Kinross Gold Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 15, 2024

There are 11 speakers on the call.

Operator

Good morning. My name is Christa, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Kinross Gold's 4th Quarter and Year End Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

Thank you. I would now like to turn the conference over to Chris Lickenheld, Vice President of Investor Relations. Chris, you may begin your conference.

Speaker 1

Thank you and good morning. With us today, we have Paul Rollinson, President and CEO and from the Kinross Senior Leadership Team, Andrea Freebrough, Claude Schimper, Will Dunford and Jeff Gold. For a complete discussion of the risks and uncertainties which may lead to actual results different from estimates in our forward looking information, please refer to page 2 of this presentation, our news release dated February 14, 2024, MD and A for the period ended December 31, 2023 and our most recently filed AIF, all of which are available on our website. I will now turn the call over to Paul.

Speaker 2

Thanks, Chris, and thank you all for joining us. This morning, I will provide an overview of our Q4 and full year results, discuss our outlook for the business going forward and review our achievements in the area of ESG. I will then hand the call over to Andrea to discuss our financial performance and guidance, to review our operating performance and Will to discuss our projects, exploration initiatives and resource update. Looking back, we had a strong 2023 and successfully delivered on our targets and are well positioned for another strong year ahead. Our operations are performing well.

Speaker 2

Our projects are advancing on schedule and on budget. Our exploration program is delivering value. We are generating substantial free cash flow And our balance sheet is in excellent condition and continues to delever. With respect to the Q4, we had a strong finish to the year, resulting in full year production in the top half of our guidance range and costs at the low end of our guidance range. The strong performance on costs was primarily driven by transparency on inflation that was incorporated into our targets our focus on operational performance with strong production contributing to cost results and favorable trends on grade within our portfolio as we ramped up higher grade operations.

Speaker 2

As always, we will remain focused on cost control in 2024. However, we are expecting a modest increase, which Andrea will discuss shortly. The strong performance on cost was underpinned by our 3 highest margin assets, Tasiast, La Coipa and Paracatu. Tasiast and Paracatu are 2 top tier assets, together accounted for approximately 1,200,000 ounces. Adding in La Coipa, These three assets accounted for just over 2 thirds of our production and an ASIC of approximately $1,000 per ounce.

Speaker 2

At Tasiast, we delivered record throughput and strong production in Q4, driving record full year production. Tasiast was our largest production contributor for the full year. Tasiast was also our highest margin mine and largest free cash flow generator in 2023. At La Coipa, We also saw very strong margins and free cash flow. We are pleased with how the operation is performing.

Speaker 2

At Paracatu, we had another year of steady production highlighted by strong mill performance and record recoveries. And while Q4 grades were lower as planned, it was the highest throughput quarter in recent years. In the U. S, we delivered a successful year with both production and costs across the U. S.

Speaker 2

Operations performing well against our targets. At Round Mountain, we approved the Phase S open pit expansion, securing strong production through the decade and bringing clarity to the future at Round Mountain. Also at Round Mountain, We are making good progress on our planned next stages of production, Phase X underground and the Gold Hills satellite opportunity. Turning now to projects, our mill expansion at Tasiast And restart of La Coipa were completed in 2023, as was the construction of our solar power plant at Tasiast. In Alaska, construction of the Manchow project is essentially complete and is on budget and on schedule for initial high grade production in the second half of the year.

Speaker 2

At Great Bear, we continue to make excellent progress. Looking back to the time of the acquisition just 2 years ago, we started with no declared resources. Today, we have approximately 2,800,000 ounces of high grade M and I and an incremental 3,300,000 of high grade inferred ounces. In 2023, we added more than 1,000,000 ounces of growth to the LP underground resource from the initial resource we declared last year, which continues to support our view of a large long life high grade mining complex. Additionally, we continue to hit new high grade intercepts.

Speaker 2

As outlined in yesterday's release, we recently intersected nearly 3.90 grams per ton across a true width of 3.5 meters at a vertical depth of nearly a kilometer. I would note that this hole was not captured in our year end resource update. Ongoing drilling on the property continues to demonstrate that this is a world class deposit in a Tier 1 location. In addition to drilling success, other areas of the project are also advancing well, which Will is going to elaborate on later on this call. Before moving to our outlook, I'd like to comment on our year end reserve and resource update.

Speaker 2

As expected, our year end reserves decreased over the prior year, primarily due to depletion. As work advances on our new projects, we are upgrading the quality of our resource through the addition of higher margin ounces. Our measured and indicated resources remain stable at year end at approximately 26,000,000 ounces, while our inferred resources grew by approximately 1,000,000 ounces, driven by the substantial increase at Great Bear. Moving to our outlook, we are reaffirming our stable production profile. 2024 is expected to resemble last year with production and CapEx at similar levels.

Speaker 2

However, costs are expected to increase modestly as a result of inflation, Production mix and mine sequencing. Our production outlook for 2025 of 2,000,000 ounces remains consistent with previous guidance and we are introducing another year of production guidance at 2,000,000 ounces in 2026. Looking further ahead, we continue to expect production to remain around the 2,000,000 ounce level through the end of the decade. Maintaining production at this level will require the approval of some of our pipeline projects, including underground opportunities at Round Mountain and Curlew and open pit mine life extensions at La Coipa. We will continue to advance these initiatives and we'll update you on our progress as we move forward.

Speaker 2

With respect to capital allocation, we remain focused on debt repayment. We reduced our debt level in 2023 And our balance sheet is in excellent shape. We believe a continuation of debt reduction remains an optimal use of excess cash. We will also continue paying our competitive dividend of $0.03 per share quarterly. Before turning over to Andrea, I'd like to comment on some of our achievements in ESG.

Speaker 2

In 2023, we once again demonstrated a strong commitment to ESG by operating responsibly and advancing our strategy across this important area. Our 2023 Sustainability and ESG report, which we will publish in May, will provide a detailed review on our ESG performance and initiatives throughout the year. Some highlights from this past year include the construction of the solar power plant at Tasiast, which helps move us closer to our goal of reducing emissions intensity by 30% by 2,030. In the area of social, We made approximately $10,000,000 of monetary and in kind contributions through site investments, including to University of Atacama's research station near our La Coipa mine in Chile and establishing The Kinross Alaska Future Leaders Scholarship at the University of Alaska Fairbanks. The goal of this scholarship is to advance the inclusion of underrepresented people within the resource industry.

Speaker 2

With that, I'll now turn the call over to Andrea.

Speaker 3

Thanks, Paul. This morning, I'll review financial highlights the quarter full year, provide an overview of our balance sheet and discuss our guidance and outlook. As Paul noted, we finished the year with production of just over 2,100,000 ounces exceeding the midpoint of our guidance range. In the 4th quarter, we produced 547,000 Q4 sales of 565,000 ounces were slightly above production due to timing. Our Q4 cost of sales of $9.76 per ounce and AISC of $13.53 per ounce were higher compared to the prior quarter as expected, primarily due to lower production at Paracatu.

Speaker 3

Full year cost of sales of $9.42 per ounce was below the $9.70 guidance midpoint, driven by strong cost performance across the portfolio. Costs at Paracatu were on plan in 2023 and are expected to increase in 2024 due to lower plant production. Margins were strong at $9.98 per ounce sold in Q4 and $1,003 per ounce sold for the full year. Our adjusted earnings per share was $0.11 in Q4 and $0.44 for the full year. Adjusted operating cash flow was $407,000,000 in Q4 and approximately $1,700,000,000 for the full year.

Speaker 3

Attributable CapEx was $298,000,000 in Q4 $1,050,000,000 for the full year. Attributable free cash flow in Q4 was $117,000,000 and for the full year was $560,000,000 Turning to the balance sheet, we finished the year having further strengthened our financial position. After repaying CAD190 1,000,000 debt in the quarter. We ended the year with approximately $350,000,000 in cash and approximately $1,900,000,000 of total liquidity. Our net debt improved to CAD1.9 billion at year end from CAD2 1,000,000,000 at Q3.

Speaker 3

We repaid the CAD50 1,000,000 outstanding on our revolving credit facility in October and then the CAD140 1,000,000 balance on our Tasiast loan in December. The Tasiast loan was repaid early with cash generated from the Tasiast operation, resulting in interest savings of approximately $35,000,000 assuming current rates over the original term to 2027. Our trailing 12 month net debt to EBITDA ratio continued to trend lower as we finished the year just above one time. In 2023 as a whole, we reduced our total debt by approximately $360,000,000 As Paul mentioned, we aim to further delever our balance sheet in 2024 as we plan to allocate excess free cash generated this year against the 2025 term loan. The term loan will be reclassified to current in our Q1 financials given its maturity in March 2025.

Speaker 3

Turning to our guidance and outlook, as Paul indicated, 2024 is expected to look similar to 2023 as our portfolio continues to generate strong and stable returns. We are forecasting production in the range of 2,100,000 ounces remaining consistent year over year. For costs, we're guiding $10.20 per ounce for cost of sales and $13.60 per ounce for all in sustaining costs. Expected cost of sales of $10.20 per ounce is up approximately 5% compared with our $9.70 per ounce guidance from 2023. The expected increase is driven by 3 factors modest inflation which has cited compared with recent years but has not gone away.

Speaker 3

Sales mix with slightly more of our production coming from our U. S. Operations which operate with higher costs and a temporarily lower production and therefore higher cost year Paracatu's mine plan. Attributable capital expenditures guidance of $1,050,000,000 for 2024 is in line with 2023. Approximately $550,000,000 of this CapEx is expected to be non sustaining in 2024.

Speaker 3

Production is expected to be higher in the second half of the year as Manchow comes online. Cash flow is also expected to be stronger in the second half as a result of the protection profile as well as our typical timing of payments related to taxes in the first half of the year. Our 2025 production guidance of 2,000,000 ounces remains unchanged from our guidance update last year. Looking ahead to 2026, as Paul noted, we've introduced another year of production guidance of 2,000,000 ounces in line with 2025 and in line with our expectation for production of approximately 2,000,000 ounces through the decade. Based on currently approved projects, attributable CapEx is expected to be $850,000,000 in 2025 and $650,000,000 in 2026.

Speaker 3

However, as we continue to approve additional projects to sustain our production level, We expect CapEx will ultimately remain stable around $1,000,000,000 I'll now turn the call over to Claude to discuss our operations.

Speaker 4

Thank you, Andrea. Last quarter, I began by sharing the details of our homegrown safety excellence program. We are taking a genuine bottom line approach to fostering our safety culture. The program has now been delivered to over 6,000 employees and business partners worldwide with 44 different nationalities participating. We are proud of this program and will be relentless in keeping safety as our core piece of our operating philosophy.

Speaker 4

Moving on to our operations, as Paul highlighted, we delivered a strong end to the year, achieving our full year targets on both production and cost. I am pleased to say this is a testament to the strong focus and dedication to operational excellence that our team demonstrated over the course of the year. Our 2 cornerstone operations, DASIS and Paracatu had another year of significant production. These two assets provided over half of our ounces and drove meaningful cash flow for our business. In 2023, we continue to advance our projects at Tasiast and La Coipa, which was successfully completed prior to the New Year.

Speaker 4

At Tasiast, we achieved record full year production of 621,000 ounces, benefiting from strong throughput and grades. In the 4th quarter, the mill demonstrated higher throughput over the prior quarter, reaching a quarterly average rate of approximately 22,000 tons per day, driving a strong final quarter of production of 161,000 ounces. Cost of sales of $6.45 per ounce in the 4th quarter was the lowest in the portfolio. Sanhuis was our lowest cost producer in 2023 with a cost of sales of $6.61 per ounce. We are anticipating another strong year for Perseus with production guided to be around 610,000 ounces as higher throughput is offset by lower plant grade.

Speaker 4

Margins are anticipated to be robust again this year with cost of sales expected to be $6.70 per ounce. At the Tasi Solar Power Plant, The structure is now complete with the first power being delivered in December. We will be ramping up the plant throughput in the first half of the year. Paracatu had another year of substantial output with full year production of 588,000 ounces. Production in Q4 was lower than Q3 as previously indicated into mine sequencing resulting in lower grades.

Speaker 4

The mill performance in Parrot 2 continues to be a stand up with excellent throughput and recovery performance in Q4. Production in 2024 is expected to be lower and cost higher as the mine sequencing continues to transition through lower grade portions of the pit before moving back into higher grades next year. At La Coipa, strong operating performance continued in Q4 with record quarterly production of 74,000 ounces, which was driven by higher throughput and strong grades. Full year production of 260,000 ounces exceeded the top end of guidance, while cost of $6.81 per ounce expected to have another strong year with a target of 250,000 ounces and a cost of sales of $800 per ounce. Moving to the U.

Speaker 4

S. Assets, we had a strong final quarter with production of 184,000 ounces at a cost of sales of $1304 per ounce, both improving over the prior quarter. Full year production of 684,000 ounces at a cost of sales of $13.18 per ounce was achieved. Production across the U. S.

Speaker 4

Assets is expected to increase this year to 730,000 ounces at a cost of sales of dollars 3.30 per ounce. The increased production is due to the expected contribution from Manchow in the second half of the year and higher production from Bald Mountain on higher planned ore stacking rates and higher grades. At Fort Knox, Q4 production of 84,000 ounces increased over the prior quarter mainly due to higher mill throughput. At Manto, construction is essentially complete. The mining activities including ore mining and stockpiling have commenced.

Speaker 4

The suction of the mill modifications at Fort Knox also continues to progress. Construction of the conveyors and associated buildings along with the interior piping and mechanical installations will continue throughout the Q1. Pre commissioning and operational readiness team is preparing for pre commissioning activities. At Bald Mountain, Q4 production of approximately 44,000 ounces improved over the prior quarter on higher grades, helping drive lower cost of sales. In 2024, Bald Mountain is expected to have a stronger year with grades increasing in the back half of the year on mine planning.

Speaker 4

At Round Mountain, production of approximately 56,000 ounces was lower over the prior quarter due to fewer ounces recovered from the leach pads, while costs decreased due to the lower input costs and timing of inventory movement. As Paul mentioned, our work at Round Mountain is advancing on plan. Stripping of Phase S has commenced and the operations team is in place. Detailed engineering of the pad expansion has been completed and construction activities are on track. Production from Phase S remains on schedule to begin in the second half of twenty twenty five.

Speaker 4

Down Mountain is expected to produce at a level similar to 2023, with production coming from ongoing mining at Phase W2. With our projects complete and the operational momentum we are seeing across all our mines, we are well positioned to deliver another strong year in 2024. With that, I will now pass the call over

Speaker 1

to William. Thanks, Claude. I'll start by expanding on Round Mountain, provide updates on curlew, Great Bear and our exploration initiatives before ending with a few comments on our year end resource update. At Round Mountain, In addition to our ongoing work on the open pit phases that Claude discussed, we continue to focus on exploring and studying our higher grade, Potentially higher margin underground opportunities at PHASAX and Gold Hill. We are progressing well with the exploration decline at PHASAX Having developed 14 75 meters to date, which is over half of the planned development for the initial exploration decline.

Speaker 1

This has put us in closer proximity to the target mineralization for Phase X allowing us to commence exploration drilling along the periphery of the target earlier this year. This drilling has already hit a high grade narrow vein with coarse visible gold, something we have seen throughout our history at Round Mountain, which has ultimately led positive reconciliation and we are pleased to see this trend continuing at depth. We will continue development of the exploration decline in parallel with and definition drilling and we'll be in a position to start definition drilling of the primary Phase X target by Q2. At Gold Hill infill drilling from the bottom of the open pit and exploration drilling from surface continue to advance as planned. Stepping back, we remain excited about the underground opportunities at Round Mountain.

Speaker 1

We see the potential for Phase X come online in late 2026 or early 2027 and Gold Hill to come online towards the end of the decade extending production at Round Mountain into the next decade. Moving to Curlew Basin, our results continue to trend well and support further work on the assets. Through 2023 exploration, we increased the size of the inferred resource by 34% as we confirmed extensions and continuity within several key zones of mineralization. We have now delineated approximately 400,000 ounces of measured and indicated and 700,000 ounces of inferred resources with strong grades of around 6 grams per ton. You will recall last quarter we released results of full 1168 with 14 meters at 16.5 grams per tonne down dip at the roadrunner zone, which was both wider and higher grade than our existing resource.

Speaker 1

As you can see on the slide at the end of the year, we received assay results from a few more standout intercepts showing higher grade and wider potential in the stealth zone including ST-thirteen twelve which showed 27 meters at over 12 grams per ton. These higher grade results are not included in this current resource update. Our focus this year will be to follow-up on this higher grade wider mineralization encountered both at Roadrunner and Stealth and to continue advancing exploration efforts to expand the higher margin, wider more continuous zones within our existing resource. We continue to study curlew to optimize the potential value and determine the best path forward for this asset. Moving on to Great Bear.

Speaker 1

As Paul indicated, our 2023 drilling program exceeded our expectations, delivering a significant resource addition of more than 1,000,000 ounces. The year over year increase was primarily driven by higher grade underground additions to the inferred resource at depth enabled by the success of directional drilling. This resulted in a 45% increase to the inferred resource and a 28% increase in the inferred grade. The significant inferred grade increase was driven by the new underground resource having come in at a higher average grade of 6 grams per tonne, driving the overall inferred resource grade to 4.5 grams per ton. The total project resource now stands at approximately 2,800,000 ounces of measured and indicated and 3,300,000 ounces of inferred resources.

Speaker 1

As a reminder, scope of 2023's drilling program was primarily to add underground resources at depth in the main LP zone. To execute on this plan, we introduced directional drilling, which was very effective allowing us to meaningfully increase the underground resource at LP. As you can see on the slide, our primary resource additions came from new higher grade underground resources between the 501,000 meter levels showing a significant extension to the LP zone. These extensions clearly continue to demonstrate our thesis of this orogenic deposit continuing with strong grades at depth. You can also see on the slide that we continue to intercept high grade mineralization beyond our current resource additions of depth.

Speaker 1

Of particular note is full BR843 shown with a star just to the left of center which intersected 389 grams per ton over a mine well width 3.5 meters. Given the timing of this drilling, this intercept didn't make it into this resource update. But this hole along with all the other assays we see continue to support our view that this will be a high quality long life underground mine following the initial open pit. While the LP zone represents the bulk of our resource expansion, we also saw some growth at Hinge and Limb, more classic Red Lake style deposits. And as noted last quarter, we saw multiple high grade intercepts at Hinge from the directional drilling well below the current resource, again showing potential for future extensions at depth.

Speaker 1

Ingen Limb continue to show potential to supplement production from the LP zone in the future and demonstrate the significant optionality of our land package. Looking to this year's exploration program, our strategy will be similar to last year's with our primary focus on further expanding the mineralized zones at LP including both the Central LP area and extensions at Discovery and V Go. We will also continue to look for additional deposits along strike and for expansions of our Red Lake mineralization at Hingin Lane. The 2024 program will be comprised of approximately 120 kilometers of drilling. Our program will continue the targeted expansions of the underground resource.

Speaker 1

However, it's worth noting because planned drilling will be deeper Progress on resource additions is expected to be more modest than realized in 2023. Moving to other areas at Great Bear. As a reminder, we are advancing across 2 key streams, the AEX underground decline through which we plan to obtain a bulk sample and perform definition and infill drilling in the LP zone and the main project which includes the mine, mill and related infrastructure required for production. For the AEX decline, the mining lease for the main AEX surface footprint has been received, providing us with the necessary surface and mining rights develop AEX subject to obtaining the required provincial permits. Feasibility level design and engineering is now complete.

Speaker 1

The surface design for AEX is shown here on the slide and detailed engineering for the AEX infrastructure is well underway. Provincial permitting of the AEX remains on track. Procurement for long lead items such as the camp, our infrastructure and water treatment is underway And we are targeting a potential start of the surface construction for AEX in the second half of the year subject to receipt of permits and potential start of the underground decline in mid-twenty 25. For the main project, we continue to advance technical studies including engineering and field test work campaigns. The results of this work will be outlined in our PEA plan for the second half of the year.

Speaker 1

The initial project description has been submitted to the Impact Assessment Agency of Canada, formally commencing the federal assessment process. The detailed project description is expected to be formally submitted shortly. The comprehensive baseline study program encompassing air and noise, Hydrogeology, geochemistry, archaeology, water quality and several other categories continues to advance. These studies underpin our indigenous consultation and permitting efforts. Our exploration team was very active in 2023.

Speaker 1

In addition to the drilling success at Great Bear, we also saw strong developments from within our portfolio of brownfield and greenfield prospects. Our brownfields program, which accounts for approximately 90% of our exploration budget consisted of more than 200 kilometers of drilling last year, taking place primarily within the footprint of existing mines and projects where we are targeting higher grade potentially higher margin deposits and possible extensions within our current hits. As detailed in our press release, this program demonstrated notable results across several locations. Having already discussed Round Mountain, I'll start with our other U. S.

Speaker 1

Assets. At Fort Knox, program focused primarily on 2 main areas, Occidental growth around the Fort Knox pit and on deeper underground targets within the Dandelion Shear zone. At Manchow, near mine exploration work took place at 6 targets and the exploration program was expanded to include several new targets identified near the mine road corridor. At Bald Mountain, drilling focused on near term resource growth which resulted in an addition to the reserve. Moving to Tasiast, RC drilling testing for extensions of the North Satellite area successfully intersected mineralization and proved the continuity of a Noah along the primary greenstone belt.

Speaker 1

Drilling this year will look to further explore on trend of this mineralization. In addition, deep drilling plan for this year will begin targeting extensions at West Branch, Cement and Prolongation

Speaker 4

with the aim of supporting an

Speaker 1

underground mining scenario at Tasiast. Moving to Chile, our brownfield drilling program potential porphyry mineralization approximately 8 kilometers due north of our mine facilities. At La Coipa, we completed approximately 15 kilometers of drilling to test the extent of near surface oxide mineralization proximal to current and historic pits. In Brazil, Recent drilling of soil anomalies primarily to the northwest of Paracatu have revealed similar style mineralization and grades in the same post packages. Further drilling at several untested soil targets will take place this year.

Speaker 1

Moving to our Greenfields program, Approximately 52 kilometers of drilling was completed across Manitoba, Nevada and our JV project in Northern Finland. Our large Snow Lake land package in Manitoba continued to show exciting potential for high grade gold mineralization associated with share hosted quartz painting. In Nevada, RC drilling was completed across several prospective properties

Speaker 4

with the

Speaker 1

potential for low sulfidation, epithermal and Karlin style gold mineralization. In Finland, we continue to advance exploration on the Lani East property alongside our joint venture partner. Moving to our broader reserve and resource update. As Paul mentioned, our reserves declined this year as we are in a phase of resource growth focused on adding higher grade ounces at earlier stage projects such as Great Bear, Curlew and the Round Mountain Undergrounds. Our measured and indicated resources remained stable at approximately 26,000,000 ounces and inferred resources were up more than 1,000,000 ounces driven by the previously discussed high grade additions at Great Bear and Furloughed.

Speaker 1

We are excited by the significantly higher grade of these inferred resources increasing the quality of our overall resource base and providing potential for future high margin production. I will now turn it back to Paul.

Speaker 2

Thanks, Will. After delivering on our commitments in 2023, we intend to carry this momentum into 2024. Our business is well positioned to deliver another strong year, both operationally and financially. And looking forward, we remain excited about our future. We have a strong production profile.

Speaker 2

We are generating significant cash flow. We have an investment grade balance sheet. We have a competitive dividend. We have an exciting pipeline of exploration and development opportunities across several attractive jurisdictions. And we are very proud of our commitment to responsible mining that continues to make us a leader in ESG performance within the industry.

Speaker 2

With that operator, I'd like to open up the line for questions.

Operator

Thank you. Your first question comes from the line of Ralph Profiti from 8 Capital. Please go ahead.

Speaker 5

Thanks, operator. Good morning, Paul and team. I want to ask a question on Great Bear. And Are there early indications that you can give us on how this ore body into the PEA is holding up at higher cutoff grades?

Speaker 1

Yeah. We can I mean you can see some of it in the cross sections that we've in the long sections that we've provided in the presentation today, but we are seeing some pretty high grade areas coming in at depth? And that's reflected in the fact that our new Resources and inferred have come in at about 6 grams a ton. So we're finding it's we are continuing to see what we were hoping to see which continuation of that orogenics system at depth and changing the cutoff grade for the open pits, it's Fairly incentive, just given that there's a very high grade core. And on the underground, it's the same thing where we've got bulkier mining.

Speaker 1

So We can be reasonable with our cutoff grades.

Speaker 5

Got you. Okay. Thanks for that. And maybe there's a question for Andrea. Just looking at the 20252026, my understanding was that those are going to be higher stripping years at Tasiast as you get into West Branch.

Speaker 5

And so I'm just wondering what are some of those potential offsets in that non sustaining category that has this sort of trailing off?

Speaker 3

In, sorry, in 2526? Correct.

Speaker 4

We'll have

Speaker 2

to get back to you on that one. Yes, I mean, it's out there a bit. Let us you're right. It is higher strip, but there's a lot of moving pluses and Minus is there, so let us take that offline and come back here.

Speaker 5

Okay. Thanks for that. And maybe just potential timelines on approvals at Karlu, maybe this is sort of further out as well, but it's an interesting project given Proximity jurisdiction and grades. Just wondering sort of if you look out a little bit potentially when we could see sort of the next milestone on studies?

Speaker 2

Yes. As you know, the majority of the permits are in place already. For example, The restart of mining, haulage, milling, really what we're focused on is getting The approval to put a dry stack tails on top of the existing tails. And again, we're working that through the system. I don't have a definitive timeline on that.

Speaker 2

But as I say, we're in good shape across the board. That's The last sort of chapter and we're pursuing that at the same time as we're continuing to grow the resource and get into the economics. So it's all moving in the right direction, but I'll have a definitive answer on the permitting.

Speaker 1

Yes. And I think we're really focused Value engineering and trying to optimize the underground design and the economics and the margin. So the timeline is more around us internally making a strategic decision. The permitting is progressing well and right now we don't believe that's going to be the critical task. We want to get some more drilling in these high grade areas, try and get some of that higher margin material into the mine plan.

Speaker 5

Got you. All very interesting. Thanks very much.

Operator

Your next question comes from the line of Joff Wolfson from RBC Capital Markets. Please go ahead.

Speaker 6

Thanks very much. On the reserve side of things, for Paracatu, was there any more information available about some of the changes In some of the numbers reported there?

Speaker 1

Yes. The changes there that you saw, you would have seen We had a bit of a decrease in the reserve beyond just depletion. And that really came also as a result of some value engineering work that we did there, Really focused on near term cash flow. So a big piece of those ounces that we removed from the reserve is higher strip material around the periphery of the ore body. We were required to do the stripping and it was impacting grade to the lower end in the near term in the next few years.

Speaker 1

So we pulled that out of the plan, it takes out some ounces at the very end of Life of Mine, but it increases our cash flow over the next few years, materially. So that's the majority of what's happened with those ounces.

Speaker 6

Okay. And then for Great Bear, and I might be asking us a bit too early before a bulk sample has been done. But a lot of drilling has been done here. I'm assuming an increased understanding of what the LP underground is sort of looking like. Any thoughts on maybe what the blended Diluted grade would be in a mining situation for that area?

Speaker 1

Yes. I mean, we did indicate that We do put stope shapes around our resource, even our inferred resource. So I know not everyone always does that, but that does put in some internal dilution. So we are what we're seeing with those stope shapes coming into the new inferred resource, it's around 6 grams a tonne. Overall on average, the underground grade, if we looked at the inferred and we stripped out the open pit, it's over 5 grams a ton.

Speaker 1

So we'll continue to see what happens at depth and how that directionally moves.

Speaker 6

Got it. Okay. And then last question, Just looking at La Coipa, I saw a bit of additions there, maybe not net of depletion, but some incremental. I'm just trying to understand maybe what the options are the company's weighing between extension there and when we could see some of The potential upside in reserves or maybe the other sort of bigger development opportunity there, if that's something that could be Pursuit of the next 5 years, but just trying to understand how should we think about this mine in the next 3 or 4 years? Thank you.

Speaker 2

Yeah, look, again, I'll start and maybe Will can chime in. As you know, we have a large land package. We have several oxide kits and we've got visibility of production through 20 7. Really, it's a bit of a permitting exercise to continue with laybacks in the pits where we're operating and operating. And at the same time, we've We've been doing some drilling on some of those satellites.

Speaker 2

So our vision for La Coipa is to see Production continue out towards the end of the decade. And in parallel, we are starting to ramp up our baselines As it relates to Lobo Marte. So the vision for Chile is continued oxide pit expansion permit Strategy with Lobo coming into the queue in parallel To transition from La Coipa to Lobo around the end of the decade?

Speaker 1

Yes. And you can see in our reserve and resource tables that we've got a fairly substantial resource there and that's when we talked earlier about our focus on that Sequencing over time to try and convert from our resources into reserves. This is a massive focus for us at La Coipa. So that in that 27 to 2,030 range, we can pull some of those resources into reserve through the permitting and the geotech work and the drilling work that we're doing.

Speaker 5

Thank you very much.

Operator

Your next question comes from the line of Greg Barnes from TD Securities. Please go

Speaker 1

ahead. Yes. Thank you. A question for Paul and Andrea regarding the capital cost estimates going out to $25,000,000 $26,000,000 $850,000,000 and six 2,000,000 and I understand that doesn't include several projects, but should we be thinking around $1,000,000,000 a year to sustain that 2,000,000 ounce production rate Going forward, is that the right number? I think you've talked about that in the past.

Speaker 2

Yes, that's exactly right. Right. That's how we think about it. So again, we have the capital in place to deliver the $2,000,000 that we put into guidance. But as we look out beyond that guidance, we'll be looking to bring projects in, sanction things in the pipeline.

Speaker 2

And so I would expect that as we do that, our capital will come back up into the $1,000,000,000 range as we continue to move out. We've often said, we're generally about $1,000,000,000 of capital total, sustaining a growth at a $2,000,000 run rate. So that's the right way to think about.

Speaker 1

Okay, great. That's it for me. Thanks.

Operator

Your next question comes from the line of Kerry McCurry from Canaccord Genuity. Please go ahead.

Speaker 7

Hi, good morning. Maybe just back on grade there. So with the new resorts, are you thinking about the PEA any differently? And that still going to be more focused on the open pit or is there enough underground critical mass now that it's going to be more balanced between the 2?

Speaker 1

Yes, that's it will be focused on both the open pit and the underground. Obviously there's as you guys can see in the resources a strong open pit starter for the 1st substantial production, but certainly what we've seen in the underground and what we've released will allow us to have an underground component in that PEA as well.

Speaker 7

And you're still thinking about 10,000 tonnes a day? Okay. And then maybe just another quick one. Just in terms of the quarterly Sequence of the year, we normally see the Q1 drop off. Any guidance you can give on what we should expect for Q1 and maybe the H1 H2 slip?

Speaker 3

On production? Yes.

Speaker 2

What was the question, Kerry?

Speaker 7

Just the quarterly sequence, I mean typically we see strong Q4s and lower Q1s, just some guidance you can give us there?

Speaker 2

Yes.

Speaker 3

Sure, Carrie. For this year for us, I think we in our remarks, we talked about second half being higher and that's with Mancheau coming on. But I would say first half is somewhere in the 48% to 49% of our full year production, and then the second half just above 50%. And I think kind of Q1, Q2 are sort of more even than we've seen in the past. So it's not kind of a step up each quarter all year, but more of a H1, H2 story this year.

Speaker 2

We do typically have a seasonality to the year. I mean, where, for example, heaps in Alaska Percolate a little slower in the winter and things heat up and things move a little better. And As you know, we get into the rainy season in Brazil and that prevents us from buying in the lower portions of the pit, so we tend to mine in higher areas with lower grades. So there is a seasonality generally in our business. You can't sort of take q1 times 4, and we try to give a flavor for that as we move through the year.

Speaker 3

I would just add that, Obviously, free cash flow follows that trend as well. But on top of that, we've got some kind of annual tax payments that come in the first half too. So, more free cash in the second half than you'll see in both Q1 and Q2.

Speaker 2

Okay. And then maybe one last one

Speaker 7

just on debt reduction, should we be expecting a similar level this year or we be thinking higher than that potentially?

Speaker 3

On debt reduction? Yes, I mean we're focused on repaying debt. In 20 23, we repaid $360,000,000 $190,000,000 of that was in Q4. So if you think about similar Production in 2024 similar CapEx and costs a little higher, might be a little bit lower than that, but at 2,000 gold somewhere in a $300,000,000 range is sort of where we're thinking.

Speaker 7

Great. That's it for me. Thanks.

Operator

Your next question comes from the line of Lawson Winder from Bank of America. Please go ahead.

Speaker 8

Hi, thank you very much operator and good morning Kinross team. Thanks for taking my questions. Just a couple from me. First of all, On the cost assumptions, Andrea, I apologize if I missed it, but did you know what the inflation assumption was for 2020 4% versus 23% and then what was the realized 2023 inflation versus the budget of 5%?

Speaker 3

Sure. So overall, I'll start with the look back. So looking back at 2023, inflation was around sort of in line with our expectations. So we talked about a 5% inflation factor in 2023 and that's where we came in. Looking forward, We're seeing labor and contractor costs continue to increase, while overall inflation is at least starting to return to normal levels.

Speaker 3

And in our cost guidance in 2024, we've got somewhere around a 4% inflation factor on 2024 costs.

Speaker 8

Okay. And that's with the oil price assumption being down about 17% versus the 2023 assumption?

Speaker 3

Our oil price assumption is, I think, 85 for 2024.

Speaker 8

Okay. Got it. I also wanted to revisit the CapEx question just a little bit to think about how to bridge the gap from $850,000,000 to $1,000,000,000 in 20 $5,000,000 so that $150,000,000 and then how to bridge that $350,000,000 gap from $650,000,000 to $1,000,000,000 in 2026. So in 2025, would that be Phase X that would be bridging that gap? And That additional $350,000,000 in 2025, which project should we think about spending bridging that gap?

Speaker 1

Obviously these are all in study phase, keeping in mind. But the phase actually is something where the capex there is essentially continuation of mining. So that is one that would be an earlier sequencing and we could be spending money on that in 2025. Currently the same thing that's somewhere we could be spending some money in 2025 and into 2026. GVR, we will continue to spend money on CapEx in a few different areas before initiating the main project And the La Coipa extensions as well, by 2026, we could be spending money there.

Speaker 8

Okay. That's very helpful. And then If I could just revisit the seasonality question on the guidance, just particularly for Brazil, would you be comfortable providing percent of breakdown in terms of like percentage of the 510,000 ounces in H1 versus what percent you would expect in H2 for Paracatu?

Speaker 3

While we're getting that, Lawson, just to correct what I said earlier, our oil price assumption is actually $75 in our guidance.

Speaker 8

Okay. Okay. Thanks for doing that. Thanks for recognizing that. That's what I thought.

Speaker 8

So that would be down 17% from The $90,000,000 last year, but obviously we realized price was only $77,000,000 or $78,000,000 last year. So virtually oil price assumption is in line versus last slightly off and then 4% inflation?

Speaker 4

So Lawson, to answer your Breakdown, it's about 45% in the first half of the year and 55% in the back end. Obviously, the last quarter is the one where we Really banging out in Brazil. First one, we have the rainy season and then where we are in effect This year puts us a little bit behind in the first half.

Speaker 8

Okay. Thank you all very much.

Operator

Your next question comes from the line of Anita Soni from CIBC. Please go ahead.

Speaker 9

Good morning, guys. Thanks for taking my questions. And most of them have been asked and answered. But one question still did have, I just want to confirm The new material that was added in Dixie on the underground, like by my calculations, it was a little north of 6 gram per ton. Is that correct?

Speaker 1

That is correct, yes.

Speaker 9

Okay. And that was all underground, right?

Speaker 1

Yes, the additions were overwhelmingly underground.

Speaker 9

Right. And then secondly on a little bit more on the capital number. I know in 2025, You should stop spending really on Fort Knox with the sorry with Manchow coming into production. I kind of don't understand what would come in there to fill that gap. So is there can you just remind me which of the projects that could be turned on in 2025?

Speaker 1

In 2025, we will also still be spending on phase asphalt. We'll be finishing up stripping there and then the Round Mountain Underground. Again, if we make a decision to move forward with that, we will just keep going with development. So we could be spending meaningful dollars on underground development in that year. And the Karlu extension, if we see what we want to see in these underground extensions, we will start to spend on infrastructure there.

Speaker 9

Okay. So just to understand,

Speaker 3

I mean, right now you've got

Speaker 9

a production profile that's 2.1% and then 2% flat really for the next couple of years for sure. And obviously with additional projects can maintain the 2,000,000 ounces, but the CapEx numbers that you have right now that has a $1,850,000,000 and then $650,000,000 That fully funds the $2,000,000,000 Anything you approve over and above that is to

Speaker 2

That supports the $2,000,000 guidance The capital that we've put out as the capital comes up, it will extend the 2,000,000 Beyond guidance?

Speaker 1

Both the curlew and roundmount Vazak have potential to start contributing in 2027. Think what we see in the outcomes of the studies.

Speaker 9

Okay. All right. And then just another Quick one that I was wondering about at Tasiast. Sorry, the costs are coming in pretty well. Can you just talk about the inflationary pressures that you're seeing?

Speaker 9

Are they like lower than the rest of the regions? And is there more inflation you're seeing in sort of U. S. And Chile?

Speaker 10

Just a sort of I guess

Speaker 9

the question is the breakout of like inflationary pressures by region.

Speaker 3

I mean, I can start sort of at a high level. I think, As I said, we're seeing kind of the biggest increases continuing on labor and contractors and probably The highest is in South America, so and primarily Brazil. And then Alaska would be 2nd along with Nevada. So I think it's fair to say that Tasiast is kind of on the lower end in terms of inflation.

Speaker 9

Okay. All right. And then my more detailed questions about the U. S. Ops, I'll take Offline with Chris.

Speaker 9

Thanks.

Operator

Your next question comes from the line of Jackie Przybylowski from BMO Capital Markets. Please go ahead.

Speaker 10

Thanks very much for taking my question. And I know this has been sort of answered, but I just wanted Back on Great Bear. It sounds like you've got some really good opportunity here at the LP zone with this AEX decline that you're putting in. I was wondering if you could maybe talk a little bit about as you're working on the studies there, The technical studies, could you maybe talk about your thinking about potential to expand the footprint of Great Bear? Or Are you thinking, sir, the size that you've mentioned in the past is already fully optimized even if there's more to discover there?

Speaker 1

We're still kind of centered around that 10,000 ton per day mark for now in terms of kind of total processing capacity at least. We're still doing final design engineering around a variety of things from the overall footprint perspective. But What we're seeing is what we were hoping to see which is extensions that indicate that this could be a long life underground mine. But it's not pushing us to drive that throughput higher.

Speaker 10

Okay. That's helpful. So the way to think about it with Future exploration success at this point is maybe it offsets grade or adds To life of mine. Okay.

Speaker 4

No,

Speaker 10

that's helpful. Thank you. Thank you.

Speaker 1

Yes, it adds to life of mine. It adds to grade profile. It's up at a significant production volume. So all good.

Speaker 10

Thank you very much.

Operator

And that concludes our question and answer session. I will now turn it back to management for closing remarks.

Speaker 2

Thank you, operator. Thanks everyone for joining us and we'll hope to catch up with you in person in the coming weeks. Thank you.

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Earnings Conference Call
Kinross Gold Q4 2023
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