Q4 2019 Earnings Call
All participants are in listen only mode to prevent any background noise.
After the speaker's remarks, there will be question and answer session.
If he would like to ask a question. During this time simply press Star then the number one on your telephone keypad. If he would like to withdraw your question press the pound cake. Thank you at this time I'd like to turn the call over to Mr., Tom Elliot Senior Vice President Investor Relations in corporate development. Mr. Elite you may begin your conference.
[music]. Thank you good morning.
Today, we have all four members of the Kinross senior leadership team.
Paul Rollinson, Andrew if Ribeiro, Baltimore and Jeff Gordon.
Before we begin I'd like to bring your attention. The fact, we will be making forward looking statements. During this presentation for a complete discussion of risks uncertainties assumptions, which may lead to actual results or performance being different from estimates container forward looking information. Please refer to page two of this presentation.
Or two news releases dated February 12 2020.
M. today for the period ended December 31st 29 team.
And our most recently filed <unk> all of which are available on our website.
I'll turn the call a ripple.
Thanks, John <unk> and thanks, everyone for joining us today.
This morning, I'll briefly recap some 2019 highlights.
Before I discuss our outlook for 2000, 2020, and then I'll turn it over to Andrea <unk> for more details.
As we reported yesterday 2019 was an excellent here for Kinross or we had a strong finish in the quarter.
Production was higher and unit costs were lower year over year.
We generated robust cash flow and increased liquidity.
Internally.
We strengthened our portfolio and future production profile.
Well, adding life at our existing mines.
Externally, we continue to generate value through our disciplined approach to corporate development.
And we maintained our strong performance any s. true.
[music], we take pride in our track record as dependable operators.
In 2019, Marty Eighth Street here that we have met or exceeded guidance for production cost and capital.
Our minds delivered strong results with production of 2.5 million ounces and cost of $706 per hour.
Our three largest minds her could you Josh yes and Kupol.
Continued to lead the way.
The accounting for over 60% of our total production.
With the lowest utilizing unit costs in the portfolio.
Averaging 606 $26 per ounce.
Perfect to set a new production record of 620000 ounces.
Reduced its average cost of sales by more than $150 per ounce just $666 per ounce.
Later this quarter.
We plan to publish our new technical report on parity to.
I think our long term view of this cornerstone asset.
Josh Yes also had a great 2019.
The first full operating here of the phase one expansion.
And also had an outstanding Q4.
The new record first report production.
And cost per ounce.
Cool.
Consistently strong performer.
Had another good year and a strong fourth quarter with the lowest average cost per ounce in the portfolio.
Round mountain performed well with our next largest contributor to the portfolio.
Benefiting from the start of production.
That phrase W and the second half for the year.
Looking at Q4, Bald mountain deserves mention for doubling production over the previous quarter.
As more ounces were recovered with the ramp up of the vantage project.
Overall portfolio performed well in 2019 and ended the year strong no.
I'll now turn to some financial highlights for the fourth quarter and a four year.
We increased our adjusted operating cash flow by over 30% quarter over quarter.
And generated strong free cash flow of approximately $110 million in the fourth quarter.
We ended the year, where the cash balance of $575 million.
And increased our liquidity to $2 billion.
Oh, well funding a major phase of our development.
We completed our 300 million dollar asset recourse financing at Tas, yes.
As part of our portfolio optimization.
We sold our London gold shares and our royalty portfolio delivering additional cash to the balance sheet.
And we realized approximately $30 million and annual cost savings.
In overhead and other operational efficiencies.
Looking at our development project in opportunities in 2019, we began production.
Our mountain Phase W and Bald mountain vantage.
An advanced or Fort Knox Gilmore project.
We've also taken important additional steps to strengthen our future production profile, including.
The decision to proceed with the capital efficient 24, K expansion of Chasse, yes.
Our acquisition of Chill Bad Cam.
We are excited about the upside potential based on results from our confirmatory drilling.
And the decision, we announced yesterday to restart operations up Mccoy.
Relatively small low risk high return project and an operating environment that we know very well.
[noise] restart of public life is expected to begin adding ounces to our production profile in 2022.
Paul will talk a little bit more about the shortly.
We also had another good year of adding resources and mine life under existing sites.
Over the past eight years or brownfields exploration program has had considerable success offsetting depletion and extending life at our minds.
This is a major reason why we have successfully maintain production at the 2.5 million else level over the same period.
In 2019.
We added yet another year of mine life at Kupol and Toronto.
And also more than offset depletion uppercut too.
Despite significantly increasing our rate of mining in production.
With a large and growing and I resource inventory.
Great exploration potential across the portfolio.
We continue to see significant additional upside at these operations and others.
Looking at our U.S.G. performance in 2019.
Another strong year and it builds upon our long history of taking these matters very seriously throughout our organization.
We had.
One of the best Safety records in our industry with an injury frequency rate on par with low risk non industrial sectors.
The lowest energy use and greenhouse gas emission intensities among their gold industry cheers.
The continued focus on best practices and tailings management.
In a top tier ranking in the goal males annual survey of corporate governance.
Mining responsibility will remain a first priority for Kinross and Twentytwenty.
Turning to the Atwood for 2020 looking further down the road, let me focus specifically on our trend for Capex and all in sustaining cost and what that means for free cash flow.
Our 2020 guidance for Capex add hesik are both lower than our actual 2019 capital expenditures and all in sustaining costs.
At spot gold prices, we expect that our 2.4 million ounces of production will drive strong free cash flow.
In 2020.
And we believe that this positive trend will continue.
We expect production will increase to 2.5 million ounces are above and 21 and will remain at the 2.5 million ounces in 2022.
At the same time, we expect a further reduction in Capex and all in sustaining cost in 2021 and again a 22.
With production expected to remain stable.
Downward trend in Capex and all in sustaining cost has the potential to drive significant free cash flow over the next few years.
[noise] so to sum up we had a great year in 2019 and are well positioned for another strong year in 2020.
That's barco prices, we expect significant free cash flow in 2020, which has the potential to improve again in 2021 and 22.
With this we expect to further strengthen our balance sheet on liquidity.
And we are advancing our pipeline of high quality projects.
She additional opportunities to extend mine life.
I'll now turn the call over to Andrea for a more so on financial results.
Thanks, Paul I'll begin with a few financial highlights from an excellent quarter and full year.
Looking first at Q4, we produced approximately 645000 attributable gold equivalent ounces and an average cost of sales of $744 per ounce and an all in sustaining cost of $1050 per hour.
We sold approximately 20000 ounces more than we produced in the quarter largely due to sales of inventory at Maricunga.
The quarter had some impressive improvements in financial performance compared with Q4, 2018 margins were up by 53% versus the 21% increase in the gold price.
Adjusted operating cash flow nearly tripled to 388 million dollar.
Adjusted net earnings increased from $14 million to a $156 million and from one cents per share to 13 cents per share and net earnings went from a net loss of $28 million to net earnings of $522 million.
For the full year 22019, we produced 2.5 million ounces and saw some key improvements over the full year of 2018.
We reduced our cost of sales to $706 per ounce, which was at the low end of our guidance range.
We increased margins by 27 that outpacing a 10% increase any our average realized gold price.
Adjusted operating cash flow increased 40% to more than 1.2 billion dollar.
Adjusted net earnings went from $128 million to $423 million and from 10 cents per share to 34 cents per share and earnings went from a net loss of $24 million to net earnings of approximately 720 million dollar.
Capital expenditures were $298 million for the quarter and $1.1 billion for the full year at the high end of our guidance range as we noted in November.
This is mainly due to decisions during the year to capitalize on value enhancing opportunities, including the 24 K project a cast.
In 2019, we reported non cash impairment reversals totaling $294 million, including $161 million I pass, yes, and $133 million up hair cut to the pair could you reversal was not ever related tax expense of 68 million dollar.
These impairment reversals are largely a result of higher gold price asked about.
As part of our portfolio management strategy late last year, we announced two transactions, which further strengthened our balance sheet, namely the sale of our remaining lundeen gold shares forgot for gross proceeds of approximately $115 million and the sale of our royalty portfolio to Mavericks metals.
For total consideration of $74 million, which included $25 million in cash and approximately 11.2 million Maverick share.
We ended 2019 with cash and cash equivalents, a 575 million dollar a year over year increase of over $225 million.
We also increased our total liquidity from $1.8 billion at the end of Q3 to $2 billion at yearend and decrease our net debt to EBITDA from 1.3 time to 0.9 time.
In short we remain in a strong financial position after a major phase of investment in future production.
In December we were also pleased to announce that we signed our 300 million dollar project financing agreement for Cassius with the I see and other international lender.
The loan is non recourse to Kinross and reflects a comprehensive process of due diligence with the lenders this partnership and Toffees underscores their confidence in the project and Mauritania as investment climate.
We expect to make our initial draw in the long later this quarter.
Turning to our outlook for 2020. This year, we expect production of 2.4 million attributable gold equivalent ounces.
Lightly lower than 2019, mainly due to expected lower production at paragould too and the completion of production at American guys, the operation transitions to care and maintenance.
We forecast an average cost of sales of $720 per ounce, plus or minus 5%, which is below our 2019 guidance.
All in sustaining costs are expected to be lower than 2019 at $970 per ounce plus or minus 5%.
As is our usual practice budget assumptions for metal prices oil prices and currencies reflect the prudent buffer to spot prices and we've provided sensitivities for these and are really.
For example, with every 100 dollar per ounce change in the gold price above our budget assumption of $1200 Brown, we expect to generate approximately $200 million of additional cash flow for the year positioning us very well at current spot gold prices.
Our capital expenditure guidance reflects a change we expect to make to our reporting in order to increase transparency and clarity.
Starting in 2020, we plan to separate out capitalize interest paid from capital expenditures in the investing section of the cash flow statement.
Our capex guidance for 2020, therefore, no longer includes capitalized interest and stands at $900 million plus or minus 5%.
In 2021, we expect to further reduce our capex by approximately $100 million with less capital stripping akacias and the completion of our North American growth projects.
We expect to reduce Capex again in 2022, as we complete our current pace of project development.
Our overhead forecast is $150 million I'm pleased to know that this is not only a reduction from 2019, but it's also $55 million lower than our overhead guidance twice in 2015, as we continue our considered and steady approach to reducing overhead and improving efficiencies.
Other operating costs in 2020 are forecast to be approximately $100 million inline with 2019 actual.
About half of this is Karen maintenance costs in Chile, and that kind of wherever Buck Horne.
[noise] DNA is forecast to be approximately $340 per ounce plus or minus 5% an increase over 2019, primarily due to impairment reversals and production Matt.
Let me also highlight for cash payments, we have already made or will make and the first quarter, namely the first installment about $141.5 million for the acquisition of Chill backend.
Repayment of the $100 million that was outstanding on our revolving credit facility at the end of 2019.
A semiannual interest payment of approximately $48 million honor senior notes at a $40 million income tax payment in Brazil, given paragould twos exceptional performance in 2019 and higher gold prices in the second half the thier.
Of course, these amounts will be offset by the strong cash generation, we expect from our business during the first and subsequent quarters of 2020.
As Tom noted with lower forecast Capex and all in sustaining cost in 2020, we expect to generate strong free cash flow at spot gold prices.
And with our Capex and all in sustaining costs expected to decrease further in 2021 and 2022, we have the potential to continue to increase free cash flow in the coming years.
I'll now turn the call over to Paul to worry for a review of our operations and development projects.
Thanks, very much Andrew.
I'll review, our operation side by side with some observations of leader in Q4 performance and we'll look at them next year.
Along the way I'll give updates on development project some highlights from our 19 exploration and 2020 exploration drilling plan.
As Paul mentioned, we had one of the best Safety Records in our industry and I want to thank our employees for focus on first priorities.
2019 was a stronger at our operations with outstanding performance for three largest minds appeared to have used some cool.
It was a big year for projects as we lap launch that has used 24 key project.
Certain production phase of your advantage.
Vans Gilmore and completed the liquidity, but for us.
Finally, it was a strong year for mineral reserve and resource additions of mine life extensions as result of exploration engineering and acquisitions.
We have long record of success in maintaining reserves and extending mine life across the portfolio drove strong brownfield exploration program and based on the sizable positions are resource inventory the past several years, we see significant <unk> continued potential.
See success in the coming years.
In 2019 parents do benefited from full year multiple performance improvements, including.
Yes, it optimization project, which has led to better ability to predict grade ore hardness recovering throughput.
Continuous improvement efforts that have increased mine and mill efficiencies and investments in site infrastructure, such as water and renewable energy.
She was the company's largest producer in 2019 with record load of nearly 620000, <unk> and a 19% year over year reduction in cost of sales to $666 per ounce.
In Q4 production appeared to was slightly lower unit costs were higher compared with previous quarter due to a number of factors, including schedule planned maintenance higher proportion of waste haulage and onetime labor related costs.
We expect another strong year prepared to June 2020, but with lower production than a record 2019 due to slightly lower grades and recoveries would agree is improving in the second half.
We had a significant year. In addition, the addition of 828000 ounces.
Mineral reserves uppercut you as a result of a better understanding of the ore body and engineering changes to the mine plan. This addition, more than also the depletion of just over 700000 ounces or 19.
Thus, despite higher annual production and accelerated mining rid of her to the mine life still extends into the next decade.
I Tasiast a full year production for phase one expansion resulted in record production and cost performance.
Times is finished the year strongly with record quarterly production of approximately 103000 ounces at a cost of sales of $494 rounds, the lowest in its history.
Mill performance Italians has continued to ramp steadily higher daily throughput averaged 14 fourthree thousand tons for the full year 15000 tons for the fourth quarter close to 60000 tons in December I truly impressive 17000 tons plus per day in January and this year, we expect to see continued strong performance at times it.
Surpassing 2019 levels I'll note that production is expected to be much stronger in the first half a year as we continue mining higher grades in the West branch Threed mining phase.
We expect to complete this phase around mid year, and then enter a period of stockpile feed which will have more grade variability, resulting in fewer ounces produced in the second half.
We expect to rely on the stock Caulfield until around the middle of 2021, as we complete stripping to access fees for of the West branch ore body.
At the 24 key project, we're making good progress detailed engineering is largely complete initial de bottlenecking and processing plant is underway and demolition has advanced.
We remain on budget and on scheduled to reach throughput of 21000 tonnes per day by the end as 2021 and 24000 tonnes per day by mid 2023.
In addition, we ramp up the mining raise an expected total of 88 million tons moved in 2020, which accounts for higher stripping costs in 2020.
Moving on to Russia, and the loss or three big operations, we had a strong coordinate excellent year at kupol to going on.
Production was up 8% year over year, due mainly to better grades.
Production from Russia is expected to be roughly the same range in 2020 at approximately half a million ounces.
And I'll note that we expect 2020 to be the last year mine production from divorcing only as we mined out the crown pillar.
Meanwhile, our investment expiration at Kupol continues to pay off.
Since 2016, we have successfully replaced every year production a cool with reserve additions of 250 to 300000 ounces annually each of which extended mine life by an additional year.
Our Reserve addition, this year of around 400000 gold equivalent ounces is one of our largest reader reserve additions to date and as yet another full year of lines that are lowest cost mine out to 2024.
In 2020, we will continue or underground drilling program, a cool with the aim of upgrading additional mineral resources to reserves.
We've also begun grassroots exploration within the so called Kupol synergy project area covering your radius of approximately 130 kilometers or on the kubel plant targeting areas that could be economic to mine.
Given the proximity to the Kupol mill.
Our overarching aim which is now firmly insight as to extend mine life at cool in order to bridge to production a true about calm.
Sure look on has a compelling base case is relatively high grade near surface deeply troubled deposit with an initial resource estimate of nearly 4 million ounces and good upside potential.
And the confirmatory drilling results, we publish our website you will note that there is one more returning 52 meters at a 129 grams per tonne.
However, we did not include this in our initial resource estimate as we want to conduct additional drilling nor is it better understand this result.
Our 2020 predictable and plan to children includes 55000 meters of drilling, including infill drilling to understand to find any potential hybrid structure within the resource as well as growth drilling to further expand the resource.
In addition, our exploration budget as earmarked $10 million for step out drilling within our highly prospective 120 square kilometer license area, where there are a number of untested targets and structural environment similar to the main chubak on deposit.
We are excited by the potential this latest acquisition and look forward to reporting on the progress.
Turning now to our U.S. operations run around had a very good 2019 recovering strongly from a wall failure in the first part of your and benefiting from startup of fees W. production mid year.
Right amount ended the year strongly with Q4 production up 26% over Q3 due to strong production from annual each product, we expect slightly lower production around 2020, due to plan lower mill grades and longer haul distances.
I told my 2900 production was hampered by challenging weather conditions and a slower than expected ramp up to the main advantage project. However, I'm happy to say that both finished the year on stronger note almost doubling production in Q4, when compared to Q3, we hired leach pad grades more ounces recovered from the vantage complex.
Production and 20 to 20 is expected to be in line between 19 unfold.
We had good success and exploration, adding 560000 assets mineral resources, primarily from a talk when rock and Redbird drilling programs all in the north area.
At Fort Knox fourth quarter production was slightly lower and costs were slightly higher than third quarter.
Looking at 2020, we are working through many of the challenges we faced last year and expect production to be in line with the technical report.
The Gilmore project remains on budget and on schedule stripping advanced during Q4 and continuing to Twentytwenty construction is scheduled to start in the spring restarting the spring with completion of the heap Leach and related infrastructure targeted fourth quarter.
We will be over to Africa trend was our smallest producer I'm sure. You'll go around spaces full year production was lower than the previous year due to lower grades will improve mill throughput in Q4 led to an increase production compared with Q3.
We expect 2020 performance of try not to be largely in line with 29 team.
And I'm pleased to know that we had good exploration success a trend on 2019 with additions of 320000 assets mineral reserves to more than offset depletion increasing mine like wait another year to 2020.
In 2020, we're sorry to 20.2, we are increasingly we are increasing our Toronto exploration budgets $10 million as we plan to drill depth extensions that aquasil suroriente channel as well as exploring the high grade extensions that overall with the goal of establishing another underground mine.
Finally, turning to Chile.
On the one hand, we're seeing the end of production from our junior as the operation has transitioned into care and maintenance on the other hand, we received board approval to restart operations and liquidity, but as we leverage existing infrastructure to mind the phase seven deposit.
The liquid Prefeasibility study contemplates total production of approximately 690000 gold equivalent ounces from 20 to 22 to 2024 at an average cost of sales of $575 per ounce and average basic of $670 grounds.
Perfect economics are attractive with an eye or 20% and our budget nickel price of 1200 laws rounds.
For 42% at 1500 dollar Gould.
The project plan includes refurbishment of the plant Mellencamp and other infrastructure in addition to bringing over and refurbishing the mine fleet from everything.
We will also be exploring opportunities to extend mine life would potentially incorporating adjacent deposits at perenco, we've been north sea and Ken Ken.
This includes further technical studies and assessing permitting requirements as well as continued commercial discussions with the river.
Our pre feasibility of city living where I think is scheduled to be completed midyear is based on commencing local Marty production. After the conclusion of mining at three seven and the other potential opportunities at Macquarie book.
To conclude in 2020, we will continue to focus on maintaining our excellent safety record delivering strong consistent operating results in cash flow.
Continuing to deliver our projects on time and budget.
With that I'll turn the call back over to Paul.
Thanks, Paul.
Look to conclude I, just want to start by saying I'm really proud of what our team accomplished in 2019 and I'm excited about our future.
I do want to leave you, though with a few key points to bear in mind.
Over the past eight years, our Asia has gone down by approximately $100 per ounce and over the next three years, we expect a sick to decrease further.
Increasing our potential for strong free cash flow.
Over that same eight year period, we have a proven track record of extending mine life, and adding reserves across our portfolio, while maintaining production at the 2.5 million ounce level.
Going forward.
With our large resource inventory.
We are strongly position to continue extending mine life.
Maintain production at the 2.5 million ounce level.
And finally.
We're very comfortable with our geographic footprint.
Based on our strong local relationships.
On a long history of steady successful operations and all of our regions.
Including nearly 10 years in Mauritania.
25 years in Russia.
We believe these trends among others bode very well for Kinross in 2020 and beyond.
With that personal I'd like to now open up the call to questions.
A reminder to asking a question. Please press Star then the number one on your telephone keypad again that Star then the number one to ask a question to withdraw your question press the pound key well pause for a moment's compiled the candy roster.
Your first question comes from ran for Protiviti with eight capital.
Oh good morning, Thanks for taking my question I have to them. Please Paul Paul Firstly, I'd Supercuts, who were seeing a more normalization of production levels, which you have telegraphed work can you tell me where you are on the mobile fleet investment and are we gonna see incremental benefits in 2020 on probably.
Activity, despite being lower on production year over year.
Yeah. So Ralph that good question, we when we're investing the fleet. The shovel is being a prepared right now so we haven't yet benefited from the full impact of the new fleet, but in the technical report, which we will publish next month, you will see the benefits of that ramped up mining rate really the the drive there.
To push more waste stripping west, where where we see better confidence in grade and recovery and what you're seeing the technical report is consistent average production over the next 10 years of about 550000 ounces year that'll be up and down but.
It has been one of the results of our asset optimization.
I see okay yeah.
And entre dotcom.
It seems like this is a lighting nicely.
After the quarter spending going ahead of depletion of Copel is that the right way to think about this bassett fitting into the strategy and is the next two to three years of drilling ahead of us.
Really getting comfortable with the geology the resource model on the mine plan.
Sure well, if it's Paul I'll start and head off too.
Paul Tomorrow.
Yeah look I think generally you're right.
Only the only point I wanted to add is.
Wouldn't necessarily assume that we're coming to the end of the Kupol mine life. We've had an excellent track record. It is an underground mine, we still see a lot of potential and certainly when you look in the rear view mirror on what we've been in being able to achieve year after year.
Obviously very hopeful on.
Expecting that we'll continue that trend so at a minimum I would say, it's perhaps a bridge from one to the other but I'm, hoping we'll we'll do better than that Paul or strategy Kupol over the last four five years has been paying off on the exploration side, where we've been focused both on a reserve and resource additions as you saw we brought a new resources at Kupol as well.
Oh and.
As we have for the last couple of years, our intent is to work towards converting those potential mineral reserves next year and as I as I said in my prepared remarks, our intention is bridge.
Cool to Chew luck on with the potentially even for concurrent production on chewable. John we are advancing the study based on the the resource that we posted with our year end the approximately 4 million ounces, but we're also advancing drilling to see if we can grow that deposit and we've allocated quite a budget a true about calling for drilling and better understanding the ore body.
We have 10 million in the exploration budget, another 10 million of study funds.
To focus on better delineating characterizing the ore body, but we.
We got a lot of work ahead of us there and where we like what we see thus far are you also would look like when the mix there locally, but we'll be parallel to kubel production will be ramping up equipment 2022.
And it will at least with the current phase seven reserve that will bridge us the end of 2024, but as I mentioned again in my prepared remarks, you might require <unk>. We've initiated studies on three satellite pits that could or at least our intent is to bring them into the mine plan there.
I see that's good clarity thank you.
Your next question comes from Craig Barnes with TD Securities.
Yes, Thank you sticking Mitchell backend that Paul Tomorrow.
Hi, great structures, particularly that one whole what what is your sense of what's going on there.
I will likely do you think there are other additional structures like that.
Well, that's a very good question I mean, the numbers on that whole are obviously, a very encouraging but we've taken a conservative approach there and not factored that into our resource estimate.
That wasn't infill hole and it was designed to intersect a known part of the resource.
In between two wider spaced holes.
And.
It has impressive visible gold in that whole and our plan right now this year is too.
Put more holes in their to better understand the geology and the structure in that area. Our hypothesis is that there are high grade structures in there, but we need to do more drilling to prove that out.
Are you seeing anything from geophysical Geo care him that outlines additional structures like that.
In short, yes, and that's part of what drove the hypothesis okay.
Just setting to Andrew it might be pushing my luck, but you talked about 2021, capex coming down by about 100 million versus 2020.
So what should we think about on 2022 order of magnitude.
Hi, Greg So yeah, you know our Capex for 2020, as we noted is 900 million, which as you know a decrease from what we from what we spent in 2019. So as you said, we've noted that we expect to bring that down another hundred million in 2020 wine.
And that's just really as we come out as the heavy heavier stripping here at Cassius in 2020, and as we complete the U.S. pro Jack So beyond that you know as we sit here today, we'd expect 2022 to be even lower than that on one of the factors being will be coming out of the spending outlook way by.
That's significant in 2021.
What about capitalized interest then Andrew what what ballpark number are we looking out for that for the next several years.
Well I mean, our interests are total interest.
The total amount of interest we expect to pay in 2020 is about 100 million and we said about 55 million or that would be capitalized and then you know going far obviously, it's going to depend on how much that we have outstanding but you know that that's not a bad estimate to just consider stays in line going.
Forward 55 million.
Of capitalized.
Yeah, I mean, I would expect it to continue to be about half okay. Okay. That's great. Thank you.
Your next question comes from the liner for.
Uh-huh Tariq with credit Suisse.
Hi, Good morning, Thanks for taking my question I think you partially answered the question, but I'd like to just come back to the reserve kinda profile and potential moving forward as you look at across the portfolio. If you were to rank the different minds in terms of where you see the most reserve upside how would you how would you think about that.
It really trying to squeeze a bit more to kupol as a tool Bakken is it looked like a satellites like just trying to get a sense of like where how you would rank in terms of.
Where you see the most reserve upside on the call it mid term.
Yeah. So were the where look if that is where have we allocated the most money and definitely Russia is number one there and that's.
Absolutely and Kubel chill Baton and as I mentioned in my remarks, we're now doing some grassroots work in and around Kubel, but I wouldn't I'd be remiss not to mention Toronto, we have a good budget. There we have a good track record of reserve additions. We also added quite a bit of resources or our focus if I were summarizing our real.
Focuses on extending at Kupol and shrapnel, obviously, because those have the nearest mine life fan.
But we're also focused.
In the USA Bald mountain, we have some exploration around and as you pointed out.
Those satellite deposits Trent.
With me, but how are the satellite deposits at Macquarie, but our drilled inventory and the work required to bring those in the plan is not necessarily associated with drilling, but rather with studies permitting and images upper end commercial discussions so to summarize our our our focus really is rush on Toronto.
From a high priority perspective, and we're quite confident that we'll be able to continue our track record of Reserve addition.
Just to add a as well I mean that does not preclude the fact that we see a lot of potential let other sites, where we have existing longer life resources such as task.
Good point.
I expect we'll have substantial increases there.
Stay tuned as we get through the Lobo feasibility study.
For some conversion to reserve there so theres a number certainly thats the exploration budget priority, but theres still depth in the portfolio to keep adding.
And.
I would just also highlight the three very large land packages, we have a coupon virtual we're kind of bald mountain very large land packages with lots of on pestered targets.
Okay. Great. That's helpful. In just a quick a quick follow up on your untapped just because you reminded me any update on the government discussions and where that is.
Sure I'll take that and look I think given the.
In short the we have engagement with this new administration that was put in place in September we products pretty positive dialogue.
And.
We feel we're moving in the right direction and.
I'm confident we're going to get an amicable successful resolution in the near term I think what's important though here context.
And as I said in my opening remarks from a context point of view.
We've been active operating now for 10 years really without incident, we've produced over 2 million ounces.
We successfully built on time on budget, a major capital project.
In the phase one.
We've had CLA unionized.
Negotiations.
With our employees, we've just approved another expansion.
And as Andrea pointed out we brought in four new partners.
As into the asset with the project financing with.
Certainly with I have CDC and <unk>.
A couple of commercial banks, all that on top of the fact that the minus firing on all cylinders and breaking records were feeling really good about the state of play in the future in Mauritania.
Thank you.
Yes.
Again, if you would like to ask a question. Please press Star then the number one on your telephone keypad.
Your next question comes from carry Mcrae, what Canaccord Genuity.
Hi, Good morning question on let coipa.
It looks like about a three year mine life. After the fast I think the PFS was more like five years. Just wondering if you can probably provide a little color and what's changed at liquid.
Right. So the PFS incorporated two deposits phase seven on Prem This FSS phase seven only.
Parental remains in the reserve and has resources as well and in in the case a friend we have to advance some permitting work as well as finalize a commercial agreement with our partner there weren't where the 65% owner in that deposit.
Okay and then maybe on task is to you mentioned the grade variability from the front half of the year to the back half of the or when you're into stockpiles can you look give us one more granularity on what sort of grades we should expect what the grade profile looks like.
Yes. This is this is an important point of view for the.
The equity research Crown here, because we are in just the geometry that has just or Bonnie.
It it has big strips and they weren't as a really good grade material.
So we will be mining out the base with its west branch three mid year, one of things we did with the.
With the approval to 24 key project last years, we actually accelerated mining rate, that's partly what drove our capex for the high end of the range in year.
And then we will be relying on stockpiles into the back half of the year.
And that will continue on until about a.
I'd say late Q2 of next year.
So what we're seeing in terms of grades is we're up in the high twos over the next.
Couple of quarters times, again, stockpiles will be probably two or just below.
And then in Q3 of 20.
21 will be ramping back up into two plus grade. So it's not a dramatic drop but it's not just as a reduction in great it'll be more variable as rely on stockpile, some which are older and.
The inventories are less certain but the average gray will be just one or two in there.
Okay great.
And then maybe one last question on Coupal, you mentioned deploy reaching end of life or should we expect the drop off in tons from divine I or do you think you make it make up the tonnage from goupil.
Again, that's a good question so we will be.
Finishing ore feed from deploying only this year there will be some stockpiles that remain add to warn also the mine will end in 2020, and really 21, but there there's a remaining stockpile in terms of feeding the mill a kubel.
We will have sufficient mill feed to keep that mill full.
Particularly as we move into narrower vein slightly lower grade material.
Great. Thank you very much.
There are no further questions at this time.
Okay, well I think you Ursula. Thank you everyone for joining us. This morning, we look forward catching up with you all in person in the coming weeks. Thank you.
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