Q2 2022 Kinross Gold Corp Earnings Call
Good day, and thank you for standing by welcome to the Kinross second quarter 2022 results conference call and webcast all lines have been placed on mute to prevent background noise.
Should you require any assistance.
Please press star zero on your telephone keypad, and an operator will assist you.
During today's call there will be a question and answer session. If you would like to ask a question. During this time simply press star one on your telephone keypad I will now turn the conference over to Chris Licht and helped Vice President of Investor Relations. 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 Freewheel, Paul Tamari and Jeff go for.
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 July 27th 2020 to the MD&A for the period ended June 32022.
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'm going to briefly review our second quarter performance.
Comment on our expectations for the second half of 2022.
And update you on key developments across our portfolio.
Then I will provide some comments on the state of our business.
The compelling value opportunity our shares currently offer.
After that I will turn the call over to Andrea and Paul.
We'll provide more detail on our financial performance and on our operations.
Beginning with our results.
As a company that has met guidance nine out of the last 10 years.
I am not happy with our operational results in the first half of this year.
Given the challenges we have encountered we are now targeting production at the low end of our guidance range.
In order to meet the low end of guidance, we will need to produce nearly 400000 ounces more in the second half than we did in the first.
We see the increase in production coming from the following four areas.
One the movement to higher grades at <unk>.
Two seasonally enhanced recovery from our U S heap Leach operations.
With particularly strong performance expected from Bald mountain.
Three maintaining the 21000 ton per day throughput at Tasiast that we've already achieved.
And for working through supply chain challenges at the La Coipa mill.
I wanted to give you my commitment that we will be highly focused on the delivery of these objectives.
On cost with the slower ramp up at the coipa.
Resulting in lower production overall.
Combined with inflation.
We expect to be above our guidance for cost of sales in Asia.
Andrea will elaborate on this in a few moments.
We remain confident in our expectation our cost per ounce will drop in the second half relative to the first half.
Given the planned increases in grade and production across our portfolio.
During the quarter, we improved our liquidity by paying down $120 million of debt.
And we plan to repay an additional $3 million to $400 million in the second half.
We also continue to return capital to shareholders through our dividend program.
And plan to continue our buyback program in the second half.
Moving to our projects.
Things are progressing well.
And of particular note yesterday evening, we released the study results for our 70% owned high grade <unk> project.
We are pleased with the results of the study and we'll be moving forward.
During the quarter, we completed the sale of our Russia business for total cash consideration of.
$340 million.
With $300 million received on closing.
We continue to advance towards the closing of Toronto, which we expect will be finalized in August .
These divestitures have resulted in approximately 70% of our production now.
Now coming from the Americas.
Looking at our value proposition.
We have a competitive reserve life index into the next decade.
Substantial production focused in the Americas.
Significant margin and free cash flow.
Our strong balance sheet and an attractive return of capital.
Our top two assets Tastiest impair <unk> together are expected to produce on average more than 1 million ounces annually into the next decade.
The rest of our portfolio in Alaska, Nevada, and Chile make up an additional 1 million ounces, which we expect to produce annually.
In addition, we expect our World class, Great Bear development project to carry our production into future decades.
Before I turn the call over I want to touch on the important area of safety our first priority.
Sadly in July we suffered a fatality at our Tasiast mine.
Just unfortunate incident is a reminder, that despite our constant focus on safety our work is never done.
And we need to be continuously improving our standards and practices.
We value the health and safety of our workforce above all else.
And are taking steps to continuously improve our risk management and safety systems.
To safeguard every member of our team.
With that I'll now turn the call over to Andrea for a review of our financial results.
Thanks, Paul.
I'll cover financial highlights from the quarter provide an overview of our balance sheet and then touch on our capital allocation.
First I'd like to point out that all of the financial market.
Ill comment on code all exclude our former rationale affect on for Anna.
As Paul noted our second quarter production of 154000 ounces was stronger than the first quarter, driven primarily by increases at <unk> and our U S operation.
Our Q2 cost of sales was $1027 per ounce, which increased relative to the first quarter largely due to increased cost at round mountain and higher fuel costs at Patheon.
Cost of sales to decrease in the cycle, which I'll come back to you.
All in sustaining costs of $1341 per ounce higher than Q1 due to the increase in cost of sales and higher sustaining capital.
As we indicated in our press release yesterday, our costs are tracking above our previous guidance range and we're now expecting full year cost of sales to be approximately $900 per ounce and our all our portfolio cost to be approximately $1240 per ounce due mainly to lower production from Macquarie.
On inflation.
On inflation, we previously incorporated a 7% increase in our operating cost for the year.
Now expect the impact to be around 10% to 12% for the full year and we factor that into our revised guidance.
Our capex, our initial assumption of 10% to 15% inflation careful.
Our expectation of $900 per ounce incorporate lower cost of sales in the second half at approximately $830 per ounce were confident in this reduction which comes from the ramp up in production across the portfolio and the benefit from increased lower cost ounces at Tasiast and la coipa in particular.
Our second quarter adjusted operating cash flow was relatively consistent with Q1 at $252 million.
Capex of $150 million in Q2 was higher than Q1, but still a slower pace than what's planned for the second half.
We still expect to spend our guided capex range of $850 million by year end.
Free cash flow during the quarter with $108 million or $103 million, excluding working capital changes, which was a significant increase over Q1.
We expect free cash flow to increase further in the second half, particularly in Q4 as our production increases and cost decrease subject to future coal prices.
With regard to our balance sheet, our financial position remains strong and is expected to strengthen further both in the second half of the year and going forward into 2023 and 2024.
We maintain investment grade credit ratings from all three rating agencies, two of which reaffirmed ratings during the second quarter.
Sure.
We ended the quarter with solid cash and liquidity position with $719 million of cash and approximately $2 1 billion of total liquidity.
As Paul mentioned, we repaid $120 million of data in the second quarter with another $100 million paid down in July and plan for continued refining going forward.
Our trailing 12 month net debt to EBITDA ratio improved slightly at June 30 to one seven times. We expect this ratio to continue to come down throughout this year and next year.
Finally on capital allocation as Paul noted, we expect to continue with our dividend, which we plan for the long term, including at lower gold prices, our dividend now amounts to a compelling yield of nearly 4%.
We also plan to maintain our baselines share buyback program at the same level of our dividend.
As always we're monitoring gold prices and inflation as we think about our capital allocation priority.
With that I'll now turn the call over to Paul.
Thanks, Andrea this morning, I'll provide key updates on our operations.
Share highlights from our decision to proceed with <unk> as well as details on our ongoing growth projects.
Sure some news from exploration.
Across our portfolio Q2 improved compared with Q1, but it was not without challenges as Paul mentioned.
Looking forward, we remain on track to ramp production up in the second half of the year driven by planned higher grades and throughput levels across the portfolio.
I'll provide a few examples of this starting with Tasiast.
Telus delivered a good second quarter with 129000 ounces produce head grades remained strong in Q2, and we are encouraged by the ongoing throughput ramp up regularly achieving more than 21000 tonnes per day.
The outlook on Tasiast remains strong and the site remains on track for a record year with over 600000 ounces of production.
We're expecting a production increase of at least 30% from packages in the second half of the year largely driven by sustained throughput of 21000 tonnes, a day and increasing grades coming out of West branch for where we are mining now.
July for example, the mill Great offers.
Hello, three grams per tonne.
Second phase of the project ramped up to 24000 tonnes. A day also remains on track for completion in the middle of 2023 with engineering substantially complete and procurement well underway.
Construction of the solar power plant to Tasiast is advancing with detailed engineering ongoing and procurement underway with initial site activity is expected to start later this year.
At <unk> production for the quarter was 129000 ounces up roughly 20% compared with the first quarter.
We expect to see higher grades at <unk> through the remainder of the year as mining enters into a higher grade ore in the southwest area of the pit as planned.
The processing of lower grade stockpiles is largely complete for this year.
Throughout July <unk>.
<unk> been averaging a grade of <unk> 45 grams per tonne, which is approximately 30% higher than the first half and we expect to produce around 50000 ounces. This month alone.
I'll now move over to liquidate them.
As Paul mentioned commissioning the mill progressed more slowly than initially planned in the second quarter.
However, <unk> is making progress and we will be a meaningful contributor to our portfolio going forward in terms of production and cash flow.
The temporary delays were primarily driven by issues commissioning the pumps and some of the other components in the mill exacerbated by global supply chain problems, which have hindered the availability of critical components.
Litigations are ongoing in July is showing improving throughput levels, including recently, reaching 10000 tonnes per day.
With the commissioning of the second line of the plant underway, we now expect la coipa to reach sustained throughput of 13000 tons per day in the fourth quarter.
These issues have resulted in a production deferral of approximately 60000 ounces.
To reflect this delay as well as a higher gold to silver price ratio than initially assumed in our guidance.
Have revised our expected lacroix for production for the year down from 200000 ounces to 125000 gold equivalent ounces.
We do not expect the delay to impact production going forward. Once we are ramped up so production in 2023 and beyond is intact and the ounces deferred this year will be realized in future quarters.
Mining rates have also ramped up as planned and we now have a stockpile of 800000 tons. The grade of one two grams per ton gold equivalent ready for the mill.
Moving to round Mountain site optimization project remains on track for completion later this year.
Overall, there are no significant changes to our expectations from our most recent comments.
We expect to develop brand mountain according to the following sequence.
<unk> W. One MW to two sub phases of CDW will be mined as an open pit and are the priority for the next two to three years.
And then frees us will be added starting in Q1 of 2023.
And the necessary permits for this phase we received this past month in June .
Following that we expect to mine W. Three MW for which is the last two sub phases of W.
We continue to evaluate the tradeoff between underground versus open pit for these phases.
Looking longer term were advancing the study of underground options for both <unk> and gold Hill.
Both of which are showing promise.
We will provide more details later this year as we approach the completion of our optimization study.
To recap our confidence in a strong second half relates to improved grades as for our planned mining sequence of <unk>.
At Tasiast production growth coming from a combination of sustained throughput at 21000 tonnes, a day and higher grade ore from West branch for.
And at La Coipa, where we are progressively advancing the commissioning of the second line to the plant in.
And lastly, leaching at the U S sites is picking up as expected.
I will move to an update now on the Montreal project.
We are pleased to announce that we're proceeding with the execution of the Montreal project in Alaska.
Montreal provides a robust growth project for Kinross, adding high grade low cost production to Fort Knox.
The project returns remain attractive despite the impact of inflation.
Our preproduction capital investments of $190 million includes a higher than typical contingency to allow for the possibility of future inflation.
The acquisition of permits is also progressing well.
Earthworks and road construction will be the priority for the remainder of 2022 setting us up for a successful field season in 2023.
We expect to be in production during the second half of 2024.
Before turning the call back over to Paul I'll provide a brief update on our exploration programs.
Starting with great bear as our exploration program advances the results reaffirm our expectation that this will become a world class mine.
We remain on track to complete the 200 kilometer exploration drill program for the year.
We continue to receive positive drill and assay results that confirm gold mineralization, which is open along strike and depth.
And we received exciting results of depths, we look 500 meters of note a recent drill hole from earlier. This month intercepted 18 meters five eight gram per tonne gold, including two meters or 41, eight grams per tonne at a vertical depth of approximately 550 meters.
Results like these support our vision for sizable underground mine to complement the open pit.
Also the 35000 meter grade control program has been completed.
<unk>, our initial view on the high grade core of the LP fault zone.
This program has improved our understanding of continuity and grade distribution.
On this topic I want to clarify a point we made during our June 28 project update session that may have been misunderstood.
The high grade nature of the open pit that we originally envisioned has been confirmed.
In addition to this we have discovered a low grade material that is incremental and it will be stockpiled to ensure we maintain high grade mill feed.
So this is good news and expect it to add value.
Environmental baseline studies have begun and all key work packages have been awarded for scoping level engineering work.
All in all we remain very encouraged by the results of our work to date and look forward to disclosing our initial resource with our year end results.
Other exploration highlights and portfolio include encouraging drill results at our Curlew Basin project and extensions to the round mountain <unk> identified in the late part of 2021.
At Curlew drilling from underground is improve the understanding of mineralized vein orientations.
In addition to encouraging results from the stealth and Galaxy veins initial drill results from the lower <unk> zone show excellent potential to contribute to overall resource growth.
We remain on track to report an expected mineral inventory at 1 million ounces to our year end results.
At round Mountain Gold Hill drilling has extended the main and Alexandra veins, we're 300 meters along strike and 200 meters down dip.
New geophysical data confirms multiple deposit skilled trends open along strike at <unk> Hill.
We are encouraged by the significant strike continuity and the open untested nature of the trend.
Meanwhile, <unk> plans for the construction of an underground exploration drift continues to advance well.
<unk> on track to commence in the fourth quarter.
And with that I'll turn the call back to Paul.
Thanks, Paul.
Despite operating challenges in the first half.
Our operations continue to advance towards our plans.
And we are confident in our outlook for a strong second half.
Our company continues to generate meaningful free cash flow.
And we think the value our shares offer has never been better.
We have an improved geopolitical footprint.
A robust production pipeline with exciting projects and exploration to come.
Our significant free cash flow profile.
Our strong balance sheet.
And an attractive return of capital program.
With that operator, I'd like to open up the line for questions.
Thank you, ladies and gentlemen, we will now conduct the question and answer session. If you would like to ask a question. Please press star followed by one on your telephone keypad.
If you would like to.
Remove yourself from the queue you May press Star one again, one moment. Please for your first question.
Okay.
Yes.
Thank you. Your first question comes from the line of Fahad Tariq of Credit Suisse. Please go ahead.
Hi, Good morning, Thanks for taking my two questions first on La Coipa, you mentioned mitigation is ongoing can you just give some more details on whether the spare parts that are needed has been procured.
What else is needed to from a supply chain perspective to get the mill kind of where you want it to be.
Yes, thanks for the the nature of the issues as we are commissioning the second second line and the filter plant.
We had some seals and bearings fail on a number of the pumps.
We've placed orders for both new components, and new pumps, and we have been steadily sourcing them. We don't have them all I would say right now, but we've been steadily having new pumps and components arrive at site and we expect to have everything we need to fully ramp up throughput in the next couple of months.
Okay, Great and then just switching gears to Monto.
Obviously with the investment decision.
Yes.
You know a positive feasibility study results why is it still excluded from 2024 production guidance.
Okay.
Okay.
We typically do our multi year guidance at the beginning of the year. So it's simply a mechanical Stefan when we update guidance.
Okay. So it's not a function of like expecting lower production in the beginning or the second half of 2024, Okay. No no no. We just have an updated our multiyear guidance.
Understood.
That's it for me thank you.
Thanks.
Your next question comes from the line of Anita Soni of CIBC World markets. Please go ahead.
Hi, Good morning, Paul.
Thanks for taking my questions. The first one is this related as regard to Capex.
If I'm correct.
You've spent about $250 million.
In the first half of the year, but you reiterated your guidance for 850 does that mean that.
Correct me, if the 250 is wrong, but.
Does that mean that we will have a heavy capex spend in the second half of the year and youll catch up or should we be gearing more towards that.
Minus and on the plus or minus 5% for the capital.
Okay.
Anita It's Andrew Yeah, I mean, we maintained our 850 guidance, but you are right that the range plus or minus 5%. We were low in the first half, but we do expect capex to ramp up in the second half for a few reasons Cabot.
Capital stripping, we expect to increase in <unk>.
At Tasiast and La Coipa.
And then we will have some additional capex that that far out from <unk> and then spending at <unk>.
Higher spending at the 20 <unk> project those are kind of the three things that factor into higher Capex second half.
Okay, and then on costs I appreciate that you don't give guidance out for.
For the coming year, but.
Until February but I am just.
I'm trying to understand given the $900 per ounce that you've guided to this year and I know that you are guiding to like lower costs in the back half of the year, but should we should we be using a lower cost in the back half of the year is that run rate for next year or should we be.
Taking that.
Inflationary pressures may offset the volume increase that you are that you're that you have planned for next year.
It's a bit of a tough one to call it needed it really it is around.
From an operational perspective, we're comfortable with the second half with a sort of a numerator denominator production great effect.
But the.
The more difficult part to call as Youre alluding to is the inflation.
And again as we said at the beginning of the year we guided.
Inflation in February at 7%, we said, we'd give an update at mid year and here, we are essentially upgrading now to 12.
So.
Trying to predict predict how that's going to play out next year at this point.
Hopefully.
It abates, but that's going to be the wildcard.
Okay. Thank you that's it for my questions.
Once again as a reminder, if you would like to ask a question. It is star one.
Next question comes from the line of Kerry Macquarie of Canaccord Genuity. Please go ahead.
Hey, good morning, everyone.
Maybe first on La Coipa I know originally the plan was to do 200000 ounces I'm just wondering what that ramp up looks like now through Q3 Q4 into Q starting into 2023.
So because of these delays in the ramp up we're now running throughput of 89000 tonnes had a few days of 10, and we want to ramp up to 13000 tons by the fourth quarter. If you make that adjustment in total ounces as I've said in the prepared remarks, we're moving liquids production from 200 to 125.
I would just add to that again just for context carry I mean.
This is obviously frustrating we're not happy with it.
The mine continues to operate it.
This is not a.
Highly technical issue.
It's.
It is a ramp up it's pretty straightforward, it's really just about getting those the spares those parts.
First for equipment, that's pretty straightforward. So we know what the issue is.
We're on top of it we've just got a source the material.
And.
I just got back in.
And we've got it.
'twenty three.
Yes, 2023 will be as per plan.
Paul said this is just a matter of ramping up to throughput.
And we've got the work we've got we've got the stockpile there at one two grams waiting to be fed.
Okay, and then maybe just switching the round mountain and just on the cost there I mean, obviously, a big jump in costs. Despite a big jump in production. Just wondering if you can add a bit of color on what happened there this quarter.
There are several drivers there one is just inflation.
Our Nevada sites were particularly impacted by cyanide lime.
Cost increases, particularly on cyanide. It's also a function of a greater proportion of heap ounces versus may allowances and also timing of where we are in stocking versus recovery.
But even bigger picture a way to look at it is it's more than anything a function of the lower production number.
And as we've said on previous calls our intent is to ramp round mountain backup to that 300000 ounce a year figure, which will get the cost structure back in line. So big picture, it's really about production scale, but in this particular quarter. It was impacted by a number of those specific issues that I just mentioned.
So cost should go down to like 1000 ounce or something like that.
Well, we're going to have to finish our optimization work, but as we ramp up to 300000 ounces, which we intend to do in 2024, the costs will trend back downward that'll be the.
Those are the last bit so we're doing all this optimization study is the cost profile, but the costs will come down as production goes up.
And maybe just one last question on Tasiast I noticed the recoveries were 89%, which is quite a step down from the last few quarters just wondering.
What happened there.
Yes, as we got into the high grade material, we encountered some high sulfide pyrrhotite and that pulled the recovery down, but we've been able to address that through better oxygenation and blending the pure types with the non pyrrhotite material to get it back up and over the last.
A few weeks, we've got that back in line.
So it was really to do with some.
Some pyrrhotite that we encountered.
Okay, great. Thank you.
Your next question comes from the line of Mike Parkin with National Bank. Please go ahead.
Hi, guys just one for me.
And in CIB outstanding and you're still generating and we expect to generate stronger free cash flows is there a thought towards a bit of a balance now in terms of still focusing on the balance sheet in terms of debt repayment, but.
Given where the share prices, maybe putting some capital to work towards the repurchase of shares.
Yes, Mike that's exactly the plan so.
We are we are maintaining both the dividend and.
And the buyback on top of the dividend.
And obviously at the same time Warner.
We're paying down debt. So we're doing all of the above.
I think we're taking a bit of a cautious.
Our approach as we think about where we are.
In the macro sense.
Where's the commodity price going where is inflation going.
We'll see how that takes us.
Certainly any margin expansion through through higher gold prices.
We will think about how we might to amp up either the buyback or.
Or accelerate the debt repayment, but we're comfortable doing all three as we sit here today.
Okay. Thanks, guys.
Your next question comes from the line of tenure Zakuska neck of Scotiabank. Please go ahead.
Hi, Greg Good morning, everyone and thank you for taking my question.
Marty I just wanted to circle back to.
Just a bigger picture.
Theme, which has obviously had some issues getting these pumps and then snap parts just wondering how you're looking at your inventories at site.
Are we.
Looking at.
And adding traditional inventories for site given some of the some supply issues, let's say at La Coipa and following that as we go into Tasiast and we're expanding throughput from 'twenty one to 'twenty three.
Next year do we have everything we need for that one on site.
So theres a couple of questions in there and I'll hit a few anecdotes on this so as we all know global supply chains are stretched and the availability of certain parts has really been impacted particularly on lead times, we have over the past six to eight months done a campaign on critical spares and we've ramped up inventory level.
Where possible where the vendors.
Had the capacity to do that so yes, we have been squirreling away critical parts and components where possible.
And building up our warehouse levels.
In the specific case of La Coipa, just to give an anecdote, we're seeing certain components with 40% to 45 week lead times on things that previous to the pandemic and previous to the supply chain challenges it would've been readily available.
And it's difficult in some cases to predict specifically, where some of these components will it really be impacted and there's always there's always a tradeoff between.
I don't want to say irresponsibly ramping up warehouse levels and just buying everything that you can manage inventory as carefully as we manage the inventory as much as we can.
While ramping up critical spares, where we think we can anticipate failures.
But it's a difficult one to get right all the time and in certain situations no amount of begging and pleading with suppliers gets you more equipment or components, sometimes the supply chains.
Are what they are and we have to source alternative supply. So that's what we're doing here at La Coipa as we are we are buying pumps from perhaps.
Not of the quality that we would normally buy put in place a substandard component or a sub standard piece of equipment and then wait to long lead time for the a better piece of equipment. So.
So yes, we are managing we are buying replacement components proactively where we can but it's not something we can do perfectly everywhere.
Just going to jump in and add in maybe a bit more I mean again just for context.
Why are we here right now where we are.
Obviously tenure.
We tested all of this equipment.
We ran test on these pumps as part of our ramp up to restart that quite poor.
The pumps all work fine.
But what we're finding is with constant load.
With the ramp up of the operation of the constant load on this.
On this equipment and this is where we've seen the failures. So it wouldn't have been routine for us to have this amount of spare parts given the positive testing, we got but what we've found as we've continued to push the throughput that's where we've seen some of the failures and that's why we're scrambling a bit to get these parts.
And a quick reminder, this is a plant that was down for 10 years.
And there are over 80 pumps in the in the filtration plant there.
And again like I said, it's not something you can replace every single one and have in warehouse and again for context 80 pumps, we're probably talking eight or 10 that are problems are 10% of our.
The total so that's we know what it is we're focused on it and we're chasing it down.
Given the experience that you've seen there and now knowing what is <unk>.
Some of these.
Fly chain issues are.
Taking a lot of time to get some of these parts are you seeing anything.
Thank you.
Turning to the Tasiast expansion.
Youre.
<unk>, south, but maybe something else in the supply chain that you are now definitely focused on to make sure you haven't tapped yet.
Well it is a hard lesson learned and we are reviewing all of our sustaining capital projects and major projects are exactly similar weak spots where are their components are key pieces of equipment, where we should have a capital spare on hand. So yes. We are from a hard lesson learned we are reviewing critical components across the rest of the portfolio.
Okay.
And anything in the critical components for Tasiast like from my understanding is shifting or the expansion of the mill I think if I remember correctly, we had the majority of things we need an on site yes.
Yes.
Yes, the 24 key project is more construction sequencing.
Set of activities tie ins.
The biggest element there are the sag discharge screen retrofit and we have all the components for that.
Okay.
I just have two other questions if I could one of circling back to Andrea and maybe Paul as well I'm just trying to understand your capital allocation again, I understand youre going to keep your share buyback $150 million our dividend at a $150 million you want to reduce your debt at the same time and I think I have.
My question I think you wanted to do another 300 or $400 million.
On top of what you've recently done for the second half of the year.
Is that correct as I'm thinking about this.
Yes, Tanya I think I mean part of this depends on gold price in the second half though.
We gave a range in terms of what we expect to add to that that repayment. So and just to clarify on this in the second quarter, we repaid $120 million that was the $100 million on our revolver and $20 million on the Tasiast loan in July we repaid another $100 million on the revolver. So we've got one.
Million left outstanding on the revolver.
Here today, and we expect to see.
To repay $200 million to $300 million in the second half so that would be taken out the rest of the revolver and then.
And then addressing other debt.
And so for the year, that's a total of $400 million to $500 million and again that just that range. It depends on where we are on gold price.
Yes, I'm, just trying to get an understanding.
Is there a certain net debt to EBITDA level that youre looking at before you feel comfortable.
You have your debt, where you want it to be and your share buyback becomes.
Okay.
I know I think your target had been to get your net debt to EBITDA under one by year end. So I'm just wondering if thats still possible that just haven't had chance to do the numbers and then my second question is at what level do you feel comfortable with your net debt to EBITDA to move from that to share buyback.
Yes.
I did previously say, we expect that ratio to be at or slightly below one Jeff Kevin production now being at the at the low end of our guidance range.
Probably end of the year.
Above one.
That by no means uncomfortable for us I think the message. There is Jeff we are working to strengthen the balance sheet were comfortable where we are but we do see it getting stronger by the end of this year and then continuing into next year as well.
And then I guess, we've always thought of the buyback is that flex in the equation.
And again, we're going to take our cue there really from from a margin perspective.
Okay.
As we continue to approach that that metric.
If we get some benefit in the commodity then.
That's where we will have the flexibility to amp up on the buyback.
So and so as your net debt to EBITDA gets to that one times.
Then we could see you be more active in your share buyback as sort of what I've understood.
If the tone is right and the commodity.
Okay. Thanks for that and if I could just squeeze in one more call.
Paul Tomorrow, it's just back to the inflationary pressures.
I appreciate you Ghansham.
Up to 12% for 2022, I'm just trying to look at your key components of your cost structure, and China understand where you yourself have seen more inflation I think from my memory I think 40% of your cost structure is labor, maybe just to touch on Las Vegas component are you seeing.
Tenured labor inflation or.
Is it mainly in the consumables and feel that we're seeing fair for everybody else I'm, just trying to get the components and just trying to see if anything has peaked for you.
Anything peaked for you in terms of what Youre seeing in the consumables.
So the one area, where we are seeing a peaking of courses in the oil prices with things flattening out of the 100.
In other key commodities, we continue to see increases in prices, but perhaps at a flatter rate of increase the most impacted things like cyanide and lime.
Ammonia explosives things that are essentially tied to the petrochemical chain in the case of labor we are seeing.
Pressure in the United States.
And then to a lesser extent in our <unk>.
Brazil and Chile.
So if youre asking we are seeing inflation across the board. We are seeing signs of some attenuation as I said in in the fuel.
And.
The rates of increase and some of the other key commodities arent as severe as they were so if.
If thats.
If thats a good news story, maybe there is something there that.
The worst of the rate increases.
Increasing rates are behind us and when you say less labor pressure in the USA in that 3% to 5% that I should be thinking about what youre seeing.
It's a little bit more than that it's probably the 5% to 8% on labor in the U S and it's really driven by.
Very high turnover rates and the only way to keep those.
Keep those jobs.
Operators in trucks and people in the mills in maintenance is by hiring and typically you have to pay a more competitive wage.
Okay. Thank you your line is open.
A lot of time, so I'll pass it onto somebody else.
Okay.
This concludes the question and answer session I will turn the call back to Paul.
Thank you operator and.
Thanks, everyone.
For joining us. This morning, we look forward to catching up in person in the coming weeks. Thank you.
This concludes today's conference call you may now disconnect your lines.
Please wait the conference will begin shortly.
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