Q4 2021 Kinross Gold Corp Earnings Call

Yeah.

Ladies and gentlemen, thank you for standing by and welcome to the Kinross Gold Corporation fourth quarter 2021 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.

To ask a question during the session you will need to press star one on your telephone.

Please be advised that today's conference call is being recorded.

If you require any further assistance please press star zero.

Now I'd like to turn the conference over to your Speaker today, Chris Lipton held Vice President Investor Relations. Thank you. Please go ahead.

Thank you and good morning with US today, we have Paul Rollinson, President and CEO and from the Kinross Senior leadership team Andrea free barrel Baltimore, Jeff Gould.

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 risks and uncertainties, which may lead to actual results different from estimates contained in our forward looking information.

Please refer to page two of this presentation.

Our news release dated February 16th 2020 to the.

The MD&A for the period ended December 31 2021.

And our most recently filed Aif all of which are available on our website.

I will now turn the call over to Paul.

Thanks, Chris and thank you all for joining us today.

I want to start by acknowledging and thanking our employees and host communities for their hard work and perseverance.

Through another challenging year during the global pandemic.

Reflecting back on 2021.

While we faced some challenges it was also a year of accomplishments that we're proud off.

We produced approximately two 1 million ounces of gold.

We reported a net increase of $2 7 million ounces in total reserves.

We finalized our agreement with the government of Mauritania.

We repaid $500 million of senior notes.

We returned $250 million to our shareholders through dividends and share buybacks.

We advanced a number of milestones within our project pipeline.

And lastly, we announced the addition of a high quality asset to our portfolio with great. There.

As we look ahead, our operations remained well position to deliver higher production.

And we expect to generate substantial free cash flow for the coming years.

We are proud of our long history of meeting or exceeding guidance. However, the current environment of Covid and inflation have made predicting the future more difficult.

We continue to monitor these factors closely as pandemic related disruptions, coupled with the rising cost of everything.

It is affecting our operating and capital costs.

You will hear Andrea and Paul speak more about the impact of inflation is having on our business later on.

Before turning the call over to Andrea I will comment briefly on upcoming milestones our guidance.

And our ESG performance and climate change strategy.

Looking ahead to 2022, we are well positioned to deliver on our key milestones.

The Tasiast mill has periodically reached 21000 tonnes per day this month.

And is on track to reach this level on a sustained basis by the end of this quarter.

The La Coipa restart project is advancing well and is expected to begin producing in the first quarter.

At round mountain.

We have added phase asked to reserves and continue to work through the optimization study.

During the third quarter, we expect to complete the feasibility study for our <unk> project in Russia.

And lastly, we expect a great bear acquisition to close in the coming days and we are working on an integration plan to ensure a smooth transition after closing.

Moving onto our guidance.

Last night, we updated our forward guidance and extended our outlook to include 2024.

We also reiterated our confidence in our long term production outlook.

Expecting average annual production of at least $2 5 million ounces over the rest of the decade.

Our production outlook going forward represents substantial growth from levels realized over the past few years.

We have slightly refined the mid points of our 2022 and 2023 production guidance.

The modest adjustments to 2022 and 2023.

Can be mostly explained by.

A deferral of production in the short term.

Due to mine life extensions and newly approved projects.

And to a lesser extent the impact of Omicron late last year and early this year.

Both of these factors are a deferral of production and not lost ounces.

With our growth projects ramping up over the coming months.

We expect our production to improve towards the second half of the year.

As a result.

Our per ounce cost and cash flow metrics are also expected to improve in the back half of the year.

Overall, the reduction in costs and the increase in production.

Is expected to generate substantial free cash flow in the coming years.

Given our strong outlook, we plan to continue with a return of capital programs. This year.

As a responsible miner ESG is something that we've always focused on and remains an integral part of our business.

It begins with the safety of our employees.

Which is our first priority.

It is also about generating sustainable benefits for our host countries and communities and this past year, we continued to make meaningful contributions during the pandemic, including supporting local vaccination efforts.

On governance or.

Our strong practices were once again recognized as Kinross was the top ranked gold mining company in the global Mail's annual corporate governance survey.

As it relates to the environment.

More specifically climate change we are also continuing to take action.

Last night, we released the details of our climate change strategy.

Introducing our target to achieve a 30% reduction and intensity of scope, one and two emissions by 2030.

The development of our solar power plant at Tasiast.

And the recent signing of an agreement to purchase renewable power at La Coipa illustrate that we are always looking for opportunities to improve.

It is worth, noting however that approximately 90% of our current scope, one and two emissions coming from the electricity we consume.

And from the fleets that we deploy.

We are committed to our targets and look forward to working with our host governments and equipment manufacturers to help achieve these goals.

Before turning the call over to Andrea I would be remiss not to comment on the tragic loss of life property damage and community impact of the contractor truck explosion in Ghana, approximately 140 kilometers from our mine.

Such tragedies reinforced the need for the mining sector and its supply chain to relentlessly focus on safety.

And as a strong reminder of the importance of keeping our communities safe.

The major mining companies with operations in Ghana are working closely with the mining chamber and the government to support the community relief and reconstruction efforts.

In addition to other relief initiatives.

Kinross has donated $1 million towards the relief fund created by the government.

It has asked other mining companies to consider similar contributions.

I will now turn the call over to Andrea for a more detailed review of our financial results.

Thanks, Paul I'll start with financial highlights from the quarter and the full year, then provide an overview of our balance sheet and comment on our outlook for operating costs and capex.

Fourth quarter production of 488000 ounces in full year production of nearly $2 1 million ounces were lower than last year as a result of the temporary suspension at tasiast.

Our full year production cost of sales of $828 per ounce and all in sustaining cost of $1138 per ounce were both higher than last year due to lower production and inflation.

Fourth quarter free cash flow was an outflow of $100 million. However, this includes $160 million of cash outflow related to changes in working capital adjusting out. These working capital changes, we generated free cash flow of approximately $60 million.

As noted in our news release last night, we recorded a noncash after tax write down of $106 million related to Bald mountain during the fourth quarter.

The write down was due to lower expected recoveries from the vantage heap Leach pad, which affected the book value of the heap Leach inventory and related property plant and equipment in the south area.

Issue is isolated to the south area and does not relate the north area of the mine where mining is expected to focus for the coming years.

Moving to our balance sheet, our financial position remains strong however, as expected our cash position decreased slightly from the previous quarter and we finished the year with $532 million of cash.

Our net debt at the end of the year with approximately $1 $1 billion and our trailing 12 month net debt to EBITDA ratio increased from just under five times at the end of Q3 to just under eight times.

Upon closing of the Great Bear transaction, we expect our net debt to EBITDA ratio to increase for the first half of this year and then by the end of the year decline back to below one <unk>.

Assuming gold prices around todays level.

We spent an additional $50 million on share repurchases in December for a total of $100 million since we launched the program in the second half of 2021.

This is in addition to our regular dividend payments totaling $150 million during the year for a total return of capital of $250 million.

Looking forward there are a few items that we expect to impact our cash flow in the first quarter, which is typical for us.

One subsequent to year end, we made our usual annual tax payment in Brazil, which was $73 million related to 2021.

Two our regular interest payment, which is expected to be in the range of $40 million and lastly, the collection of an additional $60 million related to Tasiast insurance recovery.

These net cash outflows combined with the fact that Q1 production is expected to be the lowest of the year will impact our cash generation in Q1.

However, with the planned growth to 265 million ounces of production for the full year, we do anticipate generating significant free cash flow over the course of the year.

Turning to our guidance note that all figures I reference our within our typical range of plus or minus 5%.

As Paul noted our outlook remains largely intact. However, we've made some adjustments to account for recent and evolving issues, such as omicron and inflation.

We've factored in what we expect for inflation in 2022, and we expect the benefits of our production growth to roughly offset these increases.

However, forecasting inflation beyond the current year is more difficult.

With our updated three year outlook, we've provided further visibility out to 'twenty 'twenty, four which is expected to be another strong year.

Production cost of sales during 2022 is expected to be approximately $830 per ounce, which is below our Q4 costs and in line with full year costs reported for 2021.

In terms of the cost profile throughout 2022 with the first quarter production expected to be the lowest of the year, we anticipate our Q1 cost per ounce to be higher than our full year average for.

For example, a parakeet two costs are expected to peak in the range of a $1000 per ounce due to lower production before returning to more recent levels for the rest of the year.

At Tasiast costs are expected to decline over the year as production ramps up.

All in sustaining costs. During 2022 is expected to be approximately $1130 per ounce, which is also in line with full year 2021.

Looking further ahead, we expect our production cost of sales and all in sustaining cost per ounce to decrease from 2022 levels driven by higher production and lower cost ounces from la Coipa and Cassia.

However, this excludes any impact from inflation beyond 2022, which we will incorporate into our forecast as necessary as we get closer to those here.

With respect to Capex, we plan to spend about $1 billion in 2022, which includes $50 million for ESG related projects. The most significant of which is solar power at half year.

Capex is expected to remain around 2022 levels over the next couple of years.

As we get into each year, we'll update our estimates to reflect the current cost environment and any other change it.

With respect to exploration spend we've increased our budget to $130 million to follow up on areas of success. In 2021. However, this excludes exploration at great. There, we're still finalizing our plans, but we expect this could be in the range of $50 million to $60 million.

To summarize our outlook remains strong and we expect our financial position to continue to strengthen over time as we generate significant free cash flow. We remain in an excellent position to continue with our return of capital program.

With that I'll now turn the call over to Paul Tomorrow.

Thanks, Andrea this morning, I'll provide key updates on our operations and projects discuss our production outlook and share some highlights from our reserves and resources update and exploration results.

Before that it's important to know we continue to manage the evolving challenges presented by Covid and while our operations continue to track well against our longer term plans, we experienced some disruptions beginning late last year and into early part of this year related to the omicron variant.

Well the severity of the cases had been very low we saw increased absenteeism, which impacted productivity of certain sites.

As Paul mentioned this has been reflected in our 2022 production guidance, which I will discuss shortly.

With respect to our plans and projects going forward well, we do our best to mitigate the effects of Covid inflation, we are not immune to these global challenges and therefore, the timing results or our outlook is subject to change.

Looking back on 2021, I'd like to start with an update on Tasiast.

The reset of the mill Windows planned and we expect to produce more than 600000 ounces per annum over the next several years.

During the fourth quarter, we produced 15000 ounces expected, while replenishing inventory on carbon and towards the end of the quarter. The mill achieved pre fire throughput rates of 18000 tons per day and as Paul has mentioned we've had a few days with 21000 tons already.

The mining rate improve in the fourth quarter. However, homochrome unrelated absenteeism has somewhat hindered progress in sustaining these rates. These issues are now subsiding and we expect to largely catch up on mining during 2022.

Moving on to the 24 he project the first phase to expand to 21000 tons per day is now 98% complete and we expect the project finished under budget despite challenging conditions presented during the pandemic.

We expect to reach 21000 tonnes per day on a sustained basis by the end of the first quarter as planned.

The second phase of the project is also advancing well with procurement of all major equipment complete and on track to reach 24000 tonnes per day by mid 2023.

Regarding our production outlook I'd like to provide some additional context on some of the changes.

We previously guided production range with a midpoint of $2 7 million ounces in 2022 and have adjusted that to $2 6 million ounces plus or minus 5%.

This 50000 ounce change can be explained roughly in equal parts by the impact of BOMA crime and lower expected production from the vantage pad at Bald mountain.

As Paul mentioned growth profile for 2022 was weighted towards the back half of the year at La Coipa, and Tasiast will be ramping up.

In addition, <unk> production is expected to increase in the second half of the year as grades improve.

First quarter, where ease of parents, who are expected to be the lowest severe as we plan on processing lower grade stockpile material, while mining activities focused on stripping.

For 'twenty 'twenty three we previously guided our production midpoint of $2 9 million ounces and have adjusted this to $2 8 million.

There are a number of puts and takes across the portfolio, but this adjustment can be largely explained by three factors.

First we have re sequenced the mine plans that coupon Toronto to accommodate and mine life extensions.

Second last year, we made as value add decisions at La Coipa, and Bald mountain that resulted in a deferral of production at La Coipa, we extended the mine life with the addition of <unk>. The plan is to Brent blend parental or with phase seven ore for optimal performance in the mill, which is expected to lower the feed grade in 2023, leading to a deferral of approximately 40000.

Ounces.

However, this phase of <unk> is expected to add approximately 200000 ounces to the life of mine production and extend La Coipa mine life from Twenty's going forward to 2026.

At Bald Mountain, we approved extension to that a few of the north area pits, which resulted in a resequencing of the mine plan, leading to a deferral of 30000 ounces in 2023, but adding 60000 ounces of total production.

Lastly, as noted last year the wall mitigation efforts around my own deferred the high production years due to additional stripping requirements.

The impact of this deferral was within our plus 5% range around the time of guidance.

Taking with these other developments and update to our midpoint was warranted.

Looking out to 'twenty 'twenty four we expect our existing operations and support another strong year with production of $2 6 million ounces.

Notably this excludes man show, which we continue to advance and could ultimately contribute modestly to 2020 for production.

Moving now to our reserves and resources. We are pleased to have reported a net addition of $2 7 million ounces to proven and probable reserves compared with 2020, taking total reserves up to approximately 33 million ounces.

Increasing our reserve grade by 4%.

The biggest contributor to the increase was your desk, where we successfully converted 3 million ounces from resources to reserves with the completion of our PFS during the fourth quarter. Additionally, round mountain added approximately 800000 ounces net of depletion, mostly due to phase S.

Elsewhere in the portfolio, we were able to offset depletion at Fort Knox with the contribution of approximately 200000 ounces from the Guild satellite project.

And added over 300000 ounces at Louisville, Marty with the completion of the feasibility study.

Measured and indicated resources declined from approximately 32 million ounces at the end of 2020 to 29 million ounces at the end of 2021 and.

And this decrease is mainly due to reserve conversions, partially offset by increases of Toronto, La Coipa and little Marty.

Next I want to provide a brief update on the ongoing optimization work at round mountain.

Starting with fees us we've been very encouraged by the work and as I. Just mentioned have converted this face to reserves and are now working on how to sequence it into the mine plan.

With respect to phase W. The ongoing geotechnical work has introduced the potential need for shallower slopes over a more extensive area than previously identified which may affect round mountain annual level of production.

2024.

At <unk>, we've had very encouraging drill results in fact four of our vessels last year across the company, we're at Phase X, which confirmed continuity of several structural domains.

As a result of these new developments the optimization studies now evaluating additional alternatives, which include a modified open pit sequencer phases, WNS and the potential for underground mining proportions of phase W leading into phase X.

And early stage scenario for underground mining proportions of phase W could potentially benefit the economics of physics and could also reduce capital intensity as well as our greenhouse gas emissions compared to an open pit scenario with the shallower wall angle.

These new considerations will require additional time to work through and we now expect the optimization study to be completed in the second half rather than the first.

Turning now to exploration I will discuss some highlights from last year and areas of focus for this year.

During the past year, we completed over 230000 meters of drilling and continue to focus within the footprint of existing infrastructure.

In Russia, we encountered several high grade targets on the Cooper synergies zone, which is the 130 kilometer radius around Google.

And Kai and my mom the results from drilling have delineated high grade opinions with attractive widths in the Ark La mineralized structure.

<unk> mineralization has been defined across the strike length of approximately 1.4 kilometers with significant further potential at depth and along strike.

At round mountain as I mentioned, we encountered encouraging results at phase W and confirmed continuation of mineralization beyond the current resource pit shell.

We plan to construct an exploration drift this year to continue evaluating the underground potential.

And gold Hill, our new high grade vein located over 300 meters from the current resource was discovered.

We plan to continue use test this new vein and potential for extensions at Gould Hill later in the year.

Lastly at Curlew, the drilling focused on the areas around the historic Q2 mine site, which is located approximately 35 kilometers from the Kettle River mill.

During the last year the development of the new underground roofs are completed leading to the exposure of four new veins, which will allow us to continue underground drilling.

Before turning the call back to Paul I'd like to provide an update on our la Coipa restart project and discuss the recent mine life extension.

I'm pleased to report the project is expected to finish on time and on budget with modest production expected in the first quarter commissioning.

Commissioning of the plant is well underway and we have started building a crushed ore stockpile.

We expect to ramp up production over the first half this year to reach full production levels by mid year.

The addition of the first phase of Perin combined with the successful mine plan optimization of <unk> seven has increased life of mine production by 45% to approximately 1 million ounces.

We continue to look for additional opportunities to extend mine life and have begun preliminary discussions with codelco, our joint venture partner about another phase of Karen.

With a number of satellite pits on the property. We remain very encouraged that we can continue to extend life at la coipa into the late 2000 Twenty's.

And with that I'll turn the call back to Paul.

Thank you Paul in summary.

Our business remains well positioned to deliver on our strong outlook.

We have a growing production profile.

We expect to generate substantial free cash flow.

Our balance sheet is strong.

We have an attractive return of capital program.

Our ESG performance consistently ranks well and we are taking action on climate change.

We are strong tactically and well positioned to deliver on our projects.

And lastly, with.

With the pending addition of great bear our portfolio is in excellent shape.

To sustain our strong production profile for this decade and into the next.

We firmly believe these features.

Bold with our attractive valuation.

Make this the best time.

Ken Ross shares.

With that operator, I'd like to open the line for questions.

Thank you at this time, if you would like to ask a question.

Please press star one on your telephone to withdraw your question press, the pound or hash key.

Please standby, while we compile the Q&A roster.

Okay.

Your first question comes from the line of Tyler Langton with JP Morgan.

Yes. Good morning, Thanks, guys. Thanks for taking my question.

I guess, you know Paul maybe to start and I know Theres a lot of.

The uncertainty of moving parts, but just what sort of Russia and yeah.

If there were any sort of.

Conflict can you give us a sense or just some thoughts on how I guess it.

It could potentially sort of impact your ability to sell gold from Google or than just the proceeds you know also with.

You didn't see the ability study.

Sure. Thanks Tyler.

Okay.

Can't speculate on anything politically.

All I can say is we've operated there successfully for many years.

With strong support from the Russian government.

We essentially on our Russian business, where.

98% of our employees, our Russian our procurement is majority majority sourced locally.

I'd also remind that.

Because it's a.

Camp location that.

Supplied with a winter ice road were fully stocked for everything we need into next year.

Our philosophy in Russia has always been the same way we look after our people we have world class environmental standards.

And our communities, we pay our taxes and.

We think we're quite welcome there.

And yes, it's been a great place for us.

With respect to the gold sales specifically.

We do sell gold in Russia to cover our ruble costs.

We can sell gold in Russia or out of Russia.

It's really at our discretion.

So our business again for context, it's about 7000 kilometers away from <unk>.

From what's going on.

The mine has not been impacted to date.

We will continue operating.

Yes.

No great fit that detail and then.

Just switching to the cost side for 2022.

And I guess do you have a sense.

How much of your costs.

Our locked in I'm guessing sort of labor is kind of largely sort of fixed at this point, but just inflationary.

Inflationary pressures were to ease I mean could you.

I'll provide a little bit more detail.

Maybe in terms of how youre like fuel energy on material costs could sort of potentially benefit or I don't know how much of those are kind of sort of locked in for the year.

Yes look I'll start and maybe <unk>.

Andrea you can chime in I mean.

I think as you see on the news every day, we do see like everyone inflation is everywhere.

It's going to vary depending upon where we are in the world.

For example is there a flow through on on crude oil directly or not.

We do have hedges in place.

I think you'll have seen in terms of our.

Our guidance for.

This year, we've we've used 7% infill.

Inflation assumption on our operating costs.

We do think capital could be higher.

But yes certainly.

Erring on the side of I think being conservative but to the extent.

Inflation cools or pulls back we would see some benefit.

Sure I mean, I can comment on hedging levels and then I don't know ultimately you want to provide some additional allow some additional anecdote so on the fuel side.

We're about 60% hedged on our exposures, where we can hedge for 2022.

Outside of a rate below $50 a barrel.

And then on the currencies, where we're typically hedged.

Between 40, and 50% of our exposures for most of our currencies for the current year. We also added hedges in Chile, this year and that percentage is a little bit lower but that's.

We're just getting started there Tyler I'll pick up on a couple of points related to other operating costs, our many of our consumables.

We focus on a security of supply agreement to make sure that we get what we need and then the pricing often is tied to rise and fall mechanisms tied to underlying commodity prices. So if if there is a more transitory impact of inflation does unit costs will fall in the case of labor, It's a range.

We're seeing higher labor cost pressure in certain places like Russia, and Brazil, and less in others, but of course, it's an across the board phenomenon and as you said if inflation subsides.

We would presume that.

The pressure on labor costs would also subside.

So I think you're asking how much of it is tied to general moves I think a good chunk of it is tied to underlying inflation underlying commodity prices and our cost structure would follow those.

But it's difficult to predict out beyond a year and we haven't tried to do that in our guidance.

No that's helpful. Yes.

We understand that.

Is it for me thanks, so much.

Yeah.

Your next question comes from the heart.

Tariq with credit Suisse.

Hi, Good morning. Thanks for taking my question just first just a point of clarification on the Capex guidance for 2022, and 2023 around $1 billion should we be comparing back to the base case guidance previously 800 and $700 million respectively.

Well the 800 700 that we included with our guidance last year with 800 million for 2022, and 700 for 2023, and we always characterize that as.

Based on projects that were approved at the time.

And then the exception was a little bit of spending for <unk> in there. So.

Yes, maybe I'll comment first on what happened with 2022, the increase is partly inflation.

And then partly additional project approvals and pull forward of spending and so in 2023, we haven't factored in additional inflation, but it's starting from a higher base.

It's also the inflation that we're including for this year. So a couple of the projects that we included in 'twenty, two and 23 that were.

That werent in the previous profile.

We pulled forward some early work spending at <unk> to the tune of about $50 million.

And we've made some mine life extending decisions at places like La Coipa and ball that brought some near term capex into the profile, but it.

It increased mine life and lastly, we have a focus on ESG related spending on items that reduce our carbon profile and most notably there Paul mentioned that in his opening remarks is we're we're proceeding with a solar power plant at Tasiast.

And we've also made allowance for.

A connection to a more carbon friendly grid. It you didn't ask so.

So it's a combination of inflation as Andrea said, but also re sequencing and optimization in the ER.

In the plan.

As we said earlier at 7% inflation on Opex in our guidance in Capex, we're seeing 10%, 15% in the first year and we haven't tried to guess on what it'll be in 'twenty, three and 'twenty four.

Okay.

Okay, and then in terms of 'twenty, three and 'twenty four.

The Capex guidance I believe includes your dense.

Fluids, Manto and mobile Marty can you just provide some color on the comfort level too.

<unk> Dot capex.

Essentially you start.

On those projects and then the Capex ended up being above $1 billion I'm, just trying to get a sense of.

How high is the capex could be in 'twenty three 'twenty four.

Local Marty is an easy one to talk about the construction time line for Logan warranties not within that window, and we will continue to advance permitting studies, but thats a modest number in the case of man show, where mid feasibility study and at towards the end of this year, we intend to put out the results of the study and if warranted as I said in my prepared remarks, there there may be in.

And adjustment to Capex and production so the 'twenty 'twenty four production number does not include mento.

But with the results of our feasibility study it is possible that we add some production for <unk> and 'twenty 'twenty four and we would obviously add commensurate capex.

We have allowed though in our 2022 number for some early works of man show.

Okay. That's it for me thank you.

Your next question comes from Josh Wilson with RBC capital markets.

Thanks. Good morning, just had a question first for DRAM.

<unk>.

I guess, it's tough for us to sort of.

<unk> some of the variances because the base case expectation still somewhat outstanding but if we were sort of looking at that outlook past 2024 is there any sort of volume of production.

You could quantify where we should be thinking about.

Hi, Brian mentioned producing.

If these issues materialize or continue.

So let me I'll take a bit of a higher level view and give a context and round mountain because we expect a number of questions on this.

So we have three or four new facts at round mountain.

On the on the negative.

<unk> zone of influence of that clay layer that led us to have to lay the wall slopes.

More shallower in the north area. It would appear that the zone of influence to that clear layer now expands more to the west as well so there will be a more extensive area than.

And then we had previously thought where we have to lay the slopes back.

However, on the plus side, we've added a million ounces here at phase <unk>, which is a little bit more than we were expecting and the results are a little bit better than we expected.

And on the exploration side, we're hitting some really great holes down in phase acts.

And as we look at Phase X.

It would certainly be an underground opportunity.

If we go to phase X anyway, as an underground. It would then makes sense to access portions of phase W. The higher grade portion of the phase W. From an underground. So this is a multi varied optimization, where we have to trade off slopes phase asked how it gets sequence into the mine plan and what does a potential underground scenario.

Looked like.

But to answer your question, we're still looking at to $2 50 to 300 at round mountain through 'twenty, two 'twenty three and into 'twenty four.

And thats, what the number of baked into our guidance out beyond 2025.

The level of production will depend on those three things do we split phase W.

And do we access some of the material underground. So let me just give the high level example on that if we decide to this isn't if if we decided to access some phase W. From underground we would do so at a higher cut off.

And there would be fewer ounces in the near term.

However on underground would then allow us to go after ounces in W. That are currently outside the 1200 and indeed, the $600 pit shell.

So there may be a reduction in production in what were previously going to be high years, but they would be ounces that come with.

Much lower capital development costs, and we would make these decisions on an economic tradeoff. So we would look for neutral economics, or even improved economics, and we would trade off the capital requirements, but I can't say with any degree of certainty right now because these are all subject to the optimization study that we're carrying out.

Okay, and when you're thinking about the reserves there I can't remember the exact details, but there was some reconciliation opportunity. If I recall is that these factors are these upside opportunities that were outstanding still available going forward or are they baked into the reserve.

So the reserve includes phase S, which is about $109 50, or so new ounces contained in.

And it also includes phase W. On an open pit shell with a laid back slow. So we want to start with that point is if we laid the slope is back to the to the more shallow does it pull the reserve on open pit, yes. It does so the current reserve includes phase W. In a $1200 pit shell Enphase S. Now some of the other.

Or opportunities that we havent Ram Mount of relate to the way, we manage the heaps and how we get ounces out of that those we cannot classify as reserve and those are opportunity ounces that we go after on a really.

Kind of make it up as you go along basis, because we drilled the wells, we get ounces, it's very difficult to characterize.

The older parts of those heaps and what kind of gold is in there. So those are not in reserve and Thats actually one of the difficulties for you guys. A model round mountain is it's very difficult to say what ounces come out of those heaps, but.

But right now we're below <unk>, Spanish holding those heaps and we've been getting 40 to 50000 ounces a year from the heaps and those are ounces that don't come off the reserve statement.

Got it okay.

And if I could ask one more on the on the capital allocation side of things.

And looking through the closing of the great their acquisition.

There is I guess, there is a different type of <unk>.

Opportunity in the sense that there is now that available if it can be repaid.

How do you think about the three sort of larger leavers.

Looking at the dividend or share buyback or the debt.

At this point in time.

Yes, Thanks, I'll take that Josh look high.

Again, as we look forward, we see significant free cash flow.

On a go forward and we actually I mean, the short answer is we can accommodate all three.

Certainly maintaining our current return of capital.

Which is our <unk>.

Base dividend.

And we've committed to a buyback that essentially equates to the dividend so.

Call that 300 to three.

$320 million a year of return.

And then we've also indicated that.

The shares that we did issue as part of the great Bear transaction wed.

We'd like to prioritize buying those back as well.

And we're again, we're going to look at that on a quarterly basis as we move through the year looking at the gold price looking at.

Our cash flow, but that's certainly an objective is to buyback those shares and at the same time, we do think there is ample free cash flow too.

Continue to de lever so.

We're very much committed to the return of capital and the balance sheet is always a focus.

Great. Thank you very much.

Your next question comes from Mike Parkin with National Bank.

Thanks, guys.

Just a couple of clarifications on your budget for 2022, you mentioned using $17 per barrel does that factor in.

The hedges that you were mentioning or sub 50.

Yes, you're spot oil price.

In the budget, we do factor in the hedge that is the bottom line.

But yes, no. It's a 70 dollar assumption and then we bake in the hedge benefit and then we do provide sensitivities as to what are what changes in oil price due to our overall cost of sales and that's also factoring in the hedges that are in place.

Okay.

And then switching over to the task.

In terms of.

Ghd emission reduction target.

How far does that project get you to that 30%.

It's the single biggest lever in our reduction strategy and happily. This project is a a.

A good return project.

It takes us.

Three or 4% towards our goal here.

And it's the first of several we've got a couple of others in the hopper as well, but it's the.

It's the most readily available.

<unk> project to us right now.

Okay, and then in terms of like a per ounce savings can.

Can you quantify that.

On a cost per ounce.

Okay.

Yes, it's somewhere in the five to $10 an ounce range.

It depends on where crude is obviously the higher the crude prices the better the benefit so.

With crude where it is today, it's at the higher end of that cost range cost savings range.

Okay.

And then just confirming.

Great barrier resource deal closes you mentioned $50 million to $60 million for the budget for what you want to drill there is that going to be completely expense or will that be a capitalized spend.

I think thats expense it'll be expense, Jeff at this point.

Okay.

And then just last one for me.

So it seems like round mountain is going to have potentially a significant underground component to it.

Right.

Joe.

Now the mill there to be full.

It kind of a combination of still high grade ounces coming out of some open pit operation as well as topped up with very good grades coming of underground ore.

So we don't we don't.

Yes, what we have right now is we've had a historically large mill grade stockpiles at round mountain and we have mill material coming up from different parts of the pit. So for example phase F is 50 50.

It'll be half mill have heap leach feed.

Phase W. Mined as an open pit is almost all heap leaching that goes onto the new north dedicated pad that we build and <unk>, what we're seeing in there given the grades it would be predominantly male or so between <unk>.

If theres an underground component W and acts as an underground if it pans out we would be able to keep the mill full.

Okay, Alright, that's it for me guys. Thanks, so much.

Again, if you wish to ask a question. Please press star one.

On your telephone keypad again star one to ask a question.

Your next question comes from Greg Barnes with TD Securities.

Yes, Thank you I apologize, Paul tomorrow going back to around that one.

Model I've got.

2025, and 2026 at over 400000 ounces a year.

Sounds like that's not going to happen.

Youre, probably right because our two scenarios for those years are either we lay the slopes back to the full extent of the shallow recommendations right now and giving our stripping rate constraints, we would not be able to access the great and time to hit those numbers.

The alternate scenario is a re sequencing of the mine plan that brings us forward and dives for underground at W. Because of the higher cutoff going underground. It would also depressed the production level. So.

Yes.

I am going on a bit of a gut feel limb here we've done some rough analysis on this but most likely those high production years will not materialize at that 400 plus range, but we're still targeting things in the 300.

Okay. So.

Maintain that $2 5 million ounces, a year production level, what will offset the lower production at <unk>.

Round mountain.

So when we give that $2 5 million on average for the 10 year production profile we.

We do allow ourselves some buffer some puts and takes in the portfolio there.

And.

Writ large what comes into the portfolio. There is we've got <unk> coming online in 2025.

Got <unk> production.

And as I said in the prepared remarks, we've extended la coipa.

So we have enough flexibility in the portfolio that at this stage, we don't feel that the two five average is put at risk by these re sequencing of round mountain now one of the.

One of the silver linings here in this whole round mountain stories, where we've now got.

Inventory in front of us to push mine life out into 2000 <unk>. So.

A major silver lining here at round mountain.

These ounces are generally deferred.

Accept those so here's an important point, if we have a higher cut off to go underground for portions of phase W. Absolutely. The base case, we're still going to go after a bunch of phase W is an open pit, but the deeper higher grade portions if we use a higher cut off we would lose answers that were previously reserved in the open pit shell, but we would be able to push further beyond the $1200 shouldnt.

Pick up ounces that were previously uneconomic at 1200.

So we still see this as a ounce neutral optimization exercise, but with a deferred component.

Gotcha, Okay, and potentially capital benefits.

Yeah, that's a good point it would be a lot lower stripping and it would certainly help our greenhouse gas profile given the.

The open pit component that round.

This may be an unfair question Paul but.

Bump in 2023 to $2 8 million ounces does it make sense to smooth that out somewhat.

2726, and continue that or is that unless just not doable given the mine plans while.

Well, we spent a huge amount of time debating that very question like do we go to 65 to $72 seven.

But it's actually not the right economic decision, we want to prioritize their returns and fundamentally what drives the big number in 'twenty. Three is tasiast. We can have a really good year and la coipa is going to have a really good year with the silver component.

So it would basically be deferring cash flow and it just wasn't the right thing to do from an optimization exercise.

And as we did this year when we get into next year, we will refine our guidance one year at a time.

But your question's a good one I mean, we could have goals sought flatter production, but in the event, where we landed is just pulling that cash flow when we could get it particularly as we head into what appears to be a high gold price environment in the near term.

Okay.

Just a question for Paul I, just wanted to confirm that at coupon.

Ill have to sell the gold to the Russian Central Bank anymore.

We never have no it's strictly okay.

And as I said in the previous question Tim.

Typically we sell to cover all of our ruble cost her needs in country, but.

There is no restrictions.

And the last time.

Pardon me.

There were sanctions and you would not.

As far as I recall, correct Thats correct in fact.

Ironically the.

The impact was the devaluation of the ruble, which actually enhanced our margins.

Right.

Okay. That's it for me thank you.

Your next question comes from Mike gentlemen, with Bank of America.

Oh, Hi, good morning, Paul and Andrea I, just had a question for Paul Tomorrow going back to round Mountain a first question on round mountain right.

Hey, Zach so Paul I remember back in I think it was 91 or 90 Echo bad a tour for the analysts to help round mountain.

And they were talking about phase <unk> back then.

One of the geologists sent 5 million ounces higher grade material.

But because gold is at 300 jobs.

And those I thought that might be ground condition issues.

Ill count being competent lauder issues.

Those reasons I'm not going to go after it obviously had a big open pit with lots of reserves.

So I'm just wondering now.

What do you think of all those numbers and views from.

Well, a long time ago 30 years ago.

So 30 years ago, even if you go with say 15 years ago, both phase W and X, where something called deep northwest They were combined underground and the inventories you talked about those were.

They werent Ni 43, 101 inventories are conceptual inventories.

But we have millions of ounces in resource at Phase IX and those are on an open pit shell.

What has changed since then in fact recently is.

As I said in my prepared remarks, we've had some really good exploration success now let me go.

Give a perspective here phase W and X are actually separated by a downdraft fault.

Doug just characterized with more disseminated material with some high grade pockets, whereas in <unk>, we get into more structurally controlled higher grade much more underground friendly type mineralization and if you look at our press release Youll see some of the results there with 10 to 20 meter width.

Five to 10 grams.

So as we get more resolution on what the mineralization looks like we are we are liking the potential to go underground, there and especially with the gold price.

Where it is.

<unk> hundred or 14 under 600, it certainly makes the underground look more attractive and as I said earlier it may push some of the open pit material into an underground and that's subject or optimization.

So overall I think that the excitement around <unk> is greater than it was two years there was greater than it was 15 years ago, certainly it's come into much better resolution than it was 30 years ago.

It's a prolific system around mountain is it's a very unique deposit and.

It continues to give almost sometimes beyond expectation.

Okay, great. Thanks for let me look.

I look forward to the next tour.

Sure.

Yeah.

Yeah.

Lou.

Yes.

We muster operator.

Hello, operator.

Can you.

Can you hear me.

We can now sorry, we had a moment of silence there.

Okay. Your next question comes from the line of Tanger, Zakuska, Nick <unk> with Scotiabank.

Great. Thank you for taking my question good morning, everybody.

Thanks, Paul for the information around that.

Move outs, the kebab mountain, if I could and I just wanted to talk a little bit about that carbonaceous or.

You haven't sampled isolated on the SaaS side I, just wanted to try and understand.

Stem to that channel and moving to the new iPhone are not going to be impacted but is this something that you have.

Looking at in terms of reserve.

Our reductions are something that we're going to have to remodel.

Thanks, Matt.

So we basically were were essentially done operations in the South area right now so the vantage impact is behind US now in a sense that.

Bad thing happened, we lost ounces, but it is a done deal it doesn't impact the north area. The total production loss years around 70000 ounces.

Roughly split between 2021, 2022, which is part of our guidance downward revisions to six five.

And then writing off some material that we were going to produce in later years vantage is no longer in reserve so what what's on our books.

Is what we intend to mine in the North area on a reserve basis.

What happened there is we knew we knew vantage had carbon and when we constructed the the resource model. It was difficult to model the extent of the carbon impact of zones, given the thin and wispy nature of the carbon mineralization.

As we got to mining. It. Unfortunately, there were zones that were impacted more than expected by carbon and we either.

Place those on the heaps and got low to very low recoveries or we ended up wasting them.

Which is why we had the write down but in terms of a go forward perspective.

There is nothing left advantage, we've essentially ceased operations they were doing some residual leaching, but theres no go forward substantial production expected advantage.

Okay. That's good and then maybe if I can move to.

Just the sequencing I don't know Paul Rollinson wants to take the ASR backhaul.

I'll sell into Russia.

On the sequencing of.

All of these projects.

You can see that level might take them pushed out of that you've got coming.

Coming in I'm, just trying to schedule.

<unk> would come in and what flexibility do you have any.

Sequencing is moved.

Moving some of these around too that indexing maybe.

Earlier than originally anticipated.

Yes, Thanks, Ken.

Kenya.

Yes, you are right I mean lobo.

We tend to as you guys. Thank you I appreciate we.

We look at Lobo isn't linear extension from La Coipa.

The recent mine life extensions, we've had at La Coipa.

Push out level, but in our minds, that's a good thing.

It's.

It's it's something we hope that we're going to continue to do so.

Success on La Coipa mine life extensions will hopefully gradually in a good way push logo out closer to the end of the decade.

I would say in general we have a lot of flexibility in the sequence and schedule.

What we guided on.

An announcement of great there was <unk>.

Production at <unk> by 29%.

We're set to close here before the end of the month, where.

We've got an integration plan, we're chomping at the bit to get to work and a big focus of our of our activity post closure will be looking at opportunities for schedule compression. So we've guided 29.

We do our best to move.

Things sooner than that and we certainly have the capacity in our system to do that.

So if I were to think about it one that would be much more flexible would be the lobo, Michael being pushed out and.

Sort of coming in and taking its place would that be a reasonable way of thinking about it.

Yes, I would I would say it is yeah. So Tony I had looked like but where we are very focused on the mine life extensions. There were up to 26 now we're into the next phase of negotiations and technical work on the next phase of Perin and if we got that next phase of <unk> that would push out global market. So.

It's fair to say strategically, we actually want to extend la coipa and push out of global Marty because la coipa is of high quality build asset.

And that is our strategy to extend la coipa, so that we can.

By some flexibility on the time on total Marty.

The case of Union square.

As I said earlier, we've advanced early works into this year I had mentioned we are doing early works. So those remain priorities for the medium term.

And then in the case of the Great bear asset one.

One of the first thing they wouldn't be doing here out of the gate is assessing what the critical path looks like it it almost certainly goes through permitting and we just want to get smart on the permitting requirements, Ontario in Canada federally.

Before we make any pronouncements on schedule there, but as Paul said, our objective is to compress the schedule from the 2029 date.

So in an ideal world it would be within <unk>, and then global market kind of coming in.

Yes, I think that would be a good news story, if we were able to do that if it came with la coipa.

Extension.

And then just maybe just coming back on.

Onto Russia, I guess on that review some of them.

Yes.

Procurements in country.

And also some of your banking and this exports just on the procurement and country can I just.

Confirm where youre getting in fuel would be in country.

Explosives would be in country I, just want to confirm grinding cyanide, where is that coming from and what's coming from outside of Russia or from North America practically.

Yes, good question and again I would say.

Going back historically more out of.

Comfort or.

Just historical practice just knowledge of suppliers.

Youre right. There was a lot of procurement that came out of North America.

Out of the ports in Washington, and up into Russia, but we've <unk>.

Purposely.

Migrated that procurement strategy.

To be mostly within Russia, which is which is the case today in fact the last the.

The last set of political events around the Crimea situation caused us to shift our procurement from what was previously majority focused from North America into the vast majority are being procured in region in Russia, China and surrounding countries to the point, where right now about 10%.

<unk> from outside that region, and even there we're looking at moving that procurement into our Russia and China.

So we are far less exposed than we were historically a fuel yes, yes grinding media sign at all of those things like gene listed.

Okay, So theyre coming within Russia and China.

And then selling your goal youre able to the refined gold and silver in country.

And number Alex.

<unk> outside our in country.

Can we just talk about then.

Once you Fulgent bold and let's say you have the M&A is can we talk about how your mind me Scott dividend it out and what exposure do you still have in Russia right now.

And money or have you taken all of that out.

Sure so.

At the end of December maybe I'll start there we did dividend.

Just over $110 million. So we started the year with.

Cash that we basically need to operate some of that from a working capital perspective.

Started in a pretty good spot.

Going forward, we typically we can take cash out by dividend or by intercompany loan and we can do that on a quarterly basis, but this year, we're not as reliant on the cash from Russia for other parts of the business as we might have been in the past so with the bill that you dance going on where.

We're expecting to fund that.

That stand with cash generated from coupon so the excess cash to come out of the country.

Gold price dependent but not as significant as it might've been in the past but.

We've never had any issues getting cash out of the country. So we're not concerned about that at this point.

And then just lastly on inventory.

That you have I would assume in excess of a year of inventory at your mine sites there in Russia at Grupo Juste.

Keep everything going.

That'd be correct.

We have a full year of supplies on hand.

Okay. Yeah, that's very helpful. Thank you.

Thanks.

Your next question comes from Jackie <unk> with BMO capital markets.

I guess I wanted to ask about Tasiast. It sounds like the operation is fully recovered from the fire you had in.

2021.

Just curious how you are proceeding with the insurance settlement on that should we.

Do you have any.

Understanding of the timeline on that or should we be expecting a cash inflow from a from an insurance payment in the next couple of quarters do you think.

Yes.

We did have approval from our insurers for an advance payment of $90 million just at the end of the year. So we collected $30 million of that in December and we actually have a receivable fire.

The remaining $60 million that we will have collected all of that by the end of Q1 and as I said, that's an advance payments so the processes.

<unk> completed now that Tasiast is back up and running we can we can.

Conclude the claims process.

Can't say exactly when it will be it will be fully complete but hopefully sometime this year.

Great. Thank you and maybe just a question on Serrano.

Hum.

Sad to see the terrible accident that happened.

In Ghana.

Is that has that affected your operations at all.

In terms of the availability of explosives or or anything like that.

And in Q1.

Short answer Jackie is no.

Yes look and again it was.

Terrible tragedy as you as you know I think it was a contractor.

Delivering.

This contract are delivered to many of the mines in Ghana.

As you would expect there was an investigation.

That slowed things down for a while but.

We had ample explosives.

Ed.

Available to us and we're back up and running so.

Short answers.

We're not.

Materially impacted.

Okay. Thanks, Paul.

For me thank you.

Thanks Jackie.

There are no further questions at this time I'll turn the call over to the speakers for any closing remarks.

Thanks, operator.

Thank you everyone for joining us and we look forward to.

Catching up with you hopefully in person in the coming months, Thanks take care.

Thank you for participating you may disconnect at this time.

Yeah.

Okay.

Right.

Okay.

Thanks.

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