Kinross Gold : Reports 2014 First-Quarter Results

TORONTO, ONTARIO--(Marketwired - May 7, 2014) - Kinross Gold Corporation (TSX:K)(NYSE:KGC) today announced its results for the first quarter ended March 31, 2014.

(This news release contains forward-looking information about expected future events and financial and operating performance of the Company. We refer to the risks and assumptions set out in our Cautionary Statement on Forward-Looking Information located on page six of this release. All dollar amounts are expressed in U.S. dollars, unless otherwise noted.)

Highlights:

• Production⁽¹⁾: 664,690 gold equivalent ounces (Au eq. oz.), compared with 648,897 ounces in Q1 2013.
• Revenue: $817.4 million, compared with $1,058.1 million in Q1 2013.
• Production cost of sales⁽²⁾: $727 per Au eq. oz., compared with $729 in Q1 2013.
• All-in sustaining cost⁽²⁾: $1,001 per Au eq. oz. sold, compared with $1,030 in Q1 2013.
• Adjusted operating cash flow⁽²⁾: $239.0 million, or $0.21 per share, compared with $413.7 million, or $0.36 per share, in Q1 2013.
• Adjusted net earnings^{(2), (3)}: $34.1 million, or $0.03 per share, compared with adjusted earnings of $172.4 million, or $0.15 per share, in Q1 2013.
• Reported net earnings⁽³⁾: $31.8 million, or $0.03 per share, compared with net earnings of $162.4 million, or $0.14 per share, in Q1 2013.
• Average realized gold price: $1,299 per Au oz., compared with $1,624 per Au oz. in Q1 2013.
• Outlook: Kinross expects to be within its 2014 forecast guidance for production (2.5-2.7 million Au eq. oz.), production cost of sales ($730-780 per Au eq. oz. sold), all-in sustaining cost ($950-1,050 per Au eq. oz. sold), and total capital expenditures ($675 million).

CEO Commentary

J. Paul Rollinson, CEO, made the following comments in relation to 2014 first-quarter results:

"Kinross had another quarter of solid performance, with an increase in production year-over-year as our new Dvoinoye mine came fully on stream, and a decline in all-in sustaining cost as a result of capital and operating cost reduction efforts across the Company.

"While lower gold prices affected earnings, Kinross is making steady progress to reduce costs. Capital expenditures for the quarter were approximately half of what they were a year ago, while our all-in sustaining cost continued to decline. In addition, we've been able to reduce production cost of sales on a per ounce basis by 16% at Chirano, 14% at Maricunga, and 9% at Tasiast compared with Q4 2013. With these improvements, and strong performance from our other sites, Kinross is well on track to meet its guidance for the year. In short, we continue to deliver on our strategy, which is focused on capital discipline, operational excellence, quality over quantity and balance sheet strength.

"We released the Tasiast feasibility study on schedule during the quarter. With a significant reduction in forecast capital costs compared with earlier project estimates, and expected production cost of sales of approximately $500 per ounce for the first five years of production, the study shows that an expanded Tasiast has the potential to be among our lowest cost operations, a significant contributor of new production and cash flow, and a cornerstone of our future portfolio."

Financial results

Summary of financial and operating results

The following operating and financial results are based on first-quarter 2014 gold equivalent production from continuing operations. Production and cost measures are on an attributable basis:

Production: Kinross produced 664,690 attributable Au eq. oz. in the first quarter of 2014, an increase over the first quarter of 2013, mainly due to the processing of higher grade ore from Dvoinoye, which completed its first quarter at full production.

Production cost of sales: Production cost of sales per Au eq. oz.⁽²⁾ was $727 for the first quarter of 2014, compared with $729 for the first quarter of 2013. Production cost of sales per Au oz. on a by-product basis⁽²⁾ was $708 in Q1 2014, compared with $674 in Q1 2013, based on Q1 2014 attributable gold sales of 603,073 ounces and attributable silver sales of 1,165,667 ounces.

All-in sustaining cost: All-in sustaining cost per Au eq. oz. sold⁽²⁾ decreased to $1,001 in Q1 2014, compared with $1,030 in Q1 2013, primarily due to decreases in sustaining capital and exploration and business development expenditures.

All-in sustaining cost per Au oz. sold on a by-product basis⁽²⁾ was $991 in Q1 2014, compared with $994 in Q1 2013.

Revenue: Revenue from metal sales was $817.4 million in the first quarter of 2014, compared with $1,058.1 million during the same period in 2013. The decrease was mainly due to the lower average realized gold price for the quarter.

Average realized gold price: The average realized gold price was $1,299 per ounce in Q1 2014, compared with $1,624 per ounce in Q1 2013. During the first quarter of 2014, the average price of gold was $1,293 per ounce, with gold trading between $1,221 and $1,385 per ounce based on the London PM Fix gold price.

Margins: Kinross' attributable margin per Au eq. oz. sold⁽⁴⁾ was $572 for the first quarter of 2014, compared with the Q1 2013 margin of $895 per Au eq. oz. sold.

Operating cash flow: Adjusted operating cash flow⁽²⁾ was $239.0 million for the first quarter of 2014, or $0.21 per share, compared with $413.7 million, or $0.36 per share, for Q1 2013.

Earnings: Adjusted net earnings^{(2), (3)} were $34.1 million, or $0.03 per share, for Q1 2014, compared with adjusted earnings of $172.4 million, or $0.15 per share, for Q1 2013, mainly due to a lower average realized gold price.

Reported net earnings⁽³⁾ were $31.8 million, or $0.03 per share, for Q1 2014, compared with earnings of $162.4 million, or $0.14 per share, in Q1 2013.

Capital expenditures: Capital expenditures decreased to $168.9 million for Q1 2014, compared with $309.5 million for the same period last year, mainly due to lower spending at Tasiast.

Operating results

Mine-by-mine summaries for first-quarter 2014 operating results may be found on pages 13 and 17 of this news release. Highlights include the following:

Americas

Performance was strong in the first quarter, as the region remains on track to meet both production and production cost of sales forecasts for the year. At Round Mountain, improved mill performance increased overall production relative to the prior year and the previous quarter. At Kettle-River Buckhorn, production was lower compared with the previous quarter due to anticipated lower grades. Fort Knox production declined compared with Q1 2013 primarily due to lower grades. While overall cost performance was in line with the previous quarter, the Company expects higher production cost of sales at Fort Knox over the next three quarters, as the operation enters a phase of the mine that has more operating waste.

At Paracatu, production was in line with the previous quarter, despite lower recoveries and grades primarily resulting from variability in the ore processed through Plant 1. Results improved at Maricunga, with higher production and lower costs compared with the previous quarter due to higher grades, improved productivity in the mobile fleet and ADR and crushing plants, enhanced leach pad management, and a more efficient solutions management schedule. Production cost of sales declined 14% compared with Q4 2013, from $1,217 per ounce to $1,049 per ounce, due to reduced reagent costs, operating efficiencies previously mentioned and increased production. Maricunga's production cost of sales has seen a consistent improvement and is now below Q1 2013 levels.

Russia

First quarter production at the combined operation surpassed prior year and previous quarter results, due mainly to the impact of processing higher grade Dvoinoye ore in the expanded mill at Kupol. Approximately 83,000 Au eq. oz. were produced from processing Dvoinoye ore in Q1 2014, the first quarter of full production at the mine, compared with 24,000 Au eq. oz in Q4 2013. Gold grades at the combined operation increased by 31% compared with Q1 2013 due to the processing of higher grade ore from Dvoinoye, partially offset by the planned decline in grades at Kupol. Production cost of sales per ounce remained in line with previous quarters.

West Africa

Performance was strong during the first quarter, as the region is on target to meet both production and production cost of sales guidance for the year. Tasiast achieved record quarterly production in the first quarter, primarily due to higher grades and mill throughput. Production cost of sales per ounce decreased 9% compared with Q4 2013 due to continuous improvement programs, including a new truck shop, which increased maintenance efficiencies, and a new, lower cost power plant, which replaced multiple, high-cost generators. At Chirano, the move to self-perform was a main driver behind a 16% reduction in production cost of sales, from $733 per ounce in Q4 2013 to $616 per ounce in Q1 2014. Chirano's production cost of sales has decreased steadily over the last four quarters. Chirano is expected to reduce production in Q2 2014 due to repairs at the mill which are scheduled to be completed early in the third quarter.

Tasiast expansion project

On March 31, 2014, the Company announced the results of its feasibility study for its Tasiast expansion project. The study, based on an optimal mill size of 38,000 tonnes per day and a $1,350 per ounce gold price assumption, produced promising results that indicate the potential to significantly increase cash flow per share, enhance the Company's production profile, and lower costs.

While a final construction decision on the expansion project is not expected to be made until 2015 at the earliest, a number of activities are being pursued to further enhance the viability of the expansion plan. These include: exploring opportunities to further reduce capital and operating costs; measures to reduce execution variability in supply chain, logistics, contracting and labour in the construction phase of a potential expansion project; solidifying investment conditions in Mauritania; and continuing to explore additional mineral resource potential within the mine's footprint, and along the 80 kilometre Tasiast trend. The Company has also initiated project financing discussions with core lender groups.

Liquidity

On March 6, 2014, the Company completed a $500 million unsecured debt offering. The Senior Notes have a coupon of 5.95% and are due in 2024. On March 10, 2014 Kinross used the net proceeds raised from the debt offering to repay $500 million of its term loan, thereby reducing the Company's 2017 debt maturities by 50%. By extending $500 million of debt maturities to 2024, and reducing near-term debt repayment obligations, the Company has greater financial flexibility and is able to better align its balance sheet with the life cycle of assets. The Company has no material debt maturities prior to 2016.

Cash and cash equivalents and short-term investments were $704.0 million as at March 31, 2014, compared with $734.5 million as at December 31, 2013, mainly due to debt repayment and capital expenditures, offset by operating cash flows.

Outlook

The following section of the news release represents forward-looking information and users are cautioned that actual results may vary. We refer to the risks and assumptions contained in the Cautionary Statement on Forward-Looking Information on page six of this news release.

As previously announced on February 12, 2014, Kinross expects to produce approximately 2.5-2.7 million gold equivalent ounces for the year.

The Company expects to be within its regional production cost of sales guidance and meet its company-wide production cost of sales guidance range of $730-$780 per gold equivalent ounce and its all-in sustaining costs guidance range of $950-$1,050 per gold ounce sold in 2014. The Company also expects to meet its 2014 capital expenditure forecast of approximately $675 million.

Conference call details

In connection with the release, Kinross will hold a conference call and audio webcast on Thursday, May 8, 2014 at 7:45 a.m. ET to discuss the results, followed by a question-and-answer session. To access the call, please dial:

Replay (available up to 14 days after the call):

You may also access the conference call on a listen-only basis via webcast at our website www.kinross.com. The audio webcast will be archived on our website at www.kinross.com.

Kinross will hold its Annual Meeting of Shareholders on Thursday, May 8, 2014, at 10 a.m. ET at the Design Exchange, 234 Bay Street, Toronto, Ontario, Canada. A live audio webcast (listen-only mode) of the Annual Meeting of Shareholders will be available at www.kinross.com.

This release should be read in conjunction with Kinross' 2014 first-quarter unaudited Financial Statements and Management's Discussion and Analysis report at www.kinross.com.

Kinross' unaudited 2014 first-quarter Financial Statements and Management's Discussion and Analysis have been filed with Canadian securities regulators (available at www.sedar.com) and furnished to the U.S. Securities and Exchange Commission (available at www.sec.gov). Kinross shareholders may obtain a copy of the financial statements free of charge upon request to the Company.

About Kinross Gold Corporation

Kinross is a Canadian-based gold mining company with mines and projects in Brazil, Chile, Ghana, Mauritania, Russia and the United States. Kinross maintains listings on the Toronto Stock Exchange (symbol:K) and the New York Stock Exchange (symbol:KGC).

Cautionary statement on forward-looking information

All statements, other than statements of historical fact, contained or incorporated by reference in this news release including, but not limited to, any information as to the future financial or operating performance of Kinross, constitute "forward-looking information" or "forward-looking statements" within the meaning of certain securities laws, including the provisions of the Securities Act (Ontario) and the provisions for "safe harbour" under the United States Private Securities Litigation Reform Act of 1995 and are based on expectations, estimates and projections as of the date of this news release. Forward-looking statements contained in this news release include those under the headings "Financial and operating highlights", "CEO Commentary", "Tasiast expansion project", "Liquidity", "Outlook", and include, without limitation, statements with respect to: our guidance for production; production costs of sales, all-in sustaining cost and capital expenditures; expected savings pursuant to our cost review and reduction initiatives including, without limitation, the continuation of the Way Forward: modifications to projects and operations and our exploration budget, as well as references to other possible events, the future price of gold and silver, the estimation of mineral reserves and mineral resources, the realization of mineral reserve and mineral resource estimates, the timing and amount of estimated future production, costs of production, capital expenditures, costs and timing of the development of projects and new deposits, success of exploration, development and mining activities, permitting timelines, currency fluctuations, requirements for additional capital, government regulation of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims and limitations on insurance coverage.
The words "anticipate", "efforts", "expects", "estimates", "forecasts", "focus", "guidance", "initiative", "on track", "outlook", "potential", "pursue", "strategy", "study", or "targets", or variations of or similar such words and phrases or statements that certain actions, events or results "may", "could", "would", or "should", "might", or "will be taken", "will occur" or "will be achieved", and similar such expressions identify forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by Kinross as of the date of such statements, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The estimates, models and assumptions of Kinross referenced, contained or incorporated by reference in this news release, which may prove to be incorrect, include, but are not limited to, the various assumptions set forth herein and in our most recently filed Annual Information Form and our Management's Discussion and Analysis as well as: (1) there being no significant disruptions affecting the operations of the Company or any entity in which it now or hereafter directly or indirectly holds an investment, whether due to labour disruptions, supply disruptions, power disruptions, damage to equipment or otherwise; (2) permitting, development, operations and expansion at Paracatu (including, without limitation, land acquisitions and permitting for the construction and operation of the new tailings facility) being consistent with our current expectations;
(3) the cessation by the Company of further investment and development of the Fruta del Norte deposit and La Zarza mining concession ("FDN") being consistent with Kinross' current expectations including, without limitation, as to the reasonable cooperation of the Government of Ecuador in ensuring an orderly transition with respect to FDN (including, without limitation, any related transactions) that respects the interests of both parties; continuing recognition of the Company's other remaining mining concessions and other assets, rights, titles and interests in Ecuador; the implementation of Ecuador's mining and investment laws (and prospective amendment to these laws) and related regulations and policies; and compliance with, and the implementation and enforcement of, the Canada-Ecuador Agreement for the Promotion and Reciprocal Protection of Investments; (4) political and legal developments in any jurisdiction in which the Company, or any entity in which it now or hereafter directly or indirectly holds an investment, operates being consistent with its current expectations including, without limitation, the impact of escalating political tensions and uncertainty in the Russian Federation and Ukraine or any related sanctions and any other similar restrictions or penalties imposed by any government, the transition period as we reduce our level of activity in Ecuador and any potential amendments to the Brazilian Mining Code, the Mauritanian Mining Code, the Mauritanian Customs Code, the Mauritanian VAT regime and water legislation or other water use restrictions in Chile, being consistent with Kinross' current expectations; (5) the exchange rate between the Canadian dollar, Brazilian real, Chilean peso, Russian rouble, Mauritanian ouguiya, Ghanaian cedi and the U.S. dollar being approximately consistent with current levels;
(6) certain price assumptions for gold and silver; (7) prices for diesel, natural gas, fuel oil, electricity and other key supplies being approximately consistent with current levels; (8) production and cost of sales forecasts for the Company, and entities in which it now or hereafter directly or indirectly holds an investment, meeting expectations; (9) the accuracy of the current mineral reserve and mineral resource estimates of the Company (including but not limited to ore tonnage and ore grade estimates); (10) labour and materials costs increasing on a basis consistent with Kinross' current expectations; (11) the development of, operations at and production from the Company's operations, including but not limited to ramp up at and production from Dvoinoye and permitting, development and expansion at Tasiast (including but not limited to, expansion optimization initiatives which may lead to changes in processing approach and maintenance, the timing of completion and results of the Tasiast feasibility study, and conversion of adjacent exploration licences to mining licences) being consistent with Kinross' current expectations; (12) the terms and conditions of the legal and fiscal stability agreements for the Tasiast and Chirano operations being interpreted and applied in a manner consistent with their intent and Kinross' expectations; (13) goodwill and/or asset impairment potential; and (14) access to capital markets, including but not limited to maintaining an investment grade debt rating and, as required, securing and maintaining partial project financing for Dvoinoye, Kupol and any expansion at Tasiast, being consistent with the Company's current expectations.
Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements. Such factors include, but are not limited to: sanctions (any other similar restrictions or penalties) now or subsequently imposed by, against, in respect of or otherwise impacting any jurisdiction in which the Company is domiciled or operates (including but not limited to the Russian Federation, Canada, the European Union and the United States), or any government or citizens of, persons or companies domiciled in, or the Company's business, operations or other activities in, any such jurisdiction; our ability to successfully cease further investment in and development of FDN and, in cooperation with the Government of Ecuador, successfully complete an orderly transition with respect to FDN that is respectful of the interests of both parties and does not impose on the Company (and/or any of its directors, officers or employees) any unreasonable obligations or liabilities; litigation commenced, or other claims or actions brought, against the Company (and/or any of its directors, officers or employees) in respect of the cessation by the Company of further investment in and development of FDN, or any of the Company's prior or continuing activities on or in respect thereof or otherwise in Ecuador; fluctuations in the currency markets; fluctuations in the spot and forward price of gold or certain other commodities (such as fuel and electricity); changes in the discount rates applied to calculate the present value of net future cash flows based on country-specific real weighted average cost of capital; changes in the market valuations of peer group gold producers and the Company, and the resulting impact on market price to net asset value multiples;
changes in various market variables, such as interest rates, foreign exchange rates, gold or silver prices and lease rates, or global fuel prices, that could impact the mark-to-market value of outstanding derivative instruments and ongoing payments/receipts under any financial obligations; risks arising from holding derivative instruments (such as credit risk, market liquidity risk and mark-to-market risk); changes in national and local government legislation, taxation (including but not limited to income tax, advance income tax, stamp tax, withholding tax, capital tax, tariffs, value-added or sales tax, capital outflow tax, capital gains tax, windfall or windfall profits tax, royalty, excise tax, customs/import or export taxes/duties, asset taxes, asset transfer tax, property use or other real estate tax, together with any related fine, penalty, surcharge, or interest imposed in connection with such taxes), controls, policies and regulations; the security of personnel and assets; political or economic developments in Canada, the United States, Chile, Brazil, Russia, Ecuador, Mauritania, Ghana, or other countries in which Kinross, or entities in which it now or hereafter directly or indirectly holds an interest, do business or may carry on business; business opportunities that may be presented to, or pursued by, us; our ability to successfully integrate acquisitions and complete divestitures; operating or technical difficulties in connection with mining or development activities; employee relations; litigation against the Company including, but not limited to, securities class action litigation in Canada and/or the United States; the speculative nature of gold exploration and development including, but not limited to, the risks of obtaining necessary licenses and permits; diminishing quantities or grades of reserves; adverse changes in our credit rating; and contests over title to properties, particularly title to undeveloped properties. In addition, there are risks and hazards associated with the business of gold exploration, development and mining, including environmental hazards, industrial accidents, unusual or unexpected formations, pressures, cave-ins, flooding and gold bullion losses (and the risk of inadequate insurance, or the inability to obtain insurance, to cover these risks).
Many of these uncertainties and contingencies can directly or indirectly affect, and could cause, Kinross' actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, Kinross, including but not limited to resulting in an impairment charge on goodwill and/or assets. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Forward-looking statements are provided for the purpose of providing information about management's expectations and plans relating to the future. All of the forward-looking statements made in this news release are qualified by these cautionary statements and those made in our other filings with the securities regulators of Canada and the United States including, but not limited to, the cautionary statements made in the "Risk Factors" section of our most recently filed Annual Information Form and Management Discussion and Analysis. These factors are not intended to represent a complete list of the factors that could affect Kinross. Kinross disclaims any intention or obligation to update or revise any forward-looking statements or to explain any material difference between subsequent actual events and such forward-looking statements, except to the extent required by applicable law.

Key Sensitivities

Approximately 60%-70% of the Company's costs are denominated in US dollars.

A 10% change in foreign exchange could result in an approximate $12 impact in production cost of sales per ounce⁽⁵⁾.

A $10 per barrel change in the price of oil could result in an approximate $3 impact on production cost of sales per ounce.

The impact on royalties of a $100 change in the gold price could result in an approximate $3 impact on cost of sales per ounce.

Other information

Where we say "we", "us", "our", the "Company", or "Kinross" in this news release, we mean Kinross Gold Corporation and/or one or more or all of its subsidiaries, as may be applicable.

The technical information about the Company's material mineral properties contained in this news release has been prepared under the supervision of and verified by Mr. John Sims, an officer of the Company who is a "qualified person" within the meaning of National Instrument 43-101.

Reconciliation of non-GAAP financial measures

The Company has included certain non-GAAP financial measures in this document. These measures are not defined under IFRS and should not be considered in isolation. The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. The inclusion of these measures is meant to provide additional information and should not be used as a substitute for performance measures prepared in accordance with IFRS. These measures are not necessarily standard and therefore may not be comparable to other issuers.

Adjusted net earnings attributable to common shareholders and adjusted net earnings per share are non-GAAP measures which determine the performance of the Company, excluding certain impacts which the Company believes are not reflective of the Company's underlying performance for the reporting period, such as the impact of foreign exchange gains and losses, reassessment of prior year taxes and/or taxes otherwise not related to the current period, impairment charges, gains and losses and other one-time costs related to acquisitions, dispositions and other transactions, and non-hedge derivative gains and losses. Although some of the items are recurring, the Company believes that they are not reflective of the underlying operating performance of its current business and are not necessarily indicative of future operating results. Management believes that these measures, which are used internally to assess performance and in planning and forecasting future operating results, provide investors with the ability to better evaluate underlying performance, particularly since the excluded items are typically not included in public guidance. However, adjusted net earnings and adjusted net earnings per share measures are not necessarily indicative of net earnings and earnings per share measures as determined under IFRS.

The following table provides a reconciliation of net earnings from continuing operations to adjusted net earnings from continuing operations for the periods presented:

The Company makes reference to a non-GAAP measure for adjusted operating cash flow and adjusted operating cash flow per share. Adjusted operating cash flow is defined as cash flow from operations excluding certain impacts which the Company believes are not reflective of the Company's regular operating cash flow, and excluding changes in working capital. Working capital can be volatile due to numerous factors, including the timing of tax payments, and in the case of Kupol, a build-up of inventory due to transportation logistics. The Company uses adjusted operating cash flow internally as a measure of the underlying operating cash flow performance and future operating cash flow-generating capability of the Company. However, adjusted operating cash flow and adjusted operating cash flow per share measures are not necessarily indicative of net cash flow from operations as determined under IFRS.

The following table provides a reconciliation of adjusted operating cash flow from continuing operations for the periods presented:

Consolidated production cost of sales per gold equivalent ounce sold is a non-GAAP measure and is defined as production cost of sales as per the consolidated financial statements divided by the total number of gold equivalent ounces sold. This measure converts the Company's non-gold production into gold equivalent ounces and credits it to total production.

Attributable production cost of sales per gold equivalent ounce sold is a non-GAAP measure and is defined as attributable production cost of sales divided by the attributable number of gold equivalent ounces sold. This measure converts the Company's non-gold production into gold equivalent ounces and credits it to total production.

Management uses these measures to monitor and evaluate the performance of its operating properties. The following table presents a reconciliation of consolidated and attributable production cost of sales per equivalent ounce sold for the periods presented:

Attributable production cost of sales per ounce sold on a by-product basis is a non-GAAP measure which calculates the Company's non-gold production as a credit against its per ounce production costs, rather than converting its non-gold production into gold equivalent ounces and crediting it to total production, as is the case in co-product accounting. Management believes that this measure provides investors with the ability to better evaluate Kinross' production cost of sales per ounce on a comparable basis with other major gold producers who routinely calculate their cost of sales per ounce using by-product accounting rather than co-product accounting.

The following table provides a reconciliation of attributable production cost of sales per ounce sold on a by-product basis for the periods presented:

In June 2013, the World Gold Council ("WGC") published its guidelines for reporting all-in sustaining costs and all-in costs. The WGC is a market development organization for the gold industry and is an association whose membership comprises leading gold mining companies including Kinross. Although the WGC is not a mining industry regulatory organization, it worked closely with its member companies to develop these non-GAAP measures. Adoption of the all-in sustaining cost and all-in cost metrics is voluntary and not necessarily standard, and therefore, these measures presented by the Company may not be comparable to similar measures presented by other issuers. The Company believes that the all-in sustaining cost and all-in cost measures complement existing measures reported by Kinross.

All-in sustaining cost includes both operating and capital costs required to sustain gold production on an ongoing basis. The value of silver sold is deducted from the total production cost of sales as it is considered residual production. Sustaining operating costs represent expenditures incurred at current operations that are considered necessary to maintain current production. Sustaining capital represents capital expenditures at existing operations comprising mine development costs and ongoing replacement of mine equipment and other capital facilities, and does not include capital expenditures for major growth projects or enhancement capital for significant infrastructure improvements at existing operations.

All-in cost is comprised of all-in sustaining cost as well as operating expenditures incurred at locations with no current operation, or costs related to other non-sustaining activities, and capital expenditures for major growth projects or enhancement capital for significant infrastructure improvements at existing operations.

Attributable all-in sustaining cost and all-in cost per ounce sold on a by-product basis are calculated by adjusting total production cost of sales, as reported on the interim condensed consolidated statement of operations, as follows:

The Company also assesses its all-in sustaining cost and all-in cost on a gold equivalent ounce basis. Under these non-GAAP measures, the Company's production of silver is converted into gold equivalent ounces and credited to total production.

Attributable all-in sustaining cost and all-in cost per equivalent ounce sold are calculated by adjusting total production cost of sales, as reported on the interim condensed consolidated statement of operations, as follows:

Review of Operations

Consolidated balance sheets

Consolidated statements of operations

Consolidated statements of cash flows

For more information, please see Kinross' 2014 first-quarter Financial Statements and MD&A at www.kinross.com.