Q3 2021 Kinross Gold Corp Earnings Call
Yes.
Hello, and welcome to the Kinross Gold Corporation third quarter 2021 results conference call.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
I would like to ask a question. During this time simply press Star then the number one on your telephone keypad.
And she was marked withdraw your question press the pound key.
Thank you I would now like to turn the call over to Mr. Chris <unk>, Vice President Investor Relations. Please go ahead Sir.
Thank you and good morning with US today, we have Paul Rollinson, President and CEO and from the Kinross Senior leadership team Andrea.
Andrea Free Bureau, Baltimore, Jeff Gould.
Before we begin I would like to bring your attention to the fact, we will be making forward looking statements. During this presentation for a complete discussion of the risks uncertainties and assumptions, which may lead to actual results and performance being different from estimates contained in our forward looking information.
Please refer to page two of this presentation. Our news release dated November 10, 2021, MD&A for the period ended September 32021, and our most recently filed yet.
Are available on our website I will now turn the call.
Thanks, Chris and thank you all for joining us today.
We are pleased with how our portfolio is positioned today and our outlook going into next year.
Reflecting back on the five months since the fire at Tasiast.
I am pleased to report that the mill is back up and running the.
The expansion project remains on track.
And we expect to have built high grade stockpiles by year end.
Despite tests she is having recovered.
Our market value is still significantly lower than it was before the fire.
To the extent a portion of this may be caused by lingering concerns around tasiast.
Today, we hope to alleviate those concerns.
The restart of Tasiast.
Combined with the La Coipa project and strong performance from our broader portfolio puts us in an excellent position to grow production and free cash flow over the coming years.
Turning to the third quarter results were in line with our expectations and I'm encouraged to see signs of a continued return to normal across our operations.
Including a return to the Toronto office.
Okay.
Before turning the call over to Andrea for a financial review and Paul for some operating highlights.
I'll discuss some additional detail on tasiast the.
The results from our studies on the against can Lobo Marte type projects.
And some highlights from the quarter.
At Tasiast, thanks to the excellent work by our team.
The mill repairs were completed at a lower.
Costs lower than earlier estimates.
And we are on schedule to ramp up and reach throughput of 21000 tonnes per day by the end of Q1 'twenty two.
Over the next few weeks, we will be focused on getting mill throughput back to levels comparable to the first half of the year.
Okay.
Moving on to our projects.
Yesterday, we released study results for two of our key growth projects, which.
Which in both cases largely confirmed our previous views.
The pre feasibility study for you Danske reaffirms this is a low risk high return project.
Extending our presence in Russia.
We are now working on a feasibility study, which we plan to complete next year after.
After which we expect to make a formal construction decision.
We continue to see we continue to expect that your dense will be the first mine on our backend land package and we are targeting first production in late 2025.
Turning now to local Marty.
The feasibility study reaffirms all of the projects' key parameters.
Well Martin continues to offer long term growth optionality as our potential next mine in Chile after la coipa.
Moving now to third quarter results.
Our operations tracked well against our expectations notwithstanding the challenging environment as the world works to come out of the pandemic.
We remain on plan to meet our 2021 guidance.
And we are well positioned to deliver our production and cash flow growth over the coming years.
While our production growth and related cost efficiencies are expected to drive our cash flow higher.
We are also facing inflationary pressures, which will offset some of this andrea will provide more detail on this in a few moments.
On capital returns last quarter, we announced our share buyback program with the intention of spending roughly $150 million over the following 12 months.
I am pleased to report that to date, we have spent $50 million repurchasing our stock and are well on track with our plan.
We continue to view our shares as an extremely attractive.
And are pleased to be able to repurchase at these levels.
Finally, I would like to provide an update on the progress we've made with respect to ESG.
We established an ESG Executive Committee that will report to our board on a quarterly basis.
To further enhance our initiatives.
In addition, we are working to develop a road map that will support our greenhouse gas reduction targets for 2030.
We expect to complete this assessment and.
Provide detail around our targets for their year end results.
I'll now turn the call over to Andrea for a more detailed review of financial results.
Thanks, Paul.
I'll summarize our financial results from the quarter provide some comments on inflation and how we expect it may impact our business and then provide an update on our balance sheet.
Production during the quarter was approximately 483000 ounces of sales slightly lower at 478000 ounces.
The decrease in production from last quarter was expected and was mainly due to tasiast being down as a result of repairs to the mouth.
Cost of sales of $870 per ounce in Q3 was up from the previous quarter due to lower production and increasing inflationary pressure.
All in sustaining cost of $1225 per ounce is up compared to the previous quarter due to higher cost of sales and higher sustaining capex.
The increase in both cost metrics was expected and we remain on track to meet our revised guidance for the year.
Attributable operating margins remained strong in Q3 at 51% driven largely by strong gold prices. However, as previously indicated inflation is impacting our results.
We're currently seeing inflation in the range of 3% to 5% in the second half of this year, which we incorporated into our revised guidance last quarter.
Looking ahead as the price of key inputs remains elevated we expect inflationary pressure on our operating costs in the range of 5% to 7% going forward.
Having said that our per ounce cost metrics next year are still expected to benefit from higher production.
Higher commodity prices combined with tightening labor market, specifically in specialized contract labor such as engineering services and increased global demand for mining equipment are also expected to contribute to higher Capex next year.
We're going through our budgeting process now and we will be in a position to provide more specific cost guidance with our annual results in February.
Moving to our balance sheet, our cash position decreased slightly from the previous quarter as expected and we finished the quarter with $586 million of cash.
We generated free cash flow of $39 million during the quarter, which was a decrease from the previous quarter due largely to the absence of production at Tasiast, while still spending on mining and repaired.
Looking ahead to the next corner Q4, Capex is expected to be the highest of the year and we expect to be within our guidance range for the year.
Also during the fourth quarter, we expect to make a onetime payment of $50 million related to our normal course settlement of prior year taxes.
Our net debt at the end of the quarter with $860 million and our trailing 12 month net debt to EBITDA ratio increased slightly and is just under <unk> five time.
As Paul mentioned to date, we spent approximately $50 million on share repurchases.
$32 million of which was during the quarter.
This puts us on track to return approximately $300 million through dividends and buybacks from mid 2021 to mid 2022.
Finally, we are well positioned to further strengthen our balance sheet next year at our production and free cash flow ramp up.
I'll now turn the call over to Paul Tomorrow. Thank you Andrea today, rather than a detailed review of each operation I wanted to discuss a few key highlights and we'll be happy to take questions.
At Tasiast as Paul mentioned, the mill is up and running neutral screen and other key items arrived on site as scheduled and were installed last month.
The mill is periodically achieving pre fire throughput rates as planned and we are in the process of ramping up and expect to achieve these levels on a sustained basis with the goal of achieving full production rates throughput rates in December.
While the mid as well the mill is being federal we're ahead of schedule, we've elected to use lower grade ore during the ramp up period. So the initial production will be modest.
Furthermore, during this initial period, we're replenishing inventory on carbon following its depletion in the weeks after the fire.
All told we expect to produce approximately 15000 ounces during the fourth quarter and most importantly exit the year with throughput rates of around 18000 tons per day.
We are on track initially with the project.
21000 tonnes per day by the end of the first quarter.
I'm also pleased.
To say that the mill repair costs of approximately $20 million were considerably lower.
Our initial estimates.
Mining activities at Tasiast continues through the quarter and as Paul mentioned by the end of the year, we expect to have built high grade stockpiles.
Mining rates during the quarter lower than initially anticipated as a result of challenges in drilling and blasting.
How are these issues are being addressed and we remain on track to achieve strong production Tasiast next year in line with our technical report in our studies.
The 24 K project is also progressing as planned with completion expected in mid 'twenty three.
Moving to run my own the optimization study, which includes phases is on schedule and we expect it to be completed in the first half of next year.
The geotechnical work is advancing well and we will provide the data needed to make conclusive decisions right. The ultimate slope angle as well as any needed step outs or berms.
And to date the study is not presenting any significant surprises.
In the quarter. We also completed the relocation of the wastewater from the top of the pit to further stabilize the wall.
Moving to the results that you Didnt PFS. This study confirms the project is expected strong returns the conclusion of the PFS in combination with more than 55000 meters of infill and Geo Tech drilling has allowed us to convert approximately 3 million ounces from resources to reserves.
Most of the study outcomes are in line with the assumptions at the time of the acquisition with some improvements in recovery and production.
Capex, However has increased by approximately $150 million.
Broken down roughly as follows in thirds.
First third approximately from an inflation.
Another third is from value add decisions that have improved the NPV become with an added capital cost for example, finer crushed for better recovery and finally, a third from scope changes, including earthworks and camp facilities, which are more costly than initially anticipated.
As Paul mentioned, we also completed the F S a little Marty.
The study confirmed the projects' key parameters.
Pit optimization work and infill drilling completed over the past two years resulted in an increase of local marty's reserves by approximately 300000 ounces into its resources by 600000 ounces compared to the PFS.
The estimate for initial capital increased by approximately 8% compared to the previous study, but mostly due to the reclassification of certain plant elements from sustaining to initial.
The NPV is in line.
We completed the study with key environmental and community considerations as part of the project design and continue to advance the EIA submission.
Local Marty will now enter a lengthy permitting phase, which we expect will take three years construction.
Decision will not be made until after that with construction beginning no earlier than 2025.
Mining at local market will not begin until permitting has concluded and we've completed mining at la coipa as the two sites currently planned to use the same water source.
We continue to see further potential to extend looks like but we're bringing satellite deposits into the mine plan and we've made significant progress on that.
Therefore, we may ultimately push out a little Martha to accommodate more production at La Coipa, which would allow us to further leverage our capital investments in Chile and to extend our overall production profile in that country.
And with that I'll turn it back to Paul.
Thanks, Paul.
I'll, just wrap up by reiterating that.
Production at Tasiast has resumed and our operations are in excellent shape going into next year.
Our balance sheet is strong and we continue returning capital to shareholders through dividends and buybacks.
And our production pipeline continues to grow as we advance our projects and position our company for long term success.
With that operator, I would now like to open up the call to questions.
At this time I would like to remind everyone. If you would like to ask a question. Please press Star then the number one on your telephone keypad.
We'll pause for just a moment to compile the Q&A roster.
Your first question comes from the line of Tyler Langton with JP Morgan.
Good morning, Thanks for taking my questions.
I guess just to start for the for the Danskin level. Marty studies can you just provide some detail on the sort of the level of costs are using.
For both Capex and operating costs are using more sort of current prices and those estimates are some sort of sort of historical average or sort of a normalized range.
We're using current prices. So in the case of capital estimates are there based on submissions from contractors and equipment suppliers in the case of <unk> those are clearly our near or in time.
As for operating costs, we are using current costs.
And in other words, the inflationary impacts that have been seen over the last year have been incorporated into that.
Okay. So if sort of inflation is more temporary then we could definitely see a reduction potentially in those items.
Certainly hope you're right on that but as I said at a you didn't ask a full third of the capital cost increase was due to inflation and so if inflation goes.
Abates and prices dropped then yes, we could see that but I don't anticipate that.
Alright, and I guess the same is true.
And then for operating costs too if sort of in place absolutely. Okay, yeah, the operating costs.
You are correct.
Okay, perfect and then just to Tasiast.
I know you mentioned you're on track to reach the 24 K by mid 2023 could you just remind us sort of.
Key milestones between now and then and if Theres a COO.
Capital will have to be spend just sort of details along those lines.
So we're looking at about a $30 million to $40 million of capital in that program to get from 'twenty, one to 'twenty four and it's a lot of incremental debottlenecking.
So we're looking at additions to the screening capacity on the downstream side of this of the Sag mill itself.
A fair amount of work in the Leach train with launders in Interstate screens. The addition of tanks. So it's a lot of incremental little Debottlenecking type work.
And as you said, we're ramping up to 24 and the plan in the middle of 'twenty three.
Got it perfect. That's it for me thanks, so much thank.
Thank you.
It comes from.
Your next question comes from the line of Iraq, Tariq with credit Suisse.
Hi, good morning, Thanks for taking my questions. Maybe first on 2022 cash cost. So you mentioned that on the inflation side, maybe 5% to 7%.
But then.
Maybe some offsets on from the higher production. So I'm just trying to get a sense of.
How should we be thinking about next year's cost relative to the.
$830, an ounce cash cost guidance for this year.
Well thanks.
I would just remind we have we're still in our budgeting cycle.
We do provide our cost guidance explicitly when we get in to mid February with reporting of year end.
But it is a numerator denominator effect with higher production, we do expect the cost to go down.
But Andrea do you want to just.
Maybe you can make a comment there sure so.
We we did I guess going back we did telegraph that next year cost will be coming down that sort of a tailwind and headwind is obviously inflation.
I think we.
We still do expect the cost for 2022 will be lower than 2021, but just not as large as we previously expected.
As Paul said coming from the growth in production and that growth coming mostly from Pakistan quite that which are lower lower cost operation and I would just remind we do for revenue assumptions used 500.
Obviously, we're trying to that's below where we've been recently with spot, but it's closer in terms of anticipating taxes and royalties.
Okay, Great and then maybe just switching gears on <unk>. There was some commentary in the MD&A about temporary grade variability can you just talk a little bit about what happened during the quarter. The grades were a quite a bit lower than I was expecting at least and maybe how to think about Q4.
So <unk> two if you look at the long run I'm talking over years, depending on where we are in the mine sequence certain parts of the pit behaved better than others and in this past quarter, we were mining at edges of the pit, which historically are more difficult to predict predict.
The grade as we head into the last quarter, but particularly next year, we're going to get into the more reliable point for a great scenario. So it's a temporary effect, which is not out of line with what we've seen over long run.
Our performance on Great America too.
Okay, great. That's it for me thanks.
Your next question comes from the line of Anita Soni with CIBC World markets.
Good morning, Thanks for taking my call.
I just have a question with respect to.
The mining rates at Tasiast can you give us an update on how youre doing on that on the stripping you. I think you had mentioned previously that you'd have to catch up on that in order to get the grades for 2022.
Yes, Thanks, you need us so we still expect to hit the grades for next year. Most importantly, we have had challenges in the mining rate, we accumulated probably at 35 million tons shortfall over the last two years.
You will remember the story it was more acute last year due to COVID-19 restrictions and quarantines.
We fell about 27 28 million tons behind last year. This year, we struggled to ramp up to the full run rate, but it's not as bad as it was last year, we've lost about six or 7 million tonnes. This year. However, those are both within the buffer we have an access to the higher grade material in west French four so by the end of this.
Year, we will be stockpiling higher grades and we don't anticipate an impact to next year's production, we will be in line with the technical report to the to potentially slightly beating it.
Okay.
And then in terms of round mountain could you remind me.
What the cost.
I guess the constant were excluded this quarter were a little higher than I was expecting so could you remind.
Find me where are we on that.
Ultimate number that you thought that you were going to exclude for this year out of your costs and how much more is there to go in Q4.
I'll describe that likes to remind me of the treatment of it next year.
Just a little.
But a lot of stuff and flying at us this quarter.
Anita I'll describe the physical situation and Andrew will talk about the cost treatment and we successfully so we've we've completed a lot of geotechnical work, which includes the installation of dewatering wells some pretty detailed analysis on.
Modeling the pit walls, and we've come up with a pretty confident number we're relying on the pit wall. So we've been able to steepen them a little bit from the last time, we talked.
We have moved that waste dump that was on that wall that needs to be laid back and we're now mining waste.
Below that as we saw from the slopes and our total estimate for.
Net mining over and above what had been anticipated, it's still in that $50 million to $60 million 60 million ton range.
And we're working on that plan asset cost treatment Andrea over to you.
We did.
I think about $43 million.
Costs related to round mountain.
Adjusted out at that normal costs.
There is.
A little bit more coming in Q4, but I think we guided around $50 million.
And we will be within that number.
Okay. Thank you that's it for my questions.
Your next question comes from the line of Kerry Macquarie with Canaccord.
Hey, good morning, everyone. Just a question on 2022, just given all the moving parts in 2021 can you just remind us.
Sort of where the growth is coming from in 2022 outside obviously at Tasiast.
So.
Tasiast ramping up to about $6 to $6 50 range as I said in line with TR, That's a big one and we're still targeting about 200 from La Coipa next year and Thats, obviously production, where there wasn't production before those are the two.
Key components, but we're also seeing.
A nice number at Fort Knox, and the 300 plus range.
And so those are the principal contributors tasiast lacroix buying a little bit of Fort Knox.
And the timing I couldnt quite again.
Mid year.
We are the project is going really well, where we're ahead of <unk>.
Plan on stripping mill.
The mill refurbishment is going well and are happy to say that our capital cost there had been trending under our budget. So we're in good shape at La Coipa, and I would be targeting mid year.
On first production.
And as I said around 200, plus minus next year.
Yeah.
Okay, and then maybe just on Tasiast you mentioned the exit rate of about 18000 tons a day, whereas the mill currently at.
We've been achieving 80% to 90% of what we like we just need to get that on a sustained basis.
And the target is to exit the year that 18 19, but we've been doing say 14 15 16.
As we get the mill back up and running.
Okay, great one of the reasons that the.
The refurbishment costs less than initially anticipated that the mill ended up being in better condition than we had initially feared and that of course translates into good operating performances were back up and running.
Great. Thanks.
Your next question comes from the line of Mike Parkin with National Bank financial.
Thanks, guys for taking my question and congrats on a good quarter and looking forward to 2022.
Just a couple of questions from me most have been answered.
With Parakeets U.
Costs have been a bit elevated for power because of the water situation. There and sources can you just give us an update on where that kind of stands now.
Yeah. So in Brazil, we do we do own power plants, which generate which serve most of our needs. However, theres a market stabilization mechanism in parallel to that even when you own your own power you contribute to the overall grid. So you do take a hit when.
When there was drought so what's happening in Brazil is there has been broad drug conditions that have led to shortages in hydroelectric power.
In fact, it's the worst of the year since the 19 thirties and so as a result of that we're paying higher power costs and that we expect that to continue in the near term, but the important point here is that our power costs would have been much higher.
If it weren't for the fact that we own. These hydro dams. So we are really happy that we have these and I should also add that.
This drought, which is impacting hydroelectricity across the country is not impacting us in munis, you rice, where site water balances remain healthy.
Okay, that's great and then.
With you didn't.
The exploration potential you've kind of indicated in the past is quite interesting and compelling there's a kind of a high grade structure going through the pit can you just give us an idea.
Where you are in terms of following up on potential stepping out of the pit shell and checking for continuation of that trend and when we can expect kind of color and update on that program.
Yeah. So we've the focus as you know over the last year has been on the infill program.
We're really happy to report that the resources in good shape, we've begun over the last.
A few months the first full season.
And what we're doing is we're looking at targets along strike on the toolbox on fault, there as well as depth extensions.
Principally.
Northeast and southwest so what I would what I would guide you towards is with our exploration update that we typically do in February you'll be seeing a little bit more detail on the results of these.
These programs that are really focused on areas outside that principle, you Didnt reserve.
Okay. That's great. Thanks, very much guys.
Your next question comes from the line of Greg Barnes with TD Securities.
Okay. Thank you you seem to be hedging your bets a little bit on the logo is it.
The lower return is it the permitting issues I'll, just perhaps you're hopeful it another project steps.
Steps into the pipeline ahead of us.
Why a little bit cautious around that one.
I think I mean the.
The key point.
There is.
The results are being reaffirmed what we expected yes, exactly how the study came out.
I think I don't know that we're hedging our bets, where we're really just again looking at this as a linear transition.
From La Coipa.
Over the Lobo.
We do we do have in front of us a lengthy permitting process.
We just.
We just want to take the time to make sure we do the very best we can.
But we're not in a rush to try to get <unk> up and running in fact.
There's a reasonable chance we continue to extend.
La coipa.
And Lobo may get pushed out.
Perhaps a year or two.
And Greg the best hedging that you are talking about really relates to let me just compare your density in local marketing in the case of you didn't get a lot of the permitting work can be done concurrently to engineering and we anticipated having those permits in hand, when we make a construction decision in fact that you didn't score we're even looking at potentially doing some early work on capital.
<unk> next year in the case of local Marty we had to get the engineering to quite an advanced level in order to even begin the permitting process. So whereas that you didn't get the parallel process at Lobo Marte, it's very much a serial process, where we have to have advanced the engineering.
And then we go into.
A very involved the EIA process, which will take two years, followed by sectorial permits so it's.
The bed hedging is really about the complexity in the very long time period.
Get projects over the line on the permitting side in Chile.
What about the water issues in the area and I.
I think there was some hope you could connect equate to an end.
Mobile on that front I know you've had issues with water in Chile historically.
Well I think water is a sensitive topic and Chilean region training in the attic hammer.
But again I would remind that we have.
Permitted.
Wells that are pumping water.
Ready to go they are pumping today at La Coipa and part of our strategy here. We've we've shown it in a couple of maps in different slides.
Interestingly the water wells are physically located closer to.
Lobo than they are to la coipa so.
Part of our strategy here is to look at.
Pumping water in the other direction.
Why do we have dedicated to.
Currently to la coipa, turning around in <unk>.
Pumping at the other direction.
Two logo, which is closer.
Okay.
So youre not concerned on that front.
Don't see that as a potential hurdle in Tennessee.
It looks like I think.
Permitting is always a very important.
It's it's.
Something we take very seriously.
And.
And particularly in region through we understand we know water is a sensitive topic, Greg water is foremost on our list of things to look at through this permitting process.
We look at our Chilean assets with long term a long term view, we have a big resource still on the books at Mary.
We have a very large reserve here at Louisville Marty.
And we see increasing potential at la Coipa all of these are <unk>.
Subject to difficult permitting environment.
But if there is one.
We started to look at.
What does a bigger strategy potentially it looks like for Chile. There are commercial options. For example on desalination would we ever take the lead on in Desalination project. If we had larger inventories. These are all conceptual things. We're looking at right. Now in addition to the straight line permit on water use from the La Coipa wells. So the base case is the la coipa well situation.
But we're also looking at conceptual other studies for options that may serve not only logo, but also some of our other assets and potentially even further afield. So there there's a parallel track.
Got you that's great. Thank you.
Your next question comes from the line of Tyler <unk> with Scotia Bank.
Great. Good morning, everyone. Thank you for taking my questions.
Just wanted to come back, but call Tomorrow I just Tom just.
Just back to Tasiast and La Coipa.
Can you remind me just on the stockpile at Tasiast, what are we going to have by year end and lock rate just so that we know what sort of buffer we have.
Yes, we're targeting 60 to 70000 ounces stockpiled to five.
Okay.
Thank you for that and then when you were down with the now.
Is there any buffer time that you've gained timeline for.
Thinking and some of you are there.
Portions of the MAU that weekend, we haven't heard of a buffer have you gained any time on that to get to 24.
So as you know telling you there's something we've been talking about we continue to look at those opportunities. We haven't moved off our mid 'twenty three timeline. The priority right now has been the 20 <unk> and the rebuild of the Sag mill.
Our engineering teams continue to look for those opportunities, but we're not yet ready to move off that mid 23 date.
I appreciate that I just wanted to understand if there was a bit of a buffer in that.
If we had a buffer in the system. It was on the ramp up timing to 'twenty one.
So you might ask we've moved our Q our timing on 'twenty. One can you ramp up to the end of Q1, and we haven't adjusted our numbers, we probably had a little bit of a buffer there.
Okay.
And then maybe just maybe just coming back to La coipa.
Just reading just listening to what you're finding and then.
Continue then to my reserving resource question.
It appears that.
Paul had mentioned that maybe we are.
But to gain another one or two years of additional mine life before so pushing out local market that that amount of time is there anything else that you're finding in the region that would make you think it would be beyond one or two years, yes, definitely so we are theres four or five dip.
Deposits or phases of deposits that we're looking at bringing into the final over and above what's in the current plan. The first step is a joint venture agreement with Codelco and Thats, a multi phased deposit and.
We've got to an agreement with Codelco and the first phase of that it's not 100% inked, but we anticipate having an agreement with them signed in the upcoming months.
I would add one to two years to it and then beyond there Theres a second phase of that deposit it's called <unk>.
It would have a again a multiyear potential beyond that and then also on our books are two other little satellite pits called Ken Ken and <unk>, which were.
Again at years so if.
If all our dreams came true at La Coipa, we could see a path to production out too.
27, even 28.
Which would.
Several years talking four or five years. So the initial la Coipa mine life estimate and as Paul said, it would push out a little Marty and we would actually want that that would be a good outcome. These are low capital expansions at la Coipa. These are pretty high quality pits.
And to the extent that we were able to push out a little bit Marty as a result of new production at La Coipa, We would welcome that as an outcome.
If all the stars align then we wouldn't see local market until you know maybe after 2028.
Definitely if that works that would be a good outcome for us and we are working towards that and what we're going to do.
In our messaging is as we bring these satellite pits into the La Coipa plan, we will announce those as we come up so one of the things that will drive slightly higher capital for US next year is we're going to be doing some stripping work at <unk>, which is at codelco JV deposit.
Okay.
And staying on to the reserve and resources.
Just wanted to see how the year end 2021 is shaping up.
<unk>. The addition that you have in Russia to reserves, but I just want to talk about the mine sites.
How do we feel about reserve replacement number one.
How do we feel about the resource category.
Affirming that youre, not changing cut off grades and all your pricing for your reserve and resources.
Yes. So you you took my freebie away from me there on <unk> because that was the CR replacements.
Paul.
Yeah.
We were working on.
Other potential add so as I mentioned in my prepared remarks, we're working on a phase I study at round mountain it'll be closer to whether we get that into a year and thats a pretty big.
Inventory, there that's going to be between 600, and a 1 million ounces.
We also just added 300 at logo Marty I know, you're probably going to give me credit for that and then we're going to have little dribs and drabs at at the other mine sites. We are still using 200 for a reserve optimization.
Number.
And we don't have any plans to move off that with this year end.
Okay. So.
I think we're probably not going to have a replacement. If you don't give us credit for you didn't get a little Marty.
Which together $3 3 million of reserves, we're likely not going to have a full offset in the rest of the portfolio.
Okay, that's fair enough.
And then my last question as far Andrew I, just wanted to come back to that slide nine plays talk about inflationary pressures and thank you for that flight just trying to understand.
If we were to assume.
That the first half of 2021.
We didn't see inflationary pressures would it be safe to assume and again all things being equal.
That 5% increase would be if we went to benchmark it I maybe dollar per tonne.
On the first half of your cost of 2021, I'm, just trying to see Directionally, what I should put the 5% and 10%.
I need a bank.
Like it's not only the 2021, because you've got some inflation for the second half and now like benchmarking it to 'twenty first half of 2021 on a dollar per ton be correct.
How should I think about that.
Yes.
Maybe we want to come back to you on that one tenure, we can drill into it and a little bit more detail.
Some of our numbers in front of us.
Okay I appreciate that on the capital side too.
You.
I think on the capital side you can.
We had we had.
Last year, given the $800 million.
Our capex for 2022, so that's kind of where you can apply that.
The inflationary.
Asking rent that we've given you can start with that $800 million and then on top of that we may have some other increases.
That 800 million number was based on project approved at the time and a little bit for you again on top of that so there's other things that are coming that will come in.
The capex on top of that.
In addition, Kevin right to the extent, it's not inflation related its decisions, where we've decided to think about reinvesting into our business. Okay. So 10% on the 800 plus other approved projects.
That's right.
Tony you've picked up on the inflation note, obviously on commentary on us and other companies.
It's still there and in some cases still increasing so it's not like inflation hit.
<unk> got to a new level and stabilized.
Some key commodities, we continue to see price increases.
Okay, just trying to make a stab at what we think we could see in 2022.
Some sort of a stabilized level and appreciate that it is moving to the moving target.
Mhm.
So I'll wait for some more.
Thanks.
Once again, if you would like to ask a question. Please press Star then the number one on your telephone keypad.
Next question comes from the line of Matthew Murphy with Barclays.
Hi, Yes, I was going to ask about the Capex outlook.
What what do you think the chances are that.
Capex is.
<unk> up as opposed to.
Declining I know you had.
Talked at the time of your last guidance of.
The sustaining levels to sort of sustained production long term and so.
You tack on inflation and we're still in a pretty healthy gold price environment I'm, just wondering directionally, how we should think about it.
I think I think we just covered it a little bit.
Matthew it's.
I think we're guiding up.
Both from inflation and from a from a.
New project investment perspective.
We expect up I think.
In the past, we view some directional sort of rule of thumbs.
We've said it'll get you into the right zone, if you're thinking about capital in terms of say 300 Bucks an ounce. If you inflation effect that you had.
Just that to sort of $3 30 per ounce, but directionally.
Directionally.
Up.
Yeah, Okay. Thank you.
Okay.
Your next question comes from the line of Anita Soni with CIBC World markets.
Hi, just to follow up on that.
Other expense line item.
The I'm just trying to get some color on what would be included in that for next year would there be any more.
<unk>, obviously done and then round mountain would there be any costs there still.
I mean, it's difficult it's difficult to predict just by the nature of other operating costs, but yes, I mean, obviously, we had some bigger bigger ticket items.
Specific to this year so.
Don't really expect any more of those two items.
Going forward and Covid costs, which were part of it historically are coming down yes, COVID-19 costs for the quarter were about $5 million and they have been trending down.
From last year throughout this year so.
As far as as far as we're saying, we expect them to continue to go down but well.
We'll continue to watch the clock.
Okay. Thank you.
And at this time there are no further questions are there any closing remarks.
No. Thank you all for joining us today.
Well look forward to catching up with you in the coming weeks and months. Thanks, everyone. Thank you operator.
Youre Welcome. This concludes today's conference you may now disconnect.
Okay.
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