Kinross Gold Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 1, 2024

There are 14 speakers on the call.

Operator

Thank you for standing by. My name is Jay, and I will be your conference operator today. At this time, I would like to welcome everyone to the Second Quarter 2024 Results Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer I would now like to turn the conference over to Chris Lichtenheld, Vice President of Investor Relations.

Operator

You may begin.

Speaker 1

Thank you and good morning. With us today, we have Paul Rollinson, CEO and from the Kinross senior leadership team, Andrea Freeburel, Claude Schimper, Will Dunford and Jeff Gold. For a complete discussion of the risks and uncertainties, which may lead to actual results differing from estimates contained in our forward looking information, please refer to Page 2 of this presentation, our news release dated July 31, 2024, the MD and A for the period ended June 30, 2024 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 discuss our Q2 margins and cash flow, provide high level updates on our operations and projects, update you on our sustainability initiatives and reaffirm our outlook. I will then hand the call over to Andrea, Claude and Will to provide more detail. Following a strong start to the year in Q1, we delivered another strong quarter in Q2, establishing an excellent first half and positioning us well to meet our full year guidance. In Q2, our operating margins grew by over 20% compared to the prior quarter, once again outpacing the relative increase in the gold price over the same period.

Speaker 2

As a result, free cash flow more than doubled in the 2nd quarter to $346,000,000 the first half total of just under $500,000,000 Turning now to operations. Our production in the 2nd quarter was on plan, delivering 535,000 ounces at a cost of sales of just over $1,000 per ounce. Our 2 largest assets, Tasiast and Paracatu, both performed well with production and costs improving over the prior quarter. Tasiast had an excellent quarter and was once again the highest margin mine in our portfolio, driving significant free cash flow. Erika 2 continued its consistent contribution with strong throughput and recoveries helping drive a steady quarter of production and cash flow.

Speaker 2

At La Coipa, production remains on track for the full year and we continue to use strong mill grades and recoveries to optimize throughput in order to address some maintenance opportunities. At our U. S. Operations, production was on plan with notably stronger performance from Fort Knox. Turning now to our development activities in the Q2.

Speaker 2

At Round Mountain, the Phase S open pit and the Phase X underground development work continues to advance well. Stripping at Phase S and the expansion of the heap leach pad are progressing on schedule to support initial open pit production next year. At Phase X, the development of the exploration decline is progressing on plan. As outlined in our press release, we are excited that the extension drilling at phase X intersected mineralization with strong grades and widths outside of the primary exploration target. These results demonstrate the potential for expansion of the primary resource target and are expected to support high productivity bulk mining.

Speaker 2

Moving to Alaska, consistent with our guidance, I was recently at Fort Knox to celebrate the 1st gold war from Manchow. This important milestone represents the hard work and dedication of our project team and partners to bring this high grade mine into production both on budget and on schedule. Mining operations at Manchow are performing as planned and the Fort Knox mill modifications are on track for final commissioning in Q3. As a result, we look forward to delivering several years of strong production at attractive costs from the combined operations in Alaska. At Great Bear, we continue to make strong progress in the Q2.

Speaker 2

The ongoing exploration drilling campaign continues to focus on targeted extensions of the resource at depth. And in Q2, we drilled the deepest hole on the property to date. This hole intersected attractive grades and widths at a vertical depth of nearly 1.6 kilometers down plunge of the main LP zone. This intercept is outside of our current resource and demonstrates significant potential for further resource growth. Drilling at hinge and limb also returned attractive results for depth extensions at both zones, indicating strong upside potential to supplement the main LP zone from these satellites.

Speaker 2

It's important to note that this recent deep drilling will not be reflected in the upcoming PEA because the PEA is a point in time estimate and will only include drilling up to April. The PEA will provide visibility on the open pit and a window into the initial production scale, cost and margins for the underground. Given the depth of the mineralization, the long term potential of the resource will need to be drilled off from underground as we progress development ahead of mining. However, this deep drilling to date shows the continuation of high grade mineralization beyond the current resource in the PEA, indicating the potential for significant resource growth over time. We look forward to outlining more project details when we release the PEA in September.

Speaker 2

For the AEX, the start of surface construction is targeted for later this year. Regarding permitting for the main project, the federal impact assessment is underway. Baseline studies, permitting and engineering for both the AEX and Maine project are all progressing well. In summary, we are very pleased with how things are progressing at Greatfair. Before I make a few comments on sustainability, we would be remiss to not address the recent incidents that have occurred around heap leach facilities within the mining industry.

Speaker 2

Will is going to discuss why we are confident in the quality of our heaps in more detail later on this call. Turning now to sustainability. Last night, we published our 4th annual climate report, which provides our latest comprehensive climate related disclosures. The report also outlines our progress towards our climate related goals and provides details on our climate change strategy, including our plan to reduce greenhouse gas emission intensity. In 2023, we implemented 15 energy efficiency projects across our sites with combined greenhouse gas reductions of more than 29 kilotons of CO2.

Speaker 2

As a result, our percentage of renewable energy increased 23% of total energy consumed last year. Looking forward, we are on track to achieve our targeted 30% reduction in scope 1 and scope 2 emission intensity by 2,030. In summary, we continue to be very proud of our work in the area of sustainability and I encourage everyone to read our recent climate report to learn more. Turning now to our outlook. Year to date, we have produced over 1,000,000 ounces at a cost of sales in line with our guidance.

Speaker 2

Looking ahead, we remain on track to achieve our production and cost guidance for the full year. Our continued focus on costs is driving strong margins and significant free cash flow. With that, I will now turn the call over to Andrea.

Speaker 3

Thanks, Paul. This morning, I'll review our financial highlights from the quarter, provide an overview of our balance sheet and comment on our guidance and outlook. Our 2nd quarter performance was strong with production and cash flow exceeding the prior quarter. We produced 535,000 ounces with gold sales of 521,000 ounces. Cost of sales was $10.29 per ounce and with an average realized gold price of $2,342 per ounce, we delivered strong margins of over $1300 per ounce.

Speaker 3

All in sustaining cost was $13.87 per ounce. First half cost of sales of $1,06 per ounce is in line with our full year cost guidance range of $10.20 per ounce. First half all in sustaining cost of $13.48 per ounce is also in line with our full year guidance range of $13.60 per ounce. In Q2, our adjusted earnings were $0.14 per share and adjusted operating cash flow was $478,000,000 both improving over the prior quarter. We generated $346,000,000 of attributable free cash flow in the quarter or $237,000,000 excluding working capital changes.

Speaker 3

Turning to the balance sheet, our financial position continued to improve in the second quarter and remained strong. After repaying $200,000,000 of debt against the term loan in Q2, we ended the quarter with $480,000,000 We currently have approximately $2,100,000,000 of total liquidity. Over the past 12 months, we've reduced our net debt by approximately $450,000,000 and our net debt to EBITDA from 1.3x last year to just under 0.8 times as of Q2. Looking forward, we plan to continue allocating excess free cash generated against the remaining $800,000,000 due on the term loan in 2025. Turning to our guidance, following Q2, we remain solidly on track to meet our guidance to produce 2,100,000 ounces at a cost of sales of $10.20 per ounce and all in sustaining cost of $13.60 per ounce.

Speaker 3

Capital expenditures are on track for our full year guidance of $1,050,000,000 split roughly evenly between sustaining and non sustaining capital. I'll now turn the call over to Claude.

Speaker 4

Thank you, Andrea. In 2023, we launched our Global Safety Excellence Program. And I'm pleased to say that we have now shared this program with over percent of the workforce, including both employees and business partners. We are proud of the program's impact to date and look forward to continuing to share it with the rest of the organization. This quarter, we remain focused on continuing to implement our human and organizational performance program and our operational learning teams.

Speaker 4

This program is improving our team collaboration and operationalizing our putting people first core value. Results today are very positive and it will continue to be a focus through the remainder of 2024. Moving on to our operations, we saw continued strong performance in Q2 with our mines delivering as planned in the quarter and the first half of the year. At Tasiast, production of 162,000 ounces was higher quarter over quarter, the cost of sales of $6.56 per ounce improving over the prior quarter. Tasiast was once again the lowest cost asset within the portfolio, driving significant free cash flow.

Speaker 4

Following a strong first half, TSYS remains on track to meet its full year production guidance of 610,000 ounces. At Paracatu, production of 130,000 ounces and a cost of sales of $10.39 per ounce were on plan and also improved over the prior quarter. The mine continues to see steady performance on throughput, grades and recoveries in line with the mine plan. Mine sequencing continues to transition through the lower grade portions of the pit as planned before moving back into the higher grades by year end into 2025. Parata 2 remains on track to meet its 2024 production guidance of 510,000 ounces.

Speaker 4

At La Coipa, due to production of 66,000 ounces was lower over the prior quarter, whilst cost of sales was higher mainly due to higher mill maintenance costs and timing of sales. Production at La Coipa remains on track for the full year target of 250,000 ounces, as strong performance on grades and recoveries offset lower throughput. We continue to perform reliability and optimization work on the plant. As part of this work, the team is actively managing throughput levels to enhance the reliability of the plant while the plant optimization continues. Moving to our U.

Speaker 4

S. Operations, production was higher quarter over quarter, benefiting from improved contributions from Fort Knox, while Round Mountain and Bald Mountain were lower as planned due to mine sequencing. Beginning with Fort Knox, production of 70,000 ounces was significantly higher compared to the prior quarter as mow throughput, deep dish performance, grades and recoveries all improved. Cost of sales of $13.45 per ounce was lower over the prior quarter, primarily due to the higher production. At Manchow, mining continues on schedule and ore transportation has ramped up to planned volumes.

Speaker 4

Processing of Manchow ore began in early July and is tracking to plan. The full commissioning of the Fort Knox mill modifications is expected to be completed in Q3. At Port Mountain, production of 46,000 ounces was slightly lower than the prior quarter as planned. Cost of sales of $12.71 per ounce was higher quarter over quarter. At Round Mountain, production of 62,000 ounces was lower over the prior quarter due to lower mill throughput and grades as planned.

Speaker 4

The cost of sales of $15.64 per ounce was higher quarter over quarter due to the lower production. At Phase S, mining activity continues to progress as planned. Meanwhile, the heap leach pad expansion is progressing on schedule, earthworks and procurements are all complete and initial production from Phase S remains on track to begin in the second half of next year. With that, I'll now pass the call over to William.

Speaker 5

Thanks, Claude. I'll start out by providing a brief overview of our operating heap leach facilities before moving on to an update on our projects. We are currently operating heap leach facilities across 3 sites in the US. As Paul mentioned, we are confident in the quality and safety of our heap leach facilities for a few reasons. First off, our facilities are primarily run of mine heap leach pads, meaning they have larger rocks and crushed heap leach pads, which significantly reduces the risk of liquefaction and increases the structural stability of the pads.

Speaker 5

The only heap leach we have with crushing is Round Mountain where we are only crushing a portion of the ore we are placing on the pads. So overall still have larger rock sizing than a fully crushed pad. 2nd topography, Both Round and Bald Mountain are built on relatively level ground rather than hillsides or valley fills increasing their stability. Port Knox is our only valley fill heap leach operation and again the 2 pads there are 100% run of mine ore. Finally, it is also worth noting that the embankments of the toe of the valley pads at Fort Knox are designed, engineered, operated and monitored as dams based on state regulation in Alaska which ensures strong governance on construction and stability.

Speaker 5

So overall we are confident in the quality of our heap leach facilities and as always we will maintain the safety and environmental impact of these facilities as our top priority. Moving to updates at Round Mountain. At Phase X Underground, the development of the exploration decline continues to progress well with over 2.2 kilometers developed so far. Exploration drilling has also progressed well as we have started infill drilling of the primary phase X target and continued opportunity drilling outside of the target to extend the mineralization. As you can see on figure 1 on the top of this slide, we have received multiple strong assay results on INTERCEPT outside of the Phase X target.

Speaker 5

Of particular note, you can see in the bottom of figure 2 an impressive intercept of approximately 30 grams per tonne over 32 meters above the lower portion of our primary exploration target shown in purple. There is also a link to a video on the slide and our press release that can give you a better sense of the location of these intercepts. We are pleased to see these results and confirmation of the potential to extend the mineralization that we are targeting for underground mining. We will continue our exploration program at FaZeX through the remainder of this year and into next as we advance technical studies in parallel. Moving to Curlew Basin, exploration continued to advance in the Q2.

Speaker 5

Results from the underground drill program continue to confirm thicker zones of high grade mineralization near the stealth zone where a recent assay returned approximately 14 grams per tonne over 19 meters. Drilling from both surface and underground also continued on the Roadrunner vein zone with the recent hole returning 12.5 grams per tonne over 2.4 meters. We are encouraged by these higher grade results which indicate potential to expand the resource and improve the overall resource quality. At Cray Bear, drilling continues to focus on demonstrating that high grade mineralization continues well beyond our current resource. As Paul mentioned, in Q2, we drilled the deepest hole on the property to date.

Speaker 5

This hole returned 3.8 meters at a grade of 9.5 grams per tonne at nearly 1.6 kilometers vertical depth, demonstrating the impressive continuity of this system that will ultimately need to be drilled out from underground. Drilling in the Q2 also showed good grades and widths at depths well beyond our current resource at the discovery, Yarrow and RO zones as can be seen on this slide. Similar to Yuma, these zones continue to show potential for significant resource upside and growth at depth. Lastly, drilling at Hinge and Limb this quarter has returned promising results for depth extensions at both zones. At Hinge, we had multiple strong intercepts at around 850 meters including 9.3 grams per tonne over 3.1 meters and 22.7 grams per tonne over 3.1 meters.

Speaker 5

We are excited to be seeing confirmation of depth extensions to mineralization across the board at Great Bear continuing to support our original thesis of a long life high grade mining complex. Moving to a few other updates at Great Bear. Through the AEX decline detailed engineering, execution planning and procurement continue to progress well. We are targeting a start of early works later this year and start of the underground decline in mid-twenty 25. For the main project, in Q2 we continue to advance technical studies, field work and comprehensive baseline studies.

Speaker 5

Beyond the strong exploration results, we're encouraged to see the in-depth technical work continuing to show positive results across the board, including simple metallurgy, high recovery and competent geotechnical conditions. Work on the initial project PEA is well advanced and we look forward to releasing these results from the study in early September. I will now turn the call back to Paul.

Speaker 2

Thanks, Will. Following a strong first half, our business remains in great shape and on track to deliver our full year commitments. There is much to look forward to for the remainder of the year. And beyond that, 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 that is continuing to strengthen. We have an attractive dividend. Looking forward, we have an exciting pipeline of both exploration and development opportunities. And we are very proud of our commitment to responsible mining that continues to make us a leader in sustainability.

Speaker 2

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

Operator

Thank you. The floor is now open for questions. Your first question comes from the line of Josh Wolfson of RBC Capital Markets. Your line is open.

Speaker 6

Yes, thanks very much. First question is on the production guide. I think there was commentary earlier this year about first half being softer. Given that production has been so strong, is it reasonable to expect a step up still in the second half on some of the prior guided items?

Speaker 4

Good morning, Josh. Paul here. We remain focused. We've had a very solid first half of the year, but we've got some mine sequencing setups going and making sure that we meet to continue going forward to our guidance. So relative to the mine sequencing, both the Tasiast and Barrick II, we expect to be right on guidance for the year.

Speaker 7

Okay. So you wouldn't expect an improvement

Speaker 6

for those specific assets in the back half?

Speaker 4

So we're remaining on our plan, which did have us pushing a little bit harder in the Q1 for those 2 big ones. And then the rest of the portfolio, we've got some puts and takes, which gives us sets us right up on guidance.

Speaker 6

Got it. Okay. Second question on the Great Bear upcoming PEA, there's been some impressive exploration that we've seen at least reported post the cutoff date as of April for the study. Is there any sort of potential we get a resource update as well that might even though it might not be included with the economics, but possibly we'll see what the exploration upside has been this far?

Speaker 5

Yes. We will plan to update the resource at the time that we put out the PEA just to make sure it's kind of the 2 pieces of the picture tied together with latest information. We've closed off the drilling for that as of April. That's where we'll be.

Speaker 2

Yes. There's always, as you can appreciate, a lag. But obviously, as we're coming to the market with an update, we'll bring whatever else we can at that time.

Speaker 5

Got it.

Speaker 6

Thank you. And then last question is just on the cash flow side of things. A little bit of some moving parts this quarter and also the Q1. Working capital inflows were very strong, which helps free cash flow, but cash taxes also have been tracking at least in the first half fairly high versus the annual guide. Any sort of commentary you can provide on whether we'll see cash taxes maybe decline in the back half or working capital outflows are reversed at least in the second half?

Speaker 3

Sure. Josh, it's Andrea. The working capital ebbs and flows. So in Q1, we had a net working capital outflow, Q2 was an inflow. That just sort of cycles throughout the year.

Speaker 3

It's really just around timing. At the end of Q2, our payables were higher. Those are just things that we paid in July. So nothing really of note there. On the taxes, we did make an installment payment in Mauritania of $25,000,000 So that wasn't that's probably the one piece that's outside of where we started the year.

Speaker 3

Other than that, our taxes should be kind of as expected through the year with the gold price sensitivity, which I think we provided in our guidance.

Speaker 5

Got it. Okay. Thank you very much.

Operator

Your next question comes from the line of Lawson Winder of Bank of America Securities. Your line is open.

Speaker 8

Thank you, operator, and good morning to the team and thank you for the update. Just a couple for me. Where I actually wouldn't mind starting is just on your thoughts around the year end reserve and resource update for the assets other than Great Bear. Is there any thought internally to potentially increasing the gold price assumption? And if so, which assets would have the greatest sensitivity to that?

Speaker 8

And then secondly, now given a full half of drilling, which assets are looking well placed and potentially replace reserves and what will be the next year? Thanks.

Speaker 2

Sure. I'll start and others can maybe jump in. It's a fair question. I think we're all sort of looking at spot and where we've had our reserve resource price assumptions and thinking about what we will or will not do later this fall. That's a decision we'll make later in the fall as we go into our budget cycle towards November into December.

Speaker 2

So I think it's for today, all I'll say is that we're sort of steady as she goes. I would say though that our focus is really about margin and cash flow. Our mills are full. We're stockpiling low grade. And as we sit here today, the higher gold price, it really what it really drives is the margin and the cash flow.

Speaker 2

So when we think about the reserve resource, there may be some opportunities there, but all under the heading of maintaining margin and cash flow. And as you point out, each asset is a little different. The asset in our portfolio that has the largest resource where we'll think carefully is Great Bear, sorry, Bald Mountain, where we've got about 4,000,000 ounces of resource. So we'll be thinking about that as we go further into the fall.

Speaker 8

Okay. That's very helpful color. If I could pivot a little bit and ask on M and A. And like I'll preface it with the statement that I understand Kinross is in a pretty good position in terms of projects in the portfolio, especially opportunistic in M and A and also with the context that the Kinross Gold valuation has improved over the last year and the cash position is improving?

Speaker 2

Yes, sure. Look, and I think you got it right, Lawson. I mean, we're in great shape with our organic portfolio. We've got lots of opportunities within our portfolio that we can turn on and we will be looking to further advance studies in economics. So that's one bit of good news.

Speaker 2

The portfolio itself, we've got an excellent balance sheet. We're certainly not under any pressure to do anything in that regard. So when we think about M and A, it's really when you use the word opportunistic, it's where could we see value, where could we add value. And again, I would say we have a very strong technical acumen. We can bring that technical acumen to bear to help turn things around to help improve.

Speaker 2

We also have an excellent balance sheet and so we can break capital to the equation. So not under any pressure. If something came along that made sense where we thought we could create value for our shareholders, we'd have a look at it.

Speaker 8

Okay. And then just finally on Nevada, in an area where over the past number of years, there's been difficulty with finding skilled labor and there's been some elevated labor inflation. On the Q1 call, you commented that you are seeing improvements both in terms of employee turnover as well as pressure on wages. Is that commentary still fair? What are you seeing in a 1 quarter later?

Speaker 8

Thanks.

Speaker 4

It's Phil, again. I think the commentary is fair. We are seeing still positive trend on our turnover rates and the morale and things like that. And as we move forward with the teams in Nevada, we're performing very, very well. So we're going in the right direction.

Speaker 4

It is still a tight labor market, but we feel very comfortable about what it is that we're doing.

Speaker 8

Okay. Thanks, Paul. Thanks, Glenn. Appreciate it.

Operator

Your next question comes from the line of Mike Tarkin of National Bank. Your line is open.

Speaker 7

Thanks, guys. Congrats on the good quarter. To start with, Tasiast looks like it's doing very well to its nameplate. Just wondering now with operations kind of running around nameplate, is there any initial thoughts that nameplate capacity could potentially be beaten a bit? And if so, is the mine set up where it could actually leverage that or is the constraint really more on the mine or could you actually utilize excess capacity if it exists?

Speaker 4

Mike, it's Claude again. I think our major focus is Daseous has gone through 10 years of being on a project that is phased and we're now 6 months into it being an operating mine at Full Tilt. We'd like to stabilize it there for some time and make sure that we meet the expectations. And but we're always having said that, we're always looking at opportunities on how to improve recovery, how to improve throughput. I don't think we're constrained by the mine.

Speaker 4

We have some stockpile. So the real focus is on just making sure that we attain the reliability that we expect out of that plant and maintain its performance. And then we'll look at sort of incremental continuous improvement, little things, but I don't foresee in the near to medium term and expansion again at that

Speaker 2

particular slide.

Speaker 3

Great. Thanks.

Speaker 7

And then it sounds like we could see an uptick in ounces or tons at Phase X. But given a number of the drill results you've been kind of highlighting with the recent quarterly results seemingly multiple times what the resource grade is, Could we how are your thoughts there? Are you going to put a fairly significant grade capping on some of those really high grade hits? Or So with the resource update, could we actually see a lift in grade 2 with the ongoing impressive results you're seeing from that drill program?

Speaker 5

Yes. I mean, obviously, we're very pleased with the results that we're seeing and it is higher than the grade of the target that we're going after there from the historic drilling. Round Mound does have a long history of positive reconciliation and pretty a lot of visible gold, that type of thing. So there will be capping and some controls on that when we do establish a resource for the underground. We don't have a resource out there yet that's specific to that underground target.

Speaker 5

That's something that will come in next year. But certainly, there would be, as usual in that type of deposit, some amount of capping. Okay. We really are looking at it. We're only getting into drilling.

Speaker 5

Okay. We're really getting into the drilling on the main bulk target now. And that's the key piece is the overall grade for that bulk high productivity mining. That's our vision for this asset.

Speaker 7

So with respect to the results realize to date versus what you've kind of verbally communicated as a ballpark target for grade, are you feeling very comfortable, comfortable, really comfortable versus kind of delivering to those expectations you've given in the past?

Speaker 5

We really need to do the work and come out with a better answer once we have an actual resource. We obviously see these types of grades makes us more comfortable with why we're down there and the long term margin potential that we see there. And there's 2 pieces. It's not just the grade that has us pleased with the results. The fact that these results are outside of the main target area.

Speaker 5

So there's 2 key pieces. 1 is growing the target. The other is growing the grade of the target. These drill results are positive indicators on both of those fronts. But we don't really until we get more drilling, we don't have a revised view on the entire system.

Speaker 7

Okay. One last question on it. Some of the intercepts also are showing very good widths. Is that proving in line with expectations internally? Or are you finding some of the really wide intercepts actually proving more positive?

Speaker 7

Yes. No.

Speaker 5

Again, this is really a bulk target. I mean, and what we're envisioning and some of what we've put out there in the past, this is large stoping, wide stopes, transverse stoping of some sort. So we see widths well in excess of what we've released recently in some of our historic drilling.

Speaker 2

Okay. Great. I suppose, well, for that high productivity mining market are contemplating.

Speaker 7

And maybe it's too early, but how are you kind of feeling about the quality of the rocks there? Do you feel that there'll be any kind of geotechnical challenges? Or do you find the rock is expected to be extremely competent for underground mining?

Speaker 5

Yes. Given the history of, I guess, underground mining in Nevada, we certainly went into this cautiously and with a pretty wide tool set in terms of how we prepared ourselves to handle geotechnical conditions. We do have some faults that we were well aware of in advance that we planned for as we progress the decline. But really we've been extremely pleased with the progress of the operational team on-site and what they've done from a geotech perspective. And that's increased our confidence in our ability to operate in this ground.

Speaker 5

It's not extremely competent ground, but it's also not extremely core ground that we've seen in some other assets in Nevada in the past. So we're comfortable with where we're operating at and the controls we have in place.

Speaker 7

Okay, great. And then just on an overarching kind of question, obviously, you're getting really great exploration results that evolve these assets, Curlew, Great Bear, Round Mountain, and Phase X. Is there any thought like could you put more drills to work or is it just as you kind of need these additional drill bays in the underground to kind of get things going? I understand it's great there, obviously, it makes a heck of a lot more sense to drill it from underground than from surface given the depth. It's you're hitting it makes sense to test it, but to really infill it in cost efficiency from underground makes a lot of sense.

Speaker 7

But is there thoughts towards increasing budgets?

Speaker 2

Yes, go ahead.

Speaker 5

So I mean, I'd say at Great Bear specifically, the idea of this deep drilling was to provide information for the PEA to give you kind of a snapshot in time view of what the potential of the underground is. This is deep and expensive drilling. So as you clearly understand, it is more efficient to be drilling at 1.5 kilometers from underground to the actual infill drilling. But of course, we when we're encouraged by results, not just at Great Bear, but at other places like Phase X, when you get good results, it does sometimes open up the opportunity to do more follow-up drilling. So we continuously review that process.

Speaker 5

We're going to increase those budgets. We'll certainly let you know. But right now, we think we've done what we wanted to with Great Bear in terms of illustrating and providing a strong view on that kind of core of the deposit that we'll be able to give a PEA with an understanding on cost and margins. And we've shown that the ore body continues beyond that. Really this with this underground type of system, this resource will develop over a long period of time as we continue to mine and we keep that material in front of us going from underground.

Speaker 7

Okay. Thanks very much. That's it for me.

Operator

Your next question comes from the line of Carey MacRury of Canaccord Genuity. Your line is open.

Speaker 9

Hey, good morning guys. Just looking to 2025, given it's less than 6 months away, the capital guidance of 850. I know that doesn't include improved projects, but I'm assuming that includes the underground work at Great Bear. But I guess what I'm asking is, are there other projects that we should be expecting that could be approved and bump up the 2025 CapEx number?

Speaker 3

Sure. I'll start and we'll maybe jump in after with some specifics. But yes, I mean, we typically say, as you said, we print the guidance for CapEx for years 2 3 based on what's approved and then it typically loads up and we're expecting CapEx for 2025 to be in the range of where it is for this year and last year. So around that $1,000,000,000 range for 25 as well.

Speaker 9

And what are the projects that would be driving that?

Speaker 5

So Phase X is an example of a project where we're still doing the work. So that's not that doesn't yet have beyond the kind of exploration work that we're doing. There's not an approved budget for next year. So those are the things that will extend it. Curlew is somewhere else where it's possible we'll be starting to spend some money.

Speaker 5

And we're looking at some short extensions at Bald Mountain that could affect that number.

Speaker 9

And then secondly, could you just remind us how you're thinking about the mine life at La Coipa and how Lobo Marche still fits in? Did metal prices change that timeline at all?

Speaker 2

Yes, I'll start and then maybe hand over to Will. So our Chile strategy really we've got the resources in the ground around our infrastructure at La Coipa. Continuity of production is really a permitting exercise and we're going through that right now. As I say, we've got to get a permit to do a layback, that sort of thing. So that work is underway.

Speaker 2

Our strategy is what we envision is a linear transition from La Coipa to Lobo towards the end of the decade. So our view is we get those permits, we keep mining the oxide. What we're just starting to do right now is ramp up our environmental baseline studies for the longer lead time to start to think about bringing Lobo in behind Great Bear towards the end of the decade. At a high level, that's really what's going on. And our strategy there, our key strategy is, the synergy is around the water strategy.

Speaker 2

As you may know, we've been we have permanent pumping water wells that have operated for many years at La Coipa. Those wells are physically closer to Lobo and our strategy is to

Speaker 10

use the

Speaker 2

same amount of water, same wells, but switch from La Coipa to Lobo towards the end of the decade.

Speaker 9

Okay, great. And maybe one related question. I know there was regulatory issues at Maricanga a few years back, but there's still 6,000,000 ounces sitting there. Is there any is that something that you're looking at as a potential restart at some point or is that going to be on the shelf for a while?

Speaker 2

Okay. Well, I think, again, it's option value there. You're right. It's drilled out resource. Again, water is always a question in Chile, what it would be the water strategy.

Speaker 2

That is a different water source and water basin. But yes, there's no plans right now as it relates to Maricunga, but it is a drilled out resource that we'll continue to think about.

Speaker 7

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

Operator

Your next question comes from the line of Anita Soni of CIBC Web Market. Your line is open.

Speaker 11

Hi, good morning, Paul, Claude and Andrea. I just wanted to ask firstly on Paracatu. So the grades picked up in this quarter and I was just wondering how that evolves over the

Speaker 2

rest of

Speaker 4

the year? I need to so as we go through the different parts of the Paracatu, we have said that this year overall is a little bit lower than last year. But as we move from one part of the next, towards the end of the year, we go back into the higher grade piece. And then as you'll appreciate that when we talk about higher grade at Barrick Institute, it's a marginal difference. And next year, our guidance is higher and similar to last year, whereas this year is the dip outs.

Speaker 4

But maintain focus on that $510,000 LTV card.

Speaker 11

Okay. Thanks. And then just in terms of the debt repayment. Andrea, I know I mean, you guys paid a significant amount of debt this quarter and you indicated that you're intend to pay the $1,000,000,000 as it comes due in spring. But could I get assuming gold prices remain where they are, if we're lucky enough for that to happen, what would be your capital allocation strategy after that debt is repaid?

Speaker 3

Yes. What I'd say is, at gold prices where they are now, I don't expect that we'll get through the whole term loan this year. So we'll carry some forward into probably first half of next year. The maturity is March 2025, but typically we've got some more chunky annual cash payments coming out of Q1. So there may be a little bit left as we get into this.

Speaker 3

We may be just getting out of it this time next year. And I think that's when we'll stop and think about what's about our priorities around capital allocation.

Speaker 11

And is it fair to say that about $500,000,000 is the amount that you would like in cash on hand? I'm just looking at historically what you've held.

Speaker 3

It's really a timing thing. I mean, we had close to $500,000,000 at June 30. And then as I commented earlier, our payables were a bit up at the end of the quarter, so that cash came down in July. We typically our minimum cash is around $300,000,000 to $350,000,000 Sometimes it's more and it just depends on plans to efficiently move cash around our operations.

Speaker 11

Okay. And then my last question, I'm just going to tie up some loose ends because I know analysts are asking like around the edges around this one. But as we get to 2027, 2028, before Bald sorry, before Great Bear comes on stream in mid-twenty 29. I think there might be some assets that are scheduled to end mine life, like Bald Mountain. Maybe there's a little bit of a dip at La Coipa.

Speaker 11

And TAVIUS I think is in 2027 is still in a low grade phase. Could you talk about some of the assets that might see an extension to fill in that dip? I know you guys have said you see the 2,000,000 ounces sustained to the end of the decade. I just want to get an idea of which assets could turn on stream and flatten that profile in analyst models.

Speaker 2

Yes. Sure. It's Paul here. I think, 2027 in particular, we're thinking about Phase X coming on stream in combination with Phase S, Kirlou and of course, as I spoke to a moment ago, continued mining at La Coipa, where the model would suggest we stop in 27 today. But as I indicated, our intention is to keep mining through permitting known resources through the end of the decade.

Speaker 2

So those 3 in particular, there's also some other things around the margin that we'll be looking at as well.

Speaker 11

And where does Bald Mountain tend in that?

Speaker 2

Yes. There are some things. Bald Mountain is a bigger question. Again, as I said earlier, we do have about 4,000,000 ounces of resource there. We've been focused on the lower capital quick payback opportunities.

Speaker 2

We see some of those. But there are certainly on the ball property some larger capital opportunities. And again, in that regard, it's just really about internal gold price competition for capital return. The gold is in the ground. We're just looking at the economics and thinking about when you would turn on potentially those larger capital and therefore longer return projects.

Speaker 5

And we have just received a Juniper permit, which is a significant kind of optionality expansion at Bald Mountain. So we're well permitted and everything is basically internal decision making capital allocation.

Speaker 11

Okay. Thank you. That's very helpful.

Operator

Your next question comes from the line of Tanya Jakusconek of Scotiabank. Your line is open.

Speaker 12

Great. Good morning, everyone. Thank you so much for taking my questions. I have 3. First of all, congrats on a good quarter and thanks for the heap leach information.

Speaker 12

You don't need any more issues in this sector. So it's sad to see that these things happen. Just Claude, starting on the operational front, just wanted to ask about, you mentioned that higher grades, relatively higher grades at Paracatu in Q4, obviously, Mancho in Q4. So it looks like Q4, should do better. I just want to know, is there any maintenance shutdown in any assets in Q3 or Q4 that I should be considering in the quarterly estimates?

Speaker 4

Yes. So for Tasiast, we're getting to the point where we have to do big liner changes. So that's happening in Q3. And we do have sort of run of mine stuff happening at La Coipa as well in terms of shutdowns. And those 2 will have an interest.

Speaker 4

As far as Barrick is concerned, a lot of those are into the early next year.

Speaker 12

Okay. So if I look at that, should I be thinking that these two last quarters should be relatively similar if I was to adjust for these maintenance in Q3?

Speaker 4

Yes. I mean, it may have become apparent that we're really trying to flatten out the waves in the quarters over the last couple of years at Kinross. So we keep focusing on being in that 500 dollars €2,000,000 divided by 4 dollars type range, €500,000,000 5.25,000,000 to our guidance is €2,100,000,000 So we're focusing on making it more sort of repetitious versus these highs and lows.

Operator

Your next question comes from the line of Ralph Profiti of 8 Capital. Your line is open.

Speaker 10

Thanks, operator. Just quickly, please. Andrea, on Mauritania elections, no mining related issues, but just wondering when the next budget is presented, are you expecting any sort of fiscal related matters regarding tax policy that may impact Kinross and Tasiast either positive or negative?

Speaker 2

I'll take that, Ralph. Yes, look, I mean, as you saw, President Pezwani was just reelected with a strong majority. We're very pleased to see that. We have an excellent relationship with his administration and he's shown himself to be very much a pro business and is really the country themselves, I think, prides themselves on the stability that they offer in the region. So we're not expecting anything really that's going to change.

Speaker 2

You may also recall that we actually have a stability agreement that we signed that gives us clarity on our fiscal regime. We renegotiated that a few years ago. So short answer is not expecting any changes. It's obviously the elections happened. It's sort of summer, politically there now and I expect there may be a reshuffling of the cabinet.

Speaker 2

And we're looking for I'm personally planning to get over there in hopefully early September and meet with President Kazwani and perhaps any new ministers that have been changed out. But it's all very stable and very good.

Speaker 10

Okay. Thanks for that. And if I could just get an update with respect to Great Bear and the AEX permit and just wondering if you sort of measure it against precedent. We're still a ways off from the underground decline in mid-twenty 25, but just wondering how we're sort of tracking and maybe get sort of a firmer timeline on when that permitting can come due?

Speaker 2

Yes, sure. Maybe I'll start and then I'll ask Jeff to jump in. He's leading the charge, so to speak. You're right. So the strategy, the permit strategy there is really divided into 2 parts.

Speaker 2

Provincial permits that will support the AEX, the exploration decline. And again, we've been hard at work at that and I'll let Jeff comment on sort of our expectations on timing. And then the second part, build the mine as you recall, if you're greater than 5,000 tonnes per day in the mill, you get kicked into a federal review. So we've got a parallel permit strategy going for the main project, which is naturally somewhat lagging behind the exploration. And in that regard, again, well underway.

Speaker 2

I'll let Jeff speak to the timing of the main permit and what

Speaker 13

we're doing there as well. Sure. Thanks, Paul. What I'll do is I'll just quickly divide it up in between the provincial permitting process, AAX, as Paul just described, and the main project. Turning to AAX, our team has completed a tremendous amount of work with the Ontario authorities and our First Nations partners, Wabasquangalak Sol, and they provided express letters of support to the authorities for our AEX permits.

Speaker 13

We're expecting our AEX permits in the near term with a view to commencing early works at H2 of 2024. With respect to the main project and as previously disclosed, we remain engaged with IAC on the impact assessment process. As we've made the market aware, we previously filed our detailed project description. We're waiting on IAC to provide the tailored impact study guidelines, which we're also expecting in the near term. And as you'll appreciate, that will underpin the impact assessment report.

Speaker 13

And so on both fronts, I would say we're in good shape and we're making great progress.

Speaker 2

Okay. All right.

Speaker 10

Thanks. That's what I was looking for. Appreciate it.

Operator

We have a follow-up question from Tanya Jakusconek. Your line is open.

Speaker 12

Great. Thank you so much. Operator, please don't cut me off. I have two questions. I have 3 to start.

Speaker 12

Now I have 2. Just wanted to come back, Andrea, just on the balance sheet again. I think in the previous conference call, we talked about $300,000,000 reduction this year. You've done $200,000,000 Should I be thinking another $100,000,000 or with this stronger free cash flow generation, could we see more occurring in 2024? And then I think you said another $500,000,000 or thereabout repayment in 2025 sort of by the first half?

Speaker 3

Yes, Tanya. I think looking back the $300,000,000 was when we were talking about 2,000 gold. So our sensitivity is for every $100 in gold prices an additional $200,000,000 in cash flow, that's an annual number. So, we've obviously seen higher gold prices. So that $300,000,000 is what we've seen recently more in the $700,000,000 range is what we'd expect for this year.

Speaker 3

So as I said earlier, we will have some left next year, but a lot lower than we had talked about as we started the year.

Speaker 12

Okay. So probably more than debt repayments this year and from half of next?

Speaker 2

Yes. Again, take your coal price at $2,300 in total for the year, I think we project 700 of repayment.

Speaker 12

Okay. That's very helpful. Thank you so much for that. And then my last question is just on right there and I think Paul on the previous conference call we talked about still the 10,000 tonne today scenario, sort of 5,000,000 ounces giving us that 500,000 ounce annual production. I guess we'll get an updated resource in early September.

Speaker 12

How should we think about the capital and the operating costs? I mean those numbers of capital of $1,000,000,000 to $12,200,000,000 And I think the all in sustaining were about $800 an ounce. Those are quite stale numbers. Should we be thinking something in the sort of 10% to 15% inflation adjusted for these. They were just old numbers.

Speaker 12

So just want to make sure that we're not caught off guard on the release.

Speaker 2

Sure. Yes, that's a good point, Tanya. I mean, look, I mean, inflation has come down, but it hasn't gone away. So to the extent we were saying 1 to 1.2, I would say 1.2 in today's world from where we started 2 years ago is more is directionally more where we're thinking for initial capital. On the sustaining cost, again, we're going to be out with the detail in a month.

Speaker 2

I guess I would just say we're still fine tuning, but directionally, we have always said basic less than $1,000 and certainly feeling good about the direction we're going there as well. So look again, and that's in the context of today, mid year 2024, construction still won't be happening for a couple of years. So whatever I say today, like the 1.2 plus inflation, we expect will probably continue, but not I guess what I'm trying to say is this is inflation around the edges. It's not a dramatic departure in what we thought the capital would be. It's this is a very straightforward project.

Speaker 2

In the greater scheme of things, this was not a large capital ticket for us. This is something that we forecast that will be quite manageable with our existing cash flow. And so I guess I'm trying to the report will be out in a month, but I'm managing expectations that we're reasonably on track with where we indicated we would be.

Speaker 12

Yes, I appreciate it. I mean, I appreciate that. It's just having an idea that we have seen some inflation, some of those numbers would come into these sort of sale numbers that we had of like 3, 4 years ago and if not longer. And it's just we appreciate that that will be a 2024 number. And then obviously by the time we build later a couple of years out, it will be different at that point.

Speaker 12

But appreciate the color.

Speaker 2

Thank you.

Speaker 12

Thank you.

Operator

That concludes our Q and A session.

Speaker 2

Operator, and thank you everyone for joining us this morning. We look forward to catching up in person in the coming weeks. Thank you.

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Earnings Conference Call
Kinross Gold Q2 2024
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