Kinross Gold Corporation (NYSE:KGC) has announced a strong performance in the second quarter of 2024, with a significant increase in operating margins and free cash flow. The company's production was on target, delivering 535,000 ounces at a cost of sales just over $1,000 per ounce.
Kinross Gold's Tasiast and Paracatu mines were noteworthy for their solid performance, contributing to the company's robust financial position, which includes a reduction in net debt. The firm also remains on track to meet its annual production and cost guidance.
Key Takeaways
- Kinross Gold Corporation reported a doubling of free cash flow to $346 million in Q2, with operating margins growing by over 20%.
- Q2 production was on plan with 535,000 ounces at a cost of sales of just over $1,000 per ounce.
- The Tasiast mine was highlighted as the highest margin asset in the portfolio.
- Development activities at Round Mountain and Alaska are on schedule, and the Great Bear project shows potential for growth.
- Kinross published its fourth annual climate report, demonstrating commitment to reducing greenhouse gas emissions.
- Adjusted earnings were $0.14 per share, with adjusted operating cash flow of $478 million.
- The company is exploring M&A opportunities and reported improved labor conditions in Nevada.
Company Outlook
- Kinross expects to meet its full-year production and cost guidance.
- La Coipa mine is on track for the full-year target of 250,000 ounces.
- The company anticipates capital expenditures for 2025 to be around $1 billion, with major projects contributing to this figure.
Bearish Highlights
- Lower production at Round Mountain and Bald Mountain due to mine sequencing.
- Inflation has impacted capital and operating costs for the Great Bear project, although it remains manageable.
Bullish Highlights
- The Tasiast and Paracatu mines performed well, with Tasiast being the highest margin mine.
- Positive results from underground drilling at Phase X and Curlew Basin.
- Kinross is in a strong financial position and open to value-adding M&A opportunities.
Misses
- There are no immediate plans to increase drilling budgets; decisions will be based on drilling results.
Q&A Highlights
- Kinross may revise the gold price assumption for reserves and resources to focus on margin and cash flow.
- The company is comfortable with the geotechnical conditions at Phase X.
- Stability is expected in Mauritania following the re-election of President Ghazouani, with no changes to the fiscal regime anticipated.
- Debt repayment of around $700 million is expected this year, with a lower amount next year.
Kinross Gold Corporation's second-quarter earnings call showcased the company's financial resilience and strategic progress. With a strong focus on maintaining robust margins and cash flow, the company is navigating both operational challenges and opportunities with a clear vision for growth and sustainability. As Kinross Gold continues to optimize its operations and explore strategic opportunities, investors and stakeholders can anticipate updates on projects like Great Bear, Phase X, and Curlew, as well as the transition from La Coipa to Lobo-Marte. With a stable political environment in Mauritania and a commitment to managing inflationary pressures, Kinross Gold is positioned to maintain its momentum in the global gold mining sector.
InvestingPro Insights
Kinross Gold Corporation (KGC) has demonstrated a strong financial performance in the recent quarter, which is further supported by key metrics from InvestingPro. With a market capitalization of $10.75 billion, Kinross is a significant player in the gold mining industry. The company stands out with a P/E ratio of 21.5, which is attractive when paired with its near-term earnings growth, indicating that it is trading at a low P/E ratio relative to this growth. This aligns with the first InvestingPro Tip that highlights the company's trading potential based on its earnings outlook.
A further testament to Kinross Gold's financial health is its ability to cover interest payments comfortably with its cash flows, as noted in the second InvestingPro Tip. This is a critical factor for investors looking for stability and reliability in a company's financial structure, especially in the volatile mining sector.
Investors interested in Kinross Gold's performance should note the strong return over the last year, with a one-year price total return of 80.48%. This is a significant metric that showcases the company's recent market performance and may influence investment decisions. For more detailed analysis and additional tips on Kinross Gold Corporation, investors can explore the 8 other InvestingPro Tips available at https://www.investing.com/pro/KGC. These tips provide deeper insights into the company's profitability, stock price trends, and analyst predictions, which are valuable for making informed investment choices.
Full transcript - Kinross Gold (KGC) Q2 2024:
Operator: Thank you for standing by. My name is Joel [ph] and I'll be your conference operator today. At this time, I would like to welcome everyone to the Second Quarter 2024 Results Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Chris Lichtenheldt, Vice President of Investor Relations. You may begin.
Chris Lichtenheldt: Thank you and good morning. With us today, we have Paul Rollinson, CEO; and from the Kinross Senior Leadership Team Andrea Freeborough, Claude Schimper, William Dunford and Geoff Gold. For a complete discussion of the risks and uncertainties which may lead to actual results differing from estimates contained in our forward-looking information, please refer to Page 2 of this presentation, our news release dated July 31, 2024, the MD&A for the period ended June 30, 2024 and our most recently filed AIF, all of which are available on our website. I will now turn the call over to Paul.
Paul Rollinson: Thanks, Chris and thank you all for joining us. This morning I will discuss our Q2 margins and cash flow, provide high level updates on our operations and projects, update you on our sustainability initiatives and reaffirm our outlook. I will then hand the call over to Andrea, Claude and Will to provide more detail. Following a strong start to the year in Q1, we delivered another strong quarter in Q2, establishing an excellent first half of positioning us well to meet our full year guidance. In Q2, our operating margins grew by over 20% compared to the prior quarter, once again outpacing the relative increase in the gold price over the same period. As a result, free cash flow more than doubled in the second quarter to $346 million, the first half total of just under $0.5 billion. Turning now to operations. Our production in the second quarter was on plan delivering 535,000 ounces at a cost of sales of just over $1,000 per ounce. Our two largest assets; Tasiast and Paracatu, both performed well with production costs improving over the prior quarter. Tasiast had an excellent quarter and was once again the highest margin mine in our portfolio driving significant free cash flow. Paracatu continues its consistent contribution with strong throughput and recoveries helping drive a steady quarter of production and cash flow. On the quarter [ph] production remains on-track for the full year and we continue to use strong grades and recoveries to optimize throughput in order to address some maintenance opportunities. In our US operations, production was on plan with notably stronger performance from Fort Knox. Turning now to our development activities in the second quarter. At Round Mountain, the Phase X open pit and the Phase X underground development work continues to advance well. Stripping at Phase S and the expansion of the heap leach pad are progressing on schedule to support initial open pit production next year. At Phase X, the development of the exploration decline is progressing on plan. As outlined in our press release, we are excited that the extension drilling at Phase X intersected mineralization with stronger grades and widths outside of the primary exploration target. These results demonstrate the potential for expansion of the primary resource target and are expected to support high productivity thought-out mining. Moving to Alaska; consistent with our guidance I was recently at Fort Knox to celebrate the first cold pour at Manh Choh. This important milestone represents the hard work and dedication of our project team and partners to bring this hybrid mine into production, both on budget and on schedule. Mining operations at Manh Choh are performing as planned and the Fort Knox mill modifications are on-track for final commissioning in Q3. As a result, we look forward to delivering several years of strong production at attractive costs from the combined operations in Alaska. At Great Bear, we continue to make strong progress in the second quarter. The ongoing exploration drilling campaign continues to focus on targeted extensions, the resource at depth and in Q2 we drilled the deepest hole on the property today. This hole intersected attractive grades and widths woods at a vertical depth of nearly 1.6 kilometers down plunge of the main LP zone. This intercept is outside of our current resource and demonstrates significant potential for further resource growth. Drilling at [indiscernible] also returned attractive results for depth extensions in both zones, indicating strong upside potential to supplement the main LP zone from the satellites. It's important to note that this recent deep drilling will not be reflected in the upcoming PEA because the PEA is a point-in-time estimate and will only include drilling upto April. PEA will provide visibility on the open pit and a window into the initial production scale across the margins for the underground. Given the depth of the mineralization, the long-term potential of the resource will need to be drilled off from underground as we progress development ahead of mining. However, this deep drilling today shows the continuation of high grade mineralization beyond the current resource in the PEA, indicating the potential for significant resource growth overtime. We look forward to outlining more project details when we released the PEA in September. For the AEX, the start of surface construction is targeted for later this year. Regarding permitting for the main project, the Federal impact assessment is underway. Baseline studies permitting an engineering for both, the AEX and main project are all progressing well. In summary, we are very pleased with how things are progressing at Great Bear. Before I make a few comments on sustainability, we would be remiss to not address the recent incidents that have occurred around heap leach facilities within the mining industry. Will is going to discuss why we are confident in the quality of our heaps in more detail later on this call. Turning now to sustainability. Last night we published our fourth annual climate report which provides our latest comprehensive climate related disclosures. The report also outlines our progress towards our climate related goals and provides details on our climate change strategy, including our plan to reduce greenhouse gas emission intensity. In 2023, we implemented 15 energy efficiency projects across our sites with combined greenhouse gas reductions of more than 29 kilo tons of CO2. As a result, our percentage of renewable energy increased to 23% of total energy consumed last year. Looking forward, we are on-track to achieve our targeted 30% reduction in Scope 1 and Scope 2 emission intensity by 2030. In summary, we continue to be very proud of our work in the area of sustainability and I encourage everyone to read our recent climate report to learn more. Turning now to our outlook. Year-to-date we have produced over 1 million ounces at a cost of sales in line with our guidance. Looking ahead, we remain on-track to achieve our production and cost guidance for the full year. Our continued focus on costs is driving strong margins and significant free cash flow. With that, I will now turn the call over to Andrea.
Andrea Freeborough: Thanks Paul. This morning I'll review our financial highlights from the quarter, provide an overview of our balance sheet and comments on our guidance and outlook. Our second quarter performance with strong production and cash flow exceeding the prior quarter. We produced 535,000 ounces, with gold sales of 521,000 ounces. Cost of sales was $1,029 per ounce and with an average realized gold price of $2,342 per ounce; we delivered strong margins of over $1,300 per ounce. All in sustaining costs was $1,387 throughout. First half cost of sales of $1,006 per ounce is in line with our full year cost guidance range of $1,020 per ounce. First-hand, all in sustaining cost of $1,348 per ounce is also in line with our full year guidance range of $1,360 per ounce. In Q2, our adjusted earnings were $0.14 per share and adjusted operating cash flow was $478 million, both improving over the prior quarter. We generated $346 million of attributable free cash flow in the quarter or $237 million excluding working capital changes. Turning to the balance sheet. Our financial position continue to improve in the second quarter and remained strong. After repaying $200 million of debt against the term loan in Q2 we ended the quarter with $480 million. We currently have approximately $2.1 billion of total liquidity. Over the past 12 months, we've reduced our net debt by approximately $450 million and our net debt to EBITDA from 1.3 times last year to just under 0.8 times of Q2. Looking forward, we plan to continue allocating excess free cash generated against the remaining $800 million due on the term loan in 2025. Turning to our guidance. Following Q2, we remain solidly on-track to meet our guidance to produce 2.1 million ounces at a cost of sales of $1,020 per ounce and all-in sustaining costs of $1,360 per ounce. Capital expenditures are on-track for our full year guidance of $1.05 billion split roughly evenly between sustaining and non-sustaining capital. I'll now turn the call over to Claude.
Claude Schimper: Thank you Andrea. In 2023 we launched our global Safety Excellence Program. And I'm pleased to say that we have now shared this program with over 60% of the workforce, including both employees and business partners. We are proud of the program's impact today and look forward to continuing to share it with the rest of the organization. This quarter we remain focused on continuing to implement our human and organizational performance program and our operational learning teams. This program is improving our team collaboration and operationalizing by putting people first core value. Results today are very positive and it will continue to be our focus through the remainder of 2024. Moving on to operations; we saw continued strong performance in Q2 with our mines delivering as planned in the quarter and the first half of the year. At Tasiast, production of 162,000 ounces was higher quarter-over-quarter. The cost of sales of $656 per ounce improving over the prior quarter. Tasiast was once again the lowest cost asset within the portfolio driving significant free cash flow. Following a strong first half, Tasiast remains on-track to meet its full year production guidance of 610,000 ounces. At Paracatu, reduction of 130,000 ounces and a cost of sales of $1,039 per ounce were unplanned and also improved over the prior quarter. The mine continues to see steady performance on throughput, grades and recoveries in line with the mine plan. Mine sequencing continues to transition through the lower grade portions of the pit as planned before moving back into the higher grades by year-end into 2025. Paracatu remains on-track to meet it’s 2024 production guidance of 510,000 ounces. At La Coipa, Q2 production of 66,000 ounces was lower over the prior quarter whilst cost of sales was higher mainly due to higher low maintenance costs and timing of sales. Production at La Coipa remains on-track for the full year target of 250,000 ounces as strong performance on grades and recoveries offset lower throughput. We continue to perform reliability and optimization work on the plant. As part of this work the team is actively managing throughput levels to enhance the reliability of the plant while the plant optimization continues. Moving to our US operations, production was higher quarter-over-quarter, benefiting from improved contributions from Fort Knox, while Round Mountain and Bold Mountain were lower as planned due to mine sequencing. Beginning with Fort Knox, production of 70,000 ounces was significantly higher compared to the prior quarter. As more throughput, increased performance, grades and recoveries all improved. Faster sales of $1,345 per ounce was lower over the prior quarter, primarily due to the iron production. At Manh Choh, mining continues on-schedule and all transportation has ramped up to planned volumes. Processing of Mang Choh all began in early July and it's striking to plan. The full commissioning on the footnotes [ph], more modifications is expected to be completed in Q3. At bought mountain, production of 46,000 ounces for slightly lower than the prior quarter as planned. Cost of sales of $1,271 per ounce was higher quarter-over-quarter. At Round Mountain production of $62,000 ounces was lower over the prior quarter due to lower throughput and grades as planned. The cost of sales of $1,564 per ounce was higher quarter-over-quarter due to the lower production. In Phase S, mining activity continues to progress as planned. Meanwhile, the heap leach pad expansion is progressing on schedule. Earthworks and procurements are all complete and the initial production from Phase S remains on track to begin in the second half of next year. With that, I'll now pass the call over to William.
William Dunford: Thanks, Claude. I'll start off by providing a brief overview of our operating heap leach facilities before moving on to an update on our projects. We are currently operating heap leach facilities across 3 types in the U.S. As Paul mentioned, we are confident in the quality and safety of our heap leach facilities for a few reasons. First off, our facilities are primarily run-of-mine heap leach pads, meaning they have larger rocks and crushed heap leach pads which significantly reduces the risk of liquefaction and increases the structural stability of the pads. The only heap leach we have with crushing is Round Mountain, where we are only crushing a portion of the ore we are placing on the pads. So overall, we still have larger rock sizing and a fully crushed pad. Second, topography. Both Round and Bald Mountain are built on relatively level ground rather than hill sides or valley-fills, increasing their stability. Fort Knox is our only valley-fill heap leach operation. And again, the 2 pads there are 100% run-of-mine ore. Finally, it is also worth noting that the [indiscernible] of the valley pads at Fort Knox are designed, engineered, operated and monitored as dams based on state regulation in Alaska which ensures strong governance on construction and stability. So overall, we are confident in the quality of our heap leach facilities. And as always, we will maintain safety and environmental impact of these facilities as our top priority. Moving to updates at Round Mountain. At Phase X underground, the development of the exploration decline continues to progress well, with over 2.2 kilometers developed so far. Exploration drilling has also progressed well as we have started infill drilling as the primary Phase X target and continued opportunity drilling outside of the target to extend the mineralization. As you can see on Figure 1 on the top of this slide, we have received multiple strong assay results on intercepts outside of the Phase X target. Of particular note, you can see in the bottom of Figure 2, an impressive intercept of approximately 30 grams per tonne over 32 meters above the lower portion of our primary exploration targets, shown in purple. There is also a link to a video on the slide and our press release that can give you a better sense of the location of these intercepts. We are pleased to see these results and confirmation of the potential to extend the mineralization that we are targeting for underground mining. We will continue our exploration program at Phase X through the remainder of this year and into next as we advance technical studies in parallel. Moving to Curlew Basin, exploration continued to advance in the second quarter. Results from the underground drill program continue to confirm thicker zones of high-grade mineralization near the Stealth Zone where a recent assay returned approximately 14 grams per tonne over 19 years. Drilling from both surface and underground also continued on the Roadrunner vein zone, with the recent hole returning 12.5 grams per tonne over 2.4 meters. We are encouraged by these higher-grade results which indicate potential to expand the resource and improve the overall resource quality. At Great Bear, drilling continues to focus on demonstrating that high-grade mineralization continues well beyond our current resource. As Paul mentioned, in Q2, we drilled the deepest hole on the property to date. This hole returned 3.8 meters at a grade of 9.5 grams per tonne at nearly 1.6 kilometers vertical depth, demonstrating the impressive continuity of this system that will ultimately need to be drilled out from underground. Drilling in the second quarter also showed good grades and widths at depths well beyond our current resource at the Discovery (NASDAQ:WBD), Yaro and Oro zones, as can be seen on this slide. Similar to Yuma, these zones continue to show potential for significant resource upside and growth at depth. Lastly, drilling at Hinge and Limb this quarter has returned promising results for depth extensions at both zones. At Hinge, we had multiple strong intercepts at around 850 meters, including 9.3 grams per tonne over 3.1 meters and 22.7 grams per tonne over 3.1 meters. We are excited to be seeing confirmation of depth extensions to mineralization across the board at Great Bear, continuing to support our original thesis of a long-life, high-grade mining complex. Moving to a few other updates at Great Bear. Through the AEX decline, detailed engineering, execution planning and procurement continue to progress well. We are targeting a start of early works later this year and start of the underground decline in mid-2025. For the Main Project, in Q2, we continue to advance technical studies, field work and comprehensive baseline studies. Beyond the strong exploration results, we're encouraged to see the in-depth technical work continuing to show positive results across the board, including simple metallurgy, high recovery and competent geotechnical conditions. Work on the initial project PEA is well advanced and we look forward to releasing these results from the study in early September. I will now turn the call back to Paul.
Paul Rollinson: Thanks, Will. Following a strong first half, our business remains in great shape and on track to deliver our full year commitments. There is much to look forward to for the remainder of the year and beyond that, we remain excited about our future. We have a strong production profile. We are generating significant cash flow. We have an investment-grade balance sheet that is continuing to strengthen. We have an attractive dividend. Looking forward, we have an exciting pipeline of both exploration and development opportunities and we are very proud of our commitment to responsible mining that continues to make us a leader in sustainability. With that, operator, I'd like to open up the line for questions.
Operator: [Operator Instructions] Your first question comes from the line of Joshua Wolfson of RBC Capital Markets.
Joshua Wolfson: First question is on the production guide. I think there was commentary earlier this year about first half being softer, given that production has been so strong. Is it reasonable to expect the step up still in the second half on some of the prior guided items?
Claude Schimper: Claude here. So we remain focused. We've had a very solid first half of the year but we've got some mine sequencing setups going and making sure that we need to continue to go to our guidance. So relative to the mine sequencing, both the Tasiast and Paracatu, we expect to be right on guidance for the year.
Joshua Wolfson: Okay. So you wouldn't expect an improvement for those specific assets in the back half?
Claude Schimper: No, we're remaining on our plan which did have us pushing a little bit harder in the first quarter for those 2 big ones. And then the rest of the portfolio we've got some puts and takes which gives us -- like, puts us right up on guidance.
Joshua Wolfson: Second question on the Great Bear upcoming PEA, there's been some impressive exploration that we've seen, at least reported post the cut-off date as of April for the study. Is there any sort of potential we get a resource update as well that might -- even though it might not be included with the economics but possibly we'll see what the exploration upside has been thus far?
Claude Schimper: Yes. We will plan to update the resource at the time that we put out the PEA just to make sure it's kind of the 2 pieces of the picture tied together with latest information. We've closed off the drilling for that as of April but that's where we'll be.
Paul Rollinson: Yes. There's always -- as you can appreciate a lag. But obviously, as we're coming to the market with an update, we'll bring whatever else we can at that time.
Joshua Wolfson: And then last question is just on the cash flow side of things, a little bit of some moving parts this quarter and also the first quarter. Working capital inflows were very strong which helps free cash flow but cash taxes also have been tracking at least in the first half fairly high versus annual guide. Any sort of commentary you could provide on whether we'll see cash taxes maybe decline in the back half or working capital outflows are reversed, at least in the second half?
Andrea Freeborough: Sure. Josh, it's Andrea. The working capital ebbs and flows. So in Q1, we had a net working capital outflow. Q2 was an inflow. So that just sort of cycles throughout the year. It's really just around timing. At the end of Q2, our payables were higher and those are the things that we paid in July. So nothing really of note there. On the taxes, we did make an installment payment in Mauritania of $25 million. So that wasn't -- that's probably the one piece that's outside of where we started the year. Other than that, our taxes should be kind of as expected through the year with the gold price sensitivity which I think we provided in our guidance.
Operator: Your next question comes from the line of Lawson Winder of Bank of America Securities.
Lawson Winder: Just a couple for me. Where I actually wouldn't mind starting is just on your thoughts around the year-end reserve and resource update for the assets other than Great Bear? Is there any thought internally to potentially increasing the gold price assumption? And if so which assets would have the greatest sensitivity to that? And then secondly, since now given a full half of drilling which assets are looking well placed to potentially replace reserves [ph]?
Paul Rollinson: Sure, I'll start and others can maybe jump in. It's a fair question. I think we're all sort of looking at spot and where we've had our reserve resource price assumptions and thinking about what we will or will not do later this fall. That's a decision we'll make later in the fall as we go into our budget cycle towards November and December. So I think it's -- for today, all I'll say is it's sort of steady as she goes. I would say, though, that our focus is really about margin and cash flow. Our mills are full. We're stockpiling low grade. And as we sit here today, the higher gold price, it really -- what it really drives is the margin and the cash flow. So when we think about the reserve resource, there may be some opportunities there but all under the heading of maintaining margin and cash flow. And as you point out, each asset is a little different. The asset in our portfolio that has the largest resource where we'll think carefully is Great Bear -- sorry, Bald Mountain, where we've got about 4 million ounces of resource. So we'll be thinking about that as we go further into the fall.
Lawson Winder: If I could pivot a little bit and ask on M&A. And I'll preface it with the statement that I understand. Kinross is in a pretty good position in terms of projects in the portfolio, especially in the near term and long-term with Great Bear. But I mean what is Kinross's thinking in terms of potentially being opportunistic in M&A? And also with the context that the Kinross Gold valuation has improved over the last year and the cash position is improving?
Paul Rollinson: Sure. Look -- and I think you've got it right, Lawson. I mean, we're in great shape with our organic portfolio. We've got lots of opportunities within our portfolio that we can turn on and we will be looking to further advance studies and economics. So that's one bit of good news, the portfolio itself. We've got an excellent balance sheet. We're certainly not under any pressure to do anything in that regard. So when we think about M&A, it's really -- when you use the word opportunistic, it's where could we see value, where can we add value. And again, I would say we have a very strong technical acumen. We can bring that technical acumen there to help turn things around to help improve. We also have an excellent balance sheet. And so we can bring capital to the equation. So not under any pressure, if something came along that made sense where we thought we could create value for our shareholders, so we have a look at it.
Lawson Winder: And then just finally on Nevada. It's in an area where over the past number of years, there's been difficulty with finding skilled labor and there's been some elevated labor inflation. On the Q1 call, you commented that you are seeing improvements, both in terms of employee turnover as well as pressure on wages. Is that commentary still fair? What are you seeing in -- 1 quarter later?
Claude Schimper: So, Claude here and I think the commentary is fair. We are seeing still a positive trend on our turnover rates and the morale and things like that. And as we move forward with the teams in Nevada, we're performing very, very well. So we're going in the right direction. It is still a tight labor market but we feel very comfortable about what it is that we're doing.
Operator: Your next question comes from the line of Mike Parkin of National Bank.
Mike Parkin: Congrats on the good quarter. To start with, Tasiast looks like it's doing very well to its nameplate. Just wondering now with operations kind of running around the nameplate, are there any initial thoughts that nameplate capacity could potentially be beaten a bit? And if so, is the mine set up where it could actually leverage that? Or is the constraint really more on the mine order? Could you actually utilize excess capacity if it exists [ph]?
Claude Schimper: Yes, Mike. It's Claude again. I think our major focus in Tasiast has gone through 10 years of being on a project phase. And we're now 6 months into it being an operating mine at [indiscernible]. We'd like to stabilize it there for some time and make sure that we meet the expectations. And -- but we're always -- having said that, we're always looking at opportunities on how to improve recovery, how to improve throughput. I don't think we're constrained by the mine. We have some stockpile. So the real focus is on just making sure that we attain the reliability that we expect out of that [indiscernible] and maintain its performance. And then we'll look at sort of incremental, continuous improvement, or things that I don't foresee in the near to medium term and expansion again at that particular site.
Mike Parkin: And then it sounds like we could see an uptick in ounces or tonnes at Phase X but given a number of the drill results you've been kind of highlighting with the recent quarterly results, seemingly multiple times what the resource grade is. Could we -- how are your thoughts there? Are you going to put a fairly significant grade capping on some of those really high-grade hits or with a resource update could we actually see a lift in Grade 2 with the ongoing impressive results you're seeing from that drill program?
Claude Schimper: Yes. I mean, obviously, we're very pleased with the results that we're seeing and it is higher than the grade of the target that we're going after there from the historic drilling. Round Mountain does have a long history of positive reconciliation and pretty -- a lot of visible gold, that type of thing. So there will be capping and some controls on that when we do establish a resource for the underground. We don't have a resource out there yet that's specific to that underground target. That's something that will come in next year. But certainly, there would be, as usual, in that type of deposits and amount of capping. We really are looking at -- we're only getting into the drilling. Okay. Really getting into the drilling on the main bulk target now and that's -- the key piece is the overall grade for that bulk high-productivity mining. That's our vision for this asset.
Mike Parkin: So with respect to the results realized to date versus what you've kind of verbally communicated as a ballpark target for grade, are you feeling very comfortable, comfortable, really comfortable versus kind of delivering to those expectations you've given in the past?
Claude Schimper: We're -- we really need to do the work and come out with a better answer once we have an actual resource. We obviously see these types of grades makes us more comfortable with why we're down there and the long-term margin potential that we see there. And there's 2 pieces. It's not just the grade that has us pleased with the results, the fact that these results are outside of the main target area. So there's 2 key pieces. One is growing the target. The other is growing the grade of the target. These drill results are positive indicators on both of those fronts. But we don't really -- until we get more drilling, we don't have a revised view on the entire system.
Mike Parkin: One last question on it. Some of the intercepts also are showing very good widths. Is that proving in line with expectations internally? Or are you finding some of the really wide intercepts actually proving more positive [indiscernible].
Claude Schimper: Again, this is really a bulk target. I mean -- and what we're envisioning and some of what we've put out there in the past, this is large stoping, wide stopes, transfers stoping of some sort. So we see it well in excess of what we've released recently in some of our historic drilling.
Paul Rollinson: Well, for that high productivity mining [ph] are contemplating.
Mike Parkin: And maybe it's too early but how are you kind of feeling about the quality of the rock there? Do you feel that there'll be any kind of geotechnical challenges? Or do you find the rock is expected to be extremely competent for underground mining?
Claude Schimper: Yes. Given the history of, I guess, underground mining in Nevada, we certainly went into this cautiously with a pretty wide tool set in terms of how we prepared ourselves to handle geotechnical conditions. We do have some faults that we were well aware of in advance, that we planned for as we progress the decline. But really, we've been extremely pleased with the progress of the operational team on sites and what they've done from a geotech perspective. And that's increased our confidence in our ability to operate in this ground. It's not extremely competent ground but it's also not extremely foreground that we've seen in some other assets in Nevada in the past. So we're comfortable with where we're operating at and the controls we have in place.
Mike Parkin: And then just on -- an overall arching kind of question. Obviously, you're getting really great exploration results at all these assets Curlew, Great Bear, Round Mountain, Phase X. Is there any thought, like could you put more drills to work? Or is it just, as you kind of need these additional drill bays in the underground to kind of get things going? Like I understand it -- Great Bear, obviously, it makes a heck a lot more sense to drill from underground than from surface, given the depth, it's -- you're hitting, that makes sense to test it but to really infill it, cost efficiency from underground, makes a lot of sense. But is there thoughts towards increasing budgets?
Paul Rollinson: Yes, go ahead.
Claude Schimper: So, I mean, I'd say at Great Bear specifically, the idea of this deep drilling was to provide information for the PEA to give you kind of a snapshot in time view of what the potential of the underground is. This is deep and expansive drilling. So as you clearly understand, it is more efficient to be drilling at 1.5 kilometers from underground to the actual infill drilling. But of course, we -- when we're encouraged by results, not just at Great Bear but at other places like Phase X, when you get good results, it does sometimes open up the opportunity to do more follow-up drilling. So we continuously review that process. We're going to increase those projects, we'll certainly let you know. But right now, we think we've done what we wanted to with Great Bear in terms of illustrating and providing a strong view on that kind of core of the deposit, so that we'll be able to give a PEA with an understanding on costs and margins. And we've shown that the ore body continues beyond that. Really, with this underground type of system, this resource will develop over a long period of time as we continue to mine and we keep that material in front of us going from underground.
Operator: Your next question comes from the line of Carey MacRury of Canaccord Genuity.
Carey MacRury: Just looking to 2025, given it's less than 6 months away, the capital guidance of $850 million, I know that doesn't include improved projects but I'm assuming that includes the underground work at Great Bear. But I guess what I'm asking is, are there other projects that we should be expecting that could be approved and pump up the 2025 CapEx number?
Andrea Freeborough: Sure. I'll start and Paul maybe jump in after with some specifics. But yes, I mean we typically say -- as you said, we print the guidance for CapEx for years 2 and 3 based on what's approved and then typically closed up and we're expecting CapEx for '25 to be in the range of where it is for this year and last year, so around that $1 billion range for '25 as well.
Carey MacRury: And what are the projects that would be driving that?
Claude Schimper: So Phase X is an example of a project where we're still doing the work. So that doesn't yet have beyond the kind of exploration work that we're doing, there's not an approved budget for next year. So those are the things that will extend it. Curlew is somewhere else where it's possible we'll be starting to spend some money and we're looking at some short extensions of Bald Mountain that could affect that number.
Carey MacRury: And then secondly, could you just remind us how you're thinking of the mine life at La Coipa and how Lobo-Marte still fits in? Do the metal prices change that time line at all?
Paul Rollinson: Yes, I'll start and then maybe hand over to Will. So our Chile strategy really -- we've got the resources in the ground around our infrastructure at La Coipa. Continuity of production is really a permitting exercise and we're going through that right now. As I say, we've got to get a permit to do a layback, that sort of thing. So that work is underway. Our strategy is what we envision is a linear transition from a La Coipa to Lobo towards the end of the decade. So our view is we get those permits, we keep mining the oxide. What we're just starting to do right now is ramp up our environmental baseline studies for the longer lead time to just start to think about bringing Lobo in -- behind Great Bear towards the end of the decade. At a high level, that's really what's going on. And our strategy there -- our key strategy is the synergy is around the water strategy. As you may know, we have permanent pumping water wells that have operated for many years. At La Coipa, those wells are physically closer to Lobo. And our strategy is to use the same amount of water, same wells that switch from La Coipa to Lobo towards the end of the decade.
Carey MacRury: And maybe one related question. I know there was regulatory issues at Maricunga a few years back but there's still 6 million ounces sitting there. Is there any -- is that something that you're looking at as a potential restart at some point? Or is that going to be on the shelf for a while?
Paul Rollinson: Well, I think, again, there's option value there. You're right. It's drilled out resource. Again, water is always a question in July, what it would be the water strategy. That is a different water source and the water basin. But yes, there's no plans right now as it relates to Maricunga but it is a drilled out resource that we'll continue to think about.
Operator: Your next question comes from the line of Anita Soni of CIBC World Market.
Anita Soni: I just wanted to ask firstly on Paracatu. So the grades picked up in this quarter and I was just wondering how that evolves over the rest of the year?
Claude Schimper: So as we go through the different parts of the pit in Paracatu, we have said that this year, overall, is a little bit lower than last year. But as we move from one part of the pit to the next, towards the end of the year, we go back into the higher-grade piece. And then -- but you'll appreciate that when we talk about higher grade at Paracatu, it's a marginal difference and next year, our guidance is higher and similar to last year, whereas this year is a dip-out. We maintain focus on that 510,000 ounces guidance [ph].
Anita Soni: And then just in terms of the debt repayment Andrea, I know -- I mean, you guys paid a significant amount of debt this quarter and you indicated that you intend to pay the $1 billion as it comes due in the spring. But could I get -- assuming gold prices remain where they are, if we're lucky enough for that to happen, what would be your capital allocation strategy after that debt is repaid?
Andrea Freeborough: Yes. What I'd say is our gold prices where they are now, I don't expect that we'll get through the whole term loan this year. So we'll carry some forward into probably first half of next year. The maturity is March 2025. But typically, we've got some more chunky annual cash payments coming out of Q1. So there may be a little bit left as we get into this. We may be just getting out of it this time next year. And I think that's when we'll stop and think about what's -- about our priorities and our capital allocation.
Anita Soni: And is it fair to say that about $500 million is the amount that you would like in cash on hand? I'm just looking at historically what you've held?
Andrea Freeborough: It's really a timing thing. I mean, we had close to $500 million at June 30th. And then as I commented earlier, our payables were a bit up at the end of the quarter. So that cash came down in July. We typically -- our minimum cash is around $300 million to $350 million. Sometimes it's more and it just depends on plans to efficiently move cash around our operations.
Anita Soni: And then my last question, I just got to tie up some loose ends because no analysts are asking like around the edges around this one. But as we get to 2027, 2028, or -- sorry, before Great Bear comes on stream in mid-2029, I think there might be some assets that are scheduled to end mine life, or like Bald Mountain. Maybe there's a little bit of a dip at -- sorry, at La Coipa and Tasiast, I think in 2027, it's still in a low-grade phase. Could you talk about some of the things -- some of the assets that might see an extension to fill in that dip? I know you guys have said you see the 2 million ounces sustained to the end of the decade. I just want to get an idea of which assets could turn onstream and flatten that profile in analyst models?
Paul Rollinson: Yes. Sure. It's Paul here. I think 2027 in particular we're thinking about Phase X coming onstream in combination with Phase S, Curlew. And of course, as I spoke to a moment ago, continued mining at La Coipa where we're -- the model would suggest we stop in '27 today. But as I indicated, our intention is to keep mining through permitting known resources through the end of the decade. So those 3 in particular. There's also some other things around the margin that we'll be looking at as well.
Anita Soni: And where does Bald Mountain end up?
Paul Rollinson: Yes, there are some things -- Bald Mountain is a bigger question. Again, as I said earlier, we do have about 4 million ounces of resource there. We've been focused on the lower capital quick payback opportunities. We see some of those but there are certainly on the Bald property some larger capital opportunities. Again, in that regard, if you just -- really about internal gold price competition for capital return, the gold is in the ground. We're just looking at the economics and thinking about when you would turn on potentially those larger capital and therefore, longer return projects.
Claude Schimper: And we have just received a Juniper permit which is a significant kind of optionality expansion at Bald Mountain. So we're well permitted and everything is basically internal decision-making capital allocation.
Operator: Your next question comes from the line of Tanya Jakusconek of Scotia Bank.
Tanya Jakusconek: First of all, congrats on a good quarter and thanks for the heap leach information. We don't need any more issues in this sector. So it's sad to see that these things happen. Just starting on the operational front. Just wanted to ask about -- you mentioned the higher-grade -- relatively higher grades at Paracatu in Q4. Obviously, Manh Choh in Q4, it looks like Q4 should do better. I just want to know, is there any maintenance shutdown in any aspects in Q3 or Q4 that I should be considering in the quarterly estimate?
Claude Schimper: Yes. So for Tasiast, we're getting to the point where we have to do big liner changes. So that's happening in Q3. And we do have sort of run-of-mine stuff happening at La Coipa as well in terms of shutdowns. And those 2 will have an interest. As far as Paracatu is concerned, a lot of those are into the early next year.
Tanya Jakusconek: So if I look at that, should I be thinking that these 2 last quarter should be relatively similar, if I were to adjust for these maintenance in Q3?
Claude Schimper: Yes. I mean it may have become apparent that we're really trying to flatten out the waves in the quarters over the last couple of years. Also, we keep focusing on being in that [indiscernible]. So we're focusing on making it more sort of repetitious versus these highs and lows.
Operator: Your next question comes from the line of Ralph Profiti of Eight Capital.
Ralph Profiti: Just quickly, please. Andrea, on Mauritania elections, no mining related issues but just wondering when the next budget is presented, are you expecting any sort of fiscal related matters regarding sort of tax policy that may impact Kinross and Tasiast to either positive or negative?
Paul Rollinson: I'll take that, Ralph. Yes, look, I mean as you saw, the President Ghazouani [ph] was just re-elected on a strong majority. We're very pleased to see that. We have an excellent relationship with his administration and he has shown himself to be very much a pro-business and is really -- the country itself, I think, prides themselves on the stability that they offer in the region. So we're not expecting anything really that's going to change. You may also recall that we actually have a stability agreement that we signed that gives us clarity on our fiscal regime. We renegotiated that a few years ago. So short answer is, not expecting any changes. It's -- obviously the elections happen, it's sort of summer politically there now and I expect there may be a reshuffling of the cabinet and we're looking for -- I'm personally planning to get over there in hopefully early September and meet with President Ghazouani [ph] and perhaps any new ministers that have been changed out but it's all very stable and very good.
Ralph Profiti: And if I could just get an update with respect to Great Bear and the AEX permit. And just wondering if you sort of measure it against precedence? We're still a ways off from the underground decline in mid-2025. But just wondering how we're sort of tracking -- maybe get sort of a firmer time line on when that permitting can come due?
Paul Rollinson: Yes, sure. Maybe I'll start and then I'll ask Geoff to jump in. He's been in charge so to speak. You're right. So the strategy -- the permit strategy there is really divided into 2 parts. Provincial permits that will support the AEX, the exploration decline and again, we've been hard at work at that and I'll let Geoff comment on some of our expectations on timing. And then the second part, build the mine. As you recall, if you're greater than 5,000 tonnes per day in the mill, you get kicked into a Federal review. So we've got a parallel permit strategy going for the Main Project which is naturally somewhat lagging behind the exploration. And in that regard, again, well underway. I'll let Geoff speak to the timing of the main permit and what we're doing there as well.
Geoff Gold: Sure. Thanks, Paul. What I'll do is I'll just quickly divide an update between the provincial permitting process, AEX, as Paul just described and the Main Project. Turning to AEX, our team has completed a tremendous amount of work with the Ontario authorities and our First Nations partners, Wabauskang and Lac Seul and they provided express letters of support to the authorities for AEX permits. We're expecting our AEX permits in the near term with a view to commencing our early works at H2 2024. With respect to the Main Projects and as previously disclosed, we remain engaged with IAAC on the Impact Assessment process. As we've made the market aware, we previously filed our detailed project description. We're waiting on IAAC to provide the tailored impact study guidelines which we're also expecting in the near term. And as you'll appreciate, that will underpin the Impact Assessment report. And so on both fronts, I would say we're in good shape and we're making great progress.
Operator: And we have a follow-up question from Tanya Jakusconek.
Tanya Jakusconek: I have 2 questions. Perhaps 3 to start. Now I have 2. Just wanted to come back Andrea, just on the balance sheet again. I think in the previous conference call, we talked about $300 million reduction this year. You've done $200 million. Should I be thinking another $100 million? Or with this stronger free cash flow generation, could we see more occurring in 2024? And then I think you said another $500 million or thereabout repayment in 2025 sort of by the first half?
Andrea Freeborough: Yes, Tanya, I think looking back at $300 million was when we were talking about 2,000 gold [ph]. So our sensitivity is for every $100 in gold price, an additional $200 million in cash flow, that's an annual number. So we've obviously seen higher gold prices. So that $300 million what we've seen recently more in the $700 million range is what we'd expect for this year. So as I said earlier, we will have some left next year but a lot lower than we had talked about as we started the year.
Tanya Jakusconek: Okay. So probably more than debt repayment of the year [indiscernible] asset?
Paul Rollinson: Again, I think your gold price $2,300 [ph], we -- in total for the year, I think we project $700 million of repayment.
Tanya Jakusconek: Okay. And then my last question is just on Great Bear. And I think all -- on the previous conference call, we had talked about still a 10,000 tonne per day scenario, sort of 5 million ounces, giving us that 500,000 ounce annual production. I guess we'll get an updated resource in early September. How should we think about the capital and the operating costs? I mean those numbers of capital of $1 billion, $1.2 billion? And I think the all-in sustaining were about $800 an ounce. Those are quite stale numbers. Should we be thinking something in the sort of 10% to 15% inflation adjusted for these -- they're just old numbers. So I just want to make sure that we're not caught off start on the release?
Paul Rollinson: Sure. Yes, that's a good point, Tanya. I mean, look, I mean inflation has come down but it hasn't gone away. So to the extent we were saying 1% to 1.2%, I would say 1.2% [ph] in today's world from where we started 2 years ago is more -- is directionally more where we're thinking for initial capital. On the sustaining cost, again, we're going to be out with the detail in a month. I guess, I would just say we're still fine-tuning. But directionally, we have always said AISC less than $1,000 and we're certainly feeling good about the direction we're going there as well. So look, again and that's in the context of today, midyear 2024 construction still won't be happening for a couple of years. So whatever I say today, like the 1.2% plus inflation, we expect will probably continue but not -- I guess what I'm trying to say is this is inflation around the edge, it's not a dramatic departure and what we thought the capital would be. It's -- this is a very straightforward project. In the greater scheme of things, this is not a large capital ticket for us. This is something that we forecast that we'll be quite manageable with our existing cash flow. And so I guess I'm trying to -- the report will be out in 1 month but I'm managing expectations that we're reasonably on track with where we indicated we would be.
Tanya Jakusconek: Yes, I appreciate it. I mean I appreciate that. It's just having an idea that we have seen some inflation. Some of those numbers would come into these source sale numbers that we had of like 3, 4 years ago and if not longer. And it's just -- we appreciate that, that will be a 2024 number. And then obviously, by the time we build later a couple of years out, it will be different at that point. But I appreciate the color.
Operator: That concludes our Q&A session. I will now turn the conference back over to Paul for closing remarks.
Paul Rollinson: Operator and thank you, everyone, for joining us this morning. We look forward to catching up in-person in the coming weeks. Thank you.
Operator: This concludes today's conference call. You may now disconnect.
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