We are steadfast in our pursuit of superior business and financial performance. Rigorous financial discipline and outstanding corporate citizenship are enshrined in our four core values, and we believe they go hand-in-hand. By succeeding as a business, we generate jobs and wealth in our host countries and are better able to support partnership initiatives that help to build capacity and sustain strong communities.
Since our last report, Kinross has recorded strong operating and financial results, driven by a strong gold price and increased gold production. This has translated into robust results in a number of key financial metrics including revenue, margins, cash flow, and cash flow per share. In February 2012, based on our operational performance and cash flow in 2011, we increased our semi-annual dividend from $0.06 to $0.08 per common share, an increase of 33%.
Regrettably, our share price has not tracked either our positive operating performance or the strong gold price environment, and shareholder returns in 2010 and 2011 were disappointing. This has been a major concern for the Kinross Board, management team, and employees, many of whom are shareholders. In this regard, Kinross is not alone, as our peers have also underperformed relative to the gold price in 2011, due in part to an increasingly risk-averse equities market in the wake of the European debt crisis.
Another reason for the underperformance of gold equities in 2011 and into 2012 has been an industry-wide increase in the capital cost of building new projects. A sharp global rise in new capital project development has put increased pressure on the cost of materials, labour, energy, engineering and equipment. In response to these rising capital demands, in early 2012, Kinross announced a capital and projects optimization process.
The Company is limiting its capital allocation for growth projects to $1.0 billion to $1.5 billion annually, and is prioritizing its project pipeline to be evaluated and developed in sequence, rather than built in parallel – with Tasiast as our first priority – while extending the development timelines for Lobo-Marte and Fruta del Norte (FDN). We are determined to reduce risk, conserve our capital and liquidity, and provide an appropriate return to our shareholders as we grow. We are also applying this same level of rigour to decisions we make at our existing operations, including capital investments.
In a market that is often focused on a short-term horizon, we are making development and capital decisions for the next 10 to 20 years. Our sights remain firmly set on long-term value creation – for our shareholders, employees, and the communities where we operate.
At a community level, our approach is grounded in annually updated Site Responsibility Plans (SRPs), helping to ensure consistency in our engagement on issues of greatest interest where we operate, and in the “benefit footprint” concept, designed to maximize the economic and social benefits of our activities in the communities where we work.
2009 information has not been restated to conform with International Financial Reporting Standards (IFRS) and is presented in accordance with Canadian generally accepted accounting principles.
Our financial highlights for the years 2010 and 2011 include the following:
- Attributable production of approximately 2.3 million gold equivalent ounces in 2010 and 2.6 million gold equivalent ounces in 2011, a year-over-year increase of 12% and two-year increase of 17% over 2009;
- Revenue of approximately $3.0 billion in 2010 and $3.9 billion in 2011, a year-over-year increase of 31% and a two-year increase of 63% over 2009;
- Average attributable margin per gold equivalent ounce sold of $685 per ounce sold in 2010 and $906 in 2011, an increase of 32% year-over-year and an increase of 71% over 2009; and
- Adjusted operating cash flow of $1,109.6 million in 2010 and $1,598.7 million in 2011, an increase of 44% year-over-year and a two-year increase of 71% over 2009.
For a detailed account of Kinross’ 2011 and 2010 financial performance, see our annual reports on www.kinross.com.