which the Company will hold a minority interest. If the Company could achieve this result, the Olympias and Skouries gold projects could also undergo similar changes in ownership. As a protective measure, the Company has commenced proceedings in Greece to place TVX Hellas, which holds all of the Greek properties of the Company, into bankruptcy. 20 KINROSS Gold Corporation COMMODITY PRICE RISKS Kinross has entered into gold forward sales contracts, spot deferred forward sales contracts and written call options for some portion of expected future production to mitigate the risk of adverse price fluctuations. Kinross does not hold these financial instruments for speculative or trading purposes. Kinross is not subject to margin requirements on any of its hedging lines. The outstanding number of ounces, average expected realized prices and maturities for the gold commodity derivative contracts as at June 30, 2003 are as follows: CALL AVERAGE OUNCES AVERAGE OPTIONS STRIKE YEAR HEDGED PRICE SOLD PRICE ---------------------------------------------------------------------- 2003 77,500 $ 284 50,000 $ 300 2004 137,500 277 50,000 340 2005 37,500 296 - - ---------------------------------------------------------------------- Total 252,500 $ 282 100,000 $ 320 ====================================================================== 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 June 30, 2003 was negative $14.6 million. Kinross will continue to deliver into these contracts as they mature and not replace them with new contracts. OUTLOOK As at June 30, 2003, Kinross has $125.0 million of unrestricted cash and $5.2 million of restricted cash, which should become unrestricted during the third quarter. The second quarter was the first full quarter since the combination with TVX and Echo Bay, and results have improved with the highest quarterly production volumes to date, and improved total cash costs and cash flow from operating activities. Kinross will continue to focus on improving operational profitability and maximizing the benefit of our investment in quality projects.The forecast for the full year 2003 remains unchanged, with gold equivalent production of 1.7 million ounces at total cash costs of approximately $215 to $220 per ounce. /s/ Robert M. Buchan -------------------- ROBERT M. BUCHAN PRESIDENT AND CHIEF EXECUTIVE OFFICER AUGUST 7, 2003 2003 Second Quarter Report 21 CONSOLIDATED BALANCE SHEETS KINROSS GOLD CORPORATION (EXPRESSED IN MILLIONS OF U.S. DOLLARS) (UNAUDITED) As At As at June 30 December 31 2003 2002 - -------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 125.0 $ 170.6 Restricted cash 5.2 21.1 Accounts receivable and other assets 28.7 15.5 Inventories 100.8 38.9 Marketable securities 1.9 0.1 - -------------------------------------------------------------------------------- 261.6 246.2 Property, plant and equipment 823.7 330.0 Goodwill 888.6 - Long-term investments 30.2 11.8 Future income and mining taxes 14.3 - Deferred charges and other assets 34.7 10.0 - -------------------------------------------------------------------------------- $ 2,053.1 $ 598.0 ================================================================================ LIABILITIES CURRENT LIABILITIES Accounts payable and accrued liabilities $ 83.5 $ 35.5 Current portion of long-term debt 19.7 23.3 Current portion of site restoration cost accruals 16.2 15.0 - -------------------------------------------------------------------------------- 119.4 73.8 Long-term debt 11.7 12.9 Site restoration cost accruals 104.6 42.0 Future income and mining taxes 45.4 3.3 Deferred revenue 3.4 4.5 Other long-term liabilities 5.0 5.5 Debt component of convertible debentures 23.1 21.7 Redeemable retractable preferred shares 2.8 2.5 - -------------------------------------------------------------------------------- 315.4 166.2 - -------------------------------------------------------------------------------- CONVERTIBLE PREFERRED SHARES OF SUBSIDIARY COMPANY 13.2 12.9 - -------------------------------------------------------------------------------- COMMON SHAREHOLDERS' EQUITY Common share capital 1,599.5 1,058.5 Contributed surplus 12.9 12.9 Equity component of convertible debentures 136.7 132.3 Deficit (20.7) (761.4) Cumulative translation adjustments (3.9) (23.4) - -------------------------------------------------------------------------------- 1,724.5 418.9 - -------------------------------------------------------------------------------- $ 2,053.1 $ 598.0 ================================================================================ 22 KINROSS Gold Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS KINROSS GOLD CORPORATION FOR THE THREE AND SIX MONTHS ENDED JUNE 30 (EXPRESSED IN MILLIONS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS) THREE MONTHS SIX MONTHS ENDED ENDED (UNAUDITED) JUNE 30 JUNE 30 2003 2002 2003 2002 - -------------------------------------------------------------------------------------------------------------- REVENUE Mining revenue $ 157.8 $ 59.2 $ 274.8 $ 128.0 Interest and other income 1.8 6.5 2.8 7.7 Mark-to-market (loss) gain on call options (0.9) (0.6) 1.2 (1.6) - -------------------------------------------------------------------------------------------------------------- 158.7 65.1 278.8 134.1 - -------------------------------------------------------------------------------------------------------------- EXPENSES Operating 107.6 41.1 194.3 87.9 General and administrative 6.0 2.5 11.8 4.8 Exploration and business development 7.1 2.0 13.3 4.1 Depreciation, depletion and amortization 40.3 19.6 68.5 41.4 Loss (gain) on sale of assets 0.5 (1.2) 0.4 (1.5) Foreign exchange (gain) loss (1.0) 2.2 (0.3) 3.0 Interest expense on long-term liabilities 1.4 1.3 2.5 2.8 Writedown of marketable securities 0.1 - 0.1 - - -------------------------------------------------------------------------------------------------------------- 162.0 67.5 290.6 142.5 - -------------------------------------------------------------------------------------------------------------- (3.3) (2.4) (11.8) (8.4) Minority interest (0.1) - (0.1) - Share in (loss) income of investee companies - (0.1) - 0.2 - -------------------------------------------------------------------------------------------------------------- LOSS BEFORE TAXES AND DIVIDENDS ON CONVERTIBLE PREFERRED SHARES OF SUBSIDIARY COMPANY (3.4) (2.5) (11.9) (8.2) PROVISION FOR INCOME AND MINING TAXES (1.6) (1.6) (4.1) (3.0) - -------------------------------------------------------------------------------------------------------------- LOSS FOR THE PERIOD BEFORE DIVIDENDS ON CONVERTIBLE PREFERRED SHARES OF SUBSIDIARY COMPANY (5.0) (4.1) (16.0) (11.2) DIVIDENDS ON CONVERTIBLE PREFERRED SHARES OF SUBSIDIARY COMPANY (0.2) (0.2) (0.4) (1.0) - -------------------------------------------------------------------------------------------------------------- NET LOSS FOR THE PERIOD $ (5.2) $ (4.3) $ (16.4) $ (12.2) - -------------------------------------------------------------------------------------------------------------- ATTRIBUTABLE TO COMMON SHAREHOLDERS: NET LOSS FOR THE PERIOD $ (5.2) $ (4.3) $ (16.4) $ (12.2) INCREASE IN EQUITY COMPONENT OF CONVERTIBLE DEBENTURES (2.2) (2.1) (4.3) (4.2) - -------------------------------------------------------------------------------------------------------------- NET LOSS ATTRIBUTABLE TO COMMON SHARES $ (7.4) $ (6.4) $ (20.7) $ (16.4) ============================================================================================================== LOSS PER SHARE Basic and diluted $ (0.02) $ (0.05) $ (0.07) $ (0.14) COMMON SHARES: WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 314.7 119.4 284.1 117.5 TOTAL OUTSTANDING AND ISSUED AT JUNE 30 315.1 119.4 2003 Second Quarter Report 23
CONSOLIDATED STATEMENTS OF CASH FLOWS KINROSS GOLD CORPORATION FOR THE THREE AND SIX MONTHS ENDED JUNE 30 THREE MONTHS SIX MONTHS (EXPRESSED IN MILLIONS OF U.S. DOLLARS) ENDED ENDED (UNAUDITED) JUNE 30 JUNE 30 2003 2002 2003 2002 - --------------------------------------------------------------------------------------------------- NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING ACTIVITIES: OPERATING: Loss for the period before dividends on convertible preferred shares of subsidiary company $ (5.0) $ (4.1) $ (16.0) $ (11.2) Items not affecting cash: Depreciation, depletion and amortization 40.3 19.6 68.5 41.4 Future income and mining taxes (2.2) - (2.1) - Deferred revenue realized (0.5) (1.2) (1.1) (2.5) Site restoration cost accruals 2.3 0.7 3.7 1.5 Other 3.5 0.4 5.0 - - --------------------------------------------------------------------------------------------------- 38.4 15.4 58.0 29.2 Site restoration cash expenditures (2.9) (1.5) (5.0) (2.6) Changes in non-cash working capital items Accounts receivable and other assets 11.0 (5.6) 17.2 (1.0) Inventories (4.1) 2.1 (9.5) 3.6 Marketable securities 0.6 1.0 0.6 2.5 Accounts payable and accrued liabilities (23.8) (1.9) (25.4) (2.7) Effect of exchange rate changes on cash 1.5 1.6 3.8 2.0 - --------------------------------------------------------------------------------------------------- CASH FLOW PROVIDED FROM OPERATING ACTIVITIES 20.7 11.1 39.7 31.0 - --------------------------------------------------------------------------------------------------- FINANCING: Issuance of common shares 1.5 0.3 3.3 19.3 Acquisition of preferred shares of subsidiary company - (0.3) - (11.4) Reduction of debt component of convertible debentures (1.4) (1.2) (2.8) (2.5) Repayment of debt (8.2) (1.7) (9.2) (12.2) - --------------------------------------------------------------------------------------------------- CASH FLOW USED IN FINANCING ACTIVITIES (8.1) (2.9) (8.7) (6.8) - --------------------------------------------------------------------------------------------------- INVESTING: Additions to property, plant and equipment (12.1) (6.1) (24.9) (9.2) Business acquisitions, net of cash acquired - - (81.4) - Long-term investments and other assets (3.5) 1.9 (7.7) 1.9 Proceeds from the sale of property, plant and equipment - - - 0.1 Decrease (increase) in restricted cash 5.6 (0.4) 37.4 (4.4) - --------------------------------------------------------------------------------------------------- CASH FLOW USED IN INVESTING ACTIVITIES (10.0) (4.6) (76.6) (11.6) - --------------------------------------------------------------------------------------------------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 2.6 3.6 (45.6) 12.6 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 122.4 90.0 170.6 81.0 - --------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 125.0 $ 93.6 $ 125.0 $ 93.6 =================================================================================================== Supplementary disclosure of cash flow information: Cash paid for: Interest $ 4.1 $ 3.4 $ 4.4 $ 4.0 Income taxes $ 2.5 $ 0.9 $ 3.7 $ 1.3 24 KINROSS Gold Corporation
CONSOLIDATED STATEMENT OF COMMON SHAREHOLDERS' EQUITY KINROSS GOLD CORPORATION FOR THE SIX MONTHS ENDED 2003 JUNE 30, (EXPRESSED IN MILLIONS OF U.S. DOLLARS) (UNAUDITED) CUMULATIVE COMMON CONTRIBUTED CONVERTIBLE TRANSLATION SHARES SURPLUS DEBENTURES DEFICIT ADJUSTMENTS TOTAL - ----------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 2002 $1,058.5 $ 12.9 $ 132.3 $ (761.4) $ (23.4) $ 418.9 Reduction of stated capital (761.4) - - 761.4 - - Issuance of common shares 1,302.4 - - - - 1,302.4 Increase in equity component of convertible debentures - - 4.4 (4.3) - 0.1 Net loss for the period - - - (16.4) - (16.4) Cumulative translation adjustments - - - - 19.5 19.5 - ----------------------------------------------------------------------------------------------------------- BALANCE, JUNE 30, 2003 $1,599.5 $ 12.9 $ 136.7 $ (20.7) $ (3.9) $ 1,724.5 =========================================================================================================== 2003 Second Quarter Report 25
NOTES TO THE FINANCIAL STATEMENTS KINROSS GOLD CORPORATION FOR THE THREE AND SIX MONTHS ENDED JUNE 30 (ALL DOLLAR AMOUNTS ARE EXPRESSED IN MILLIONS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 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, 2002, 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 ("CDN GAAP") 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, 2002 and the unaudited quarterly report for the three months ended March 31, 2003. 2. NEW PRONOUNCEMENTS In 2003, the Accounting Standards Board of CICA issued Accounting Guideline No. 14 -Disclosure of Guarantees, which is effective for financial periods ending after December 15, 2002.The guideline requires the disclosure of guarantees including indemnification pursuant to contractual arrangement. There have been no additional guarantees granted during the quarter. 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. 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 the first six months of 2003, the mark-to-market adjustments decreased the liability by $1.2 million.
26 KINROSS Gold Corporation 4. STOCK OPTIONS The Company's stock option plan is described in note 14 of the consolidated financial statements for the year ended December 31, 2002.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 $21.1 million (2002 - $16.5 million) and pro forma EPS would have remained at a loss of $0.07 per share for the six month period ended June 30, 2003 (2002 - $0.14). The fair value of the options granted during the six month period ended June 30, 2003 is estimated to be $0.4 million (2002 - $0.1 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 in the six months period ended June 30, 2003: dividend yield of 0%, expected volatility of 70%, risk-free interest rate of 2.7% 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. 5. SEGMENTED INFORMATION The Company operates six gold mines and has a significant interest in five joint ventures. In addition, the Company has an 89.2% 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, the 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. 2003 Second Quarter Report 27
AS AT JUNE 30, 2003 AND FOR THE SIX MONTHS ENDED JUNE 30, 2003: OWNERSHIP MINING OPERATING INTEREST LOCATION INTEREST REVENUE COSTS REVENUE - ------------------------------------------------------------------------------------------------- OPERATED BY KINROSS Fort Knox Alaska 100% $ 68.0 $ 48.3 $ - Kubaka Russia 98.1% 27.7 14.2 0.1 Round Mountain Nevada 50% 63.3 35.0 - Lupin Nunavut 100% 16.7 20.7 - New Britannia Manitoba 50% 6.3 5.9 - JOINT VENTURE PARTICIPANT La Coipa Chile 50% 22.2 17.8 - Crixas Brazil 50% 14.3 5.2 0.5 Brasilia Brazil 49% 14.6 8.4 0.4 Musselwhite Ontario 32% 8.4 7.0 - Porcupine Joint Venture Ontario 49% 38.5 27.4 - OTHER E-Crete Arizona 89% - 1.2 - Corporate and other (B) (5.2) 3.2 0.9 TOTAL $ 274.8 $ 194.3 $ 1.9 AS AT JUNE 30, 2002 AND FOR THE SIX MONTHS ENDED JUNE 30, 2002: OPERATED BY KINROSS Fort Knox Alaska 100% $ 63.0 $ 52.0 $ - Kubaka Russia 54.7% 33.2 15.0 0.1 Hoyle Pond Ontario 100% 29.9 16.9 - OTHER E-Crete Arizona 86% - 1.4 - Corporate and other (B) 1.9 2.6 0.7 TOTAL $ 128.0 $ 87.9 $ 0.8
28 KINROSS Gold Corporation
(CONT'D) DEPRECIATION, DEPLETION SEGMENT INTEREST AND PROFIT SEGMENT CAPITAL EXPENSE AMORTIZATION (LOSS) ASSETS EXPENDITURES ------------------------------------------------------------------- OPERATED BY KINROSS (A) Fort Knox $ 0.6 $ 19.8 $ (1.9) $ 256.4 $ 11.2 Kubaka 0.1 8.2 5.0 71.4 0.5 Round Mountain - 15.6 11.9 126.7 1.2 Lupin - 2.1 (6.7) 38.1 1.3 New Britannia - 2.3 (2.3) 19.9 0.7 JOINT VENTURE PARTICIPANT La Coipa - 3.2 0.5 55.5 0.3 Crixas - 4.6 5.0 61.3 1.0 Brasilia 0.1 2.5 3.0 133.5 1.2 Musselwhite - 3.4 (2.6) 76.3 0.8 Porcupine Joint Venture - 10.2 (0.4) 87.2 3.3 OTHER E-Crete 0.2 0.3 (1.7) 8.2 - Corporate and other (B) 1.5 (3.7) (21.1) 1,118.6 3.4 TOTAL $ 2.5 $ 68.5 $ (11.3) $ 2,053.1 $ 24.9 AS AT JUNE 30, 2002 AND FOR THE SIX MONTHS ENDED JUNE 30, 2002: OPERATED BY KINROSS Fort Knox $ 0.9 $ 23.3 $ (13.5) $ 300.1 $ 4.4 Kubaka 0.2 9.8 8.7 61.7 0.1 Hoyle Pond - 8.7 3.6 86.2 4.0 OTHER E-Crete 0.2 0.8 (2.2) 8.2 0.4 Corporate and other (B) 1.5 (1.2) (6.5) 83.9 0.3 TOTAL $ 2.8 $ 41.4 $ (9.9) $ 540.1 $ 9.2 (A) includes $72.7 million (2002 - $78.3 million) in cash and cash equivalents held at the Corporate level. (B) includes Corporate and other non core mining operations.
2003 Second Quarter Report 29
FOR THE THREE MONTHS ENDED JUNE 30, 2003: DEPRECIATION, DEPLETION SEGMENT OWNERSHIP MINING OPERATING INTEREST INTEREST AND PROFIT CAPITAL LOCATION INTEREST REVENUE COSTS REVENUE EXPENSE AMORTIZATION (LOSS) EXPENDITURES - ------------------------------------------------------------------------------------------------------------------------------------ OPERATED BY KINROSS Fort Knox Alaska 100% $ 34.8 $ 24.5 $ - $ 0.4 $ 9.8 $ (0.7) $ 2.0 Kubaka Russia 98.1% 16.2 8.5 0.1 0.1 5.1 2.5 0.4 Round Mountain Nevada 50% 42.0 20.9 - - 9.5 11.0 0.9 Lupin Nunavut 100% 9.2 11.5 - - 1.2 (3.8) 0.5 New Britannia Manitoba 50% 3.9 3.7 - - 1.9 (1.8) 0.5 JOINT VENTURE PARTICIPANT La Coipa Chile 50% 11.6 9.4 - - 2.1 (0.8) 0.3 Crixas Brazil 50% 8.7 2.7 0.4 - 2.8 3.6 0.9 Brasilia Brazil 49% 8.8 4.7 0.3 0.1 1.5 2.1 0.8 Musselwhite Ontario 32% 5.5 4.2 - - 2.4 (1.4) 0.6 Porcupine Joint Venture Ontario 49% 20.3 13.6 - - 5.8 (0.1) 1.9 OTHER E-Crete Arizona 89% - 0.7 - 0.1 0.2 (0.9) - Corporate and other (A) (3.2) 3.2 0.3 0.7 (2.0) (12.4) 3.3 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL $ 157.8 $ 107.6 $ 1.1 $ 1.4 $ 40.3 $ (2.7) $ 12.1 ==================================================================================================================================== FOR THE THREE MONTHS ENDED JUNE 30, 2002: OPERATED BY KINROSS Fort Knox Alaska 100% $ 30.0 $ 24.1 $ - $ 0.3 $ 10.9 $ (5.6) $ 3.4 Kubaka Russia 54.7% 18.0 8.0 0.1 0.1 5.1 5.2 - Hoyle Pond Ontario 100% 12.4 7.9 - - 4.0 0.3 2.3 OTHER E-Crete Arizona 86% - 0.6 - 0.1 0.4 (1.0) 0.2 Corporate and other (A) (1.2) 0.5 0.3 0.8 (0.8) (2.5) 0.2 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL $ 59.2 $ 41.1 $ 0.4 $ 1.3 $ 19.6 $ (3.6) $ 6.1 ==================================================================================================================================== (A) includes Corporate and other non core mining operations. RECONCILIATION OF REPORTABLE OPERATING SEGMENT LOSS TO NET LOSS FOR THE PERIOD: THREE MONTHS SIX MONTHS ENTERPRISE WIDE DISCLOSURE: ENDED JUNE 30 ENDED JUNE 30 GEOGRAPHIC INFORMATION: 2003 2002 2003 2002 - -------------------------------------------------------------------- Segment loss $ 9.7 $ (1.1) $ 9.8 $ (3.4) MINING REVENUE MINING Add (deduct) items not included in PROPERTIES, segment (loss) profit: THREE MONTHS SIX MONTHS PLANT AND Corporate and other (12.4) (2.5) (21.1) (6.5) ENDED JUNE 30 ENDED JUNE 30 AS AT JUNE 30 - -------------------------------------------------------------------- 2003 2002 2003 2002 2003 2002 (2.7) (3.6) (11.3) (9.9) ---------------------------------------------------------- (Loss) gain on sale of assets (0.5) 1.2 (0.4) 1.5 United States $ 76.8 $28.2 $131.3 $ 61.5 $349.3 $249.2 Minority interest (0.1) - (0.1) - Russia 16.2 18.0 27.7 33.2 17.5 20.9 Writedown of marketable securities (0.1) - (0.1) - Chile 11.6 0.9 22.2 3.1 46.7 - Share in income (loss) of investee Brazil 17.5 - 28.9 - 167.1 - companies - (0.1) - 0.2 Other - - - - 5.2 5.2 Provision for income taxes (1.6) (1.6) (4.1) (3.0) ---------------------------------------------------------- Dividends on convertible preferred Total foreign 122.1 47.1 210.1 97.8 585.8 275.3 shares of subsidiary company (0.2) (0.2) (0.4) (1.0) Canada 35.7 12.1 64.7 30.2 237.9 89.4 - -------------------------------------------------------------------- ---------------------------------------------------------- Net loss for the period $ (5.2) $ (4.3) $(16.4)$ (12.2) Total $157.8 $59.2 $274.8 $128.0 $823.7 $364.7 ==================================================================== =========================================================== 30 KINROSS Gold Corporation 2003 Second Quarter Report 31
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. 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 common shares during the six-month period was $6.69 (2002 - $4.56). 2003 2002 - ------------------------------------------------------------------------------ Weighted average number of common shares outstanding at June 30th 284,092 117,475 Add: Options, warrants and participating securities as if issued, exercised and outstanding at January 1st Options 2,816 2,237 Restricted shares - 1 Convertible debentures (A) 4,884 4,884 Redeemable retractable preferred shares (B) 1,058 1,058 Convertible preferred shares of subsidiary company (C) 360 360 Kinross warrants 8,333 - TVX warrants 17 - Echo Bay warrants 6,777 - - ------------------------------------------------------------------------------ Weighted average number of common shares used for diluted earnings per share. 308,337 126,015 ============================================================================== (A) Convertible debentures - $144.3 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 - 222,583 shares issued and outstanding to non-affiliated shareholders as at June 30, 2003. 7. BUSINESS ACQUISITIONS (A) 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. At the same meeting, the shareholders of the Company approved the elimination of the Company's deficit balance at December 31, 2002 of $761.4 million through a reduction of the Company's stated share capital account. 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. ("Echo Bay") and TVX Gold Inc. ("TVX").The combination was carried out as a plan of arrangement whereby each holder of TVX common shares received 2.1667 common shares of the Company.Also pursuant to the arrangement, shareholders of Echo Bay 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 described above.The Company issued 177.8 million common shares to the shareholders of Echo Bay (other than itself) and TVX with an aggregate fair value of $1,269.8 million with respect to these acquisitions. 32 KINROSS Gold Corporation In a separate transaction, TVX acquired Newmont Mining Corporation's 50% non-controlling interest in the TVX Newmont Americas joint venture ("TVX Newmont JV") for an aggregate purchase of $180.0 million.The purchase price was satisfied using TVX's available cash of $85.5 million and cash advanced by the Company to TVX of $94.5 million. Upon completion of the arrangement and TVX's purchase of Newmont's interest in the TVX Newmont JV, the Company owns all of the outstanding TVX common shares and Echo Bay common shares and owns, indirectly, all of the TVX Newmont JV.TVX holds interests in various operating mines around the world, including, those held through its 50% controlling interest in the TVX Newmont JV.The underlying operating mines in the TVX Newmont JV are located in Canada, Brazil, and Chile. The production from the TVX Newmont JV in 2002 was 473,602 ounces of gold equivalent. 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 522,208 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 CDN GAAP and Statement of Financial 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 CDN and U.S. GAAP, the TVX and Echo Bay identifiable assets acquired and liabilities assumed will be recorded at their fair values as of the effective date of the acquisition.The excess of the purchase price over such fair value will be recorded as goodwill. In accordance with CICA Handbook Section 3062, "Goodwill and Other Intangible Assets", for purposes of CDN 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. The goodwill resulting from the preliminary purchase price allocation is $888.6 million. The purchase price allocation is preliminary as the Company is currently in the process of estimating the fair values of the acquired property, plant and equipment based on the quantity of proven and probable reserves and undeveloped mineral interests at each site and the estimated future production costs and capital expenditures required to produce the reserve material and the replacement cost of land, buildings and equipment; the estimation of the fair values of other long-term liabilities for reclamation and remediation liabilities; and estimating the fair value of mining royalty properties and other based on the expected returns on those royalties. The determination of these fair values is expected to be completed in the fourth quarter of 2003. Goodwill is subject to a determination of fair values and will be revised for possible impairment at least annually or more frequently upon the occurrence of certain events or when circumstances indicate the reporting unit's carrying value, including goodwill that was allocated to it, is greater than its fair value. Kinross has not determined if a goodwill impairment exists and expects to make that determination annually, or more frequently as circumstances dictate, in accordance with CDN and U.S. GAAP. 2003 Second Quarter Report 33 The fair values of the assets and liabilities of Echo Bay and TVX and the preliminary allocation of the purchase consideration are as follows:
IN MILLIONS EXCEPT SHARE PRICE AND NUMBER OF SHARES ECHO BAY TVX - ------------------------------------------------------------------------------------------------- Calculation of preliminary allocation of purchase price: Common shares of the Company issued to the Echo Bay and TVX shareholders 93,820,424 93,930,887 The average closing market price of the Company's shares over the four trading days from June 6 through June 11, 2002 $ 7.14 $ 7.14 - ------------------------------------------------------------------------------------------------- Fair value of the Company's common stock issued 669.9 670.7 Plus - fair value of warrants and options to be assumed by the Company (100% vested) 22.5 6.8 Plus - direct acquisition costs incurred by the Company 6.1 6.1 Less - the Company's previous 10.6% ownership interest in Echo Bay (63.8) - - ------------------------------------------------------------------------------------------------- Total purchase price 634.7 683.6 Plus - fair value of liabilities assumed by the Company Accounts payable and accrued liabilities 21.8 38.1 Current portion of site restoration cost accruals 2.5 1.1 Long-term debt (including current portion) - 2.1 Site restoration cost accruals 42.4 12.9 Future income tax liabilities 1.0 42.0 Other long-term liabilities - 8.1 Liability with respect to TVX Newmont JV assets acquired - 94.5 Less - fair value of assets acquired by the Company Cash (16.4) (27.8) Short-term investments (1.9) (0.5) Accounts receivable and other assets (2.8) (20.4) Inventories (19.9) (20.7) Prepaid expense and other (2.7) (2.5) Properties, plant and equipment (169.6) (337.8) Restricted cash (10.1) (11.3) Future income tax assets - (13.8) Other non-current assets (24.9) (13.1) - ------------------------------------------------------------------------------------------------- Residual purchase price allocated to non-amortizable goodwill $ 454.1 $ 434.5 =================================================================================================
34 KINROSS Gold Corporation (B) On December 3, 2002, the Company entered into purchase agreements with four of the five Russian shareholders (holding, in aggregate 44.17% of the share of Omolon Gold Mining Corporation ("Omolon"). The four shareholders agreed to tender their shares in Omolon and Omolon agreed to pay $44.7 million including legal fees for said shares. As at March 31, 2003, the Company owns 98.1% of Omolon. The fair value of the assets and liabilities of the recently acquired 45.3% interest in Omolon and the allocation of the purchase consideration are as follows: IN MILLIONS EXCEPT SHARE PRICE AND NUMBER OF SHARES - ------------------------------------------------------------------------------ Fair value of assets acquired by the Company: Cash $ 26.1 Accounts receivable 2.9 Inventories 12.3 Property, plant and equipment 13.8 Other non-current assets 1.9 Less - fair value of liabilities assumed by the Company Accounts payable and accrued liabilities (5.7) Current portion of site restoration cost accruals (0.2) Long-term debt (including current portion) (2.2) Site restoration obligations (3.2) Non-controlling interest (1.0) - ------------------------------------------------------------------------------ Total cash consideration $ 44.7 ============================================================================== Financed by: Cash (including cash acquired - $26.1 million) $ 44.7 - ------------------------------------------------------------------------------ The combination of the Company, Echo Bay and TVX occurred on January 31, 2003. If the combination had been effective as of January 1, 2003, the pro forma revenues of the Company for the six month period ending June 30, 2003, would have been increased by $28.9 million to $307.7 million and the net loss would have been reduced by $3.4 million to $13.0 million for this period.These pro forma results were adjusted to exclude the transaction costs incurred by Echo Bay and TVX, and depreciation, depletion and amortization were calculated based on the allocation determined in the preliminary purchase equation pertaining to the combination. The pro forma financial information does not purport to represent the Company's results of operations had the combination occurred at the beginning of 2003 or to project the Company's results of operation for any future periods. 2003 Second Quarter Report 35 8. LEGAL PROCEEDINGS The following changes have occurred during the quarter to legal proceedings and contingencies described in the consolidated financial statements for the year ended December 31, 2002, and the first quarter ended March 31, 2003. LITIGATION IN BRAZIL On June 20, 2003, TVX Newmont Americas, a subsidiary of Kinross, and Rio Tinto Brasil entered into an amended operation and management agreement in complete resolution of a prior dispute between TVX Newmont Americas and Rio Tinto Brasil.All litigation in connection with the settlement has been terminated. LITIGATION IN GREECE Since January 2003, the Stratoni lead/zinc mine located in Greece, owned by TVX Hellas, a subsidiary of the Company, has been shut down. The Company has been working with the Greek government and potential investors to determine whether this mine can be reopened under a revised ownership structure in which the Company will hold a minority interest. If the Company could achieve this result, the Olympias and Skouries gold projects could also undergo similar changes in ownership. As a protective measure, the Company has commenced proceedings in Greece to place TVX Hellas, which holds all of the Greek properties of the Company, into bankruptcy. RUSSIA The Company recently received notice that local taxation authorities in Russia are seeking a reassessment of the tax paid on the Company's Russian operations in the approximate amount of $8.0 million, which includes penalties and interest.The notice challenges certain deductions taken by the Company and tax concessions relating to tax returns filed by the Company in prior years. The Company believes its interpretation of the tax regulations is correct and intends to oppose the reassessment. 36 KINROSS Gold Corporation
CORPORATE INFORMATION DIRECTORS AND OFFICERS DIRECTORS OFFICERS CORPORATE DATA INVESTOR RELATIONS CONTACT: JOHN A. BROUGH A C N JOHN E. OLIVER CORPORATE OFFICE E-MAIL: PRESIDENT INDEPENDENT CHAIRMAN 52nd Floor, Scotia Plaza INFO@KINROSS.COM Torwest Inc. 40 King Street West ROBERT M. BUCHAN Toronto, Ontario WEBSITE: ROBERT M. BUCHAN PRESIDENT AND CHIEF Canada M5H 3Y2 WWW.KINROSS.COM PRESIDENT AND CHIEF EXECUTIVE OFFICER EXECUTIVE OFFICER Tel: (416) 365-5123 TOLL FREE: (866) Kinross Gold Corporation JOHN W. IVANY Fax: (416) 363-6622 561-3636 EXECUTIVEVICE PRESIDENT Toll free: (866) 561-3636 SCOTT A. CALDWELL Carl B. Hansen EXECUTIVE VICE PRESIDENT AND SCOTT A. CALDWELL U.S. OFFICE DIRECTOR, INVESTOR RELATIONS CHIEF OPERATING OFFICER EXECUTIVE VICE PRESIDENT 681 Sierra Rose Drive Tel: (416) 365-5673 Kinross Gold Corporation AND CHIEF OPERATING Suite B OFFICER Reno, Nevada Tracey M.Thom ARTHUR H. DITTO USA 89509 MANAGER, INVESTOR RELATIONS RETIRED MINING EXECUTIVE BRIAN W. PENNY Tel: (416) 365-1362 VICE PRESIDENT, FINANCE Tel: (775) 829-1000 JOHN M.H.HUXLEY A C N AND CHIEF FINANCIAL Fax: (775) 829-1666 PRINCIPAL OFFICER STOCK EXCHANGES Algonquin Power TRANSFER AGENT K - TSX KGC - NYSE Corporation JERRY W. DANNI AND REGISTRAR VICE COMPUTERSHARE JOHN A. KEYES E PRESIDENT,HEALTH,SAFETY TRUST COMPANY RETIRED MINING EXECUTIVE AND ENVIRONMENTAL AFFAIRS OF CANADA Toronto, Ontario GEORGE F. MICHALS A G KEVIN C. DROVER Canada PRESIDENT VICE PRESIDENT, OPERATIONS Baymont Capital Tel: (416) 981-9633 Resources Inc. ALAN C. EDWARDS Toll free: 1 800 663-9097 VICE PRESIDENT,TECHNICAL CAMERON A. SERVICES AND PROJECT COMPUTERSHARE MINGAY E G DEVELOPMENT TRUST COMPANY PARTNER INC. Cassels, Brock & CHRISTOPHER T. HILL Denver, Colorado USA Blackwell LLP VICE PRESIDENT,TREASURER Tel: (303) 262-0600 JOHN E. OLIVER C G N GORDON A. EXECUTIVE MANAGING MCCREARY DIRECTOR AND CO-HEAD VICE PRESIDENT, Scotia Capital U.S. CORPORATE AFFAIRS Bank of Nova Scotia ALLAN D. SCHOENING VICE PRESIDENT, HUMAN - --------------------------- RESOURCES AND COMMUNITY A Audit Committee RELATIONS C Compensation Committee E Environmental and RONALD W. STEWART Health and Safety VICE PRESIDENT, EXPLORATION Committee G Corporate Governance SHELLEY M. RILEY Committee CORPORATE SECRETARY N Nominating Committee
2003 Second Quarter Report KINROSS Gold Corporation ------------------ WWW.KINROSS.COM EX-99.2 4 tex99_2-30225.txt EX-99.2 KINROSS Gold Corporation - -------------------------------------------------------------------------------- SUSPENSION OF OPERATIONS AT THE LUPIN MINE TORONTO, ONTARIO, AUGUST 13, 2003...KINROSS GOLD CORPORATION (TSX-K; NYSE-KGC) ("KINROSS") announces the immediate suspension of operations for its Lupin mine in Nunavut Territory, Canada due to the poor economic performance of the operation over a protracted period of time. Kinross took control of the Lupin operation on February 1, 2003, as a result of the merger with Echo Bay Mines Ltd. The total number of employees ultimately affected by this decision is 235 plus an additional 70 contract employees. Forty of these employees are residents of the Northwest Territories and Nunavut Territory with the balance of the employees residing elsewhere in Canada. On May 12, 2003, Kinross had announced a restructuring plan for the Lupin mine and although, through the diligent efforts of employees, planned cost improvements had been achieved, the strengthening Canadian dollar negated those cost efficiencies when expressed in US dollars, the currency that the gold output is sold in. Although the suspension of operations is being implemented immediately, a small group of personnel will continue reviewing future alternatives for the property including the development of a mine plan to extract the shaft and crown pillars at Lupin. These pillars and other remnant mining are expected to contain almost 110,000 ounces of gold (approximately 400,000 tonnes at an average grade of about 8.5 grams of gold per tonne). Recovery of these pillars through 2004 has the potential for the operation to produce a comparable amount of gold to that originally planned for 2004, but at a higher grade and, consequently, at lower total cash costs per ounce. Notwithstanding the potential for the future extraction of the pillars, effective immediately mining will be suspended, followed within days by the suspension of milling operations. The plant and equipment will be placed on care and maintenance pending the results of the review of future alternatives for the property. A small core of personnel will continue with the environmental management programs to ensure compliance with all regulatory requirements. The Lupin deposit, located on the west shore of Contwoyto Lake 80 kilometres south of the Arctic Circle, is a banded iron formation that was discovered in 1960. The mine began commercial production in 1982 and pioneered the use of supporting a mining operation by aircraft for the rotation of employees, transporting perishables and shipping of dore to market and the transport of consumables for the operation over a winter road. This development scenario that was refined at Lupin has become the model for the development of the new diamond mines in the Northwest Territories and Kinross' Kubaka mine in the Russian Far East. With the exception of a period of suspension from 1998 to 2000, due to low gold prices, the Lupin mine has operated from 1982 and produced approximately three million ounces of gold and has been a significant contributor to the economy of northern Canada. - -------------------------------------------------------------------------------- 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, 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. 52nd Floor, Scotia Plaza, 40 King Street West, Toronto, Ontario M5H 3Y2 Telephone (416) 365-5123 Fax (416) 363-6622 For further information, e-mail info@kinross.com or contact: Robert M. Buchan Gordon A. McCreary Ted Rutherglen President and Vice President Manager of Human Resources Chief Executive Officer Corporate Affairs Lupin Mine Tel. (416) 365-5650 Tel. (416) 365-5132 Tel: (780) 890-4691 -----END PRIVACY-ENHANCED MESSAGE-----