Q2 2021 Kinross Gold Corp Earnings Call
Okay.
Yeah.
Good day, and thank you for standing by.
So the Kinross Gold Corporation second quarter 2021results.
<unk> conference call and webcast.
At this time, all participants are in listen only mode.
After the speaker's presentation, there will be a question and answer session.
To ask a question during the session you will need to press star 1 on your telephone if you require further assistance. Please press star zero.
I would now like to hand, the conference over Ath Speaker today, Mr. Chris Slipping out Vice President of Investor Relations. Please go ahead.
Thank you and good morning, with US today, we have Paul Rollinson, President and CEO and the Kinross.
The leadership team, Andrew if Ribeiro Baltimore Geoff gold.
Before we begin I would like to bring your attention to the fact, we will be making forward looking statements. During this presentation.
Brief discussion of the risks uncertainties and assumptions.
Actual results from performance being different from us.
Our forward looking information please refer to page 2 of this presentation. Our news release dated July 22.
'twenty 1 yes.
D&A for the period ended June 32021, and our most recently filed area all of which are available on our website.
I will now turn the call of the call over to Paul Thanks, Chris.
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 operations.
With the safety and wellbeing of our people as our top priority.
We are maintaining our pandemic related protocols where needed.
However.
We are also benefiting from a continued return to more efficient operating.
<unk> practices wherever possible, notably.
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.
Situation at Tasiast.
Our return of capital plan.
And some highlights from the quarter.
We realize.
The fire at Tasiast created a lot of uncertainty, which negatively impacted our stock price.
Our objective today is.
And an update that helps from 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.
To provide additional before year end.
Furthermore, our updated estimate for the cost of repair is.
He is now reduced to not more than $35 million.
And importantly.
The goal is 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.
Yes.
With respect to the 24 K expansion.
While the plant is down we have been able to continue to mine and advance the project.
Operator, we will begin 2022, which is substantially more ore in stockpile.
Which further secures our ability to meet our production goals in 'twenty, 2 'twenty 3 and.
And now 24.
I was recently in Mauritania.
And we visited Tasiast and met with senior.
<unk> government officials.
On July 15th we.
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 as we 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.
It makes now.
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.
Dividend as.
As we are targeting to double the total cash we are allocating 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 2010.
<unk> 3 <unk>.
Which sees us growing production to $2.9 million ounces.
With respect to the cost guidance.
Setbacks, we face this year at Tasiast and round mountain.
On their own would not have taken us out of our original guidance range.
However, combining these setbacks with higher gold prices and inflation.
Has created a need to update our outlook on cost for the year.
Importantly, though.
Our margins remained strong.
And ahead of our original budget expectations.
Andrea will provide more detail on our guidance update in a few moments.
Finally, I would like to highlight 2 other important recent developments 1 we completed a scoping study at <unk>, which confirms the value of the project.
And 2.
We published.
<unk> 2020 sustainability 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.
That strategy.
Notwithstanding our strong record on safety, which is our first priority.
We were recently reminded that our work in this area is never done.
I am saddened to report that in June.
We experienced a fatality at our Toronto mine in.
Chart.
The 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.
Got it thanks Paul.
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 were 548000 ounces.
We generated free cash flow of 1.
$183 million during the quarter, which was an increase over $100 million from the previous quarter due largely to lower taxes paid.
Cost of sales were $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 were robust again in Q2 at 54% driven largely by strong gold prices.
All in sustaining cost of 1000.
$69 per ounce per app 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 <unk> 19.
Percent and 13% respectively from the same quarter last year also a result of the decrease in production and higher cost of sales.
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.
Notes in June.
We now have 1.5 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.
Slightly and is now just under 0.4 time.
Our investment grade credit profile from the 3 major rating agencies has been further enhanced 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.
And credit facility to July 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 to share buyback program. We expect to begin executing this program and in the near future and based on where we sit today, we would expect to.
To double our return of capital over 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 and increase our return of capital to shareholders.
Turning to our.
Our revised outlook for 2021 I note that all figures I will 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 Tasiast 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 of sustaining capex overhead and other sustaining cost over fewer ounces of production, resulting from the Tastiest fire.
Our guidance for other operating expense is increasing from $150 million to $285 million.
The.
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 approximately $50 million of non mining related operating costs incurred.
<unk> at Tasiast during the repair of the mill, including site G&A.
And third approximately $50 million of costs 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 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.
We're seeing.
At the time of our Q4 release, 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.
Carey 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 more details.
Ill now turn the call over to Paul Tomorrow. Thank.
Thank you Andrea.
Hum.
I will provide a brief update on the impacts from Covid, followed by an update on our operations projects and exploration programs.
As Paul mentioned Covid restrictions are generally lifting around the world and most of our operations are slowly returned to normal with some exceptions.
Thanks to our employees operating communities.
Inflation's governments in our operations.
Performed 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 the mill has been turned and we are now confident that the gearless motor drives.
Coronium bearings in the mill sugar in good shape.
Note we've included a link.
And from a video of the mill restart test.
Our press release.
Based on this we are confident that the restart in the fourth quarter.
Our neutral on the screen has been ordered and the anticipated delivery date supports the planned mill restart time line.
For the installation of the trauma screen, and we expect to be able to resume operations at full capacity.
Okay, right away without a significant ramp up period.
We remain confident in our ability to meet 2022 production targets.
The high grade stockpiles that we will build will be available at startup.
The 21 key project is now 90% complete commissioning activities of the power plant have begun and we expect it to be operations from the late.
<unk> Q4.
And we expect 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 from the project tie ins sooner.
Moving to Brazil per.
<unk> had a good first half.
Half overall.
The mine produced 151000 ounces, an increase of 24000 over Q1 due.
Due primarily to the timing of ounces processed through the mill.
Higher cash cost in the compared with Q1 are attributed principally to an isolated incident of unplanned maintenance in.
Inflationary pressures, particularly around consumables labor.
And diesel.
And higher power cost due to drought and the government's response restricting hydro power generation.
Which has resulted in an increased exposure to more expensive spot power purchases.
On this issue, it's worth noting that while drug conditions are prevalent and affecting power generation. It is not impacting water balance it.
There too.
In Russia Coupal delivered another good quarter.
Results were largely in line with Q1 as the transition to a 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 Cooper, who combined with lower grade stockpiles from day 1.
We expect grades to stay around 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.
This historic waste bile proved to be mineralized.
Covering the cost of the re handling.
Mitigation efforts have stabilized the wall and significant progress has been made on further dewatering.
The overall optimization study, including opportunities for phases pushback is progressing well and on schedule to be completed early next year.
Production was lower quarter over quarter as a result of our focus on mitigating the volume stability while costs were largely in line.
Yes.
Turning to our other operations Fort Knox performed well during the second quarter as production increased compared to Q1 due to an increase in ounces recovered from the New Barnes Creek heap Leach.
Cash cost remained high due to.
Higher operating waste mined but decreased year over year due to more ounces produced from the new heap Leach.
Bald mountain production was lower compared to the previous quarter due to the timing of ounces recovered from the heap.
As we mined through some carbonaceous 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.
Channel has also delivered a good performance so far this year production.
Production was slightly lower than Q1, mainly due to lower grades from the underground line, but is largely in line year over year.
And the mine continues to generate positive cash flow.
Yeah.
Okay.
Moving onto our projects as Paul mentioned momentum 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 views at the time of the.
Including grades recoveries life of mine production of approximately 1 million ounces with first production expected in 2020.
Capital cost estimates however.
<unk> increased by approximately $50 million to approximately $150 million.
On a 100% basis.
The increase is largely due to strategic decisions that are expected to derisk, the project and improve operational efficiencies, including reducing the use of contractors in.
In addition, our better understanding the project site conditions, particularly to fog Rafi and environment contributed to this increased capital.
The project is moving to NFS and we expect to report.
Those results by the end of 2022.
Our other projects are advancing well development work on the Gill satellite pits located approximately 15 kilometers east of Fort Knox is proceeding as planned.
And is on track for first production later this year.
La Coipa remains on budget and on track for first production in mid 'twenty 2.
With fleet refurbishment is now complete.
Pre stripping plant refurbishment and minor road construction are also progressing very well.
<unk> is on schedule for completion in Q4 of this year, while permitting and community relations continue to advance.
You didn't see PFS is still expected to be completed by year end in support of our reserve update.
Infrastructure work at site has commenced including the establishment of campuses cities.
First production unit is still anticipated in 2025.
Okay.
With respect to exploration across the company, we continue to focus on promising targets around current operations.
In areas, where existing infrastructure can be leveraged.
With a 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.
Targets at the South end of the Coupal vein were tested interest.
Intersecting narrow, but high grade veins.
Importantly, exploration cancer establish a kind of high volume and carefully on sky.
Within the Cooper synergies zone, yielding high grade results in both areas.
At Toronto promising results during the first half of the year.
We will encounter as we continue to target multi year mine life extensions and additions to its mineral resource estimates at year end.
Underground resource.
Upgrade and definition drilling is seran taino located additional high grade pods and underground drilling was carried out at Serra <unk> antenna and surface drilling at the memo west ore bodies.
Development of an exploration drift to provide optimized drilling positions to target the over high grade plunging shoot is ongoing and is expected.
<unk> to be completed in the third quarter.
The results of the first hold exceeded expectations with mineralized with greater than previously interpreted.
Drilling at Ekati, South has extended known mineralization to the immediate south of the reserve area, while at Tango 2 mineralized Westlake had been identified.
You didn't ask exploration activities focus on infill drilling and completing the PFS geotechnical work. Additionally, on the larger tube account property.
Exploration drilling has commenced 2 to 5 kilometers to the northeast of the Danske resource pit.
Along the principal chilled by current fault.
Women are mineralization has been encountered.
Okay.
At round mountain exploration activity that phase <unk> focus on infill drilling and extending the known mineralization.
We also work to improve the geologic model and assess mine planning options with the goal of delineating high grade material for potential underground mining and results continue to be encouraging.
Lastly at.
<unk> <unk>.
Exploration activities continue to target incremental high margin ounces proximal 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 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.
We are making excellent progress on our key initiatives and our business remains in a strong position.
The Tasiast mill is expected to be running in Q4.
Despite the setbacks.
At Tasiast and round mountain, we expect both assets.
To be strongly reposition for the future.
Our investment grade balance sheet, we 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.
<unk> a buyback program to capitalize on sales.
Yes.
With that operator, I would now like to open up the call to questions.
Thank you.
As a reminder to ask a question. Please press star 1 on your telephone keypad.
So with you on your.
Question branch banking.
Please standby, while we compile the Q&A roster.
Your first question comes from Tyler Langton from Jpmorgan. Your line is open.
Hey, good morning, Thanks for taking my question.
Just.
Sort of.
The cash cost guidance for the year is could you provide a little bit more detail on sort of the impact.
Of inflation and higher gold prices on that guidance and then just I guess when you think about the impact of potential inflationary pressures on 'twenty 'twenty 2 it's.
<unk> 2021 I guess benefiting from any.
Fuel hedges or 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 has sort of 3 buckets.
And you know roughly a.
A third a third a third.
Between that between the 3 so the first is just not having the tasiast down since those were lower cost ounces. So it's really a function of sales mix.
And.
The second being related to gold price or at a higher gold price at 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 our 505 jet price and so the third bucket would be would be inflation and.
We're just we're watching the trends and inflation, we've seen some inflation starting to creep in just over the last month or 2 and so that's sort of the third Bakken in terms of what how we expect it might impact our cash cost for 2021.
To answer your question on hedging we have hedges in place.
For 2021, and we also have hedging in place for <unk>.
For 'twenty, 2 and 'twenty, 3 just that sort of lower levels. So for for for example on fuel.
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 really helpful and then just.
Just switching to round mountain I guess production was down just kind of slightly versus Q1 and costs were actually lower I guess could talk just a little bit about kind of what drove this.
And then just.
How you think about the second half.
In terms of production.
Cost.
We'll run them out as you know we are working through the mitigation plan for the instability that had been detected earlier in the year first and foremost we have Sn.
Essentially reduce the risk to a very low.
For the wall has stopped moving.
We continue our de watering program.
And what we've done at the mine is rather than mining in that phase W.
Which was originally planned for the year, we have shifted focus to other parts of the Oh. The operations of for example, we're doing another cut at the bottom of the pit.
We're developing.
Developing further at gold Hill, which is a satellite deposits as well as a portion of the main pit so.
It's a round mountain is complex in the sense. It has a lot of sources of ore and as we continue to unload the north wall. We will continue to rely on these disparate sources of or so.
So number of various ore sources can be within the pit in the satellite pits.
From the heaps.
And as I mentioned in my prepared remarks, the <unk>.
<unk> that we moved at the top of the pit proved to be mineralized.
And we generated revenue there, but we expect quarterly production at round mountain to be in that high <unk> range from the next couple.
Quarters.
And it'll.
It'll be.
Roughly at that level going into next year and as we talked about on our last quarter. The the higher annual production is in deferred.
Until 2025.
But we expect.
Round mountain production to be in that mid 2 hundreds to high 2 hundreds.
Over the next couple of years.
And just cost be sort of what should we expect cost to take a step up.
In the second half or too early to tell.
Yes, yes cost will step up a little bit in the second half.
Great. That's it from me thanks, so much.
Your next question comes from <unk> <unk> from Credit Suisse. Your line is open.
Hi, Good morning, just continuing on round mountain the $50 million in the remediation.
Efforts cost can you talk a little bit about how to reconcile that against the the.
Waste Paul recovery that you just touched on and then also.
Yes.
Should we be thinking about that particular cost into 2022.
So the overall.
I'll paint a high level picture here the gross cost additions at round mountain are related to moving that waste and.
And we will essentially break even on that because it proved to be a mineralized, but also laying the wall back to a.
More shallow slope angles, so that will generate gross additional tonnages in the overall mine plan.
I am very confident that we have already and will continue to find offsets that on an NPV basis and that doesn't include phase S.
I'm also increasingly comfortable with.
So.
So the gross additional cost of round mountain are not necessarily in year, because our mining capacity is limited. So we're going to mine. The same amount every year, but then the result is a deferral of ounces.
As more waste has moved in the near term as.
As per the accounting treatment Andrea will talk about that yes.
I mean, as Paul said, where we're moving the same amount of ounces. It's just the cost are being characterized as as 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 related to round mountain.
Yeah.
Yes, so I think for next year, we're probably going to call that mining cost because.
The gross additional cost next year will be stripping cost.
Sure.
So I'd say just other operating cost over all of the increase that we're seeing that I've talked about this.
This year is really kind of a 1 year thing it's not something we expect to continue in.
In terms of that level of other operating cost going forward.
Understood. Okay. Thank you that's it from me.
Okay.
Your next question comes from Josh Wolfson from.
Cash capital markets. Your line is open.
Thanks, just wanted to zone in a bit more on the cost for Toronto and in parallel to our.
As preparatory I think you had mentioned that there were.
Some sort of interest in downtime items that affected that but that also.
RB some local inflation.
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.
Right. So there was a onetime mainly.
Downtime event on the conveyor so that impacted the denominators.
<unk> the cost.
Perhaps the biggest is the power cost increase there is widespread drought.
In Brazil, particularly affecting areas with significant hydroelectric generation capacity and.
And given the the.
The equalization mechanism in the Brazil power market.
We ended up having some exposure to the spot price. So are the biggest increase.
In cost per 2 was related to higher than anticipated power cost. However, I should also point out debt that power cost impact would have been much greater.
<unk> 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 labor cost.
Are up about 5%.
Trending a little bit.
The annual rate increases we've seen for a number of years.
And we're starting to see some.
Inflation in key consumables of which paired with your use of the lot for example.
Most notably grinding media, which is obviously a steel derived product.
Ashford Toronto its cost.
Above our high principally due to the relative mix of open pit and underground where we are the mine sequence.
But we expect those cost to improve with.
As we get deeper into the life of mine as we could have a greater share of <unk>.
Underground production.
Okay.
And then.
There are some some good commentary on on production heading into 2022 and 2023 Im just wondering on the capital side.
Some of the historical guidance provided of 807 hundred for the next 2 years, there's obviously a lot of different.
All parts here.
And even our historical numbers were under question given potential project growth opportunities.
Whereas the current thinking on.
On the direction.
Future capital.
Numbers for 'twenty 2 'twenty 3.
Sure I'll, maybe I'll hopefully.
Current moving 1 cash.
Yeah look I mean, I think we do see us 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.
There's no question, we're starting to see inflation.
<unk> come into the system.
We think it will probably be a little bit greater on the capital side.
And.
I think it's a flow through if there is a macro and micro effect, there with commodity underlying commodity and Mike.
Microeconomic supply demand fan.
On that.
We think 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.
What that number will be but I think the key.
Comment we're trying to say is yes, absolutely those capital numbers that we put out.
Which we're there to support the 2.7% to 9 production.
Now come with the with an inflation caviar, Adam where we're going to be monitoring that and look to refine our.
View, so I would say, we're biased obviously increasing.
But I don't want to be pinned down on the on the number just yet.
Okay, and sorry, just to clarify I think you sort of understanding was.
Kind of flat 900 ish going forward to sustain the new hire.
Okay great.
It's sort of the impression that it could be above that sort of flat line expectation or just above what the historical guidance was which was I guess low.
Yes so.
I think and we've had a few discussions around this point, we are out there with a 9%.
Kevin in terms of capital, which was to support.
<unk> production guidance of $2.7 going to $2.9 'twenty 2 'twenty 3 we then said if to the extent we continue I think thats the point Youre, making.
Of continuing to run out at say the $2.9 level.
<unk>, we would expect the capital to come back up towards 900.
And we set.
Postal code.
Direction, there would be to use a sort of a $300 per ounce kind of assumption, that's how we'd characterize it and I think that's all still true.
Well.
I understand and get a little bit more focused here on where we might end up with the inflation effect on that.
Great and Josh we are seeing we are seeing inflationary impacts and some of our capital estimates part of the increase in <unk> was inflation related.
As.
Trying to allude to in my prepared remarks.
Some of it was scope related some of it was value added decision related but there wasn't inflationary component.
And we're seeing engineering firms construction companies.
Adding projects with higher unit rates than they would have say a year ago in recognition of the fact that.
Overall.
Net capital project space is 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.
Thanks for taking my questions. So firstly on <unk>.
We were looking for higher Crane, I think list from the western portion of the paint line and look at your guidance for this year it was saying that Tom.
Part of the drive up to $2.4 to $7.9 months alright, great compared to Q1, when can we expect to see that.
We're still targeting.
Production around.
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 grades, but as we are in that west part in the next.
Quarter in the fourth quarter.
We do expect a slight upward trend in grade, but not huge.
Yes, I mean, we're talking like <unk> 37 versus <unk> 4 right is that is that the variance.
It's.
Yes, that's right yeah, so I'm going to 0.4, yes, that's right okay.
And secondly on round mountain.
I'm still trying to understand because there was a bit of back and forth in terms of what debt capital spend would be to flatten that slope and when that was going to happen. So.
In 2022, and 2023, you've got to do this pushback to basically stabilize that.
That wall.
And I think that when you came back on the last conference call you mentioned that Youre kind of mining constrained there. So I'm just trying to understand that capex spend for I think it was 30 to 50 million tons that you had mentioned needed to be moved to.
To flatten that float and the timeframe I had assumed with.
2 years.
Hum at whatever $1 per ton cost I'm, just trying to understand you know 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.
Right. So we are doing that the mine plan to redesign right now.
The net we haven't finalized the slopes.
We put in the dewatering wells from last quarter, we are.
Core pressures are coming down.
And we are finalizing the geotechnical volume so the total quantum of tons is not yet finalized, but youre correct in the assumption that principally the moving of those tons will take place.
Over the next 2 years.
And we are mining constrained around my own does about 100 million tons a year. So instead of and this is the principal reason for the push out on the phase W ounces instead of <unk>.
Mining, a certain proportion of waste and ore, where it's 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 tons I can't tell you exactly what it will be right now.
But it's likely at the upper end of that range you've talked about.
Okay, and then my last question and I'll pass it off to 2 to other people just trying to understand cash.
Obviously at this stage.
So I was just.
Prior to the fire.
You know that happened in the last couple of weeks.
You were.
A little behind on the stripping in accessing the higher grade ore is that's why we saw the lower grade.
Coming through this quarter and some portion of that would then also have.
Ben I guess stockpiles.
Feeding the mill.
How are you doing now as well.
This 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, we are contingent upon you know 1 of the things that you had mentioned.
Was that you would get ahead or get caught up on your stripping. So that you could access those higher grade ores.
That were expected to drive I guess plus point plus 2 gram per tonne material next year.
That's right. So we continue to mine. So the mine was down from 82 days at a time.
The fire, but we're back up to the mining rate that we need and what's happening right now is principally waste movement.
<unk> building at this point.
Today medium grade stockpiles as planned we're going to get into the higher grade portion in the fourth quarter and those are gonna be assets.
Stockpiled as well during.
During the mill rebuild so in effect, what's happening is at 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.
A couple of months worth of high grade stockpile.
<unk> on the ground now.
The great net stockpile is not so high that it will displace what we would've mined from high grade next year anyway, but it does provide a derisking element in that.
It allows us some flexibility on mining rate next year.
So.
The short story is.
This mill downtime.
Provides the silver lining opportunity to get caught up on 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 grades they were north of $2.
Grant how material is that correct.
Yes, okay.
Okay, and then I had 1 last question sorry, just with the Q4.
Guidance that youll be starting up some time in Q4.
Could you provide just I apologize to ask this question, but could you provide some clarity because Q4 is a big pretty big window.
And is it.
Early Q4 late Q4 for the restart or is it just near the end of the air 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 mill the motor the trillions.
Other associated key components in general the big important things are okay. There has been damage to.
Some ancillary things like the the intake into discharge shoots.
Some structural work on our cyclone tower and.
Working backwards the thing that needs to be replaced and it drives the critical path to return to production as the trauma screen.
We've placed an order.
And we expect to have that arrive at site call.
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 screened sometime in November in a best case.
<unk> we'd have a.
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 100% throughput startup January 1 with an upside towards some production.
In December.
<unk>.
Okay. Thank you that's it from my questions.
Again to ask a question. Please press star 1 on your telephone keypad.
Your next question comes from Mike Parkin from National Bank Financial Your line is open.
Scenario you guys just a couple of questions left.
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'd say first of all it is.
By the nature of those cost are difficult to predict but the increase that I talked about in my remarks for this year.
Sort of a onetime thing not something we'd expect to repeat.
Next year so.
There is no reason to expect at this point that next year wouldn't be back to what we've.
Last year.
Prior to 2020 line.
And then just 1 final question.
Congrats from signing that agreement with the warranty and government.
Can you just give us a bit of color.
Where the sticking point wasn't tastiest sued and why that was excluded to get.
The main part signed off and where the kind of negotiations still sit with Tasiast suite.
Sure I'll hand, it off to Geoff Haire, who is.
Intimately involved in that whole process.
Our focus and priority always was to get the main event, which is.
<unk> seen us just mind buttoned down and we're very glad we've done as it relates to suit, Jeff maybe to share yes.
That's right Paul.
And Mike I guess, what I would say is.
Our previous arrangements on suit contemplated a different approach in an ownership structure.
And.
The main agreement on Tasiast.
And it was delaying our negotiations so.
Excluding it was a catalyst for signing the agreement and banking the main economic event Tasiast as Paul just said.
I would say that with the main agreement now sign are behind us.
The tower is wide open with the government to define solutions on sued in discussions.
Well certainly.
Continue and I guess, the last thing I would say as debt.
While soon as purse.
<unk>, it's not material at this time and certainly both the main task.
Cash used in northern properties that we own remain remained perspective.
Okay. That's it from me guys. Thanks, so much.
Okay.
Your next question comes from Danielle disconnect from Scotiabank. Your line is open.
The door, great. Good morning, everybody and congratulations on getting that Tasiast now.
Startup I guess startup getting it on track for startup in Q4.
Just.
2 questions I would like to start with Paul I'm, just coming back to that inflation question.
Both from capital.
<unk> and operating cost can we just go through and your cost structure.
You mentioned labor that 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.
Seeing inflationary pressures on your cost first and then coming back to your capital I have some more questions on that.
Okay, I'll walk through the cost bar for operating expenses in the labor area.
We are seeing cost increases that are only modestly higher than historical trends principally in Brazil.
Brazil.
And we're starting to see it tick up in the U S.
And Russia.
And what I'm seeing here.
Say, 3% instead of 2% or 4% instead 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 a normalization on that labor availability trend.
In terms of consumable.
<unk> <unk> is what it is you can do that calculation yourself on a net of hedge basis, we provide information on.
The degree of our hedging.
The other consumables, where we're starting to see especially more recently an uptick in inflation are key things like grinding steel cyanide explosives.
Importantly for example.
Zempel in areas like cyanide and explosives, we're seeing 10% increases that are principally going to be impacting Q.
Q3, and Q4 year to date the numbers there have been more team 2 or 3 years to 4%, but as we work through some of those lower cost inventories were now getting into material, that's 10% to 12% higher in cost.
On those.
The chemical chain, so cyanide explosives and reagents in the case of grinding media, particularly at the large mills like Tasiast <unk> and Fort Knox, we're seeing pretty significant increases at 30% certainly looking at the next 2 months and again, it's been more.
<unk> from 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.
Taylor, we're probably seeing as Andrea said in her remarks about a third of the.
The cash cost per revision upward as is due to the inflation component. So it has been.
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.
Half of the year on Opex.
Inflation itself wouldn't have taken those out of our original industrial yes.
Overall contact yes had it only been inflation, we would have been at the top end of our cash cost range.
The third.
Thats announced 12, so yes.
Got that.
Altogether, maybe on <unk>.
The capital cost it seems as though you mentioned Paul that the inflationary pressures on more on cash.
<unk>.
And <unk> it doesn't seem as though the specific issues or labor within that component that is have you 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'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.
Caters a value added equipment limited.
Paul 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 a result of both the monetary side in other words price inflation on a straight.
<unk> 5 commodities, we're also seeing that value add supply demand tightness.
And as I said earlier with referenced 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.
Great.
Straight up that's good color on that and then maybe just for Paul Rollinson.
Congratulations on the share buyback.
Just from the slide that you have $150 million coming from dividends and 150.
From the share buyback is that $1.50 from the share buy back a minimum and also what would you.
Now that's to see <unk>.
To go beyond that $1.50.
Sure. Thanks Tonya.
Yes look.
The.
That's certainly how we're looking at it it's a start I mean, the way I look at it.
Okay.
Our intention was always to get into.
To a buyback.
Situation at this point in the year.
Then we had the setback with Tasiast and as you know were as.
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 pre <unk>.
Neat.
Notwithstanding that we're continuing on with this buyback and I think that doubly sort of underscores our confidence in the business.
When we look at the 150, we've established as a sort of a baseline forever with the dividend.
It seemed it was a reasonable starting point given the scenario we're in right now it.
It would be to double target to double.
That $1.50 to 300.
We're on tractors Theres nothing operationally that we're looking at.
I guess if.
<unk> Rewind a couple of weeks if.
We were 90% confident we'd end up where we are today.
Few weeks ago, when we gave our mill fire update.
If we were wrong, if we were in the 10% category.
And it would have 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 that would.
Prevent us from continuing with this buyback.
Is it a <unk>.
We've tried to give some color I think a lot of people tend to put out.
5% in CIB.
Who knows what happens we've tried to be very specific.
You should hold us accountable for that number.
Could it be higher share well, let's see how the world goes from here.
Okay, great. Thank you.
There are no further questions at this time I would now like to turn the call live or it can be scary Paul Rollinson.
Great. Thanks, operator.
Thank you everyone.
Thanks for joining us. This morning, we look forward to catching up in person hopefully.
Light at the end of the tunnel in the coming weeks and months. Thank you.
This concludes today's conference call. Thank you all for joining you may now disconnect.
Yeah.
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Total revenue.
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