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 Ken Ross Gold second quarter 2023 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, Andrea Freeborough, Claude Schimpert, 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 August 2nd, 2023, the MD&A for the period ended June 30th, 2023, 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. This morning, I will provide a brief overview of our second quarter comment on our outlook, and update you on our ESG initiatives. I will then hand the call over to Andrea to walk through our financial performance, and then Claude and Ned to discuss our operating performance and projects. We had a great second quarter, contributing to a strong first half of the year, positioning us well to meet our four-year guidance. Cassius, Erica Tu, and LaCoipa delivered excellent results, representing approximately 70% of our production in the quarter, with an ASIC of approximately $1,000 per ounce, driving strong free cash flow. At Paracatu and La Coypa, good performance was driven by strong grades and recoveries. At Tassius, the ramp-up continued during the quarter, and the operation delivered record production of nearly 160,000 ounces at a cost of sales of approximately $650 per ounce. Construction of the 24K expansion project is now complete, and we are well on our way toward sustaining higher throughput levels by year end. Our U.S. operations delivered on plan with stronger production over the prior quarter. While costs at the U.S. assets are expected to increase in the second half of the year, the mines are performing as planned and we continue to work towards lower cost production next year with the startup of Manchot and favorable mine sequencing in Nevada. At Manchot, construction activities are advancing well and the project remains on schedule and on budget to begin contributing high-grade ore to the Fort Knox operation in the second half of next year. At Round Mountain, we remain excited about the future. We are encouraged by ongoing optimization for the Phase S open pit and expect to complete the work later this year. Work on the underground decline at Phase X is progressing well, and we are on schedule to begin definition drilling early next year. As you will see in the video link provided in our press release, we see potential for a lower cost bulk underground mining operation at phase X with further exploration upside. Gold Hill, our satellite deposit at Round Mountain, continues to deliver strong exploration results, further confirming our view that there is potential for additional high margin underground mill feed at Gold Hill to supplement phase XOR. And finally, we continue to make excellent progress at Great Bear. And the work we've done continues to support our view that this development project is expected to become a top tier mine. We currently have 11 drills on site and the focus has been extending our underground resource below the initial open pit resource. We will be updating our resource statement at year end. and expect a meaningful increase to the underground resource. We are pleased to have recently signed an amended advanced exploration agreement with our partners, the Wabaskang and Lac Seul First Nations, on whose traditional territories the project is located. This amended agreement reflects the changing nature of activities from surface exploration to underground exploration as the project advances. At Great Bear, the path is clear as we continue to focus on advancing the project through permitting and construction. Ned will elaborate on other activities at Great Bear later on the call. Here to date, we have produced over 1 million ounces and we remain on track to achieve our production and cost guidance for the year. We strengthened our balance sheet during the quarter And at current gold prices, we expect this trend to continue. Our quarterly dividend remains in place, which offers a competitive yield of nearly 3%. Since 2021, we have repurchased $400 million of shares, representing 8% of our shares outstanding. Overall, we view the buyback program as very successful. However, in accordance with the plan we announced last fall, we have paused share buybacks based on the change by one of our rating agencies, moving our outlook from stable to negative. As a result, we are prioritizing debt repayment, and in Q2, we repaid $220 million of debt, and we plan to repay the remaining $100 million drawn on our revolver in the coming months. Going forward, we will continue to review our capital allocation priorities in the context of the prevailing environment. Lastly, I'd like to highlight our latest update on ESG initiatives. We recently published our third annual climate report, which details climate related disclosures for last year. The report also outlines our progress towards meeting our climate related goals and provides detail on our climate change strategy and our plan to reduce greenhouse gas emissions intensity going forward. Notably, in the report, we provide an update on our TASIA solar project, which we expect will be delivering 34 megawatts of renewable energy by the end of this year. For context, 34 megawatts of clean energy is the equivalent to removing more than 10,000 gasoline-powered vehicles from the road for each year of the operation.

We continue to be very proud of our work in this important area. With that, I will now turn the call over to Andrea.

Thanks, Paul. This morning I'll discuss financial highlights from the quarter, provide an overview of our balance sheet, and comment on our guidance and outlook. As Paul noted, our second quarter performance was strong, with production and cash flow improving over the prior quarter as planned and over last year. We produced 555,000 ounces, with production benefiting from seasonality in our business, including mine sequencing at Perica II and ramp-ups at Tassius and La Corsa. Gold sales of 553,000 ounces were in line with production. In Q2, our average realized gold price was $1,976 per ounce, in line with the average spot price. Cost of sales of $900 per ounce was lower over the prior quarter due to higher production and particularly strong cost performance at Tassius, Pericatu, and La Coypa. Cost of sales at these three assets averaged $725 per ounce, driving strong operating and free cash flow. All in sustaining costs were $1,296 per ounce in Q2, which was also lower quarter over quarter, primarily due to lower cost of sales. All in sustaining costs at Passius, Pericatu, and La Coypa were approximately $1,000 per ounce. First half cost of sales were $941 per ounce. We remain on track to meet our full year cost guidance of $970 per ounce. Costs are expected to increase in the second half of the year due to the accounting impact of drawing down on our inventory at Round Mountain. We expect costs to come back down next year. In Q2, our adjusted earnings per share was 14 cents and adjusted operating cash flow per share was 37 cents, both improving over the prior quarter. Free cash flow for the quarter was $247 million or $177 million excluding working capital changes. Turning to the balance sheet, our financial position continued to improve in the second quarter and remained strong. We ended the quarter with $478 million in cash and approximately $1.9 billion of liquidity, both improving over the first quarter. Our debt declined by approximately $220 million during the quarter as we prepaid $200 million on the revolving credit facility, as well as $20 million on our Tassius loan. As Paul mentioned, we plan to prioritize repayment of the remaining $100 million on our revolver this year, further deleveraging our balance sheet. Our trailing 12-month net debt to EBITDA ratio improved as of quarter end and is now 1.3 times, and our current gold prices is expected to decline further through the remainder of the year. At the end of the second quarter, we announced a debt refinancing whereby we issued $500 million in senior notes due in 2033 to replace our outstanding 2020 four senior notes at a comparable interest rate. Following first half results, we remain on track to meet our full year production and cost guidance. We achieved approximately 49% of our full year production guidance in the first half, and the second half remains on plan. On inflation, as a reminder, we factored a 5% increase into our cost of sales guidance for this year relative to full year costs in 2022, and we still believe this is an appropriate estimate. So far this year, oil has been trending positively. However, this continues to be offset by higher royalties as a result of stronger gold prices. Capital expenditures remain on track, and our CapEx forecast for the full year remains roughly evenly split between sustaining and non-sustaining items. In summary, we're reaffirming our full-year guidance for production in the range of 2.1 million ounces, cost of sales of $970 per ounce, and ASIC of $1,320 per ounce, all within a plus or minus 5% range. I'll now turn the call over to Claude to discuss our operations.

Thank you, Andrea. As Paul and Andrea highlighted, we saw strong performance from our operations in the second quarter, with higher production and lower costs compared to Q1, with all of our mines delivering on plan. TASIUS delivered another robust quarter with production of 158,000 ounces and an impressive improving over the prior quarter on higher throughput and improving recoveries. Remaining tie-ins were completed in June and commissioning continues in the class. In addition, we are making progress on the throughput ramp-up. The plant has achieved throughput of 24,000 tons per day for sustained periods of time and have also reached as high as 28,000 tons per day on several occasions, this demonstrating the operation's ability to achieve the expanded throughput. Our focus is now on sustaining this high throughput, which we expect to achieve by the end of the year. At the Tanjia solar project, solar work is essentially complete and mechanical works are well advanced with a focus on the installation of the photovoltaic modules. We have now installed 65,000 out of the total 80,000 panels planned. Electrical work is underway and planning for commissioning has begun.

This project is on schedule for the completion by the end of the year. At La Coypa, production is tracking well against a full-year plan.

Continued outperformance on grain and recovery are driving production, while plant optimization continues through the second half of the year. La Coypa continues to contribute robust free cash flow and was the lowest cost highest margin mine in our portfolio in the second quarter. Following first half production at La Coypa, we remain on track to meet our full-year production guidance in the range of 240,000 ounces. At Paraka 2, increases in grade and recovery led to an improvement in the production and costs in Q2. Q3 production is expected to be the strongest for the year, driven by increased mining rates in the higher grade, deeper areas in the southwest of the pit. Paraka 2 remains on track to achieve its full year production guidance in the range of 580,000 ounces. Now moving to the U.S. operations. Production and cost improved across our operations in Q2, and we are on track with our full year guidance. As discussed earlier, costs of these assets are higher relative to the rest of the portfolio, and are expected to increase in the second half of the year before declining next year. Beginning with Fort Knox, Q2 production was higher quarter over quarter due to planned higher processing rates. We saw strong performance from the mill and a benefit from some additional ounces from unplanned ore material encountered in the phase 10 stripping. Work advanced well on the Fort Knox mill modifications to accommodate ore from the Manchot project, and we are on track to begin processing high-grade ore from Manchot in the second half of next year. At Bald Mountain, production improved over the prior quarter as higher mining rates were realized in Q2. following the weather challenges in Q1, leading to higher leach stacking rates.

At Round Mountain, we achieved our planned production for the quarter, which was relatively flat compared to Q1.

As Andrea mentioned, cost of sales at Round Mountain are expected to increase in the second half of the year before declining next year, as the Phase W investment period wraps up and mining shifts to the lower strip areas with higher grades.

With that, I will now turn the call over to Ned.

Thanks, Claude. I'll start by elaborating on Round Mountain, then comment on our Manchot and Curlew projects, before finishing with an update on Great Bear. While Round Mountain is currently in a period of elevated costs, I want to take a minute to update you on why we remain excited about the future of Round Mountain. Following a period of investment in the new phases, Round Mountain has the potential to be a significant producer through the 2030s, with higher margins and strong returns on invested capital. Here's how we currently envision the future of Round Mountain. We are currently mining through the remaining portions of OpenFit Phase W2, which is expected to maintain our current production level through 2024 and provide a mill and leach tail into 2025 and early 2026. After mining in phase W2, we are studying the option to transition to phase S, which could sustain open pit production through the early 2030s. Concurrent with open pit mining at phase S, we could also potentially begin underground production from phases X and Gold Hill later in the decade. We are pleased with the ongoing work in the following areas. At phase S, ongoing optimization work is showing encouraging results with lower capital intensity and lower strip, driving improved economics compared with our prior view. At phase X, construction of underground exploration deep line is progressing well with 350 meters developed thus far. The deep line is on track to facilitate the start of definition drilling early next year with production from Phase X envisioned to begin in the late 2026. The future of Round Mountain continues to take shape, and we look forward to sharing more positive developments over the coming quarters. Coming back to Gold Hill, which is located seven kilometers away from the Round Mountain pit, we continue to see strong potential for a higher grade underground mine supplementing production from Phase X. Drilling this year has confirmed an 800-meter west strike extension with multiple high-grade intercepts. During the quarter, we had our best result to date, hitting more than 40 grams per ton over approximately two meters. With continued exploration success of Gold Hill, we look forward to ultimately bringing this high-grade satellite deposit into our broader plans at Round Mountain. Moving to Manchot, project activities remain on schedule and on budget, and we're pleased to report the mine operating permits were received during the second quarter. Contracting and procurement activities are now complete, and construction and mining activities are ramping up. Construction on the mill modifications at Fort Knox to process the Manchot ore has commenced. and the Kinross operations team is now fully staffed, while onboarding of key business partners to support the mining and ore transport is ongoing. We are excited about bringing this high-grade margin project into production next year. At Curlow in Washington State, results from ongoing underground exploration continue to confirm vein extensions and continuity with high priority target areas. Exploration drilling will continue throughout the third quarter with the aim to build on the resource through proximal growth. Notably, yesterday's release includes the best intercepts from Curlew in the past 10 years, with hole 1148 intersecting 41 grams per ton over 2 meters. We remain excited about this project. and look forward to continuing to advance our work over the coming quarters. Moving to the update on Great Bear, in the second quarter, we continued to make excellent progress on several fronts. Starting with exploration, there are currently 11 drill rigs operating on site, and in Q2, we drilled approximately 56,000 meters, bringing the year-to-date total to approximately 96,000 meters. Exploration is focused in the area 500 meters to 1 kilometer below surface at the LP fault zone. And drilling efficiency since introducing directional drilling has been enhanced. This method decreases the amount of drilling required to reach deep targets, improving productivity and cost per meter drilled while also allowing for more efficient and precise targeting. With a current focus on resource expansion, recent results are encouraging as they continue to confirm high-grade mineralization at depth, including whole BR805, which intercepted 6.7 meters at a grade of 19.3 grams per ton at a vertical depth of 730 meters. With the success of our drilling campaign so far this year, we have seen meaningful growth in the underground resource. Outside of drilling, other activities are also advancing well. Feasibility level engineering for the AEX decline infrastructure is approximately 70% complete, including geophysics and soils geotechnical drilling. And the procurement process for long lead items such as the camp, power infrastructure, and water treatment plans have commenced. Three engineering firms with significant experience in Ontario have been engaged to support our strong in-house owners team. Engineering and field test work campaigns for the main project continue to advance well, with results of this work to be included in our preliminary economic assessment next year. Permitting activities are also progressing well, including initial reviews by the Impact Assessment Agency of Canada of the draft initial project description.

I will now turn it back to Paul. Thank you, Dan.

Before concluding, I want to acknowledge and thank Ned for his significant contribution to KINRAS over the years. So thank you, Ned, and all the best in your next chapter. In closing, we are meeting our goals and have delivered a strong Q2 and first half and are on track with our plans. We are excited about our outlook. We have a strong production profile. We are generating significant cash flow. We continue to return capital to our shareholders through an attractive dividend. We have an exciting pipeline of exploration and development opportunities, and finally, We are very proud of our commitment to responsible mining that has made us a leader in ESG performance within the industry. With that operator, I'd now like to 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 Josh Wolfson from RBC Capital Markets. Your line is open.

Yeah, thanks very much. With the disclosure of the Great Bear underground resource upside, I'm just wondering, and it may be a bit early, is there any read-through here to potential design changes, or is this more so confirming some of the mine life extension that was signaled with the original study?

Hi, good morning. This is Ned.

It's actually the latter, so it is an extension of the resource. We're growing the resource in the underground, and you'll see the update with the year-end resources. Pretty exciting. Fundamentally, the design is, as we described it earlier, an open pit with an underground mine, and starting with the tonnage coming mainly from the open pit, a little bit from the underground, then transitioning to a full 100% underground mine that takes us through decades as the resource grows. What's exciting for us lately is that we're actually seeing the grade increases by going to New York.

Again, it's very exciting and look forward to our releases in the coming quarters and end of year resource.

Thanks. And on the outlook for CASEUS, the grade in the second quarter, continued to be pretty strong. What is the potential for that grade to continue even as throughput ramps up in the second half? And then sort of as a follow-up to that, the prior mine plan had outlined a larger drop-off in upcoming three years for the existing guidance. Is there any opportunity to sort of rethink sequencing that with some of the performance we've seen this year?

josh it's claudia um so we have seen the obviously the grade in the second quarter was better uh we are balancing uh it says this mining is slightly ahead of plan so we're able to increase our stockpile slightly and with that we're able to blend a little bit better and balance the great expectations we do see it still strong in q3 but dropping off in q4 And then as we go into 2024, we're going back into the mine plan and it will go down a little bit more.

Okay, thank you very much.

And your next question comes from the line of Fahad Tariq from Credit Suisse. Your line is open.

Hi, good morning. Thanks for taking my question. Just going back to some of the comments around debt reduction. Is there a particular leverage target that you're looking at? I know the buybacks, I think the parameter was 1.7 times net debt to EBITDA. I believe on my math, you're already below that or slightly below that. I'm just curious on how you're thinking about maybe a targeted leverage ratio.

Sure. It's Andrea here. The 1.7 that we talked about when we launched the enhanced buyback was just where our net debt to EBITDA was at that point in time. And that was just part of the design of the plan, which was always meant to protect the balance sheet and our investment grade rating. We are below that now. So we're, you know, just around or just slightly below 1.3 times at the end of the second quarter. We were 1.65 at the end of Q1, so the improvement in Q2 was sort of half related to debt reduction and half higher EBITDA. And our priority going forward, as Paul and I both said in our remarks, is to, first of all, to repay the remaining $100 million we have drawn on the credit facility. That's in addition to the $200 we repaid during the quarter. And then beyond that, we would target starting to take down the term loans for the billion-dollar term loan that we took out to finance the cash portion of the Great Bear acquisition. That's due in early 2025, but it has flexible repayment terms, so we can start repaying that at any point in time. In terms of target leverage ratios, yeah, we would like to continue to reduce, and below one would be great. But depending on gold price, if we were, you know, at or above 2000 gold, we expect to get there sort of towards the end of the year. So we'll see where we get to with gold price and as we go through the year here.

And in speaking with the rating agencies, I don't know if you have, but have they communicated like what it would take to get back to a stable operational outlook?

I guess maybe it's helpful just to comment on how, I mean, it's S&P that moved us to negative outlook and how they look at it. It's a pretty strict definition that, you know, drives to the negative outlook. I think it's a 30% chance that we would be downgraded in that lower gold price scenario. So they were using a 1400 long-term scenario. So You know, we don't agree with that negative outlook. And in a lower gold price scenario, there's levers that we would pull to protect the balance sheet and protect the rating. But, you know, it is what it is in terms of their rating. And so I expect the actions we're taking now in terms of debt repayment will, you know, we'll get that outlook reversed, all else being equal. But in terms of when they might review again, It's typically at least a couple of quarters, so I would expect that'll be sometime next year, either after year end or after Q1.

Okay, that's super clear. Maybe just switching gears quickly to Perica 2. Looks like the grades are coming in pretty decent, and it sounds like it's going to be even better in Q3 as you get kind of deeper into the pit. I'm just curious on when you say higher grades in the second half, are we thinking like something close to what was achieved in Q4 of last year, like 2.5 grams per ton? Is that kind of in the right range or just trying to get some color on modeling pericotin in the second half?

Yeah, I think the 0.5 would be a little bit high. As you know, the average for the first 0.41. And so we would anticipate this next quarter to be slightly higher. And then dropping back down in Q4. We're a little bit ahead of the sequence this year compared to last year. So we do see a drop off in Q4. And then next year, for the whole year, the grades drop down quite a bit. So Baraka 2 drops down quite a bit in its last month plan.

And then picking up the following year as we do the additional stripping in 2024. Pick up again in 2025. Okay, great. Thank you very much.

And your next question comes from the line of Anita Soni from CIBC World Markets. Your line is open.

Hi. So I've got a lot of sort of fine-tuned modeling questions, but first I wanted to say congratulations on the good quarter, and it's good to see you guys back at getting within your guidance range for the year. So on Perica, just to follow up, next year's strip, is that, you said it's slightly higher, or is that like a one turn, or is it materially higher than it is this year?

For Perica 2? Yeah, for Perica 2, yes.

It's a little bit higher next year, and the grade is also a little bit lower next year because we're in Phase 11 and a couple of other phases within the Fed, and that's why the

relative to this year.

Just for the year. Yeah, just for the year. So I think right now you're, what, kind of like 1.3 in this quarter? I'm not, this quarter I guess is a little bit lower is one of the questions I wanted to ask. But were you a little bit lower this quarter on the strip ratio in peripatutes?

I'LL HAVE TO GET BACK TO YOU ON THAT ONE, ANITA, BECAUSE WE'RE LOOKING AT IT RELATIVE TO THE GRADE.

WE'RE ON TRACK. AND PRODUCTION RATIO, PARAKETU'S ON TRACK.

MAYBE IF YOU JUMP IN, ANITA, THIS IS NED. MAYBE I CAN HELP YOU WITH A LIFE OF MODELING. AS YOU KNOW, PARAKETU HAS MULTIPLE REGIONS. THERE'S THE NORTH REGION, WHICH IS LOWER GRADE, ALMOST NO STRIP. the south side which is the deeper part higher grade and and higher strip and what uh what claude is is alluding to is that in um in 24 we're going to be mining more in the north area of the pit as we strip uh phases uh 13b and 15. um so the grade in in 2024 will be slightly lower but All in, all in, we're north of 500,000 ounces of pericot, too. So that's in play. Then, you know, potentially in 2025, we get back to similar, maybe a little bit lighter than this year, but about 550,000 ounces.

I hope that helps.

That does, yeah. Thank you. Okay. And then just moving on to bald and round, I think, I guess, I'm just trying to understand, some of the movements in terms of, you said that cost would go higher in the back half of the year, which I get, but is it related to a strip ratio that's happening there? And I just noticed like things like the, you know, on Round Mountain, the processing cost came down. Could you talk about that and what's driving that and will that be sustained?

I would just need to probably hand off to Andrea, but it's more accounting than operational. It's more to do with heat bleach accounting, which is something we might want to take offline, but I'll hand over to Andrea to give us sense.

Yeah, I think that's high level.

Well, I was going to say, I think I had to take off a significant amount on the inventory to make it balanced, so that's what I was driving at. And when will that reverse? So I think it was like $60 million to make the unit cost balance to the cash cost.

Yeah, I mean, we've always said we expected costs at round to be, you know, to stay elevated this year. They were down a bit in the second quarter, so we do expect them to be higher in the second half of the year. As Paul mentioned, this is really just related to our Heath Leach accounting, and it kind of peaks in the second half of this year. So we expect the cost to come back down in 2024. All right.

And so all of that will reverse this year, right? Nothing in 2024?

Yeah.

I think this year it's accounting. It's not really representative of cash flow. It's that inventory accounting effect. And next year we'll be moving into a different portion of the pit with, with less strip and better grades.

Yeah, I think, you know, we may still have this inventory impact next year, but we don't expect it to be as significant as in the second half of this year. And this is also kind of gold price dependent as well. Okay.

All right.

We can take you through it in detail offline if that's helpful, Anita.

Yeah, I think so. But yeah, thanks and congrats on a good quarter.

And your next question comes from a line of Kerry McCurry from Canaccord Genuity. Your line is open.

Hey, good morning, everyone. Just a question on the Tassius ramp-up. They've planted just over 18,000 tons a day. The project's complete, and I know you're ramping it up, but how's throughput in July, and is there any guidance you can give on sort of what we should expect for Qtree?

Yeah, we really...

Got the throughput in July right. We did have, as we mentioned, in June and July, we did mention that we had a shutdown planned for the first part of June. We delayed that a little bit into the June-July crossover. So we had some days there that weren't working to tie in some other things and some piping. But once we got going, then that's where we hit those record tonnage as fatalities in a day. What we're now doing is focusing on as we commission the back end of the plant, make sure that we don't stress the system too much and set ourselves up for a solid back end of the year relative to the plant.

So should we be assuming something like 20,000 tons a day in Q3 or is that?

much yeah we did say in the first quarter we said we would average between 20 and 21. we're now looking closer to 21 000 for the whole year so things are looking solid at this okay great and then maybe on the solar plant um can you quantify what sort of cost ground savings you'd expect to see there um yeah let's uh Yeah, I mean, we'll have to get back to you on that particular number, exactly on the cost per ounce. We are looking for considerable savings on our fuel costs. Obviously, as we put the plant into operation and sort of the numbers just come through, it's $15 an ounce.

We're expecting just on power and savings alone. Great, thank you.

And your next question comes from the line of Tanya Jakuznik from Scotiabank. Your line is open.

Yes, good morning, everyone. Thank you so much for taking my questions. I, too, first is on the reserve and resources, and second is just on costs. Can I just circle back to the resources? Just maybe, Ned, can you just remind me, the underground at Great Bear, when you reported... the resource, I think it was underground of about 1.3 million. Was that in the, you know, between, you know, just about the 500-meter level? I'm just looking at your cross-section on page 23, and I'm just trying to understand for the resources that you're going to report at year-end 2023 for Great Bear, is that going to be between the 500-meter level and the 1,000-meter level?

hi tanya good morning uh i got we got your name right this time right oh right it's me so um yeah thanks for your question that's a that's a great question so um i'm just looking at the numbers here so what we reported for the underground was was approximately 1.7 million ounces And you got it right. That's down to the 500 meter mark based on what we got from drilling. And like I mentioned in the presentation, our focus now is from 500 meters below what we've announced down to one kilometer. So we're very focused. And that directional drilling is amazing. It's saving us a lot of time. So we're bringing in a lot of potential ounces here. What we see is that with the year end resource statement, what I see, Tanya, is material increase in the underground resource. So, you know, be watching for that number that will come by year end.

And would it be able to give us some sort of guidance on what we should expect?

Like we shouldn't have a. Go ahead.

Yeah. Well, you know, we've drilled it out. We know it's there, but we haven't put a technical report around it yet. So it's, you know, ranging.

I would say, Paul, it's ranging, you know, there is, again, like what Paul said, there's no technical report, but, you know, Based on our vision, based on what I look at from my experience, based on what I look at from the drilling, and when I see what's on the screen, it's potentially, you know, what I saw now is looking like 500,000 increase in approximately in the underground resource and targeting continuous growth into year end.

Okay. Now that's helpful. And I think as the other point that Ned made earlier is we are seeing generally higher grades. Part of that is how we design the open pit and how it pulls and dives for grade at depth in the bottom of the pit. So we're sort of seeing a rebalancing as we focus on the underground, which is dragging the average grade up as well.

Okay. This is all good news. Maybe just on your thinking overall for the company, can I assume that at year-end, when I look at your resource category, can I assume that the exploration success you're having at Great Bear, the exploration success at Gold Hill, and at Curlew, can I expect those three projects to have increases in resources?

Yeah, for sure, Tanya. There will be increases in resources. I'm not sure if we're going to catch it up in a block model and an update for Gold Hill by this year end. For sure the drilling is there and, you know, we bring it in and we look at what potentially it could be. But the other two assets, Great Bear and Curler, we're looking at an increase in resource, yes.

Okay. We won't have Gold Hill in an underground resource yet, but we're definitely seeing the drilling in the fullness of time that will pull in.

Exactly. Maybe that's a year end 2024. Then just maybe just if I could ask about just the overall reserves. I know it's just half a year has gone by, but any guidance on how you're seeing your drilling at your current mine sites to see whether reserves can be replaced at those assets?

As you know, Tanya, we bring ounces from not being inferred or we call it category category four in in internally in kinross and we bring that into inferred and then we drill the inferred and bring that into indicated and into measured um that is ongoing at all all our assets right uh our focus mainly when it comes to resources growing great there as you know um again then after that is growing uh curlew and With the underground decline at Round Mountain, we really want to drill from depth. As you know, we've already progressed. We're underground now, but take us a little bit of time to get there and set up at the right angle to drill phase X from underground. That will bring in more resources. And then we continue to drill it, for example, as an example in Fort Knox and bring

some of the resources into reserves at Fort Knox and other operating sites that we have.

Okay. So, I should take that it's a bit too early for you to comment on whether reserve replacement is occurring? Yes.

Yeah.

Okay. We'll ask next quarter. And then if I could just ask a final question. I'm just, you know, Andrea touched a little bit on this about just the inflationary pressures in the cost structure. You've assumed 5% of inflation in 2020 costs over 2022. You mentioned that you are seeing lower oil prices, diesel prices, positively helping your costs offset by royalties. Can I just touch on the other components? Are you seeing any relief or any lower pricing in other consumables labor, anything else relative to what you've budgeted? You may not be experiencing it now because you may have inventory, but are you seeing any relief in other portions of your cost structure?

We are seeing some relief in certain areas, but there's generally been offset for us going the other way. Overall, we're not expecting to see the cost We're not expecting to see anything different than what we factored into the guidance, which was the 5% increase overall. We've, you know, we've seen some increases in maintenance and, you know, labor costs just year over year. We don't expect labor costs to go down, even as inflation, you know, decreases or reverses. We've also got some higher power costs in Nevada. than we've had in the past. So overall, we're not seeing a net decrease because of inflation reversing, but it's sort of leveling out with some puts and takes here. Claude, I don't know.

Yeah, cyanide, as an example, is offered peak pricing, and there's a bit of competition in the market in that area. We do see steel being better at some of the consumables for the plant. But offset one is ammonia, and it's really a function of the conflict in Ukraine. It's causing us supply chain issues with our explosive contractors, and that's raising the price there. So let's put some things. The power in Nevada, as Andrea mentioned, is that the price is set 12 months, and so we're really paying in June 2023 for So as we go more of those things, we do expect some relief, but we're watching it very closely and we think our 5% target was a good one to maintain the line.

Yeah, no, thanks, Claude. I appreciate that because, you know, in general, we found that most companies between three to six months of inventory and contracts and other So, you know, should we, you know, get through these, like as yourself has mentioned on the power, which was priced on June 2022, once we get through that, you know, hopefully we will see some relief in costs in 2024 as we get through, you know, i.e. this power and or maybe other inventories at site that are, you know, booked at higher prices. So I was just wondering, you know, is it safe to look at when Paul mentions, you know, costs declining, you know, into 2024? Is that just due to operational grade and other, or can we see some relief in inflationary pressures?

You know, we certainly expect to see some, and you're absolutely correct, as some of our inventory that we have on site now was purchased at higher prices. So as we pull them off, we're paying more for them now. And then next year, we will see the opposite effect, where we're paying less for some as we speak. So we do see some potential relief.

But the first part of your comment, Tanya, is also true in terms of the operational impact. We expect costs to come down in the U.S. in 2024 as Manchot comes on in Alaska and then also in Nevada, as I noted earlier.

Okay. All right. Thank you so much for taking my questions. I'll leave it to someone else to ask. Thank you. Thank you.

And again, if you'd like to ask a question, it's star one in your telephone keypad. Your next question comes from the line of Mike Parkin from National Bank. Your line is open.

Thanks for taking my questions in this quarter. Just a bit of a follow-up on Tammy's question. With some of your inputs improving, mainly like diesel, are you seeing an opportunity to add additional hedges on things where you're seeing potential for wins and locking in good prices?

I mean, we typically hedge, you know, somewhere in the 50 to 60% of, well, currencies and WTI, you know, within a year. So we do add hedges sort of periodically when we see opportunities, you know, in the market and then, you know, to lower amounts for, for a couple of years out. Our guidance for this year factored in the hedges that we had in place, and we're still on track with that guidance. We're hedged for this year about 60% of our exposures at an average rate of $56 a barrel. And then going out in 2024, we're hedged between 35 and 40% at a bit of a higher cost, closer to $70. And then we've got, you know, a small amount of hedges out in 2025. So, you know, we sort of roll that forward as we go through when we see opportunities.

Okay. Thanks very much. That's it for me.

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

Thank you, Rob, operator. Thanks, everyone, for joining us this morning. We look forward to catching up with you in person in the coming weeks and months. Thanks.

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