Q1 2022 Kinross Gold Corp Earnings Call
Okay.
Good day, and thank you for standing by.
Welcome to the Kinross Gold first quarter 2022 results conference call and webcast.
At this time all participants are in a listen only mode.
After the speaker presentation, there will be a question and answer session.
I'll ask a question during the session you will need to press star one on your telephone.
If you require any further assistance please press star zero.
I would now like to hand, the conference over to your first speaker, Mr. Chris victim House. Thank you and please go ahead. Thank.
Thank you and good morning with US today, we have Paul Rollinson, President and CEO and from the Kinross Senior leadership team, Andrea Febrile, Baltimore and Geoff Gold.
Before we begin I would also like to state that we will be making forward looking statements. During this presentation.
For a complete discussion of the risks and uncertainties, which may lead to actual results differ from estimates contained in our forward looking information. Please refer to page two of this presentation.
Our news release dated May 10, 2022 <unk>.
The MD&A for the period ended March 31 2022.
And our most recently filed Aif all of which are available on our website.
I'll now turn the call over to Paul.
Thanks, Chris Thank you all for joining us today.
This morning, I'm going to provide a brief overview of our first quarter results and our updated guidance.
Then I will provide an update on our key areas of focus, including our balance sheet and capital allocation plans.
Our operations and exploration.
And then comment briefly on M&A.
After that I will turn the call over to Andrea and Paul will provide additional detail on our quarter and our outlook.
With respect to our first quarter results our assets performed largely as planned.
And are set to ramp up throughout the year.
It was a low production quarter as expected due.
Due to seasonality in our mine planning schedule.
But we remain on track to deliver stronger performance as the year progresses.
Two key operating milestones were achieved during the quarter.
First.
Tasiast delivered record production.
And exited the quarter with throughput of approximately 21000 tonnes per day.
And is on track with its target of 24 K by mid next year.
And secondly, la coipa poured its first Dore bar in February and is on target to ramp up production in the back half of the year.
With respect to guidance in our news release last night, we updated our outlook.
To reflect the pending divestitures of our Russian operations and Toronto.
We have effectively restated our original production targets <unk>.
Excluding Russia, and Toronto for all of 2022 and future years.
With all other operations remaining on track with our original three year guidance.
Regarding costs.
We updated our original guidance to exclude Russia and Toronto.
But you also reflect a higher gold and oil prices. We are currently experiencing.
This meant that instead of lowering operating costs, we left the guidance at $830 per ounce.
Reflect these higher prices.
At this point, we are not making further provisions in our guidance.
But we are monitoring the macro environment closely.
And we will adjust later in the year if appropriate.
Andrea will comment more on that shortly.
I now want to address our focus on the business moving forward given the two major catalysts that have impacted us.
Namely <unk>.
The pending divestitures of our Russian assets in Toronto.
And the continuing inflationary pressures, we see across our business.
With respect to our balance sheet.
We are in a strong financial position with.
With an investment grade balance sheet, which we expect to continue to strengthening over the coming years.
With respect to our capital allocation strategy.
Our objectives have not fundamentally changed.
We will continue to reinvest in our business.
Maintaining the strength of our balance sheet.
And return capital to our shareholders.
In the current gold price environment, we expect to continue with our baseline dividend and share buyback plans.
Returning approximately $300 million per year to shareholders.
However, given the current environment.
We will be closely monitoring the gold price.
And the impacts of inflation on our margins as we go forward.
Turning to our operations.
Combination of the pending divestitures with the acquisition of Great Bear.
Has reshaped the geographic mix of our portfolio.
We now have 70% of our production coming from the Americas.
Two tier one assets Erika to you on Tasiast.
Counting for approximately half of our production.
A return to low cost operations in Chile with <unk>.
<unk> for further growth.
And our World Class development project in Canada.
In the current environment, we are very focused on continuous improvement and cost management.
Maintaining our reserves and growth through exploration.
Starting with continuous improvement.
We are maintaining our strong focus in this area to help manage ongoing cost inflation.
For example.
We are executing our plan to enhance synergies in Nevada between Bald mountain and round mountain.
We are making investments in grade control to minimize dilution.
We have developed alternate supplier strategies with a focus on total cost of ownership over the lifecycle.
And we have been advancing certain vendor payments to lock in preferential pricing where possible with respect to maintaining our reserves. We are analyzing our reserve pricing in the context of today's environment.
We recognize that ongoing inflation puts upward pressure on cost structures.
And in turn the gold price required to support the economics of new projects.
We are not considering dropping cut off grades or otherwise compromising the quality of ounces we mined.
In light of higher gold prices.
Rather we are evaluating how to realign the reserve price assumptions on both gold price and input costs.
To more accurately reflect today's inflationary environment.
We are not changing our reserve pricing yet.
But it is something we continue to analyze.
Finally with respect to exploration, we are excited about our prospects and have increased our budget to its highest level in recent years.
With respect to our brownfields exploration program.
We have several exciting projects, including curlew and.
And potential underground extension is that a number of our existing mines.
We plan to advance over the coming quarters.
Great Bear in particular will be an exciting and significant area for continued investment to demonstrate the assets world class value over time.
I am excited about the potential of our exploration programs and I expect over time, our investments in this area will surface value in our pipeline of projects and ultimately layer growth and profitability on top of our baseline production.
Next I want to provide a brief comment on the M&A question, we've been getting.
We are happy with our balance sheet, our current operating profile and pipeline of opportunities and don't feel any pressure to replace the production from Russia or Toronto.
It's been a challenging first quarter.
With our pending exit from Russia in Ghana.
With that 70% of our production now comes from the Americas and.
And all things being equal.
We'd like to see this rebalanced portfolio.
Contribute positively to our share price.
Before handing off to Andrea I will briefly discuss ESG.
Last night, we released our 2021 sustainability report.
We continue to rank well among our peers in major ESG rankings and ratings and more importantly, we remain focused on doing what's right on the ground.
For example.
Last year.
We generated approximately $3 $5 billion and economic benefits in our host countries.
We recycle 80% of the water used at our sites.
And we approved an investment in solar at Tasiast and <unk>.
Strong step towards our goal of reducing greenhouse gas intensity.
We are proud of our achievements and our consistent performance in all aspects of ESG.
I will now turn the call over to Andrea.
Thanks, Paul.
I'll begin with financial highlights from the quarter, then provide a overview of our balance sheet and expand on our capital allocation strategy and finally comment on our updated outlook.
I'd first like to point out that all of the first quarter operating and financial metrics I'll be discussing today exclude our Russian operation.
Which have been classified as discontinued operation.
With respect to Serrano, we're targeting to close the transaction in the second quarter and our results will include the <unk> operations until that time.
As Paul mentioned, our first quarter production was anticipated to be the lowest of the year and we expect improvement as we progress through the year with the second half in particular being stronger than the first half.
Starting with production, our first quarter production of 410000 ounces with lower than Q1 last year, primarily due to lower production from our U S operation, partially offset by record production Cassia.
Production cost of sales of $1000 per ounce and all in sustaining cost of $1245 per ounce were higher than last year due to lower production and inflationary cost pressures.
First quarter free cash flow was a net outflow of $1 million. However, this includes $156 million of working capital outflow adjusting for this our free cash flow would have been $155 million.
Our first quarter Capex was $106 million with the lower band compared to last year, driven by lower capital stripping and timing.
Lower first quarter Capex is typical for us and we expect higher spending throughout the rest of the year.
Lastly, as noted in our news release last night, we recorded a noncash impairment charge of $670 million related to the planned divestiture of our Russian operation.
The accounting fair value was determined based on a $680 million of consideration to be received with the deferred payment subject to an elevated discount rate given the current political climate in Russia.
Moving to our balance sheet. In addition to commenting on our financial position at the end of Q1 I will also expand on our capital allocation strategy.
Our cash and liquidity position remains strong at the end of the quarter with approximately $450 million of cash and $1 $7 billion of liquidity.
During the quarter, we drew $1 $1 billion from our revolver in connection with the closing of the great Bear transaction and subsequently repaid $1 billion with proceeds from the new term loan.
As such our net debt increased from $1 1 billion at the end of Q4 to $2 $3 billion and our trailing 12 month net debt to EBITDA ratio increase from just under <unk>.
Eight times at the end of Q4 to approximately one eight times, excluding Russia, which is still very manageable, we expect our leverage ratio to return to around one or slightly below by the end of the year.
Assuming current gold prices.
With our now Americas focused business, along with Tastiest entering its best year, we remain well positioned to generate significant free cash flow over the coming years.
When considering plans for allocating this free cash we look at a range of scenarios, depending on gold price and inflation to balance our priority.
As Paul mentioned, we remain committed to our baseline return of capital program beyond that we plan to prioritize reducing that given the inflationary environment.
At current gold prices, we plan to allocate about $1 billion to debt repayment over the next few years and we expect our net debt to EBITDA to continue to decrease going forward.
Turning to our revised guidance note that all figures I reference are within our typical range of plus or minus 5% and exclude both Russia and Ghana for all of 2022 and going forward.
Starting with production, we expect to produce 215 million ounces in 2020, 223, and 2023 and $2. One in 2024, which is consistent with our original guidance when excluding Russia in Toronto.
Looking at cost guidance, given we were revisiting these metrics, we updated our assumptions for gold and oil price to be more reflective of the prevailing environment.
Specifically, we are now assuming $800 per ounce gold and $100 per barrel oil prices, rather than 1500 and $70 million previously.
With respect to Capex, we have right sized our capex profile and now plan to spend $850 million in 2022, and expect Capex to remain in the range of $750 million over the following two years before factoring in additional inflation beyond this year and potential additional growth projects.
Moving on to inflation, we continue to see inflation through the first quarter and in some instances above and beyond what we factored into our budget and guidance.
As a reminder, we reflected a 7% inflation assumption in our operating cost and 10% to 15% and Capex at this point as Paul noted, we're not adjusting our inflation assumption, but we are monitoring the trends and we will update our views if necessary.
Lastly, our revised exploration guidance of $140 million includes approximately $60 million related to great. There.
Excludes funds previously planned for Russia in Toronto.
Before I hand off to Paul to Maury I'd like to reiterate that although our production profile has gotten smaller our recently announced divestitures do not have a significant impact on our expected free cash flow over the coming year.
Free cash flow generated at Coupal was expected to be reinvested into the construction of <unk> and with the Serrano smaller scale its contribution to the consolidated profile with modest.
With that I'll now turn the call over to Paul.
Thanks, Andrea this morning, I'll provide some key updates on our operations and projects and share some highlights from our great Bear project.
I'll start with Tasiast and <unk>.
<unk> strong first quarter with a new production record of 134000 ounces.
Head grades were strong this quarter and we're encouraged by the improvements in mining rates throughout the quarter as the site overcame challenges posed by Omar Chrome variant earlier in the year.
The ramp up to 21000 tonnes per day went well in the quarter with several days, reaching this threshold.
As is typical with ramp ups they were down days during the quarter associated with tie ins and troubleshooting, but the outlook on Tasiast remains strong and the site is on track for a record year with over 600000 ounces of production.
The second phase of the project ramp up to 24000 tonnes a day.
Also remains on track for the Middle of 2023 engineering is planned to be completed in Q2 and construction of the third Leach tank is now 70% complete.
Looking across the rest of the portfolio our operations are tracking well against our plan and our projects continue to advance.
As Andrew mentioned, our production profile. This year is weighted to the second half.
Particular at La Coipa, Tasiast in Paris, two and to a lesser extent the other sites also.
Starting with Macquarie, Bob we achieved a significant milestone and poured our first gold bar during the quarter.
The project was delivered on schedule and under budget, which is a significant achievement given the challenging environment. The team worked through during the pandemic.
We remain on track to ramp up production over the first half of this year and reach full production levels by the middle of the year.
At <unk>, we saw a lighter quarter of production as anticipated with the processing of lower grade stockpile material, while mining activities focused on advancing stripping.
Production is expected to increase throughout the year as grades improve and we expect to deliver another strong year.
Turning to round mountain given the complexity of the wall issued phase W. I'd like to provide a brief summary of what has happened and what we've learned so far.
As is often the case with open pit mines, where mineralization extends the depth. There is a point at which we need to decide whether to continue with the next open pit pushback or transitioned to an underground.
When our early warning systems in Texas, the geotechnical issue at CSW last year, it caused us to pause mining and assess this tradeoff sooner than we otherwise would have.
Based on what we've learned so far through optimization study, we know that are rolling off the trees or you would need to be shallower than originally envisioned and over an area of more extensive than initially thought.
Which brings with it the need for substantial additional stripping the amount of additional stripping need is capital intensive. So we're in the process of exploring the potential to mine portions of phase W from underground.
The geotechnical work, we've done combined with the exciting exploration success, we've had the feedbacks.
He is enhancing the opportunity to move underground sooner with less capital and better returns in the open pit.
Moving underground sooner Romano would result in lower annual production levels and $24 25 versus the original plan, However, moving underground through lower capex needs and ultimately extend the mine life.
Our optimization study is progressing well and has outlined optimal mine sequencing over the next few years, while also incorporating sees us into the plan.
We will be prepared to discuss our detailed plans going forward. Once we complete the study in the second half of the year.
But for now we know we will make the first couple of phases of phase W. Followed by phases as open pit pushback.
Before turning the call back over to Paul I'll provide a brief update on our exploration program and our great Bear project.
Starting with Great Bear we continued to receive positive drill and assay results that confirm Goldman amortization, which is open along strike and depth. The results reaffirm our thesis with this asset has the potential to be a high grade open pit mine with further potential to transition to a large underground operation.
We have an extensive exploration program planned for this year with over 200000 meters of drilling with the goal of declaring an initial resource with year end results along with an infill program to support a PFS, which is scheduled to start next year.
With respect to the timing of the project, we continue to look for ways to potentially compress the schedule and bring initial production earlier than our current estimate of 2029.
We're also analyzing a advance exploration program, which will potentially allow us to establish an underground decline as early as 2024.
This program would allow for underground drilling for more efficient exploration of deeper areas of the <unk> fault zone, along with the nearby hinge and limb gold zones as well as for bulk sampling.
We began baseline environmental studies and local socio economic studies required for the permitting process this quarter.
Other exploration highlights from the portfolio include encouraging drill results at round mountain and at our Curlew Basin project, which is in close proximity to the Kettle River mill.
At <unk>, we encountered several high grade Hoelzer Gould Hill that confirm the down dip extension of the Alexandria vein, which we discovered late last year.
At fees ex plans for construction of an underground exploration drift continues to advance well and remain on track to commence later this year.
At <unk>, we continue to see positive exploration results with recent drilling discovering previously unidentified gains, including an extension of the galaxy vein, which was discovered last year.
While it's still early and more work is needed on both exploration and permitting we remain encouraged by degrees width and depth, we're seeing that have the potential to support another mine in the Americas.
In summary, our exploration program is off to a great start and our focus remains on promising targets around current operations in areas, where existing infrastructure can be leveraged.
With that I will turn the call back over to Paul.
Thanks, Paul over the past several months our company has gone through some significant changes.
However.
Some things that haven't changed include.
A strong three year production profile.
A portfolio that supports strong production through the decade.
Our continued focus on margins.
Strong balance sheet.
And capital returns through dividends and share repurchases.
What has changed is that our portfolio has been reshaped.
By our planned exits from Russia in Ghana.
And our business is now more Americas focused.
And our growth projects have reached significant milestones with tasiast hitting its throughput targets and la coipa ramping up to full production.
In our view, our updated portfolio warrants a better valuation and.
And we look forward to seeing this materialize.
As we continue to execute on our plans.
With that operator, I'd like to open up the line for Q&A.
Thank you at this time I would like to take any questions you might have for us today and as a reminder to ask a question you will need to press Star then the number one on your telephone keypad to withdraw your request you may press, the pound or hash Keith we will pause for a moment to compile the kidney roster.
We have our first question comes from the line of any Dasani from CIBC World markets. Your line is open. Please go ahead.
Good morning, everyone. Thanks for taking my call.
My question I guess, the first one is with regards to grade at <unk>.
In the back half of the year I pulled up the old Technical report.
Average grades around two seven for.
<unk> for the next for 2022 and 2023.
Given the two five like should we be still gearing towards that $2 seven overall for the for the question here.
Yes, we will be tracking higher towards three actually for the full year in other words, we're going to be hitting higher than $2 five grades going into the second.
Sorry, youre going to be hitting higher than 2.5 or 2.7.
Higher than $2, five and higher than three in pieces over the course of the year we.
We still intend to average just shy of three for the year for full year 'twenty one.
Okay.
Full year 2002, you mean right.
Yes, sorry, yes full year 'twenty two.
Okay, and then similarly at Paragon to I mean, I guess, you've been looking for higher grades.
For.
A year now and.
I know, you're you've been saying that it's nothing nothing major but just what kind of grade should we be gearing towards for the second half of the year at <unk>.
So the reason the grades have been lower over the last couple of quarters is because we've had the fleet focused on stripping and we've been putting lower grade stockpile through the mill as.
As we get into Q2, Q3, Q4, where trend higher closer to four in Q2, and then above <unk> four for the second half.
Initial year Nir.
Nearing 0.5, so we are on track with greater peg or two and what you've been seeing for the last couple of quarters as simply mine sequencing and stockpile milling.
Okay, and then I will ask one more question on AR and round Mountain and then leave it to others to ask some questions. So thanks for giving us some clarity on what's going on now there's a little bit lost as to where that stood.
But in just in terms of sort of gave US an idea of what 2024 and 'twenty five could potentially look like and then you said that Youre currently modeling.
Open pit or sorry seeming open pit.
Extraction parfaits.
<unk>.
Alright.
Is W right now.
But what does 2022 2023 look like are we should we be modeling around the current run rates that you have this quarter or is there some kind of an improvement that we will see over the course of the year.
Yeah. Thanks for the rundown question, even though we knew that this is going to be a topic of focus.
Well we've.
As you know, we we had the wall movement early last year.
And then early this year, we determined that the clay layer that is causing the geo tech issues is more extensive and so we've had to re look at how we sequence the plan and one of the bits of news here are that we've pulled phase S. Forward. So we're going to do.
Starting immediately is we're going to feed direct or from the first two phases of W. And Thats what were going to focus on over the next several months and then it will start stripping phase F.
Later this year.
So that the sequence in the near term will be W. W. Two then fees asked and what we're targeting is production.
Approaching $2 $42 50 for this year.
<unk> again next year, and then closer to 300 after that so we've established here is that we're an open pit mine.
The next couple of phases of the W. And then phase S.
And then the second half of our optimization study, which we're working on in the balance of this year, we will determine whether the third and fourth phases of Bellevue and then X.
What their configuration is open pit versus underground, but to answer. The question. We are going to ramp up quarterly production around the first quarter was lower than initially thought because of <unk>.
Under dosing of cyanide in the heap. So it was a heap issue not necessarily a mining issue.
We expect to finish the year like I said in that in that $2 40 range and see them again next year and then starting to ramp up in.
In 'twenty four.
Okay and then so if we I was stripping out the capital from Russia.
Russia and from and from Toronto and kind.
Kind of came in a little under what you are saying for 17 with some 50. So if there is somewhat of a shortfall is that the what should it be.
<unk> allocated to stripping at round mountain is that.
Where we would expect to see.
There was a differential.
Andrew Olson.
750 for 'twenty three 'twenty, four we're really sort of directional.
Okay.
Thank you Jasmine from where we had previously thought about $1 billion.
Chandler take.
<unk> out there.
So capex.
Are you against that was thanks Kelly.
So it's really more of a directional number then.
Okay.
Sure.
And at round Mountain.
We are limited by the fleet. So we have a constant stripping rate and so the total tonnes moved around will be big.
Basically the same every year, but the capex this year will likely be lower.
If I could ask what is that mining rate overall.
We target about $100 million.
A year pumps, Brandon, okay between waste and ore Okay, alright, thanks, I'll get back in the queue for other questions. Thanks.
Our next question comes from the line of Mike Parkin from National Bank Financial Your line is open. Please go ahead.
Thanks, guys.
Any color in terms of.
You kind of noted already.
I mean, it's been around the 21000 tons per day to exit the quarter. So that's good but what about la coipa. How can you give any color there in terms of what youre seeing in April or may to date.
On throughput it's been spotty, we're still in the very early stages of the commissioning there.
We've had the typical tie in and downtime.
Our production as you've seen has been very small there.
But as we got into May we started to see more reliable throughput pushing 789 10000 tonnes a day and our plan has always been to ramp up to a steady state.
For the second half really targeting late June early July .
So it has definitely been spotty up and down and but that was expected.
To do the commissioning ramp up schedule, but we will get into that steady state in the second half.
But nothing that has you alarms like kind of largely everything as expected typical kind of.
Yes.
Yes, both tasiast and La Coipa.
Had the tie ins and downtime.
Pumps breaking and.
Power bumps, but entirely consistent with what we had modeled and expected for commissioning ramp ups.
Okay.
With respect to <unk> too.
Obviously, some challenges with water and regions.
Brazil, I don't think from what I recall that you guys are generally okay, but this kind of some regional factors.
Affect your power rate can you just give us.
Update on where things stand there.
And this year is the rainy season was a record and.
If anything our problem was the opposite having to manage excess water.
Water balances site is doing fine.
Power plants are also doing fine.
The.
How much we can take off take from our power plants is higher than it was last year.
Certainly having own those power plants through the drought.
Has greatly benefited our unit prices, but bottom line is that both operationally at site and the power plants, it's smooth sailing right now due to water.
Okay, that's great.
And then just with Kettle River currently.
Can you just give us a bit of color on what the goal is there.
Obviously announce it that doesn't come up in conversation very often of the results are pretty interesting where do you guys. What are you guys kind of thinking of for that project.
What <unk> seen in our tone, we are starting to talk about it a little bit more really excited about what we're seeing there.
Intercepts R V.
Very encouraging we're getting things like six meters at five grams three meters of six grams.
And the overall thinking there is to use the fact that we have the Kettle River mill, the Kettle River infrastructure Curlew Basin project is quite closer to be a.
Or a shorter trucking them, what we're doing from Buckhorn and what we're targeting here is getting to about 1 million ounces, we're not there yet, but we have line of sight on that.
And at 1 million ounces were.
We're looking at a pretty attractive project and we started to do in the background here is <unk>.
Parallel to the exploration program, which as I said, we're very excited about we're looking at the permitting aspects of reopening the Kettle River mill.
We're looking at potential project economics, and that'll be something similar to what we did at La Coipa refurbishing the mill and investing in the infrastructure.
But because we've got the decline already in place at Curlew, where in effect already mining there.
Now that we're down at the depth, we would like to be much of a focus over the next couple of quarters, we'll be drilling from underground. So it is exciting we're targeting 1 million ounces.
We're adding them in our in our models as we go we're not at that million yet, but we're quite excited about the prospects.
So with that decline kind of in play we could actually potentially see a greater volume of drill holes getting reported as we move through the year.
That's the intent, yes, and as we had done some drilling from surface over the years, there and with the underground drilling is allowing us to do is obviously a much more granular targeted.
Program and we are discovering veins that we did not know were there. So we're proving up a hypothesis that the mineralization continues.
At depth and down dip and it's been it's been really positive.
Okay, great Super Thanks.
Thanks, very much guys thats it for me.
Our next question comes from the line of Greg Barnes from TD Securities. Your line is open. Please go ahead.
Thank you Paul Rollinson, perhaps some of the overhang on your stock is still some concern about your ability to close.
The sale of the Russian assets do you see any particular risks around that all the counterparty being able to pay in dollars.
Sure. Thanks, Greg.
Maybe I'll give a little bit of a background segue, then maybe transition over to Jeff.
On the day to day.
Look as you know I mean, we're in uncharted territory here.
It's a very fluid situation.
Our strategy really has been to in the first instance.
And our focus on the priority of our.
Health and safety of our people and our environmental standards.
Well the position we've taken with the government as we were trying to affect.
A transition.
Two a responsible operator.
Within industrial logic someone that's an underground miner in the region, where we operate.
We've pursued a process as laid out by the government.
And so in terms of looking after our people looking after the environment.
Finding a responsible buyer and following the process we feel were.
We've really done everything we can.
Sure.
But again I would I would say we're in uncharted territory.
Jeff do you want to maybe thank you.
Give a sense of where we're at sure yes, yes.
Yes, Greg look as as Paul said unprecedented circumstances.
We don't want to speculate on the outcome or timing of the Russian government approval.
As there is some uncertainty around that but we've done everything we can we leave with larger applications.
We've obviously advanced our closing process.
Our ancillary agreements.
Effectively.
The approvals.
The parties require theres effectively a sign off from the ministry of industry and trade that's required and then there was a.
Our newly constituted subcommission that was setup.
To approve foreign company transactions and that is something that is required and in addition, there is a federal.
Anti monopoly service approval required.
Which is which is sort of tad about two to antitrust in the western world. So we're doing everything we can we're supporting the buyer with larger applications.
We're waiting and if and when those approvals show up and we're in a position to close we'll we'll update the market at that time.
Okay. Okay. That's helpful.
Some color on that situation.
Paul You also mentioned you're considering.
There was the pricing.
$200 per ounce now.
I know this is overly simplistic, but if you use 8% inflation I guess, you've got 13 up until it's announced.
On a ballpark number that you're thinking about in terms of gold price you'd like to use going forward or how you would get there.
Well.
You're bang on in like you've hit the nail on the head it's strictly that when you look at our.
Our total spend whether it's operating our capital when you start to run for.
Kind of inflation numbers that we're seeing.
It's mathematical.
And so we haven't done anything yet we still got our mine plan set up.
Our reserves at 1200, but but too as I indicated in the commentary.
Our strategy is not around I would say the sins of the past where people drop cutoff grades.
To try to paint a growth story.
Our our thinking is really about and I use the word carefully maintaining our reserves.
By looking at higher gold prices.
To take into account.
Cost of inflation effect.
Kind of prices, we're talking about Paul I mean.
Essentially there, yes, so with the 8% Youre right. It gets you to 3500, but that 8% as a.
Hedge impacted in other words, we have the cushion from hedges on oil in the near term as we look at $100 per barrel longer term. The number is probably higher than 8% and as we got through the first quarter here heading into may inflation is trending higher than we had.
<unk> been anticipating so what we're modeling right now is.
$13 50 to 400 sensitivities right now with $100 oil with a $100 oil exactly.
What we're going to do is with subsequent quarters, where an elaborate on that thinking a little bit more but we are running our internal plans at $13 50 in 2500 to see the impacts if we were to move if we were to move higher.
We would accompany that move higher with an instruction to our sites.
Not to increase pit size or.
Change cutoff grades so in other words, we would look to maintain pit geometries because in some situations a.
Higher reserve price might increase pit size and that's not what we're trying to do here. We're just trying to maintain the reserve recognizing inflationary environment and then the whole other side of the inflation that we have to think about.
Is what will happen with currencies in particular.
Brazilian Reais solar.
I guess, we're just putting a notice out there Greg that in.
Inflation is here as you know we were pretty transparent when we put 7% into our guidance at the beginning of the year, we're just watching it very closely.
Trying to trying to have you guys understand what our thinking is.
No that's great color. Thanks, very much gives us a lot of context.
Our next question comes from the line of carrier Macquarie from Canaccord. Your line is open. Please go ahead.
Hey, good morning, everyone, just maybe back on La Coipa can you talk about what you've assumed for guidance there in terms of production.
Going to be all commercial production or was there some sort of noncommercial production associated with that.
Okay.
We almost all the production will be actual production ounces and we're assuming around 200000 ounces for the year.
Clearly like I said in my prepared remarks, La Coipa is very heavily back weighted here.
So probably like 180% to 90% of that would be an H two.
Yes, yes.
Yes, that's about right yes.
Okay.
And then you mentioned the impact of the fuel hedges on the cost is there any way you can quantify like the $8 30 cost assumption for this year. If you were unhedged is there a sense of what that number would be.
Well I guess.
Start by just saying we're about our web.
About 15% of our exposure or have Scott at average price just below $50.
That's helpful.
Okay, and then maybe one last one for Paul Tomorrow, just on the Great Bear Youre doing great control drilling there any surprises or youre, saying under great control Julien.
In terms of the mineralization no we're seeing everything we were hoping for.
We've done about 12 kilometers out of a planned 35000 dollar program and its really to delineate and have a better understanding of how we construct our resource model, but also to set up for operational practices.
But no surprises.
Okay, great. Thank you.
You have another question from the line of <unk> from CIBC World markets. Your line is open. Please go ahead.
Hi, so.
I guess I also wanted to ask about Fort Knox and <unk>.
And whats going on with the Gill satellite pits and.
Gilmore.
That sort of stands like where we are in the in the mining sequence. There you can just.
Refresh my memory on that one.
So the Gill satellite is up and running we are we're using a contract miner there with a smaller fleet.
And where trucking the Mellower overdo, the Maine, Fort Knox mill, and its progressing well it's.
A year, one so all going well there.
In the case of Gilmore, that's now part of the fundamental mine plant, we no longer differentiate between Gilmore Knoxville warm.
And just.
Just to give you a rough sense.
Gil will make up about 50% of the mill by the end of this year.
Having slightly higher grade than the principal Fort Knox pit.
I seem to I thought that it was going to start up this quarter and I was just.
So is that like the I think the proportion, but it's kind of like $18 52.
Not to get too specific versus a $13 million from that.
The Gilmore proper instead, that's going to ramp up to 50 50 is that is that what youre, saying.
In terms of total tonnes.
I'll have to get back to you on the total tons split.
The guild tons are relatively low.
As I said it is higher grade smaller fleet. The principal tons movement is in the main.
Fort Knox pit with the 790 fleet.
Okay and then the second question I had was around Capex, obviously with the with the Capex spend in this quarter it was <unk>.
Fairly low.
Can we just can you just give us an idea of like where.
Where and how that will evolve in the ramp up over the course of the year.
I'll start.
Typically we have a relatively slow start to the year on Capex. So Q1 is usually our lowest capex quarter, we have maintained our guidance for the year.
Russia and Toronto.
One of the.
One of the reasons, our Capex is lower in Q1 with less stripping capital shopping constantly do expect that to ramp up through the year and a couple of specifics look weibo, we will end with a pretty significant underrun on capex will be probably $20 million.
Under budget there.
And a good way in a good way exactly.
Yes.
We have a solar power plant.
We're developing at Tasiast and that is has been deferred a little bit. So the capital that we were anticipating in Q1 didn't show up and it's been deferred a little.
Okay, and then I think the last question that I have was.
Just with respect to our.
The guidance so far I'll, just say I understand the $2, one 5 million ounces of G. L. That you have now completely excludes any contribution from Toronto, right, which probably would have been I mean, you deliver like 30000 or so this quarter. So you strip that out when you take the $2 one five.
That's right, we basically guided for continuing operations that we expect to be there going forward. So.
For all of US for all of 2022 back to January one, but obviously, we produced almost 100000 ounces.
Sure.
Discontinued operations from the AG side about 30000 ounces.
From <unk> in Q1, there will be sampling.
The early part of Q2, as well and selling cars.
And then similarly any spend that you had.
Russia was already excluded, but any toronto spend and tronox.
The 31st.
We shouldnt be including that in our <unk> 50 number for the year.
That's right Okay, alright, okay. Thank you very much.
Once again I would like to remind everyone. If you wish to ask a question. Please press star one on your telephone keypad to withdraw your request you may press, the pound or cash.
Our next question comes from the line of Danielle <unk> disconnect from Scott You. Your line is open. Please go ahead.
Great. Good morning, everyone and thank you for taking my questions have been answered, but I just want to circle back just wanted to finish off on guidance, maybe Andrea just on the capital allocation or Paul you mentioned that 300 million on 150 from dividends and $158 million on share buybacks.
What where do you stand on the great resource and shares issued for that transaction.
It had been mentioned previously that you were going to look at buying those back half dozen now pushed out priority has been the $1 billion debt reduction.
Where do we stand on that.
Yes, it's good question Tanya Thank you.
Obviously, that's something we do want to address we still want to address.
Also trying to be.
Mindful of the.
The environment we're in today.
We're looking pretty closely at the gold price and how it holds in.
On the revenue line and the.
The inflation, we're seeing is.
Is there is not going away.
It's growing and I mean that in a year over year context. So.
We are absolutely committed in the 300, and we would like to.
To take out those shares issued.
For great bear, but at the same time, we want to be transparent.
That as.
As we think about that.
We're thinking about this from a margin perspective as well.
Okay, So we'll prioritize them that way.
Payments over the next few years.
Buyback.
Well the idea is obviously, we'd like to do both but in a contracting margin environment will always seek to balance sheet first.
Now for sure.
And maybe just.
Finishing off on guidance just yet.
We have a lot of ramp up in the second half.
It's all quite fast.
Tasiast and package it quarter over quarter improvement. So I'm, just trying to get an idea on an overall portfolio basis as we go through the year are we looking at.
Progress every quarter over quarter improvements are we looking at a portfolio, where you've got 45 55 first half second and none.
Quarter over quarter improvement over that.
45, 55, maybe some guidance that would be helpful.
It varies by asset So for example at Fort Knox.
We anticipate getting back to about 80 for each of the remaining three quarters, whereas at <unk> two it's a slower ramp up we did.
Oh wait and then we're targeting probably $1 20 in the second quarter, and then heading up above $161 70 for the last two quarters. So parents, who is definitely back end weighted as I.
I answered the earlier question ramping up the.
The grade.
So what we're looking at really here is <unk>.
Our medium ramp up in Q2, something over half a million and then getting into the $6 50 range for each of Q3 and Q4, giving you some color on some of the assets there and of course Tasiast with every.
Month that goes by we get into better and better grades. So tasiast is also quite back end weighted.
Thank you.
We might go up to be so back end weighted but it's just the nature of the portfolio and where each asset is.
Right now so they are backend waited on grade and throughput and ramp ups and a heap leach timing.
Okay, well, thank you for that and now that I have you on maybe.
You mentioned about fast tracking dexia and trying to get that in earlier than 2029 with.
With the decline there help you and in terms of having some underground production earlier.
Is there excess length toll milling capacity in the area as you get your mainline pipe to bring it on earlier or how should I be thinking where you can get in time to get the synergies from 2029.
So as we look at potential schedule compression the critical paths do run through permitting and some other regulatory processes. For example, electrical system tie ins. So the focus will be on continuing to evolve our understanding engage with all key stakeholders on the permitting timeline the underground decline doesn't necessarily adverse.
Since the project what it does allow us to do is.
Do much better targeted underground drilling for better definition of the hinge and limb underground targets, but also the L. P underground target.
The decline will be situated in between the two we would drill as we go and the principal goal there is not necessarily scheduled acceleration, but rather.
Resource growth earlier, and better definition on underground targets for engineering purposes.
Okay, and how should I think maybe my last question, how should I be thinking about.
Our pipeline is as we go forward, obviously peak call coming in the rns.
And then you would have <unk> and if we can come in earlier than 2029, Thats, great and then local market. So it is coming in in 2030 with that be a reasonable assumption of how I should think.
Pipeline.
That $50 million ounce over the rest of the decade I'm trying to understand how all of that pans out.
So you've got the sequencing correct macho at peak is going well at Fort Knox, We're on track there.
For 2024 production the one in the middle that you missed is extending la coipa. So we've got the first extension at La Coipa with the JV with Codelco, we're now working on a another phase extension with codelco and that Paren deposit.
<unk> called for and for web print to don't ask me, where we go from two to four and lower Marseille as we've said before.
If we can extend la coipa, we would push out a logo Marty because la coipa is built permitted so to the extent that we add mine life at La Coipa, we will push out a little Marty.
And the other one as I was talking to earlier with a mic curlew is starting to show up on the list here as well as something that could come into production. If we can get to that minimal minimum viable project somebody to come in in the back half of the decade here.
Okay, so that could come in even before.
Marcos you extending mine life at <unk>.
Quite definite yes, definitely we would want to do that.
The other thing in the in the very far background as Mary can go we've got a big resource there and we've initiated a very early stage study on what things might look like.
In a sustained higher gold price environment in Chile, as you know we have a huge resource there and we're starting to do some preliminary level studies on.
On a reopening plan there, but it's very early days there.
Okay, Alright, thank you outlined what someone else ask questions. Thank you.
Thanks Danielle.
There are no further questions at this time I would like to turn the call back over to Paul Rollinson.
Thank you operator.
Thanks, everyone for.
The calls today and the questions. We look forward to catching up in person in the coming weeks. Thank you.
Okay.
This concludes today's conference call. Thank you all for participating you may now disconnect have a great day.
Okay.
Yes.
Yes.
Okay.
Okay.
Okay.
Okay.
Okay.
[music].
Okay.
Yes.
Okay.
Yes.
Yes.
Okay.
Yes.
Okay.
[music].
Okay.
Okay.
Thank you.
Sure.
Okay.
Okay.
Okay.
Yes.
Okay.
Yes.
Yes.
Yes.
Okay.
Okay.
Okay.