Kinross Gold Corporation

Good morning. My name is Rob and I will be your conference operator today. At this time, I would like to welcome everyone to the Kinross Gold third quarter 2022 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. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. Chris Lichtenheld, Vice President, Investor Relations. You may begin your conference.

Thank you and good morning. With us today, we have Paul Rowlinson, President and CEO, and from the Kinross Senior Leadership Team, Andrew Friborough, Claude Schemper, Ned Jalil, and Jeff 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 two of this presentation, our news release dated November 9th, 2022, the MD&A for the period ended September 30th, 2022, 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 update you on our third quarter performance, our expectations going forward, and Great Bear. First, I would like to introduce our operational leaders. Claude Schimper is our new Chief Operating Officer. For those of you who don't know Claude, he has been with Kinross for 12 years. And prior to taking on the COO role, he very successfully led our Russian business and then took on added oversight of our African operations. Ned Jalil is our new Senior Vice President of Technical Services. Ned first joined Kinross 10 years ago and has added significant value in several areas, including previously leading our successful optimization of Perica 2 in Brazil. Both Claude and Ned are mining engineers with deep technical experience globally and a boots on the ground management style. As you will hear shortly, our new operational leadership is off to an excellent start as we see significant improvements in key metrics across our portfolio. With respect to our third quarter performance, our operations continue to make strong progress with production up 17% and cost down 8% compared to the second quarter. Similar to prior years, our plans again this year called for increasing production throughout the year, which we are seeing. Last quarter, I discussed the production increase we expect in the second half of this year and the four key areas where it is expected to come from. Specifically, Pariquetou, the US Heaps, La Coypa, and Tassiust. At Pariquetou, as per our mine plan, grades have increased from the second quarter to the third quarter and the operation continued to deliver on plan in October setting the stage for an exceptionally strong Q4. Second, the seasonality effect from our U.S. heaps is playing out as expected and production increased nearly 20% in the third quarter. Third, we have worked through the challenges at La Coypa where the operation is expected to continually improve. However, given the time required to resolve the issues, we now expect four year production to be approximately 100,000 ounces. At Tassius, mill throughput and recovery were lower than planned due to some commissioning challenges in processing high grade ore. As Claude will describe later, we have made good progress in resolving the challenges and we expect the fourth quarter to be significantly stronger than the first three quarters. However, Given these challenges, we now expect TASIUS to come in around 550,000 ounces for the full year and then back up to design levels going forward. Given the slower ramp ups at La Coypa and TASIUS, we now expect consolidated production of approximately 2 million ounces for 2022. Going forward during the 2023 through 2025 timeframe, we expect combined production of more than 6 million ounces with relatively stable production each year and a renewed focus on capital discipline, cash flow generation, and resiliency. I would now like to comment broadly on how our business is positioned in the current economic environment. Given that the gold price is down compared with the first half of the year and cumulative inflation in the past 18 months is approximately 20%, we are adapting our plans. As always, we remain disciplined in our business planning. We are prioritizing reinvesting in our business where we can generate the highest returns and our mind plans are focused on generating attractive margins. In order to ensure we are positioned for strength in this environment, our new technical and operational leaders have completed an extensive review of major investments and pit phases across our portfolio. The good news is we have optionality in our portfolio in a number of areas, including where we are looking at the transition from open pit to underground mining. As part of this process, we have also completed the optimization study at Round Mountain and have decided to defer open pit expansions for Phase S and W3 to focus on more attractive underground targets that have shown very positive results. Of course, the ounces from the open pit phases are still in the ground, and we maintain the optionality to mine these phases if the environment improves. Ned will provide more detail on these plans later on the call. Finally, this extensive review of our operations has also served to confirm the robust economics of our other plans across the portfolio. Finally, I'd like to comment on Great Bear and how excited I am about the results we are seeing. Our drilling continues to confirm our thesis of a large high-grade deposit with mineralization coming to surface and remaining open in all directions. In particular, our drilling continues to confirm our thesis that the deposit extends to depth. In fact, as you can see on the slide, Our current drilling program recently intercepted 16 grams per ton over 24 meters at a depth of approximately 700 meters at the Yuma Chute. While we are still early in our study process, we are very pleased with what we are seeing and expect to release our initial resource early next year alongside a technical report focused on geology and metallurgy. We are targeting an initial resource of 4 to 5 million ounces, but ultimately expect this deposit could support a multi-decade mine, which produces many times this amount at robust margins. We are excited to have an asset in Canada, and Red Lake is an excellent mining jurisdiction. Our timeline is consistent with projected timelines for other projects going through the same process. Having said that, we have an excellent team that will take every opportunity to expedite the process with the goal of achieving first production as soon as possible. With that, I will now turn the call over to Andrea.

Thanks, Paul. This morning I'll discuss financial highlights from the corner, provide an overview of our balance sheet and capital allocation, and comment on our guidance and outlook. As Paul noted, our third quarter production of 529,000 ounces was up 17% over Q2, continuing to show improvement quarter to quarter across our operation. Our Q3 cost of sales was $941 per ounce, which is down from the previous quarter, with a further reduction expected in Q4 as production continues to increase. All-in sustaining cost was $1,282 per ounce in the third quarter, a decrease in the second quarter, driven primarily by the increase in production. As we indicated in our news release yesterday, we expect our cost of sales to come in slightly above $900 per ounce for the full year, and our all-in sustaining costs to be approximately $1,240 per ounce. Our third quarter adjusted operating cash flow was $259 million, up slightly from the second quarter as higher production and lower costs offset lower gold prices. Free cash flow in the quarter was negative as a result of the worst capital outflow, some of which related to timing of sales. Excluding important capital changes, we generated over $60 million of free cash flow. With substantially higher production in the fourth quarter, we expect significant free cash flow at spot prices. CapEx of $197 million Q3 was higher than Q2 but still below our planned pace for the year due to slower capitalized stripping in Nevada and at La Coitia. We now expect to spend closer to $750 million for the full year based primarily on this slower capital spending as well as the decision to defer phase W3 and phase F open pit expansions at Round Mountain. Turning to the balance sheet, our financial position is strong and we expect it to remain strong despite the challenging macro environment. We ended the quarter with $488 million of cash and approximately $2 billion of total liquidity. Our trailing 12-month net debt to EBITDA ratio was relatively stable during the quarter at 1.8 times. At current gold prices, we expect net debt to EBITDA to be similar at year-end before declining by the end of next year. Our next debt maturity is in 2024, when we have $500 million of senior notes coming due. In the current gold price environment, we expect to be looking to refinance these notes sometime during 2022. Turning now to our capital return program, our total return of capital this year is expected to be approximately $450 million, or more than 8% of our current market cap, in the form of both buybacks and dividends. We repurchased $60 million of shares during Q3 and $180 million to date this year. We've now repurchased the shares issued in our acquisition of Great Bear. I will now turn the call over to Claude.

Thank you, Andrea. This morning I'll provide some additional detail regarding our ramp-ups at La Coypa and Taziest, but first I'd like to provide a little more context on what I've been focused on since taking on the role of Chief Operating Officer. I've been in the role for about three months and have been spending considerable time at the sites, closely reviewing our practices and our plans related to the operational performance as well as safety. Working with the operational teams, we have found opportunities to enhance our discipline around operational excellence and delivering on our plans. We are also driving a renewed focus on generating robust margins and strong returns of our capital. I've examined our operating plans and have made some changes to ensure we achieve our objectives. As Paul mentioned, we have adjusted our production expectation to reflect these changes and to be more realistic in the risks we face. Moving to our operations, third quarter production was significantly stronger than the second quarter. Thales and the Kuiper, while behind initial expectations, made progress and are said to have a very strong fourth quarter. At TASIEST, mill throughput and recovery were lower than expected due to temporary commissioning challenges with the new leach tanks and the gravity circuit, which resulted in lower than planned mill availability and retention time in the leaching circuit. We have now commissioned three new leach tanks, which has increased retention time and allowed us to add a pre-oxidation stage. These adjustments have helped drive recoveries back to 90%, and the team continues to focus on an extensive action plan to improve mill availability and ensure high recoveries with sustained throughput. We now expect to produce around 550,000 ounces at TASIUS this year. At the COIPA, while the ramp-up has taken longer than originally planned, we are encouraged to see steadily increasing throughput and production through Q3 as we resolve commissioning issues and improve the reliability of the mill. In October, we produced 20,000 ounces and averaged 9,500 tons a day, hitting a design capacity of 13,000 tons a day on multiple days. We have also seen our highest grade since restarting La Coypa in October, with an average mill grade of 1.5 grams a ton as the mine hits its stride and gets into the higher grade oil. La Coypa is well positioned going forward. The mine is in excellent shape, the mechanic shop and other infrastructure are all in order, and the tailings facility is operating at design levels. The adjustments to the plant are now behind us. I'll now hand over to Ned.

Thank you, Claude, and good morning. I've also been in the new expanded role for approximately three months. My focus is on leading our projects and technical services team, including our strategic mine planning process. I've spent considerable time reviewing Great Bear, our Round Mountain optimization plan, and our other projects. I'm excited about our growth projects and the future of the company. Turning to Round Mountain, we have completed our optimization work, which looked at four primary opportunities to exploit the significant resources. Phase W3, Phase S, Phase X Underground, and Gold Hill Underground. That work has highlighted the potential for higher margin underground operations at Phase X and Gold Hill, which are better suited for the current gold price and inflationary environment. We will focus on continuing mining Phase W1 and W2 open pit pushbacks while we progress underground infrastructure development and exploration at Phase X and Gold Hill. We are excited about our recent results on Phase X and Gold Hill Underground and see opportunity to build a more resilient lower ASIC operation at Round Mountain through parallel mining eventually of both Phase X and Gold Hill, with Phase X drift starting early next year. Based on the drilling to date, the two mines could work well together in that Phase X has the woods and the potential to be a bulk mining underground operation at a profitable grade of approximately 3 to 4 grams per ton, while Gold Hill shows potential to be a narrower, higher grade operation at 6 to 8 grams per ton. We see potential for the combined underground operation to produce approximately 150,000 ounces per year at an average ASIC of 1,000 to 1,100 per ounce. That same optimization work helps ensure capital discipline and led to a decision to defer Phase S and Phase W3 open pit expansions. Phase S and W3 remain economic at the current gold prices and could be exploited in the future when the gold price or cost drive improves. Moving to Great Bear, we're even more excited today than we were at the time of the acquisition. The more work we do on Great Bear, the more confident we are in our thesis that this orogenic deposit is analogous to Hemel, which produced more than 20 million ounces. We now have substantial drilling down to 500 meters and are very excited about continuing to explore depth expansions over the coming months. In addition to the hole that Paul highlighted, you can see from the slide we have numerous holes with strong widths and grades. For example, we have intercepted 29 meters at 7 grams per ton at the Aurochute and 25 meters at 12 grams per ton at the Yauruchute. And importantly, the deposit remains open in every direction. Looking ahead, we have exceptional upside potential on our highly prospective land package, mainly We are focused on exploring for possible zones parallel to the LP fault zone as well as further additional zones for more traditional Red Lake style mineralization similar to our hinge and limb zones. We are on track to release our initial resource for Great Bear early next year and continue to expect 4 to 5 million ounces, which is a significant accomplishment having owned the project since February of this year. as we approach this initial resource it's important to remember that we remain in the early stages of drilling the deposit and therefore can only demonstrate a small portion of what we believe will ultimately be proven over the next couple of years we will continue our exploration until drilling and drilling at depth By mid 2024, we expect to begin our exploration pipeline, which will allow more efficient drilling at depth. In terms of mine planning, it's still early and we continue to explore a range of mill sizes, sequence options, and underground development timelines. Our focus at this point is performing sufficient internal study work to start the clock on permitting early next year. Having said that, our current thinking is we will narrow on a mill size of 10,000 tons per day, a high-grade open pit in the range of 3 grams per ton, and an annual production in the range of 500,000 ounces per year. I will now turn the call back over to Paul.

Thanks, Dan. I'll close by saying that in the third quarter, we have made significant progress in positioning our business for strength going forward. We have our La Coypa and Tassius ramp-ups mostly behind us, a renewed focus on operational excellence, a dynamic capital return program, and a strong and stable production outlook. We are looking forward to a strong fourth quarter and are well-positioned to move into next year. Thank you, operator. We can now open up the line for questions.

At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. And your first question comes from the line of Anita Soni from CIBC World Markets. Your line is open.

Hi, good morning. Thanks for taking my question. So firstly, on the capital, the deferrals that you mentioned in this year, so Um, about 100Million, um, is that, you know, as we look to next year, would we expect some of those, uh, capital reductions to come in through, uh, sorry, some of that capital to be deferred into next year or. Are we still looking at, like, 750Million dollars of capital for 2023 and 2024? Hi, Anita. It's Andrea. I can take that. Um.

I guess to start the 100M that came off of 2022 was. Mostly stripping some of that was related to phase and W3 at round. So that doesn't come back next year. That was about half of the. Half of the decrease, so about 50M. And then I guess, you know, looking at next year, haven't provided that guidance yet. Earlier this year when we talked about $750 million for 2023, we noted that that was before adding additional inflation and before any additional projects. So, you know, since then we've approved Manchot, and that should be in the neighborhood of $150 million for our portion in 2023. So, you know, we're expecting all things considered, thinking about a bit of inflation, some of that stripping, the part not related to Round Mountain coming back next year. I'd expect next year's CapEx to be in the neighborhood of a billion dollars. Okay.

And then moving to cost, if I may, because that's the other one that, you know, you've provided the production guidance, and thank you for that, but the cost outlook. So, I can't remember if you had provided any kind of an outlook or guidance. I don't think you had, but as we look to next year and, you know, you're sort of sitting at around 900 dollars per ounce this year, slight production increase now guided to year over year. Should we be thinking around, you know, maybe a little bit better than 900 dollars per ounce? Or is there other factors at play? Like, I know that La Coypa, you're getting more contributions from La Coypa and that had pretty good costs there, but is there other offsets to those La Coypa coming in?

Yeah, maybe I'll start and hand off to Andrea. Yeah, you're right. I mean, we give our guidance in February. We're in the middle of our budgeting process as we speak. That's our normal cycle. We're all still studying the inflation situation. Some puts and takes there, some softening, but we don't see it going away. So that's why we haven't provided cost guidance at this point, but it will be coming. But in general, directionally.

Yeah, directionally, I mean, we're not expecting an increase, but we're also not expecting a significant decrease. As Paul said, we're in our budgeting process. We haven't quite made a call on inflation yet next year, but we can assume that it stops. For now, I would just think about next year's costs as flat to what our costs will end up for the year this year.

Okay, and then my last question, before I pass it off, was as we look at the guidance revision reduction for 2023, so going down to 2.1 million ounces, you may have said that in your comments, but could you just go over the areas where you know, you saw the major kind of reductions there. So I would assume some of it was the Tagus, some of it was La Coypa, but you also mentioned the review across the operation. So I just was hoping for a bit of a breakdown in that 200,000 ounce reduction.

Yeah, I'll start and maybe Claude can chime in. It is primarily, point number one, it's not lost, it's deferred. We're just sliding it out. And the slide out is mostly coming from La Coypa and Tassius. As we said, we've got the, we feel we're on top of some of those commissioning challenges we encountered. They're behind us, but we'll continue to ramp here. So as we said, good third quarter, set up for an excellent fourth quarter. But as we go into 23, we've smoothed the guidance really out through 25. And you know, we've we've guided 2.1. We don't get into sort of 2nd decimal place guiding, but there's some flex in the system there that I think will tighten up as we. As we get into our official guidance in mid February.

OK, and then we just let me try to pick up the 2nd decimal place and the on tap. Yes, as we look at, you know, I think you indicated that. that the throughput rates might be a little bit lower than what we had, I would have previously anticipated with the second half of the year, 24K10 per day, but you said that you probably not reach that sustainably until 2024. What kind of grades are we looking at? Because I can't really get to that much of a reduction number without impacting my grades for next year.

So, Anita, it's Claude. I'll take that one. So, two things. One is Certainly, in terms of the 24K, it's not necessarily towards the end of the year. We expect to be there getting the multi-turn at that rate by mid-year and then moving on through the year to make it sustainable. The challenge with that thing is that in order to get there, you need to shut the plant down to do some tie-ins. Therefore, those days that you're doing that affects your average for the year, but overall, We should be running at the 24,000 tons a day towards the back half of the year consistently, and that's the intention. The average grade for the year is 2.8 grams a ton, and we expect to meet those. We've had some really good reconciliation in other parts this year, and as Paul noted, we're set up for a very strong fourth quarter and moving into next year now.

Okay, thank you. I understood the concept of the sustainability I can see from the 21K. You've reached those levels on intermittent, but it's not sustained yet, so I was assuming the same for the 24. But thank you. I'll leave it there. Thanks.

And again, if you would like to ask a question, it's star 1 in your telephone keypad. Your next question comes from the line of Greg Barnes from TD Security. Your line is open.

Yeah, thanks. Paul or whoever, can you give us a sense of how Round Mountain production is going to look like going forward with this switch to the underground? We've got 250,000 to 300,000 ounces a year in our model right now. Is that what we're looking at for the short term and then going down to 150,000 ounces a year? How does this evolve?

Yeah, I'll maybe take the lead and then hand off to Ned. But I think you're essentially right. As we said, the next two years really don't look any different. We're going to continue mining as – as we're currently in those phases of the open pit. And again, this is context. We've taken 20 million ounces out of this pit over the life. We know the feeder mineralization is coming from the west. We know it's higher grade as we go down. And as we've gone through our scrub with our new team here and really looked at it, we think we've got you know, a very attractive three-gram underground scenario that we can profitably mine as we go to depth. There will be a transition from the open pit to the underground, and then, Ned, maybe just to elaborate of what we're thinking for production. I think you covered it in your script.

Yeah. Thanks, Paul. So, like what you said, the open pit is unchanged for the next two years. We're targeting approximately 250,000 ounces for the next two years.

And then we still get the benefit, and though we're not mining open pit beyond that, at least at this point, we do get the benefits of the leach tails. That puts us in a good spot as we plan to drive the exploration drift next year for Phase S to start ramping Phase X in 2026. and then take that up to approximately 100,000 ounces in production coming from phase X, and then layering on top of that Gold Hill, again, targeting approximately 50,000 ounces of production. That gets you to 150,000 ounces of production, potentially 28, 29. And then what we see, based on the drill inventory, You see, we see around 700,000 ounces to 1,000,000 ounces now. That has the potential to grow through the exploration program at both Gold Hill and Phase X that would cover us through this decade and go into 2033 and beyond.

Yeah, so the way I look at it, Greg, is yes, we've got lower production, but we're both seeking cash flow. as opposed to production. So for lower capital, we get higher grade, higher margin, greater flexibility, and potentially much longer mine life.

Any sense in what capital we're looking at as you progress into the underground? This is what you're looking at for the open pit scenarios?

Well, it's just, you know, as you know, with a pit the size of round, any layback is in the hundreds of millions of dollars to keep getting deeper in a pit versus underground. We haven't got those numbers completely firm that I want to share them today, but we are going to put in the decline in both Gold Hill and round. So access to get down there for those is in the neighborhood of 60 million. And then we're into it. We'll continue with the drilling as Ned says. As Ned has said, with the decline, we should be able to extend the mineralization. And then what I would do is I would reverse engineer kind of the kind of ounces. I think if you were to double the 700 to say one and a half, you can see why we're going in this direction as opposed to continuing to push the size of the pit.

OK, that's great. That's very helpful.

Thank you. Just to add, Paul. So as you know, Greg, phase S and W3, the ounces are still in the ground.

So in the event on top of this path to underground that we're targeting now, in the event the macro environment changes, Those are available for us as open pit pushbacks in the future.

So the declines won't impact phase S and W3. They won't.

Not at all. The optionality and. And again, we're just kind of looking at our notes here. I think you know if you thought about the phase S and W. Those are probably from a layback capital. Circa 300 each three 350. versus, you know, transition to an underground is probably in the – has a two in front of it. Okay. That's great.

Thank you. Your next question comes from a line of Anya Skadukanik from Scotiabank. Your line is open.

Good morning, everyone. I think that's me. Yeah, I'm going to assume it's me. So I've got a few questions. Just wanted to follow up just on Round Mountain, if I could. Just make sure I understood it. So we're going to be in this 250,000 ounce production range for 23 and 24. And then it looks like we are going to decline to 150,000 ounces into 2028. Is that correct?

Yeah, so morning, Anya. Tanya. Tanya, sorry. Okay, sorry. No worries.

Tanya. So yes, we're looking at the next two years, like what you said, 250,000 ounces targeted.

Then we do have a transition between the open pit and the underground, and we would benefit from the leech tail for 2025 and 2026. And and approximately for 2025, we're looking at a production during the transition period, which is 2025 between 50,000 ounces and 100,000 ounces of production ramping up in 2026 to approximately 100,000 ounces and then Towards 2028 you go up to somewhere between 100,000 and 150,000 ounces and then sustain production at the 150. Beyond that.

OK, and I guess the point of is we're going to be mining. We expect 3 grams in it at rounded depth. And circa 6 grams at Gold Hill. We blend those. Two sources, and we obviously are goal-seeking higher margin and higher cash flow.

Yeah, no, I understand that. I was just trying to understand from an overall production profile. So 250, 250, 23, 24, we kind of moved down to that 50, 100,000 ounces, you know, residual for, you know, let's say 25-ish, 26-ish, and then we slowly moved back up to that 150 with the underground. Is that a correct thought?

That is the correct thought, yes.

All right. And the $60 million for the decline?

$60 million for the decline over this year, sorry, 2023 and 2024. All right, got it.

Thank you so much for that information. And the only other thing I wanted to ask, just within the production profile, and again, looking at some of the old technical studies that were out there, and some of them are a little bit old, Are we expecting just Paracatou to be very similar in 2023 to 2022? It's just, you know, I had a bump in 2023 and I just wondered, you know, when I adjust La Coypa and Tassius, should I think of Paracatou as a flattish production in 2023?

Tanya, it's Claude. The simple answer is yes. Paracatou is become really the stable workhorse of the portfolio. And next year's production is very similar to this year.

All right. So something in the $5.50-ish. Okay. So that's very helpful. Thank you so much for that. And then just wanted to circle back just to the balance sheet. And then lastly, just on inflation, just on the balance sheet, Andrea, you mentioned that the EBITDA ending the end of the year very close to what we have now and then declining and 2023. I'm just wondering with the refinancing of those 500 million notes, should we just assume that they're refinanced out at just obviously higher interest rates because that's the environment that we're at? Is that how we should think about it?

Yeah, I mean, you know, as I said, we've got a strong balance sheet and, you know, we expect it to remain strong. Given where gold prices are or have been recently, We do expect that we'll refinance those notes. We have options, but if you looked at accessing the U.S. investment grade, today it would be somewhere in the high 6% range to push those notes out. We do have ample liquidity, though, so we've got options. We've got our $1.5 billion revolver that is generally, normally undrawn as sort of a backstop. But that gives you an idea of what the U.S. public debt would look like.

Which is about a 1% spread on where we are today, where those notes are. Yeah. Okay.

That's helpful. Thank you. And then, Paul, maybe just, you know, like, you know, I've been asking all companies on conference calls as we look out, you know, we have heard, you know, some sort of release seeing some sort of relief in input costs within the cost structure. And Andrea did mention that, you know, obviously costs, you know, may not be going down next year. But I'm just trying to understand, where are you seeing relief, if any, in your cost structure besides just the diesel, you know, consumables? Maybe you're seeing something in there, and I don't know if you're seeing anything in labor. Just trying to see if you're seeing any signs of easing. Yeah.

Sure, I want to go to that question, but I guess my point, just the overriding point is we don't see the same inflation in all locations. In fact, as we've said, we actually have probably seen more significant inflation in Nevada than in other parts. There's inflation everywhere, but we felt it more in Nevada, and we've seen it in people costs, The energy costs, the spare part costs, that's a place where we really felt it the most. And as we said on our call, we've done a rigorous kind of resiliency, cash flow scrub. And the only asset where we've adapted our plan is Round Mountain. And as a result of that, everything else still holds in very well. But Ned, maybe you could just elaborate a little bit on where we have seen a little bit of light, maybe at the end of the tunnel.

Yeah, thanks, Paul. So like what Paul mentioned, so for example, diesel and grinding media, we actually have started that to taper off the peak and start coming down. Unfortunately, cyanide and bulk explosives are still at their peak. Again, we're working... hard with our suppliers in order to come up with the best estimates for next year as we go through the budgeting process. And finally, back to Nevada, the mill processing has been impacted by the higher natural, the mill and leach both have been impacted by an increase in power cost and natural gas in addition to the consumables, we are seeing that still at the same levels as several months ago.

Okay. I know in the Q2 call, Paul mentioned that we were seeing inflation in the 10% to 12% range in your costs. Would you say that's similar in Q3? Yes.

Yeah, I think what we said, so the journey for us on inflation was going back to 21. We were starting to talk about 5%. We put our guidance out at the beginning of the year in February. We said 7% for the year. We said we'd update at mid-year. And on the second quarter, we said it's actually not 7% what we guided, but it's 12%. And that seems to be holding in at 12% as we've continued through the year. But it's a cumulative 12 on top of a five last year. And as I say, not all sites are exactly equal and some we've got a little bit more pressure, some a little bit less, but 12 is the number I would use as a kind of a weighted average for 22. Noted.

And just if I could ask on labor, you had seen, you know, increase in labor in the U.S., 5 to 8 percent, I think you said in your previous call, with high turnover. Any relief in labor at all anywhere?

Tania, again, I would say that the pressure is still on on labor. We have finalized contracts in Chile and Brazil for three years on both sides. The U.S. is a little bit more flexible, but our retention strategy remains at round in Nevada in particular, and we have not seen the pressure come off labor. In fact, again, in the U.S., it's a bit more of a competitive market, especially in the lower-skilled positions.

Okay. Thank you so much for that. I'll leave it for someone else to ask questions. Thank you.

Thank you. Your next question comes from a line of Kerry McCurry from Canaccord. Your line is open.

Hi, good morning. Just a quick one for me. Gold sales were lower than production across a number of sites. Just wondering if there's anything specific behind that, and secondly, should we assume those ounces get sold in Q4?

Hi, Carrie, it's Andrea. I mean, we typically have some differences between production and sales at certain sites. So it was a bit more pronounced in the third quarter, but there's not kind of one reason for it. It was just across, I think, four sites. So all of those ounces were sold at the start of Q4.

Maybe just to follow up on that, if those ounces were sold, do you have a sense of what the unit cost would have been in terms of the cash cost?

Presumably, we're kind of lower just on the denominator effect.

Oh, yeah, sorry. We'll get back to you on that, Kerry. We do have that. We'll get back to you offline on that.

Okay, great. Thank you. Thanks.

And your next question comes from the line of Lawson Winder from Bank of America Securities. Your line is open.

Hello, good morning, and thank you for your comments today. Thanks for taking the question. I wanted to ask about Parakatu and the CapEx outlook. So, Andrea, you mentioned about a billion dollars of CapEx for next year. Thank you for that guidance. Would there be any major tailings raises for Parakatu included in that? And, you know, looking out beyond 2023, what is kind of the timing for tailing raises there?

It's Claudia. Listen, I'll take this. Para-produced capital outlook for the next couple of years is really just stripping, and there are continued tailings work that continues over the sort of spread, and so it has a very flat profile for at least the next four years in terms of where the capital expenditure would be. Beyond that, as we do the next phases in the PIT, we would then seek expansion, really from 27, 28 onwards.

So nothing lumpy or spiky, sort of normal course.

Yeah, we've now gotten into the case where the base of those big dams have been built, and really it's now just every year the same amount of capital to keep raising and moving forward.

Okay, that's very helpful. And then what... Can you remind us what the tailing dam construction method is that was used there? And is there any work that you guys have to do in order to bring that sort of into compliance with Canadian Dam Association standards?

Hi, morning, Lawson. This is Ned.

The construction method in the Pariquet II is a central line construction method, and we are and have been always in compliance with Canadian Dam Association. Canadian regulations for dam construction.

Okay, perfect. I also wanted to ask about the labor agreement expiring at year end. So, first of all, when did those negotiations start? And is there any sort of, I guess I would say, hot button issues that you could share with us or sort of areas that need to be addressed in this upcoming agreement that you can share? Thank you.

Yeah, maybe I'll take that and club jump in if you want. I guess number one, you're right. This is a three year collective labor agreement, so we have been through this many times. It is a. It is a process. We're in the middle of it. The discussions are underway and as a result of that, I don't really want to. say much about it. I think it wouldn't be appropriate for me to get into the terms of labor negotiation on a call like this. But I do expect, as we have many times in the past, this time again we'll work through it. We recognize, you know, there is you know, there is inflation at Mauritania just like there is elsewhere in the world, and that will certainly be part of our discussion. But we expect we'll work through it and get it behind us by year end.

And when exactly did those negotiations sort of start in earnest? Was that fairly recently?

Yes, typically those agreements start Prior to expiration, it expires on December the 31st. So we really just entered into negotiations on the first week of November with the delegates. We've basically, you know, sort of opening discussions with them. And as Paul mentioned, it's, you know, there's some sensitive pieces around it, and we're just moving through it.

Okay. All right. That's all for me. Thanks very much, gentlemen.

Thank you. And there are no further questions at this time, Mr. Paul Rawlinson. I'll turn the call back over to you for some final closing comments.

Thank you, operator. Thanks, everyone, for joining us. Strong third quarter and really setting ourselves up for an outstanding fourth quarter and a good launch into 23. Again, thank you for joining us, and we look forward to catching up in person in the coming weeks. Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect.