Q2 2021 Kinross Gold Corp Earnings Call
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I would now like behind the confidence over 80 of speaker today Mr.
Slipping out Vice President of Investor Relations. Please go ahead.
Thank you and good morning.
The way, we have total income of pregnancies.
So the.
The leaders of the.
Andrea Greenberg of Baltimore for example.
We began I would like to bring your attention for the FERC, we will be making forward looking.
Chris from for divisions.
A brief discussion of the risks uncertainties.
Awesome results from the bonds being different from us.
Forward looking information.
Please refer to page 2 of the presentation. Our news release dated July of 'twenty 'twenty..1 1 unit for the period ended June 30 of 2021.
And our most recently filed for the area.
All of which are available on our website.
I will now turn the call of the call over to Paul.
Thanks, Chris and thank you all for joining us today.
While there continues to be challenges globally coming out of the pandemic.
We are seeing signs of a return to normal across our opt.
Operations.
With the safety and wellbeing of our people is our top priority.
We are maintaining our pandemic related protocols where needed.
However.
We are also benefiting from the continued return to more efficient operating practices.
The other possible notably.
Yeah.
With travel restrictions easing, we have been able to reach most of our sites more easily.
Before turning the call over to Andrea for a financial review and Paul for an operating review.
I will comment briefly on the.
The situation at Tasiast.
Our return.
<unk> plan.
And some highlights from the quarter.
We realize the fire of Kashi has created a lot of uncertainty, which negatively impacted our stock price.
Our objective today is to provide an update that helps for me of this uncertainty.
We needed the past several weeks to make mechanical inspections.
And based on this we do not believe there is any substantial damage to the integrity of the mill.
As a result.
We are confident that we will be operational before year end.
Furthermore, our updated estimate for the cost of repair is.
It is now reduced to not more than $35 million.
And importantly.
The goal of still in the ground.
And we have an insurance claim for the damages and the interruption to our business.
Therefore.
We do not see a fundamental change in the value of our business.
With respect to the 2014 of expansion.
While the plant is down we have been able to continue to mine and advance the project.
We will begin 2022 with the substantially more of.
For an stockpile.
Which further secures our ability to meet our production goals in 'twenty, 2 and 'twenty 3.
And now 24.
I was recently in Mauritania.
And we visit of Tasiast and met with senior government officials.
On July 15th.
For we signed the final agreement.
Which provides enhanced certainty on the economics of Tasiast.
Achieving this important milestone reinforces our strong partnership with the government.
We appreciate.
We are appreciative of the strong support from the government, particularly.
And work through the impact of the mill fire.
We have a high degree of confidence in our strong production growth and increasing free cash flow over the next few years.
In addition, the fact that we see no fundamental change in the value of the business.
Coupled with our recent stock price performance.
Mix now of highly compelling time to begin the share buyback program that we announced last night.
We see the buyback is a meaningful addition to our regular dividend.
As we are targeting to double the total cash we are.
Yes relating to returns over the next 12 months.
Moving on to the broader portfolio.
We are confident in our ability to meet our revised 21 production guidance.
And our outlook to 2023.
Which sees us growing production to $2.9 million ounces.
Ounces.
With respect to the cost guidance the <unk>.
Setbacks, we face this year at Tasiast and round mountain.
On the wrong would not have taken us out of our original guidance range.
However, combining these setbacks with.
Alex the gold prices.
And installation.
<unk> has created a need to update our outlook on cost for the year.
Importantly, though.
Our margins remained strong.
And the head of our original budget expectations.
Andrea will provide more.
With high rail on our guidance update in a few moments.
Finally, I would like to highlight 2 other important recent developments 1 we completed the scoping study at <unk>, which confirms the value of the project.
And 2.
We published our 2020 sustainability.
For detailed report.
Which outlines our strong performance and targets in areas of safety and sustainability.
Environment.
Social and governance.
Along with this we also released our first climate report, which outlines our climate strategy.
Ability.
Notwithstanding our strong record on safety, which is our first priority.
We were recently reminded that our work in this area of <unk> never done.
I am saddened to report that in June we.
We experienced the fatality at our Toronto mine in Ghana.
Loss of 1 of our employees reinforces the need to continue focusing our efforts on enhancing safety and risk management systems.
Across our global operations.
I will now turn the call over to Andrea for a more detailed review of our financial results.
Thanks, Paul.
I.
I'll begin with financial highlights from the quarter, including highlights on our balance sheet and provide some commentary on our updated outlook.
Production during the quarter was approximately 538000 ounces and sales of 548000 ounces.
Generating free cash flow of $183 million during the quarter.
The which was an increase over $100 million from the previous quarter due largely to lower taxes paid.
Cost of sales for $830 per ounce in Q2, which was up from the previous quarter and Q2 of last year due to lower production.
Higher operating waste mined.
At a number of our sites as expected and.
Some inflationary pressures that we're starting to see.
Attributable operating margins for robust again in Q2 at 54% driven largely by strong gold price it.
All in sustaining cost of $1069 per ounce per app compare.
Compared to the previous quarter and Q2 of last year, primarily due to lower ounces sold and higher cost of sales.
Our adjusted net earnings of $157 million and adjusted operating cash flow of $364 million were down approximately 19% and 13%.
Simply from the same quarter last year also of a result of the decrease in production and higher cost of sales.
Okay.
Moving to our balance sheet, our cash position remains strong and we finished the quarter with $676 million of cash after repaying $500 million of senior notes in June.
Of this back half 125 billion of senior notes remaining with the next maturity date in March of 2024.
Our net debt at the end of the quarter improved to approximately $780 million.
Our trailing 12 month net debt to EBITDA ratio improved slightly and is now just under zero.
We know of time.
Our investment grade credit profile from the 3 major rating agencies has been further enhanced the this year with Moody's moving us to a positive outlook in Q1, followed by an upgrade from Fitch in Q2.
In July we extended the maturity date of our revolving credit facility to July.
By 2026, returning to a 5 year term.
Looking ahead to the remainder of the year as Paul mentioned, we're pleased to have put in place for share buyback program. We expect to begin executing this program in the near future and based on where we sit today, we would expect to double our return of capital over the.
The next 12 months through this program.
In summary, our cash flow remains strong and our balance sheet continues to strengthen we are well positioned to fund our growth over the next few years, while continuing to reduce our debt an increase of our return of capital to shareholders.
Turning to our updated outlook for 2021.
1 I note that all figures I'll reference here are within our typical confidence range of plus or -5%.
Starting with cost of sales, we've increased our 2021 guidance from 790 to $830 per ounce.
The increase is mainly due to the deferral of low cost ounces from.
And higher gold prices, resulting in higher royalty payments as well as emerging trends in inflation.
We have also increased guidance for all in sustaining cost from 1025 to $1110 per ounce.
This increase is the result of the higher cost of sales and the impact.
Fact of sustaining capex overhead and other sustaining costs over fewer ounces of production, resulting from the chassis of fire.
Our guidance for other operating expense is increasing from $150 million to $285 million.
The increase is due to 3 factors.
First the Tasiast mill repairs are estimated to be up to $35 million.
A portion of this may end up being classified within Capex, but for now we've made the allowance within other operating cost.
Second of approximately $50 million of non mining related operating costs incurred at tasiast during the repair of the mill, including.
<unk> site G&A.
And third approximately $50 million of cost related to the wall remediation effort at round mountain.
As a reminder, we will be pursuing the recovery of the Tasiast related cost as we work through the insurance process.
For capital expenditures, we are maintained.
Maintaining our full year guidance of $900 million.
Looking out beyond this year as Paul mentioned, we are confident in our production outlook of $2.7 million $2.9 million ounces for 2022 and 2023, respectively.
With respect to cost we'd like to provide some context on what we're seeing.
At the time of our Q.
We had indicated that we expect cost of sales in 2022 to decline and to be largely in line with 2020.
Our business remains on track to benefit from higher production.
Which will favorably influence our per ounce cost metrics and we'll continue to monitor inflationary pressures.
Some of these inflationary pressures may be temporary and others may not be as we approach. The end of this year and complete our strategic business planning and advance our budget process for 2022, we will be able to provide the details.
I'll now turn the call over to Paul Tomorrow. Thank.
Thank you Andrea.
I will provide a brief.
David on the impacts from Covid gold.
<unk> volume update on our operations projects from exploration programs.
As Paul mentioned Covid restrictions of jewelry listing around the world.
Most of the operations of slowly returned to normal with some ex servicing.
Thanks for employees operating communities most governments in our operations.
Some of them very well throughout this pandemic.
I'll begin by providing an update on the Tasiast mill repairs.
Most importantly over the last few days of mill has been turned and we are now confident of the gearless motor drive the trunnion bearings in the mill shell are in good shape.
To note. We've included the link to a video of the mill restart test.
In our press release.
Based on this we are confident that the restart in the fourth quarter.
The neutral on the screen has been order of than anticipated delivery dates for the planned mill restart timeline for.
All of the inflation of the trauma screen and we expect to be able to resume operations of full capacity essentially right of way without a significant ramp up.
Perfect.
We remain confident in our ability to meet 2022 production targets as the high grade stockpiles that we will build will be available of startup.
The 21 key project is now 90% complete commissioning activities of the power plant has begun and we expect it to be operating from the late part of Q4 and.
And we.
To reach 21000 tonnes per day in the first quarter of 2022.
Additionally, we are exploring ways to potentially shorten the time needed to reach 24000 tonnes per day by taking advantage of mill downtime to advance some of the project clients sooner.
Moving to Brazil per.
<unk> had a good first half overall.
The mine produced honors.
51000 ounces, an increase of 24000 of Q1.
Due primarily to the timing of ounces processed through the mill.
Higher cash cost compared with Q1 are attributed principally to an isolated incident of unplanned maintenance.
Inflationary pressures, particularly on the consumables labor in diesel.
And higher power cost.
Due to drought and the government's response of restricting hydro power generation.
It has resulted in increased exposure to more expensive spot power purchases.
On this issue, it's worth noting that while drought conditions are prevalent in the effecting power generation. It is not impacting water balance of the queue.
In Russia.
Cooper delivered another good quarter.
For largely in line with Q1 of the transition to narrow vein mining continues to progress as planned.
We saw lower grades compared to the previous quarter and Q2 of last year.
Due to planned mine sequencing at coupon the combined with lower grade stockpiles from 29.
We expect grades.
Restaurant from these levels for the remainder of the year.
Turning to Nevada at round Mountain implementation of the revised mine plan is proceeding well and Q2 production was in line with our expectations.
The relocation of the waste pile at the top of the pit continued during the quarter and should be completed next month.
Fortunately the historic waste.
Is there an activity of mineralized.
Covering the cost of the re handling.
Mitigation efforts of stabilize the wall and significant progress has been made on further dewatering.
The overall optimization study, including opportunities for the phase out of pushback is progressing well and on schedule to be completed early next year.
Protect.
Production was lower quarter over quarter as a result of our focus on the beginning of the wall of stability while costs were largely in line.
Turning to our other operations for knock performed well during the second quarter as production increased congrats of Q1 due to an increase in the answers required from the New Barnes Creek heap Leach.
Cash cost remained high due to higher operating.
<unk> waste mined of decreased year over year due to more ounces produced from the new heap Leach.
While the ounce production with lower compared to the previous quarter due to the timing of answers your cash from the heap.
As we mined through some combination of material and the vantage pit at the beginning of the quarter.
We expect stronger production in the second half.
Higher cash cost compared to the previous quarter were due to lower production and higher fuel cost.
China has also delivered a good performance so far this year <unk>.
Production was slightly lower than in Q1, mainly due to lower grades from the underground mine that is largely in line year over year.
The mine continues to generate positive cash flow.
Moving onto our projects as Paul mentioned, the mattress Scoping study was completed this quarter on schedule.
The results confirm the project as low risk low cost high grade high return in addition to our Fort Knox mine.
Many of the key metrics in the study remained comparable to our view of the at the time of the acquisition.
Moving grades for.
For the life of mine production of approximately 1 million ounces with first production expected in 2020.
Capital cost estimates however.
Have increased by approximately $50 million to approximately $150 million.
On a 100% basis.
The increase was largely.
Due to the strategic decisions that are expected to derisk, the project and improve operational efficiencies, including reducing the use of contractors.
In addition of better understanding of the project site conditions, particularly topography and environment contributed to this increased capital.
The project is moving to NFS and we expect to report those results for the end of 2000.
<unk> retail.
Our other projects are advancing well.
The development work on the <unk> satellite pits located approximately 15 kilometers east of foreign losses proceeding as planned.
And is on track for first production later this year.
The la Coipa remains on budget and on track for the first production in mid 'twenty 2.
The fleet Refurbishments.
2 months of complete pre.
Pre stripping plant refurbishment of minor of construction are also progressing very well.
The Lobo Marte PFS is on schedule for completion in Q4 of this year, while permitting and community relations continue to advance.
You did the PFS as Felix let the completed by year end in support of the reserve update.
Infrastructure.
<unk> net of site has commenced including the establishment of campus entities for.
First production of the events is still anticipated in 2025.
With respect to exploration across the company, we continue to focus on promising targets around current operations.
In areas of our existing infrastructure can be leveraged for the goal.
Of extending mine life, and adding to our mineral reserve and resource estimates.
At <unk> the exploration program targeting mine life extension is proceeding as planned.
The targets at the South end of the <unk> vein are tested.
The second narrow the high grade veins.
Importantly, exploration cancer established of kind of my volume and care value on sky within.
<unk>, where our Cooper synergy zone, yielding high grade results in both areas.
At Toronto promising results during the first half of the year for.
Of our encounter as we continue to target multi year mine life extensions and additions to its mineral resource estimates at year end.
Underground resource upgrade.
Within the commission drilling of Seran panel located additional high grade pods and underground drilling was carried out at Serra <unk> sales and panel of surface drilling at the memo west of our bodies.
Development of an exploration drift to provide optimized drilling positions to target the over of high grade plunging shoot is ongoing and is expected to be.
Completed in the third quarter.
The results of the first of all the exceeded expectations with the mineralized with greater than previously interpreted.
Drilling at Ekati, South has extended known mineralization to the immediate south of the reserve area, while at channel 2 mineralized Westlake had been identified.
Great and debt are you desk exploration activities focus on infill drilling and completing the PFS geotechnical work. Additionally on the larger trove of account property exploration drilling has commenced 2 to 5 kilometers northeast of the Vince <unk> of our spirit of.
Along the principal <unk> fault.
Women are mineralization has been encountered.
At round mountain exploration activities of phase <unk> focused on infill drilling and extending the known mineralization.
We also work to improve the geologic model and assess the mine planning options with the goal of delineating high grade material for potential underground mining and results continue to be encouraging.
Lastly at.
Ex.
Exploration activities continue to target incremental high margin ounces proximate to the K 2 K 5 deposits by constructing a series of exploration drifts to explore the highly prospective area.
Rehabilitation development is ahead of schedule with underground drilling to commence in the third quarter and continue well.
Into next year.
To wrap up on operations and projects our priorities continue to be the health and safety of our employees our.
Of our social license to operate and the wellbeing of our communities and stakeholders.
Delivering strong consistent operating results and delivering our projects on time and on budget.
And with that I'll turn the call back.
Back to Paul.
Thanks, Paul.
In summary.
So we are making excellent progress on our key initiatives and our business remains in a strong position.
The cash yes, Mel is expected to be running in Q4.
Despite the setbacks.
At Tasiast and round mountain, we expect both assets to.
To be strongly positioned for the future.
Our investment grade balance sheet will continue to strengthen as we grow our production of free cash flow over the coming years.
And our shares remain highly attractive.
And we are initiating.
<unk> of buyback program to capitalize on for us.
The debt operator, I would now like to open up the call to questions.
Thank you.
As a reminder, the ask your question. Please press star 1 on your telephone keypad.
And so we're enjoying the.
<unk>, perhaps the alky.
Please standby, while we compile linking the roster.
Your first question comes from Tyler Langton from Jpmorgan. Your line is open.
Hey, good morning, and thanks for taking my question.
Just on sort of the.
Question of the cash cost guidance for the year ex can you provide a little bit more detail on sort of the impact of.
Of inflation and higher gold prices on that guidance and then just I guess when you think.
The impact of potential inflationary pressures on 2022.
2021, I guess benefiting from any.
Fuel.
As of supply contracts that sort of limiting the impact this year, but it could kind of roll off next year.
Sure so.
I would look at the increase in cash cost guidance of startup carrying bobcat.
<unk>.
Roughly a.
Sorry, the third.
<unk> net between the 3 of the first is just.
And not having the tasiast ounces those of the lower cost ounces. So it's really a function of sales net.
And.
The second being related to gold price or at a higher gold price than our budget we're paying.
Higher royalties and we've provided sensitivities on that with our guidance back in February so.
We said $5 an ounce for every $100 gold price over.
Over 505 jet price and.
So the third bucket would be would be inflation and.
We're just we're watching the trends of inflation, we've seen some inflation start to creep in just over the last month or 2.
And so that's part of the third Bakken in terms of black.
While we expect that might impact our cash cost for for 2021.
The answer your question on <unk>.
Hedging we have hedges in place.
For 2021, we'd also have hedging in place for <unk>.
For 'twenty, 2 and 'twenty, 3 just that sort of lower levels. So for the for for example on.
The fuel we have.
We're about 55% hedged this year.
45% hedged.
In 2022, and then lower lower amount again for 2023.
Okay. That's the truly helpful and then just.
I guess switching to round mountain I guess production was down just kind of slightly versus Q1 and costs were actually lower I guess can you talk a little bit about kind of.
What drove this.
And then just.
How do you think about the second half and true.
The production.
And cost.
We'll run that as you know we are working through the mitigation plan for the instability that had been detected earlier in the year first and foremost do we have.
Essentially reduce the risk to a very.
For for the Wall has stopped moving.
We continue our dewatering program.
And what we've done at the mine is rather than mining that CSW, which was originally planned for the year, we have shifted focus to other parts of the.
For the operations of for example, we're doing another cut at the bottom of the pit.
Low number.
Developing further of gold Hill, which is the satellite deposits as well as a portion of the main pit so.
Iran is complex in the sense of it has a lot of sources of ore and as we continue to unload that north low we will continue to rely on these disparate sources of or so.
From the various of our sources can be within the pit in the satellite pits.
From the heaps.
And as I mentioned in my prepared remarks, the <unk>.
Based on the removed at the top of the pit proved to be mineralized.
And we generated revenue there, but we expect quarterly production of round mountain to be in the high <unk> range for the next couple.
Couple of quarters.
And.
It'll be.
Roughly of that level going from next year.
We talked about on our last quarter the the.
Higher annual production of the differed.
Until 2025.
But we expect.
Ran out of production to be in that mid 2 hundreds the high 2 hundreds.
The next couple of years.
And just cost B sort of what should we expect cost to take a step up in.
In the second half of our deteriorated.
Yes, yes cost of those tickets step up a little bit in the second half.
Great. That's it for me thanks, so much.
Your next question comes from Fahad Tariq from Credit Suisse. Your line is open.
Hi, Good morning, just continuing on round mountain, the 15 million and the remediation.
The efforts cost can you talk a little bit about how to reconcile that against the.
The waste recovery that you just touched on and then also.
Also how should we be thinking about that particular cost into 2022.
So the overall.
I will paint the at the high level of picture here the growth cost additions at round mountain are related to moving that way for them.
And we will essentially break even on that because of the preceding mineralized, but also laying the wall of back to a.
More shallow slope angles, so that will generate growth additional tonnages in the overall mine plan.
I am very confident that we have already and will continue to find offset on an NPV basis and that doesn't include phases.
I am also increasingly comfortable with.
The growth additional cost of round mountain.
Not necessarily in year, because our mining capacity is limited to where in the mind. The same amount every year, but then the result of the deferral of ounces.
As more waste has moved in the near term.
As for the accounting treatment Andrea will talk about that.
Really I mean, as Paul said we're.
Moving the same amount of assets itself the parcel of being characterized.
As the other operating cost given the situation there.
Okay and on next year's cost if we think about just like other operations other operating expense.
Really the trend mountain.
So the.
So I think for next year, we're probably going to.
Call that mining cost because of the gross additional cost next year will be stripping cost.
Okay.
So I'd say just other operating cost over all of the increase that we're seeing that I talked about this year.
<unk> is really kind of aligning our saying, it's not something we expect to continue.
In terms of that level of other operating cost line.
Understood. Okay. Thank you that's it for me.
Your next question comes from Josh Wolfson from RBC.
<unk> capital markets. Your line is open.
Thanks, just wanted to sort of selling out of a bit more on the cost for Toronto and <unk>.
As per paired share that you had mentioned that there were.
Some sort of interest in downtime items that affected that but that also for.
Local inflation.
And then.
Just wanted to understand I guess, where you see costs with these with these inflationary factors and then same thing I guess for <unk> I guess, there is a bit.
Fewer sort of external factors.
So there the onetime maintenance.
Some of event on the compare so that impacted the denominator so that moves contributors of the cost.
Perhaps the biggest is the power cost increase there is widespread growth in.
In Brazil, particularly affecting areas with significant hydroelectric generation capacity and.
And given the the.
The amortization mechanism in the Brazil power market.
We ended up having some exposure to the spot price of our the biggest increase.
In constant currency was related to higher than anticipated power cost. However, I should also point out debt that power cost impact would have been much greater.
Had we not owned our own power plants. So we're we're really happy that we have those plants.
In addition, we do see some.
Local cost inflation on labor cost.
Our off of about 5%.
The training of little bit.
Above the annual rate increases we've seen for a number of years.
And we're starting to see.
Inflation in key consumables of which paired with the use of the lot for example.
Notably grinding media, which is obviously of steel derived product.
As for Toronto.
Its cost.
We're high principally due to the relative mix of open pit and underground where we are in the mine sequence.
But we expect those cost to improve with.
As we get deeper into the life of mine as the crude.
The greater share of our underground production.
Okay.
And then.
There are some good commentary on on production of heading into 2022 and 2023 I'm just wondering on.
On the capital side.
And some of the historical guidance provided of 807 hundred for the next few years, there's obviously a lot of different.
Sure.
And even the historical numbers were under question given potential project growth opportunities.
The current thinking on.
On the direction of the future capital.
The numbers for 22 of 23.
Sure I'll, maybe I'll hopefully along.
Moving carbon Porsche.
Yes, Hello for me.
We do see a slightly different dynamic between the operating cost inflation on the capital.
Operating being more of a sticky kind of lagging with things like labor and.
And there is no question, we're starting to see inflation.
All of that come into the system.
We think it will probably be a little bit greater than on the capital side.
And.
I think it's the flow trends there as of macro and micro effect there with the <unk>.
The underlying commodity and.
The microeconomic supply demand factor.
Yes.
We think it's it's it's certainly here for the balance of the year and into next year.
We think in some cases, it'll be a little bit greater than maybe in the new project side.
But we haven't sort of finalized a prediction on what that number.
<unk> fee, but I think the key.
Comment we're trying to say is yes, absolutely those capital numbers that we put out.
Which for there to support the $2.7 of 2.9 production.
Now come with the with an inflation caveat and where we're going to be monitoring that and look to refine our view.
Well, so I would say we're biased obviously increasing.
But I don't want to be kind of pin down on the on the number of chest chat.
Okay, and sorry, just to clarify I think the sort of understanding was.
Kind of flat 900 ish going forward to sustain the new higher volume.
And of all place.
It's sort of of the impression that it could be above that sort of flatline expectation or just above what the historical guidance was between flow.
Yes so.
I think.
We've had a few of discussions around the point, we were out there with the 98.7.
In terms of capital of which was to support the.
The production guidance of 2.7 to $2.9 'twenty 2 'twenty 3.
We then said if.
To the extent, we continue I think thats the point Youre, making.
The continuing to run out of say the $2.9 level.
I expect the capital to come back up towards $900.
And we set.
The postal code.
Direction, there would be the use of sort of a $300 per ounce kind of assumption, that's how we'd characterize it and I think that's all still true.
We're just trying to.
We would understand and get a little bit more focused here on where we might end up with the inflation effect on that.
Great and geology, we are seeing we are seeing inflationary impacts some of our capital estimates from part.
Part of the increase of <unk> was inflation related.
As I.
The move to my prepared remarks.
Some of the scope related some of it with value added decision related but there was an inflationary component.
And we're seeing engineering firms construction companies bid.
Bidding projects with higher unit rates than they would of say a year ago in recognition of the fact of the role.
<unk>.
Capital projects Spates of heating up.
Okay. That's very helpful. Thank you very much.
Your next question comes from Anita Soni from CIBC World markets. Your line is open.
Good morning. Thanks.
Thanks for taking my questions. So firstly on per for 2 I think we were looking for higher grade asking the list from the western portion of the paint line and look at your guidance for the CRM <unk>, saying that.
Part of the drive up to $2.47.9 million alright, great compared to Q1 when can we expect the C&I.
We're still targeting.
Production around the business.
Just short of around 600 this year.
We did have some lower grade in the past quarter as we mined in parts of the pit that historically had lower grade, but as we are in that west part in the next quarter.
Fourth quarter, we do expect a slight upward trend in grade, but not huge.
And when we're talking like <unk> 37 versus <unk> for that is that the variant.
Yes, that's right yes.
All of them going forward, yes, thats right okay.
And secondly on round mountain.
I'm still kind of understands convertible debt of <unk>.
And for US in terms of what the capital spend the R&D to flatten that flow and when that in front of happened. So.
In 2022, and 2023, you've got the do the pushback 19 basically stabilize that.
That wall.
And I think when you came back on the last conference call. You mentioned that were kind of mining constrained. There. So I'm just trying to understand that capex spend for I think of is 30 to 50 million tons that you had mentioned needed to be moved.
The decline not growth and the timeframe I had assumed with the next.
For 2 years.
What are the $1 per ton cost I'm, just trying to understand as I think about the capital going into next year that to me is 1 of the biggest swing factors outside of your inflation comment.
Could you give me some color on that.
Alright, So we are doing that the mine plan to redesign right now.
We haven't finalized the slopes.
We put in the dewatering wells in the last quarter, we are.
Per pressures are coming down.
And we are finalizing the Geo tech designs of the total quantum of times, we've not yet.
In line, but you are correct in the assumption that principally of the moving of those tons will take place.
Over the next 2 years.
And we are mining constrained around does about 100 million tons a year. So instead of and this is the principal reason for the push out on the face value ounces of instead of the mining a certain proportion of of waste and ore where it is now greater proportion of waste within that 100 million constrained.
So we will work through that.
Excess in the next 2 years and the total quantum of tonnes.
Can't tell you exactly what it will be right now.
The slightly at the upper end of that range you've talked about.
Okay, and then my last question and I'll pass it off to Tom.
Of the people are just trying to understand tasiast at the stage.
I would assume.
Prior to the fire.
You guys.
And in the last couple of weeks.
You were.
A little behind on the stripping in accessing the higher grade ore that's why we saw the lower grade.
Coming through this quarter and some portion of that would then also have.
I guess stockpiles.
Feeding the mill.
How are you doing now as well.
Sort of.
Dealing with the fire and trying to get back up and restarted how are the mining rate.
In the last months and I guess 5 weeks going because I guess for a contingent upon you 1 of the <unk>.
Things that you had mentioned.
Sue.
You would get ahead of our get caught up on your stripping you could access those higher grade ores.
That were expected to drive I guess, plus <unk> plus 2 gram per tonne material next year.
That's right. So we continue to mine so the bottom line was down for maybe 2 days at the time.
The higher <unk>.
For backup to the mining rate that we need and what's happening right now is principally waste movement.
The building at this point.
Today medium grade stockpiles as planned we're going to get into the higher grade portion of the fourth quarter and those are going to be stockpiled as well during.
During the middle of rebuild so in effect, what's happening as of the at the start of January 2022.
We expect to have the mill running full tilt.
We expect to be mining.
Run of mine high grade material in addition.
2 having Ah.
A couple of months worth of high grade stockpile.
On the ground now.
The great net stockpile is not so high that it will displace where we would of mines from high grade next year anyway.
But it does provide the derisking element in that.
It allows us some flexibility of mining rate next year.
So for.
Short story is.
Of this mill downtime provides.
<unk> provides the silver lining opportunity of caught up in the mine plan get back into a position where were mining west French for high grades and then de risking next year's production profile with the availability of stockpile material.
And those West branch high grade they were north of $2.
5 granted from the churn rate is that correct.
Yes, okay.
Okay, and then I had 1 last question sorry to start with the Q4.
The guidance that youll be starting up some time in Q4.
Could you provide just Paul just asked the question, but could you provide some clarity Q4 at the big pretty big Windows.
And as the.
Early Q4 of late Q4 for the restart or is it just near the end of the year kind of thing well I'll describe what exactly is happening. So we are we've turned the mill we've done the integrity checks on the.
The middle of the motor of the trillions.
The other associated key components in general of the Big important things are okay, and there has been damaged.
<unk> 2 some ancillary things like the the.
<unk> taken the discharge shoots.
Some structural work on the cyclone tower and working backwards the thing that needs to be replaced and it drives of the critical path to return to production of the trauma screen.
We placed an order and we expect to have that arrive at site.
Call it late.
The late October early November so it doesn't get better than that that is the critical path.
And it will depend on the installation time, which we envisage it will be about 2 weeks.
So it's not inconceivable that that mill is turning with the new trauma screen sometime in November in the best.
Best case scenario, we would have.
Good production month in December, but our revised guidance assumes no production this year and.
We would we would strive to try to beat that but right now we're assuming full fledged of 100% throughput startup January 1 with an upside towards some production.
Camber.
Okay. Thank you that's it for my questions.
Okay.
So again to ask the question. Please press star 1 on your telephone keypad.
Your next question comes from Mike Parkin from National Bank Financial Your line is open.
In the <unk> guys, just a couple of questions left.
The other operating expense guidance for this year, how do you see that.
Trending as we go into 2022, if you can give color on that yet.
I guess, Mike I think first of all of it.
By the nature of those cost are difficult to predict but the increase that I talked about in my remarks for this year.
Share of a 1 time thing not something we'd expect to repeat.
Next year sell.
There's no reason to expect at this point that next year wouldn't be back to what we've.
Here.
Prior to 2020 line.
And then just 1 final question.
Congrats from signing that agreement rest of the open warranty and government.
Can you just give us a bit of color.
Where the sticking point wasn't task has sued and why that was excluded to get the.
<unk> seen the main part signed off from where the kind of negotiations still.
For the past your suite.
Sure I'll hand, it off to Geoff Haire, who is.
Hesitantly involved in that whole process, but I for.
Focus and priority always was to get the main event, which is.
The mine buttoned down and the various.
Glad we've done that as it relates to say, Jeff maybe to share.
Yes, yes.
That's right Paul.
And Mike.
What I would say is.
Our previous arrangements on suit contemplated a different approach in an ownership structure.
Then.
The.
The main agreement on Tasiast and.
And it was delaying our negotiation so ex.
Excluding it was the catalyst for signing the agreement.
Banking the main economic event that Tasiast as Paul just said.
I would say that with the main agreement now sign of behind Us.
The floor is wide open with the government to define solutions on Sudan and discussion.
We'll certainly.
Continue and I guess, the last thing I would say is debt.
Well suited for.
<unk> of it is not material at this time and certainly both the main cash.
Cash used of northern properties that we own remained remain perspective.
Okay. That's it for any of you guys. Thanks, so much.
Okay.
Your next question comes from Danielle the disconnect from Scotiabank. Your line is open.
The door, great Paul Good morning, everybody and congratulations on getting that cash now.
I guess the startup getting into contract for product. Thank you for.
Right.
Yes.
2 questions.
That was part of this.
Coming back on for that inflation question.
Both from capital.
It all and operating cost can we just gulfstream.
The cost structure.
You mentioned labor.
Specifically labor.
In Brazil are you seeing labor inflation in the U S and our Russia, and maybe some of the other consumables where youre seeing.
Place generic pressures on.
On your cost per sub and then coming back to your capital I have small question for Matt.
Okay I'll walk through the cost bar for operating expenses in the in the labor area.
We are seeing cost increases that are only modestly higher than historical trends principally in Brazil.
King.
And we're starting to see it pick up in the U S.
In Russia.
What I'm, saying here.
3% instead of 2% of 4 percentage sort of 3% sort of remains.
Somewhat team, but in Brazil. It is something we are focused on we are definitively seeing.
Labor cost inflation in Brazil.
What we're seeing in the U S and also in parts of.
In South America is labor availability and that will drive up labor cost down the road.
If there isn't the normalization on that labor availability from.
In terms of consumables.
<unk> is what it is you can do that calculation yourself on a net of hedge basis, we provide information on.
Of the degree of our hedging the <unk>.
Other consumables, where we're starting to see especially more recently the an uptick in inflation are key things like driving steel cyanide explosives.
And importantly for.
In areas like cyanide in the.
Explosives, we're seeing 10% increases that are principally can be impacting.
Q3, and Q4 year to date the.
The numbers there have been more tier 2 or 3 of 4%, but as we work through some of those lower cost inventories were now getting into material thats, 10% to 12% higher in cost.
Example of on those.
The chemical chain so cyanide.
<unk> in the regions in the case of grinding media, particularly at the large mills like Tasiast there too.
The Fort Knox, we're seeing pretty significant increases of 30% certainly looking at the next 2 months and again, it's been more.
For team in the first 2 quarters as we work through the inventories, but there we're seeing about 30%.
Going forward and then the last part of cost is.
The big maintenance category, both on services and spares, there is probably where we see the lowest pressure as yet.
And so I think when you put it all.
Altogether, we're probably seeing as Andrea said in her remarks about a third of the.
The cash cost of revision upward as is due to the inflation component. So it's Ben.
It's been manageable in the first half, but here in May and June and heading into July and August we do see inflation picking up into the back.
Year on Opex.
Inflation itself wouldn't have taken those out of our original that's right yes.
Overall contact he has had it only been inflation, we would've been at the top end of our cash cost range.
For the third.
For the back to announce as trough.
Yes.
I got that.
Half of the maybe on <unk>.
The the capital cost it seems as though you mentioned Paul that the inflationary pressures on more on contractor of them.
In the filings it doesn't seem as though of the specific issues or labor within that component that is part of your focus.
Focused on or maybe.
Just a bit more clarity there.
DSO in Capex, we probably see more inflation or the risk of greater inflation than in Opex because we.
We're exposed to both the monetary side of inflation in other words, the price of individual inputs going up but also tightness in the supply chain itself. So limited number.
Applicators of value added equipment limited.
Pool of construction and engineering and as I said earlier, we are seeing them.
Bid projects with higher pricing than even 6 months ago or a year ago. So as the result of both of the monetary side in other words price inflation on Australia.
The straight up commodities, we're also seeing that value add supply demand tightness and as I said earlier with reference demand show, we are seeing 10% to 15% inflation related to capital estimates on growth projects, which is higher than what we're seeing on the opex side.
Thank.
No thats good color on that and then maybe just for Paul Rollinson.
Congratulations on the share buyback.
I noticed on the slide that you have $115 million coming from dividends of 150.
From the share buyback is that $1.50 from the share buyback of minimum and also what we're.
You need to see.
To go beyond that $1.50.
Sure ex China.
Look.
The the.
That's certainly how we're looking at.
The start I mean, the way I look at it.
Our intention was always to get into.
2.
<unk> situation at this point in the year.
Then we had the setback with Tasiast and as you know we're.
As a result, we'll be deferring production and cash flow. So we're going to be down cash flow from where we thought we were.
Going to be pretty for.
Yeah.
Notwithstanding that we're continuing on with this buyback and I think the doubly sort of underscores our confidence in the business.
When we look at the 150 of we've established as a sort of the baseline forever.
The dividend.
It seemed to us a reasonable starting point given the scenario. We're in right now would be to double target to double.
That 150 to 300.
We're on track there is theres nothing operationally that we're looking at.
I guess if.
Fire Rewind a couple of weeks, if we were 90% confident we'd end up where we are today.
Few weeks ago, when we gave of mill fire uptake.
If we were wrong, if we were in the 10% category.
And it would of been longer than fourth quarter, perhaps.
That might have impacted our thinking around the buyback, but it has played out as we predicted and so theres nothing operationally debt would.
Prevent us from continuing with the buyback.
Is it a <unk>.
Target, we've tried to give some color I think of lot of people tend to put out.
Our 10% <unk>.
Who knows what happens we've tried to be very specific.
And you should hold us accountable for that number.
Could it be higher sure, let's see how the the world goes from here.
Okay, great. Thank you.
There are no further questions at this time I would now like the turn the call over can you share with Paul Rollinson.
Great. Thanks, operator.
Thank you everyone.
Thanks for joining us. This morning, we look forward the catching up in person hopefully.
Light at the end of the tunnel in the coming weeks or months. Thank you.
This concludes today's conference call. Thank you all for joining you may now disconnect.
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Your line.
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Yes.