1998 Annual Report - Kinross Gold

KINROSSGOLD CORPORATION1998 ANNUAL REPORT

CONTENTSCORPORATE PROFILE1 Highlights4 Message to ShareholdersOperations12 Operations Review16 Fort Knox19 Hoyle Pond24 Kubaka27 Refugio28 Macassa29 Denton-Rawhide30 Blanket31 Residual Properties34 Exploration and Development37 Community Commitment38 EnvironmentFinancial Information42 Management’s Discussion and Analysis51 Auditor’s Report52 Consolidated Financial Statements56 Notes to the Consolidated FinancialStatements76 Supplemental Information77 Corporate DataON JUNE 1, 1998 KINROSS GOLD CORPORATIONMERGED WITH AMAX GOLD INC. MAKING THE “NEW”KINROSS THE FIFTH LARGEST NORTH AMERICANGOLD PRODUCER. THIS MERGER HAS RESULTED ININCREASING THE COMPANY’S RESERVES ANDPRODUCTION DRAMATICALLY, WHILE LOWERING CASHCOSTS. SINCE THE COMPANY’S FORMATION IN 1993,KINROSS HAS QUICKLY BECOME AN INTERNATIONALGOLD MINING COMPANY, WELL POSITIONED AS AMAJOR PLAYER ON THE GLOBAL SCENE.Cover:The image of the golden retriever has appeared on every cover of the Kinross annual report since 1994 with the exception of 1997.Last year we felt that using such a light image would not be appropriate in such a dark period in the gold industry.This year’s cover is designed to indicate that maybe... just maybe... there is light at the end of the tunnel.Note:All dollar amounts contained in this report are expressed in U.S. dollars unless otherwise specified.Cautionary Statement:This document includes certain “forward-looking statements” within the meaning of section 21E of the United States Securities Exchange Actof 1934, as amended. All statements, other than statements of historical fact, included herein, including without limitation, statements regardingpotential mineralization and reserves, exploration results and future plans and objectives of Kinross Gold Corporation (“Kinross”), are forwardlookingstatements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate, andactual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual resultsto differ materially from Kinross’ expectations are disclosed under the heading “Risk Factors” and elsewhere in Kinross’ documents filed fromtime to time with the Toronto Stock Exchange, the United States Securities and Exchange Commission and other regulatory authorities.

H I G H L I G H T SORE RESERVES AND RESOURCESKinross Gold Corporation’s Share at December 31, 1998 (1)Grade Contained ContainedOperating and Kinross ORE Gold Silver Gold Silver Gold SilverDeveloping Mines Share (%) (tonnes) (g/t) (g/t) (kg) (kg) (ozs) (ozs)PROVEN AND PROBABLE RESERVESBased on $325/oz. Gold (Including stockpiles - Inplace, Mineable and Diluted)Canadian Operations:Hoyle Pond 100.0% 1,413,000 10.72 - 15,148 - 487,000 -Macassa 100.0% 877,000 12.38 - 10,855 - 349,000 -U.S. Operations:Fort Knox 100.0% 142,092,000 0.82 - 116,484 - 3,745,000 -Denton-Rawhide 49.0% 19,991,000 0.70 11.37 14,028 227,370 451,000 7,310,000Outside U.S. and Canada:Kubaka - Russia 53.0% 1,667,000 16.08 21.76 26,812 36,267 862,000 1,166,000Refugio - Chile 50.0% 38,286,000 0.90 - 34,339 - 1,104,000 -Blanket - Zimbabwe 100.0% 2,870,000 2.36 - 6,781 - 218,000 -Development Projects:Hoyle 2000 - Canada 100.0% 145,000 7.30 - 1,058 - 34,000 -Aginskoe - Russia 25.0% 230,000 29.62 13.12 6,812 3,017 219,000 97,000Total Proven +Probable Reserves 207,571,000 1.12 1.28 232,317 266,654 7,469,000 8,573,000POSSIBLE RESERVESCanadian Operations:Hoyle Pond 100.0% 1,741,000 7.74 - 13,468 - 433,000 -Macassa 100.0% 65,000 24.88 - 1,617 - 52,000 -U.S. Operations:Fort Knox 100.0% 11,487,000 0.75 - 8,616 - 277,000 -Denton-Rawhide 49.0% - 0.00 - - - - -Outside U.S. and Canada:Kubaka - Russia 53.0% - 0.00 - - - - -Refugio - Chile 50.0% 3,029,000 0.98 - 2,955 - 95,000Blanket - Zimbabwe 100.0% - 0.00 - - - - -Development Projects:Hoyle 2000 - Canada 100.0% - - - - - - -Aginskoe - Russia 25.0% 172,000 19.71 11.58 3,390 1,991 109,000 64,000Total Possible Reserves 16,494,000 1.82 0.12 30,046 1,991 966,000 64,000RESOURCES (Measured, Indicated and Inferred Resources Excluding Proven, Probable and Possible Reserves)Canadian Properties:Hoyle Pond 100.0% 2,736,000 7.18 - 19,658 - 632,000 -Macassa 100.0% 3,588,000 9.92 - 35,583 - 1,144,000 -Q.R. 100.0% 802,000 5.12 - 4,106 - 132,000 -U.S. Properties:Fort Knox 100.0% 49,405,000 0.77 - 37,822 - 1,216,000Denton-Rawhide 49.0% 2,362,000 0.88 10.61 2,084 25,070 67,000 806,000Candelaria 100.0% 9,777,000 0.15 144.44 1,493 1,412,215 48,000 45,403,000DeLamar 100.0% 9,266,000 1.25 32.05 11,571 296,950 372,000 9,547,000Haile 100.0% 7,925,000 3.06 - 24,261 - 780,000 -Outside U.S. and Canada:Kubaka - Russia 53.0% 1,895,000 6.66 157.83 12,628 299,096 406,000 9,616,000Refugio - Chile 50.0% 118,152,000 0.82 - 96,547 - 3,104,000 -Blanket - Zimbabwe 100.0% 2,612,000 5.70 - 14,899 - 479,000 -Angostura - Colombia 20.6% 30,125,000 1.17 4.73 35,179 142,425 1,131,000 4,579,000Development Projects:Hoyle 2000 - Canada 100.0% 11,552,000 4.45 - 51,415 - 1,653,000 -Goldbanks - U.S. 100.0% 166,191,000 0.48 1.40 80,093 232,285 2,575,000 7,468,000Pentland Firth - Canada 46.4% 41,058,000 1.03 - 42,208 - 1,357,000 -Mirage - El Salvador 50.7% 2,112,000 6.73 49.20 14,215 103,918 457,000 3,341,000Mt. Henry - Australia 100.0% 10,832,000 1.25 - 13,499 - 434,000 -Selene - Australia 100.0% 14,138,000 1.18 - 16,641 - 535,000 -Total Resources 484,528,000 1.06 5.18 513,902 2,511,959 16,522,000 80,760,000(1) Reserves and Resources reflect Kinross' ownership but do not reflect the merger with La Teko Resources Ltd.which became effective February 26, 1999.1

H I G H L I G H T SGold Equivalent Production(000’s of ounces)1,2001,1001,000900800700600500400300200384225245CASH MARGIN PER OUNCEOF PRODUCTION388 388254342258525344268499309874214400300200100Total Cash Costs & Realized Gold Prices(U.S.$ / ounces)50403020100CASH FLOW PROVIDEDFROM OPERATIONS(millions $)5040302010010001994 1995 1996 1997 199801996 1997 1998Gold Equivalent ProductionRealized Gold PricesTotal Cash Costs1998 GOLD AND SILVER PRODUCTIONKinross Gold Corporation’s Share at December 31, 1998Company’s Share Gold Production Silver Productionof Production (%) (kg) (oz.) (kg) (oz.)Primary Operations:Hoyle Pond 100% 4,944 158,953 - -Macassa 100% 2,427 78,034 - -Fort Knox* 100% 6,314 203,010 - -Kubaka* 50% 4,801 154,350 - -Denton-Rawhide 49% 1,898 61,015 13,219 425,000Refugio* 50% 1,320 42,446 - -Blanket 100% 1,097 35,266 - -22,801 733,074 13,219 425,000Residual Properties 2,819 90,647 70,667 2,272,000Total 25,620 823,721 83,886 2,697,000* For the seven month period of Kinross’ ownershipSTOCK PRICE(Canadian dollars as quoted on the Toronto Stock Exchange)CDN.$141210864214$CDN.12108642J J A S O N D J F MA M J J A S O N D J F M AM J J A S O N D J F M AM J J A S O N D J F M AM J J A S O N D J F M AM J J A S O N D1993 1994 19951996199719982

H I G H L I G H T SPROPERTY LOCATION MAPRyan Lode & True NorthFort KnoxKubaka (53%)Pentland (46%)DeLamarHayden HillDenton-Rawhide (49%)GoldbanksHoyle PondMacassaAginskoe (25%)CandelariaEl Dorado, Mirage (51%)Greystar (21%)BlanketGuanaco (90%)Refugio (50%)Mt. Henry & SelenePrimary OperationsResidual PropertiesAdvanced Exploration/Development Projects3

M E S S A G E T OS H A R E H O L D E R SFor Kinross shareholders, the most significant event of 1998 was clearly the company’ssuccessful merger with U.S. based Amax Gold Inc. Announced in February and completed inJune, the merger propelled Kinross into the million ounce per year level, adding 700,000ounces of gold production annually. Our company is now the fifth largest gold producer inNorth America and possibly the fastest growing company in the industry.Critics may scoff that bigger is not always better. But, in today’s gold market, I think they’re just plain wrong. I believethat, when gold prices are low and profit margins reduced, most investors cut back their exposure to gold stocks. As aresult, they generally single out for investment only large companies whose stock is easy to get in and out of. Stock inthose companies will inevitably tend to trade at prices that, on a comparative basis, are far higher than for their smallercompetitors. Those higher prices are good for shareholders. They also increase a company’s flexibility for acquisitionand financing opportunities. So, they are clearly desirable. Producers wanting to achieve this elevated level of pricingneed either a major new discovery or bigger size, financial strength and momentum to move up the scale. And that wasour thinking behind the merger with Amax.The strategy was right. The merger gave us size and that attracted the attention of the U.S. investment and brokeragecommunities. It gave us financial strength by reducing our overall cash–operating costs to $200 per ounce of goldequivalent, supporting the increasing view that we’re far more than just survivors. And it gave us momentum. Thatmomentum continues with the acquisition of Alaskan-focussed La Teko Resources Ltd. and increased ownership of theKubaka mine in Russia. We are the new kid on the block.The merger also helped eliminate concern about a perceived weakness in the company. The old Kinross had grownrapidly in five years. Annualized gold equivalent production of 25,000 ounces per year in June, 1993, climbeddramatically to more than 500,000 ounces in 1996. However, we really only had one world class asset in the company– Hoyle Pond. Now, Hoyle Pond has never disappointed and it is expected to produce for decades to come. But the natureof its orebody makes reserve determination difficult and costly. It begs comparison with the Dome mine also located inTimmins, Ontario. Dome has run the majority of its 88-year life so far with just four years of reserves. Hoyle Pond, too,has a low level of reserve ounces, but a good level of resource ounces. Many Canadian analysts and institutions have ahigh comfort level with this type of orebody, because it’s proven itself. But the asset is not yet as well accepted in otherparts of the world, particularly the U.S., where this type of deposit is not as well known. As a result, having Hoyle Pondas our only world class asset caused some concern.4

M E S S A G E T O S H A R E H O L D E R SThat concern has been eliminated by the merger with Amax Gold. Kinross now boasts three world class assets – the FortKnox mine in Alaska, the Kubaka mine in Russia and the Hoyle Pond mine in Timmins. Proof is in the pudding. Themerger has resulted in a 128% increase in reserve ounces of gold.Before I outline where our sights are set for Kinross’ future, I want to note that the merger was also successful on anotherfront – personnel. I am pleased to tell you that with few problems, the merger was completed without acrimony and thenew Kinross is operating as one entity.And so to the future. We will work to maximize the value of all the company’s assets, but in particular the three keyoperations at Fort Knox, Kubaka and Hoyle Pond. Currently these three mines produce at about a 750,000 ounce peryear rate to Kinross’ interest, or about 70% of our total annual production.However, given the low total cash costs at these operations of about $180 perounce, they contribute over 80% of cash flow.Our first focus is F O R T K N O X . That operation is the most efficientand has the quickest and lowest cost production growth potential. Thisopportunity results from the acquisition of La Teko Resources with its twomajor deposits within easy trucking distance of our mill.Currently we have begun the process of permitting the Ryan Lode deposit,Proof is in the pudding.The merger has resultedin a 128% increase inreserve ounces of gold.which has about 800,000 ounces of gold resources. We hope to produce about 75,000 ounces per year from this property,starting late next year. Given that this will displace some lower grade production in the mill from the existing pit, thenet increase will probably be closer to 50,000 ounces per year.Development of the True North deposit with about 1.3 million ounces of gold resources, will require reaching agreementwith our joint venture partner to proceed with permitting. Our objective is to process the True North deposit in the FortKnox mill at a rate of about 175,000 ounces per year starting in 2001. Taking into account the displacement of lowergrade ore from the mill, this scenario would increase the gold production of the Fort Knox mill by over 100,000 ouncesper year.The net result should be that the Fort Knox plant will produce about 500,000 ounces per year, at total cash costs of about$180 – $185 per ounce in 2001. Capital cost for this level of production is estimated at less than $35 million.As well, longer term, we are advancing the Gil deposit (433,000 ounces of gold resources and growing) and expect othergood prospect areas to generate further reserves to allow this level of production to continue for many years to come.So far as I’m concerned, Fort Knox is looked after, its future assured.5

M E S S A G E T O S H A R E H O L D E R SOn to K U B A K A. The Kubaka mine in the Russian Far East is a high grade, open-pit operation. While the technicalcapability of the mine has never been a concern to investors, the political climate has been. When Russia’s financialcrisis shocked world markets in the late summer, the effects on Kinross were twofold.First, the government – through its state agency Gokhran – no longer had the money to purchase Kubaka’s output. Asa result, the company requested under its contract to export the gold. Quite a request! To the best of our knowledge, nocommercial organization had ever before exported gold from Russia, unless all the money made was returned to thecountry. As a result, we were trying to break new ground, a very time-consuming and stressful endeavour. It took almosttwo months to get a real answer, during which time the mine inventory rose to over 150,000 ounces of gold. While thefirst few of Kinross’ historic shipments were quite complicated, now that the company and exporting agencies haveagreed on a process, it has become routine. To date, we have exported over 275,000 ounces of gold.The second way in which Kinross was affected by the Russian financial crisis was investor concern about the company’sRussian holdings. Concern about Russia’s future generally, combined with inaccurate reporting of the Russiangovernment’s intentions regarding the domestic gold industry, caused fears about the future of Kubaka and Kinross’ rolein this mine. Although our successful export of gold has allayed those fears, IThe Kubaka mine inthe Russian Far East isa high grade, open-pitoperation.want to reassure our shareholders that the level of co-operation that we havehad from both the federal and state levels of government has been excellent.The federal government and the central bank have been responsive to ourneeds. And, at the state level, the government is attempting to have Magadandeclared an economic zone which would result in lowering import duties onus. The establishment of a gold refinery in the province, combined with ourability to export bullion, has the potential to increase our flexibility inmanaging production revenues.At the mine itself, Kinross has put in place numerous initiatives to reduce costs and improve productivity. These includechanging from helicopter to fixed-wing aircraft, changing crew rotations, reconfiguring procurement methods andimplementing a productivity bonus strategy. While our Russian workers, like any workers, were initially skeptical andreluctant to accept our proposed changes, a trust has gradually grown between Kinross management and the workforce.In fact, more than just embracing the initiative, workers have now become proactive in the changes and improvements.In 1999, we expect to see the impact of these changes in higher productivity and reduced costs per tonne.As an aside, through the financial turmoil in the late summer and early fall of 1998, when the Russian banks in Magadanwere not permitted to allow depositors access to their accounts, Kinross found the Rubles necessary to pay our workforcein cash. While it was not easy, I am very proud of the efforts to secure the funds and to maintain the trust our workforcehas in the company. More recently, the company has been actively involved in arranging food and fuel shipments forcertain remote villages that are woefully short of both. The company will monitor the effect of the current crisis on itsconstituents and act appropriately.6

M E S S A G E T O S H A R E H O L D E R SWhen the company merged with Amax Gold, Kinross not only became operator of the Kubaka mine, but also became a50% shareholder in Omolon Mining, the organization that holds the Kubaka license directly. Late in 1998, at the requestof Geometal Plus, an Omolon shareholder, we made a payment on that company’s equity loan relating to its originalinvestment in Kubaka. While this loan is fully secured by the cash flows from the mine, we also received a 3% equitybonus for supplying the financial support to Geometal Plus. As a result, at the end of 1998, we reported a 53% ownershipof Omolon Mining and thus the Kubaka mine. Subsequent to the end of the year, the company has agreed to purchasea further 1.7% in the mine from the bankruptcy trustee of another of Omolon’s shareholders.Kinross is delighted to increase its ownership in Kubaka to 54.7%. It is both an excellent use of capital and a clearindication of our commitment to Kubaka, the largest gold mine in Russia, and to the Russian Far East in general.On to H O Y L E P O N D. It is a reflection of the size, diversity and strength of Kinross today that Hoyle Pond isnot discussed until now. The third largest mine that the company owns, Hoyle Pond remains an extremely importantasset of which we are justly proud. In 1998, the mine completed its move to shaft hoisting from ramp haulage, atransition that began with the sinking of a shaft in November 1995. Since Kinross took over the Hoyle Pond mine in1993, we have continually increased production from 60,000 ounces per yearto almost 175,000 ounces in 1997. However, in 1998, Hoyle Pondmanagement and staff took a breather to complete the transition to shafthoisting and to look at future options. As a result, our production in 1998declined for the first time since 1993 to 158,953 ounces. Total cash costsremained competitive at about $171 per ounce compared to $186 in 1997.Two years ago, we described a new initiative at Hoyle, called Hoyle 2000. Thisgroup of professional engineers and geologists were to evaluate all ore sourceson the Hoyle property (and on others that Kinross might not even own) andHoyle Pond remains anextremely importantasset of which we arejustly proud.to develop a strategy and a timetable to maximize Hoyle’s production by the year 2000. Since we announced this targetdate, gold prices began their bear market and this initiative became less pressing to accomplish. However, the group hasbeen working diligently and effectively to outline the company’s options and, at this point, Hoyle is prepared to movequickly to increase production once the group’s results are in. A detailed description of the Hoyle 2000 initiative ispresented on page 22 of this report.Meanwhile the mine is expected to produce 165,000 ounces of gold in 1999, although at a lower cash cost, budgeted atless than $160 per ounce.Following the 1997 rockburst at the Macassa mine, a detailed review was conducted to establish the future of the mine.We believed that we could at least operate into the spring of 1999 but the reserve potential beyond that was questionable.During the review, however, research identified a number of promising targets that were subsequently followed upin 1998.7

M E S S A G E T O S H A R E H O L D E R SOur success, as you will read on page 28, has been quite remarkable and we believe bodes well for continued productionfrom this mine for many years to come. This success underlines a well worn tenet. The best place to look for gold is insight of your headframe. The success at Macassa is a credit to the explorationists who identified the opportunity and thestaff and miners who have efficiently exploited it. This is also the strategy we are currently following at our three keyoperations and will always remain a powerful, underlying strategy to our exploration effort.The only one of our primary operations that caused the management any headaches in 1998 was the Refugio mine inChile. This 50% joint venture mine has consistently under performed since its construction and we were frankly reluctantto give it our full support once we owned it. However, along with our partner, we have committed considerable time andeffort into identifying the problems and over time they are being solved.As we’ve told you in previous annual reports, the company’s goal was toreach one million ounces of gold equivalent production per year. Critics saidour goal was aggressive and unrealistic. Once again, they were wrong.The true motivation in this effort has been the recognition that the orebody and the mechanics of the leaching processare sound and that the problems are simply the plant. I use simply because, without an orebody, there is no mine but,with an orebody, solutions are possible. We look forward in 1999 to seeing the results of the ongoing hard work, andfeel confident that this mine will show improvement throughout this year.As we’ve told you in previous annual reports, the company’s goal was to reach one million ounces of gold equivalentproduction per year. Critics said our goal was aggressive and unrealistic. Once again, they were wrong.I’m pleased to tell you that, even in that short time and in this market, we have achieved our goal and that, in fact, in1999, Kinross is budgeted to produce approximately 1.1 million ounces of gold equivalent. We had set our sights on themillion ounce a year target because, at that level of production, Kinross would have achieved senior status and, as such,could look forward to an increased cash flow multiple and more diversified ownership. However, now that we’ve hit themark, the bar has been raised. Senior status now appears to be 2 million ounces per year of production. While, on onelevel, it’s disappointing to have conquered a mountain only to find other, higher ones, hidden behind it, on another level,it is rejuvenating to think of the opportunities therein. As your CEO, I endorse these opportunities, and, as a company,we look forward to meeting the challenges they represent.To do so, in the near term, we will focus on improving production at our three key operations. We look forward to FortKnox achieving the half million ounce per year mark, a 130,000 ounce increase from the 1999 budget. At Kubaka wecould add about 100,000 ounces over the original 200,000 ounces budgeted for 1999 if we can continue to increaseour ownership.8

M E S S A G E T O S H A R E H O L D E R SAnd while no decision has yet been made, production increases at Hoyle Pond are likely. Assuming Hoyle can increaseoutput to 235,000 ounces, those three mines would boost our production level to about 1.4 million ounces, with verylittle technical risk. To complement this growth, we are also developing the Norseman project in Western Australia (seepage 35), that could well be taken to feasibility in 1999 and production in 2000. Taken together, the above achievabletargets would eventually provide Kinross with 1.5 million ounces of production annually. That represents significantgrowth, achieved with capital we currently have, a laudable achievement which should result in substantial shareappreciation.But you know where I’m heading now... remarkable as those figures are, they will not elevate our company to seniorstatus. As a result, the 500,000 ounce per year shortfall will be the focus of our acquisition strategy going forward. Butall in good time. The market has not yet credited us for the internal growth that we can foresee. As a result, we do nothave a stock that properly reflects Kinross in relation to its peer group. Until that’s corrected, acquisition of enoughproduction to get us senior status is unlikely and not currently being pursued. We do, however, remain vigilant and readyto make acquisitions when they are available and accretive.In 1996, Kinross started its exploration program, hiring a Vice-President Exploration. The move reflected the company’sgrowth and the need to start spending money to find new reserves.Since that modest beginning, the size of the exploration program has kept pace with company growth. And this year,we expect to have our first major success attributed to the exploration group with the Norseman project in WesternAustralia. While cash flow obviously remains tight in this low gold price environment, we have allocated $11 millionfor exploration and business development in 1999. The bulk of this budget will be spent on reserve and resourceenhancement around the Kubaka mine ($3 million on a 100% basis), the Gil deposit at Fort Knox ($1.4 million) andadditional drilling and a feasibility study at Norseman ($2.7 million). While funds for more speculative explorationefforts will thus be quite modest, we will stay focused and opportunistic in this area as well.One of the most important programs that mining companies undertake today is securing the environment at their minesites both during and after production. Some environmental groups erroneously believe that mining companies enjoypolluting their surroundings. Nothing could be further from the truth. Our families live on the same planet, have thesame aspirations for our children and we share the same moral obligation to act carefully and responsibly, no matterwhere we operate. I want our shareholders to know that we take that responsibility seriously.We have a highly developed environmental protection program, monitored at numerous levels of the corporationincluding an environmental committee of the board. Our system of checks and balances more than fully meets thecompany’s mandated obligations and helps create a corporate culture of caring and continued improvement. More ofsenior management’s time will be devoted to environmental issues, including continued improvement in best practices,proactive education in communities impacted by our operations and deflection and correction of bias and poorlyinformed criticism of our industry. Kinross is a leader in environmental management and is committed to remain in theforefront in the years to come.9

M E S S A G E T O S H A R E H O L D E R SLast year, we reported $59.8 million from forward gold sales that were closed out in January and July 1998. While thiswas an acceptable return that reflected our belief that the gold market had bottomed, it left the company without anyhedging program. To address this problem, we hired a Treasurer, with a background in metal trading with a major goldmining company. The company has developed a hedging strategy, approved by the board late in 1998. This strategyanticipates that Kinross will build up a book of forward gold sales appropriate for a company of its size. While this willtake time, we have begun the process and currently the company has sold forward 150,000 ounces of gold, using spotdeferred contracts at approximately $300 per ounce. Hopefully throughout 1999 this book will gradually increase asopportunity allows.While I have outlined our company goals for 1999 and beyond, I believe it would be useful to re-iterate them so you,the shareholder, will have no doubt about what we are trying to achieve. These goals are doable and reflect our directionand skill as a company. They are also the ones which I believe we can be judged on.ª Produce a record 1,075,000 gold equivalent ounces at a record low total cash cost of $200 per ounce ofgold equivalent.ª Complete the permitting of Ryan Lode and commence the permitting of True North.ª Decide on a production growth goal for Hoyle Pond and report to the shareholders, before the end of 1999, what thatgoal is and how we expect to achieve it.ª Complete the drilling of the Mt. Henry and Selene deposits that make up the Norseman Project and commence afeasibility study, targeting initial production for the year 2000.ª Complete the technical improvements at the Refugio mine necessary to put this operation on a strong footing.ª Increase investor awareness of what the new Kinross is about, why it is worthy of a better relative stock price andhave that reflect in the stock’s relative performance.Looking forward into 1999, my goal as CEO is to ensure that our targets as set out in this message and in the body ofthe report are achieved. My other priority is to ensure that investors interested in gold securities will be made aware ofKinross. I need to broadcast what it has achieved and what it can reasonably be expected to achieve going forward. Ineed to insist that investors looking only at the top four senior North American producers emerge from their tunnelvision to review the price and outlook for Kinross. I need to make them recognize and acknowledge that we are alegitimate alternative to those four producers. If we do our job and they respond, then we can eventually achieve thelevel of production and financial capability that would elevate Kinross to senior producer status.And then just watch what the new kid on the block can do.Robert M. BuchanChairman and Chief Executive OfficerMarch 17, 199910

Left: Robert (Bob) M. BuchanChairman and Chief Executive OfficerRight: Arthur (Art) H. DittoPresident and Chief Operating Officer

O P E R A T I O N SHIGHLIGHTSKinross enjoyed a watershed year in 1998. The Amax Goldmerger elevated the company to a million ounces ofannual gold production, with new operating bases in theRussian Far East, Alaska, and Chile. The transaction hasadded to our managerial and technical strength, and willhelp further reduce our gold production costs.This year, the company increased production by 75%,producing a gold equivalent output of 874,447 ounces. TheMacassa, Kubaka, and Denton-Rawhide operationsexceeded production goals for the year. Hoyle Pond, FortKnox, and Blanket were close but slightly below targetdue to lower grade ore. The Refugio joint-venture in Chile,and the DeLamar mine in Idaho both experiencedsignificant production shortfalls. Refugio's throughput wassignificantly under budget, and DeLamar experienced bothlower grade ore and reduced mill throughput. Expectingcontinuing weak gold prices, operations at DeLamar weresuspended in early 1999 and facilities were placed on careand maintenance.Average production grade for the year at Hoyle Pond was13.17 grams of gold per tonne, compared to 13.60 theprior year. Less production from the high-grade Hoyleveins, and more production from the lower grade 1060area long-hole stopes were the main factors. As well, 7Vein ore grade was less this year than last.Extensive development in the 1060 region continues toprepare more mining areas and to improve ore and wastehandling capability. By year end about 28,000 tonnes permonth, representing 64% of all ore and waste from theHoyle Pond operation, were being hoisted instead of truckhauled, improving mine efficiency.The Hoyle 2000 initiative incorporated all district geologicand drill-hole data into a common database which greatlyimproved our understanding of property geology.This work guided an extensive and successful drillingprogram in the Owl Creek East area west of the Hoylemine. These results justified driving a ramp from Hoylewestward to this area. This access will be used forunderground diamond drilling and for later mining andmine servicing in the Owl Creek East region. A badlyneeded administrative and mine-dry facility, which willimprove employee effectiveness, was completed at theHoyle shaft by year end.Despite a slow beginning, Macassa exceeded its productionand cost goals this year. The operation increased itsunderground output above the 5000 Level, successfullycompleted the Lakeshore crown pillar mining program,and achieved desired results from the tailings treatmentoperation. By year end, we had identified new reserveopportunities to the west of No. 3 shaft, to the east of areasbeing mined above the 5000 level, and above the 3800Level. The future of the operation, bleak after the 1997rock burst, now looks promising, provided productivitycontinues to improve.Kubaka's first full year of operation was excellent. Themine produced 506,868 ounces of gold equivalent. As well,cost saving and productivity improvements begun at midyear have steadily reduced costs. Similarly, excessiveunsold gold inventory, a problem from the outset ofoperations, was reduced to normal quantities. Gold salesnow satisfactorily match production. Winter supply routeswere established on schedule, and material to restock theoperation's 1999 needs moved routinely to site.12

O P E R A T I O N SFort Knox experienced a year of record mill throughput,achieved in part, by adding a pebble crushing circuit inthe fourth quarter. Commercial gold production was up by14% compared to 1997 due to greater mill throughput.Reserve development drilling during the year replaced goldmined, although reserves reported at year end wereslightly reduced because estimates this year were based ona gold price of $325 per ounce instead of $375 per ounceused in 1997. The maintenance of the mine's mobileequipment, a job previously contracted out, is now doneby Fort Knox employees. This change creates more costreduction opportunities.At Refugio, production was 10% better than 1997, but totalcash costs of $313 per ounce for the full year, althoughimproved, remain unsatisfactory. Mechanical failures anda legacy of design and construction weakness continue toplague the operation. By the third quarter, most operatingbottlenecks and system problems were restricted to thetertiary crushing circuit. We made persistent efforts toresolve outstanding financial claims against the projectcontractor who had taken the project on a fixed-price,"turn key" basis. After accepting a mediated settlement inOctober, the joint-venture partners were optimistic that thecontractor would advance funds to make necessaryretrofits. However, this has not happened, and other legalremedies are underway. We believe the operation can, withmodest capital from each of the joint venture partners, befixed to achieve stable output at costs below $240 perounce. Reserves at year end were approximately 26% lessthan the prior year because of mining and the use of alower gold price for calculation of reserves.Performance at Denton-Rawhide exceeded expectations. Forthe first time, the operation crushed 5.4 million tonnes ofore. Gold production increased and unit costs were belowtarget. At the Blanket mine, the gold production shortfallwas offset by lower cash costs reflecting the weakZimbabwean dollar.Several non-operating properties contributed goldproduction as they wind down to permanent closure.Most challenges associated with the operating side of theAmax Gold merger were addressed by year end. A new andcomprehensive administrative management system wasinitiated to improve the company's procurement,accounting, materials management, maintenance, humanresource, and information reporting functions.COSTS OF PRODUCTIONWe reduced consolidated total cash costs for the year by20%, from $268 to $214 per ounce of gold equivalent. Theimprovement is primarily due to lower production costs atFort Knox and Kubaka, although other operationscontributed also. Closing the high cost operations atDeLamar and Candelaria will help reduce total cash coststo our $200 per ounce target for 1999.RESERVES AND RESOURCESThe Amax merger dramatically increased proven andprobable gold reserves which are now 174% highercompared to 1997. Proven and probable gold and silverreserves are 7,469,000 and 8,573,000 ounces respectively.Possible reserves amount to 966,000 and 64,000 ouncesrespectively and gold and silver resources are 16,522,000and 80,760,000 ounces respectively. Mining depletedapproximately 1,400,000 gold equivalent ounces.CAPITAL EXPENDITURESCapital expenditures related to operations during 1998totaled $33.8 million. The majority, $16.9 million wasspent at Hoyle Pond and Hoyle 2000 for major minedevelopment, mine equipment, and construction of a newadministration complex. At Fort Knox, approximately$10.2 million was spent raising the mill tailings structureand constructing a pebble crushing circuit in the mill.13

O P E R A T I O N SThroughout the rest of our operations, capital programswere modest, totaling about $6.7 million. Most capitalthis year helped sustain operations, improve productivityand lower costs. Our capital budget for 1999 is $52.6million – $43.7 million to properly sustain operations andprepare Hoyle Pond for future growth, and $8.9 million indiscretionary funds, not yet approved for expenditure.ENVIRONMENTAL AFFAIRSKinross spent about $5.6 million on reclamation andenvironmental improvements this year. The scale andquality of that reclamation work is impressive andongoing under careful engineering and qualitysupervision. Around our sites, about 486 hectares of landhave been reclaimed, a big accomplishment. Ourreclamation obligations increased dramatically this yearwith the addition of three major operations, and five plantsite closings. The company has updated its reclamationplans and cost estimates for those plans total about $75million. Obtaining regulatory permits for reclamation andclosure is a daunting job and requires the continuous anddiligent work of highly qualified professionals. Kinross iscommitted to the process and to meeting its reclamationresponsibilities.We also conducted a thorough audit program at alllocations, including an engineering risk assessment ofseveral operations and facilities. This initiative assessespermit compliance, emergency response plans, structuralrisks, and policy compliance. As well, this year, we put inplace a land application program to dissipate accumulatedwater at DeLamar. Our commitment continues.OUR PEOPLEKinross has become a global enterprise operating on fivecontinents. Our workforce climbed 78% this year toapproximately 2,800. They speak several languages anddialects and contribute a variety of skills.They are a dedicated group of which we are proud.The huge growth our company experienced this yearinvolved significant change for many. Such changes were,at times, disruptive and stressful. However, personnel fromseveral organizations and joint ventures are now workingtogether effectively.Reflective of our growth, Scott Caldwell, Chris Hill andAllan Schoening joined Kinross as Senior Vice President,Surface Operations, Vice President, Treasurer and VicePresident, Human Resources and Community Relations,respectively. In addition, Don MacKinnon, Rick Dye andBob Gosik were promoted to the positions of VicePresidents of Underground Operations, Technical Servicesand Project Development and Environmental Affairs,respectively.We worked hard to promote safety awareness throughoutthe company and that work paid off. We lowered our losttimeaccident rate from 1.63 to 1.25 for every 200,000employee hours worked. Unacceptably, a fatal accidentoccurred at Hoyle Pond in November.OUTLOOKOur business plan anticipates little change in the 1999gold price. Consequently, emphasis is not on increasingoutput but on containing and reducing costs. Our capitalprogram is flexible and under continual review such thatit can be contracted or curtailed if necessary. We expect toproduce just under 1.1 million gold equivalent ounces attotal cash costs of $200 per ounce in 1999, whichrepresents a 23% increase in output and a 7% decrease incost compared to 1998.Arthur H. DittoPresident and Chief Operating Officer14

O P E R A T I O N S15 Gold pour at Fort Knox.

O P E R A T I O N SF O R T K N O XU . S . A .1998 OVERVIEWProduction:365,452 ounces of gold(320,758 ounces of gold in 1997)(203,010 ounces of gold for theseven month period of Kinross’ownership)Total ore milled:12,466,179 tonnesAverage grade:0.99 grams of gold per tonneTotal cash costs:$189 per ounce($170 per ounce in 1997)($199 per ounce for the sevenmonth period of Kinross’ownership)Large mining equipment at Fort Knoxachieves economies of scale.REVIEW OF OPERATIONSFort Knox, an open pit mine, islocated 40 kilometers northeast ofFairbanks, Alaska.Although Fort Knox personnelincreased annual gold productionby 14% over 1997, that figure was4% below plan due to lower thanexpected mill feed grade. The slightshortfall in ounces produced wasnearly overcome by this year’s recordannual mill throughput of 12.5million tonnes, a 29% increaseover tonnes processed in 1997. Theimprovement in mill throughputwas accredited to efficient plantoperation and the installation of aSAG mill recycle crusher whichbegan operation in October, 1998.The construction of the SAG millrecycle crusher was completed amonth ahead of schedule and withinexpected capital costs.In 1998, Fort Knox mined 30.3million tonnes of material, abovethe target tonnage of 26.6 milliontonnes. Improved results reflectedmore and better use of the existingmining fleet.Capital spending for the year wason budget with $10.2 million ofexpenditures during the last sevenmonths of the year. The 1998 totalcash cost per ounce was $189 ($199for the period of Kinross’ ownership).Exploration efforts were concentratedon near-mine potential. The “in-pit”drilling program delineated anadditional 7.2 million tonnes of orecontained inside the current ultimateopen pit mine. We conductedextensive soil sampling andgeochemistry work on the Gil, anexciting, nearby exploration target.Fort Knox personnel completed theirsecond year of operations withouta lost-time accident. Mine employeeshave now worked in excess ofone million hours since the last losttimeaccident which occurred inAugust, 1996.As part of Fort Knox’s ongoingenvironmental commitment,approximately 71 hectares ofdisturbed land were reclaimed.16

802 35022 6 011 8 1 0-013001400160017 018 020001700200016 304 01015001100120011001200110013001200110012001300O P E R A T I O N SFORT KNOX SITE PLAN1010 0911 9 9 02 0 802 17 02 2 6 02 3 501 9 9 01 81 01 6 301 7 0STOCKPILES222 602 0 8 019901 4 5 03601316 02701 36 0501415 4 01 6 301 72 03522 0 8 0Fort Knox1 9 0 0Road4 01 51 7 2 01 90 01 01817201 63 01 5 4 01 1 8 01 27 00190BORROWMATERIAL14001300120011001000N1 9 901 6 3 0015 45 01 4100018 1 019 0 0217 01 990217 02 0 8019 0 0226 02 1 7 02 0 8 01 9 0 00116 37 2 01 5 4 0OPEN PITMILLCOMPLEX1 9 0 0Tailing Haul Road1 8 1 01 5 4 0STARTERPOND1 5 4 01 3 6 0TAILINGDAM127 01 3 6 01 9 0 01 1 8 010 901 6 3 01 5Electric Transmission Line1 5 4 01 1 8014 50Service Road and Pipeline1 2 70DEVELOPEDWETLANDS12 70120013001400130012001100WaterReservoirALTERNATEBORROWMATERIALLOST HORSEBORROW/TOPSOILSTOCKPILE AREABORROWMATERIAL1200140011001100WATER DAMEXCAVATIONACCESSLAT 65 0 24.66NLON 147 12 44.47W14 5 01 990160015002 17 0190 01 6 3 01 7 2 020801 7 2 015009 9 020 8 02 2 6 02 0 8 01 9 9 0181 0021 71 8 101 6 30140014002 2 6 0TOPSOIL STOCKPILESAND/OR ROCK DUMPS1 7 201 6 3 08 020190 01 9 9 0GILMORE DOME1 811 5 4 01 45 01 3 6 01 2 7PROJECT BOUNDARY1 5 4 0170019 0015001800210019001800190001 km.17

O P E R A T I O N SOUTLOOKWith the successful installation ofthe SAG mill recycle crusher, 1999mill throughput is expected to be13.5 million tonnes. Gold recoveriesare forecast to exceed 90%.As a result, the Fort Knox Mine isexpected to produce approximately370,000 ounces of gold in 1999,despite a slight decline in mill feedgrade compared to 1998. Fort Knoxpersonnel will continue to focuson improving mill throughput andgold recovery.The open-pit mine is scheduled tomove 30.5 million tonnes of materialin 1999. We also expect a continuedimprovement in major equipmentmechanical availability.The 1999 total cash cost per ounceis expected to be approximately$192 compared to $189 for the fullyear of 1998.The slight increase in total cash costper ounce reflects lower forecastmill feed grades and a slight increasein labour costs offset by higherthroughput. We will pursue potentialcost savings in lower bulkconsumable prices and improvedproductivity.We will also continue our near-minesite exploration with further in-pitore delineation drilling and work atthe Gil exploration site. In addition,exploration of the Ryan Lode andTrue North deposits is expectedto lead to definitive developmentplans for these higher gradesatellite deposits.A limited, capital-spending programof approximately $6 million isplanned for 1999. Majorexpenditures include the near-pitexploration programs, mine de-waterdrilling and mine mobile equipment.TECHNICAL BACKGROUNDThe Fort Knox mine is the mostrecent development in a miningdistrict that has produced inexcess of 8 million ounces of gold.The low cost mine began commercialproduction on March 1, 1997.Construction of the mine andprocess facility cost approximately$373 million.The gold deposit is hosted by theFort Knox pluton, a multi-phasegranitic body that intrudesPrecambrian to mid-upper Paleozoicschist of the Yukon-Tanana terrane.The surface exposure is elongatedmeasuring approximately 1.1kilometers east-west and 0.6kilometers north-south. The goldoccurs in and along the margins ofpegmatite veins, quartz veins andveinlets, quartz-filled shears, andfractures within granite. Themineralization is low in sulfides.Fort Knox’s commitment to on-goingmine site reclamation will continue,with over 40 hectares of landscheduled for reclamation in 1999.Open pit mining at Fort Knoxis accomplished by utilizing 150ton trucks and 24 cubic yardhydraulic shovels.18

O P E R A T I O N SH O Y L E P O N DC A N A D A1998 OVERVIEWProduction:158,953 ounces of gold(174,317 ounces in 1997)Total ore milled:424,376 tonnesAverage grade:13.17 grams of gold per tonneTotal cash costs:$171 per ounce($186 in 1997)REVIEW OF OPERATIONSThe Hoyle Pond underground mineis located 18 kilometers northeast ofdowntown Timmins, Ontario.In 1998, the Hoyle Pond operationproduced 158,953 ounces of gold attotal cash costs of $171 per ounceversus a budgeted $176 per ounce.The mill processed about 10% lesstonnage in 1998 compared to 1997.This reduced throughput and slightlylower grade were partially offset byimproved metallurgical recoveriesresulting from further optimizationof the carbon-in-pulp (CIP) circuitinstalled in 1997.Capital expenditures for minedevelopment, exploration, equipmentand mine infrastructure totalled$16.9 million. Mine developmenttotaled 14,915 meters, including7,416 meters of ore and 7,499 metersof waste. Waste developmentconsisted of an ore and waste passsystem, ventilation raises, 7B Veinaccess/exploration drifting andextension of the 1060 ramp to the340 meter level. The paste fillsystem was also extended to the440 meter level.Ore development on the 440 levelincluded level drifting, subleveldrifting, Alimak stope access raising,and open raising. Stope developmentand exploration drifting alsocontinued on the Hoyle Pond veins.Rail haulage was commissioned onthe 440 level with ore and wastenow skipped to surface.Exploration expenditures totaled$2.2 million and involved 39,393meters of surface and undergrounddiamond drilling. Explorationfocused on delineating existingpossible reserves in the 1060BZones, 16 Vein, 9 Vein, and 7B Vein.Possible reserves within the 1060Zone were upgraded to Probablebetween the 300 and 440 meterlevels as well as 60 meter abovethe 720 meter level.19

O P E R A T I O N SHOYLEPOND AREA – SITE PLAN AND SOUTH PARALLEL LONGITUDINAL SECTIONMarlhillJoanisZonePENTLANDKINROSSNEZ IIINEZBell CreekPentlandWetmorePentlandSchumacherPentlandWetmore EastBlack Hawk(Vogel)Thunderwood JVOwl CreekPit99350E99550E750Owl Creek EastMineralized Belt99950EBlack HawkPENTLANDLegendGold MineralizationMafic VolcanicUltramaficVolcanicSedimentsFelsic IntrusiveBell Creek MineProduction (1986-1994)146,797 ozs.Joanis(~800m North)Resource18,915 ozs.Owl Creek PitProduction (1981-1989)225,000 ozs.120m200m300m440m120m200m300m440mPhase 3Phase 2750 block720m800mKinrossReserves (Bell Creek North A)33,547 ozs. PentlandResources (Bell Creek North A)Resource70,773 ozs.30,300 ozs.Resources (Bell Creek West) Pentland - Schumacher III8,600 ozs.(Kinross 46.4%)Resources (Bell Creek N.E. Zones)226,318 ozs.BlackhawkBlackhawk / VogelResource459,678 ozs.(Blackhawk 50%Kinross 32.5%,Thunderwood 17.5%)ThunderwoodKinross J.V.Resource149,545 ozs.(Kinross 65% interest)720m800mOwl CreekResource(above 200m Level)408,000 ozs.(below 200m Level)402,327 ozs.Owl Creek EastResources421,058 ozs.20

40M RampRemuckO P E R A T I O N SHoylePond2000Zone7 VeinSedimentZoneKINROSSMill Creek350950Zone1060ZoneKidd CreekMet Site101KINROSSHoyle Twp. Matheson Twp.Whitney Twp. Cody Twp.0 1kmHoyle PondRamp PortalHoyle Pond Ore BodiesKidd Creek Met Site350 BlockPhase 1120m200m300m440m950 Zone720m800mProjectionHoyle Pond MineReserves (includes Hoyle,1060 and 7 Vein)920,172 ozs.Resources (includes Hoyle,1060 and 950 Zone)632,028 ozs.ResourcesReserves21

O P E R A T I O N SLimited widely spaced drilling belowthe 720 level indicated the continuityof all zones below the level with allzones remaining open at depth.Three sub parallel veins werediscovered north of the 1060 Zone440 level access drift. These narrowstructures called the 1060 N Zonesare high grade with visible gold (vg).The zones are open in all directionsand will be drilled in 1999. The weststrike extension of the 1060 Zoneswere tested above the 720 levelwhere a 1060 type structure wasintersected 170 meters west of the B1west plunge line at the 575 meterlevel. Further drilling is plannedfrom the 440 level.Approximately 190,000 tonnes at11.51 grams per tonne (70,000)ounces of new reserves were outlinedin the Lower Porphyry Zone fromthe 280 level to the 80 meter level.Current drilling immediately abovethe 440 level shows that the zonecontinues down plunge to at leastthat elevation.The 950 Zone access drift on the440 level was begun and will beused as a platform for diamonddrilling and exploration drifting.Geologic data compilation of theHoyle Pond main mine throughout1998 has defined a number ofexploration drill and developmenttargets that are the focus of thepresent exploration effort. At leastfour potential mining blocks havebeen targeted for short termdevelopment. Exploration drillingnorth of the 407E access drift hasdefined a Hoyle Pond type structure(150 Zone) from the 340 level tothe 440 level. The zone appears tocorrelate with the previously drilledhigh grade 2000 Zone intersection of294.5 grams per tonne over 0.8meters just above the 720 level.Recent results include 22.3 grams pertonne over 3.0 meters (vg). Currentdrilling is targeting the zone close tomine workings on the 440 and onthe 400 meter levels.Hoyle 2000The Hoyle 2000 Projects group,with extensive experience inevaluating mineral deposits andprocessing, was mandated twoyears ago to add value to theTimmins operation by identifyingand evaluating explorationand production opportunities.As well, the group helps improveinfrastructure in the form of roads,buildings and processing.In 1998, as well as providingtechnical assistance to both theHoyle Pond and Macassa mines,the group also completed resourceevaluations on the Kinross-ownedHoyle township lands and onarea properties containing shorttermproduction potential presentlycontrolled by others.A total of 190 drill holes for 26,597meters and 300 meters of rampingwere completed on targets in HoyleTownship in 1998.22

O P E R A T I O N SThe group also constructedgeological models of all significantlymineralized zones on the Hoyleproperty, including Owl Creek East,Owl Creek, Thunderwood, and BellCreek deposits. This effort resultedin an increase of approximately500,000 ounces in the resourcecategory. Technical support inthe form of improved geologicalmodeling and mine planningwas also provided to the KirklandLake operations.The group’s major effort in 1998 wasa successful exploration programinvolving 16,841 meters for 164holes of surface diamond drillingfocused on the Owl Creek Easthorizon. This work was targeted attwo blocks, each 200 meters longand to a depth of 120 meters. Thedrilling revealed that the originalinterpretation of three mineralizedhorizons was incorrect and that, infact, up to seven horizons werepresent. The additional tonnes inthese lenses increased the containedounces in the targeted blocks inthe order of 50%. Grades remainat 8.0 grams per tonne. A ramp wasalso initiated extending from the20 meter level from the Hoyle Pondramp west towards the 350 block onthe Owl Creek East horizon.In addition, 9,756 meters of diamonddrilling in 26 holes was alsocompleted on other targets on theproperties.OUTLOOKThe Hoyle Pond operation isexpected to produce about 165,000ounces of gold in 1999 at totalcash costs of approximately $160per ounce. The mill is scheduledto process about 10% moretonnage than 1998 at a gradeabout 5% lower.Plans for 1999 include the continuedconstruction of the Owl Creek Eastramp through to the end of Phase 2.This project will include 1,000meters of ramping and drill cutouts,extraction of a 4,000 tonnebulk sample, 52,000 meters ofunderground drilling and 26,000meters of surface drilling. Expectedcompletion date is the end of thethird quarter in 1999.Exploration diamond drilling is alsoscheduled to be completed fromsurface targeted at the “Fold Nose”area to search for mineralized veinsystems at depths similar to thoseat the Hoyle Pond mine.In addition, the Hoyle 2000 groupwill continue to evaluate the pitpotential of the Owl Creek East andOwl Creek deposits, forecastingcompletion of an economic studyby mid 1999.New office and mine dry adjoiningthe Hoyle Pond headframe.23

O P E R A T I O N SK U B A K AR U S S I A1998 OVERVIEW(50% ownership interest –increased to 53% effectiveDecember 16, 1998)Production:253,434 ounces of goldequivalent (131,852 ounces ofgold equivalent in 1997)(154,350 ounces of goldequivalent for the seven monthperiod of Kinross’ ownership)Total ore milled:646,508 tonnesAverage grade:24.55 grams per tonneTotal cash costs:$154 per ounce of gold equivalent($175 per ounce of gold equivalentin 1997)($149 per ounce of goldequivalent for the seven monthperiod of Kinross’ ownership)REVIEW OF OPERATIONSThe Kubaka Mine is located in theRussian Far East, within the MagadanOblast, 950 kilometers northeast ofthe city of Magadan. Access to thesite is via air and winter road.The export and sale of approximately218,000 ounces of gold wascompleted in 1998. This processcontinues to go smoothly.The Kubaka Mine produced506,868 ounces of gold equivalentin 1998, approximately 8% betterthan plan. Although the annual millthrough put was 1.6% below plan,this tonnage shortfall was more thancompensated for by higher-thanexpectedfeed grades, and betterthan-expectedrecoveries.Aerial view of the Kubaka operation.The mill processed 646,508 tonnesof ore with an average gold recoveryof 98.2% compared to plannedrecoveries of 97%. Productivityenhancements showed good resultsat the mine as personnel moved 10.7million tonnes of material, exceedingplan by about 2%.Cash spending for the year was wellbelow plan. The 1998 total cash costsper ounce of gold equivalent were$154, approximately $18 per ouncelower than plan.Several initiatives, in almost allareas of the operation, significantlyreduced operating costs andimproved productivity. The moresignificant initiatives includedreducing the size of the workforce,improving overseas procurementmethods, and using fixed wingaircraft instead of helicopters totransport personnel.The major exploration programsundertaken during the yeardelivered mixed results. Althoughmineralization was further definedat several outlying targets, noadded ore reserves, capable ofproviding additional Kubaka millfeed, were identified.24

O P E R A T I O N SKUBAKA MINE SITE PLANBoundary of Kubaka operationsKubaka MineReagentStorageExplosiveMagazineBoundary of Kubaka operationsTailingsFacilityWaterRetentionDamFuelFarmMillTruck Shop,Administration,WarehouseLiving & Dining3x0.4 åKubaka River0 250 500m25

O P E R A T I O N SAlthough capital spending at Kubakais modest the major capital programfor the year was the start ofconstruction of a water treatmentplant. Construction will be completedby May, 1999.OUTLOOKThe Kubaka Mine should produceapproximately 400,000 ounces ofgold equivalent in 1999. The millis scheduled to process a minimumof 657,000 tonnes of ore and themine will move 8.6 million tonnesof material in that time.Total cash spending for 1999 isforecast to be far lower than 1998levels. Despite this fact, total cashcosts per ounce of equivalent goldare expected to increase to the$170-180 per ounce range due tothe processing of lower grade ore.The Kubaka operations group willcontinue to focus on initiatives toimprove productivity and loweroperating costs. Site personnel areconfident they can make significantadvances in these areas.A limited capital program ofapproximately $1 million isscheduled to take place in 1999.The 1999 exploration effort willconcentrate on delineating nearmine-siteore to provide additionalfeed for the Kubaka mill. Severaltargets have been identified, andfield exploration activities willbegin this spring.TECHNICAL BACKGROUNDThe high grade Kubaka mine iswithin a historic, gold-producingarea and is now the largest operatinggold mine in Russia. The open pit,low-cost mine achieved commercialproduction in June, 1997. The mineand process facility cost about $242million to build.The gold deposit is located in anarea of highly weathered Paleozoicvolcanic rocks resting on aPrecambrian crystalline basement.The Kubaka deposit is an epithermalquartz-adularia vein systemhosted in volcanic rocks and theirsedimentary derivatives.The main Kubaka vein is steeplydipping and outcrops at surface.The vein consists of massive tofinely banded quartz. Gold occursas disseminated grains of electrum.The gold to silver ratio is one to one.Open pit mining is accomplishedon 6-meter benches by utilizing 50tonne trucks and front-end loaders.The mill is designed to processbetween 650,000 and 700,000tonnes of ore per year. Power isgenerated on site by a series ofdiesel-powered generators.Sign post at Kubaka during construction– “You can get there from here!”26

O P E R A T I O N SR E F U G I OC H I L E1998 OVERVIEW(50% Basis)Production:80,660 ounces of gold equivalent(73,698 ounces of gold equivalentin 1997)(42,446 ounces of goldequivalent for the seven monthperiod of Kinross’ ownership)Total ore mined:8,239,339 tonnes crushedAverage grade:0.93 grams of gold per tonneTotal cash costs:$313 per ounce($341 per ounce in 1997)($336 per ounce for theseven month period ofKinross’ ownership)Open pit mining at Refugio.REVIEW OF OPERATIONSGold production, although short ofbudget, increased 9% over 1997levels as operational changescontinue to show improvements.Overall gold equivalent productionfor 1998 was 161,320 ounces(42,446 ounces to Kinross’ account)compared to 147,396 ounces in1997. Production in other areas alsoimproved. Crusher throughputincreased by 22% and total crushedore to the leach pad increased by15%. While total cash costs perounce of gold declined from 1997to 1998, marked improvementswere seen in the last quarter.Major capital expenditures duringthe year included completing processimprovements, fixing constructiondeficiencies and better winterizingfacilities. These site-wideimprovements have increasedproduction through the crusher andrecovery facility and significantlyreduced weather-related delays.The one major operational shortfallthis year resulted from mechanicalfailures in the main conveyorsystem, significantly reducingproduction for three months.These deficiencies have beenidentified and corrected.Safety results in 1998 improved overeight-fold compared to previousyears through investments inimproved facilities, training andsafety programs.OUTLOOKLate in 1998, a fully revised resourceestimate and mine plan wascompleted. This new plan will greatlyenhance operational flexibility andallow us to better adjust to changingoperating conditions.Mined ore production will increase18% over 1998 levels but wasteproduction will decrease by over56%. Budgeted ore production is10.5 million tonnes while waste isbudgeted at 4.7 million tonnes.Ore grade is budgeted at 0.94 gramsper tonne. Budgeted gold equivalentproduction is 220,000 ounces(Kinross’ 50% share is 110,000ounces) at total cash cost of $240per equivalent ounce.Operational improvements in 1999centre around two major changes.First, we will replace the tertiarycrushers. To that end, onsite testingof an alternative tertiary crushersystem has begun. The goal is toreplace the current crushers withlarger machines capable ofproducing a smaller crushed productwhich will improve recovery.Target completion date is mid-year.Secondly, we will change fromcontract to self-mining. Byassuming mining operations,Refugio will realize lower miningcosts and a greater flexibility toadapt to changing conditions.27

O P E R A T I O N SM A C A S S AC A N A D A1998 OVERVIEWProduction:78,034 ounces of gold(56,709 ounces of gold in 1997)Total ore milled:(tonnes)Underground: 107,195Lakeshore Crown Pillar: 48,019Lakeshore Tailings: 200,126Average Grade:(grams of gold per tonne)Underground: 15.05Lakeshore Crown Pillar: 12.17Lakeshore Tailings: 2.57Total cash costs:$257 per ounce ($370 in 1997)Aerial view of the No. 3 headframe at Macassa.REVIEW OF OPERATIONSThe Macassa Mine is located inKirkland Lake, Ontario.In 1998, total gold production atMacassa reached 78,034 ounces,about 3,000 ounces above budget, attotal cash costs of $257 per ounce.In addition, 121,841 tonnes ofcustom mill feed was processed. Thethree main sources of mill feed forthis production included the MacassaNo. 3 Shaft, the Lakeshore Tailingsand the Lakeshore Crown Pillar.As well, this year’s accidentfrequency at the Kirkland Lakeoperation was at a historic low. Thatachievement was recognized whenthe operation won two prestigioussafety awards - the Angus CampbellAward for lowest lost-time frequencyin the Porcupine Safety Group andthe Kinross Gold Corporation Awardfor safest underground mine.At the Macassa No. 3 Shaft, miningcontinued above the 5025 level.A permanent rockbreaker wasinstalled at the 5025 level and a newdrift at the 3800 foot elevation wasdeveloped. This new development isencountering significant ore gradevalues along the '04 Break, while anaggressive diamond drill programhas delineated an additional 74,000ounces of gold above the 5025 level.At Lakeshore, an additional 11,600ounces of gold above budgetwas achieved from the crown pillar,while dry mining of tailingscontinued successfully.OUTLOOKIn 1999, $1.9 million has beenbudgeted to expand the mineinfrastructure from the 5025 leveldown to the 5300 level and fromthe 4250 level up to the 3800 level.The 5725 loading pocket will be reestablishedto handle ore and wastefrom below the 5025 level and theegress and muck pass raises will beextended up to the 3800 level.As well, proposed explorationexpenditures of over $1.8 millionwill aim to establish new reservesaround the No. 3 Shaft, particularlyabove the 4250 level towardsurface. Also in 1999, the drymining of tailings at Lakeshorewill re-commence in late spring.The production target for theKirkland Lake operation in 1999 is80,000 ounces of gold at total cashcosts of about $240 per ounce.This is an increase over 1998 ounceproduction and a decrease of 7%in total cash costs.28

O P E R A T I O N SD E N T O N - R A W H I D EU . S . A .1998 OVERVIEW(49% basis)Production:69,015 ounces of gold equivalent(66,402 ounces of gold equivalentin 1997)Total ore mined:5,432,000 tonnes crushed;4,025,000 tonnes run of mineAverage crushed grade:0.86 grams of gold per tonne10.6 grams of silver per tonneTotal cash costs:$235 per ounce of gold equivalent($247 per ounce of gold equivalentin 1997)REVIEW OF OPERATIONSThe Denton-Rawhide mine is locatedin Nevada, about 50 miles southeastof Fallon.Overall gold production in 1998 was5% better than plan, the result of anincreased amount of ore processedand a faster than expected gold leachcycle. More ore was processedbecause of the installation of a newprimary crusher feeder.This equipment improves crusherproductivity by allowing more ore tobe crushed and stacked on the leachpad. Another contributing factor wasthat a greater than predicted amountof low-grade ore was encounteredduring the year and placed on therun of mine leach pads.OUTLOOKDenton-Rawhide is planning toproduce approximately 60,000ounces of gold equivalent in 1999.to Kinross’ interest and total cashcosts are expected to be about$260 per gold equivalent ounce.The mine is planning to spend$1.9 million (49%) on capitalimprovements during the year,primarily on mobile mine equipment.Mine management has developedprograms to improve mobileequipment availability and furtherlower operating costs. In addition,the Denton-Rawhide group hassuccessfully lowered the cost ofmajor consumables used in the mineand process areas.Open pit mining at Denton-Rawhide.Total ore processed at Denton-Rawhide was 5.43 million tonnes,a 3% increase over 1997 tonnescrushed and stacked on the leachpads. Total ore and waste mined in1998 was 18.1 million tonnes.Exploration will focus on claimblock targets with the potential tosupply supplemental ore for theexisting process facility.The total cash costs per ounceaveraged $235 for the year, 9%below plan.Exploration activities in 1998 wereconcentrated on the Regent Hill,Northwest Regent, North Jet andArrow areas. The continuousimprovement program was utilizedextensively in 1998, resulting inproductivity improvements andlower costs.29

O P E R A T I O N SB L A N K E TZ I M B A B W E1998 OVERVIEWProduction:35,266 ounces of gold(35,237 ounces in 1997)Total ore milled: (tonnes)Underground: 202,350Tailings: 1,096,360Average grade:(grams of gold per tonne)Underground: 4.24Tailings: 0.81Total cash costs:$193 per ounce($262 per ounce in 1997)REVIEW OF OPERATIONSThe Blanket Mine is an undergroundgold mine located in southwesternZimbabwe within a two hour driveof the city of Bulawayo.Gold production of 35,266 ounces,although below budget, showed aslight improvement over 1997 levels.Lower tonnage and lower recoveriesfrom underground ore contributed tothe shortfall. As well, about 17,000tonnes of budgeted higher gradeore was mined but not hauled tothe mill. It was stockpiled to allowother capital development in themine. The higher grade ore will beprocessed in 1999.The tailings plant performance wasreduced to 11,071 ounces (13,291ounces in 1997) because of acutemetallurgical problems. Recoveriesfell from 45% in 1997 to about 38%.Most of the problem resulted fromuncertainties about the supply ofoxygen, necessary to the recoveryprocess and currently imported fromSouth Africa. To this end, we havefinalized plans to procure our ownoxygen generating plant.About $1 million was spentdeveloping the mine and plant.Most of this capital investmentimproved underground haulage andshafts. As well, money was spenton exploration diamond drillingnear the operating mine site.Encouraging results wereencountered in the developmentof the Smiler mine (six kilometersnorth of the Blanket mine).A shaft was sunk 60 meters andlevel development was begun.Successfully developed, this projectcould increase Blanket undergroundproduction by some 20%.Productivity and safety at the mineimproved, primarily due to thecontinued use of longhole miningand the introduction ofthe shrinkage method during thesecond quarter.A successful third quarter audit ofenvironmental practices produceda blueprint to make the entireoperation environmentallycompliant. A major improvementwas the construction of an extensionto the tailings plant which greatlyincreases the ability to manageand contain spills.OUTLOOKKey developments will includecontinued haulage developmenton the 510 meter and 750 meterlevels and shaft sinking, haulagedevelopment and diamond drillingof the Smiler project. Diamonddrilling of the Eroica ore zone tofirm up resources below the 510meter level will also continue.A feasibility study of a newshaft project will be completedand environmental improvementswill continue.The oxygen plant will becommissioned in the first quarter tooptimize recoveries. The savingsrealized from having our ownoxygen supply will be redirectedtowards plant improvements.Production targets are 40,000ounces of gold at total cash costsof less than $200 per ounce. Totalcapital expenditures are forecast atapproximately $2 million.30

O P E R A T I O N SR E S I D U A L P R O P E R T I E SCANDELARIAU.S.A.REVIEW OF OPERATIONSThe Candelaria Mine is located insouth central Nevada, approximately80 kilometers southeast ofHawthorne, Nevada.Although metal recovery from leachpad No. 2 kept up with projectionsand was on budget for the first halfof the year, it fell well belowprojections as the year progressed.Several attempts were made toimprove the grade, including blastingthe pad to improve solution flow.However by year-end, because thegrade could no longer offset costs,the decision was made to stop metalrecovery early in 1999 and reclaimthe entire site.Property closure issues remained themajor priority during the year. Freshwater rinsing of leach pad No. 1continued and much of the crushersystem and site buildings weredismantled and removed.Recontouring and revegetation ofthe site also continued during theyear. The final site closure planwas approved and approval of thereclamation plan was receivedsubsequent to year-end.OUTLOOKThe goal for 1999 is to complete allmajor reclamation activities atCandelaria so that by the year 2000only site monitoring will be required.A possible exception includes somefinish rinsing and minor piperemoval from leach pad No. 2.Reclamation activities during 1999will include final rinsing andrevegetation of leach pad No. 1,rinsing of leach pad No. 2 and finalremoval of the crusher, truck shopand other sold buildings.DELAMARU.S.A.REVIEW OF OPERATIONSThe DeLamar Mine is locatedapproximately 160 kilometers fromBoise, Idaho, in the southeasternpart of the state, near the Oregon-Nevada-Idaho border.The DeLamar Mine produced62,056 ounces of gold equivalent in1998. Lower than expected millfeed grade and ore tonnage from theFlorida Mountain area hamperedmetal production in 1998.Due to an extended period ofdepressed metal prices, Kinrossmanagement decided to suspendproduction at DeLamar in late1998. Limited production continuedto the end of the fourth quarterof 1998.The facility will be ready to re-openwhen economic conditions and metalprices improve. Kinross has madeevery effort to identify opportunitiesfor those employees affected by thesuspension of operations.The Land Application Treatmentsystem (LAT) was successfully built,commissioned and operating in 1998.The LAT, approved by state andfederal regulatory agencies, isan environmentally sound andeconomically efficient method ofeliminating surplus water throughevaporation. It allows us to lowerwater levels contained in the processwater storage area.31

O P E R A T I O N SOUTLOOKThe DeLamar Mine was placed in acare and maintenance state by themiddle of the first quarter of 1999.So that operations can resume in anefficient and cost effective manner,the facility will remain in a stand-bymode. The resumption of operationsat DeLamar is contingent uponan improvement in gold andsilver prices.DeLamar site personnel willcontinue to uphold Kinross’ strongcommitment to the environment.Activities will consist of ongoingsurface reclamation, watermanagement, water and airquality monitoring.GUANACOCHILEREVIEW OF OPERATIONSThe Guanaco Mine is approximately230 kilometers southeast ofAntofagasta, Chile.Although mining at Guanaco wascompleted in 1997, crushing andstacking continued into January,1998 and recovery of metal from theleach pads continued throughout theyear. Production has exceededbudget (15,019 equivalent ouncesversus a budget of about 12,000equivalent ounces to Kinross’account). Recovery results of 57%almost hit the projected target of57.5%. Recovery was slowed in midyearas piping was removed and theheaps recontoured to their final slope.OUTLOOKGuanaco’s production target for theyear is about 16,000 ounces of goldequivalent at total cash costs of justover $200 per ounce. Total recoveryfrom the heaps is now projected atover 59%. Study is also underway onadditional mining and explorationopportunities on the substantial landposition at Guanaco.All reclamation that can be donewithout interrupting production isnow completed.However, as a result of reslopingthe heaps and the improvedsolution distribution, metal recoveryimproved to the point that theproject is currently runningboth circuits.32

O P E R A T I O N SHAYDEN HILLU.S.A.REVIEW OF OPERATIONSThe Hayden Hill Mine is located190 kilometers northeast ofReno, Nevada.Mining at Hayden Hill wascompleted late in 1997. Recovery ofmetal from the leach pads continuedthroughout 1998. Gold recovery fromthe pads reached 65.5% versus abudget of 62.9% by year’s end.Total gold equivalent ouncesrecovered for the year to Kinross’account was 18,922 ounces exceededbudget by over 10,000 ounces.In addition to production, propertyclosure issues were the major priorityduring the year. The crushing plantand other minor buildings were soldand removed from the site. Majorwork was completed on reslopingand revegetation of waste dumpsand the closure of the Providencepit was completed. An updatedand comprehensive reclamation planwas completed and submittedfor approval.OUTLOOKRecovery of gold from the leachpad will continue through the year2000. Production for 1999 isprojected at approximately 17,000equivalent gold ounces at totalcash costs of approximately $235per ounce.Reclamation of all areas not relatedto processing will continuethroughout the year. Resloping ofthe heap leach pad to its finalconfiguration will be completedduring the year.QRCANADAREVIEW OF OPERATIONSThe QR Mine is located in BritishColumbia approximately 70kilometers southeast of Quesnel.Due to declining gold prices, thedecision was made to ceaseoperations at QR. Open pitoperations at QR were completed thelast quarter of 1997. Undergroundproduction ended in February 1998.Milling of stockpiled ore wascompleted in April. For the year,a total of 14,071 ounces of goldequivalent were recovered frommilling and mill cleanup at a totalcash cost of $253 per ounce of goldequivalent. As part of a detailedclosure plan, the mill and anyequipment remaining on site wasserviced and prepared for saleor storage. All other equipment wasremoved from site and sold or sentto other Kinross operations. Initialsite stabilization work was completedduring the year. Reclamation plansare being updated and the majorityof the closure reclamation workis scheduled for completion in 1999.33

O P E R A T I O N SE X P L O R A T I O N A N DD E V E L O P M E N TAs Kinross becomes a major goldmining company, its commitment toworldwide exploration continues. In1998, the company invested $10.3million to identify new opportunitiesto establish operations. We need toidentify such opportunities bothnear existing sites and in new areasto replace our annual depletion ofover 1.2 million ounces of gold. Ourexploration efforts are tied closely tooperations, building upon ourcorporate strengths to maximizereturn for the work and dollarsinvested. Where exceptional valuecan be realized in frontier areas,Kinross has the technical andfinancial capabilityto move forward successfully.In addition, affiliated juniorcompanies Pentland Firth VenturesLtd. and Mirage ResourceCorporation, supplement theKinross exploration effort.The business of gold exploration isbecoming increasingly global forKinross. With mining operations inAlaska and the Russian Far East, thecompany recently opened an officein Fairbanks, Alaska, to establish anexploration focus on the Arcticregion of the Pacific Rim.Having acquired an attractive,advanced exploration project in thegoldfields of Australia, the companyis now also doing business in a newpart of the world from its office inPerth, Western Australia. Tocomplement our operations inTimmins and Kirkland Lake, Kinrossis also placing greater emphasis onexploration in the Canadian Shieldof eastern Canada. Salt Lake Citycontinues to function as thetechnical hub of the Company,exploring land from British Columbiato Panama. As well, the explorationteam based in Zimbabwe will seekhigh quality, advanced projects ineastern and southern Africa.The Kinross exploration program isproactive and success driven.Funding to identify newopportunities and advance ongoingprojects is budgeted at $10.3 millionfor 1999. Compelling new projectswill also be supported throughspecial funding. Total explorationrelatedspending for the year isforecast at $11.3 million. This budgetwill allow the company to maintaina stream of high quality, advancedprojects with the potential to becomefuture Kinross mines.The GIL PROJECT is a jointventure between Kinross (80%) andTeryl Resources (20%) located nearthe Fort Knox open pit.The ore discovered at Gil will feedthe Fort Knox mill in future years.The exploration program in 1998focused on the eastern portion of theclaimblock and included soilsampling, trenching, and drilling.The drill program comprised 29reverse circulation holes totaling3,050 meters, and four core holestotaling 983 meters.Mineralization at Gil lies withincalc-silicate horizons in schist.There is typically some goldenrichment along iron-stained shearsand within quartz-calcite veinlets.Sulfides are rare. Gold occurs in twozones: a thin, higher grade upperhorizon and a thicker, lower gradedeeper horizon.An in-situ mineral resource withoutinferring economic parameterswas calculated using polygonalmethods at the end of 1998. Thesecalculations show that drilling hasidentified in excess of 400,000ounces of gold at Gil at an averagegrade of 1.37 grams per tonne.The deposit remains open alongstrike and there are several targets tothe north yet to be drilled. We expectadditional mineralization will bediscovered at Gil that will becomepart of the Fort Knox productionschedule in the future.34

O P E R A T I O N SThe NORSEMAN PROJECTin Western Australia was acquired inApril, 1998 as a low-risk, advancedexploration opportunity that hasprovided the Company with apresence in a major gold province.The geologic setting has manysimilarities to the setting in theHoyle Pond Mine area. Kinrosscontrols about 15 kilometers ofstrike length of the Norseman Break,a structural zone that has beenproduced more than 7 millionounces of gold since the 1930’s.The focus of exploration, the Mt.Henry and Selene prospects, liesmidway along the strike of theNorseman Shear, which juxtaposesmafic and ultramafic volcanicsagainst metasediments. Typically,the shear zone in the north is nearlyvertical and flattens to the southwhere it dips about 25 degrees to thewest. In the north at Mt. Henry,mineralized widths average 5-10meters at an average grade of 1.25grams per tonne with implicationsthat thicknesses and grades improvewith depth. In the south at Selene,the mineralized intervals are widerat a slightly lower grade, but againboth aspects improve with depth.On the east mineralized thicknessesare 20-30 meters at an average gradeof 1.18 grams per tonne.To the west the character of the orezone increases to nearly 50 metersat an average grade of 1.92 gramsper tonne of gold.A mineral inventory was calculatedfor the Mt. Henry-Selene deposits atthe end of 1998. Using a 0.70 gramsper tonne of gold cut-off grade, thetotal resources (Measured + Indicated+ Inferred) delineated at theNorseman Project are approximately25 million tonnes at an averagegold grade of 1.23 grams per tonneyielding 971,000 contained ouncesof gold using two methods ofcalculation. Of this total, more than85% are in Measured and Indicatedcategories. The deposits remainopen to expansion both along strikeand down dip.Results from first-stage metallurgicalstudies indicate that the ore can berecovered with standard technology.Additional tests will be carried out in1999 to determine the optimal goldrecovery. As well, environmentalbaseline studies are underway to setthe stage for completion of a projectfeasibility study by year’s end.The RAILROAD PROJECT islocated in north-east Nevada,currently the most productive goldcamp in North America.The project is a joint venturebetween Kinross and ExplorationMirandor Inc. and coversapproximately 140 square kilometers,adjoining Newmont’s million ounceRain Mine on the south.The area geology is quite complex,comprising a sequence of Paleozoicsedimentary rocks that have beensubjected to several faulting andfolding episodes and subsequentlyintruded by a granite with peripheralmineralized skarn deposits.Exploration was largely confinedto the middle to upper Paleozoicpackage of rocks, similar to thosethat host the Rain deposit. Moretypical, “Carlin-style” mineralizationis hosted by lower Paleozoic rocksthat crop out in small fault blockson the property, but underlie theentire project area, mostly at depthsaccessible to exploration.In 1998, Kinross carried out anintegrated exploration programconsisting of mapping, rock chipand soil grid geochemistry.We tested near-surface targetswith 60 shallow drill holes. Mostof the holes intersected intervalsof anomalous gold mineralization.Many were notably mineralizedand will require a follow-up drillingprogram in 1999.35

O P E R A T I O N SStep-out drilling in the northeasternpart of the project area wassuccessful in increasing the extent ofmineralization at the POD zone (1.27million tonnes at 2.91 grams of goldper tonne). In addition, several otherdrill holes in the vicinity returnednotable gold values over mineablethicknesses. A drill hole located 500meters to the east of POD (K98-30,27.4 to 51.8 meters at 1.58grams of gold per tonne) providedencouragement that the zone haspotential to expand, while a singlehole drilled at the end of the fieldseason (K98-49, 260.6 to 281.9meters at 2.47 grams per tonne),was the first test of a large, newlydefined, geochemical anomalyin soils about 1,000 meters southof POD.The work program in 1999 willcontinue to evaluate those areaswhere there has been drillingsuccess, and more importantly, willbegin to probe for large, highergrade gold deposits at depth withinthe lower Paleozoic strata, the typicalsite for development of Carlin-stylegold deposits.Kinross increased its ownership inGREYSTAR RESOURCES LTD.to 21% during 1998. Greystar isexploring the Angostura gold projectin eastern Colombia and has thepotential to develop a very large,bulk mineable gold deposit.An updated geologic resourceestimate was prepared for theAngostura project by MineDevelopment Associates late in 1998.Using a database of 137 diamonddrill holes (36,785 meters of core)and a 0.5 grams of gold per tonnecut-off grade, the resource estimateindicates that there are 4.84 milliongold equivalent ounces in 80.74million tonnes at an average gradeof 1.75 grams of gold per tonne and6.86 grams of silver per tonne.Lowering the cut-off grade to 0.3grams of gold per tonne, increasesthe global mineral resource to 6.73million ounces of gold equivalentat an average grade of 0.98 gramsof gold equivalent per tonne.The mineralized zone remainsopen and will likely continue toexpand significantly.The AGINSKOE PROJECTis a bonanza grade, epithermalprecious metals vein system locatedin the south-central portion of theKamchatka peninsula of the RussianFar East. Kinross holds a 25%interest and is the project operator.Together with its venture partners,the Company is pursuing project debtfinancing with political riskinsurance. No on-site work wascarried out at Aginskoe in 1998.PENTLAND FIRTHVENTURES LTD.(46% Kinross)Pentland Firth is an explorationcompany holding large propertypositions in Ontario, including anumber of properties adjoiningKinross operations. These holdingsinclude approximately 165 squarekilometers in under-exploredproperties in two premier goldcamps, the Porcupine Camp nearTimmins and the Golden Highwaynear Matheson, Ontario. In addition,the company has a large landposition comprising the HammondReef project in northwestern Ontarionear Atikokan.In 1998 Pentland Firth spent C$1.44million on exploration activities,largely on the New Mine Trends nearHoyle Pond and at the Ludgateproject on the Golden Highway.MIRAGE RESOURCECORPORATION(51% Kinross)With the support of Kinross, MirageResource has been actively exploringthe El Dorado project in El Salvadorsince 1993. Presently there is a drillindicatedresource of about onemillion gold equivalent ounceshosted by high grade, epithermalquartz veins that cut Tertiary-agevolcanics on the properties. Thereremains significant potential toincrease the resource.36

C O M M U N I T YC O M M I T M E N TAt the Fort Knox Mine efforts were made to enlighten thelocal community as to the importance of mining in theirlives by conducting numerous tours of the facility duringthe course of the year. Tours and presentations are sofrequent that a full time “tour guide” is needed during thesummer months. Another very important effect on theFairbanks Community is the significant, positive economicimpact that the mine has on the local community.An independent economic impact study conducted by theBorough of Fairbanks, shows that the positive impactsfrom the mine are far reaching. The Fort Knox Mineprovides direct and indirect employment, significanttax revenue to the Borough and lower electric powercosts for the average household.In Russia, through its joint venture with Omolon GoldMining Company, Kinross is committed to effective socialdevelopment programs in the Magadan Oblast. Someexamples of those programs that have been completed orare under way are:ª Technical and management education, artisan trainingand heavy equipment training for local residents.These programs provide training in such state of theart technology as DCS control systems, inventorymanagement, communication systems, etc. These programsare designed to prepare local residents for employment atthe Kubaka Mine. The programs also provide valuable jobskills for those persons who decide to pursue opportunitieswith other companies.ª Support local businesses and suppliers of goods andservices by purchasing from Magadan based companieswhenever possible. Omolon purchases local meat, fishand produce whenever possible. Internet, fax and voicecommunication is provided by local/Russian companies.The 1999 fuel requirements were purchased from Russiancompanies and the fuel was refined domestically. Theexplosives required for the breaking of rock at the mineare also produced domestically.ª Supply of communication system and infrastructureimprovements to the Evensk area.ª Provide assistance with required logistical andmanagerial support for the distribution of food,fuel and medical supplies furnished to the region byvarious charitable organizations.ª Omolon Mining Company is the largest privateemployer (400 employees) in the region, and is the largesttax paying entity in the Oblast.During 1998, the personnel of the Denton-Rawhide Mineparticipated in numerous community relation activities.One of the more significant activities relates to theeducation of people in the community as to theimportance of the mining industry. Denton-Rawhideroutinely gives tours of the mine to school childrenand their instructors. Denton-Rawhide sponsored threelocal teachers to attend a two-day seminar titled“Out of the Rock”.The Denton-Rawhide Mine interacts with the Walker RiverPaiute Tribe on a long term, continuous basis and donatedfive computers to the tribe during the year.In Chile, the Company contributes to the salaries ofthe park rangers stationed at the 300,000 hectare TresCruces National Park located near its Refugio mine.This park is home to an estimated 3,500 flamingos andother protected species.In Zimbabwe, the Company continues to lend itssupport to the Chipangali Wildlife Orphanage, a worldrenownedsanctuary for sick, injured and orphanedanimals and birds.Flamingos at Tres Cruces National Park, Chile.37

E N V I R O N M E N TIn 1998, Kinross continued its commitment to theenvironment with the completion of two exemplaryreclamation projects of which stakeholders are justifiablyproud. The first, Sleeper Pit Lake, referred to by the pressas a “treasure for all time”, is located in Western Nevada.The lake, originally an open-pit mine created during theSleeper mine operation, is now a water recreationresource of immense potential. The lake was createdthrough careful water management and chemical additivecontrol at a scale never before attempted. Approximatelytwo kilometers long, one kilometer wide and 125 metersdeep, the lake is already home to minor fish species andis of high enough water quality to introduce bluegill andbass in the future. On a smaller scale, but equallyimpressive in terms of exemplary post-miningreclamation, is the second project at the Kirkland LakeDon Lou tailings basin. Working closely with civicgroups, city hall and Ducks Unlimited, mine personnelhave been able to reclaim the tailings basin so that itnow provides a first-class wetlands habitat for wildlifeand waterfowl. Nesting boxes have been placed atappropriate locations to further encourage a sustainedecological resource. The addition of a nature trail aroundthe perimeter of the lake allows residents of KirklandLake to take nature walks and observe the wetlandbiosystem. The lake is unique in the community and willbe an asset for generations to come.To be sure, not all mining locations provide opportunitiesfor such impressive projects. Site conditions dictate thetype of reclamation to a large extent. Kinross locationsvary from dry, sterile environments where cows andsheep are used to introduce necessary soil nutrients, tosubarctic locations where providing for reindeer habitatmay be the main focus. Despite this variation, Kinrossoperations are committed to successful reclamationprojects. They do so by maintaining proper funding andaggressively conducting reclamation activities concurrentwith the mine’s operation.The company has also placed increased emphasis onreclamation considerations from the very initial stagesof mine planning and operation.Stringent reclamation requirements are not the onlysignificant environmental issues which modern miningcompanies face. The need to conduct all miningoperations in an environmentally-sensitive manner,sometimes going beyond regulatory requirements, hasbecome increasingly important. To that end, in 1998,Kinross continued to reduce discharges to theenvironment consistent with pollution prevention goals.Also in 1998, despite working in a regulatory climatewhere governmental agencies worldwide are aggressivelyenforcing even minor discrepancies, no Kinross operationwas fined or penalized.Major accomplishments for individual Kinross operationsare described below.UNDERGROUND MINE OPERATIONSOur primary accomplishments at underground operationsincluded better tailings management and improvedreclamation. At Timmins we improved the tailingstreatment facility and completed permitting for the BellCreek mill expansion. At Kirkland Lake, we completedreclamation of the Don Lou tailings basin describedabove and recontoured and seeded approximately 4hectares of shoreline at the Lakeshore property and alongthe Macassa tailings facility. Construction was alsocompleted at Blanket mine for the new tailings facility.38

E N V I R O N M E N TKirkland Lake Don Lou tailingsbasin post reclamation.39

E N V I R O N M E N TSURFACE MINE OPERATIONSOur major accomplishments at the surface minesincluded better water management and concurrentreclamation. At Kubaka, we built a waste water treatmentplant and substantially improved the dam at the reclaimwater pond. At Fort Knox, we removed asbestos froman historic power plant building and replanted 36hectares of land. In September, removal of water fromthe tailings pond at DeLamar was begun. At Refugio, wefurther improved the crusher dust control system toreduce dust. At Denton-Rawhide, we initiated permittingon the phase 6 heap leach pad.RESIDUAL OPERATIONSFor operations nearing the end of their mine life, closureactivities were accelerated to save money. At HaydenHill, closure activities included the construction of theSouth acid rock drainage disposal facility and the finalreclamation of 31 hectares of disturbed land. AtCandelaria, cows and sheep were used to reclaim theW6 and W3/W4 waste dumps. In addition, we continuedrinsing the No. 1 leach pad to bring cyanideconcentrations down to accepted values and flushedsalts from the upper portions of the spent ore.At Guanaco, we improved sanitary and waste disposal.CLOSURE PROPERTIESAt present, Kinross has four properties in various stagesof closure the QR Mine in British Columbia, the HaileMine in South Carolina, the Sleeper and Wind Mountainmines in Nevada. Operations at the QR Mine, whichconsisted of both surface and underground minefacilities, ceased in early 1998. Process chemical removal,oil removal and mill cleanup were completed in 1998,and ongoing monitoring and reporting are in progressto comply with regulations. An extensive care andmaintenance program is required at Haile. Collection andtreatment of significant quantities of surface water fromboth open pits and heap leach facilities is underway.Mining and processing at the Haile Mine has beensuspended since 1991. The primary closure activity atthe Wind Mountain Mine has been recontouring theheap leach pads. A recirculating rinse system is helpingevaporate process solution and reduce the volume ofwater requiring final disposal. At the Sleeper Mine,besides the pit lake management program, the mainactivities are recontouring 65 hectares of heap leach padsurfaces and revegetation of another 114 hectares ofdisturbed land. The experimental use of biosolids fromthe town of Winnemucca sewage treatment plant wasalso initiated in 1998 with the hope of further reducingsoil preparation requirements and cost.Re-establishing natural habitats.40

F I N A N C I A LI N F O R M A T I O N

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I SAll results are expressed in United States dollars unless otherwise stated.THE COMPANYKinross Gold Corporation (“The Company” or “Kinross”) is engaged in the mining and processing of gold and silverore and the exploration for and acquisition of gold-bearing properties, principally in the Americas, Russia, Australiaand Africa. The Company’s products are gold and silver produced in the form of doré that is shipped to refineries forfinal processing.AMAX GOLD INC. MERGERThe most significant event of 1998 was the completion of the merger with Amax Gold Inc., (“Amax”) whereby theCompany acquired all of the assets and assumed all of the liabilities of Amax. The acquisition increased annualproduction to one million ounces per annum of gold equivalent and created the fifth largest North American goldproducer. The acquisition was important to the Company in that it enabled the Company to substantially reduceaverage cash operating costs per equivalent ounce of gold; to increase production and to increase cash margins.The asset acquired, combined with the primary assets of Kinross, provides a solid basis for future growth andincreased leverage to higher gold prices.The June 1, 1998, acquisition has been accounted for using the purchase method. For a detailed explanation of theaccounting treatment of the acquisition see Note 2 of the notes to the Consolidated Financial Statements. TheCompany completed the acquisition and issued from treasury 92,158,907 common shares in exchange for 100% of theissued and outstanding shares of Amax. In addition, the Company issued 23,398,598 common shares to Cyprus AmaxMinerals Company (“Cyprus Amax”) upon conversion of $90,272,000 of debt owed by Amax to Cyprus Amax andupon issuance of 11,598,649 common shares to Cyprus Amax for cash of $44,728,000. The 1998 results of operationsreflect the ownership of the assets acquired from Amax from the date of acquisition.NET LOSSNet loss in 1998 was $25,372,000 or $0.13 cents per share before the write-downs of mineral properties andmarketable securities. This was higher than the 1997 loss of $7,628,000 or $0.10 cents per share before the writedownsof mineral properties and long-term investments. During the fourth quarter of 1998, pre and after tax noncashwrite-downs totalling $220,022,000 were taken on certain mining assets and marketable securities, while in 1997,non-cash write-downs totalling $87,822,000 ($76,103,000 after taxes) were taken on certain mining assets and longterminvestments. As a result, in 1998 the Company recorded a loss for the year of $245,394,000 or $1.08 per sharecompared to a loss of $83,731,000 or $0.71 cents per share in 1997.REVENUESGold and Silver SalesThe Company’s primary source of revenue is from the sale of its gold and silver production. The Company produced874,447 ounces of gold equivalent in 1998 compared to 499,025 ounces in 1997. Revenue from gold and silver saleswas $269,212,000 in 1998 compared to $173,190,000 in 1997. Revenue in 1998 increased as substantially higher goldequivalent production was achieved as a result of the acquisition of Amax on June 1, 1998, but was partially offsetby lower realized gold prices in 1998. In 1998, the Company realized $309 per ounce of gold, as compared to $344per ounce in 1997. The average spot price for gold was $294 per ounce in 1998 compared to $331 in 1997.SUMMARY INFORMATION1998 1997Gold production - ounces 823,721 428,973Gold revenues $ 254,221,000 $ 147,554,000Average realized gold price per ounce $ 309 $ 344Average gold spot prices $ 294 $ 331Silver production - ounces 2,697,000 4,730,000Silver revenues $ 14,991,000 $ 25,636,000Average realized silver price per ounce $ 5.56 $ 5.42Average silver spot prices $ 5.53 $ 4.90Gold equivalent production - ounces (1) 874,447 499,025(1) Gold to silver ratios were 53.17:1 in 1998 and 67.52:1 in 1997.KINROSS GOLD CORPORATION42

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I SINTEREST AND OTHER INCOMEThe Company invests its surplus cash in high quality, interest-bearing short-term investments. Interest and otherincome during 1998 totalled $17,385,000 compared to $10,316,000 in 1997. Interest income increased due to highermonthly average cash balances and other income increased substantially due to the inclusion of $1,800,000 ofmanagement fees earned from the Kubaka mine for the seven months of ownership.COSTS AND EXPENSESOperating CostsThe 75% increase in gold equivalent production resulted in higher production costs of $196,298,000 in 1998 comparedto $137,145,000 in 1997. On a per ounce basis, cash operating costs improved dramatically in 1998 to $205 perequivalent ounce of gold compared to $265 in 1997, while total cash costs (including royalties and production taxes)improved by $54 per ounce in 1998.CONSOLIDATED PRODUCTION COSTSper Equivalent Ounce of GoldFor the year ended December 31,1998 1997Cash operating costs $ 205 $ 265Royalties 9 2Production taxes - 1Total cash costs 214 268Reclamation 8 7Depreciation, depletion and amortization 93 65Total production costs $ 315 $ 340Total cash costs per ounce of gold equivalent improved in 1998 as a result of the low cost mines added to theportfolio upon the completion of the acquisition of Amax, improved operating performance at the Denton-Rawhideand Macassa mines and the impact of lower Canadian and Zimbabwean dollar exchange rates. In 1999, total cashcosts per ounce are expected to decline to $200 per ounce, as a result of the inclusion of a full year’s operatingperformance of the mines acquired from Amax and the phasing out of the higher cost residual operations. Details ofthe individual mine performance are discussed in the following sections.PRODUCTION DATAGold Equivalent Production - OuncesFor the Year Ended December 31,1998 1997Primary operations:Hoyle Pond 158,953 174,317Macassa 78,034 56,709Fort Knox* 203,010 -Kubaka* 154,350 -Denton-Rawhide 69,015 66,402Refugio* 42,446 -Blanket 35,266 35,237741,074 332,665Other operations:DeLamar 62,056 64,380Candelaria 23,305 53,142Hayden Hill* 18,922 -Guanaco* 15,019 -QR 14,071 41,115Golden Kopje - 7,723133,373 166,360Total gold equivalent ounces 874,447 499,025*Acquired from Amax effective June 1, 1998KINROSS GOLD CORPORATION43

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I STOTAL CASH COSTSFor the Year Ended December 31,(Dollars per equivalent ounce of gold)1998 1997Primary operations:Hoyle Pond 171 186Macassa 257 370Fort Knox* 199 -Kubaka* 149 -Denton-Rawhide 235 247Refugio* 338 -Blanket 193 262200 238Other operations:DeLamar 356 313Candelaria 372 303Hayden Hill* 121 -Guanaco* 210 -QR 253 358Golden Kopje - 429298 326214 268*Acquired from Amax effective June 1, 1998PRIMARY OPERATIONSHoyle Pond MineThe Company acquired the Hoyle Pond mine, located in Timmins, Ontario, in 1993. Gold production in 1998 was158,953 ounces, which compares to 174,317 ounces in 1997. In 1998, total cash costs were $171 per ounce of gold ascompared to $186 in 1997. Total cash costs per ounce of gold decreased in 1998 due to lower unit costs of miningand a weaker Canadian dollar. Estimated gold production for 1999 is 165,000 ounces at total cash costs ofapproximately $160 per ounce.Kubaka MineOn June 1, 1998, the Company acquired a 50% ownership interest in the Kubaka mine, located in the Magadan Oblastin eastern Russia pursuant to the acquisition of Amax. Gold equivalent production for the Company’s 50% interestfor the seven months of ownership in 1998 was 154,350 ounces. Total cash costs for the seven-month period were$149 per gold equivalent ounce. The Kubaka mine continues to perform very well, having achieved the Company’slowest cash operating costs per ounce. As a result of the continued success at the Kubaka operations, the Companyincreased its ownership interest to 53% in late December of 1998. Estimated gold equivalent production for theCompany’s ownership interest in 1999 is 210,000 ounces at total cash costs of approximately $175 per equivalentounce.Fort Knox MineOn June 1, 1998, the Company acquired the Fort Knox mine, located near Fairbanks, Alaska pursuant to theacquisition of Amax. Gold production for the seven months of ownership in 1998 was 203,010 ounces. Total cashcosts for the seven-month period were $199 per ounce of gold. Total cash costs increased to $210 per ounce of goldduring the fourth quarter due to mining a lower grade portion of the reserves. With the recently expanded millcapacity and slightly improved grades, the mine is expected to reduce total cash costs per ounce of gold to thatamount that was achieved in the first four months of Kinross’ ownership. Estimated gold production for 1999 is370,000 ounces at total cash costs of approximately $192 per ounce.Refugio MineOn June 1, 1998, the Company acquired a 50% interest in the Refugio mine, located in Chile pursuant to theacquisition of Amax. Kinross’ share of gold equivalent production for the seven months of ownership in 1998 was42,446 ounces. Total cash costs for the seven-month period were $338 per gold equivalent ounce.KINROSS GOLD CORPORATION44

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I STotal cash costs decreased to $272 per equivalent ounce of gold during the fourth quarter primarily due toimprovements in the reliability of the overland conveyance system. Estimated gold equivalent production attributableto Kinross’ 50% interest for 1999 is 110,000 ounces at total cash costs of approximately $240 per equivalent ounce.Macassa MineThe Macassa mine, which is located in Kirkland Lake, Ontario, was acquired in 1995. Gold production in 1998 was78,034 ounces, which compares to 56,709 in 1997. In 1998, total cash costs were $257 per ounce as compared to $370in 1997. Total cash costs per ounce of gold improved dramatically in 1998 due to improvements in undergroundmining of the upper levels and a successful crown pillar recover program at the Lakeshore tailing basin. Estimatedproduction for 1999 is 80,000 ounces of gold at total cash costs of approximately $240 per ounce.Denton-Rawhide MineThe 49%-owned Denton-Rawhide mine is located near Fallon, Nevada. The Company’s share of production in 1998was 69,015 ounces of gold equivalent, which compares to 66,402 in 1997. Total cash costs in 1998 were $235 perounce of gold equivalent as compared to $247 in 1997. Total cash costs decreased in 1998 as a result of higher thanbudgeted run of mine low-grade production, which increased ounces recovered from the leachpads. Estimatedproduction for 1999 attributable to Kinross’ 49% interest is 60,000 ounces of gold equivalent at total cash costs ofapproximately $260 per equivalent ounce.Blanket MineThe Blanket mine, located in Zimbabwe, was acquired in 1993. Gold production in 1998 was 35,266 ounces, comparedto 35,237 ounces in 1997. Total cash costs were $193 per ounce of gold as compared to $262 in 1997. Total cashcosts per ounce of gold decreased in 1998 primarily as a result of a lower Zimbabwean dollar. Estimated productionfor 1999 is 40,000 ounces of gold at total cash costs of approximately $200 per ounce.OTHER OPERATIONSIn addition to its primary operating mines, the Company has five locations in various stages of residual production orclosure. Gold equivalent production from these mines in 1998 was 133,373 ounces at average total cash costs of $298per ounce. Residual production from some of these mines is expected to contribute approximately 33,000 ounces in1999 at total cash costs of approximately $235 per equivalent ounce.ROYALTY COSTSIn 1998, royalty costs per ounce of gold equivalent increased to $9 per ounce from $2 per ounce in 1997. The mostsignificant royalties are royalty-based taxes on production from the Kubaka mine in Russia.SITE RESTORATION COSTSAlthough the ultimate amount of reclamation and closure costs is uncertain, the Company estimates its future closureobligations at $75,000,000 based on information currently available including preliminary closure plans andapplicable regulations. As at December 31, 1998, the Company has accrued $57,840,000 of this liability. TheCompany accrues site restoration costs over the remaining life of the reserves. These costs per equivalent ounce ofgold production increased to $8 in 1998 from $7 in 1997. Site restoration costs are expected to decrease on a perounce basis in 1999 as the full effects of the Amax acquisition are recognized.ADMINISTRATIONAdministration expenditures include corporate office expenses related to the overall management of the businesswhich are not part of direct mine operating costs. Administration costs include the costs incurred at three offices.These offices are the corporate office in Toronto, the United States office in Salt Lake City and the Zimbabwe office inHarare. Administration expenses totalled $7,279,000 in 1998 compared to $5,912,000 in 1997. The increase in 1998was due to increased staffing and general costs resulting from the additional administrative activities of the newlyacquired assets of Amax. Administration expenses are expected to increase to $8,500,000 in 1999 due to theinclusion of the full year management costs related to the Amax assets acquired.EXPLORATION AND BUSINESS DEVELOPMENTIn 1998, total exploration and business development expenditures were $14,757,000 of which $10,317,000 wasexpensed. In 1997 total exploration and business development expenditures were $14,627,000 of which $4,693,000was expensed.KINROSS GOLD CORPORATION45

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I SCapitalized exploration was incurred primarily on the Hoyle Pond property and Fort Knox properties, while expensedexploration activities focused on the Norseman project in Australia, and various other projects in the United States.Planned expenditures in 1999 are estimated to be approximately $2,000,000 higher than 1998.DEPRECIATION, DEPLETION AND AMORTIZATIONDepreciation, depletion and amortization totalled $81,011,000 in 1998, compared to $32,508,000 in 1997.Depreciation, depletion and amortization have increased per equivalent ounce of gold to $93 from $65 in 1997. The1998 increase per equivalent ounce of gold was due to a larger depreciable base as a result of the Amax acquisition.Depreciation, depletion and amortization per equivalent ounce of gold is expected to decline in 1999 to $85 due tothe write-downs recorded during 1998 as explained below.INTEREST EXPENSEInterest expense totalled $11,124,000 in 1998, compared to $5,346,000 in 1997. Interest expense is comprised of$3,580,000 relating to the Company’s proportionate share of interest on the Kubaka project and subordinated loans,$2,000,000 of interest on the Alaskan industrial revenue bonds, $3,800,000 of interest on the debt component of theconvertible debentures and the balance interest on the capital leases. Interest expense increased in 1998 due to thedebt assumed as a result of the Amax acquisition. For further information on the Company’s debt position see note 9to the Consolidated Financial Statements.WRITE-DOWN OF MINERAL PROPERTIESThe $216,081,000 after-tax write-down of mineral properties recorded in 1998 was comprised of the following;$145,167,000 relating to the Fort Knox mine, including $104,665,000 of excess costs of the Amax acquisition that hadbeen allocated to the Fort Knox mine; $46,901,000 relating to the Refugio mine and the balance to other non-coreassets. The Company reviewed the carrying value of its portfolio of mines in 1998 using a net recoverable amountcalculation and a $325 gold price assumption.The $80,437,000 ($68,718,000 net of taxes) write-down of mineral properties taken in 1997 was comprised of thefollowing; $35,719,000 relating to the Macassa mine due to a series of rockbursts that made the mining at depthuncertain; $13,516,000 due to the phasing out of the Q.R. mine which was completed in 1998; $22,500,000 on theGoldbanks property and the balance relating to other non-core assets. The Company reviewed the carrying value ofits portfolio of mines in 1997 using a net recoverable amount calculation and a $350 gold price assumption.The details of the asset write-downs are presented in note 15 to the Consolidated Financial Statements.WRITE-DOWN OF LONG-TERM INVESTMENTS AND MARKETABLE SECURITIESThe $3,941,000 write-down of marketable securities taken in 1998 was as a result of a decrease in the quoted marketvalue of an investment.The Company has various equity positions in resource-related companies. The $7,385,000 write-down of long-terminvestments taken in 1997 was as a result of the status of the market and management’s estimate of value of theseinvestments. The Company determined in 1997 that a permanent impairment in value had occurred and wrote certaininvestments down to their estimated market value as at December 31, 1997.INCOME TAXESThe Company is subject to tax in various jurisdictions including Canada, the United States, Russia, Zimbabwe andChile. In addition, the Company has substantial operating losses and other tax deductions to shelter future taxableincome. The 1998 liability is due to mining taxes incurred in Ontario, federal large corporations’ tax and alternativeminimum tax in the U.S. For a detailed income tax reconciliation, see note 16 to the Consolidated FinancialStatements.LIQUIDITY AND FINANCIAL RESOURCESCash flow provided from operations increased by 78% in 1998 to $54,538,000 as compared to $30,592,000 in 1997.Cash flow provided from operations is expected to increase in 1999 once the full annual effects of the Amaxacquisition are achieved. The 1998 cash flow provided from operations was negatively affected by lower realized goldprices but positively affected by significantly lower total cash costs per ounce of gold equivalent and increased output.KINROSS GOLD CORPORATION46

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I SProceeds from unwinding the Company’s hedge book and the hedge book acquired from Amax added additional cashof $59,837,000, while other working capital items consumed $12,392,000. As a result, cash flow provided fromoperating activities in 1998 was $101,983,000, which compares favourably to $46,597,000 realized in 1997.During 1998, the Company issued 38,119,000 common shares pursuant to a public offering for cash of $126,687,000which was used primarily to pay down debt as part of the Amax acquisition; 23,398,598 common shares pursuant tothe conversion of debt of $90,272,000 owed by Amax to Cyprus Amax; 11,598,649 common shares to Cyprus Amaxfor cash consideration of $44,728,000; and 92,159,000 pursuant to the Amax acquisition valued at $329,930,000. Fordetails on the business acquisitions that occurred during 1998, see note 2 to the Consolidated Financial Statements.During 1998, the Company repaid long-term debt of $361,468,000 of which 94% was repaid at the time of completionof the Amax acquisition with the balance relating primarily to the Kubaka project financing debt and the Kubakaworking capital debt.As at December 31, 1998, the Company’s long-term debt consists of, $49,024,000 relating to the Kubaka projectfinancing, $8,882,000 on the Kubaka subordinated debt, $71,000,000 on the Alaskan industrial revenue bonds andvarious capital leases totalling $22,034,000. The current portion of the long-term debt is $25,086,000. The December31, 1998 balance sheet reflects the acquisition of a further 3% of Kubaka; thus the consolidated debt as at December31, 1998 includes 53% of the Kubaka amounts outstanding. Cyprus Amax has guaranteed the project-financing debtand the Alaskan industrial revenue bonds and the Company has agreed to reimburse Cyprus Amax for any guaranteepayments. The Company has agreed to use all reasonable efforts to cause itself to be substituted for Cyprus Amaxunder these guarantees. For details of the various components of long-term debt, see note 9 to the ConsolidatedFinancial Statements.Capital expenditures declined by 15% in 1998 as $33,840,000 was spent on capital additions, which compares to$39,913,000 in 1997. The 1998 capital expenditures focused primarily on the Hoyle Pond and Fort Knox operationswith 80% of total capital expenditures incurred at these two mines. Capital spending at the Hoyle Pond mine totalled$16,895,000 for exploration drilling, underground development, additions to the underground mobile fleet andconstruction of a new mine office and dry complex, while at the Fort Knox mine, $10,234,000 was spent on thetailings dam expansion, the pebble crusher addition and exploration. Capital expenditures were financed out of cashflow provided from operations and planned capital expenditures totalling $44,000,000 in 1999 are expected to befunded out of cash flow provided from operations.As at December 31, 1998, the Company has $153,413,000 of cash and operating working capital of $30,779,000 fortotal working capital of $184,192,000. This combined with low cost production, and a manageable debt repaymentschedule, provides the Company with a solid platform for future growth.BUSINESS RISKS AND MANAGEMENTThe Company continuously reviews the mining risks it encounters in its day-to-day operations. It mitigates thelikelihood and potential severity of these risks through the application of high operating standards. In addition, thereis great emphasis on safety, training and loss control programs at the various sites. During 1998, the Companylowered its lost time accident rate from 1.63 to 1.25 for every 200,000 employee hours worked. The Company alsomaintains insurance coverage to cover normal business risks.The Company’s operations have been and in the future may be, affected to various degrees by changes inenvironmental regulations, including those for future site restoration and reclamation costs. Although the ultimateamount of site restoration and reclamation costs to be incurred is uncertain, the Company has estimated planned siterestoration and reclamation costs which it believes will meet current regulatory requirements.The Company has prepared reserve estimates based on a $325 per ounce gold price. Market fluctuations in the priceof gold may render certain ore reserves uneconomical at lower gold prices. The Company’s sensitivity to a $25reduction in the gold price assumption would be to decrease proven and probable reserves by 5.5%, while a $25increase in the gold price assumption would be to increase proven and probable reserves by 5.6%.The Company’s business is subject to extensive licenses, permits, government legislation, controls and regulations.The Company endeavors to be in compliance with these at all times.KINROSS GOLD CORPORATION47

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I SThe Company is subject to the considerations and risks of operating in Russia. During 1998, the economy of theRussian Federation entered into a period of financial difficulty, the impact of which includes, but is not limited to, asteep decline in prices of domestic debt and equity securities, a severe devaluation of the currency, a moratorium onforeign debt repayments, an increasing rate of inflation and increasing rates of interest on government and corporateborrowings. Although, the Company’s operations have been affected by this and may continue to be affected for theforeseeable future, the Company completed its first export shipment of gold during the crisis. The Company hasreceived excellent co-operation from the various levels of government in Russia and continues to export gold whenthe central bank decides not to purchase it. In addition, the moratorium on foreign debt repayments was subsequentlylifted.DISCLOSURES ABOUT MARKET RISKSCommodity Price RisksThe Company’s revenues are derived primarily from the sale of gold production. The Company’s net income can varysignificantly with fluctuations in the market prices of gold. At various times, in response to market conditions, theCompany has entered into gold forward sales contracts for some portion of expected future production to mitigate therisk of adverse price fluctuations. The significant decline in spot gold prices in 1997 increased the value of theCompany’s forward sales contracts. The Company closed out these contracts in late 1997 and early 1998 for$22,224,000 and $14,376,000 in cash, respectively. In addition, in 1998, the Company closed out the forward salescontracts acquired from Amax for $45,952,000 in cash. As at December 31, 1998 the Company has gold forward salescontracts outstanding covering 150,000 ounces of future production at $301 per ounce. Based on the Company’sprojected 1999 sales volumes, each $10 per ounce change in the average realized price on gold sales would have anapproximate $11,000,000 impact on revenues and pre-tax earnings. For further details of the remaining deferredrevenue and the period it will be recorded in revenue see note 8 of the Consolidated Financial Statements.Foreign Currency Exchange RiskThe Company conducts the majority of its operations in the U.S., Russia, Canada, Chile and Zimbabwe. Currencyfluctuations affect the cash flow that the Company will realize from its operations as gold is sold in U.S. dollars,while, production costs are incurred in Russian rubles, Chilean pesos, Canadian, U.S. and Zimbabwean dollars.The Company’s results are positively affected when the U.S. dollar strengthens against these foreign currencies andadversely affected when the U.S. dollar weakens against these foreign currencies. The Company’s cash and cash equivalentbalances are held in U.S. and Canadian dollars, holdings denominated in other currencies are relatively insignificant.In the last half of 1998, the Russian ruble has weakened against the U.S. dollar and the Company has benefitedprimarily through lower Russian labour and materials costs. The Company’s Russian operations are translated intoU.S. dollars using the temporal method due to Russia’s highly inflationary economy. The temporal method translatesnon-monetary items at historical rates, while monetary assets and liabilities are translated at actual exchange rates ineffect at the balance sheet date. The major currency related exposure at any balance sheet date is on rubledenominated cash balances and working capital. The bullion inventory is denominated in U.S. dollars thus there areno related foreign exchange risks. The foreign exchange exposure on the balance of the working capital items isnominal. Gold sales during 1998 were denominated 50% in U.S. dollars and 50% in rubles. The U.S. dollars receivedare used to service the U.S. dollar denominated debt and the foreign supplies inventory purchases, while the rublesreceived from the gold sales are used to pay local operating costs. The Company has and will continue to convert anyexcess rubles into U.S. dollars to repay U.S. denominated third party and inter-corporate debt obligations. Assumingestimated 1999 ruble payments for Russian labour and materials of 350 million rubles at an exchange rate of 20rubles to one U.S. dollar, each 2 ruble change to the U.S. dollar could result in an approximate $1,000,000 change inthe Company’s pre-tax earnings.In Chile, the currency of measurement is the U.S. dollar as the majority of transactions are denominated in U.S.dollars. Local expenditures are recorded based on the prevailing exchange rate at the time and bullion settlementreceivables are denominated in U.S. dollars. The vast majority of expenditures are denominated in U.S. dollarsresulting in little peso-related exposure.The Company has self-sustaining operations in Canada which are translated into U.S. dollars using the current ratemethod. The current rate method translates assets and liabilities into U.S. dollars at the rate of exchange in effect atthe balance sheet date and revenue and expense items into U.S. dollars using the average rate for the reportingperiod. The U.S. dollar increased in value by approximately 6% when compared to the Canadian dollar in 1998.KINROSS GOLD CORPORATION48

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I SThis, combined with holding net assets in the Canadian self-sustaining operations, resulted in an increase of$13,865,000 in the foreign currency translation adjustment account. In addition, the Company has Canadian dollardenominated operating, administration, exploration and interest expense. The Company currently has hedged$18,000,000 of this exposure for the next three years at average exchange rates of Canadian $1.4611 per U.S. dollar.Excluding hedging contracts described above, and assuming 1999 Canadian dollar payments of $95 million dollars atan exchange rate of Canadian $1.45 per U.S. dollar, each 5 cent change to the U.S. dollar could result in anapproximate $2,000,000 change in the Company’s pre-tax earnings.In Zimbabwe, the temporal method is used to consolidate the financial results. The major currency exposure is onoperating costs, cash balances and working capital denominated in Zimbabwean dollars. Since the completion of theAmax acquisition, the exposure to changes in the Zimbabwean dollar exchange rates is no longer material since theBlanket mine represents less than 5% of the Company’s revenue and asset base.Interest Rate RisksThe Company has interest rate swaps to fix interest rates on a portion of its floating rate debt. The costs associatedwith these contracts are amortized to interest expense over the terms of the agreements. For details on the interestrate swap contracts outstanding as at December 31, 1998, see note 8 to the Consolidated Financial Statements. AtDecember 31, 1998, the Company carries $128,906,000 of variable rate debt, all denominated in U.S. dollars. Interestexpense would change by approximately $1,000,000 for every one percent change in interest rates.YEAR 2000The Company’s principal uses of technology affected by Year 2000 issues are the management of internal financialdata and the control of milling processes. Year 2000 has potential implications to the Company’s businessapplications and automated mine operations, such as process controllers and other electronic measuring devices. Wehave focused our investigations on:1. Business systems including information technology hardware and software including interfaces with systems ofthird parties,2. Embedded technologies including equipment that controls, supports or monitors mining equipment, mills,environmental, transportation and communications,3. Third party business relationships with suppliers and customers.The effort is organized into three major phases:1. Assessment, including the review of each operation and identification of all systems and third parties, which mightcause Year 2000 related business interruptions.2. Impact analysis, including the review of the systems, technologies and third parties identified in the assessmentphase and classification the risk potential. Decisions are made as to which risks can adversely affect the Company.Remediation plans are formulated, and contingency planning is begun.3. Implementation of the remediation plans and continuation of the contingency planning based on the results ofremediation and latest information from third parties.The Company has completed 75% of the assessment phase with respect to the business systems and embeddedtechnology.All internal business systems software consists of purchased products which are Year 2000 compliant, and which willbe put into operation by September 1999.A detailed review of embedded technologies, concentrating on mill process control systems, will be complete by May1999 and to date, no major issues in process control technologies have been found. At four key operations (the FortKnox mine, the Kubaka mine, the Hoyle Pond mine and the Macassa mine), the review has been completed or is nearcompletion with only minor remediation work identified.Goods and services that are deemed critical to each operation have been identified and the Company is working withthe vendors of those goods and services to ensure that no interruption will occur that will affect the operations.KINROSS GOLD CORPORATION49

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I SDepending on the results and interpretation of these findings, the Company will modify its contingency plansaccordingly.Impact analysis and implementation is being performed as non-compliant items are discovered and will be ongoingthrough the end of 1999; however the majority of work will be completed by the end of the third quarter of 1999.The Company has assigned the responsibility for overseeing its Year 2000 initiatives to the Chief Financial Officer,who reports to the Board of Director’s Audit Committee. The project is managed by the Director of InformationTechnology, who works with a coordinator assigned at each site to coordinate activities amongst mine site personneland to ensure that reviews and remediation are completed as planned. In certain cases, the Company has engagedthird parties to assist in the Year 2000 efforts.CostsThe Company has estimated the costs to prepare for Year 2000 at $1,000,000 of which $100,000 has been spent todate. All project costs are funded by cash flow from operations. The Company’s policy is to expense its Year 2000costs as incurred. In addition, the Company is in the process of implementing an enterprise wide information systemwhich is Year 2000 compliant to improve management information from its various business units.Risks and Contingency PlansExamples follow of the types of risks the Company could face as a result of failures of its information systems,milling systems, or the failure of one of the major third party suppliers.1. Business systems risks could include disruptions to business data processing such as payroll, accounts payable,purchasing, and other information systems until the systems can be corrected;2. Mining operations risks could include disruptions to mining processes and facilities with delays in delivery ofgold until the process system could be corrected;3. Major supplier risks could include disruptions in the provisions of goods and services that could causeinterruptions of mining and processing activities and delays in delivery;4. Major customers risks could include disruptions in sales, revenue and cash inflow as a major customer may not beYear 2000 compliant impacting their ability to order or pay for products.Considerable attention has been given to the potential problems Russia may incur with regards to Year 2000preparedness. The Kubaka Mine, due to its remoteness, is isolated from most of the potential problems. The sitegenerates its own electrical power, and off-site communication is provided by a satellite system linked into the NorthAmerican public phone network. Normal inventories carried on-site at that time of year are sufficient for the facilityto operate for 12 months. Transportation to the site is provided by dedicated charter aircraft. Potential risks for thisoperation are the ability of the refinery to process product.To minimize the risks associated with the Year 2000 issue, the Company has in its plan: to identify scenariosinvolving possible Year 2000 failures focusing on critical systems and critical third party vendors and to developcontingency plans for mitigating the impact of such scenarios. These plans will be the focus of efforts in the secondquarter of 1999. The Company believes that its largest potential risks involve third parties since the Company cannotcontrol their Year 2000 efforts. Although there are many areas of potential risk, at present the Company believes thatthe highest potential risks are the provision of power to its operations, and transportation related problems, any ofwhich could have an adverse impact on the Company’s operations and financial results. The Company expects tohave contingency plans in place by the third quarter of 1999.With respect to potential power interruptions, all operations are equipped with standby power generating facilities,and additional generating capacity is located at a shutdown property. Part of the contingency planning will be torelocate these additional generators to the sites felt to be most vulnerable to power interruption or where the effectsof an interruption would be most severe.The Company believes it is taking the necessary steps to resolve Year 2000 issues; however there can be no assurancethat any one or more such failures would not have a material adverse effect on the Company. Actual outcomes andresults could be affected by future factors including, but not limited to, availability of skilled personnel, ability tolocate software problems, critical suppliers and subcontractors meeting commitments, and timely actions by customersand suppliers.KINROSS GOLD CORPORATION50

A U D I T O R S ’ R E P O R TTo the Shareholders of Kinross Gold CorporationWe have audited the consolidated balance sheets of Kinross Gold Corporation as at December 31, 1998 and 1997 andthe consolidated statements of operations, common shareholders’ equity and changes in financial position for each ofthe years in the three year period ended December 31, 1998. These financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these financial statements based on ouraudits.We conducted our audits in accordance with generally accepted auditing standards in Canada. Those standardsrequire that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statement presentation.In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position ofthe Company as at December 31, 1998 and 1997 and the results of its operations and the changes in its financialposition for each of the years in the three year period ended December 31, 1998, in accordance with generallyaccepted accounting principles in Canada.Deloitte & Touche LLPChartered AccountantsToronto, OntarioFebruary 5, 1999Management’s Responsibility for Financial StatementsThe consolidated financial statements, the notes thereto and other financial information contained in the annualreport are the responsibility of the management of Kinross Gold Corporation. These financial statements have beenprepared in accordance with generally accepted accounting principles in Canada, using management’s best estimatesand judgements where appropriate.The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reportingand internal control. The Audit Committee, which is comprised of Directors none of whom are employees or officersof the Company, meets with management as well as the external auditors to satisfy itself that management is properlydischarging its financial reporting responsibilities to the Directors who approve the consolidated financial statements.The consolidated financial statements have been audited by Deloitte & Touche LLP, the independent auditors, inaccordance with generally accepted auditing standards in Canada. The auditors have full and unrestricted access tothe Audit Committee.Robert M. BuchanChairman andChief Executive OfficerBrian W. PennyVice President, Financeand Chief Financial OfficerToronto, OntarioFebruary 5, 1999KINROSS GOLD CORPORATION51

C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SCONSOLIDATED BALANCE SHEETSKinross Gold CorporationAs at December 31,(expressed in thousands of U.S. dollars)1998 1997AssetsCurrent assetsCash and cash equivalents $ 153,413 $ 190,328Bullion settlements and other accounts receivable (Note 3) 55,350 15,707Inventories (Note 4) 54,610 21,778Marketable securities 1,248 18,711264,621 246,524Mineral properties, plant and equipment (Note 5) 809,843 196,912Long - term investments (Note 6) 24,953 16,006Deferred charges and other assets 15,364 1,598$ 1,114,781 $ 461,040LiabilitiesCurrent liabilitiesAccounts payable and accrued liabilities $49,455 $15,562Current portion of long - term debt (Note 9) 25,086 1,435Current portion of site restoration cost accruals (Note 10) 5,888 -80,429 16,997Long-term debt (Note 9) 125,854 3,805Site restoration cost accruals (Note 10) 51,952 10,011Deferred income and mining taxes (Note 16 ) 6,891 7,713Deferred revenue and other 28,990 18,927Debt component of convertible debentures (Note 11) 42,705 46,853Redeemable retractable preferred shares (Note 12) 3,077 3,077339,898 107,383Convertible preferred shares of subsidiary company (Note 13) 88,338 -Common shareholders' equityCommon share capital (Note 14) 904,212 312,406Contributed surplus 3,583 3,422Equity component of convertible debentures (Note 11) 103,064 96,935Deficit (296,413) (45,070)Foreign currency translation adjustments (27,901) (14,036)686,545 353,657$ 1,114,781 $ 461,040Commitments and contingencies (Note 22)Signed on behalf of the Board:Gerald J. MalysDirectorJohn A. BroughDirectorKINROSS GOLD CORPORATION52

C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SCONSOLIDATED STATEMENTS OF OPERATIONSKinross Gold CorporationFor the years ended December 31,(expressed in thousands of U.S. dollars except per share amounts)1998 1997 1996RevenueMining revenue $ 269,212 $ 173,190 $ 204,759Interest and other income 17,385 10,316 3,733286,597 183,506 208,492ExpensesOperating 196,298 137,145 138,347General and administrative 7,279 5,912 5,406Exploration and business development 10,317 4,693 3,487Depreciation, depletion and amortization 81,011 32,508 30,080294,905 180,258 177,320(Loss) income before undernoted (8,308) 3,248 31,172Gain (loss) on sale of marketable securities 2,626 25 (15)Gain on sale of long-term investments - - 92Loss on sale of mineral properties - (1,675) -Foreign exchange gain (loss) and other 469 (2,652) (545)Share of loss of associated companies (768) (361) (293)Interest expense on long-term liabilities (11,124) (5,346) (1,232)Writedown of marketable securities (3,941) - -Writedown of long-term investments (Note 6) - (7,385) -Writedown of mineral properties (Note 15) (216,081) (80,437) (5,221)(Loss) income before taxes and dividends on convertible preferredshares of subsidiary company (237,127) (94,583) 23,958(Provision for) recovery of income and mining taxes (Note 16) (4,242) 10,852 (13,509)(Loss) income for the year before dividends on convertible preferredshares of subsidiary company (241,369) (83,731) 10,449Dividends on convertible preferred shares ofsubsidiary company (Note 13) (4,025) - -Net (loss) income for the year (245,394) (83,731) 10,449Increase in equity component of convertible debentures (Note 11) (5,949) (5,356) (261)Net (loss) income for the year attributable to common shareholders $ (251,343) $ (89,087) $ 10,188(Loss) earnings per shareBasic $ (1.08) $ (0.71) $ 0.09Fully diluted N/A N/A $ 0.08Weighted average number of common sharesoutstanding for the year (000's) 233,220 123,874 116,600KINROSS GOLD CORPORATION53

C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SCONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITYKinross Gold CorporationFor the years ended December 31,(expressed in thousands of U.S. dollars)ForeignShareShareRetained currencycapital Contributed purchase Convertible earnings translationcommon surplus warrants debentures (deficit) adjustments TotalBalance, December 31, 1995 $ 205,648 $ - $ 3,760 $ - $ 33,829 $ (5,169) $ 238,068Conversion of share purchase warrants - - (1,186) - - - (1,186)Issuance of common shares 83,334 - - - - - 83,334Convertible debentures issued, net - - - 92,867 - - 92,867Increase in equity component ofconvertible debentures - - - 396 (261) - 135Net income for the year - - - - 10,449 - 10,449Foreign currency translation adjustments - - - - - (941) (941)Balance, December 31, 1996 288,982 - 2,574 93,263 44,017 (6,110) 422,726Expiry of share purchase warrants - 2,574 (2,574) - - - -Issuance of common shares 23,424 - - - - - 23,424Redemption of convertible debentures, net - 848 - (2,779) - - (1,931)Increase in equity component ofconvertible debentures - - - 6,451 (5,356) - 1,095Net loss for the year - - - - (83,731) - (83,731)Foreign currency translation adjustments - - - - - (7,926) (7,926)Balance, December 31, 1997 312,406 3,422 - 96,935 (45,070) (14,036) 353,657Issuance of common shares, net 591,806 161 - - - - 591,967Increase in equity component ofconvertible debentures - - - 6,129 (5,949) - 180Net loss for the year - - - - (245,394) - (245,394)Foreign currency translation adjustments - - - - - (13,865) (13,865)Balance, December 31, 1998 $ 904,212 $ 3,583 $ - $ 103,064 $ (296,413) $ (27,901) $ 686,545KINROSS GOLD CORPORATION54

C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SCONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITIONKinross Gold CorporationFor the years ended December 31,(expressed in thousands of U.S. dollars)1998 1997 1996Net inflow (outflow) of cash related to the following activities:Operating:(Loss) income for the year before dividends on convertible preferredshares of subsidiary company $(241,369) $ (83,731) $ 10,449Items not affecting cash:Depreciation, depletion and amortization 81,011 32,508 30,080Writedown of mineral properties 216,081 80,437 5,221Writedown of long-term investments - 7,385 -Writedown of marketable securities 3,941 - -(Gain) loss on sale of marketable securities (2,626) (25) 15Gain on sale of long-term investments - - (92)Loss on sale of mineral properties - 1,675 -Deferred income and mining taxes (334) (11,496) 10,672Deferred revenue realized (9,865) - -Site restoration cost accruals 6,911 2,653 1,857Other 788 1,186 (302)54,538 30,592 57,900Deferred revenue - hedging gains 13,885 20,726 -Changes in non-cash working capital itemsBullion settlements and other accounts receivable (227) 17,960 (18,408)Inventories 10,708 7,611 (1,924)Marketable securities 7,615 (18,369) (187)Commodity derivative contracts (Note 8) 45,952 - -Accounts payable and accrued liabilities (23,122) (8,928) (879)Effect of exchange rate changes (7,366) (2,995) 578101,983 46,597 37,080Financing:Issuance of common shares, net (Note 14) 591,967 23,424 83,334Conversion of share purchase warrants, net - - (1,186)Conversion of preferred shares - (195) (104)Redemption of convertible debentures - (2,171) -Convertible debentures (4,148) (3,426) 141,651Repayment of debt (361,468) (3,155) -Dividends on convertible preferred shares of subsidiary company (4,025) - -222,326 14,477 223,695Investing:Additions to mineral properties, plant and equipment (33,840) (39,913) (67,343)Business acquisitions, net of cash acquired (326,199) (24,503) -Long-term investments and other assets (3,149) (6,931) (8,697)Proceeds from the sale of long-term investments - - 1,967Proceeds from the sale of equipment 1,964 - -(361,224) (71,347) (74,073)(Decrease) increase in cash and cash equivalents (36,915) (10,273) 186,702Cash and cash equivalents, beginning of year 190,328 200,601 13,899Cash and cash equivalents, end of year $ 153,413 $190,328 $200,601KINROSS GOLD CORPORATION55

N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S(All tabular dollar amounts are in thousands of U.S. dollars except per share data)1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe consolidated financial statements of Kinross Gold Corporation (the “Company”) are expressed in U.S. dollars andhave been prepared in accordance with accounting principles generally accepted in Canada which differ in certainmaterial respects from those generally accepted in the United States, as described in Note 20.Nature of operationsThe Company is engaged in the mining and processing of gold and silver ore and the exploration for, and acquisitionof, gold-bearing properties, principally in the Americas, Russia, Australia and Africa. The Company’s products aregold and silver produced in the form of doré which is shipped to refineries for final processing.Basis of presentationThe consolidated financial statements include the accounts of the Company, its subsidiaries and its proportionateshare of joint venture interests. Long-term investments in shares of associated companies, over which the Companyhas the ability to exercise significant influence, are accounted for using the equity method. The cost method is usedfor entities in which the Company owns less than 20%. When a decline in the value of an investment is other thantemporary, the investment is written down accordingly.Use of estimatesThe preparation of the Company’s consolidated financial statements in conformity with generally accepted accountingprinciples requires management to make estimates and assumptions that affect amounts reported in the financialstatements and accompanying notes. Management’s estimates are made in accordance with mining industry practice.Significant areas requiring the use of management estimates relate to the determination of mineral reserves,reclamation and environmental obligations, impairment of assets and useful lives used to compute depreciation,depletion and amortization. Actual results could differ from those estimates.Translation of foreign currenciesSelf-sustaining domestic and foreign operationsThe Company reports its financial statements in U.S. dollars, while the currency of measurement for the Company’soperations varies depending upon location.The currency of measurement for the Company’s operations domiciled in Canada is the Canadian dollar. Canadiandollar amounts are translated to U.S. dollars for reporting purposes using the current rate method. Under the currentrate method, assets and liabilities are translated at the exchange rates in effect at the balance sheet date, revenuesand expenses are translated at average rates for the year. The Company’s non-Canadian subsidiaries and joint ventureinterests are self-sustaining operations whose economic activities are largely independent of those of the Company.The currency of measurement for the Company’s operations in the U.S. and Chile is the U.S. dollar. For operations inZimbabwe and Russia, the temporal method is used to translate local currency amounts into U.S. dollars due to thehighly inflationary economies in those countries. Under the temporal method, all non-monetary items are translatedat historical rates. Monetary assets and liabilities are translated at actual exchange rates in effect at the balancesheet date, revenues and expenses are translated at average rates for the year and gains and losses on translation areincluded in income.The unrealized translation gains and losses on the Company’s net investment in self-sustaining operations translatedusing the current rate method accumulate in a separate component of shareholders’ equity, described in theconsolidated balance sheet as foreign currency translation adjustments. Such exchange gains and losses may becomerealized in the event of a disposition of the net investment in a self-sustaining operation, in which event anappropriate portion of the foreign currency translation adjustment is recognized in income.Foreign currency transactionsMonetary assets and liabilities are translated at the rate of exchange prevailing at the balance sheet date. Nonmonetaryassets and liabilities are translated at historical rates. Revenue and expenses are translated at the averagerate of exchange for the year. Exchange gains and losses are included in income except for the unrealized gains orlosses on long-term debt (including the debt component of the convertible debentures) which are deferred andamortized over the term of the debt. (See Note 11)KINROSS GOLD CORPORATION56

N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SCash and cash equivalentsCash and cash equivalents include cash and highly liquid investments with an original maturity of three months orless. The Company invests cash in time deposits maintained in high credit quality financial institutions.Marketable securitiesMarketable securities are carried at the lower of cost and quoted market value.InventoriesOre stockpiles are valued at the lower of production cost and net realizable value. Mine operating supplies are valuedat the lower of cost and replacement cost. Bullion produced at the Company’s Kubaka mine and held in Russia(“Kubaka bullion”) is valued at estimated net realizable value.Mineral properties, plant and equipmentMineral properties, plant and equipment are recorded at cost. Costs associated with properties which are in thedevelopment stage are deferred, on a project basis, until the economic viability of the project is determined. Oncecommercial production is reached, the deferred costs of the project are amortized over their economic lives, on thebasis described below.Where the total reserves are not determinable because ore bearing structures are open at depth or are open laterally,which is currently the case at the Hoyle Pond and Blanket mines, the straight-line method of amortization is appliedover the estimated life of each mine which is currently up to 10 years.Where the mine operating plan calls for production from well-defined ore reserves, the unit-of-production method ofamortization is applied.Plant and equipment that have useful lives shorter than the mine life are depreciated on a straight-line basis overtheir estimated useful lives of one to five years.Property evaluationsThe Company reviews and evaluates the recoverability of mineral properties, plant and equipment on a periodic basis.Estimated future net cash flows, on an undiscounted basis, from each property are calculated using estimatedrecoverable ounces of gold (considering current proven and probable reserves and mineralization expected to beclassified as reserves); estimated future gold price realization (considering historical and current prices, price trendsand related factors); and operating, capital and reclamation costs. Reductions in the carrying value of mineralproperties, plant and equipment, with a corresponding charge to income, are recorded to the extent that the estimatedfuture net cash flows are less than the carrying value.Estimates of future cash flows are subject to risks and uncertainties. It is possible that changes could occur whichmay affect the recoverability of mineral properties, plant and equipment.Financial instrumentsThe Company enters into derivative financial instrument contracts to manage certain market risks which result fromthe underlying nature of its business. The Company uses spot deferred forward contracts and options to hedgeexposure to commodity price risk for gold and silver; foreign exchange forward contracts to hedge exposure tofluctuations in foreign currency denominated operating costs; and interest rate swaps to hedge exposure to changes ininterest rates. All derivative financial instruments are accounted for using the accrual method as management viewsthe contracts as effective hedges and has designated the contracts as hedges of specific exposures. Hedgeeffectiveness is assessed based on the degree to which the cash flows on the derivative contracts are expected tooffset the cash flows of the underlying position or transaction being hedged.Realized and unrealized gains or losses on derivative contracts are deferred and recorded in income when theunderlying hedged transaction is recognized. Premiums on options are deferred and recorded in income at the sametime as the hedged transaction. Gains or losses (realized or unrealized) for derivative contracts which no longerqualify as hedges for accounting purposes or which relate to a hedged transaction that has been sold or terminatedare recorded in income immediately.KINROSS GOLD CORPORATION57

N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SGains on the early settlement of gold hedging contracts are recorded as deferred revenue on the balance sheet andincluded in income over the original delivery schedule of the hedged production.Revenue recognitionGold and silver poured, in transit and at refineries, are recorded at net realizable value and included in bullionsettlements and other accounts receivable, with the exception of Kubaka bullion. The estimated net realizable valueof Kubaka bullion is included in inventory until it is sold.Site restoration costsEstimated costs of site restoration are accrued and expensed over the estimated life of the mine on a straight-line orunit-of-production basis. Ongoing environmental expenditures are expensed as incurred. Estimates of the ultimatesite restoration costs are based on current laws and regulations and expected costs to be incurred, all of which aresubject to possible changes thereby impacting current determinations.Mineral explorationMineral exploration expenditures are charged to income as incurred. Property acquisition costs relating toexploration properties and expenditures incurred on properties identified as having development potential are deferredon a project basis until the viability of the project is determined. Costs associated with economically viable projectsare depreciated and amortized in accordance with the policies described above. If a project is not viable, theaccumulated project costs are charged to income in the year in which that determination is made.Income and mining taxesThe provision for income and mining taxes is based on earnings for financial reporting purposes. Deferred taxes arisefrom the recognition of revenues and expenses in different years for financial reporting and tax purposes.Earnings (loss) per shareBasic earnings (loss) per common share have been calculated using the weighted average number of common sharesoutstanding during the year and reflect an adjustment to net income (loss) for the increase in the equity component ofthe convertible debentures. The calculation of fully diluted earnings (loss) per common share includes the effects ofthe potential conversion of the redeemable retractable preferred shares. For the year ended December 31, 1998 and1997, the convertible debentures, convertible preferred shares of subsidiary company, stock options and warrantswould have no dilutive effect.1997 and 1996 figuresCertain of the 1997 and 1996 figures have been reclassified to conform to the 1998 presentation.2. BUSINESS ACQUISITIONS1998On June 1, 1998, the Company acquired 100% of Amax Gold Inc. (“Amax”). Amax’s name was subsequently changedto Kinam Gold Inc. (“Kinam”). The purchase price of $337,898,000 was satisfied by the issuance from treasury of92,158,907 common shares of the Company to the former shareholders of Amax and the payment of transaction costsof $7,968,000.On December 16, 1998, the Company acquired a further 3% of Omolon Gold Mining Company (“Omolon”) (in additionto the 50% interest acquired as a result of the Amax acquisition) from a Russian partner in consideration for settlingobligations of the Russian partner of $3,791,000. Repayment of the $3,791,000 owing to the Company by the Russianpartner will be made from the Russian partner’s share of dividends from Omolon. The Russian partner has the right toreacquire the 3% interest in Omolon for approximately $7,500,000.On April 28, 1998, the Company purchased several blocks of mining tenements, known as the Norseman Project,covering approximately 533 square kilometers in the Eastern Goldfields region of Western Australia from theAdministrator of Australasian Gold Mines for $5,208,000.KINROSS GOLD CORPORATION58

N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SThe following is a summary of the 1998 acquisitions all of which were accounted for using the purchase method:Additional 3%NorsemaninterestAmax Project in Omolon TotalFair value ascribed to net assets acquiredMineral properties, plant and equipment $ 898,053 $ 5,208 $ 7,034 $ 902,328Other assets (including cash of $20,698,000) 118,817 - 830 127,614Total assets 1,016,870 5,208 7,864 1,029,942Less liabilities assumed 678,972 - 4,073 683,045$ 337,898 $ 5,208 $ 3,791 $ 346,897Purchase priceCash $ 7,968 (1) $ 5,208 $ 3,791 (2) $ 16,967Common shares 329,930 - - 329,930$ 337,898 $ 5,208 $ 3,791 $ 346,897(1) Represents transaction costs(2) The purchase price of the 3% interest reflects the fact that, for financial reporting purposes, the receivable from theRussian partner has been included in the cost of the investment in Omolon. As repayments are received from theRussian partner, the cost of mineral properties will be reduced accordingly.The following pro forma operating data reflects the 1998 acquisition of Amax as though it had occurred at thebeginning of 1998 and as though it was consolidated for the entire year. Pro forma 1998 revenues and net loss wouldhave been $408,320,000 and $245,062,000, respectively, which would have decreased the basic loss per share to $0.86.The pro forma financial information does not purport to represent what the Company’s results of operations wouldhave been had the acquisition occurred at the beginning of 1998 or to project the Company’s results of operations forany future periods.1997On April 18, 1997, the Company acquired an additional 50% of the Goldbanks property from Restoration MineralsCompany thereby increasing its interest in the Goldbanks property to 100%. The purchase price of $24,503,000including associated purchase costs was satisfied by the issuance from treasury of 3,000,000 common shares of theCompany and a cash payment of $7,000,000. In addition, the Company granted a 3.5% precious metals net smelterreturn (“NSR”) royalty and a 2% base metal NSR royalty each of which becomes payable once the property hasproduced 1,321,214 ounces of gold.3. BULLION SETTLEMENTS AND OTHER ACCOUNTS RECEIVABLEBullion settlements and other accounts receivable are comprised of the following:1998 1997Bullion settlements $ 20,243 $ 5,537Due from joint venture partners 20,426 -Taxes, interest and miscellaneous 14,681 10,170$ 55,350 $ 15,7074. INVENTORIESInventories are comprised of the following:1998 1997Ore stockpiles $ 7,621 $ 15,482Kubaka bullion 10,877 -Mine operating supplies 36,112 6,296$ 54,610 $ 21,778KINROSS GOLD CORPORATION59

N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S5. MINERAL PROPERTIES, PLANT AND EQUIPMENTThe components of mineral properties, plant and equipment are as follows:1998 1997Producing propertiesMineral properties $ 23,997 $ 24,258Plant and equipment (amortized on straight-line basis) 133,051 117,215Plant and equipment (amortized on unit-of- production basis) 778,539 118,866935,587 260,339Less accumulated depreciation, depletion and amortization 180,683 99,672754,904 160,667Development properties 49,731 36,245Exploration properties 5,208 -$ 809,843 $ 196,9126. LONG-TERM INVESTMENTSThe quoted market value of the Company’s interest in associated companies is $21,643,000 as at December 31, 1998(December 31, 1997 - $14,960,000). Long-term investments as at December 31, 1998 include an investment with acarrying value of $8,532,000 which in the previous year had been included in marketable securities.During 1997, the Company reviewed the carrying value of its long-term investments. As a result of this review andthe status of the equity markets, the Company reduced the carrying value of its investments to reflect their marketvalues as at December 31, 1997.7. JOINT VENTURE INTERESTSThe Company conducts a portion of its business through joint ventures under which the ventures are bound bycontractual arrangements establishing joint control over the joint ventures. As at December 31, 1998, the Companyhas interests in five joint venture projects.(a) Denton-Rawhide MineThe Company owns a 49% interest in the Denton-Rawhide Mine. The Company is charged its proportionate share ofthe operating expenses and capital expenditures of the mine and receives its share of revenue in kind from gold andsilver production.(b) Kamgold Joint Stock CompanyThe Company owns a 25% interest in, and the right to operate, Kamgold, a Russian joint stock company and isresponsible for negotiating project financing. Costs of $2,161,000 incurred to December 31, 1998 (December 31, 1997- $2,042,000) along with the $4,133,000 purchase cost, have been capitalized to mineral properties, plant andequipment. As at December 31, 1998, the Company is continuing its efforts to negotiate project financing.(c) Omolon Gold Mining CompanyThe Company owns a 53% interest in Omolon Gold Mining Company (“Omolon”), a Russian joint stock company whichoperates the Kubaka mine located in eastern Russia. A 50% interest was acquired as a result of the Amax acquisitionand a further 3% interest was acquired in December 1998 as a result of satisfying the loan requirements of a Russianpartner.(d) Compania Minera MaricungaThe Company owns a 50% interest in Compania Minera Maricunga (“CMM”), a Chilean contractual mining company,which was acquired as a result of the Amax acquisition. CMM operates the Refugio mine located in central Chile.(e) Haile PropertyThe Company owns a 62.5% interest in the Haile property located in South Carolina which was acquired as a result ofthe Amax acquisition. Negotiations are underway to acquire the remaining 37.5%. The Company has not made adecision to develop the Haile property and is considering various options with respect to its interest in Haile.KINROSS GOLD CORPORATION60

N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SThe following table summarizes information contained in the consolidated financial statements relative to these jointventure interests.1998 1997 1996Revenue $ 79,372 $23,248 $27,243Operating costs 55,250 16,632 17,117Depreciation, depletion and amortization 25,069 6,463 6,835Exploration 1,043 - -Interest 3,600 - -84,962 23,095 23,952(Loss) earnings before taxes ($5,590) $153 $3,291Current assets $62,844 $6,695 $8,517Mineral properties, plant and equipment 174,848 34,934 59,121237,692 41,629 67,638Current liabilities 35,492 558 1,941Long-term liabilities 45,604 1,550 1,358Equity $156,596 $39,521 $64,339Cash provided by operating activities $19,283 $6,616 $10,126Cash used in investing activities $2,223 $1,598 $10,147The 1996 balances include the Company’s 50% ownership interest in Goldbanks property, the remaining 50% interesthaving been acquired in 1997 (see Note 2).8. FINANCIAL INSTRUMENTSThe Company manages its exposure to fluctuations in commodity prices, foreign exchange rates and interest rates byentering into derivative financial instrument contracts in accordance with the formal risk management policyapproved by the Company’s Board of Directors. The Company does not hold or issue derivative contracts forspeculative or trading purposes.(a) Commodity risk managementThe profitability of the Company is directly related to the market price of gold and silver. The Company uses spotdeferred contracts, fixed forward contracts and option contracts to hedge against the unfavourable changes incommodity prices for a portion of its forecasted gold and silver production. Spot deferred contracts are forward salecontracts with flexible delivery dates that enable management to choose to deliver into the contract on a specific dateor defer delivery until a future date. If delivery is postponed, a new contract price is established based on the oldcontract price plus a premium (referred to as contango).The outstanding values, average rates and maturities for commodity derivative contracts as at December 31, 1998 are:AverageAnticipatedOunces price per ounce delivery scheduleGoldSpot deferred contracts 150,000 $ 301 1999Call options sold:207,500 $ 308 19997,500 $ 400 20007,500 $ 400 2001SilverSpot deferred contracts 67,137 $ 5.013 1999As at December 31,1997, the Company had fixed forward sales contracts, spot deferred contracts, call options sold andput options purchased representing 15,000, 20,000, 50,400 and 150,000 ounces of gold, respectively. In addition, theCompany also had fixed forward sales contracts and spot deferred contracts representing 500,000 ounces of silver foreach type of contract, respectively.KINROSS GOLD CORPORATION61

N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SIn late 1997 and early 1998, due to low gold spot prices, the Company had substantial unrealized gains on itsportfolio of gold derivative contracts. The Company closed out certain contracts prior to December 31,1997 andrealized a gain of $22,224,000. In early 1998, the Company closed out the balance of the gold derivative contractsoutstanding at that time and realized an additional gain of $14,376,000. These gains, totalling $36,620,000, weredeferred and are being included in income over the original delivery schedule of the various contracts.As at December 31, 1998, the balance of the deferred gain with respect to these contracts was $24,143,000 and will beincluded in income as follows:1999 $ 8,630,0002000 $ 9,636,0002001 $ 5,877,000On June 1, 1998, the Company repaid the gold loan portion of the Fort Knox project financing as part of theacquisition of Amax realizing a gain of $3,566,000. The gain is being taken into income over the original deliveryschedule set out in the loan payments. The deferred portion of this gain at December 31, 1998 amounted to$2,964,000 and will be recognized in income over the next three years.On June 1, 1998, the date the Company acquired Amax, the commodity derivative contract portfolio held by Amaxprior to the acquisition had a fair value of $45,952,000 which was included in the assets acquired in accordance withpurchase accounting (see Note 2). Subsequent to the acquisition date, the Company closed out the contracts andrealized $45,952,000 in cash. The net effect was to increase the cash position of the Company with no effect onincome in 1998 or future years relating to this transaction.(b) Foreign currency risk managementAll sales revenues for the Company are denominated in U.S. dollars. The Company is exposed to currencyfluctuations on operating costs which are denominated in Canadian dollars, Russian rubles, Chilean pesos, Zimbabwedollars and other currencies. These potential currency fluctuations could have a significant impact on the cost ofproducing gold and on the profitability of the Company. This risk is reduced, from time to time, through the use offoreign exchange forward contracts to lock in the exchange rates on firmly committed future operating costs.As at December 31, 1998, the Company has foreign currency forward contracts to sell U.S. dollars and buy Canadiandollars of $54 million (1997 - $nil) at an average exchange rate of CDN. $1.4611 per U.S. dollar. These contractsmature evenly over a 36 month period ending December 2001.(c) Interest rate risk managementThe Company manages the risk associated with the floating rate debt portfolio by entering into pay fixed, receivefloating, interest rate swaps. The total amount of interest rate swaps outstanding as at December 31, 1998 was $35million (December 31, 1997 - $nil) at an average effective fixed rate of 5.92%. The maturity dates for these swapsrange from March 1999 to June 1999.(d) Fair values of financial instrumentsCarrying values for primary financial instruments, including cash and cash equivalents, bullion settlements and otheraccounts receivable, marketable securities, accounts payable and accrued liabilities, approximate fair values due totheir short-term maturities. The carrying value for long-term debt (other than convertible debentures and redeemableretractable preferred shares) approximates fair value primarily due to the floating rate nature of the debt instruments.The fair value of the outstanding convertible debentures is based on the quoted market price of the debentures at therespective balance sheet dates and, as at December 31, 1998 and 1997, was approximately $100,688,000 (CDN.$154,098,000) and $102,421,000 (CDN.$146,378,000), respectively.Fair value estimates for derivative contracts are based on quoted market prices for comparable contracts and representthe amount the Company would have received from, or paid to, a counterparty to unwind the contract at the marketrates in effect at December 31.KINROSS GOLD CORPORATION62

N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SThe following table represents the fair value gain (loss) relating to derivative contracts outstanding as at December 31:1998 1997Gold and silver commodity contracts $ 1,678,000 $ 12,896,000Foreign currency contracts $ (2,080,000) $ -Interest rate contracts $ (112,000) $ -(e) Credit risk managementCredit risk relates to derivative contracts and arises from the possibility that a counterparty to an instrument in whichthe Company has an unrealized gain fails to perform. The Company only transacts with highly-rated counterpartiesand a limit on contingent exposure has been established for each counterparty based on the counterparty’s creditrating. At December 31, 1998, the Company’s gross credit exposure was $1,678,000 (December 31, 1997 -$12,896,000).9. LONG-TERM DEBTInterestrates 1997 1998 Principal repayment schedule as at December 31, 19981999 2000 2001 2002 ThereafterKubaka project financing Variable $ - $ 49,024 $13,250 $13,250 $22,524 $ - $ -Kubaka subordinated debt Variable - 8,882 2,968 3,948 1,966 - -Fort Knox IndustrialRevenue Bonds Variable - 71,000 - - - - 71,000Capital leases 8.0%-8.5% 5,240 22,034 8,868 7,021 3,626 2,519 -5,240 150,940 $25,086 $24,219 $28,116 $2,519 $71,000Less current portion 1,435 25,086$ 3,805 $125,854The European Bank of Reconstruction and Development (“EBRD”) and the U.S. Overseas Private Investment Corporation(“OPIC”) provided project-financing debt on the Kubaka mine, which upon completion of the Amax acquisition onJune 1, 1998, totalled $117,500,000. During 1998, Kubaka repaid $25,000,000 of these obligations, leaving$92,500,000 outstanding as at December 31, 1998. The Company’s 53% proportionate share of these obligations is$49,024,000. Interest on the project-financing debt is variable based upon LIBOR and as at December 31, 1998 isapproximately 12% per annum. The project financing debt becomes recourse solely to Kubaka after completion tests,as defined, are passed. Cyprus Amax Minerals Company (“Cyprus Amax”), the former parent of Amax, has guaranteedthe project-financing debt and the Company has agreed to reimburse Cyprus Amax for guarantee payments.The Company is currently pursuing finalization of the completion tests in order to eliminate the guarantees.A bank licensed to do business in Russia has provided subordinated debt to finance the Kubaka mine. As at December31, 1998, $16,758,000 remains outstanding on this debt. The Company’s 53% proportionate share of these obligationsis $8,882,000. Interest on the project-financing debt is variable based upon LIBOR and as at December 31, 1998 isapproximately 12% per annum. The subordinated debt has no terms of repayment until the completion tests under theEBRD and OPIC project financing are achieved. Once completion tests are achieved, the loan is repayable over ninequarterly payments. The subordinated debt is supported by a letter of credit from the Company.The solid waste disposal facility at the Fort Knox mine has been financed by $71 million of tax-exempt industrialrevenue bonds. The variable rate bonds, maturing in May 2009, were issued by the Alaska Industrial Developmentand Export Authority and are backed by a letter of credit guaranteed by Cyprus Amax. The Company’s interest rateon the bonds is approximately 4.5% including letter of credit fees. An additional 1.75% differential is paid toCyprus Amax as a guarantee fee. Amounts paid to Cyprus Amax under this arrangement totalled $739,000 in 1998.The Company has agreed to reimburse Cyprus Amax for any payments made or costs incurred under the guarantee.The Company has agreed to use all reasonable efforts to cause itself to be substituted for Cyprus Amax in the guarantee.The Company has entered into capital leases for production equipment at various operations. Interest on such capitalleases accrues at an effective rate of 8.0% - 8.5% per annum.KINROSS GOLD CORPORATION63

N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SThe Company has a $30,000,000 credit facility with a major chartered bank at commercial rates. The Company hasutilized $27,458,000 of this facility for letters of credit at December 31, 1998.10. SITE RESTORATION COSTSAlthough the ultimate amount of reclamation and closure costs is uncertain, the Company estimates its future closureobligation at $75,000,000 based on information currently available including preliminary closure plans and applicableregulations. At December 31, 1998, the Company has accrued $57,840,000 of this liability (December 31, 1997 -$10,011,000). In addition, the Company has posted bonds and letters of credit totalling $45,728,000 as requested byvarious regulatory agencies. In view of uncertainties concerning future site restoration costs, ultimate costs coulddiffer from the estimated amounts. Future changes, if any, in regulations and cost assumptions may be significant andwill be recognized when applicable.11. CONVERTIBLE DEBENTURESOn December 5, 1996, the Company issued unsecured subordinated convertible debentures in the aggregate principalamount of $146,020,000 (CDN. $200,000,000). The debentures bear interest at 5.5% per annum, mature on December5, 2006 and, at the holders’ option, are convertible into common shares of the Company at a conversion price ofCDN. $13.35 per share, being a rate of 74.906 common shares per CDN. $1,000 principal amount of debentures.Interest is payable in cash; however, the Company has the right to settle the principal amount by the issuance ofcommon shares. The debentures are redeemable after June 30, 2000 until December 31, 2001 at par plus accrued andunpaid interest under certain conditions. On or after December 31, 2001, the debentures will be redeemable at par plusaccrued and unpaid interest.The convertible debentures are being accounted for in accordance with their substance and are presented in thefinancial statements in their component parts, measured at their respective fair values at the time of issue.The debt component has been calculated as the present value of the required interest payments discounted at a rateapproximating the interest rate that would have been applicable to non-convertible debt at the time the debentureswere issued. Interest expense is determined on the debt component, such component being reduced by the requiredsemi-annual interest payments. The difference between the debt component and the face value of the debentures isclassified as equity, net of issue costs adjusted for income taxes. The equity component of the debentures, net ofthe value ascribed to the holders’ option, is increased over the term to the full face value by charges to retainedearnings (deficit).The convertible debentures are denominated in Canadian dollars. As a result of changes in the exchange rate betweenthe U.S. and Canadian dollars, the U.S. dollar equivalent of the debt component has been reduced. This unrealizedforeign exchange gain is being deferred and included in income over the term of the convertible debentures.Accordingly, included in the debt component of the convertible debentures at December 31, 1998 is a deferredunrealized foreign exchange gain totalling $4,035,000 (December 31, 1997 - $1,951,000). This gain will be recognizedover the remaining life of the debentures which is currently eight years.During 1997, the Company bought back $3,048,000 (CDN. $4,176,000) principal amount of the convertible debenturesfor $2,171,000 (CDN. $3,103,000).As at December 31, 1998, the outstanding principal amount of the convertible debentures was $127,963,000(CDN. $195,824,000).12. REDEEMABLE RETRACTABLE PREFERRED SHARESAs at December 31, 1998, 384,613 outstanding redeemable retractable preferred shares are issued to a senior officerand director of the Company.The holder of the redeemable retractable preferred shares is entitled to receive a CDN. $0.80 per share fixedcumulative annual preferential cash dividend, payable in equal quarterly installments and, is entitled at any time toconvert all or any part of the redeemable retractable preferred shares into common shares on the basis of 8.2555common shares for each redeemable retractable preferred share so converted, subject to anti-dilution adjustments. TheCompany may at any time redeem, upon a minimum thirty day notice, all or any part of the redeemable retractablepreferred shares at a price of CDN. $10.00 per share, together with unpaid dividends accrued to the date of redemption.KINROSS GOLD CORPORATION64

N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SThe holder of the redeemable retractable preferred shares is entitled to require the Company to redeem for cash all orany part of the redeemable retractable preferred shares at this price.Dividends paid on the redeemable, retractable preferred shares of $207,000 in 1998 (1997 - $233,000; 1996 -$240,000) have been recorded as part of interest expense in the statement of operations.During 1998 - none (1997 - 24,227) of the redeemable retractable preferred shares were converted into commonshares (1997 - 200,006).13. CONVERTIBLE PREFERRED SHARES OF SUBSIDIARY COMPANYThe convertible preferred shares of subsidiary company comprise 1,840,000 shares of $3.75 Series B ConvertiblePreferred Shares of Kinam Gold Inc. (formerly Amax Gold Inc.). The Kinam preferred shares are convertible intocommon shares of the Company at a conversion price of $10.3073 per share (equivalent to a conversion rate of 4.8512common shares for each preferred share), subject to adjustment in certain events.The Kinam preferred shares are redeemable at the option of the Company at any time on or after August 15, 1997, inwhole or in part, for cash initially at a redemption price of $52.625 per share declining ratably annually to $50.00 pershare on or after August 15, 2004, plus accrued and unpaid dividends.Annual cumulative dividends of $3.75 per share are payable quarterly on each November 15, February 15, May 15 andAugust 15, as and if declared by Kinam’s Board of Directors.Dividends on the Kinam preferred shares after the effective date of the Amax acquisition were $4,025,000 during1998.If all of the Kinam preferred shares were converted, an additional 8,926,000 common shares of the Company would beissued.14. COMMON SHARE CAPITALThe authorized share capital of the Company is comprised of an unlimited number of common shares.A summary of common share transactions for the three years ended December 31,1998 is as follows:1998 1997 1996Number of Number of Number ofShares Amount Shares Amount Shares AmountBalance, January 1, 126,879 $ 312,406 121,745 $ 288,982 108,973 $ 205,648Issued:For consideration other than cash - - 4,446 21,376 1,699 12,794Pursuant to the Amax acquisition 92,159 329,930 - - - -Issued to Cyprus Amax pursuant to theconversion of debt and cash 34,997 135,000 - - - -Under stock option plan 729 990 183 190 411 658Under employee share purchase plan 660 1,929 431 1,958 218 1,673Upon conversion of preferred shares - - 200 194 108 104Upon buy back of common shares undernormal course issuer bid (947) (2,730) (126) (294) - -Public offering 38,119 126,687 - - 7,000 58,065Upon exercise of share purchase warrants - - - - 3,336 10,040Balance, December 31, 292,596 $ 904,212 126,879 $ 312,406 121,745 $ 288,982KINROSS GOLD CORPORATION65

N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SOn January 31, 1996, the Company issued 7,000,000 common shares from treasury for total proceeds, before costs ofissue, of $61,997,000.On March 3, 1998, the Company issued 38,118,812 subscription rights, for total proceeds, before costs of issue, of$132,113,000. Each right entitled the holder to receive one common share of the Company upon completion of theAmax acquisition for no additional consideration. All subscription rights were converted into common shares during1998.On June 1, 1998, the Company issued 92,159,000 common shares pursuant to the Amax acquisition and 34,997,000common shares to Cyprus Amax. The common shares issued to Cyprus Amax comprised 23,399,000 common sharespursuant to the conversion of $90,272,000 of debt owing to Cyprus Amax by Amax and 11,598,000 common sharesfor cash consideration of $44,728,000.The Company has an employee share purchase plan whereby employees of the Company have an opportunity topurchase common shares. The plan allows employees to contribute up to a maximum of 10% of their base annualsalary. In addition, the Company matches the employees’ contributions. Quarterly, the Company issues from treasurycommon shares equal to the employees’ contribution and the Company’s contribution. The common shares arepurchased based on the average of the last twenty trading sessions prior to the end of the quarter. The Companyissued from treasury 660,000 common shares pursuant to the plan during 1998 (1997 - 431,000; 1996 - 218,000).The Company has a stock option plan for directors, officers and employees, enabling them to purchase commonshares. The total number of options outstanding at any time cannot exceed 10% of the total number of outstandingcommon shares. Each option granted under the plan is for a maximum term of five years and is exercisable as to33.33% each year, commencing one year after the date of grant. The exercise price is determined by the Company’sBoard of Directors at the time the option is granted, subject to regulatory approval and may not be less than the mostrecent closing price of the common shares at the date of grant. The stock options outstanding at December 31, 1998expire at various dates to December 21, 2003.A summary of the Company’s outstanding stock option transactions as at December 31 is as follows:1998 1997 1996Outstanding at beginning of year 6,092,128 3,903,603 3,212,869Granted 2,185,000 2,480,000 1,125,000Exchanged pursuant to the Amax acquisition 1,174,334 - -Exercised (728,767) (183,100) (410,932)Cancelled (355,167) (108,375) (23,334)Outstanding at end of year 8,367,528 6,092,128 3,903,603The range of per share prices and the number of shares reserved for options outstanding are as follows:1998 1997 1996Range of exercise prices CDN. $2.70 - $11.63 CDN. $1.40 - $12.50 CDN. $0.48 - $12.50Currently exercisable 4,286,764 2,341,578 1,541,850Average price exercised during year CDN. $2.05 CDN. $1.43 CDN. $2.18Average option price outstanding at year end CDN. $5.97 CDN. $6.28 CDN. $7.65As at December 31, 1998, CDN. $1.00 = U.S. $0.6534Common Share Purchase WarrantsAs part of the 1998 Amax acquisition (see Note 2), the Company issued 8,775,449 common share purchase warrants toCyprus Amax. These warrants are exercisable at $5.9826 per share and expire on June 1, 2001.15. WRITEDOWN OF MINERAL PROPERTIESAnnually, the Company reviews the carrying values of its portfolio of mining properties and advanced stageexploration properties. Through this process the Company determined that the following assets had suffered apermanent impairment in value and therefore have been written down to their estimated recoverable amount.KINROSS GOLD CORPORATION66

N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S1998 1997 1996Fort Knox Mine (including fair valueincrement of $104,665) $ 145,167 $ - $ -Refugio Mine 46,901 - -Macassa Mine - 35,719 -QR Mine - 13,516 -Goldbanks Property - 22,500 -Non-core Assets 24,013 8,702 5,221$ 216,081 $ 80,437 $ 5,221In the fourth quarter of 1998, following a comprehensive evaluation of its mining properties on the basis set out inNote 1, the Company determined that the net recoverable amounts of the Fort Knox, Refugio, DeLamar and Candelariamines were less than the net book value of the related assets including the fair value increment that had beenallocated to the Fort Knox mine as a result of the Amax acquisition. As a result of this review, the Company recordeda pre-tax writedown totalling $216,081,000 to reflect the writedown of these mining properties to their estimatedrecoverable amounts. The 1998 fourth quarter review of the producing mines was performed using a gold priceassumption of $325 per ounce.On April 12, 1997, a series of rockbursts suspended operations at the Macassa mine and prevented access to certainpreviously identified proven and probable reserves. As a result, the mine life was shortened from previous estimates.Accordingly, the Company recorded a pre-tax writedown totalling $35,719,000 during the second quarter of 1997 toreflect a reduction in the carrying value of the Macassa mine to the estimated recoverable amount.During the fourth quarter of 1997, the Company conducted a detailed review of the Q.R. mine in light of the high costof production that was being experienced against current and anticipated gold prices. The Company reviewed themine taking into consideration the existing ore stockpiles on surface, the readily available underground provenreserves that could be mined over the balance of 1997 and the first quarter of 1998 and the hedges in place that wereallocated to the QR mine. The Company recorded a pre-tax writedown totalling $13,516,000 to reflect the estimatedrecoverable amount.In the fourth quarter of 1997, the Company recorded additional writedowns of $22,500,000 and $8,702,000 against theGoldbanks property and other non-core assets, respectively. The Goldbanks writedown resulted from a reduction inprobable reserves in light of the current and anticipated gold price environment when compared to 1996, while thenon-core asset writedown was primarily associated with certain development projects of predecessor companies nolonger considered viable.The 1997 analysis was performed using a gold price assumption of $350 per ounce.16. INCOME AND MINING TAXES(a) The provision for (recovery of) income and mining taxes is as follows:1998 1997 1996Income taxesCurrentCanada (i) $ 610 $ 282 $ 1,316Foreign 1,433 1,403 -DeferredCanada - (13,661) 8,447Foreign - - (1,620)Mining taxesCurrent - Canada 2,533 391 1,511Deferred - Canada (334) 733 3,855$ 4,242 $ (10,852) $ 13,509(i) Includes large corporations tax of $610,000 in 1998, $282,000 in 1997 and $469,000 in 1996.KINROSS GOLD CORPORATION67

N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S(b) The reconciliation of the combined Canadian federal and provincial statutory income tax rate to the effective taxrate is as follows:1998 1997 1996Combined statutory income tax rate (recovery) (43.0%) (43.5%) 43.5%Increase (decrease) resulting from:Mining taxes 0.9 1.2 22.4Resource allowance and depletion (0.6) 1.0 (17.0)Difference in foreign tax rates 11.8 2.4 2.6Non-recognition of benefit of losses 31.5 26.0 1.1Other 1.2 1.4 3.8Effective tax rate (recovery) 1.8% (11.5%) 56.4%(c) For Canadian income tax purposes, the Company has timing differences of approximately $20,000,000, the benefitof which has not been recognized.(d) At December 31, 1998, the Company had U.S. net operating losses carryforward of approximately $160,000,000and alternative minimum net operating losses of approximately $88,000,000, expiring in the tax years 2004 through2018. The use of the U.S. losses carryforward will be limited in any given year as a result of previous changes inownership of the Company. At December 31, 1998, the Company also had Chilean net operating losses carryforward,of approximately $45,000,000 which do not expire.(e) The following information summarizes the principal timing differences and the related deferred tax effect.1998 1997Deferred tax assetsAccrued expenses and other $ 1,227 $ 525Site reclamation cost accruals 8,310 665Deferred revenue 6,835 -Alternative minimum tax credits 9,558 4,167Non-capital loss carryforwards 65,652 8,528Inventory capitalization 1,088 1,096Gross deferred tax assets 92,670 14,981Non-recognition of losses and other tax assets (25,841) (10,715)Net deferred tax assets 66,829 4,266Deferred tax liabilitiesSite reclamation cost accruals - 351Mineral properties, plant and equipment 73,720 11,628Gross deferred tax liabilities 73,720 11,979Net deferred tax liabilities $ 6,891 $ 7,71317. RELATED PARTY TRANSACTIONSIn addition to related party transactions disclosed elsewhere in these financial statements, the Company has enteredinto the following transactions with Cyprus Amax, a significant shareholder:Cyprus Amax continues to provide, on a full cost reimbursement basis, communications, administrative, insurance andother services to the Amax divisions it had previously owned. The Company was charged $229,000 for these servicesin the seven months in 1998 subsequent to the Amax acquisition. Cyprus Amax has also billed the Company$215,000 in 1998 pursuant to an exploration joint venture agreement.18. SEGMENTED INFORMATIONThe Company operates five gold mines: Hoyle Pond, located in Ontario; Kubaka (53% ownership), located in Russia;Fort Knox, located in Alaska; Macassa, located in Ontario; and Blanket, located in Zimbabwe. The Company alsoparticipates in two joint ventures, Denton-Rawhide (49%), located in Nevada, and Refugio (50%), located in Chile.KINROSS GOLD CORPORATION68

N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SIn addition to its producing gold mines, the Company has several other gold mining assets in various stages ofreclamation, closure, care and maintenance and development and three corporate offices in Canada, the United Statesand Zimbabwe. The accounting policies used by these segments are the same as those described in the Summary ofSignificant Accounting Policies (see Note 1).As the products and services in each of the reportable segments, except for the corporate activities, are essentially thesame, the reportable segments have been determined at the level where decisions are made on the allocation ofresources and capital, and where complete internal financial statements are available.Reportable Operating SegmentsHoyle Kubaka Fort Knox Macassa BlanketDenton-RawhideRefugioCorporateand Other1998Mining revenue $47,646 $45,861 $60,518 $23,312 $10,415 $20,389 $13,258 $47,813 $269,212Interest revenue - 1,691 - - 209 - 90 12,844 14,834Interest expense - 3,580 2,909 - 6 - 173 4,456 11,124Amortization of capitalassets 9,941 16,878 27,002 2,088 1,167 5,528 4,097 14,310 81,011Writedown of mineralproperties - - 145,167 - - - 46,901 24,013 216,081Segment profit (loss) (a) 10,423 5,754 (155,729) (739) 2,153 (1,657) (52,511) (42,738) (235,044)Segment assets 81,571 185,513 444,235 18,091 9,969 30,973 51,307 293,122 (b) 1,114,781Capital expenditures 16,895 - 10,234 321 893 1,024 910 3,563 33,840(c)Total1997Mining revenue 56,766 - - 20,646 11,824 23,248 - 60,706 173,190Interest revenue - - - - 144 - - 9,940 10,084Interest expense - - - - 20 26 - 5,300 5,346Amortization of capitalassets 7,042 - - 4,166 1,339 6,464 - 13,497 32,508Writedown of mineralproperties - - - 32,231 - - - 48,206 80,437Segment profit (loss) (a) 16,905 - - (37,592) 1,687 153 - (68,015) (86,862)Segment assets 77,448 - - 23,487 9,714 35,425 - 314,966 (b) 461,040Capital expenditures 21,090 - - 3,661 649 1,056 - 13,457 39,9131996Mining revenue 62,126 - - 31,494 12,626 27,243 - 71,270 204,759Interest revenue - - - - - - - 3,153 3,153Interest expense - - - - - 99 - 1,133 1,232Amortization of capitalassets 3,236 - - 5,561 1,037 6,836 - 13,410 30,080Writedown of mineralproperties - - - - - - - 5,221 5,221Segment profit (loss) (a) 33,133 - - 3,301 3,207 3,192 - (18,567) 24,266Segment assets 64,997 - - 59,365 10,134 42,157 - 357,058 (b) 533,711Capital expenditures 35,276 - - 10,072 1,640 4,157 - 16,198 67,343(a) segment profit (loss) includes the writedown of mineral properties(b) includes $125,754,000 (1997 - $183,025,000, 1996 - $193,580,000) in cash and cash equivalents held at theCorporate level(c) includes Corporate and other non core mining operationsKINROSS GOLD CORPORATION69

N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SReconciliation of reportable operating segment (loss) profit to net (loss) income for the year:1998 1997 1996Segment (loss) profit $ (192,306) $ (18,847) $ 42,833Add (deduct) items not included insegment (loss) profit:Corporate and other (42,738) (68,015) (18,567)(235,044) (86,862) 24,266Writedown of marketable securities (3,941) - -Writedown of long-terminvestments - (7,385) -Gain (loss) on sale of marketablesecurities 2,626 25 (15)Share of loss of associatedcompanies (768) (361) (293)(Provision for) recovery of income taxes (4,242) 10,852 (13,509)Dividends on convertible preferredshares of subsidiary company (4,025) - -Net (loss) income for the year $ (245,394) $ (83,731) $ 10,449Enterprise-wide disclosure:Geographic information:Mineral properties,Mining revenueplant and equipment1998 1997 1996 1998 1997United States $ 116,460 $ 67,773 $ 77,792 $ 529,851 $ 88,208Russia 45,861 - - 128,792 2,041Chile 17,603 - - 42,709 -Other 10,415 14,256 16,237 12,696 7,291Total foreign 190,339 82,029 94,029 714,048 97,540Canada 78,873 91,161 110,730 95,795 99,372Total $ 269,212 $ 173,190 $ 204,759 $ 809,843 $ 196,91219. EMPLOYEE PENSION AND RETIREMENT PLANSThe Company has several pension and retirement plans covering substantially all employees in North America andcertain employees in foreign countries.Pension expense under these plans amounted to $1,712,000 in 1998, $1,364,000 in 1997 and $1,137,000 in 1996.The Company makes annual contributions to defined contribution plans in accordance with the terms of the respectiveplans. The obligation for pension benefits under defined benefit plans is determined through periodic actuarialreports that are based on projections of interest, employees’ compensation levels and length of service to the time ofretirement.Summary information relating to these defined benefit plans is as follows:1998 1997Pension fund assets at market-related values $ 9,159 $ 6,239Obligations for pension benefits 11,720 6,658Excess of obligations over fund assets $ (2,561) $ (419)KINROSS GOLD CORPORATION70

N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S20. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLYACCEPTED ACCOUNTING PRINCIPLESThe consolidated financial statements have been prepared in accordance with accounting principles generally acceptedin Canada (“CDN. GAAP”) which differ from those principles and practices that the Company would have followed hadits consolidated financial statements been prepared in accordance with generally accepted accounting principles in theUnited States (“U.S. GAAP”).Material variations between balance sheet and statements of operations and changes in financial position items asshown in the consolidated financial statements under CDN. GAAP and the amounts determined using U.S. GAAP areas follows:Consolidated Balance Sheets:Long-terminvestmentsMineralproperties,plant andequipmentDeferredcharges andother assetsObligationforemployeefuturebenefitsother thanpensionsDebtcomponentofconvertibledebenturesEquitycomponentofconvertibledebenturesDeficitCommonsharecapitalUnrealizedlosses onlong-terminvestmentsAs at December 31, 1998under CDN. GAAP $24,953 $809,843 $15,364 $ - $42,705 $103,064 $(296,413) $904,212 $ -Employee futureliabilities assumed uponcompletion of the Amaxacquisition - 3,676 - 3,676 - - - - -Accrual of employeefuture benefits otherthan pensions (a) - - - 1,081 - - (1,081) - -Recognition of deferredexchange gains onconvertible debentures (b) - - - - - (14,716) 14,716 - -Elimination of the effectsOf recognition of theEquity component ofConvertible debentures - - 1,612 - 85,258 (88,348) 3,919 - -Additional writedown ofMineral propertiesunder U.S. GAAP (c) - (84,938) - - - - (84,938) - -Unrealized losses onlong-term investments (3,310) - - - - - - - (3,310)Reversal of 1991 deficitelimination (d) - - - - - - (5,254) 5,254 -As at December 31, 1998under U.S. GAAP $21,643 $728,581 $16,976 $4,757 $127,963 $ - $(369,051) $909,466 $(3,310)KINROSS GOLD CORPORATION71

N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SConsolidated Balance Sheets:Long-terminvestmentsMineralproperties,plant andequipmentDeferredcharges andother assetsObligationforemployeefuturebenefitsother thanpensionsDebtcomponentofconvertibledebenturesEquitycomponentofconvertibledebenturesDeficitCommonsharecapitalUnrealizedlosses onlong-terminvestmentsAs at December 31,1997 under CDN. GAAP $16,006 $196,912 $1,598 $ - $46,853 $96,935 $(45,070) $312,406 $ -Accrual of employeefuture benefits otherthan pensions (d) - - - 956 - - (956) - -Recognition of deferredexchange gains onconvertible debentures (c) - - - - - (5,953) 5,953 - -Elimination of the effectof recognition of theequity component ofconvertible debentures - - 1,612 - 90,476 (90,982) 2,118 - -Unrealized losses onlong-term investments (1,046) - - - - - - - (1,046)Reversal of 1991 deficitelimination (a) - - - - - - (5,254) 5,254 -$14,960 $196,912 $3,210 $956 $137,329 $ - $(43,209) $317,660 $(1,046)Consolidated Statements of Operations1998 1997 1996Net (loss) income for the year under CDN. GAAP $ (245,394) $ (83,731) $ 10,449Adjustments:Additional writedown of mineral properties under U.S. GAAP (b) (84,938) - -Increase in convertible debenture interest (net of tax in 1996) (c) (4,148) (3,426) (109)Recognition of exchange gains on convertible debentures (c) 8,763 5,953 -Employee future benefits other than pensions (d) (125) (272) (193)Net (loss) income for the year under U.S. GAAP $ (325,842) $ (81,476) $ 10,147Basic (loss) earnings per common share under U.S. GAAP $ (1.40) $ (0.66) $ 0.09Fully diluted earnings per common share under U.S. GAAP - - $ 0.08Effect of U.S. GAAP adjustments on basic (loss) earnings per common share $ (0.32) $ 0.05 $ -Statement of Operations Presentation:Under U.S. GAAP, the measures “(loss) income before undernoted” and “loss before taxes and other items” are notrecognized terms and would therefore not be presented. “(Loss) income before undernoted” when adjusted to include“write-down of mineral properties” and to exclude “interest and other income” is comparable to the terminology“income from operations” under U.S. GAAP.A. The following table reconciles “income before undernoted” to “income from operations”.1998 1997 1996(Loss) income before undernoted under CDN. GAAP $ (8,308) $ 3,248 $ 31,172Deduct:Writedown of mineral properties (216,081) (80,437) (5,221)Interest and other income (17,385) (10,316) (3,733)(Loss) income from operations under U.S. GAAP $ (241,774) $ (87,505) $ 22,218KINROSS GOLD CORPORATION72

N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SConsolidated Statements of Changes in Financial Position1998 1997 1996Operating activities determined under U.S. GAAP $ 97,835 $ 43,171 $ 36,836Financing activities determined under U.S. GAAP $(103,456) $ (3,473) $ 211,145Investing activities determined under U.S. GAAP $ (31,294) $ (49,971) $ (61,279)Interest paid during the year $ 12,720 $ 9,241 $ 1,242Income taxes paid during the year $ 138 $ 2,692 $ 1,645Under CDN. GAAP, activities that do not affect cash are included in the determination of financing and investingactivities in the statement of changes in financial position. U.S. GAAP requires the exclusion of activities that do notaffect cash flow from the determination of financing and investing activities. In addition, the presentation of anequity component of convertible debentures for CDN. GAAP purposes creates a difference in cash provided fromoperating activities under U.S. GAAP.The details of the individual line item differences in operating, financing and investing activities are as follows:Operating:1998 1997 1996Cash flow from operating activities under CDN. GAAP $ 101,983 $ 46,597 $ 37,080Increase in convertible debenture interest (c) (4,148) (3,426) (244)Cash flow from operating activities under U.S. GAAP $ 97,835 $ 43,171 $ 36,836Financing:1998 1997 1996Issuance in common shares, net under CDN. GAAP $ 591,967 $ 23,424 $ 83,334Issuance of common shares pursuant to business acquisitions (329,930) (17,250) -Issuance of common shares to repay debt (90,272) - -Issuance of common shares for long-term investments - (4,100) (5,434)Issuance of common shares on acquisition of mineral properties - (26) (7,360)Conversion of preferred shares - (195) (104)Issuance of common shares, net under U.S. GAAP $ 171,765 $ 1,853 $ 70,4361998 1997 1996Repayment of debt under CDN. GAAP $(361,468) $ (3,155) $ -Repayment of debt via issuance of common shares 90,272 - -Repayment of debt under U.S. GAAP $(271,196) $ (3,155) $ -1998 1997 1996Conversion of preferred shares under CDN. GAAP $ - $ (195) $ (104)Conversion of preferred shares - 195 104Conversion of preferred shares under U.S. GAAP $ - $ - $ -1998 1997 1996Convertible debentures under CDN. GAAP $ (4,148) $ (3,426) $141,651Increase in equity component of convertible debentures 4,148 3,426 244Convertible debentures under U.S. GAAP $ - $ - $141,895KINROSS GOLD CORPORATION73

N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SInvesting1998 1997 1996Addition to mineral properties, plant and equipment under CDN. GAAP $(33,840) $(39,913) $(67,343)Issuance of common shares on acquisition of mineral properties - 26 7,360Additions to mineral properties, plant and equipment under U.S. GAAP $(33,840) $(39,887) $(59,983)1998 1997 1996Business acquisitions, net of cash acquired of$20,698 under CDN. GAAP $(326,199) $(24,503) $ -Business acquisitions financed by the issuance of common shares 329,930 17,250 -Business acquisitions, net of cash acquired under U.S. GAAP $ 3,731 $ (7,253) $ -1998 1997 1996Long-term investments and other assets under CDN. GAAP $ (3,149) $ (6,931) $ (8,697)Common shares issued to acquire long-term investments - 4,100 5,434Long-term investments and other assets under U.S. GAAP $ (3,149) $ (2,831) $ (3,263)Statements of Comprehensive IncomeThe Company’s statements of comprehensive income under U.S. GAAP are as follows:1998 1997 1996Net (loss) income under U.S. GAAP $ (325,842) $ (81,476) $ 10,147Change in currency translation adjustments (13,865) (7,926) (941)Change in unrealized (losses) gains on long-term investments (2,264) (5,259) 601Comprehensive income under U.S. GAAP $ (341,971) $ (94,661) $ 9,807(a) Under U.S. GAAP, companies are required to accrue the expected cost of postretirement benefits other thanpensions during the years employees provide service to the company. Under CDN. GAAP, these benefits are expensedwhen paid.(b) Under CDN. GAAP, the convertible debentures described in Note 11 are accounted for in accordance with theirsubstance and, as such, are presented in the financial statements in their liability and equity component parts. UnderU.S. GAAP, the entire principal amount of the convertible debentures is treated as debt with interest expense based onthe coupon rate of 5.5%.In addition, under CDN. GAAP, the unrealized foreign exchange gains on the CDN. denominated debentures (see Note11) are deferred and amortized over the term of the debentures. Under U.S. GAAP, these gains are recognized inincome currently along with exchange gains related to the portion of the convertible debentures included in equityunder CDN. GAAP.(c) Following an evaluation of the Company’s mineral properties, plant and equipment on the basis set out in Notes 1and 15, an additional $84,938,000 would be charged to income in 1998 under U.S. GAAP as a result of discountingfuture cash flows from impaired properties. Under CDN. GAAP, future cash flows from impaired properties are notdiscounted. This difference in methodology did not have a material impact in on reported results of operations inprior years.(d) CDN. GAAP allows for the elimination of operating deficits by the reduction of stated capital attributable tocommon shares with a corresponding offset to the accumulated deficit. This reclassification, which the Company madein 1991, is not permitted by U.S. GAAP and would require in each subsequent year an increase in share capital and areduction in deficit of $5,254,000.For purposes of this U.S. GAAP reconciliation, the Company’s policy to measure compensation costs related to stockoptions is in accordance with APB 25 and recognizes no compensation expense for stock options granted.KINROSS GOLD CORPORATION74

N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T SRecent PronouncementsIn June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting StandardsNo. 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS No. 133) which establishes accountingand reporting standards for derivative instruments and hedging activities. It requires an entity to measure allderivatives at fair value and to recognize them in the balance sheet as an asset or liability, depending on the entity’srights or obligations under the applicable derivative contract. Management has not yet evaluated the effects of thisstatement on its financial position or results of operations. The Company will adopt SFAS No. 133 as required for itsannual filing of fiscal year 2000.21. UNCERTAINTY DUE TO THE YEAR 2000 ISSUEThe Year 2000 Issue arises because many computerized systems use two digits rather than four to identify a year.Date-sensitive systems may recognize the Year 2000 as 1900 or some other date, resulting in errors when informationusing Year 2000 dates is processed. In addition, similar problems may arise in some systems which use certain datesin 1999 to represent something other than a date. The effects of the Year 2000 Issue may be experienced before, on,or after January 1, 2000, and, if not addressed, the impact on operations and financial reporting may range fromminor errors to significant systems failure which could affect an entity’s ability to conduct normal businessoperations. It is not possible to be certain that all aspects of the Year 2000 Issue affecting the Company, includingthose related to the efforts of customers, suppliers, or other third parties, will be fully resolved.22. CONTINGENCIES AND RELATED COMMITMENTSThe Company is subject to the considerations and risks of operating in Russia as a result of its 53% ownership of theKubaka mine located in eastern Russia and its 25% interest in Kamgold, a development project also in eastern Russia.During 1998, the economy of the Russian Federation entered a period of financial difficulty, the impact of whichincludes, but is not limited to, a steep decline in prices of domestic debt and equity securities, a severe devaluation ofthe currency, a moratorium on foreign debt repayments, an increasing rate of inflation and increasing rates of intereston government and corporate borrowings. The Company’s operations in Russia have been affected, and may continueto be affected for the foreseeable future, by Russia’s financial difficulties.Russian tax legislation is subject to varying interpretations and constant changes, which may be retroactive. Further,the interpretation of tax legislation by tax authorities as applied to the transactions and activities of the Company’sRussian operations may not coincide with that of management. As a result, transactions may be challenged by taxauthorities and the Company’s Russian operations may be assessed additional taxes, penalties and interest, whichcould be significant. The periods remain open to review by the tax authorities for six years.The Company is also involved in legal proceedings and claims which arise in the ordinary course of its business.The Company believes these claims are without merit and is vigorously defending them. In the opinion ofmanagement, the amount of ultimate liability with respect to these actions will not materially affect the financialposition, results of operations or cash flows of the Company.23. SUBSEQUENT EVENTDuring 1998, the Company entered into an agreement to purchase all of the outstanding shares of La Teko ResourcesLtd., (“La Teko”) not already owned by the Company. La Teko is a public company listed on the Toronto StockExchange and the Vancouver Stock Exchange and quoted on the National Association of Securities Dealers’ ElectronicBulletin Board in the United States.A special general meeting of La Teko shareholders has been scheduled for February 19, 1999 to consider theapproval of the transaction which would result in the Company issuing 10,459,000 of its common shares to acquireapproximately 23,533,000 outstanding La Teko common shares not already owned by the Company.La Teko is an exploration corporation with several projects in the Fairbanks area of central Alaska as well as oneproperty in each of central Yukon and southern Arizona. Two of the Alaska projects, True North and Ryan Lode, arein the advanced exploration stage.KINROSS GOLD CORPORATION75

S U P P L E M E N T A L I N F O R M A T I O NQUARTERLY DATA(expressed in thousands of U.S. dollars except per share amounts) (Unaudited)March Quarter1998 1997June Quarter1998 1997September Quarter1998 1997December Quarter1998 1997Full Year1998 1997RevenueMining revenue $38,825 $40,827 $59,304 $44,825 $83,464 $41,519 $87,619 $46,019 $269,212 $173,190Interest and other income 3,744 2,505 4,795 2,490 3,494 2,586 5,352 2,735 17,385 10,31642,569 43,332 64,099 47,315 86,958 44,105 92,971 48,754 286,597 183,506ExpensesOperating 29,358 34,941 41,878 32,965 61,231 35,329 63,831 33,910 196,298 137,145General and administrative 1,250 1,652 1,927 1,999 1,792 849 2,310 1,412 7,279 5,912Exploration and business development 1,236 663 1,884 673 2,747 1,123 4,450 2,234 10,317 4,693Depreciation, depletion and amortization 7,199 8,188 16,549 8,932 27,162 7,573 30,101 7,815 81,011 32,50839,043 45,444 62,238 44,569 92,932 44,874 100,692 45,371 294,905 180,258(Loss) income before undernoted 3,526 (2,112) 1,861 2,746 (5,974) (769) (7,721) 3,383 (8,308) 3,248Gain on sale of marketable securities 826 - - - 1,841 - (41) 25 2,626 25Loss on sale of mineral properties - - - - - - - (1,675) - (1,675)Foreign exchange gain (loss) and other (12) (153) 329 (1) (395) - 547 (2,498) 469 (2,652)Share of loss in associated companies (105) - (103) - (99) (145) (461) (216) (768) (361)Interest expense on long-term liabilities (1,172) (1,303) (2,246) (1,389) (3,811) (1,326) (3,895) (1,328) (11,124) (5,346)Writedown of marketable securities - - - - - - (3,941) - (3,941) -Writedown of long-term investments - - - - - - - (7,385) - (7,385)Writedown of mineral properties - - - (35,719) - - (216,081) (44,718) (216,081) (80,437)(Loss) income before taxes and dividends on convertiblepreferred shares of subsidiary company 3,063 (3,568) (159) (34,363) (8,438) (2,240) (231,593) (54,412) (237,127) (94,583)(Provision for) recovery of income and mining taxes (876) 1,493 (1,121) 10,817 (112) (1,050) (2,133) (408) (4,242) 10,852(Loss) income for the period before dividends on convertiblepreferred shares of subsidiary company 2,187 (2,075) (1,280) (23,546) (8,550) (3,290) (233,726) (54,820) (241,369) (83,731)Dividends on convertible preferred shares ofsubsidiary company - - (575) - (1,725) - (1,725) - (4,025) -Net (loss) income for the period 2,187 (2,075) (1,855) (23,546) (10,275) (3,290) (235,451) (54,820) (245,394) (83,731)Increase in equity component of convertible debentures (1,477) (908) (1,479) (908) (1,478) (1,385) (1,515) (2,155) (5,949) (5,356)Net (loss) income for the period attributable tocommon shareholders $710 ($2,983) ($3,334) ($24,454) ($11,753) ($4,675) ($236,966) ($56,975) ($251,343) ($89,087)(Loss) earnings per shareBasic $0.01 ($0.02) ($0.02) ($0.20) ($0.06) ($0.04) ($1.01) ($0.45) ($1.08) ($0.71)Operating activities(Loss) income for the period before dividends onconvertible preferred shares of subsidiary company $2,187 ($2,075) ($1,280) ($23,546) ($8,550) ($3,290) ($233,726) ($54,820) ($241,369) ($83,731)Items not affecting cash 3,825 7,279 14,882 33,008 25,598 10,595 251,602 63,441 295,907 114,323Cash flow provided from operations 6,012 5,204 13,602 9,462 17,048 7,305 17,876 8,621 54,538 30,592Deferred revenue - hedging gains 13,885 - - - - - - 20,726 13,885 20,726Changes in non-cash working capital items 9,164 10,001 (847) (3,556) 29,617 7,023 2,992 (15,194) 40,926 (1,726)Effect of exchange rate changes (986) (1,622) (4,284) 46 1,836 (404) (3,932) (1,015) (7,366) (2,995)Cash flow provided from operating activities 28,075 13,583 8,471 5,952 48,501 13,924 16,936 13,138 101,983 46,597Financing activitiesIssuance of common shares, net 129,794 588 463,312 17,987 (1,579) 434 440 4,220 591,967 23,229Repayment of debt (292) (801) (345,554) (782) (614) (1,036) (15,008) (536) (361,468) (3,155)Convertible debentures (906) (482) (904) (1,234) (906) (849) (1,432) (3,032) (4,148) (5,597)Dividends on convertible preferred shares of subsidiary company - - (575) - (1,725) (1,725) - (4,025)128,596 (695) 116,279 15,971 (4,824) (1,451) (17,725) 652 222,326 14,477Investment activitiesAdditions to mineral properties, plant and equipment (4,825) (10,641) (7,379) (10,671) (12,629) (10,505) (9,007) (8,596) (33,840) (39,913)Business acquisitions, net of cash acquired (4,625) - (321,985) (24,503) - - 411 - (326,199) (24,503)Long-term investments and other assets - - - - (776) - (2,373) (6,931) (3,149) (6,931)Proceeds form the sale of equipment - - 1,964 500 - - - - 1,964 -(9,450) (10,641) (327,400) (34,674) (13,405) (10,505) (10,969) (15,527) (361,224) (71,347)Increase (decrease) in cash and equivalents 147,221 2,247 (202,650) (12,751) 30,272 1,968 (11,758) (1,737) (36,915) (10,273)Cash and equivalents, beginning of period 190,328 200,601 337,549 202,848 134,899 190,097 165,171 192,065 190,328 200,601Cash and equivalents, end of period $337,549 $202,848 $134,899 $190,097 $165,171 $192,065 $153,413 $190,328 $153,413 $190,328SUMMARIZED FIVE YEAR REVIEW1998 1997 1996 1995 1994Operating results (in thousands of U.S. dollars)Revenue 286,597 183,506 208,492 137,887 95,965Net (loss) income for the year (245,394) (83,731) 10,449 12,552 17,795Cash flow provided from operations 54,538 30,592 57,900 38,503 30,407Capital expenditures 33,840 39,913 67,343 75,837 25,688Financial position (in thousands of U.S. dollars)Cash and cash equivalents 153,413 190,328 200,601 13,899 81,838Working capital 184,192 229,527 237,159 29,901 89,038Total assets 1,114,781 461,040 533,711 288,109 191,513Long-term debt 171,636 53,735 59,522 9,228 7,433Common shareholders' equity 686,545 353,657 422,726 238,068 160,519Debt to total capitalization 20% 13% 12% 5% 5%Operating statistics (unaudited)Gold production (ounces) 823,721 428,973 450,102 274,355 174,165Silver production (ounces) 2,697,000 4,730,000 5,568,000 5,024,000 5,152,000Cash operating costs per equivalent ounce of gold $205 $265 $255 $250 $219Per share dataNet (loss) income basic ($1.08) ($0.71) $0.09 $0.12 $0.19Net (loss) income fully diluted - - $0.08 $0.12 $0.18Cash flow provided from operations $0.23 $0.25 $0.50 $0.37 $0.33KINROSS GOLD CORPORATION76

C O R P O R A T E D A T ADesign: Geordie Allen – Crescent Design Consultants, Printing: Bowne of Toronto, Cover and Executive Photography: Rob KinghornDIRECTORSRichard H. BlockPrivate InvestorJohn A. Brough 1, 2Executive Vice PresidentWittington InvestmentsLimitedRobert M. BuchanChairman andChief Executive OfficerKinross Gold CorporationArthur H. DittoPresident andChief Operating OfficerKinross Gold CorporationJ. Haig de B. FarrisPresidentFractual CapitalCorporation1, 3, 4Bruce E. Grewcock 3Executive Vice PresidentPeter Kiewit Sons’, Inc.John M.H. Huxley 2PresidentAlgonquin PowerCorporationGerald J. Malys 1Senior Vice President andChief Financial OfficerCyprus Amax MineralsCompanyJohn E. Oliver 3, 4Senior Vice PresidentCorporate and Real EstateBanking Bank of NovaScotiaJames A. Todd, Jr. 4Retired ChairmanBirmingham Steel Corp.Milton H. Ward 2Chairman, President andChief Executive OfficerCyprus Amax MineralsCompanyOFFICERS1 Member of the Audit Committee2 Member of the Compensation Committee3 Member of the Corporate Governance Committee4 Member of the Environmental CommitteeRobert M. BuchanChairman andChief Executive OfficerMilton H. WardVice ChairmanArthur H. DittoPresident andChief Operating OfficerJohn W. IvanyExecutive Vice PresidentBrian W. PennyVice President, Financeand Chief Financial OfficerScott A. CaldwellSenior Vice President,Open Pit OperationsRichard A. DyeVice President, TechnicalServices & ProjectDevelopmentRobert J. GosikVice President,Environmental AffairsChristopher T. HillVice President, TreasurerDonald C. MacKinnonVice President,Underground OperationsGordon A. McCrearyVice President,Investor Relations andCorporate DevelopmentRobert W. SchaferVice President, ExplorationAllan D. SchoeningVice President,Human Resources andCommunity RelationsShelley M. RileyCorporate SecretaryCORPORATE OFFICE57th Floor, Scotia Plaza40 King St. WestToronto, OntarioCanada M5H 3Y2Tel: (416) 365-5123Fax: (416) 363-6622Email: info@kinross.comWebsite: http://www.kinross.comU.S. OFFICEKINROSS GOLD CORPORATION77Suite 820,185 South State St.Salt Lake City, UtahU.S.A. 84111Tel: (801) 363-9152Fax: (801) 363-8747TRANSFER AGENT &REGISTRARMontreal Trust Companyof Canada,Toronto, OntarioThe Bank of Nova ScotiaTrust Company of NewYork,New York, N.Y.STOCK EXCHANGESThe Toronto StockExchange – Symbol “K”The New York StockExchange – Symbol “KGC”ANNUAL MEETING OFSHAREHOLDERSThe Annual Meeting ofShareholders will be heldat 4:30 p.m. on Tuesday,April 20, 1999, in theGreat Hall, St. LawerenceHall, 157 King Street East,Toronto, Ontario.

KINROSS GOLD CORPORATION 1998 ANNUAL REPORT