UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of August, 2002
KINROSS GOLD CORPORATION
52nd Floor, Scotia Plaza, 40 King Street West
Toronto, Ontario M5H 3Y2
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.
Form 20-F |_| Form 40-F [X]
Indicate by check mark whether the registrant by furnishing the information
contained in this Form 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]
INDEX
Second Quarter Report dated August 1, 2002 Pages 3-24
Signature Page Page 25
-2-
KINROSS GOLD CORPORATION
======= ==== ============
For the Period ended June 30, 2002
All results are expressed in United States dollars unless otherwise stated.
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 (the "Company"), 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 the Company's expectations are disclosed under the heading "Risk
Factors" and elsewhere in the Company's documents filed from time to time with
the Toronto Stock Exchange, the United States Securities and Exchange Commission
and other regulatory authorities.
Second Quarter Consolidated Results
Gold equivalent production of 204,148 ounces at total cash costs of $209 per
ounce, combined with changes in working capital resulted in cash flow provided
from operating activities of $11.1 million or $0.03 per share during the second
quarter of 2002. This compares to gold equivalent production of 233,722 ounces
at total cash costs of $191 per ounce that resulted in cash flow provided from
operating activities of $13.4 million or $0.04 per share during the second
quarter of 2001. The Company recorded a net loss of $4.3 million or $0.02 per
share for the second quarter of 2002, compared to a net loss of $7.5 million or
$0.03 per share in 2001.
First Half Consolidated Results
Gold equivalent production of 429,450 ounces at total cash costs of $202 per
ounce, combined with changes in working capital resulted in cash flow provided
from operating activities of $31.0 million or $0.09 per share during the first
half of 2002. This compares to gold equivalent production of 473,074 ounces at
total cash costs of $191 per ounce that resulted in cash flow provided from
operating activities of $46.1 million or $0.15 per share during the first half
of 2001, which included $21.1 million of proceeds from the restructuring of gold
forward sales contracts. The Company recorded a net loss of $12.2 million or
$0.05 per share for the first half of 2002, compared to a net loss of $11.0
million or $0.05 per share in 2001.
The 2001 second quarter and first half results, as well as the December 31, 2001
balance sheet have been restated to comply with the new Canadian GAAP treatment
of unrealized foreign exchange gains (see Note 2 to the Consolidated Financial
Statements for details of this restatement).
Revenues
Gold and Silver Sales
The Company's primary source of revenue is from the sale of its gold production.
The Company sold 194,447 ounces of gold during the second quarter of 2002,
compared with 236,811 ounces in 2001. Revenue from gold and silver sales was
$59.2 million in the second quarter of 2002 compared with $70.7 million in 2001.
Revenue from gold and silver sales in the second quarter of 2002 was lower than
the revenue in 2001 due to lower gold production and sales. In the second
quarter of 2002, the Company realized $303 per ounce of gold, compared with $297
in 2001. The average spot price for gold was $313 per ounce in the second
quarter of 2002 compared with $268 in 2001.
The Company sold 426,120 ounces of gold during the first half of 2002, compared
with 466,414 in 2001. Revenue from gold and silver sales was $128.0 million in
the first half of 2002, compared with $134.8 million in 2001. Revenue from gold
and silver sales in the first half of 2002 was lower than the revenue in 2001
due to lower gold production and sales. In the first half of 2002, the Company
realized $299 per ounce of gold, compared with $287 in 2001. The average spot
price for gold was $302 per ounce in the first half of 2002 compared with $266
in 2001.
-3-
Three months ended Six months ended
June 30, June 30,
2002 2001 2002 2001
------------- --------------- ------------ -------------
Attributable gold equivalent production - ounces 204,148 233,722 429,450 473,074
Attributable gold production - ounces 202,696 232,143 426,652 469,535
Gold sales - ounces (excluding equity accounted ounces) 194,447 236,811 426,120 466,414
Gold revenue (millions) $ 58.9 $ 70.4 $ 127.2 $ 134.0
Average realized gold price per ounce $ 303 $ 297 $ 299 $ 287
Average spot gold price per ounce $ 313 $ 268 $ 302 $ 266
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 periods. The resulting ratios are 66.42:1 in 2002 and 59.52:1 in
2001.
Interest and Other Income
Interest and other income was $6.5 million in the second quarter of 2002 and
$7.7 million in the first half of 2002, compared with $2.9 million in the second
quarter of 2001 and $5.4 million in the first half of 2001. Interest and other
income in the second quarter of 2002 increased as the Company accrued its share
of the undisputed portion of the Refugio arbitration award of $5.5 million. The
Company expects to be paid this portion of the award during the third quarter.
The contractor who designed and built the Refugio mine has disputed the balance
of the award of approximately $12.0 million of which the Company's share is
approximately $6.0 million. The Chilean Court of Appeals has heard arguments and
a decision is expected before year end.
Mark-to-Market Gain (Loss) on Written Call Options
Premiums received at the inception of written call options are recorded as a
liability at the time of issuance. Gains and losses on changes in the fair value
of the liability are recognized in earnings. The change in fair value of the
written call options resulted in a loss of $0.6 million in the second quarter of
2002 and $1.6 million in the first half of 2002. This compares with a loss of
$0.7 million in the second quarter of 2001 and a gain of $2.4 million in the
first half of 2001.
Costs and Expenses
Operating Costs
Consolidated operating costs were $41.1 million in the second quarter of 2002
and $87.9 million in the first half of 2002, compared with $46.6 million in the
second quarter of 2001 and $91.3 million in the first half of 2001. Total cash
costs per ounce of gold equivalent produced were $209 in the second quarter of
2002 and $202 in the first half of 2002, compared with $191 in both the second
quarter and first half of 2001. Total cash costs per ounce of gold equivalent in
the first half of 2002, when compared to 2001, were lower at the Hoyle Pond and
Kubaka mines and higher at the Fort Knox mine.
We have included cash costs per ounce data, a non GAAP measurement, in this
quarterly report because we understand that certain investors use this data to
determine the Company's ability to generate cash flow from operating activities.
We believe that this information provides the reader with details on the ability
of the operating mines to generate cash flow from operating activities.
Operating costs for other attributable production include operating costs for
the Denton-Rawhide, Andacollo, and Blanket mines. These mines are held by
non-consolidated subsidiaries.
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 the Gold Institute guidelines. The Gold
Institute is a worldwide association of suppliers of gold and gold products and
includes leading North American gold producers. Costs are derived from amounts
included in the consolidated statement of operations and include mine site
operating costs such as mining, processing, administration, royalties and
production taxes, but are exclusive of amortization, reclamation, capital,
development and exploration costs.
-4-
Reconciliation of Total Cash Costs per
Equivalent Ounce of Gold to Consolidated Financial Statements
(millions except production in ounces and per ounce amounts)
Three months ended Six months ended
June 30, June 30,
2002 2001 2002 2001
--------------- ---------------- --------------- ---------------
Operating costs per financial statements $ 41.1 $ 46.6 $ 87.9 $ 91.3
Operating costs for attributable production 3.5 2.0 7.5 4.1
Site restoration cost accruals (0.8) (0.4) (1.6) (0.8)
Change in bullion inventory (0.8) (1.5) (4.8) (1.5)
Other (0.4) (2.1) (2.2) (2.9)
--------------- ---------------- --------------- ---------------
Operating costs for per ounce calculation purposes $ 42.6 $ 44.6 $ 86.8 $ 90.2
--------------- ---------------- --------------- ---------------
Gold equivalent production - ounces 204,148 233,722 429,450 473,074
Total cash costs per equivalent ounce of gold $ 209 $ 191 $ 202 $ 191
Details of the individual mine performance are discussed in the following
sections.
Fort Knox Mine
The Fort Knox open pit mine, located near Fairbanks, Alaska includes the results
of operations for both the True North and Fort Knox open pit mines. Gold
equivalent production in the second quarter of 2002 was 89,553 ounces and
182,713 ounces in the first half of 2002, compared with 104,743 ounces in the
second quarter of 2001 and 205,090 ounces in the first half of 2001. Total cash
costs per equivalent ounce were $253 in the second quarter of 2002 and $255 in
the first half of 2002, compared with $193 in the second quarter of 2001 and
$189 in the first half of 2001.
Total cash costs per gold equivalent ounce exceeded plan in the second quarter
by approximately 13% due primarily to the lower than budgeted mill throughput.
The main reason for the shortfall in mill throughput was the poor availability
of the haulage fleet that moves the ore from the True North mine to the mill.
Even with the addition of a contractor to increase haulage capacity, the
operation was unable to deliver the planned tonnage of True North ore to the
mill. The contractor has added further haulage capacity as a short term
solution. The lower grade of ore processed reflects the decision to process more
Fort Knox material to partially offset the delivery problems for the higher
grade True North ore. While the problems are being addressed, as can be seen by
the declining monthly costs, the decision has been made to replace the Peterbilt
tractors with Kenworth's. This approximate $2.1 million expenditure is expected
to solve this problem. Since the grade at both operations continue to meet or
exceed plan, the resolution of the haulage problems and the continued
improvement in maintenance procedures resulting in higher equipment
availability, will result in total cash costs continuing to trend downward
during the balance of 2002.
April May June July(e)
----- --- ---- ----
Gold equivalent production (ounces) 28,028 31,772 29,753 35,616
Total cash cost ($ per gold equivalent ounce) 284 246 232 227
(e) estimated
Gold equivalent production is estimated to be approximately 239,000 ounces at
total cash costs of $204 per ounce for the second half of 2002.
Capital expenditures at the Fort Knox operations during the first half of 2002
were $4.5 million compared with $10.3 million during 2001. Capital expenditures
during the first half of 2002 were primarily incurred to raise the tailings dam,
to engineer, design and start the construction of the tailings thickener
project, and to conduct capitalized exploration on the Fort Knox main pit.
-5-
At Fort Knox, a major in-pit drilling campaign has been initiated to upgrade
existing resources and test extensions of the orebody. To the end of the second
quarter roughly one third of the drilling has been completed. Results to date
have been encouraging, confirming the existing model and illustrating the
extensions of the mineralized zone into both the north and south pit walls. Work
will continue through the second half of the year. The assay results to date for
this program are available at www.kinross.com.
Hoyle Pond Mine
The Hoyle Pond underground mine is located in Timmins, Ontario. Gold equivalent
production in the second quarter of 2002 was 38,067 ounces and 91,543 ounces in
the first half of 2002, compared with 36,497 ounces in the second quarter of
2001 and 72,563 ounces in the first half of 2001. Total cash costs per
equivalent ounce were $191 in the second quarter of 2002 and $163 in the first
half of 2002, compared with $178 in the second quarter of 2001 and $193 in the
first half of 2001.
Cash production costs were slightly higher than planned for the first half of
2002 and slightly higher than incurred during the first half of 2001, but higher
gold equivalent production more than offset the increased costs. Gold equivalent
production and unit costs per ounce for the first half of 2002 were positively
affected by an 11% increase in ore processed and an 8% increase in the grade of
the ore processed.
Capital expenditures at the Hoyle Pond operations during the first half of 2002
were $4.0 million compared with $4.4 million during 2001. Capital expenditures
during the first half of 2002 were required to further advance the 1060 ramp,
underground development drilling and underground fleet replacements. Within the
Hoyle Pond mine drilling at depth on the B1 vein system continues to intersect
impressive mineralization 200 to 275 metres below the 720 metre level and 150
metres below the lowest level of the current resource estimate. In addition
exploration work continues on the A vein, beneath the 420 metre level and on the
upper and lower porphyry zones.
Effective July 1, 2002, the Company agreed to form a joint venture with a wholly
owned subsidiary of Placer Dome Inc. ("Placer"). The formation of the joint
venture combined the two companies' respective gold mining operations in the
Porcupine district in Ontario, Canada. Placer owns 51% of this joint venture and
is the operator, while the Company owns 49%. Placer contributed the Dome mine
and mill and the Company contributed the Hoyle Pond, Nighthawk Lake and Pamour
mines, exploration properties in the Porcupine district, as well as the Bell
Creek mill. Future capital, exploration and operating costs will be shared in
proportion to each party's ownership interest.
The formation of the joint venture will be accounted in accordance with Section
3055 of the CICA Handbook as an exchange of productive assets in the ordinary
course of business. Since these assets were exchanged for an interest in similar
assets and there has been no culmination of the earnings process, the exchange
will be recorded at the carrying value of the assets contributed.
Kubaka Mine (54.7% Ownership Interest)
The Kubaka open pit mine is located in the Magadan Oblast in the Russian Far
East. The Company's share of gold equivalent production in the second quarter of
2002 was 60,396 ounces and 117,041 ounces in the first half of 2002, compared
with 50,300 ounces in the second quarter of 2001 and 106,475 ounces in the first
half of 2001. Total cash costs per equivalent ounce were $139 in the second
quarter of 2002 and $140 in the first half of 2002, compared with $157 in the
second quarter of 2001 and $148 in the first half of 2001.
The Kubaka mine continues to perform exceptionally well, having achieved the
lowest total cash costs per ounce of the Company's primary operations. Cash
production costs were less than plan during the first half of 2002, unchanged
from 2001. In the first half of 2002, mill tonnages processed declined by 2%,
which was more than compensated by a 12% increase in the grade of the ore
processed.
Open pit mining operations at Kubaka will continue until late in the third
quarter of 2002. After the open pits are exhausted, gold reserves will be mined
in the North High Wall, Center Zone and North Vein using underground mining
methods. This program is scheduled to start in the fourth quarter of 2002 and
continue through the third quarter of 2003.
-6-
Exploration activities at the Birkachan project continued during the quarter as
activities focused within and adjacent to the proposed pit area. The Company
continues to analyze the results of drilling to date and continues with the
process of converting the exploration license at Birkachan to a mining license.
Other Operations
In addition to its primary operating mines, the Company has ownership interests
in other locations including the Refugio mine, which is in residual, leach
production and the Blanket mine located in Zimbabwe. Gold equivalent production
at these locations during the first half of 2002 was 38,153 ounces at total cash
costs of $239 per ounce.
With the increase in spot gold prices, the Company and its joint venture partner
are reassessing the status of the Refugio mine. The Company has commenced a
detailed review of the operating, exploration, capital and working capital
requirements to restart operations. Once definitive plans are developed, which
is expected to be in the second half of this year, the Company will report back
to its stakeholders.
George/Goose Lake Exploration
At Goose Lake located south of Bathurst Inlet in Nunavut Territory, Canada, a
5,734 metre drill program consisting of 26 holes was completed during the second
quarter. Significant mineralization was encountered in 19 of the drill holes
with additional assays pending on two holes. These results are being evaluated,
together with previous exploration results on the George/Goose Lake properties,
in the context of the proposed business combination with Echo Bay and TVX Gold.
Echo Bay operates the Lupin mine located approximately 175 kilometres west of
the George/Goose Lake properties. In addition, the Nunavut Territorial
Government is conducting a feasibility study for a port on Bathurst Inlet and a
road to the Lupin mine and other resource projects in the area. If constructed
this infrastructure has the potential to enhance the economic viability of the
George/Goose Lake project. The assay results of this most recent exploration
program are available at www.kinross.com.
Other Expenses
General, administration and exploration expenditures were $4.5 million in the
second quarter of 2002 and $8.9 million in the first half of 2002, compared with
$5.4 million in the second quarter of 2001 and $10.0 million in the first half
of 2001. The Company continues to focus on containment of its overhead costs,
but anticipates higher exploration spending during the remainder of the year.
Exploration activities will increase as the Company completes the exploration
programs required to expend the flow through funds raised in late 2001.
Depreciation, Depletion and Amortization
Depreciation, depletion and amortization was $19.6 million during the second
quarter of 2002 and $41.4 million in the first half of 2002, compared with $23.7
million in the second quarter of 2001 and $43.1 million in the first half of
2001. Depreciation, depletion and amortization have increased to $97 per
equivalent ounce of gold sold in the first half of 2002, from $94 in 2001.
Depreciation, depletion and amortization increased primarily due to a change in
the mix of production at the Fort Knox mine. The True North production has a
higher per ounce charge than the Fort Knox production and there was no
significant production from the True North mine in the first half of 2001.
Interest Expense on Long-Term Liabilities
Interest expense on long-term liabilities was $1.3 million during the second
quarter of 2002 and $2.8 million in the first half of 2002, compared with $2.0
million in the second quarter of 2001 and $4.6 million in the first half of
2001. Interest expense on long-term liabilities during the first half of 2002 is
comprised of $0.9 million related to the Fort Knox industrial revenue bonds and
capital leases, $1.5 million on the debt component of convertible debentures and
the balance on the Kubaka project financing debt. Interest expense decreased in
2002 due to lower debt balances outstanding and lower interest rates.
Provision for Income and Mining Taxes
Provision for income and mining taxes was $1.6 million during the second quarter
of 2002 and $3.0 million in first half of 2002, compared with a recovery of $0.9
million in the second quarter of 2001 and an expense of $0.1
-7-
million in the first half of 2001. Income taxes during the first half of 2002
comprised of $2.9 million of Russian income taxes and Canadian large
corporations tax of $0.1 million.
Dividends on Convertible Preferred Shares of Subsidiary Company
Cumulative dividends accrued on the convertible preferred shares of subsidiary
company ("Kinam Preferred Shares") held by non-affiliated shareholders were $0.2
million in the second quarter of 2002 and $1.0 million in the first half of
2002, compared with $1.7 million in the second quarter of 2001 and $3.4 million
in the first half of 2001. During the first half of 2002, the Company completed
a cash tender offer and acquired 670,722 Kinam Preferred Shares, leaving 223,878
or 12.2% of the issued and outstanding Kinam Preferred Shares held by
non-affiliated shareholders. The resulting effect of this transaction, combined
with the Kinam Preferred Shares acquired in the third quarter of 2001 was to
reduce the accrual of dividends to non-affiliated shareholders.
Liquidity and Financial Resources
Operating Activities
Cash flow provided from operating activities was $11.1 million in the second
quarter of 2002 and $31.0 million in the first half of 2002, compared with $13.4
million in the second quarter of 2001 and $46.1 million in the first half 2001.
Included in the first half 2001 cash flow from operating activities was $21.1
million of cash flow generated upon the restructuring of certain spot deferred
forward sales contracts. The first half 2002 cash flow from operating activities
was positively affected by lower working capital requirements. The 2002 cash
flow from operating activities was used to finance capital expenditures and
service existing debt.
Financing Activities
During the first quarter of 2002, the Company completed an equity issue and
issued 23.0 million common shares from treasury for net proceeds of $18.5
million. The majority of the funds received were used to acquire Kinam Preferred
Shares with a book value of $36.5 million for $10.7 million ($11.4 million
including costs of the tender offer). The $25.1 difference in value associated
with this transaction was applied against the carrying value of certain
property, plant and equipment.
The debt component of the convertible debentures was reduced by $1.2 million in
the second quarter of 2002 and $2.5 million in the first half of 2002, compared
with $1.4 million in the second quarter of 2001 and $2.7 million in the first
half of 2001.
Long-term debt repayments were $1.7 million in the second quarter of 2002 and
$12.2 million in the first half of 2002, compared with $11.8 million in the
second quarter of 2001 and $36.1 million during the first half of 2001.
Long-term debt repayments during the first half of 2002 were comprised of $9.0
million of the Fort Knox industrial revenue bonds, $2.1 million of capital
leases and $1.1 million of Kubaka project financing debt.
The Company did not declare or pay any dividends on the Kinam Preferred Shares
during the second quarter or first six months of 2002 or 2001.
As at June 30, 2002, the Company had a $50 million operating line of credit in
place with a bank syndicate, which is utilized for letters of credit purposes.
As at June 30, 2002, $54.4 million of letters of credit were issued under this
facility, which required the Company to restrict $4.4 million of cash as
security for the excess letters of credit outstanding. The Company has extended
the final maturity date of the operating line of credit to October 3, 2003 and
the June 30, 2002 $20.0 million reduction of the facility has been extended to
December 31, 2002. The Company is currently in the process of re-marketing this
credit facility with the intention of increasing the size and term of this
facility.
As at June 30, 2002, the Company's long-term debt consists of $3.1 million
relating to the Kubaka project financing, $40.0 million of Fort Knox industrial
revenue bonds and various capital leases and other debt of $8.9 million. The
current portion of the long-term debt is $20.6 million.
-8-
Investing Activities
Capital expenditures were $6.1 million in the second quarter of 2002 and $9.2
million in the first half of 2002, compared to $4.6 million in the second
quarter of 2001 and $16.1 million in the first half of 2001. The first half 2002
capital expenditures focused primarily on the Hoyle Pond and Fort Knox
operations with 91% of total capital expenditures incurred at these two mines.
Capital expenditures were financed out of cash flow from operating activities.
Commodity Price Risks
The Company has entered into gold forward sales contracts, spot deferred forward
sales contracts and written call options for some portion of expected future
production to mitigate the risk of adverse price fluctuations. The Company does
not hold these financial instruments for speculative or trading purposes. The
Company is not subject to margin requirements on any of its hedging lines.
The outstanding number of ounces, average expected realized prices and
maturities for the gold commodity derivative contracts as at June 30, 2002 are
as follows:
Ounces Call Options Average
Hedged Average Sold Strike
Year 000 oz Price 000 oz Price
------------------------------------------------------------------------------------------------------------------
2002 149 $292 - $ -
2003 137 277 100 320
2004 137 277 50 340
2005 38 296 - -
----------------------- -----------------------
Total 461 150
======================= =======================
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, 2002 was negative $18.8
million.
In a press release on May 2, 2002 the Company indicated its intent to deliver
into its relatively small gold forward sales and not to replace these hedges.
Consequently, during the second quarter the ounces of gold hedged declined by
77,000 ounces and call options sold representing 50,000 ounces of gold expired
unexercised.
Proposed Combination Involving the Company, TVX Gold Inc. ("TVX") and Echo Bay
Mines Ltd. ("Echo Bay")
The Company, TVX and Echo Bay have entered into a combination agreement dated
June 10, 2002 as amended July 12, 2002 for the purpose of combining the
ownership of their respective businesses. TVX shareholders will receive 6.5
common shares of the Company for each TVX share outstanding and Echo Bay
shareholders' will receive 0.52 common shares of the Company for each Echo Bay
common share outstanding. Concurrent with the business combination, TVX has
agreed to acquire Newmont Mining Corporation's 50% non-controlling interest in
the TVX Newmont America's joint venture for $180 million. Echo Bay, a United
States registrant, is required to clear the information circular with the
Securities and Exchange Commission of the United States ("SEC") before mailing
to its shareholders. The draft information circular was filed with the SEC for
review on July 16, 2002. The Company will provide shareholders with details of
the transaction, in an information circular to be mailed in connection with a
special shareholders meeting once this process is finalized.
Outlook
As at June 30, 2002, the Company has $90.2 million of working capital, which
includes a strong cash balance and low debt. Kinross anticipates improved
performance of its assets in the second half of 2002 with significantly more
gold production from Fort Knox at much lower unit total cash costs than in the
first half of 2002, expanded output from Timmins as a result of the formation of
the Porcupine Joint Venture and continued excellent performance from Kubaka.
-9-
The Company's strong working capital position, combined with the cash, working
capital and low debt of TVX and Echo Bay will provide Kinross with a solid
balance sheet upon completion of the business combination. In addition, Kinross'
annual production is expected to increase to approximately 2.0 million ounces at
total cash costs of less than $200 per ounce. This will provide strong cash flow
from operating activities to be used for future growth opportunities.
Appointment
In keeping with recent corporate governance guidelines proposed by regulatory
authorities regarding Board of Directors' independence, Kinross is pleased to
announce the appointment of John E. Oliver as Chairman of the Company. Robert M.
Buchan, formerly Chairman and CEO, has been appointed President and CEO and
Scott A. Caldwell, formerly President and COO, has been appointed Executive Vice
President and COO. Mr. Oliver is Executive Managing Director and Co-head Scotia
Capital U.S., Bank of Nova Scotia. Mr. Oliver has been a member of the Board of
Directors of Kinross since 1995 and has been the Independent Board Leader of
Kinross since February 13, 2002.
/s/ Robert M. Buchan
-----------------------------
(signed) Robert M. Buchan
President and Chief Executive Officer
August 1, 2002
-10-
Gold Equivalent Production - Ounces
Three months ended Six months ended
June 30, June 30,
-------------------------- ---------------------------
2002 2001 2002 2001
------------- ------------ ------------- -------------
Primary operations:
Fort Knox 89,553 104,743 182,713 205,090
Hoyle Pond 38,067 36,497 91,543 72,563
Kubaka (1) 60,396 50,300 117,041 106,475
------------- ------------ ------------- -------------
188,016 191,540 391,297 384,128
------------- ------------ ------------- -------------
Other operations:
Refugio (2) 2,312 22,799 8,902 48,626
Blanket 10,956 10,478 20,653 20,647
Denton-Rawhide (3) 2,864 4,903 6,740 9,306
Andacollo (3) - 3,180 1,858 6,762
Hayden Hill - 822 - 1,887
Guanaco - - - 1,718
------------- ------------ ------------- -------------
16,132 42,182 38,153 88,946
------------- ------------ ------------- -------------
Total gold equivalent ounces 204,148 233,722 429,450 473,074
============= ============ ============= =============
Consolidated production costs
($ per ounce of gold equivalent)
Cash operating costs $ 202 $ 186 $ 196 $ 185
Royalties 7 5 6 6
------------- ------------ ------------- -------------
Total cash costs 209 191 202 191
Reclamation 4 2 4 2
Depreciation and amortization 101 104 97 94
------------- ------------ ------------- -------------
Total production costs $ 314 $ 297 $ 303 $ 287
============= ============ ============= =============
(1) Represents the Company's 54.7% ownership interest.
(2) Represents the Company's 50% ownership interest.
(3) Includes proportionate share of Denton-Rawhide and Andacollo production
attributable to the Pacific Rim (formerly Dayton) ownership interest.
-11-
Cash operating costs
($ per ounce of gold
equivalent)
Three months ended Six months ended
June 30, June 30,
-------------------------- ---------------------------
2002 2001 2002 2001
------------- ------------ ------------- -------------
Primary operations:
Fort Knox $ 253 $ 193 $ 255 $ 189
Hoyle Pond 190 177 162 192
Kubaka 117 140 119 129
------------- ------------ ------------- -------------
197 176 192 173
------------- ------------ ------------- -------------
Other operations:
Refugio 302 224 165 228
Blanket 267 229 253 224
Denton-Rawhide 244 243 238 255
Andacollo - 248 287 254
Hayden Hill - 247 - 267
Guanaco - - - 413
------------- ------------ ------------- -------------
268 230 232 236
------------- ------------ ------------- -------------
$ 202 $ 186 $ 196 $ 185
============= ============ ============= =============
Total cash costs
($ per ounce of gold equivalent)
Primary operations:
Fort Knox $ 253 $ 193 $ 255 $ 189
Hoyle Pond 191 178 163 193
Kubaka 139 157 140 148
------------- ------------ ------------- -------------
204 181 199 178
------------- ------------ ------------- -------------
Other operations:
Refugio 320 237 182 241
Blanket 271 233 258 226
Denton-Rawhide 251 243 243 256
Andacollo - 254 295 259
Hayden Hill - 260 - 277
Guanaco - - - 436
------------- ------------ ------------- -------------
274 238 239 245
------------- ------------ ------------- -------------
$ 209 $ 191 $ 202 $ 191
============= ============ ============= =============
-12-
Gold Production and Cost Summary
Three months ended Six months ended
June 30, June 30,
--------------------------- ---------------------------
2002 2001 2002 2001
------------- ------------- ------------- -------------
Fort Knox
Tonnes milled/crushed (000's) (1) 3,237.3 3,576.5 6,782.7 6,879.6
Grade (grams per tonne) 1.01 1.06 0.99 1.08
Recovery 85% 86% 84% 86%
Gold equivalent production to dore (2) 89,553 104,743 182,713 205,090
Per ounce:
Total cash costs $ 253 $ 193 $ 255 $ 189
Depreciation, depletion and amortization 115 104 112 93
Site restoration cost accruals 2 3 3 3
------------- ------------- ------------- -------------
Total production costs $ 370 $ 300 $ 370 $ 285
============= ============= ============= =============
Hoyle Pond
Tonnes milled/crushed (000's) (1) 120.8 103.9 243.5 218.6
Grade (grams per tonne) 11.15 12.43 13.00 12.00
Recovery 88% 88% 90% 86%
Gold equivalent production to dore (2) 38,067 36,497 91,543 72,563
Per ounce:
Total cash costs $ 191 $ 178 $ 163 $ 193
Depreciation, depletion and amortization 63 93 78 96
Site restoration cost accruals 8 3 7 1
------------- ------------- ------------- -------------
Total production costs $ 262 $ 274 $ 248 $ 290
============= ============= ============= =============
Kubaka (3)
Tonnes milled/crushed (000's) (1) 221.3 216.6 430.3 439.4
Grade (grams per tonne) 15.67 13.34 15.61 13.89
Recovery 98% 98% 98% 98%
Gold equivalent production to dore (2) 60,396 50,300 117,041 106,475
Per ounce:
Total cash costs $ 139 $ 157 $ 140 $ 148
Depreciation, depletion and amortization 84 102 84 101
Site restoration cost accruals 3 - 3 -
------------- ------------- ------------- -------------
Total production costs $ 226 $ 259 $ 227 $ 249
============= ============= ============= =============
-13-
Refugio (4)
Tonnes milled/crushed (000's) (1) - 1,786.7 - 4,643.9
Grade (grams per tonne) - 0.91 - 0.95
Recovery - 64% - 64%
Gold equivalent production to dore (2) 2,312 22,799 8,902 48,626
Per ounce:
Total cash costs $ 320 $ 237 $ 182 $ 241
Depreciation, depletion and amortization - - - -
Site restoration cost accruals - - - -
------------- ------------- ------------- -------------
Total production costs $ 320 $ 237 $ 182 $ 241
============= ============= ============= =============
Blanket
Tonnes milled/crushed (000's) (1) 298.7 312.9 579.7 588.5
Grade (grams per tonne) 1.65 1.57 1.64 1.58
Recovery 69% 66% 67% 69%
Gold equivalent production to dore (2) 10,956 10,478 20,653 20,647
Per ounce:
Total cash costs $ 271 $ 233 $ 258 $ 226
(1) Tonnes milled/crushed represents 100% of mine production
(2) Gold equivalent to dore represents the Company's share
(3) 54.7% ownership interest
(4) 50% ownership interest
-14-
Consolidated Balance Sheets
(expressed in millions of U.S. dollars)(unaudited)
As at As at
June 30 December 31
2002 2001
---------------- ----------------
(Re-stated)
Assets
Current assets
Cash and cash equivalents $ 93.6 $ 81.0
Restricted cash 4.4 -
Accounts receivable and other assets 18.4 13.8
Inventories 36.1 42.4
Marketable securities 0.3 1.5
---------------- ----------------
152.8 138.7
Property, plant and equipment (Note 4) 364.7 415.0
Long - term investments 13.2 12.9
Deferred charges and other assets 9.4 11.0
---------------- ----------------
$ 540.1 $ 577.6
================ ================
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 31.9 $ 31.0
Current portion of long - term debt 20.6 33.1
Current portion of site restoration cost accruals 10.1 12.6
---------------- ----------------
62.6 76.7
Long-term debt 31.4 31.0
Site restoration cost accruals 44.6 43.0
Future income and mining taxes 3.5 3.3
Deferred revenue 7.1 9.6
Other long-term liabilities 6.2 6.0
Debt component of convertible debentures 24.9 26.0
Redeemable retractable preferred shares 2.5 2.4
---------------- ----------------
182.8 198.0
---------------- ----------------
Convertible preferred shares of subsidiary company (Note 4) 12.4 48.0
---------------- ----------------
Common shareholders' equity
Common share capital 965.0 945.7
Contributed surplus 12.9 12.9
Equity component of convertible debentures 129.1 124.8
Deficit (739.6) (723.2)
Cumulative translation adjustments (22.5) (28.6)
---------------- ----------------
344.9 331.6
---------------- ----------------
Contingencies (Note 8) $ 540.1 $ 577.6
================ ================
-15-
Consolidated Statements of Operations
For the three and six months ended June 30
(expressed in millions of U.S. dollars except per share amounts) (unaudited)
Three months ended Six months ended
June 30, June 30,
-------------------------------- ------------------------
2002 2001 2002 2001
------------- --------------- ------------ ----------
(Re-stated (Re-stated
- Note 2) - Note 2)
Revenue
Mining revenue $ 59.2 $ 70.7 $ 128.0 $ 134.8
Interest and other income 6.5 2.9 7.7 5.4
Mark-to-market (loss) gain on call options (0.6) (0.7) (1.6) 2.4
------------- --------------- ------------ ------------
65.1 72.9 134.1 142.6
------------- --------------- ------------ ------------
Expenses
Operating 41.1 46.6 87.9 91.3
General and administrative 2.5 2.9 4.8 5.6
Exploration and business development 2.0 2.5 4.1 4.4
Depreciation, depletion and amortization 19.6 23.7 41.4 43.1
------------- --------------- ------------ ------------
65.2 75.7 138.2 144.4
------------- --------------- ------------ ------------
Loss before the undernoted (0.1) (2.8) (4.1) (1.8)
Gain on sale of assets 1.2 - 1.5 -
Foreign exchange (loss) gain (2.2) (1.6) (3.0) (0.4)
Share in (loss) income of investee companies (0.1) (0.3) 0.2 (0.7)
Interest expense on long-term liabilities (1.3) (2.0) (2.8) (4.6)
------------- --------------- ------------ ------------
Loss before taxes and dividends on convertible
preferred shares of subsidiary company (2.5) (6.7) (8.2) (7.5)
Provision for income and mining taxes (1.6) 0.9 (3.0) (0.1)
------------- --------------- ------------ ------------
Loss for the period before dividends on convertible
preferred shares of subsidiary company (4.1) (5.8) (11.2) (7.6)
Dividends on convertible preferred shares of subsidiary
company (0.2) (1.7) (1.0) (3.4)
------------- --------------- ------------ ------------
Net loss for the period (4.3) (7.5) (12.2) (11.0)
Increase in equity component of convertible debentures (2.1) (1.9) (4.2) (3.8)
------------- --------------- ------------ ------------
Net loss attributable to common shares $ (6.4) $ (9.4) $ (16.4) $ (14.8)
============= =============== ============ ============
Net loss per share
Basic and diluted $ (0.02) $ (0.03) $ (0.05) $ (0.05)
Weighted average number common shares outstanding 358.1 301.2 352.4 301.1
Total outstanding and issued common shares at June 30 358.3 301.7
Consolidated Statement of Common Shareholders Equity
For the six months ended June 30, 2002
(expressed in millions of U.S. dollars)(unaudited)
Cumulative
Common Contributed Convertible Translation
Shares Surplus Debentures Deficit Adjustments Total
------------- -------------- ------------------ ----------- ---------------- -----------
(Re-stated
- Note 2)
Balance, December 31, 2001 $ 945.7 $ 12.9 $ 124.8 $ (723.2) $ (28.6) $ 331.6
Issuance of common shares 19.3 - - - - 19.3
Increase in equity component
of convertible debentures - - 4.3 (4.2) - 0.1
Net loss for the period - - - (12.2) - (12.2)
Cumulative translation
adjustments - - - - 6.1 6.1
------------- -------------- ------------------ ----------- ---------------- -----------
Balance, June 30, 2002 $ 965.0 $ 12.9 $ 129.1 $ (739.6) $ (22.5) $ 344.9
============= ============== ================== =========== ================ ===========
-16-
Consolidated Statements of Cash Flows
For the three and six months ended June 30
(expressed in millions of U.S.dollars)
(unaudited)
Three months ended Six months ended
June 30, June 30,
-------------------------------- -------------------------
2002 2001 2002 2001
------------- --------------- ------------ -----------
Net inflow (outflow) of cash related to the following (Re-stated (Re-stated
activities: - Note 2) - Note 2)
Operating:
Loss for the period before dividends on convertible preferred $ (4.1) $ (5.8) $ (11.2) $ (7.6)
shares of subsidiary company
Items not affecting cash:
Depreciation, depletion and amortization 19.6 23.7 41.4 43.1
Deferred revenue realized 1.4 1.5 1.6 0.1
Site restoration cost accruals (1.1) - (1.4) -
Other (0.4) (4.1) (1.2) (6.7)
------------- --------------- ------------ ----------
15.4 15.3 29.2 28.9
Proceeds on restructuring of gold forward sales contracts - - - 21.1
Site restoration cash expenditures (1.5) (1.4) (2.6) (2.6)
Changes in non-cash working capital items
Accounts receivable and other assets (5.6) 4.3 (1.0) 1.7
Inventories 2.1 4.4 3.6 4.7
Marketable securities 1.0 - 2.5 -
Accounts payable and accrued liabilities (1.9) (8.9) (2.7) (6.8)
Effect of exchange rate changes on cash 1.6 (0.3) 2.0 (0.9)
------------- --------------- ------------ ----------
Cash flow provided from operating activities 11.1 13.4 31.0 46.1
------------- --------------- ------------ ----------
Financing:
Issuance of common shares, net 0.3 0.3 19.3 0.5
Acquisition of preferred shares of subsidiary company (0.3) - (11.4) -
Reduction of debt component of convertible debentures (1.2) (1.4) (2.5) (2.7)
Repayment of debt (1.7) (11.8) (12.2) (36.1)
------------- --------------- ------------ ----------
Cash flow used in financing activities (2.9) (12.9) (6.8) (38.3)
------------- --------------- ------------ ----------
Investing:
Additions to property, plant and equipment (6.1) (4.6) (9.2) (16.1)
Long-term investments and other assets 1.9 (0.7) 1.9 (2.4)
Proceeds from the sale of property, plant and equipment - 0.4 0.1 1.4
(Increase) decrease in restricted cash (0.4) - (4.4) 2.9
------------- --------------- ------------ ----------
Cash flow used in investing activities (4.6) (4.9) (11.6) (14.2)
------------- --------------- ------------ ----------
Increase (decrease) in cash and cash equivalents 3.6 (4.4) 12.6 (6.4)
Cash and cash equivalents, beginning of period 90.0 75.8 81.0 77.8
------------- --------------- ------------ ----------
Cash and cash equivalents, end of period $ 93.6 $ 71.4 $ 93.6 $ 71.4
============= =============== ============ ==========
Supplementary disclosure of cash flow information:
Cash paid for: Interest $ 3.4 $ 5.6 $ 4.0 $ 6.9
Income taxes $ 0.9 $ 0.3 $ 1.3 $ 0.9
-17-
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (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, 2001, except for those indicated below.
The accompanying interim unaudited consolidated financial statements
include all adjustments that are, in the opinion of management, necessary
for a fair presentation. These financial statements do not include all
disclosures required by Canadian Generally Accepted Accounting Principles
for annual financial statements and accordingly the financial statements
should be read in conjunction with the financial statements and notes
thereto contained in the Company's annual report for the year ended
December 31, 2001.
2. New Pronouncements
Effective January 1, 2002, the Company adopted the new Canadian Institute
of Chartered Accountants ("CICA") recommendations for foreign currency
translation. This standard eliminates the practice of deferring and
amortizing unrealized translation gains and losses on foreign currency
denominated monetary items that have a fixed or ascertainable life
extending beyond the end of the fiscal year following the current reporting
period. Foreign exchange gains and losses arising on translation of these
monetary items are now included in the determination of current period
losses. The Company previously had unrealized foreign exchange gains and
losses on converting the debt component of Canadian dollar dominated
convertible debentures to U.S. dollars. In addition, the Canadian dollar
denominated redeemable retractable preferred shares were translated to U.S
dollars at the historical rate on the date of issue. The adoption of this
new standard has been applied retroactively with prior year comparative
amounts restated. The effects on the consolidated financial statements are
as follows:
---------------------------------------------------------------------------
Change in Statement of Operations and Deficit amounts:
($ millions)
---------------------------------------------------------------------------
Increase in foreign exchange loss for the six months ended June 30, 2001 0.1
Increase in net loss for the six months ended June 30, 2001 0.1
Decrease in deficit - December 31, 2000 2.2
Decrease in deficit - December 31, 2001 2.8
3. Financial Instruments
The Company manages its exposure to fluctuations in commodity prices,
foreign exchange rates and interest rates by entering into derivative
financial instrument contracts in accordance with the formal risk
management policy approved by the Company's Board of Directors. The Company
does not hold or issue derivative contracts for speculative or trading
purposes.
Realized and unrealized gains or losses on derivative contracts, that
qualify for hedge accounting, are deferred and recorded in income when the
underlying hedged transaction is recognized. Gains on the early settlement
of gold hedging contracts are recorded as deferred revenue on the balance
sheet and included in income over the original delivery schedule of the
hedged production.
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 half of 2002, the mark-to-market
adjustments increased the liability by $1.6 million.
-18-
4. Acquisition of Convertible Preferred Shares of Subsidiary Company
During 2001, the Company acquired 945,400 convertible preferred shares of
subsidiary company with a carrying value of $48.9 million in exchange for
24,186,492 common shares of the Company valued at $23.2 million. The $25.7
million difference in value associated with this transaction was applied
against the carrying value of certain property, plant and equipment.
The Company completed an equity offering in February, 2002, and issued
23,000,000 common shares from treasury for gross proceeds before costs of
the issue of $19.5 million. The majority of funds raised were used to
complete a $16.00 per share cash tender offer for the Kinam Preferred
Shares owned by non-affiliated shareholders. On March 28, 2002, 652,992
Kinam Preferred Shares were tendered under the cash tender offer and after
extending the offer an additional 17,730 Kinam Preferred Shares were
tendered on April 4, 2002, leaving 223,878 or 12.2% of the issued and
outstanding Kinam Preferred Shares held by non-affiliated shareholders. The
Kinam Preferred Shares tendered had a book value of $36.5 million and were
purchased by the Company for $10.7 million ($11.4 million including costs
of the tender offer). The $25.1 million difference in value associated with
these transactions was applied against the carrying value of certain
property, plant and equipment.
5. Stock options
Effective January 1, 2002, the Company adopted the recommendations of the
CICA for stock-based compensation and other stock-based payments. This
recommendation establishes standards for the recognition, measurement and
disclosure of stock-based compensation and other stock-based payments made
in exchange for goods and services. The standard requires that all
stock-based awards made to non-employees be measured and recognized using a
fair value based method. The standard encourages the use of a fair value
based method for all awards granted to employees, but only requires the use
of a fair value based method for direct awards of stock, stock appreciation
rights, and awards that call for settlement in cash or other assets. Awards
that the Company has the ability to settle in stock are recorded as equity,
whereas awards that the Company is required to or has a practice of
settling in cash are recorded as liabilities.
The Company's stock option plan is described in note 14 of the consolidated
financial statements for the year ended December 31, 2001. The Company has
elected not to use the fair value method of accounting for stock options.
As a result it does not recognize compensation expense nor the fair value
of the options issued to its employees. No stock-based awards are made
available to non-employees.
Had compensation expense for the stock-based compensation plans been
determined based upon the fair value method of accounting for awards
granted on or after January 1, 2002, the pro forma net loss attributed to
common shares would have amounted to $16.5 million and pro forma EPS would
have remained at loss of $0.05 per share for the six month period ended
June 30, 2002. The fair value of the options granted during the six month
period ended June 30, 2002 is estimated to be $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, 2002:
dividend yield of 0%, expected volatility of 63% risk-free interest rate of
4.7% and expected lives of 5 years. The Company has not included those
options outstanding on the date of adoption of this new recommendation in
the calculation of its proforma earnings per share for the period.
6. Segmented Information
The Company operates five gold mines: Hoyle Pond, located in Ontario;
Kubaka (54.7% ownership), located in Russia; Fort Knox, located in Alaska,
United States; Blanket, located in Zimbabwe; and Refugio (50% ownership),
located in Chile. As of December 31, 2001, the Company no longer
consolidates the Zimbabwe operation as a result of the political situation
in that country. See Note 15 to the 2001 Kinross Annual Report. In
addition, the Company has an 85.9% interest in E-Crete, a producer of
aerated concrete, 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 the products and
services in each of the reportable segments, except for the corporate
activities, are essentially the same, reportable segments have been
determined at the level where decisions are made on the allocation of
resources and capital, and where complete internal financial statements are
available.
-19-
Reportable Operating Segments
-------------------------------------------------------------- Corporate
Hoyle Kubaka Fort Knox Blanket Refugio E-Crete and Other Total
----- ------ --------- --------- ------- ------- ---------- -------
As at June 30, 2002 for the six months ended June 30, 2002: (b)
Mining revenue $ 29.9 $ 33.2 $ 63.0 - $ 3.1 - $ (1.2) $ 128.0
Interest revenue - 0.1 - - - - 0.6 0.7
Interest expense - 0.2 0.9 - 0.1 0.2 1.4 2.8
Depreciation, depletion and amortization 8.7 9.8 23.3 - - 0.8 (1.2) 41.4
Segment profit (loss) 3.7 8.5 (13.4) - 6.6 (2.2) (13.1) (9.9)
Segment assets 86.2 61.7 300.0 - 12.9 8.2 71.1(a) 540.1
Capital expenditures 4.0 0.1 4.5 - - 0.4 0.2 9.2
As at June 30, 2001 for the six months ended June 30, 2001: (b)
Mining revenue $ 19.8 $ 30.2 $ 55.8 $ 5.7 $ 13.0 - $ 10.3 $ 134.8
Interest revenue - 0.8 - 0.5 0.1 - 1.9 3.3
Interest expense - 0.7 2.1 - - 0.2 1.6 4.6
Depreciation, depletion and amortization 7.2 12.0 19.4 1.2 - 0.2 3.1 43.1
Segment profit (loss) (3.0) 1.7 (5.3) 0.2 1.8 (1.5) (0.7) (6.8)
Segment assets 91.7 96.0 335.6 12.8 11.1 8.3 95.1(a) 650.6
Capital expenditures 4.4 0.4 10.3 0.2 - 0.4 0.4 16.1
For the three months ended June 30, 2002: (b)
Mining revenue $ 12.4 $ 18.0 $ 30.0 - $ 0.9 - $ (2.1) $ 59.2
Interest revenue - 0.1 - - - - 0.2 0.3
Interest expense - 0.1 0.3 - 0.1 0.1 0.7 1.3
Depreciation, depletion and amortization 4.0 5.1 10.9 - - 0.4 (0.8) 19.6
Segment profit (loss) 0.4 5.0 (5.5) - 5.6 (1.0) (8.1) (3.6)
Capital expenditures 2.3 - 3.5 - - 0.2 0.1 6.1
For the three months ended June 30, 2001: (b)
Mining revenue $ 10.3 $ 16.0 $ 29.6 $ 3.1 $ 6.3 - $ 5.4 $ 70.7
Interest revenue - 0.4 - 0.3 0.1 - 1.2 1.8
Interest expense - 0.3 0.9 - - 0.1 0.7 2.0
Depreciation, depletion and amortization 3.7 6.5 11.2 0.6 - 0.1 1.6 23.7
Segment profit (loss) (1.0) 0.8 (3.2) 0.4 0.6 (0.8) (3.2) (6.4)
Capital expenditures 1.4 0.2 2.4 0.1 - 0.4 0.1 4.6
(a) includes $78.3 million (2001 - $48.5 million) in cash and cash equivalents
held at the Corporate level
(b) includes Corporate and other non core mining operations
-20-
Reconciliation of reportable operating segment (loss) profit to net loss for the period:
Three months Six months
ended June 30, ended June 30,
-------------------------------- -------------------------
2002 2001 2002 2001
------------- --------------- ------------ -----------
Segment loss $ 4.5 $ (3.2) 3.2 (6.1)
Add (deduct) items not included in segment (loss) profit:
Corporate and other (8.1) (3.2) (13.1) (0.7)
------------- --------------- ------------ -----------
(3.6) (6.4) (9.9) (6.8)
Gain on sale of assets 1.2 - 1.5 -
Share in income (loss) of investee companies (0.1) (0.3) 0.2 (0.7)
(Provision for) recovery of income taxes (1.6) 0.9 (3.0) (0.1)
Dividends on convertible preferred shares of subsidiary company (0.2) (1.7) (1.0) (3.4)
------------- --------------- ------------ -----------
Net loss for the period $ (4.3) $ (7.5) (12.2) $ (11.0)
============= =============== ============ ===========
Enterprise - wide disclosure:
Geographic information:
Mining revenue Mineral properties
Three months Six months plant and equipment
ended June 30, ended June 30, --------------------------------------
----------------------- ----------------------- As at June 30,
2002 2001 2002 2001 2002 2001
-------- ---------- --------- ---------- ------------------ ---------------
United States $ 28.2 $ 33.5 $ 61.5 $ 63.5 $ 249.2 $ 329.0
Russia 18.0 15.8 33.2 30.0 20.9 43.0
Chile 0.9 6.3 3.1 13.4 - -
Other - 3.3 - 5.8 5.2 14.9
-------- ---------- --------- ---------- ------------------ ---------------
Total foreign 47.1 58.9 97.8 112.7 275.3 386.9
Canada 12.1 11.8 30.2 22.1 89.4 92.2
-------- ---------- --------- ---------- ------------------ ---------------
Total $ 59.2 $ 70.7 $ 128.0 $ 134.8 $ 364.7 $ 479.1
======== ========== ========= ========== ================== ===============
7. (Loss) Earnings per Share
(Loss) earnings per share ("EPS") has been calculated using the
weighted average number of shares outstanding during the period.
Diluted EPS is calculated using the treasury stock method in 2001. The
calculation of diluted earnings per share assumes that employee stock
options were exercised at the beginning of the period, or time of
issue, if later. Employee stock options with an exercise price greater
than the average market price of the common shares were not included in
the calculation of diluted earnings per share as the effect is
anti-dilutive. The average price of the common shares during the six
month period was $1.52 (2001 - $0.62).
2002 2001
---- ----
Weighted average number of common shares outstanding at June 30th 352,426 301,151
Add: Options, warrants and participating securities as if issued, exercised
and outstanding at January 1st
Options 6,710 3,393
Restricted shares 2 -
Convertible debentures (a) 14,651 14,651
Redeemable retractable preferred shares (b) 3,175 3,175
Convertible preferred shares of subsidiary company 1,086 8,926
------------------- ----------------
Weighted average number of common shares used for diluted earnings
per share. 378,050 331,296
=================== ================
(a) Convertible debentures - $128.9 million (Cdn. $195.8 million) principal
issued and outstanding
(b) Redeemable retractable preferred shares - 384,613 shares issued and
outstanding
-21-
(c) Convertible preferred shares of subsidiary company - 223,878 shares
issued and outstanding to non-affiliated shareholders as at June 30, 2002.
8. Contingencies
Binding arbitration has ruled in favour of Compania Minera Maricunga
("CMM") on claims against Fluor Daniel Chile Ingenieria y Construccion
S.A., Fluor Daniel Corporation, and Fluor Daniel Wright Ltd. ("Fluor") for
damages relating to the original construction of the Refugio gold mine in
northern Chile. The arbitrator has concluded that Fluor was "grossly
negligent" in certain aspects of the construction of the Refugio facilities
and has determined a net award in favour of CMM for US$20 million plus
interest accumulated from July 1999 for a net amount of $23.6 million.
Fluor decided to contest the arbitrators ruling in the Chilean Appellate
Court. Fluor has only contested the "consequential damages" portion of the
arbitrators ruling, which is approximately half of the net settlement. Oral
and written arguments were presented to the Chilean Appellate Court on July
2, 2002. The appellate court is expected to render a decision within two
months. The Company has recorded its proportionate share of the net award
that is not being contested of approximately $5.5 million.
In addition, there have been no further developments in the legal claims
disclosed in the year end and the first quarter interim report to
shareholders.
9. 2001 figures
Certain of the 2001 figures have been reclassified to conform to the 2002
presentation.
10. Subsequent Event
Effective July 1, 2002, the Company agreed to form a joint venture with a
wholly owned subsidiary of Placer Dome Inc. ("Placer"). The formation of
the joint venture combined the two companies' respective gold mining
operations in the Porcupine district in Ontario, Canada. Placer owns 51% of
this joint venture and is the operator, while the Company owns 49%. Placer
contributed the Dome mine and mill and the Company contributed the Hoyle
Pond, Nighthawk Lake and Pamour mines, exploration properties in the
Porcupine district, as well as the Bell Creek mill. Future capital,
exploration and operating costs will be shared in proportion to each
party's ownership interest.
The formation of the joint venture will be accounted for in accordance with
Section 3055 of the CICA Handbook as an exchange of productive assets in
the ordinary course of business. Since these assets were exchanged for an
interest in similar assets and there has been no culmination of the
earnings process, the exchange will be recorded at the carrying value of
the assets contributed.
11. Business Combination with TVX and Echo Bay
The Company, TVX Gold Inc. ("TVX") and Echo Bay Mines Ltd. ("Echo Bay")
have entered into a combination agreement dated June 10, 2002, as amended
July 12, 2002 for the purpose of combining the ownership of their
respective businesses. Echo Bay, a United States registrant, is required to
clear the information circular with the Securities and Exchange Commission
of the United States ("SEC"), before mailing to its shareholders. The draft
information circular was filed with the SEC for review on July 16, 2002.
The Company will provide shareholders with details of the transaction in an
information circular to be mailed in connection with a special shareholders
meeting once this process is finalized.
TVX shareholders will receive 6.5 common shares of the Company for each TVX
share outstanding and Echo Bay shareholders' will receive 0.52 common
shares of the Company for each Echo Bay common share outstanding.
Concurrent with the business combination, TVX has agreed to acquire Newmont
Mining Corporation's 50% non-controlling interest in the TVX Newmont
America's joint venture for $180 million.
-22-
DIRECTORS
John A. Brough
President
Torwest Inc.
Robert M. Buchan
President and Chief Executive Officer
Kinross Gold Corporation
Arthur H. Ditto
Vice Chairman
Kinross Gold Corporation
John M.H. Huxley
Principal
Algonquin Power Corporation
John A. Keyes
Retired Mining Executive
Cameron A. Mingay
Partner
Cassels, Brock & Blackwell LLP
John E. Oliver
Executive Managing Director and Co-head
Scotia Capital U.S.
Bank of Nova Scotia
OFFICERS
John E. Oliver
Chairman
Arthur H. Ditto
Vice Chairman
Robert M. Buchan
President and Chief Executive Officer
Scott A. Caldwell
Executive Vice President and Chief Operating Officer
John W. Ivany
Executive Vice President
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Brian W. Penny
Vice President, Finance and Chief Financial Officer
Jerry W. Danni
Vice President, Environmental Affairs
Christopher T. Hill
Vice President, Treasurer
Gordon A. McCreary
Vice Prsident, Investor Relations and Corporate Development
Ronald W. Stewart
Vice President, Exploration
Allan D. Schoening
Vice President, Human Resources and Community Relations
Shelley M. Riley
Corporate Secretary
CORPORATE OFFICE
52ND Floor, Scotia Plaza,
40 King St. West,
Toronto, Ontario
Canada M5H 3Y2
Tel: (416) 365-5132
Fax. (416) 363-6622
Email: info@kinross.com
Website: www.Kinross.com
U.S. OFFICE
Suite 100
802 E. Winchester,
Murray, UT 84107
Tel: (801) 290-1101
Fax: (801)290-1102
TRANSFER AGENT & REGISTRAR
Computershare Trust Company of Canada,
Toronto, Ontario
Tel: (416) 981-9633 or 1(800)663-9097
Computershare Trust Company Inc.
Denver, Colorado
Tel: (303) 986-5400
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SIGNATURE
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
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Shelley M. Riley
Corporate Secretary
August 29, 2002
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