Melcor REIT announces second quarter 2017 results

EDMONTON, AB—(Marketwired – August 02, 2017) –

Highlights

  • Overall portfolio performance remained steady in Q2–2017 and year to date
  • Rental Revenue of $16.56 million in Q2–2017; $33.56 million year to date
  • Net operating income of $10.57 million in Q2–2017; $21.31 million year to date
  • Adjusted funds from operations (AFFO) of $5.22 million or $0.20 per unit in Q2–2017; $10.47 million or $0.41 per unit year to date
  • Debt to Gross Book Value (GBV) ratio of 55%, well below our maximum threshold of 65%
  • Distributions of $0.05625 per trust unit were paid in April, May and June for a payout ratio of 83%
  • Andrew Melton was appointed as the REIT's second President & Chief Executive Officer and Ralph Young was appointed Board Chair on April 15, 2017.

Melcor REIT (TSX: MR.UN) today announced results for the second quarter ended June 30, 2017. Rental revenue in the quarter and year to date periods remained steady over the prior year at $16.56 million and $33.56 million respectively. Net operating income also remained steady at $10.57 million and $21.31 million respectively. The net loss of $1.79 million in the quarter and $15.28 million year to date is a result of non–cash fair value adjustments on investment properties due to an increase in capitalization rates. Management believes Adjusted funds from operations (AFFO) is a better reflection of our true operating performance. AFFO grew 3% to $10.47 million ($0.41 per unit) to date in 2017.

Andrew Melton, President & CEO of Melcor REIT commented: “It is my pleasure to report on another successful quarter for the REIT. Our portfolio continues to perform steadily — no small feat given the economic and political uncertainty that we have faced over the past few years, particularly in Alberta. In spite of the uncertainty, we've continued to execute on our tried and true business strategy of taking care of our tenants and taking care of our buildings. By executing this strategy, our results have remained steady and stable.

We have a strong foundation for future growth and continue to seek out and pursue opportunities to add to our portfolio.

Ultimately, success can be measured in many ways, and I believe our consistent performance is a significant success. Full credit goes to our tremendous team.”

Q2–2017 Activity:

Our portfolio performance remained steady through the second quarter and first half of 2017. The stability and diversity of our portfolio with respect to both tenant profile and asset class position the REIT well for managing through economic cycles. We are focused on the real estate fundamentals of asset enhancement and property management while conservatively managing our debt. At 83%, our payout ratio is a strong indicator of our overall health and our ability to sustain distributions at current rates. In Q2–2017, we adopted REALpac's new guidance on AFFO retroactive to January 1, 2017 and for the comparative period, which resulted in a change from our previously reported payout ratios. We believe this is an improved disclosure and does not represent a fundamental change in our underlying results or strategy.

Highlights of our performance in the second quarter include:

  • Stable same–asset property income and occupancy in all asset classes and operating regions, with 92.7% occupancy at June 30, 2017. Same–asset NOI was down 1%.
  • The net loss of $15.28 million year to date is a result of the non–cash fair value losses on investment properties recorded in the period due to an increase in capitalization rates. Management believes adjusted funds from operations (AFFO) is a better reflection of our true operating performance.
  • AFFO was relatively stable at $5.22 million in Q2–2017 and $10.47 million year to date.
  • We continued to execute on our proactive leasing strategy to both retain existing and attract new tenants. Through the first half of 2017 we completed 162,288 sf in new and renewed leasing (including holdovers) with a retention rate of 78.6% year to date.
  • We responded to 99% of services requests within 30 minutes via our signature care program in Q2–2017. We view this metric as an important indication of our commitment to ongoing client care, which contributes to tenant satisfaction and ultimately retention.
  • On April 27, 2017 we completed the sale of LC Industrial, a 67,610 sf industrial building in Lethbridge, Alberta for $7.76 million (including transaction costs). This divestiture represents the REIT's first asset disposal and provides the REIT with additional capacity to recycle capital in future asset acquisitions. Rental revenue related to LC Industrial in the three and six–months ended June 30, 2017 was $0.05 million and $0.20 million (2016 – $0.15 million and $0.32 million).
  • We took advantage of favourable lending conditions and early re–financed $13.95 million in mortgages at an average interest rate of 3.65% both during and subsequent to the quarter. Early re–financing was a strategy employed to mitigate and re–balance our risk in 2018 when 21% of our mortgages mature.
  • We continue to experience negative market pressure on Edmonton downtown office space as approximately 1.8 million sf in new inventory comes online. Edmonton downtown office spaces makes up 12% of the REIT's GLA.
  • We paid distributions of $0.05625 per trust unit in April, May and June for a quarterly payout ratio of 83%.
  • As at June 30, 2017 we have $2.17 million in cash. The REIT also has additional capacity under our revolving credit facility. Our working capital position remains healthy and we continue to collect receivables in a timely manner to ensure near–term liquidity.

Selected Highlights

Financial Highlights  
  Three months ended       Six months ended      
  June 30       June 30      
($000s) 2017   2016   Change
%
  2017   2016   Change
%
 
Non–Standard KPIs                                
Net operating income (NOI)   10,570     10,773   (2 )%   21,307     21,386   %
Funds from operations (FFO)   6,835     6,822   %   13,650     13,519   1 %
Adjusted funds from operations (AFFO)(6)   5,219     5,158   1 %   10,469     10,142   3 %
Adjusted Cash Flow from Operations (ACFO)   4,417     4,524   (2 )%   8,900     8,718   2 %
   
Rental revenue   16,559     16,807   (1 )%   33,559     33,433   %
Income before fair value adjustments   3,566     3,570   %   7,146     6,976   2 %
Fair value adjustment on investment properties   (249 )   (174 ) nm     (16,708 )   (1,999 ) nm  
Distributions to unitholders   1,882     1,883   %   3,764     3,764   %
Cash flows from operations   2,701     2,937   (8 )%   5,528     5,546   %
Same–asset NOI   9,991     10,119   (1 )%   19,971     20,105   (1 )%
   
Per unit metrics                                
Loss – diluted $ (0.16 ) $ (0.37 )     $ (1.37 ) $ (1.27 )    
FFO(6) $ 0.27   $ 0.26       $ 0.53   $ 0.52      
AFFO(6) $ 0.20   $ 0.20       $ 0.41   $ 0.39      
Distributions $ 0.17   $ 0.17       $ 0.34   $ 0.34      
Payout ratio(6)   83 %   84 %       83 %   86 %    
   
              30–June–17   31–Dec–16   Change
%
 
Total assets ($000s)                   642,977     663,724   (3 )%
Equity ($000s)(1)                   260,600     260,600   %
Debt ($000s)(2)                   344,887     351,947   (2 )%
Weighted average interest rate on debt                   3.60 %   3.63 % (1 %)
Debt to GBV ratio(3)                   55 %   55 % %
Finance costs coverage ratio(4)                   2.99     2.88   4 %
Debt service coverage ratio(5)                   2.61     2.65   (2 )%

(1) Calculated as the sum of trust units and Class B LP Units at their book value. Class B LP Units are presented as a financial liability in the condensed interim consolidated financial statements.
(2) Calculated as the sum of total amount drawn on revolving credit facility, mortgages payable, Class C LP Units, excluding unamortized fair value adjustment on Class C LP Units and convertible debenture, excluding unamortized discount and transaction costs.
(3) Excluding convertible debentures, Debt to GBV ratio is 49% (December 31, 2016 – 50%).
(4) Calculated as the sum of FFO and finance costs; divided by finance costs, excluding distributions on Class B LP Units and fair value adjustments on derivative financial instruments.
(5) Calculated as FFO divided by sum of contractual principal repayments on mortgages payable and distributions of Class C LP Units, excluding amortization of fair value adjustment on Class C LP Units.
(6) We adopted REALpac's new guidance on AFFO in Q2–2017 retroactive to January 1, 2017 and for the comparative periods. See Adjusted Funds from Operations on page 10 for detail.

Operational Highlights            
  30–June–17   31–Dec–16   Change
%
 
Number of properties   37     38   (3 )%
Gross leasable area (GLA) (sf)   2,711,847     2,775,782   (2 )%
Occupancy (weighted by GLA)   92.7 %   92.4 % %
Retention (weighted by GLA)   78.6 %   71.0 % 11 %
Weighted average remaining lease term (years)   4.70     4.85   (3 )%
Weighted average base rent (per sf) $ 15.69   $ 15.73   %

MD&A and Financial Statements

Information included in this press release is a summary of results. This press release should be read in conjunction with the REIT's Q2–2017 quarterly report to unitholders. The REIT's consolidated financial statements and management's discussion and analysis for the three and six–months ended June 30, 2017 can be found on the REIT's website at www.MelcorREIT.ca or on SEDAR (www.sedar.com).

Conference Call & Webcast

Unitholders and interested parties are invited to join management on a conference call to be held Thursday, August 3, 2017 at 11:00 AM ET (9:00 AM MT). Call 416–340–8527 in the Toronto area; 1–800–355–4959 toll free.

The call will also be webcast (listen only) at http://www.gowebcasting.com/8555. A replay of the call will be available at the same URL shortly after the call is concluded.

About Melcor REIT

Melcor REIT is an unincorporated, open–ended real estate investment trust. Melcor REIT owns, acquires, manages and leases quality retail, office and industrial income–generating properties in western Canadian markets. Its portfolio is currently made up of interests in 37 properties representing approximately 2.71 million square feet of gross leasable area located across Alberta and in Regina, Saskatchewan; and Kelowna, British Columbia. For more information, please visit www.MelcorREIT.ca.

Non–standard Measures

NOI, FFO, AFFO and ACFO are key measures of performance used by real estate operating companies; however, they are not defined by International Financial Reporting Standards (IFRS), do not have standard meanings and may not be comparable with other industries or income trusts. These non–IFRS measures are defined and discussed in the REIT's MD&A for the quarter ended June 30, 2017, which is available on SEDAR at www.sedar.com.

Forward–looking Statements:

This press release may contain forward–looking information within the meaning of applicable securities legislation, which reflects the REIT's current expectations regarding future events. Forward–looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the REIT's control, that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward–looking information. Such risks and uncertainties include, but are not limited to, general and local economic and business conditions; the financial condition of tenants; the REIT's ability to refinance maturing debt; leasing risks, including those associated with the ability to lease vacant space; and interest rate fluctuations. The REIT's objectives and forward–looking statements are based on certain assumptions, including that the general economy remains stable, interest rates remain stable, conditions within the real estate market remain consistent, competition for acquisitions remains consistent with the current climate and that the capital markets continue to provide ready access to equity and/or debt. All forward–looking information in this press release speaks as of the date of this press release. The REIT does not undertake to update any such forward–looking information whether as a result of new information, future events or otherwise. Additional information about these assumptions and risks and uncertainties is contained in the REIT's filings with securities regulators.

Only 22% of Adherence Teams Work With Patients During Early Clinical Stages of Product Development

RESEARCH TRIANGLE PARK, NC—(Marketwired – August 02, 2017) – The highest percentage of surveyed life science teams — 66% — begin patient adherence activities during either Phase 3 of product development or the registration and launch window, according to pharmaceutical intelligence firm Cutting Edge Information.

Data recently published in Patient Adherence Program Planning: Drive Compliance to Improve Treatment Outcomes also found that in comparison to the 22% of patient adherence teams that work with patient organizations early on, 51% of surveyed teams delay activities with them until a product's first year on the market or later.

The study found that the earlier life science teams initiate partnerships with patient advocacy groups, the better. However, after analyzing existing trends within the pharmaceutical industry, data from the study show that many patient adherence teams may need to accelerate their timelines.

“Pharmaceutical companies seeking to improve patient adherence rates may want to target product accessibility concerns first,” said Adam Bianchi, senior director of research at Cutting Edge Information. “Partnerships with key advocacy groups can help life science teams develop initiatives aimed at improving medication affordability for patient audiences.”

Many surveyed companies reported having stronger campaigns aimed at achieving private and public payer coverage for their products when collaborating with patient advocacy groups. In cases where payers remain reluctant to cover products, life science teams and patient advocacy groups worked together to brainstorm additional solutions.

Patient Adherence Program Planning: Drive Compliance to Improve Treatment Outcomes, available at https://www.cuttingedgeinfo.com/product/patient–adherence–program–planning/, examines how pharmaceutical, biotechnology and other life science companies develop and support patient adherence topics. The report includes detailed benchmarking metrics and case studies of winning initiatives, including budgets, timing, outsourcing and vendor selection, as well as program channels — including digital and mobile resources — for new patient adherence initiatives.

The report is a decision support tool for life science companies seeking to implement or improve their approaches to patient adherence. The report is designed to help executives:

  • Develop a winning combination of patient adherence activities across a range of media
  • Take advantage of new patient adherence technologies and strategies, such as gamification
  • Benchmark budget and staffing resources for patient adherence initiatives
  • Discover industry trends and insights into new approaches for patient adherence programs

For more information about Cutting Edge Information's patient adherence research and to obtain a copy of Patient Adherence Program Planning: Drive Compliance to Improve Treatment Outcomes, please visit https://www.cuttingedgeinfo.com.

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Kinross reports 2017 second-quarter results

TORONTO, ON —(Marketwired – August 02, 2017) – Kinross Gold Corporation (TSX: K) (NYSE: KGC) today announced its results for the second–quarter ended June 30, 2017.

(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 19 of this release. All dollar amounts are expressed in U.S. dollars, unless otherwise noted.)

2017 second–quarter highlights:

  • Production1: 694,874 gold equivalent ounces (Au eq. oz.), compared with 671,267 Au eq. oz. in Q2 2016.
  • Revenue: $868.6 million, compared with $876.4 million in Q2 2016.
  • Production cost of sales2: $660 per Au eq. oz., compared with $731 in Q2 2016.
  • All–in sustaining cost2: $910 per Au eq. oz. sold, compared with $988 in Q2 2016. All–in sustaining cost per gold ounce (Au oz.) sold on a by–product basis was $901 in Q2 2017, compared with $976 in Q2 2016.
  • Operating cash flow: $179.7 million, compared with $315.9 million in Q2 2016.
  • Adjusted operating cash flow2: $230.8 million for Q2 2017, an increase of 23% compared with $187.2 million for Q2 2016.
  • Adjusted net earnings (loss)2,3: $54.9 million, or $0.04 per share, compared with adjusted net loss of $9.8 million, or $0.01 per share, in Q2 2016.
  • Reported net earnings (loss)3: Net earnings increased to $33.1 million, or $0.03 per share, compared with a net loss of $25.0 million, or $0.02 per share, in Q2 2016, mainly due to a decrease in production cost of sales.
  • Organic development projects:
    • The Tasiast Phase One expansion continues to advance on time and on budget and is expected to reach full commercial production in Q2 2018. Plant construction is now 55% complete.
    • The Tasiast Phase Two and Round Mountain Phase W feasibility studies are on schedule to be completed in September. The Company expects to make a development decision on both projects at that time.
    • At Bald Mountain, engineering work at the Vantage Complex in the South area is progressing on schedule.
    • In Russia, the Company has started processing ore from the September Northeast satellite deposit near Dvoinoye, while at Moroshka, decline development is on schedule, with construction of surface infrastructure now complete.
  • Outlook: Kinross expects to be within its 2017 guidance for production (2.5 – 2.7 million Au eq. oz.), production cost of sales ($660 – $720 per Au eq. oz.) and all–in sustaining cost ($925 – $1,025 per Au eq. oz.). The Company expects to be within its capital expenditures guidance of $900 million (+/– 5%).
  • Debt offering: On July 6, 2017, Kinross closed its offering of debt securities, consisting of $500.0 million principal amount of 4.50% Senior Notes due 2027. The Company used the net proceeds, along with available cash on hand, to repay its term loan, which was due August 2020.
  • Balance sheet: As of June 30, 2017, Kinross had cash and cash equivalents of $1,061.3 million, and available credit of $1,433.1 million, for total liquidity of approximately $2.5 billion. The Company has no scheduled debt repayments until 2021.

1 Unless otherwise stated, production figures in this news release are based on Kinross' 90% share of Chirano production.
2 These figures are non–GAAP financial measures and are defined and reconciled on pages 14 to 18 of this news release.
3 Net earnings/loss figures in this release represent “net earnings (loss) attributable to common shareholders”.

CEO Commentary
J. Paul Rollinson, President and CEO, made the following comments in relation to 2017 second–quarter results:

“We delivered another quarter of strong and consistent operational results, as our portfolio of mines achieved production targets, lowered costs, and generated strong cash flows.

“Our organic development projects are advancing well, and we expect to complete feasibility studies and make a development decision on the Tasiast Phase Two and Round Mountain Phase W expansion projects in September. The Tasiast Phase One expansion project is proceeding as planned and is expected to reach full commercial production in Q2 2018. Our projects in Russia have progressed well, with ore from the September Northeast deposit now being processed at the Kupol mill. We continue to advance Bald Mountain expansion opportunities and expect production to double this year compared with 2016.

“The $500 million debt financing we completed in July enhances our financial flexibility, strengthens our balance sheet, and leaves no debt maturities until 2021.

“We are once again on track to meet our annual company–wide guidance for production and costs, and Kinross remains strongly positioned to continue delivering value for our shareholders.”

Financial results

Summary of financial and operating results

           
    Three months ended     Six months ended
    June 30,     June 30,
(in millions, except ounces, per share amounts, and per ounce amounts)   2017   2016     2017   2016
Operating Highlights                          
Total gold equivalent ounces(a)                          
  Produced(c)     700,452     675,623       1,378,233     1,367,533
  Sold(c)     689,362     690,983       1,341,878     1,355,148
                           
Attributable gold equivalent ounces(a)                          
  Produced(c)     694,874     671,267       1,366,830     1,358,730
  Sold(c)     683,584     686,752       1,329,530     1,346,149
                           
Financial Highlights                          
Metal sales   $ 868.6   $ 876.4     $ 1,664.7   $ 1,659.0
Production cost of sales   $ 456.6   $ 506.7     $ 915.4   $ 964.4
Depreciation, depletion and amortization   $ 204.0   $ 210.2     $ 421.5   $ 403.4
Operating earnings   $ 104.9   $ 69.2     $ 153.5   $ 112.0
Net earnings (loss) attributable to common shareholders   $ 33.1   $ (25.0 )   $ 167.7   $ 10.0
Basic earnings (loss) per share attributable to common shareholders   $ 0.03   $ (0.02 )   $ 0.13   $ 0.01
Diluted earnings (loss) per share attributable to common shareholders   $ 0.03   $ (0.02 )   $ 0.13   $ 0.01
Adjusted net earnings (loss) attributable to common shareholders(b)   $ 54.9   $ (9.8 )   $ 78.3   $ 11.4
Adjusted net earnings (loss) per share(b)   $ 0.04   $ (0.01 )   $ 0.06   $ 0.01
Net cash flow provided from operating activities   $ 179.7   $ 315.9     $ 387.5   $ 530.4
Adjusted operating cash flow(b)   $ 230.8   $ 187.2     $ 481.7   $ 394.8
Average realized gold price per ounce   $ 1,260   $ 1,266     $ 1,241   $ 1,223
Consolidated production cost of sales per equivalent ounce(c) sold(b)   $ 662   $ 733     $ 682   $ 712
Attributable(a) production cost of sales per equivalent ounce(c) sold(b)   $ 660   $ 731     $ 680   $ 709
Attributable(a) production cost of sales per ounce sold on a by–product basis(b)   $ 645   $ 711     $ 665   $ 693
Attributable(a) all–in sustaining cost per ounce sold on a by–product basis(b)   $ 901   $ 976     $ 922   $ 963
Attributable(a) all–in sustaining cost per equivalent ounce(c) sold(b)   $ 910   $ 988     $ 931   $ 972
Attributable(a) all–in cost per ounce sold on a by–product basis(b)   $ 1,098   $ 1,027     $ 1,100   $ 1,022
Attributable(a) all–in cost per equivalent ounce(c) sold(b)   $ 1,102   $ 1,037     $ 1,103   $ 1,028
   
(a) “Total” includes 100% of Chirano production. “Attributable” includes Kinross' share of Chirano (90%) production.
(b) The definition and reconciliation of these non–GAAP financial measures is included on page 14 to 18 of this news release.
(c) “Gold equivalent ounces” include silver ounces produced and sold converted to a gold equivalent based on a ratio of the average spot market prices for the commodities for each period. The ratio for the second quarter of 2017 was 73.01:1, compared with 75.06:1 for the second quarter of 2016 and for the first six months of 2017 was 71.46:1, compared with 77.20:1 for the first six months of 2016.
   

The following operating and financial results are based on second–quarter 2017 gold equivalent production. Production and cost measures are on an attributable basis:

Production: Kinross production increased to 694,874 attributable Au eq. oz. in Q2 2017, compared with production of 671,267 attributable Au eq. oz. in Q2 2016.

Production cost of sales: Production cost of sales per Au eq. oz.2 decreased to $660 for Q2 2017, the lowest since 2011, compared with $731 for Q2 2016, mainly as a result of lower cost of sales per ounce at Round Mountain, Fort Knox, Bald Mountain and Tasiast.

Production cost of sales per Au oz. on a by–product basis2  decreased to $645 in Q2 2017, compared with $711 in Q2 2016, based on Q2 2017 attributable gold sales of 665,858 ounces and attributable silver sales of 1,294,197 ounces.

All–in sustaining cost: All–in sustaining cost per Au eq. oz. sold2 decreased to $910 in Q2 2017, compared with $988 in Q2 2016. All–in sustaining cost per Au oz. sold on a by–product basis2 decreased to $901 in Q2 2017, compared with $976 in Q2 2016.

Average realized gold price: The average realized gold price in Q2 2017 was $1,260 per ounce, compared with $1,266 per ounce in Q2 2016.

Revenue: Revenue from metal sales decreased slightly to $868.6 million in Q2 2017, compared with $876.4 million during the same period in 2016, mainly due to the slightly lower average realized gold price.

Margins: Kinross' attributable margin per Au eq. oz. sold4 was $600 for Q2 2017, compared with a Q2 2016 margin of $535 per Au eq. oz.

4Attributable margin per equivalent ounce sold is a non–GAAP measure defined as “average realized gold price per ounce” less “attributable production cost of sales per gold equivalent ounce sold.”

Operating cash flow: Adjusted operating cash flow2 increased by 23% to $230.8 million for Q2 2017, compared with $187.2 million for Q2 2016.

Net operating cash flow was $179.7 million for Q2 2017, compared with $315.9 million for Q2 2016.

Earnings (loss): Adjusted net earnings2,3 increased to $54.9 million, or $0.04 per share, for Q2 2017, compared with a net loss of $9.8 million, or $0.01 per share, for Q2 2016, mainly as a result of a decrease in production cost of sales.

Reported net earnings3 were $33.1 million, or $0.03 per share, for Q2 2017, compared with a net loss of $25.0 million, or $0.02 per share, for Q2 2016. Reported net earnings increased mainly as result of a decrease in production cost of sales.

Capital expenditures: Capital expenditures increased to $200.7 million for Q2 2017, compared with $114.0 million for the same period last year, primarily due to Tasiast Phase One expansion project costs, and increased spending at Paracatu and Bald Mountain.

Operating results
Mine–by–mine summaries for 2017 second–quarter operating results may be found on pages nine and 13 of this news release. Highlights include the following:

Americas

With strong operational performance during the quarter, the region is on track to meet its 2017 guidance range for production and cost of sales per ounce, notwithstanding the temporary curtailment of mining operations at Paracatu.

At Fort Knox, production and cost of sales per ounce were mainly in line with Q1 2017. Production decreased compared with Q2 2016 largely due to a colder spring season that affected heap leach performance, which was offset by an increase in mill grades. Cost of sales per ounce was lower year–over–year mainly due to a decrease in operating waste.

Round Mountain performed strongly during the quarter, with production increasing 12% compared with Q1 2017, and 24% compared with Q2 2016, primarily due to higher mill grades, the highest the mine has reached since 2008. The production increase was also as a result of more ounces recovered from the heap leach primarily as a result of higher grades. Cost of sales per ounce was at its lowest level since 2012, and was substantially lower both year–over–year and quarter–over–quarter mainly due to the higher mill grades. Labour costs also decreased year–over–year.

At Bald Mountain, production increased compared with Q1 2017 and Q2 2016 mainly due to a significant increase of tonnes placed on the heap leach pads, and ounces recovered. Cost of sales decreased compared with Q1 2017 mainly due to lower contractor costs and was lower year–over–year mainly due to a decrease in contractor and maintenance costs. The mine is expected to substantially increase production in the second half of the year due to mine sequencing and timing from the heap leach and is on track to double production for 2017 compared with full–year 2016.

Kettle River–Buckhorn outperformed during the quarter, as production increased compared with Q1 2017 and Q2 2016, with cost of sales per ounce decreasing mainly due to higher grades. While the last batch of ore was hauled from Buckhorn in July, the mill is expected to continue to process stockpiles, with minimal production expected in the third quarter. The small–footprint, high–grade underground mine performed strongly during its nine year mine life and exceeded expectations, with mine life originally slated to end in 2015. Exploration in the region continues in 2017.

At Paracatu, production was higher compared with Q1 2017 and Q2 2016 mainly due to higher recoveries. Cost of sales per ounce decreased compared with Q1 2017 mainly due to the higher recoveries, and was higher compared with Q2 2016 primarily due to more operating waste mined and unfavourable foreign exchange movements.

At the beginning of July, the expected temporary curtailment of mining and Plant 2 operations commenced at Paracatu due to the lower than average rainfall in the area. The Company's 2017 production guidance took into account the potential curtailment and is not expected to be impacted at this time. The expected production impact has been partly mitigated by the tailings reprocessing initiative, which is expected to increase in the third quarter at Plant 1, while Plant 2 maintenance has been brought forward to coincide with the downtime. The production from the tailings reprocessing is expected to be approximately 25,000 – 35,000 gold ounces in the third quarter, with a processing rate of approximately 50,000 t/d at Plant 1. The Company also continued to implement water mitigation efforts, including an enhanced water pumping system, securing water rights, and installment of wells around the site. Curtailment of mining and Plant 2 operations will continue until the water balance allows for production to resume, which is expected in Q4 when the rainy season begins.

At Maricunga, production from the rinsing of the heap materials placed on the pads prior to the suspension of mining activities continued to produce better than expected results. Cost of sales per ounce was lower quarter–over–quarter and year–over–year due to higher ounces recovered. While the rinsing of the pads is now expected to continue for the remainder of the year, production is expected to be minimal and lower than the first half of 2017.

Russia

The region performed well in Q2 2017 and is expected to meet its 2017 production and cost of sales per ounce guidance. Kupol and Dvoinoye production was slightly higher compared with Q1 2017 primarily due to an increase in ore processed, and was lower compared with Q2 2016 mainly due to the anticipated lower grades. Cost of sales per ounce remain among the lowest in the portfolio, but increased compared with Q1 2017 mainly due to lower grades and more operating waste mined, and increased compared with Q2 2016 mainly due to a decline in gold equivalent ounces sold and unfavourable foreign exchange rates.

West Africa

The region had solid performance during the quarter and is on track to meet its 2017 guidance for production and cost of sales per ounce. Tasiast production was lower compared with Q1 2017 primarily due to lower mill grades and a decrease in ore processed, with cost of sales per ounce higher primarily due to higher contractor costs and lower grades. Production and cost of sales per ounce outperformed Q2 2016 results due to the strike and suspension of mining last year.

At Chirano, production was slightly lower compared with Q1 2017 mainly due to less ore mined, and was 28% higher compared with Q2 2016 mainly due to higher grades as the operation ended open pit mining and transitioned to mining the underground Paboase and Akoti deposits. Cost of sales per ounce was higher quarter–over–quarter mainly due to increased maintenance costs and was 22% lower year–over–year mainly due to better grades and lower operating waste.

Organic development projects

Tasiast Phase One project development is progressing well, and continues to be on time and on budget, with full commercial production expected in Q2 2018. Plant construction is now 55% complete, with 85% of all equipment and materials now onsite. Installation of the SAG mill's outer shell is now complete and mechanical work has commenced. The oxygen plant has now been commissioned, with the tailings storage facility expected to be commissioned shortly. Concrete works and foundations for the primary crusher, apron feeder and cyclone towers have been completed and heavy mechanical work has now commenced at all three facilities. Installation of three new leach tanks is progressing, and installation of the conveyor is expected to begin shortly. Phase One is expected to increase plant throughput to 12,000 t/d from 8,000 t/d.

The Tasiast Phase Two and Round Mountain Phase W feasibility studies are advancing well and expected to be completed in September, when the Company expects to make a development decision on both expansion projects. The Tasiast Phase Two expansion contemplates installing an additional 18,000 t/d of throughput capacity, for a total combined capacity of 30,000 t/d for both phases. The Round Mountain Phase W expansion project is expected to extend mine life at one of Kinross' most consistent operations located in one of the best mining jurisdictions in the world.

At Bald Mountain, detailed engineering work at the Vantage Complex in the South area is progressing on schedule. The project team has now been established and the execution plan is being developed. The permitting process is proceeding as planned and major construction work is expected to begin in the first half of 2018. The proposed heap leach pad and associated processing facilities and infrastructure is expected to accommodate a total capacity of 68 million tonnes of ore.

Development at Kinross' Russian development projects are in their advanced stages. At the Moroshka satellite deposit, located approximately four kilometres from Kupol, decline development is on schedule, with construction of surface infrastructure now complete. The Company began processing ore from the September Northeast satellite deposit at the Kupol mill in June 2017. September Northeast, which is located approximately 15 kilometres from Dvoinoye, was completed on budget and on schedule.

Exploration

Kinross' exploration efforts continued to focus within the footprint of existing mines and the immediate surrounding districts. During the first half of the year, a total of approximately 113,000 metres of drilling was completed for brownfield exploration, representing 54% of the 2017 brownfield drilling program. Highlights from the first half of 2017 include:

  • Kupol: A total of approximately 44,000 metres was drilled at Kupol in the first half of 2017, including approximately 21,400 metres of infill drilling completed at the north and south strike extensions of the Kupol main vein. The infill drilling program continues to show encouraging results. The program is expected to be completed in Q3 2017, after which geological modelling and evaluation will commence to determine potential mineral reserve conversions and mineral resource additions for end of year.
  • Tasiast Sud: The majority of exploration activities at Tasiast in the first half of 2017 were conducted in the Tasiast Sud area within the C613 and C615 deposits, which are located immediately south of the Tasiast mine and west of the Tamaya deposit. Approximately 12,800 metres of drilling was completed and results have been encouraging. As a result, Kinross is commencing an accelerated infill drilling program in the area, with the goal of potential mineral resource additions at year end. The Company has also initiated a pre–feasibility study on the potential for a dump leach operation at Tasiast Sud, combining material from Tamaya, C613 and C615. The majority of mineralization at both C613 and C615 is within a banded iron formation, with C613 defined over an approximate two kilometre mineralized strike open to the south and north, and C615 defined over a three kilometre strike.
  • Bald Mountain: Exploration activities are continuing to focus on pit extensions and targets identified in 2016. Drilling results from the Vantage Complex deposit, including the Vantage South extension, Saddle and Luxe, along with drilling at Top, Top Gap and Saga in the North area, have been encouraging.

Debt offering

On July 6, 2017, Kinross closed its offering of debt securities, consisting of $500.0 million principal amount of 4.50% Senior Notes due 2027. Kinross used the net proceeds, along with available cash on hand, to repay its term loan, which was due August 2020. As a result, the Company now has no scheduled debt repayments until 2021.

Balance sheet

As of June 30, 2017, Kinross had cash and cash equivalents of $1,061.3 million, compared with $819.0 million as of March 31, 2017. The Company also had available credit of $1,433.1 million as of June 30, 2017 for total liquidity of approximately $2.5 billion.

On July 28, 2017, the Company extended the maturity date of its $1,500.0 million revolving credit facility by one year from August 10, 2021 to August 10, 2022.

Cerro Casale divestment

On June 9, 2017, Kinross completed an agreement to sell its 25% interest in the Cerro Casale project and its 100% interest in the Quebrada Seca exploration project in Chile to Goldcorp Inc. (“Goldcorp”).

The sale included gross cash proceeds of $260.0 million (which includes $20.0 million for Quebrada Seca), a contingent payment of $40.0 million following a construction decision for Cerro Casale, the assumption by Goldcorp of a $20.0 million contingent payment obligation payable to Barrick Gold Corporation when production at Cerro Casale commences, and a 1.25% royalty on 25% of gross revenues from all metals sold at the properties (with the Company foregoing the first $10.0 million). Additionally on closing, the Company entered into a water supply agreement with the Cerro Casale joint venture to have certain rights to access, up to a fixed amount, water not required by the Cerro Casale joint venture.

Yukon property vend–in

On June 14, 2017, Kinross completed an agreement to sell its 100% interest in the White Gold exploration project for gross cash proceeds of $7.6 million, 17.5 million common shares of White Gold Corp., representing 19.9% of the issued and outstanding shares of White Gold Corp., with a current market value of approximately $28 million, and deferred payments of approximately $11.4 million.

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 19 of this news release.

The Company expects to be within its 2017 production guidance range of approximately 2.5 – 2.7 million Au eq. oz., its production cost of sales guidance range of $660 – $720 per Au eq. oz., and its all–in sustaining cost guidance range of $925 – $1,025 per Au eq. oz. sold.

The Company expects to meet its 2017 capital expenditures forecast of approximately $900 million (+/– 5%).

Other operating costs is now expected to be $80 – $90 million for 2017, compared with the previous $60 million forecast, mainly as a result of the temporary curtailment at Paracatu and VAT and other tax related items at Tasiast.

Depreciation, depletion and amortization is now expected to be approximately $300 – $325 per Au eq. oz. for 2017, compared with the previous forecast of $350 per Au eq. oz.

Conference call details

In connection with the release, Kinross will hold a conference call and audio webcast on Thursday, August 3, 2017 at 8:00 a.m. ET to discuss the results, followed by a question–and–answer session. To access the call, please dial:

Canada & US toll–free – 1–800–319–4610
Outside of Canada & US – 1–604–638–5340

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

Canada & US toll–free – 1–800–319–6413; Passcode – 1511 followed by #.
Outside of Canada & US – 1–604–638–9010; Passcode –1511followed by #.

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.

This news release should be read in conjunction with Kinross' 2017 second–quarter unaudited Financial Statements and Management's Discussion and Analysis report at www.kinross.com. Kinross' 2017 second–quarter unaudited 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 senior gold mining company with mines and projects in the United States, Brazil, Russia, Mauritania, Chile and Ghana. Our focus is on delivering value based on the core principles of operational excellence, balance sheet strength, disciplined growth and responsible mining. Kinross maintains listings on the Toronto Stock Exchange (TSX: K) and the New York Stock Exchange (NYSE: KGC).

Review of operations

                                             
                                             
Three months ended June 30,         Gold equivalent ounces                            
    Produced     Sold     Production cost of
sales 
($millions)
    Production cost of sales/equivalent ounce sold
    2017     2016     2017     2016     2017     2016     2017   2016
                                                     
Fort Knox   91,848     97,221     91,237     97,625     $ 57.9     $ 77.4     $ 635   $ 793
Round Mountain   115,191     92,813     108,811     91,646       69.7       71.3       641     778
Bald Mountain   49,881     32,704     54,308     35,508       41.4       43.2       762     1,217
Kettle River – Buckhorn   30,966     25,031     30,858     24,808       12.4       18.2       402     734
Paracatu   138,869     126,774     137,056     126,365       99.5       87.5       726     692
Maricunga   15,624     44,304     7,415     45,362       1.9       42.6       256     939
Americas Total   442,379     418,847     429,685     421,314       282.8       340.2       658     807
                                                     
Kupol   146,013     183,638     149,187     198,890       80.5       82.9       540     417
Russia Total   146,013     183,638     149,187     198,890       80.5       82.9       540     417
                                                     
Tasiast   56,278     29,577     52,703     28,467       42.1       35.3       799     1,240
Chirano (100%)   55,782     43,561     57,787     42,312       51.2       48.3       886     1,142
West Africa Total   112,060     73,138     110,490     70,779       93.3       83.6       844     1,181
                                                     
Operations Total   700,452     675,623     689,362     690,983       456.6       506.7       662     733
Less Chirano non–controlling interest (10%)   (5,578 )   (4,356 )   (5,778 )   (4,231 )     (5.1 )     (4.8 )            
Attributable Total   694,874     671,267     683,584     686,752     $ 451.5     $ 501.9     $ 660   $ 731
                                                     
                                                     
 
                                             
Six months ended June 30,         Gold equivalent ounces                            
    Produced     Sold     Production cost of
sales
($millions)
    Production cost of sales/equivalent ounce sold
    2017     2016     2017     2016     2017     2016     2017   2016
                                                     
Fort Knox   184,886     185,021     185,978     185,514     $ 116.4     $ 139.6     $ 626   $ 753
Round Mountain   217,940     185,739     212,909     182,120       145.2       131.7       682     723
Bald Mountain   96,958     53,126     95,955     46,705       75.2       56.3       784     1,205
Kettle River – Buckhorn   55,532     53,343     55,753     53,072       26.1       40.4       468     761
Paracatu   246,965     246,150     240,332     243,455       197.4       167.4       821     688
Maricunga   51,625     103,380     15,986     102,852       4.9       89.9       307     874
Americas Total   853,906     826,759     806,913     813,718       565.2       625.3       700     768
                                                     
Kupol   289,391     376,088     292,668     374,581       152.3       161.1       520     430
Russia Total   289,391     376,088     292,668     374,581       152.3       161.1       520     430
                                                     
Tasiast   120,901     76,655     118,815     76,858       89.1       82.5       750     1,073
Chirano (100%)   114,035     88,031     123,482     89,991       108.8       95.5       881     1,061
West Africa Total   234,936     164,686     242,297     166,849       197.9       178.0       817     1,067
                                                     
Operations Total   1,378,233     1,367,533     1,341,878     1,355,148       915.4       964.4       682     712
Less Chirano non–controlling interest (10%)   (11,403 )   (8,803 )   (12,348 )   (8,999 )     (10.9 )     (9.6 )            
Attributable Total   1,366,830     1,358,730     1,329,530     1,346,149     $ 904.5     $ 954.8     $ 680   $ 709
                                                     
 
 

Consolidated balance sheets

             
(unaudited expressed in millions of United States dollars, except share amounts)
             
    As at  
    June 30,     December 31,  
    2017     2016  
                 
Assets                
  Current assets                
    Cash and cash equivalents   $ 1,061.3     $ 827.0  
    Restricted cash     12.7       11.6  
    Accounts receivable and other assets     138.3       127.3  
    Current income tax recoverable     54.0       111.9  
    Inventories     971.8       986.8  
    Unrealized fair value of derivative assets     11.6       16.1  
      2,249.7       2,080.7  
  Non–current assets                
    Property, plant and equipment     4,821.9       4,917.6  
    Goodwill     162.7       162.7  
    Long–term investments     200.2       142.9  
    Investments in associate and joint ventures     23.9       163.6  
    Unrealized fair value of derivative assets     2.2       6.0  
    Other long–term assets     481.6       411.3  
    Deferred tax assets     92.3       94.5  
Total assets   $ 8,034.5     $ 7,979.3  
                 
Liabilities                
  Current liabilities                
    Accounts payable and accrued liabilities   $ 432.4     $ 464.8  
    Current income tax payable     20.5       72.6  
    Current portion of provisions     86.0       93.2  
    Current portion of unrealized fair value of derivative liabilities     0.5       7.1  
        539.4       637.7  
  Non–current liabilities                
    Long–term debt     1,734.5       1,733.2  
    Provisions     868.9       861.2  
    Other long–term liabilities     161.4       172.2  
    Deferred tax liabilities     369.3       390.7  
Total liabilities     3,673.5       3,795.0  
                 
Equity                
  Common shareholders' equity                
    Common share capital   $ 14,902.5     $ 14,894.2  
    Contributed surplus     233.6       238.3  
    Accumulated deficit     (10,858.4 )     (11,026.1 )
    Accumulated other comprehensive income     46.7       39.1  
Total common shareholders' equity     4,324.4       4,145.5  
  Non–controlling interest     36.6       38.8  
Total equity     4,361.0       4,184.3  
Total liabilities and equity   $ 8,034.5     $ 7,979.3  
                 
Common shares                
  Authorized     Unlimited       Unlimited  
  Issued and outstanding     1,246,993,687       1,245,049,712  
                 
                 

Consolidated statements of operations

 
(unaudited expressed in millions of United States dollars, except share and per share amounts)
    Three months ended     Six months ended  
    June 30,     June 30,     June 30,     June 30,  
    2017     2016     2017     2016  
                                 
Revenue                                
  Metal sales   $ 868.6     $ 876.4     $ 1,664.7     $ 1,659.0  
                                 
Cost of sales                                
  Production cost of sales     456.6       506.7       915.4       964.4  
  Depreciation, depletion and amortization     204.0       210.2       421.5       403.4  
Total cost of sales     660.6       716.9       1,336.9       1,367.8  
Gross profit     208.0       159.5       327.8       291.2  
  Other operating expense     46.2       36.1       61.2       70.0  
  Exploration and business development     24.9       21.8       45.9       38.5  
  General and administrative     32.0       32.4       67.2       70.7  
Operating earnings     104.9       69.2       153.5       112.0  
  Other income (expense) – net     10.7       3.7       124.7       13.2  
  Equity in earnings (losses) of associate and joint ventures     (0.5 )     (0.1 )     (0.9 )     0.1  
  Finance income     2.6       1.9       6.1       3.5  
  Finance expense     (28.0 )     (32.3 )     (57.0 )     (65.5 )
Earnings before tax     89.7       42.4       226.4       63.3  
  Income tax expense – net     (58.0 )     (69.4 )     (60.9 )     (56.7 )
Net earnings (loss)   $ 31.7     $ (27.0 )   $ 165.5     $ 6.6  
Net earnings (loss) attributable to:                                
  Non–controlling interest   $ (1.4 )   $ (2.0 )   $ (2.2 )   $ (3.4 )
  Common shareholders   $ 33.1     $ (25.0 )   $ 167.7     $ 10.0  
Earnings (loss) per share attributable to common shareholders                                
                                 
  Basic   $ 0.03     $ (0.02 )   $ 0.13     $ 0.01  
  Diluted   $ 0.03     $ (0.02 )   $ 0.13     $ 0.01  
                                 
Weighted average number of common shares outstanding (millions)                                
  Basic     1,247.0       1,244.2       1,246.2       1,208.9  
  Diluted     1,257.4       1,244.2       1,256.1       1,219.4  
                                   

Consolidated statements of cash flows

                         
(unaudited expressed in millions of United States dollars)                        
    Three months ended     Six months ended  
    June 30,     June 30,     June 30,     June 30,  
    2017     2016     2017     2016  
Net inflow (outflow) of cash related to the following activities:                                
                                 
Operating:                                
Net earnings (loss)   $ 31.7     $ (27.0 )   $ 165.5     $ 6.6  
Adjustments to reconcile net earnings (loss) to net cash provided from operating activities:                                
  Depreciation, depletion and amortization     204.0       210.2       421.5       403.4  
  Gain on disposition of associate and other interests – net     (11.0 )           (11.0 )      
  Reversal of impairment charges                 (97.0 )      
  Equity in losses (earnings) of associate and joint ventures     0.5       0.1       0.9       (0.1 )
  Share–based compensation expense     3.3       3.3       6.6       7.1  
  Finance expense     28.0       32.3       57.0       65.5  
  Deferred tax recovery     (4.1 )     (45.0 )     (17.2 )     (104.0 )
  Foreign exchange losses (gains) and other     (21.6 )     13.3       (44.6 )     16.3  
  Changes in operating assets and liabilities:                                
    Accounts receivable and other assets     (7.1 )     4.9       43.1       3.6  
    Inventories     (10.8 )     49.6       (5.1 )     83.9  
    Accounts payable and accrued liabilities     57.0       101.0       (17.8 )     115.0  
Cash flow provided from operating activities     269.9       342.7       501.9       597.3  
  Income taxes paid     (90.2 )     (26.8 )     (114.4 )     (66.9 )
Net cash flow provided from operating activities     179.7       315.9       387.5       530.4  
                                 
Investing:                                
  Additions to property, plant and equipment     (200.7 )     (114.0 )     (379.6 )     (253.5 )
  Business acquisition           22.0             (588.0 )
  Net additions to long–term investments and other assets     (5.5 )     (9.0 )     (15.1 )     (20.1 )
  Net proceeds from the sale of property, plant and equipment     3.7       2.5       4.8       6.9  
  Net proceeds from disposition of associate and other interests     267.5             267.5        
  Increase in restricted cash     (0.3 )     (0.5 )     (1.1 )     (0.9 )
  Interest received and other     1.2       0.9       3.3       1.5  
Net cash flow provided from (used in) investing activities     65.9       (98.1 )     (120.2 )     (854.1 )
Financing:                                
  Issuance of common shares on exercise of options     0.7       1.0       0.8       1.0  
  Proceeds from issuance of equity                       275.7  
  Interest paid     (2.8 )     (3.6 )     (34.5 )     (33.2 )
  Other     (0.5 )           (0.5 )      
Net cash flow provided from (used in) financing activities     (2.6 )     (2.6 )     (34.2 )     243.5  
Effect of exchange rate changes on cash and cash equivalents     (0.7 )     2.6       1.2       4.5  
Increase (decrease) in cash and cash equivalents     242.3       217.8       234.3       (75.7 )
Cash and cash equivalents, beginning of period     819.0       750.4       827.0       1,043.9  
Cash and cash equivalents, end of period   $ 1,061.3     $ 968.2     $ 1,061.3     $ 968.2  
                                 
                                 
                                                         
Operating Summary                                                        
    Mine   Period   Ownership   Tonnes Ore Mined (1)   Ore
Processed (Milled) (1)
  Ore
Processed (Heap Leach) (1)
  Grade (Mill)   Grade (Heap Leach)   Recovery (2)   Gold Eq Production (5)   Gold Eq Sales (5)   Production cost of sales   Production cost of sales/oz   Cap Ex (7)   DD&A
            (%)   ('000 tonnes)   ('000 tonnes)   ('000 tonnes)   (g/t)   (g/t)   (%)   (ounces)   (ounces)   ($ millions)   ($/ounce)   ($ millions)   ($ millions)
Americas   Fort Knox   Q2 2017   100   5,353   3,069   5,830   0.86   0.26   84%   91,848   91,237   $ 57.9   $ 635   $ 21.4   $ 20.0
Q1 2017   100   5,242   2,933   3,885   0.75   0.23   83%   93,038   94,741   58.5   617   28.0   22.5
Q4 2016   100   9,864   3,235   7,226   0.79   0.28   83%   114,427   115,101   82.8   719   23.2   22.5
Q3 2016   100   8,959   3,270   9,507   0.68   0.26   85%   110,396   107,444   79.8   743   13.8   20.4
Q2 2016   100   6,141   3,467   4,914   0.64   0.28   83%   97,221   97,625   77.4   793   15.2   22.3
Round Mountain   Q2 2017   100   8,136   979   5,685   1.35   0.52   78%   115,191   108,811   $ 69.7   $ 641   $ 8.6   $ 28.3
Q1 2017   100   5,947   951   4,548   1.14   0.51   82%   102,749   104,098   75.5   725   6.3   28.9
Q4 2016   100   7,488   865   6,054   0.99   0.43   78%   99,310   107,313   86.6   807   28.5   33.6
Q3 2016   100   5,392   953   5,426   0.98   0.43   82%   93,215   88,477   73.7   833   14.8   24.2
Q2 2016   100   6,632   942   5,533   0.80   0.40   80%   92,813   91,646   71.3   778   12.3   20.8
Bald Mountain (8)   Q2 2017   100   5,174     5,159     0.58   nm   49,881   54,308   $ 41.4   $ 762   $ 15.6   $ 16.2
Q1 2017   100   3,660     3,660     0.69   nm   47,077   41,647   33.8   812   15.7   14.1
Q4 2016   100   3,627     3,627     0.72   nm   44,343   34,585   44.5   1,287   17.7   17.3
Q3 2016   100   3,081     3,081     0.66   nm   32,675   30,174   30.9   1,024   16.6   10.7
Q2 2016   100   2,182     2,182     0.48   nm   32,704   35,508   43.2   1,217   4.5   8.6
Kettle River– Buckhorn   Q2 2017   100   91   95     11.45     90%   30,966   30,858   $ 12.4   $ 402   $ –   $ 0.1
Q1 2017   100   98   96     9.95     93%   24,566   24,895   13.7   550     0.4
Q4 2016   100   128   122     8.49     94%   30,690   30,862   15.5   502    
Q3 2016   100   123   111     8.14     94%   28,241   28,104   17.1   608    
Q2 2016   100   101   101     7.40     93%   25,031   24,808   18.2   734    
Paracatu   Q2 2017   100   10,422   13,333     0.43     77%   138,869   137,056   $ 99.5   $ 726   $ 31.4   $ 36.7
Q1 2017   100   10,226   11,892     0.38     73%   108,096   103,276   97.9   948   25.9   33.5
Q4 2016   100   10,675   11,962     0.44     73%   124,975   127,576   101.5   796   47.9   40.9
Q3 2016   100   12,597   11,084     0.48     73%   111,889   111,796   77.5   693   34.0   31.0
Q2 2016   100   12,109   12,331     0.44     70%   126,774   126,365   87.5   692   15.9   35.4
Maricunga (8)   Q2 2017   100             nm   15,624   7,415   $ 1.9   $ 256   $ 0.1   $ 0.6
Q1 2017   100             nm   36,001   8,571   3.0   350   0.1   1.2
Q4 2016   100             nm   32,899   33,360   17.8   534   2.1   1.2
Q3 2016   100   766     779     0.68   nm   39,253   39,458   37.5   950   0.9   10.8
Q2 2016   100   1,346     1,475     0.61   nm   44,304   45,362   42.6   939   1.3   11.6
Russia   Kupol (3)(4)(6)   Q2 2017   100   489   440     9.78     95%   146,013   149,187   $ 80.5   $ 540   $ 15.4   $ 44.5
Q1 2017   100   448   417     10.23     95%   143,378   143,481   71.8   500   5.4   55.0
Q4 2016   100   503   426     12.46     95%   180,023   179,912   80.8   449   21.1   63.1
Q3 2016   100   492   440     11.79     95%   178,032   181,508   82.4   454   24.8   60.9
Q2 2016   100   513   428     12.75     95%   183,638   198,890   82.9   417   15.1   59.9
West Africa   Tasiast   Q2 2017   100   975   728   87   2.35   0.59   93%   56,278   52,703   $ 42.1   $ 799   $ 95.2   $ 18.8
Q1 2017   100   1,037   746   75   2.41   0.50   92%   64,623   66,112   47.0   711   71.1   25.3
Q4 2016   100   1,683   736   454   2.39   0.46   91%   63,728   61,318   58.7   957   68.7   29.4
Q3 2016   100   2,462   457   1,585   1.78   0.45   91%   34,793   30,793   38.1   1,237   36.3   22.0
Q2 2016   100   1,937   489   1,542   1.39   0.45   92%   29,577   28,467   35.3   1,240   36.0   22.3
Chirano – 100%   Q2 2017   90   613   822     2.48     92%   55,782   57,787   $ 51.2   $ 886   $ 10.1   $ 36.8
Q1 2017   90   845   852     2.25     92%   58,253   65,695   57.6   877   17.9   34.5
Q4 2016   90   864   811     2.55     92%   62,106   53,400   41.2   772   14.3   28.4
Q3 2016   90   858   918     2.35     92%   61,817   62,573   53.0   847   9.5   30.0
Q2 2016   90   547   882     1.72     91%   43,561   42,312   48.3   1,142   11.1   25.8
Chirano – 90%   Q2 2017   90   613   822     2.48     92%   50,204   52,009   $ 46.1   $ 886   $ 9.1   $ 33.1
Q1 2017   90   845   852     2.25     92%   52,428   59,125   51.8   877   16.1   31.1
Q4 2016   90   864   811     2.55     92%   55,896   48,060   37.1   772   12.9   25.6
Q3 2016   90   858   918     2.35     92%   55,635   56,316   47.7   847   8.5   27.0
Q2 2016   90   547   882     1.72     91%   39,205   38,081   43.5   1,142   10.0   23.2
(1) Tonnes of ore mined and processed represent 100% Kinross for all periods presented.
(2) Due to the nature of heap leach operations, recovery rates at Maricunga and Bald Mountain cannot be accurately measured on a quarterly basis. Recovery rates at Fort Knox, Round Mountain and Tasiast represent mill recovery only.
(3) The Kupol segment includes the Kupol and Dvoinoye mines.
(4) Kupol silver grade and recovery were as follows: Q2 (2017) 78.20 g/t, 84.7%, Q1 (2017) 83.03 g/t, 85.4%; Q4 (2016) 99.05 g/t, 86.6%; Q3 (2016) 104.36 g/t, 90.0%; Q2 (2016) 105.89 g/t, 86.5%
(5) Gold equivalent ounces include silver ounces produced and sold converted to a gold equivalent based on the ratio of the average spot market prices for the commodities for each period. The ratios for the quarters presented are as follows: Q2 2017: 73.01:1, Q1 2017: 69.99:1; Q4 2016: 70.88:1; Q3 2016: 68.05:1; Q2 2016: 75.06:1
(6) Dvoinoye ore processed and grade were as follows: Q2 (2017) 111,664 tonnes, 15.79, Q1 (2017) 120,255 tonnes, 14.67 g/t ; Q4 (2016) 120,000 tonnes, 21.24 g/t ; Q3 (2016) 117,814 tonnes, 18.96 g/t ; Q2 (2016) 118,057 tonnes, 22.42 g/t
(7) Capital expenditures are presented on a cash basis, consistent with the statement of cash flows.
(8) “nm” means not meaningful.
   

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 (loss) to adjusted net earnings (loss) for the periods presented:

                         
                         
    Adjusted Earnings  
  (in millions, except per share amounts)   Three months ended     Six months ended  
    June 30,     June 30,  
    2017     2016     2017     2016  
                                 
Net earnings (loss) attributable to common shareholders – as reported   $ 33.1     $ (25.0 )   $ 167.7     $ 10.0  
                                 
Adjusting items:                                
  Foreign exchange (gains) losses     (0.2 )     6.2       2.4       9.0  
  Gain on disposition of associate and interests and other assets – net     (9.1 )     (3.0 )     (9.6 )     (6.5 )
  Foreign exchange (gains) losses on translation of tax basis and foreign exchange on deferred income taxes within income tax expense     5.6       (31.6 )     1.2       (37.8 )
  Acquisition costs                       7.8  
  Taxes in respect of prior years     24.4       24.0       29.1       17.5  
  Reversal of impairment charges(b)                 (97.0 )      
  Tasiast and Maricunga suspension related costs           22.7             22.7  
  Chile weather event related costs     1.6             1.6        
  Insurance recoveries           (13.0 )     (17.5 )     (13.0 )
  Other(c)     1.6       6.9       1.2       (1.0 )
  Tax effect of the above adjustments     (2.1 )     3.0       (0.8 )     2.7  
      21.8       15.2       (89.4 )     1.4  
Adjusted net earnings (loss) attributable to common shareholders   $ 54.9     $ (9.8 )   $ 78.3     $ 11.4  
Weighted average number of common shares outstanding – Basic     1,247.0       1,244.2       1,246.2       1,208.9  
Adjusted net earnings (loss) per share     0.04       (0.01 )     0.06       0.01  
                                 
(a) In 2016, the Company amended its presentation of the reconciliation of net earnings to adjusted net earnings by presenting the adjusting items on a pre–tax basis and including their tax impact as a separate line item. As a result, the comparative period has been recast to reflect this change in presentation.
(b) During the six months ended June 30, 2017, the Company recognized a reversal of impairment charges related to the disposal of its 25% interest in Cerro Casale.
(c) Other includes non–hedge derivatives losses (gains), transaction costs and restructuring costs.
   

The Company makes reference to a non–GAAP measure for adjusted operating cash flow. 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, the adjusted operating cash flow measure is not necessarily indicative of net cash flow from operations as determined under IFRS.

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

                       
                       
    Adjusted Operating Cash Flow  
  (in millions)   Three months ended     Six months ended  
    June 30,     June 30,  
    2017   2016     2017     2016  
                               
Net cash flow provided from operating activities – as reported   $ 179.7   $ 315.9     $ 387.5     $ 530.4  
                               
Adjusting items:                              
  Working capital changes:                              
    Accounts receivable and other assets     7.1     (4.9 )     (43.1 )     (3.6 )
    Inventories     10.8     (49.6 )     5.1       (83.9 )
    Accounts payable and other liabilities, including taxes     33.2     (74.2 )     132.2       (48.1 )
      51.1     (128.7 )     94.2       (135.6 )
Adjusted operating cash flow   $ 230.8   $ 187.2     $ 481.7     $ 394.8  
                               
                               

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:

       
    Consolidated and Attributable Production Cost of Sales Per
Equivalent Ounce Sold
 
  (in millions, except ounces and production cost of sales per equivalent ounce)   Three months ended     Six months ended  
    June 30,     June 30,  
    2017     2016     2017     2016  
                                 
Production cost of sales – as reported   $ 456.6     $ 506.7     $ 915.4     $ 964.4  
Less: portion attributable to Chirano non–controlling interest     (5.1 )     (4.8 )     (10.9 )     (9.6 )
Attributable production cost of sales   $ 451.5     $ 501.9     $ 904.5     $ 954.8  
                                 
Gold equivalent ounces sold     689,362       690,983       1,341,878       1,355,148  
Less: portion attributable to Chirano non–controlling interest     (5,778 )     (4,231 )     (12,348 )     (8,999 )
Attributable gold equivalent ounces sold     683,584       686,752       1,329,530       1,346,149  
Consolidated production cost of sales per equivalent ounce sold   $ 662     $ 733     $ 682     $ 712  
Attributable production cost of sales per equivalent ounce sold   $ 660     $ 731     $ 680     $ 709  
                                 
                                 

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:

                         
                         
    Attributable Production Cost of Sales Per Ounce Sold on a
By–Product Basis
 
  (in millions, except ounces and production cost of sales per ounce)   Three months ended     Six months ended  
    June 30,     June 30,  
    2017     2016     2017     2016  
                                 
Production cost of sales – as reported   $ 456.6     $ 506.7     $ 915.4     $ 964.4  
Less: portion attributable to Chirano non–controlling interest     (5.1 )     (4.8 )     (10.9 )     (9.6 )
Less: attributable silver revenues     (22.3 )     (29.1 )     (45.2 )     (48.6 )
Attributable production cost of sales net of silver by–product revenue   $ 429.2     $ 472.8     $ 859.3     $ 906.2  
                                 
Gold ounces sold     671,625       669,251       1,305,431       1,316,741  
Less: portion attributable to Chirano non–controlling interest     (5,767 )     (4,219 )     (12,324 )     (8,976 )
Attributable gold ounces sold     665,858       665,032       1,293,107       1,307,765  
Attributable production cost of sales per ounce sold on a by–product basis   $ 645     $ 711     $ 665     $ 693  
                                 
                                 

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 consolidated statement of operations, as follows:

       
    Attributable All–In Sustaining Cost and All–In Cost Per Ounce
Sold on a By–Product Basis
 
(in millions, except ounces and costs per ounce)   Three months ended     Six months ended  
    June 30,     June 30,  
    2017     2016     2017     2016  
                                 
Production cost of sales – as reported   $ 456.6     $ 506.7     $ 915.4     $ 964.4  
Less: portion attributable to Chirano non–controlling interest(1)     (5.1 )     (4.8 )     (10.9 )     (9.6 )
Less: attributable(2) silver revenues(3)     (22.3 )     (29.1 )     (45.2 )     (48.6 )
Attributable(2) production cost of sales net of silver by–product revenue   $ 429.2     $ 472.8     $ 859.3     $ 906.2  
Adjusting items on an attributable(2) basis:                                
  General and administrative(4)     32.0       32.4       67.2       70.7  
  Other operating expense – sustaining(5)     13.9       8.2       20.1       31.7  
  Reclamation and remediation – sustaining(6)     21.4       32.9       42.2       51.2  
  Exploration and business development – sustaining(7)     14.0       12.9       24.9       24.4  
  Additions to property, plant and equipment – sustaining(8)     89.4       90.0       179.1       175.7  
All–in Sustaining Cost on a by–product basis – attributable(2)   $ 599.9     $ 649.2     $ 1,192.8     $ 1,259.9  
  Other operating expense – non–sustaining(5)     13.0       4.9       19.5       7.4  
  Reclamation and remediation – non–sustaining(6)     1.5             3.1        
  Exploration – non–sustaining(7)     10.7       8.6       20.7       13.6  
  Additions to property, plant and equipment – non–sustaining(8)     106.2       20.6       185.7       55.0  
All–in Cost on a by–product basis – attributable(2)   $ 731.3     $ 683.3     $ 1,421.8     $ 1,335.9  
Gold ounces sold     671,625       669,251       1,305,431       1,316,741  
Less: portion attributable to Chirano non–controlling interest(9)     (5,767 )     (4,219 )     (12,324 )     (8,976 )
Attributable(2) gold ounces sold     665,858       665,032       1,293,107       1,307,765  
Attributable(2) all–in sustaining cost per ounce sold on a by–product basis   $ 901     $ 976     $ 922     $ 963  
Attributable(2) all–in cost per ounce sold on a by–product basis   $ 1,098     $ 1,027     $ 1,100     $ 1,022  
                                 
                                 

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 consolidated statement of operations, as follows:

       
    Attributable All–In Sustaining Cost and All–In Cost Per
Equivalent Ounce Sold
 
(in millions, except ounces and costs per equivalent ounce)   Three months ended     Six months ended  
    June 30,     June 30,  
    2017     2016     2017     2016  
                                 
Production cost of sales – as reported   $ 456.6     $ 506.7     $ 915.4     $ 964.4  
Less: portion attributable to Chirano non–controlling interest(1)     (5.1 )     (4.8 )     (10.9 )     (9.6 )
Attributable(2) production cost of sales   $ 451.5     $ 501.9     $ 904.5     $ 954.8  
Adjusting items on an attributable(2) basis:                                
  General and administrative(4)     32.0       32.4       67.2       70.7  
  Other operating expense – sustaining(5)     13.9       8.2       20.1       31.7  
  Reclamation and remediation – sustaining(6)     21.4       32.9       42.2       51.2  
  Exploration and business development – sustaining(7)     14.0       12.9       24.9       24.4  
  Additions to property, plant and equipment – sustaining(8)     89.4       90.0       179.1       175.7  
All–in Sustaining Cost – attributable(2)   $ 622.2     $ 678.3     $ 1,238.0     $ 1,308.5  
  Other operating expense – non–sustaining(5)     13.0       4.9       19.5       7.4  
  Reclamation and remediation – non–sustaining(6)     1.5               3.1          
  Exploration – non–sustaining(7)     10.7       8.6       20.7       13.6  
  Additions to property, plant and equipment – non–sustaining(8)     106.2       20.6       185.7       55.0  
All–in Cost – attributable(2)   $ 753.6     $ 712.4     $ 1,467.0     $ 1,384.5  
Gold equivalent ounces sold     689,362       690,983       1,341,878       1,355,148  
Less: portion attributable to Chirano non–controlling interest(9)     (5,778 )     (4,231 )     (12,348 )     (8,999 )
Attributable(2) gold equivalent ounces sold     683,584       686,752       1,329,530       1,346,149  
Attributable(2) all–in sustaining cost per equivalent ounce sold   $ 910     $ 988     $ 931     $ 972  
Attributable(2) all–in cost per equivalent ounce sold   $ 1,102     $ 1,037     $ 1,103     $ 1,028  
                                 
                                 
 
(1) “Portion attributable to Chirano non–controlling interest” represents the non–controlling interest (10%) in the production cost of sales for the Chirano mine.
(2) “Attributable” includes Kinross' share of Chirano (90%) production.
(3) “Attributable silver revenues” represents the attributable portion of metal sales realized from the production of the secondary or by–product metal (i.e. silver). Revenue from the sale of silver, which is produced as a by–product of the process used to produce gold, effectively reduces the cost of gold production.
(4) “General and administrative” expenses is as reported on the consolidated statement of operations, net of certain severance expenses. General and administrative expenses are considered sustaining costs as they are required to be absorbed on a continuing basis for the effective operation and governance of the Company.
(5) “Other operating expense — sustaining” is calculated as “Other operating expense” as reported on the consolidated statement of operations, less other operating and reclamation and remediation expenses related to non–sustaining activities as well as other items not reflective of the underlying operating performance of our business. Other operating expenses are classified as either sustaining or non–sustaining based on the type and location of the expenditure incurred. The majority of other operating expenses that are incurred at existing operations are considered costs necessary to sustain operations, and are therefore classified as sustaining. Other operating expenses incurred at locations where there is no current operation or related to other non–sustaining activities are classified as non–sustaining.
(6) “Reclamation and remediation — sustaining” is calculated as current period accretion related to reclamation and remediation obligations plus current period amortization of the corresponding reclamation and remediation assets, and is intended to reflect the periodic cost of reclamation and remediation for currently operating mines. Reclamation and remediation costs for development projects or closed mines are excluded from this amount and classified as non–sustaining.
(7) “Exploration and business development — sustaining” is calculated as “Exploration and business development” expenses as reported on the consolidated statement of operations, less non–sustaining exploration expenses. Exploration expenses are classified as either sustaining or non–sustaining based on a determination of the type and location of the exploration expenditure. Exploration expenditures within the footprint of operating mines are considered costs required to sustain current operations and so are included in sustaining costs. Exploration expenditures focused on new ore bodies near existing mines (i.e. brownfield), new exploration projects (i.e. greenfield) or for other generative exploration activity not linked to existing mining operations are classified as non–sustaining. Business development expenses are considered sustaining costs as they are required for general operations.
(8) “Additions to property, plant and equipment — sustaining” represents the majority of capital expenditures at existing operations including capitalized exploration costs, capitalized stripping and underground mine development costs, ongoing replacement of mine equipment and other capital facilities and other capital expenditures and is calculated as total additions to property, plant and equipment (as reported on the consolidated statements of cash flows), less capitalized interest and non–sustaining capital. Non–sustaining capital represents capital expenditures for major growth projects as well as enhancement capital for significant infrastructure improvements at existing operations. Non–sustaining capital expenditures during the second quarter and six months ended June 30, 2017, primarily relate to projects at Tasiast.
(9) “Portion attributable to Chirano non–controlling interest” represents the non–controlling interest (10%) in the ounces sold from the Chirano mine.
 

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 harbor” 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, but are not limited to, those under the headings (or headings that include): “2017 second–quarter highlights”, “Operating results”,”Organic development projects”, “Exploration” and “Outlook” and include, without limitation, statements with respect to our guidance for production; production costs of sales, all–in sustaining cost and capital expenditures; the schedules and budgets for the Company's development projects; the closing of the Cerro Casale sale and the consequences thereof; and continuous improvement initiatives, as well as references to other possible events, the future price of gold and silver, 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, currency fluctuations, capital requirements, project studies, mine life extensions, restarting suspended or disrupted operations; continuous improvement initiatives; and resolution of pending litigation. The words “anticipate”, “assumption”, “believe”, “consideration”, “estimates”, “expects”, “explore”, “forecast”, “focus”, “forward”, “guidance”, “intend”, “initiative”, “measures”, “on budget”, “on schedule”, “on track”, “outlook”, “opportunity”, “phased”, “plan”, “possible”, “potential”, “project”, “projection”, or variations of or similar such words and phrases or statements that certain actions, events or results may, could, should or will be achieved, received or taken, or will occur or result 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 whether due to extreme weather events (including, without limitation, excessive or lack of rainfall and, in particular, the duration of the production curtailment at Paracatu resulting from insufficient rainfall) and other or related natural disasters, labour disruptions (including but not limited to workforce reductions), supply disruptions, power disruptions, damage to equipment or otherwise; (2) permitting, development, operations and production from the Company's operations being consistent with Kinross' current expectations including, without limitation, land acquisitions and permitting for the construction and operation of the new tailings facility, water and power supply and launch of the new tailings reprocessing facility at Paracatu; (3) political and legal developments in any jurisdiction in which the Company operates being consistent with its current expectations including, without limitation, the impact of any political tensions and uncertainty in the Russian Federation and Ukraine or any related sanctions and any other similar restrictions or penalties imposed, or actions taken, by any government, including but not limited to potential power rationing, tailings facility regulation and amendments to mining laws in Brazil, potential amendments to water laws and/or other water use restrictions and regulatory actions in Chile, potential amendments to minerals and mining laws, energy levies laws, and dam safety regulation in Ghana, potential amendments to customs and mining laws (including but not limited amendments to the VAT) in Mauritania, the potential passing of Environmental Protection Agency regulations in the US relating to the provision of financial assurances under the Comprehensive Environmental Response, Compensation and Liability Act, and potential amendments to and enforcement of tax laws in Russia (including, but not limited to, the interpretation, implementation, application and enforcement of any such laws and amendments thereto), being consistent with Kinross' current expectations; (4) 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; (5) certain price assumptions for gold and silver; (6) prices for diesel, natural gas, fuel oil, electricity and other key supplies being approximately consistent with current levels; (7) production and cost of sales forecasts for the Company meeting expectations; (8) 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) and mine plans for the Company's mining operations (including but not limited to throughput and recoveries being affected by metallurgical characteristics at Paracatu); (9) labour and materials costs increasing on a basis consistent with Kinross' current expectations; (10) 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; (11) goodwill and/or asset impairment potential; and (12) access to capital markets, including but not limited to maintaining a debt rating 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, other actions taken, 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; 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, Mauritania, Ghana, or other countries in which Kinross does 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 or other claims against, or regulatory investigations and/or any enforcement actions or sanctions in respect of the Company (and/or its directors, officers, or employees) including, but not limited to, securities class action litigation in Canada and/or the United States, or any investigations, enforcement actions and/or sanctions under any applicable anti–corruption, international sanctions and/or anti–money laundering laws and regulations in Canada, the United States or any other applicable jurisdiction; 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 the “Risk Analysis” section of our full year 2016 MD&A and our 2017 Q1 MD&A. 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.

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 mineral properties contained in this news release has been prepared under the supervision of Mr. John Sims, an officer of the Company who is a “qualified person” within the meaning of National Instrument 43–101 (“NI 43–101″).

New York State Department of Health Approves iAnthus' Proposed Acquisition of Valley Agriceuticals

TORONTO, ON and NEW YORK, NY—(Marketwired – August 02, 2017) – iAnthus Capital Holdings, Inc. (“iAnthus” or “the Company”), (CSE: IAN) (CSE: IAN.CN) (CNSX: IAN) (OTCQB: ITHUF), which owns, operates, and partners with licensed cannabis operators throughout the United States, is pleased to announce that the New York State Department of Health (“DOH”) has approved the Company's proposed acquisition of Valley Agriceuticals, LLC (“Valley Agriceuticals”), as set forth in a binding term sheet between the parties signed in June 2017 (the “Binding Term Sheet”). The state also announced that Valley Agriceuticals has officially been granted a license as a Registered Organization under the medical marijuana program of the State of New York.

Per the license from the state, Valley Agriceuticals has been granted dispensary locations in King's County (“Brooklyn”), Dutchess County, Oneida County and Suffolk County, as well as approval for cultivation and manufacturing operations in its facility in Wallkill, NY. With the dispensary location in Brooklyn, Valley Agriceuticals will have a presence in the second most densely populated county in the United States. If counted as a standalone city, Brooklyn would be the fourth most populous city in the United States with an estimated 2.6 million residents, smaller than only New York City as a whole, Los Angeles and Chicago. The Suffolk County location also exposes Valley Agriceuticals to a large market of approximately 1.5 million residents.

iAnthus recently agreed, pursuant and subject to the terms of the Binding Term Sheet, to acquire 100% of Gloucester Street Capital, LLC, and its wholly owned subsidiaries, Valley Agriceuticals and Valley Agriceuticals Real Estate, LLC for US$17.3 million, which includes US$2.3 million payable in cash and US$15.0 million payable in common shares and Class A restricted voting convertible shares of iAnthus (“Class A shares” and together with the common shares, referred to for convenience as “shares”) priced at US$2.00 per share. Up to an additional five million shares may be issued to Valley Agriceuticals' shareholders conditional upon Valley Agriceuticals achieving 15,000 active patient registrations by December 31, 2020 (the “Milestone Payments”). In aggregate, iAnthus expects to issue 7,500,000 shares to satisfy the US$15.0 million payment and up to a further 5,000,000 shares to satisfy the Milestone Payments.

In addition to acquiring Valley Agriceuticals and its license to cultivate, process and dispense medical cannabis through four dispensary locations, the proposed acquisition also includes the Valley Agriceuticals cultivation campus in Wallkill, NY, consisting of 136 acres of real estate that is currently zoned for cannabis cultivation, a 6,500–square foot custom–built cultivation and processing facility.

Following yesterday's decision by the DOH to approve the transaction, the deal is expected to close during the third quarter of 2017, following applicable approval from the Canadian Securities Exchange and completion of definitive documentation between parties.

“Today marks a big step for the iAnthus and Valley Agriceuticals teams, receiving the state's blessing for the acquisition, in addition to the granting of the license and dispensary locations to the Valley Agriceuticals team. The team is already making progress in securing prime real estate in each of the dynamic markets in which it has been granted licenses,” said Hadley Ford, CEO of iAnthus. “The Brooklyn and Suffolk County dispensaries in particular provide Valley Agriceuticals with direct exposure to large patient bases.”

“On behalf of the Valley Agriceuticals team, we are excited to be given the opportunity to join New York's medical cannabis program,” said Erik Holling, President of Valley Agriceuticals. “Our team looks forward to ensuring that New York's medical cannabis patients have access to the best medicines possible to take full advantage of the health benefits of medical cannabis.”

Background on the New York State Medical Marijuana Program

The New York State Medical Marijuana Program (the “Program”) began registering patients in December 2015 and currently numbers 25,726 certified patients, as of August 1, 2017. The Program has been expanded in the recent months to increase the accessibility of medical marijuana to patients through the addition of chronic pain as a qualifying condition and publishing the names of qualifying practitioners to make it easier for patients to obtain a medical certification.

Since the addition of chronic pain to the Program's list of approved indications, certified patients have surged, increasing by 10,744 since late March, and increase of 72%. Both houses of the New York State Congress have also recently passed legislation to add post–traumatic stress disorder (“PTSD”) to the list of qualifying conditions. That bill is currently awaiting a final decision by the governor and is expected to provide an additional catalyst for patient growth in the near future.

Transaction Details

Subject to the terms of the Binding Term Sheet, iAnthus will acquire 100% of Gloucester Street Capital, LLC, and its wholly owned subsidiaries, Valley Agriceuticals and Valley Agriceuticals Real Estate, LLC, for US$17.3 million, which includes US$2.3 million payable in cash and US$15.0 million payable in shares of iAnthus priced at US$2.00 per share (resulting in 7,500,000 shares). The proposed acquisition will also include the Valley Agriceuticals cultivation campus real estate and cultivation and processing facility. Up to an additional five million shares may be issued to Valley Agriceuticals shareholders conditional upon Valley Agriceuticals achieving 15,000 active patient registrations by December 31, 2020. Certain of the executives of Valley Agriceuticals will receive 60% of their respective share consideration in Class A shares.

The transaction remains subject to a number of conditions, including Canadian Securities Exchange approval and completion of definitive documentation between parties. The transaction is expected to close during the third quarter of 2017.

For more information about the New York State Medical Marijuana Program, please visit
https://www.health.ny.gov/regulations/medical_marijuana/about.htm

The securities issued by iAnthus under the transaction will be issued on a prospectus exempt basis and will be subject to: (i) a hold period in Canada of four months and a day from the date of issuance; and (ii) an applicable US securities law legend.

About iAnthus Capital Holdings, Inc.
iAnthus Capital Holdings, Inc., through its wholly–owned subsidiary iAnthus Capital Management, LLC, provides investors diversified exposure to best–in–class licensed cannabis cultivators, processors and dispensaries throughout the United States. iAnthus currently owns, operates or has partnered with marijuana license holders in Massachusetts, Vermont, Colorado and New Mexico. Founded by entrepreneurs with decades of experience in investment banking, corporate finance, law and healthcare services, iAnthus provides a unique combination of capital and hands–on operating and management expertise. The Company leverages these skills to support a diversified portfolio of cannabis industry investments for our shareholders. For more information, visit www.iAnthuscapital.com.

About Gloucester Street Capital, LLC.
Gloucester Street Capital, LLC, together with its wholly–owned subsidiaries, Valley Agriceuticals, LLC and Valley Agriceuticals Real Estate Holdings, LLC, was founded in 2014 to apply for registration as a licensed Registered Organization under the New York State Medical Marijuana Program. On May 25, 2017, DOH issued Valley Agriceuticals a conditional registration as a Registered Organization, subject to DOH review and approval of certain additional information related to Valley Agriceuticals' real property interests and requested minor additions to Valley Agriceuticals' application and operating plan. Valley Agriceuticals expects to receive its final registration as a Registered Organization in the Summer of 2017.

Forward Looking Statements
Statements in this news release that are forward–looking statements are subject to various risks and uncertainties concerning the specific factors disclosed here and elsewhere in iAnthus' periodic filings with Canadian securities regulators. When used in this news release, words such as “will, could, plan, estimate, expect, intend, may, potential, believe, should,” and similar expressions, are forward–looking statements.

Forward–looking statements may include, without limitation, statements relating to the acquisition of final registration as a registered organization in New York State, the number of enrollees in the Program, Valley Agriceuticals' proposed products, the expected date of the closing of the proposed acquisition, and potential for patient growth in New York State.

Although iAnthus has attempted to identify important factors that could cause actual results, performance or achievements to differ materially from those contained in the forward–looking statements, there can be other factors that cause results, performance or achievements not to be as anticipated, estimated or intended, including, but not limited to: dependence on obtaining regulatory approvals; investing in target companies or projects which have limited or no operating history and are engaged in activities currently considered illegal under US Federal laws; change in laws; limited operating history; reliance on management; requirements for additional financing; competition; hindering market growth and state adoption due to inconsistent public opinion and perception of the medical–use and adult–use marijuana industry and; regulatory or political change.

There can be no assurance that such information will prove to be accurate or that management's expectations or estimates of future developments, circumstances or results will materialize. As a result of these risks and uncertainties, the results or events predicted in these forward–looking statements may differ materially from actual results or events.

Accordingly, readers should not place undue reliance on forward–looking statements. The forward–looking statements in this news release are made as of the date of this release. iAnthus disclaims any intention or obligation to update or revise such information, except as required by applicable law, and iAnthus does not assume any liability for disclosure relating to any other company mentioned herein.

The Canadian Securities Exchange has not reviewed, approved or disapproved the content of this news release.

Stamps.com Reports Second Quarter 2017 Results

EL SEGUNDO, CA—(Marketwired – August 02, 2017) – Stamps.com® (NASDAQ: STMP), the leading provider of postage online and shipping software solutions to over 725 thousand customers, today announced results for the quarter ended June 30, 2017.

Second Quarter 2017 Financial Highlights

  • Total revenue was $116.1 million, up 38% compared to $84.0 million in the second quarter of 2016.
  • GAAP net income was $31.0 million, up 117% compared to $14.3 million in the second quarter of 2016.
  • GAAP net income per fully diluted share was $1.71, up 118% compared to $0.79 in the second quarter of 2016.
  • Non–GAAP adjusted EBITDA was $58.1 million, up 52% compared to $38.2 million in the second quarter of 2016.
  • Non–GAAP adjusted income per fully diluted share was $2.08, up 62% compared to $1.29 (as adjusted) in the second quarter of 2016.

“We are very pleased with the continued strength of our financial performance this quarter,” said Ken McBride, Stamps.com's Chairman and CEO. “In addition to our strong revenue and earnings growth during the second quarter, we reached our highest level of paid customers and average revenue per paid customer, we saw continued strong growth in our shipping business areas, and we experienced strong contributions from all of our subsidiaries. We remain very excited about our future business opportunities which, combined with our second quarter performance, led us to increase our guidance for 2017.”

Second Quarter 2017 Detailed Results

Second quarter 2017 total revenue was $116.1 million, up 38% compared to the second quarter of 2016. Second quarter 2017 Mailing and Shipping revenue (which includes service, product and insurance revenue but excludes Customized Postage and Other revenue) was $111.8 million, up 37% versus the second quarter of 2016. Second quarter 2017 Customized Postage revenue was $4.3 million, up 73% versus the second quarter of 2016.

Second quarter 2017 GAAP income from operations was $41.7 million and GAAP net income was $31.0 million. GAAP net income per share was $1.71 based on 18.1 million fully diluted shares outstanding. This compares to second quarter 2016 GAAP income from operations of $25.0 million and GAAP net income of $14.3 million or $0.79 per share based on fully diluted shares outstanding of 18.2 million. Second quarter 2017 GAAP income from operations, GAAP net income and GAAP income per fully diluted share increased by 67%, 117% and 118% year–over–year, respectively.

Second quarter 2017 GAAP income from operations included $11.0 million of non–cash stock–based compensation expense and $4.0 million of non–cash amortization of acquired intangibles. Second quarter 2017 GAAP net income also included $93 thousand of non–cash amortization of debt issuance costs. Excluding the non–cash stock–based compensation expense and non–cash amortization of acquired intangibles, second quarter 2017 non–GAAP income from operations was $56.7 million. Also excluding non–cash amortization of debt issuance costs, second quarter 2017 non–GAAP pre–tax income was $56.0 million. Second quarter 2017 non–GAAP income tax expense was $18.2 million, which was $8.3 million higher than the $9.9 million GAAP income tax expense for the quarter. The higher non–GAAP tax expense reflects the tax impact on the non–GAAP pre–tax income at a non–GAAP effective tax rate of 32.5%. See the section later in this press release entitled “About Non–GAAP Financial Measures” for more information on how non–GAAP taxes are calculated. Taking into account the non–GAAP adjustments, second quarter 2017 non–GAAP adjusted income was $37.8 million or $2.08 per share based on 18.1 million fully diluted shares outstanding.

Second quarter 2016 GAAP income from operations included $8.4 million of non–cash stock–based compensation expense, $3.2 million of non–cash amortization of acquired intangibles and $0.5 million of acquisition related expenses. Excluding the non–cash stock–based compensation expense, non–cash amortization of acquired intangibles and acquisition related expenses, second quarter 2016 non–GAAP income from operations was $37.1 million. Second quarter 2016 GAAP pre–tax income also included $93 thousand of non–cash amortization of debt issuance costs. Also excluding non–cash amortization of debt issuance costs, second quarter 2016 non–GAAP pre–tax income was $36.4 million.

Second quarter 2016 non–GAAP income tax expense as reported last year was $1.1 million. In the second quarter of 2016, the Company still had significant tax assets to utilize and was paying the alternative minimum tax; however as of first quarter 2017, the Company had utilized the majority of those tax assets and is expected to be a regular cash taxpayer for 2017. As a result, the Company adopted a new methodology in the first quarter of 2017 for calculating non–GAAP tax expense. See the section later in this press release entitled “About Non–GAAP Financial Measures” for more information on how non–GAAP taxes were calculated in 2016 and 2017. The Company has recast the non–GAAP second quarter of 2016 financial results in this release to conform to the tax methodology used in the second quarter 2017 as the Company believes this presentation is the most useful for investors wishing to compare period over period results. The recast non–GAAP tax expense for the second quarter of 2016 is $13.0 million using the 2016 effective tax rate of 35.7%. As recast, second quarter 2016 non–GAAP adjusted income was $23.4 million or $1.29 per share based on 18.2 million fully diluted shares outstanding.

Therefore, second quarter 2017 non–GAAP income from operations, non–GAAP adjusted income and non–GAAP adjusted income per fully diluted share increased by 53%, 62% and 62% year–over–year, respectively.

Non–GAAP income from operations, non–GAAP adjusted income and non–GAAP adjusted income per share are described further in the “About Non–GAAP Financial Measures” section of this press release and are reconciled to the corresponding GAAP measures in the following tables (unaudited):

 
Reconciliation of Non–GAAP to GAAP Financial Measures (Second Quarter 2017)
                         
Second Quarter Fiscal 2017
All amounts in millions except per share data:
  GAAP
Amounts
  Stock–Based
Compensation
Expense
  Intangible
Amortization
Expense
  Debt
Amortization
Expense
  Income
Tax
Adjustments
  Non–GAAP
Amounts
                         
Cost of Revenues   $ 19.09     $ 0.45     $     $     $   $ 18.64  
Research & Development     11.63       2.22                       9.41  
Sales & Marketing     22.28       1.97                       20.31  
General & Administrative     21.45       6.33       4.00                 11.13  
                                               
Total Expenses     74.45       10.97       4.00                 59.48  
                                               
Income (Loss) from Operations     41.69       (10.97 )     (4.00 )               56.66  
                                               
Interest and Other Income (Loss)     (0.77 )                 (0.09 )         (0.68 )
                                               
Benefit (Expense) for Income Taxes     (9.88 )                       8.31     (18.19 )
                                               
Adjusted Income (Loss)     31.04       (10.97 )     (4.00 )     (0.09 )     8.31     37.79  
                                               
On a diluted per share basis   $ 1.71     $ (0.61 )   $ (0.22 )   $ (0.01 )   $ 0.46   $ 2.08  
                                               
Shares used in per share calculation     18.12       18.12       18.12       18.12       18.12     18.12  
                                               
 
Reconciliation of Non–GAAP to GAAP Financial Measures (Second Quarter 2016 (Recast))
                             
Second Quarter Fiscal 2016 (Recast)
All amounts in millions except per share data:
  GAAP
Amounts
  Stock–Based
Compensation
Expense
  Intangible
Amortization
Expense
  Acquisition
Related
Expenses
  Debt
Amortization
  Income Tax
Adjustments
  Non–GAAP
Amounts
                             
Cost of Revenues   $ 13.72     $ 0.45     $     $     $     $   $ 13.27  
Research & Development     8.13       1.42                             6.71  
Sales & Marketing     20.08       1.86                             18.22  
General & Administrative     17.11       4.68       3.24       0.52                 8.67  
                                                       
Total Expenses     59.05       8.42       3.24       0.52                 46.87  
                                                       
Income (Loss) from Operations     24.97       (8.42 )     (3.24 )     (0.52 )               37.14  
                                                       
Interest and Other Income (Loss)     (0.87 )                       (0.09 )         (0.78 )
                                                       
Pre–Tax Income (Loss)     24.09       (8.42 )     (3.24 )     (0.52 )     (0.09 )         36.36  
                                                       
Benefit (Expense) for Income Taxes     (9.80 )                             3.18     (12.98 )
                                                       
Adjusted Income (Loss)     14.29       (8.42 )     (3.24 )     (0.52 )     (0.09 )     3.18     23.38  
                                                       
On a diluted per share basis   $ 0.79     $ (0.46 )   $ (0.18 )   $ (0.03 )   $ (0.01 )   $ 0.17   $ 1.29  
                                                       
Shares used in per share calculation     18.19       18.19       18.19       18.19       18.19       18.19     18.19  
                                                       

Second Quarter GAAP Net Income and Non–GAAP Adjusted EBITDA

Second quarter 2017 GAAP net income was $31.0 million, up 117% compared to $14.3 million in the second quarter of 2016.

Second quarter 2017 non–GAAP adjusted EBITDA was $58.1 million, up 52% compared to $38.2 million in the second quarter of 2016.

Adjusted EBITDA is a non–GAAP financial measure which is described further in the “About Non–GAAP Financial Measures” section of this press release and is reconciled to GAAP net income in the following table (unaudited):

 
Reconciliation of Non–GAAP Adjusted EBITDA to GAAP Net Income
     
Second Quarter   Three Months ended
All amounts in millions   June 30,
    2017   2016
         
GAAP Net Income (Loss)   $31.04   $14.29
         
Depreciation and Amortization expense   $5.40   $4.33
Interest & Other Expense (Income), net   $0.77   $0.87
Income Tax Expense (Benefit), net   $9.88   $9.80
         
Stock–based Compensation Expense   $10.97   $8.42
Acquisition Related Expenses   $ —   $0.52
         
Adjusted EBITDA   $58.06   $38.24
         

Taxes

In the first quarter of 2017, the Company adopted Accounting Standards Update No. 2016–09, Compensation–Stock Compensation (Topic 718): Improvements to Employee Share–Based Payment Accounting (ASU 2016–09), which requires us, among other items, to record excess tax benefits as a reduction of the provision for income taxes in the income statements, whereas they were previously recognized in equity. The impact of adoption has been reflected in our income statement for the period ended June 30, 2017.

For the second quarter of 2017, the Company reported a GAAP income tax expense of $9.9 million, representing an effective GAAP tax rate of 24.1%, which was lower than our effective GAAP tax rate of 35.7% for 2016. The lower effective GAAP tax rate was primarily related to the tax benefits resulting from employee option exercises in the second quarter of 2017 and the associated change in accounting treatment under ASU 2016–09. As discussed below under the heading “About Non–GAAP Financial Measures,” we believe our effective non–GAAP tax rate for 2017 will be approximately 32.5%. Accordingly, the second quarter 2017 effective GAAP rate of 24.1% should not be assumed to apply for 2017 as a whole and may not be indicative of our tax rate for the third and fourth quarters. Our second quarter 2017 GAAP net income should also be understood to have been positively impacted by the lower effective tax rate applicable specifically to the quarter.

Share Repurchase and Debt Repayment

During the second quarter of 2017, the Company repurchased approximately 374 thousand shares at a total cost of approximately $44.0 million. During the first half of 2017, the Company repurchased approximately 730 thousand shares at a total cost of approximately $87.9 million. The current Board–approved share repurchase program, which expires in November of 2017, had a remaining authorization of approximately $68.5 million as of June 30, 2017.

During the second quarter of 2017, the Company made a required principal repayment of $1.5 million against the borrowings under the Company's existing credit agreement related to the Endicia acquisition. As of June 30, 2017, the total debt under the credit agreement excluding debt issuance costs was $135.7 million.

Summary of our Updated Business Outlook

Today the Company increased its 2017 GAAP financial outlook as follows:

  • We expect total 2017 revenue to be in a range of approximately $435 million to $460 million; this compares to previous guidance of $405 million to $430 million.
  • We expect GAAP net income per fully diluted share to be in a range of approximately $5.15 to $6.07; this compares to previous guidance of $4.78 to $5.69.

The above GAAP numbers adjusted as detailed below result in the following non–GAAP financial outlook:

  • We expect non–GAAP adjusted EBITDA to be in a range of approximately $220 million to $240 million; this compares to previous guidance of $205 million to $225 million.
  • We expect non–GAAP adjusted income per fully diluted share to be in a range of $7.50 to $8.50; this compares to previous guidance of $7.00 to $8.00.

Detailed Discussion of our Updated Business Outlook

For 2017, the Company currently expects total revenue to be in a range of approximately $435 million to $460 million; this compares to previous guidance of $405 million to $430 million.

For 2017, the Company currently expects GAAP net income to be in a range of approximately $97 million to $111 million; this compares to previous guidance of $90 million to $103 million. The expected GAAP net income range includes depreciation and amortization expense of approximately $22 million, stock–based compensation expense of approximately $46 million, interest expense and other income, net of approximately $5 million and income tax expense of approximately $47 million to $53 million. In addition, the expected GAAP net income range includes approximately $6 million in executive consulting expense related to our consulting agreement with our former Co–President and Corporate & Business Development Officer which will be recognized in accordance with GAAP in the third quarter of 2017. The expected GAAP net income range also includes a gain of approximately $2 million related to an insurance reimbursement of the Company's legal fees in relation to its Express One settlement. Excluding the executive consulting expense, insurance proceeds gain, depreciation and amortization expense, stock–based compensation expense, interest expense and other income, net and income tax expense, we expect non–GAAP adjusted EBITDA to be in a range of approximately $220 million to $240 million; this compares to previous guidance of $205 million to $225 million.

The following table is provided to facilitate a reconciliation of 2017 expected non–GAAP adjusted EBITDA to expected GAAP net income:

     
    Fiscal Year 2017 Guidance
All amounts in millions   Low End of Range   High End of Range
         
GAAP net income   $97.3   $110.8
         
Adjustments to reconcile adjusted EBITDA to GAAP net income:    
Executive consulting expense   $6.1   $6.1
Insurance proceeds gain   ($2.2)   ($2.2)
Depreciation and amortization expense   $22.0   $22.0
Stock–based compensation expense   $45.5   $45.5
Interest expense and other income, net   $4.5   $4.5
Income tax expense   $46.8   $53.3
Total adjustments excluded from adjusted EBITDA   $122.7   $129.2
         
Adjusted EBITDA   $220.0   $240.0
         

For 2017, the Company currently expects GAAP net income per fully diluted share to be in a range of approximately $5.15 to $6.07; this compares to previous guidance of $4.78 to $5.69. The expected GAAP net income per fully diluted share range includes non–cash stock–based compensation expense of approximately $46 million, non–cash amortization of acquired intangibles expense of approximately $16 million and non–cash amortization of debt issuance costs of approximately $0.4 million. In addition, the expected GAAP net income per fully diluted share range includes executive consulting expense of approximately $6 million and includes a gain on insurance proceeds of approximately $2 million. Excluding the stock–based compensation expense, amortization of acquired intangibles expense, amortization of debt issuance costs, executive consulting expense and gain on insurance proceeds, and including higher expected non–GAAP income taxes of approximately $21 million from the expected tax effects of these adjustments at an assumed 32.5% effective tax rate, non–GAAP adjusted income per fully diluted share is expected to be in a range of $7.50 to $8.50; this compares to previous guidance of $7.00 to $8.00.

The following table is provided to facilitate a reconciliation of fiscal year 2017 expected non–GAAP adjusted income per fully diluted share to expected GAAP net income per fully diluted share:

     
    Fiscal Year 2017 Guidance
All amounts in millions except per share data   Low End of Range   High End of Range
         
GAAP net income per fully diluted share   $5.15   $6.07
         
Adjustments to reconcile non–GAAP to GAAP:        
Executive consulting expense   $6.1   $6.1
Insurance proceeds gain   ($2.2)   ($2.2)
Stock–based compensation expense   $45.5   $45.5
Amortization of acquired intangibles   $16.0   $16.0
Amortization of debt issuance costs   $0.4   $0.4
Total adjustments excluded from non–GAAP   $65.8   $65.8
Effective tax rate   32.5%   32.5%
Increased tax expense from non–GAAP adjustments   $21.4   $21.4
Total tax effected adjustments excluded from non–GAAP   $44.4   $44.4
         
Fully diluted shares   18.9   18.3
Total adjustments excluded from non–GAAP adjusted income per fully diluted share   $2.35   $2.43
         
Non–GAAP adjusted income per fully diluted share   $7.50   $8.50
         

This business outlook does not include the impact from potential future acquisitions, including acquisition costs or related financings, or unanticipated events. This business outlook and the related assumptions are forward–looking statements subject to the safe harbor statement contained at the end of this press release, and reflect our views of current and future market conditions. Ranges represent a set of likely assumptions, but actual results could fall outside the range presented. Only a few of our assumptions underlying our guidance are disclosed above, and our actual results will be affected by known and unknown risks, trends, uncertainties and other factors, some of which are beyond our control or ability to predict. Although we believe that the assumptions underlying our guidance are reasonable, they are not guarantees of future performance and some of them will inevitably prove to be incorrect. As a result, our actual future results can be expected to differ from our expectations, and those differences could be material.

Company Metrics and Conference Call

2017 Company metrics, updated to include the second quarter, is available at http://investor.stamps.com (under a tab on the left side called Company Information, Metrics). These metrics are not incorporated into this press release.

The Stamps.com financial results conference call will be webcast today at 5:00 p.m. Eastern Time and may be accessed at http://investor.stamps.com. The Company plans to discuss its business outlook during the conference call. Following the conclusion of the webcast, a replay of the call will be available at the same website.

About Stamps.com, Endicia, ShipStation, ShipWorks and ShippingEasy

Stamps.com (NASDAQ: STMP) is the leading provider of postage online and shipping software solutions to over 725 thousand customers, including consumers, small businesses, e–commerce shippers, enterprises, and high volume shippers. Stamps.com offers solutions that help businesses run their shipping operations more smoothly and function more successfully under the brand names Stamps.com, Endicia, ShipStation, ShipWorks and ShippingEasy. Stamps.com's family of brands provides seamless access to mailing and shipping services through integrations with more than 450 unique partner applications.

Endicia is a leading brand for high volume shipping technologies and services for U.S. Postal Service shipping. Under this brand we offer solutions that help businesses run their shipping operations more smoothly and function more successfully. Our Endicia branded solutions also provide seamless access to USPS shipping services through integrations with partner applications.

ShipStation is a leading web–based shipping solution that helps e–commerce retailers import, organize, process, package, and ship their orders quickly and easily from any web browser. ShipStation features the most integrations of any e–commerce web–based solution with more than 150 shopping carts, marketplaces, package carriers, and fulfillment services. Integration partners include eBay, PayPal, Amazon, Etsy, Square, Shopify, BigCommerce, Volusion, Magento, Squarespace, and carriers such as USPS, UPS, FedEx and DHL. ShipStation has sophisticated automation features such as automated order importing, custom hierarchical rules, product profiles, and fulfillment solutions that enable its customers to complete their orders, wherever they sell, and however they ship.

ShipWorks is a leading brand for client–based shipping solutions that help high volume shippers import, organize, process, fulfill, and ship their orders quickly and easily from any standard PC. With integrations to more than 90 shopping carts, marketplaces, package carriers, and fulfillment services, ShipWorks has the most integrations of any high–volume client shipping solution. Package carriers include USPS, UPS, FedEx, DHL, OnTrac and many more. Marketplace and shopping cart integrations include eBay, PayPal, Amazon, Etsy, Shopify, BigCommerce, Volusion, Channel Advisor, Magento, and many more. ShipWorks has sophisticated automation features such as a custom rules engine, automated order importing, automatic product profile detection, and fulfillment automation, which enable high volume shippers to complete their orders quickly and efficiently.

ShippingEasy is a leading web–based shipping software solution that allows online retailers and e–commerce merchants to organize, process, fulfill and ship their orders quickly and easily. ShippingEasy integrates with leading marketplaces, shopping carts, and e–commerce platforms to allow order fulfillment and tracking data to populate in real time across all systems. The ShippingEasy software downloads orders from all selling channels and automatically maps custom shipping preferences, rates and delivery options across all supported carriers.

About Non–GAAP Financial Measures

To supplement the Company's condensed consolidated financial statements presented in accordance with GAAP, Stamps.com uses non–GAAP measures of certain components of financial performance. These non–GAAP measures include non–GAAP income from operations, non–GAAP adjusted income, non–GAAP adjusted income per fully diluted share and adjusted EBITDA. Non–GAAP adjusted income per fully diluted share is calculated as adjusted non–GAAP net income divided by fully diluted shares. Prior to the second quarter 2016, the Company referred to non–GAAP adjusted income as non–GAAP net income. Adjusted EBITDA as calculated in this press release represents earnings before interest and other expense, net, interest and other income, net, income tax expense or benefit, depreciation and amortization and excludes certain items, such as stock–based compensation expense, described in this release used to reconcile GAAP to non–GAAP income from operations. The presentation of non–GAAP financial measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. These non–GAAP financial measures may differ from similarly titled measures used by other companies. Reconciliation of non–GAAP financial measures included in this press release to the corresponding GAAP measures can be found in the financial tables of this earnings release.

Non–GAAP financial measures are provided to enhance investors' overall understanding of the Company's financial performance and prospects for the future and as a means to evaluate period–to–period comparisons. The Company believes the non–GAAP measures that exclude certain non–cash items including stock–based compensation expense, amortization of acquired intangibles, amortization of debt issuance costs, contingent consideration charges and income tax adjustments, and exclude certain expenses and gains such as acquisition related expenses, litigation settlement expenses, executive consulting expenses, and gains on insurance proceeds, provide meaningful supplemental information regarding financial performance by excluding certain expenses and benefits that may not be reflective of our current operating performance. The Company believes that non–GAAP financial measures, when viewed with GAAP results and the accompanying reconciliation, enhance the comparability of operating results against prior periods and allow for greater transparency of operatin