Kinross Gold Corp Q3 FY2021 Earnings Call

Hello and welcome to the Kinross Gold Corporation, Third Quarter 2021 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. Thank you. I would now like to turn the call over to Mr. Chris Lichtenheldt, Vice President Investor Relations. Please go ahead, Sir.

Thank you and good morning. With us today, we have Paul Rollinson, President and CEO. And from the Kinross senior leadership team, Andrea Freeborough, Paul Tomory, and Geoff Gold. Before we begin, I would like to bring your attention to the fact we will be making forward-looking statements during this presentation. For a complete discussion of the risks, uncertainties, and assumptions, which may lead to actual results and performance being different from estimates contained in our forward-looking information, please refer to page 2 of this presentation, our news release dated November 10th, 2021, the MD&A for the period ended September 30th, 2021, and our most recently filed AIF, all of which are available on our website. I will now turn the call over to Paul.

Thanks, Chris, and thank you all for joining us today. We are pleased with how our portfolio is positioned today and our outlook going into next year. Reflecting back on the 5 months since the fire at Tasiast, I'm pleased to report that the mill is back up and running, the expansion project remains on track, and we expect to have built high-grade stockpiles by year-end. Despite Tasiast having recovered, our market value is still significantly lower than it was before the fire. To the extent that a portion of this may be caused by lingering concerns around Tasiast, today we hope to alleviate those concerns. The restart of Tasiast combined with the La Coipa project and strong performance from our broader portfolio puts us in an excellent position to grow production and free cash flow over the coming years. Turning to the third quarter, results were in line with our expectations, and I'm encouraged to see signs of a continued return to normal across our operations, including a return to the Toronto office. Before turning the call over to Andrea for a financial review and Paul for some operating highlights, I'll discuss some additional detail on Tasiast, the results from our studies on the Udinsk and Lobo-Marte projects, and some highlights from the quarter. At Tasiast, thanks to the excellent work by our team, the mill repairs were completed at a cost lower than earlier estimates, and we're on schedule to ramp up and reach throughput of 21,000 tons per day by the end of Q1 '22. Over the next few weeks, we will be focused on getting mill throughput back to levels comparable to the first half of the year. Yesterday, we released study results for 2 of our key growth projects, which in both cases largely confirmed our previous views. The pre-feasibility study for Udinsk reaffirms this is a low-risk, high-return project extending our presence in Russia. We are now working on a feasibility study which we plan to complete next year, after which we expect to make a formal construction decision. We continue to expect that Udinsk will be the first mine on our Chulbatkan land package, and we are targeting first production in late 2025. Turning now to Lobo-Marte, the feasibility study reaffirms all of the project’s key parameters. Lobo-Marte continues to offer long-term growth optionality as our potential next mine in Chile after La Coipa. Our operations tracked well against our expectations, notwithstanding the challenging environment as the world works to come out of the pandemic. We remain on plan to meet our 2021 guidance, and we are well-positioned to deliver our production and cash flow growth over the coming years. While our production growth and related cost efficiencies are expected to drive our cash flow higher, we are also facing inflationary pressures, which will offset some of this. Andrea will provide more detail on this in a few moments. On capital returns, last quarter, we announced our share buyback program with the intention of spending roughly $150 million over the following 12 months. I'm pleased to report that to-date, we have spent $50 million repurchasing our stock and are well on track with our plan. We continue to view our shares as extremely attractive and are pleased to be able to repurchase at these levels. Finally, I would like to provide an update on the progress we've made with respect to ESG. We established an ESG Executive Committee that will report to our Board on a quarterly basis, to further enhance our initiatives. In addition, we are working to develop a roadmap that will support our greenhouse gas reduction targets for 2030. We expect to complete this assessment and provide detail around our targets with our year-end results. I will now turn the call over to Andrea for a more detailed review of financial results.

Thanks, Paul. I will summarize our financial results from the quarter, provide some comments on inflation and how we expect it may impact our business, and then provide an update on our balance sheet. Production during the quarter was approximately 483,000 ounces, with sales slightly lower at 478,000 ounces. A decrease in production from last quarter was expected and was mainly due to Tasiast being down as a result of repairs to the mill. Cost of sales of $870 per ounce in Q3 was up from the previous quarter due to lower production and increasing inflationary pressures. All-in sustaining costs of $1,225 per ounce was up compared to the previous quarter due to higher cost of sales and higher sustaining CapEx. The increase in both cost metrics was expected, and we remain on track to meet our revised guidance for the year. Attributable operating margins remained strong in Q3 at 51%, driven largely by strong gold prices. However, as previously indicated, inflation is impacting our results. We're currently seeing inflation in the range of 3% to 5% in the second half of this year, which we incorporated into our revised cost guidance last quarter. Looking ahead, as the price of key inputs remains elevated, we expect inflationary pressure on our operating costs in the range of 5% to 7% going forward. Having said this, our per ounce cost metrics next year are still expected to benefit from higher production. Higher commodity prices combined with tightening labor markets, specifically in specialized contract labor such as engineering services and increased global demand for mining equipment are also expected to contribute to higher CapEx next year. We're going through our budgeting process now, and we'll be in a position to provide more specific cost guidance with our annual results in February. Moving to our balance sheet, our cash position decreased slightly from the previous quarter as expected, and we finished the quarter with $586 million of cash. We generated free cash flow of $39 million during the quarter, which was a decrease from the previous quarter due largely to the absence of production at Tasiast, while still spending on mining and repair. Looking ahead to the next quarter, Q4 CapEx is expected to be the highest of the year, and we expect to be within our guidance range for the year. Also, during the fourth quarter, we expect to make a one-time payment of $50 million related to a normal course settlement of prior taxes. Our net debt at the end of the quarter was $860 million, and our trailing 12-month net debt to EBITDA ratio increased slightly, and it's just under 0.5 times. As Paul mentioned, to-date, we've spent approximately $50 million on share repurchases, $32 million of which was during the quarter. This puts us on track to return approximately $300 million through dividends and buyback for mid-2021 to mid-2022. Finally, we're well-positioned to further strengthen our balance sheet next year as our production and free cash flow ramp-up. I'll now turn the call over to Paul Tomory.

Thank you, Andrea. Today, rather than a detailed review of each operation, I want to discuss a few key highlights and will be happy to take questions. At Tasiast, as Paul mentioned, the mill is up and running. The neutron screen and other key items arrived on site as scheduled and were installed last month. The mill is periodically achieving pre-fire throughput rates as planned, and we are in the process of ramping up and expect to achieve these levels on a sustained basis with the goal of achieving full production rates, throughput rates in December. While the mill is being fed ahead of schedule, we've elected to use lower grade ore during the ramp-up period, so the initial production will be modest. Furthermore, during this initial period, we're replenishing inventory on carbon following its depletion in the weeks after the fire. All told, we expect to produce approximately 15,000 ounces during the fourth quarter and, most importantly, exit the year with throughput rates of around 18,000 tons per day. We are on track initially with the project to hit 21,000 tons per day by the end of the first quarter. I'm also pleased to say that the mill repair costs of approximately $20 million were considerably lower than our initial estimates. Mining activities have continued through the quarter, and as Paul mentioned, by the end of the year, we expect to have built high-grade stockpiles. Mining rates during the quarter are lower than initially anticipated, as a result of challenges in drilling and blasting. However, these issues are being addressed, and we remain on track to achieve strong production at Tasiast next year, in line with our technical report and our studies. The 24k project is also progressing as planned with completion expected in mid '23. Moving to Round Mountain, the optimization study, which includes Phase S, is on schedule, and we expect it to be completed in the first half of next year. The Geotech work is advancing well and will provide the data needed to make conclusive decisions throughout the ultimate slow bungle, as well as any needed to step out some berms. To date, the study is not presenting any significant surprises. In the quarter, we also completed the relocation of the waste pile from the top of the pit to further stabilize the wall. Moving to the results of the Udinsk PFS, this study confirms the project's expected stronger returns. The conclusion of the PFS and combination of more than 55,000 meters of infill and Geotech drilling has allowed us to convert approximately 3 million ounces from resources to reserves. Most of the study outcomes are in line with the assumptions at the time of the acquisition with some improvements in recovery and production. CapEx, however, has increased by approximately $150 million, broken down roughly as follows: the first third is approximately from inflation; another third is from value-added decisions that have improved the NPV but come with added capital cost, for example, a finer crush for better recovery; and finally, a third from scope changes including earthworks and camp facilities, which were costlier than initially anticipated. As Paul mentioned, we also completed the FS on Lobo-Marte. The study confirmed the project's key parameters. Pit optimization work and infill drilling completed over the past few years resulted in increased global market reserves by approximately 300,000 ounces, and to its resources by 600,000 as compared to the PFS. The estimate for initial capital increased by approximately 8% compared to previous studies, but mostly due to the reclassification of certain plant elements from sustaining to initial. As such, the NPV is in line. We completed the study with key environmental and community considerations as part of the project design, and continue to advance the EIA submission. Lobo-Marte will now enter a lengthy permitting phase, which we expect will take 3 years. Construction decisions will not be made until after that, with construction beginning no earlier than 2025. Mining at Lobo-Marte will not begin until permitting has concluded and we've completed mining at La Coipa, as the two sites are currently planned to use the same water source. We continue to see further potential to extend La Coipa by bringing satellite deposits into the mine plan, and we've made significant progress on them. Therefore, we may ultimately push out Lobo-Marte to accommodate more production at La Coipa, which would allow us to further leverage our capital investments in Chile and to extend our overall production profile in that country. And with that, I will turn it back to Paul.

Thanks, Paul. I will just wrap up by reiterating that production at Tasiast has resumed and our operations are in excellent shape going into next year. Our balance sheet is strong and we continue returning capital to shareholders through dividends and buybacks. Our production pipeline continues to grow as we advance our projects and position our Company for long-term success. With that, operator, I would now like to open up the call to questions.

At this time, I would like to remind everyone that we will pause in just a moment to compile the Q&A roster. Your first question comes from the line of Tyler Langton with JPMorgan.

Good morning. Thanks for taking my questions. Just to start for the Udinsk and Lobo-Marte studies, can you just provide some detail on the level of costs you are using for both CapEx and operating costs? Are you using more current prices in those estimates or some sort of historical average or normalized range?

We're using current prices. So, in the case of capital estimates, they're based on submissions from contractors and equipment suppliers. In the case of Udinsk, those are clearly near or in time. As for our operating costs, we are using current costs. In other words, the inflationary impacts that have been seen over the last year have been incorporated into that.

Okay, Paul. So, if inflation is more temporary then we'll definitely see a reduction potentially in those items.

Well, I certainly hope you're right on that. But as I said, at Udinsk a full third of the capital cost increase was due to inflation. And so, if inflation abates and prices drop, then yes, we could see that but I don't anticipate that.

Right. But I guess the same is true for operating costs too if sort of in place.

Absolutely.

Okay. Perfect. And then just at Tasiast, I know you mentioned you're on track to reach the 24k by mid-2023. Can you just remind us sort of key milestones between now and then? And if there's a capital left to be spent, details on those lines?

Yes, so we're looking at about $30 million to $40 million of capital in that program to get from 21 to 24. And it's a lot of incremental debottlenecking. We're looking at additions to the screening capacity on the downstream side of the SAG mill itself. There's a fair amount of work in the leach train with launders and interstage screens, the addition of tanks, so it's a lot of incremental little debottlenecking type work. And as you said, we're ramping up to 24 in the plan in the middle of '23.

Got it. Perfect. That's it for me. Thanks so much.

Thank you.

Your next question comes from the line of Fahad Tariq with Credit Suisse.

Hi, good morning. Thank you for taking my questions. First, regarding 2022 cash costs, you mentioned inflation could be around 5% to 7%, but there might be some offsets from increased production. I'm trying to understand how we should approach next year's costs compared to this year's guidance of $830 per ounce in cash costs. Thank you.

Thank you. I'd like to remind you that we are still in our budgeting cycle. We will provide our cost guidance explicitly in mid-February when we report the year-end. There is a numerator-denominator effect with higher production. We expect costs to decrease, but Andrea, would you like to share your thoughts on this?

Sure. Looking ahead to next year, we indicated that costs will decrease. While inflation remains a challenge, we anticipate that costs for 2022 will be lower than in 2021, although not as much as we initially thought. As Paul mentioned, this growth is primarily driven by increased production from Tasiast and La Coipa, which are both lower-cost operations.

And I would just remind you that we have our revenue assumptions set at $1,500. While this is below our recent spot prices, it aligns more closely with our expectations for taxes and royalties.

Okay, great. And then maybe just switching gears on Paracatu, there was some commentary in the MD&A about temporary grade variability. Can you just talk a little bit about what happened there in the quarter? Because your grades were quite a bit lower than I was expecting at least, and maybe how to think about Q4? Thanks.

At Paracatu, over the long term, different areas of the mine show varying performance depending on where we are in the mining sequence. In the last quarter, we were working on the edges of the pit, which are historically harder to forecast in terms of grade. As we move into the final quarter and into next year, we'll be accessing areas that provide more consistent grade estimates. Therefore, this recent variability is a temporary phenomenon and aligns with our historical performance regarding grade at Paracatu.

Okay, great. That's it from me. Thanks.

Your next question comes from the line of Anita Soni, with CIBC World Markets.

Good morning. Thanks for taking my call. I just have a question with respect to the mining rates at Tasiast, can you give us an update on how you're doing on the stripping? I think you'd mentioned previously that you'd have to catch up on that in order to get the grades for 2022.

Yeah. Thanks, Anita. So, we still expect to hit the grades for next year, most importantly. We have had challenges in the mining grade. We accumulated probably 35 million tons shortfall of the last 2 years. You all remember the story. It was more acute last year due to COVID restrictions and the quarantines. So, we fell about 27, 28 million tons behind last year. This year, we struggled to ramp up to the full run rate, but it's not as bad as it was last year. We've lost about 6 or 7 million tons this year. However, those are both within the buffer we have on access to the higher-grade material on West Branch 4. So, by the end of this year, we will be stockpiling higher grades, and we don't anticipate an impact to next year's production. We will be in line with the technical report to potentially slightly beating it.

Could you remind me what the costs were that we excluded this quarter? It seems they were a bit higher than I anticipated. Also, what is the total amount you plan to exclude for this year, and how much more do you expect in Q4? Additionally, could you clarify how this will be treated next year, considering there are still many details from this quarter?

Anita, I'll describe the physical situation, and Andrea will talk about the cost treatment. So, we successfully completed a lot of Geotech work which includes installation of de-watering wells, some pretty detailed analysis on modeling the pit walls. And we've come up with a pretty confident number where we're in line of pit wall, so we've been able to speed them a little bit from the last time we talked. We have moved that waste dump that was on the wall that needs to be laid back and we're now mining waste down below that as we saw from the slopes. Our total estimate for net mining over and above what had been anticipated is still in that $50 to $60 million range, and we’re working on that plan. Cost treatment, Andrea?

Anita, we will see about $43 million in costs related to Round Mountain adjusted out of normal costs. There is a bit more coming in Q4, but I think we guided around $50 million for that, and we'll stay within that number.

Okay. Thank you for taking my questions.

And your next question comes from the line of Carey MacRury with Canaccord.

Hey, good morning, everyone. Just a question on 2022, just given all the moving parts in 2021, can you just remind us where the growth is coming from in 2022 outside, obviously, Tasiast?

So, Tasiast revving up to that 6 to 650 range, as I said, in line with the TR, that's a big one and we're still targeting about 200 from La Coipa next year. And that's obviously production where there wasn't production before those are the two key components. But we're also seeing a nice number of Fort Knox and a 300-plus range. So those are the principal contributors. Tasiast, buying a little bit of Fort Knox.

And the timing again.

Mid-year. The project is progressing very well. We are ahead of schedule on stripping. The mill refurbishment is going smoothly, and I’m pleased to report that our capital costs have been consistently below budget. Overall, we're in a good position, but for La Coipa, we are aiming for first production around mid-year, as I mentioned, approximately 200 next year.

And then maybe just on Tasiast, you mentioned the exit rate of about 18,000 tons a day, where is the mill currently at?

We've been achieving 80% to 90% of what we like, we just need to get that on a sustained basis. The target is to exit the year that '18 and '19. But we've been doing say, '14, '15 and '16 as we get the mill back up and running. One of the reasons is that the refurbishment costs less than initially anticipated, and the mill ended up being in better condition than we had initially feared. And that, of course, translates into good operating performance as we're back up and running.

Great. Thanks.

Your next question comes from the line of Mike Parkin with National Bank Financial.

Thanks guys for taking my question. And congrats on a good quarter, and looking forward to 2022. Just a couple of questions from me, most have been answered. With respect to costs for power because of the water situation there and sources. Can you just give us an update on where that kind of stands now?

In Brazil, we own power plants that meet most of our needs. However, there's a market stabilization mechanism in Paracatu that requires contributions to the overall grid, leading to financial impacts during droughts. Currently, Brazil is experiencing severe drought conditions, resulting in hydroelectric power shortages, which is the worst situation since the 1930s. Consequently, we are facing higher power costs, which we expect to persist in the near future. It's important to note that our power costs would have been significantly higher if we did not own these hydro dams, for which we are very grateful. Additionally, while the drought affects hydroelectricity nationwide, it is not impacting us in Minas Gerais, where the state water balances remain in good condition.

Okay, that's great. You mentioned in the past that the exploration potential is quite interesting and compelling with this high-grade structure pointing to the pit. Can you provide an update on the potential of stepping out of the pit shell in the second half for the continuation of that trend? When can we expect more information on that program?

We have been focused on the infill program over the past year, and I'm pleased to report that the resource is in good condition. In recent months, we started our first fuel season and are examining targets along the strike on the fault, as well as depth extensions primarily in the Northeast and Southwest. I encourage you to look out for our exploration updates in February, where we will share more detailed results of these programs, particularly in the areas surrounding the main Udinsk reserve.

Okay. That was great. Thanks very much, guys.

Your next question comes from the line of Greg Barnes with TD Securities.

Thank you. You seem to be hedging a little bit on Lobo. Is it the lower return, is it the permitting issues or just perhaps you are hopeful of another project steps into the pipeline ahead of it? That’s why a little bit cautious around that one.

The key point is that the results reaffirm what we expected from the study. We are not hedging our bets; instead, we see this as a straightforward transition from La Coipa to Lobo. There is a lengthy permitting process ahead of us, and we want to take our time to ensure we execute everything as well as possible, so we are not rushing to start Lobo. In fact, it is likely that we may extend La Coipa, and Lobo could be postponed by a year or two. The hedging you mentioned relates to comparing Udinsk and Lobo-Marte. At Udinsk, a significant amount of permitting work can proceed alongside engineering, and we expect to have those permits when we decide to start construction. We are even considering early capital investment next year at Udinsk. Conversely, Lobo-Marte requires the engineering to reach a substantial level before we can begin the permitting process. The permitting at Lobo-Marte is much more sequential, meaning we need advanced engineering before starting a comprehensive Environmental Impact Assessment process, which will take two years, followed by sectoral permits. The complexity and long duration of the permitting process in Chile are what the hedging is really about.

What about the water issues in the area? And I believe there's some hope you could connect La Coipa and Lobo on that trunk. I know you've had issues with water in Chile, historically.

Water is a sensitive topic in Chile and Region 3. However, we have primitive wells that are currently pumping water at La Coipa. Part of our strategy, as illustrated in several maps, involves the fact that these water wells are located closer to Lobo than to La Coipa. Therefore, we are considering the possibility of redirecting the water that is currently allocated to La Coipa and pumping it towards Lobo, which is nearer.

All right. So, you're not concerned in that fund necessarily. You don't see that as a potential hurdle in diplomacy?

I believe that permitting is very important and something we take seriously. In region three, we recognize that water is a sensitive issue.

Greg, water is foremost on our list of things to look at through this permitting process. Can I ask, we look at our Chilean assets with a long-term view. We have a big resource still on the books with Maricunga, we have a very large reserve here at Lobo-Marte. And we see increasing potential of La Coipa. All of these are subject to difficult permian environment. But if there is one, we've started to look at what does a bigger strategy potentially look like for Chile, there are commercial options, for example, on desalination. Would we ever take the lead on a desalination project if we had larger inventories? These are all conceptual things we're looking at right now in addition to the straight-line permit on water use from the La Coipa well. In this case, the La Coipa well situation, overall, also looking at conceptual other studies for options that may serve not only Lobo but also some of our other assets and potentially even further off field. So there are parallel tracks.

Okay, gotcha.

Your next question comes from the line of Tanya Jakusconek with Scotia Bank.

Good morning, everyone. Thank you for taking my questions. I wanted to follow up on Baltimore and also revisit Tasiast and La Coipa. Can you provide an update on the stockpile at Tasiast, including what we expect to have by the end of the year and the rate, so we can understand the buffer we have?

Yes, we're targeting 60,000 ounces to 70,000 ounces in stockpile at 2.5.

Okay. Thank you for that. And then, when you were down with the mill, is there any buffer time that you've gained timewise for thinking in some of your other portions of the mill that if we have a bit of a buffer? Have you gained any time on that to get to 24?

As you know, Tanya, this is something we've been talking about. We continue to look at those opportunities. We haven't moved off from mid-'23 timeline. The priority right now has been the 21K and the rebuild of the SAG mill. Our engineering teams continue to look for those opportunities, but we're not yet ready to move off that mid-'23 date.

I appreciate that. I just wanted to understand if there was a bit of a buffer right now.

If we had a buffer in the system, it was on the ramp-up timing to '21. So, you might ask, we've moved our timing on '21 Q1 up to the end of Q1, we haven't adjusted our numbers, we probably had a little bit of a buffer there.

Thank you. I wanted to revisit La Coipa. Based on what you've shared and connecting it to my question about reserves and resources, it seems Paul mentioned that we might be able to extend the mine life by another one or two years by adjusting Lobo-Marte's timeline. Are there any additional findings in the area that suggest we could extend it beyond that one or two years?

Yes, definitely. There's 4 or 5 deposits or phases of deposits that we're looking at bringing to the final over and above what's in the current plan. The first step is a joint venture agreement with Codelco. And that's a multi-phased deposit, and we've got to an agreement with Codelco in the first phase of that. It's not a 100% inked, but we anticipate having the agreement with them signed in the upcoming months that would add one to two years to it. And then beyond there, there's a second phase of that deposit, it's called Perrin. It would have, again, multi-year potential beyond that. And then also on our books are 2 other little satellite pits called Canaccord La Coipa, which would give again a year. So, if all our dreams came true at La Coipa, we could see a path to production out to 27 even 28, which would add several years. Talking 4 or 5 years of the initial La Coipa mine life estimate. And as Paul said, it would push out Lobo-Marte. And we would actually want that; that would be a good outcome. These are low capital expansions at La Coipa. These are pretty high-quality pits and to the extent that we're able to push out a little Lobo-Marte, La Coipa, we would welcome that as an outcome.

So, considering the scale of operations, we would see Lobo-Marte potentially pushed back until after 2028.

If that happens, it would be a positive outcome for us, and we are working towards it. As we incorporate these satellite pits into the La Coipa plan, we will make announcements as we progress. One factor that will slightly increase our capital expenditures next year is that we will conduct some stripping work at Perrin, which is the Dako joint venture deposit.

And staying on to the reserve and resources, just wanted to see how year-end 2021 is shaping up, excluding the addition that you had in Russia to reserve, I just want to talk about the mine sites. How do you feel about reserve replacement? How do we feel about the resource category? And just confirming that you're not changing cutoff grades and/or you’re pricing for your reserve and resources.

You took my freebie away from me there on Udinsk, so we're looking at other potential additions. As I mentioned in my prepared remarks, we're conducting a phase study at Round Mountain. It's going to be close as to whether we can include that in our year-end figures. That's a significant inventory, estimated to be between 600,000 and a million ounces. We also recently added 300 at Lobo-Marte, though I know you might not be considering that. Additionally, we'll have some smaller contributions from the other mine sites. We are still using 1,200 for our reserve optimization number and have no plans to change that by year-end.

Okay.

I think we're probably not going to have a replacement if you don't give us credit for Udinsk and Lobo-Marte, which together are $3.3 million of reserves. We're likely not going to have a full offset in the rest of the portfolio.

Okay, that's understandable. My final question is for Andrea. I wanted to revisit Slide 9, where you discussed the inflationary pressures. Thank you for that slide. I am trying to grasp whether, assuming there were no inflationary pressures in the first half of 2021, it would be reasonable to think that the 5% increase could be benchmarked against the dollar per ton from that period. I'm trying to determine how to set the 5% and 10% metrics. I need a foundation to work from, keeping in mind that the latter half of 2021 experienced some inflation, which complicates comparing it to the first half on a dollar per ton basis. How should I approach this?

Maybe we want to come back to you on that one, Tanya. We can drill into it in a little bit more detail with some more numbers in front of us.

Okay, and I appreciate that on the capital side too. Thank you.

On the capital side, last year we allocated $800 million for capital expenditures in 2022. That amount serves as a starting point for the inflationary estimates we provided. We expect to apply that $800 million, and additionally, there may be other increases. This figure was based on projects that were approved at that time, along with some additional considerations for Udinsk. There are other upcoming projects that will also contribute to the capital expenditures beyond those initially approved.

Right, to the extent it's not inflation-related; it's decisions where we've decided to reinvest into our business.

Okay. So, 10% on the 800 plus other approved projects?

That's right. You picked over the inflation note, obviously on commentary on us and other companies. It's still there and in some cases, still increasing. So, it's not like inflation hit, things got to a new level and stabilized in some commodities; we continue to see price increases.

Okay. Just trying to make a stab at what we think we could see in 2022 from some stabilized level and appreciate that it is a moving target. I'll wait for some more on that. Thank you.

Thanks.

Once again, your next question comes from the line of Matthew Murphy with Barclays.

Hi, I'm going to have some of the capex. Look, what do you think the chances are that capex is flat up as opposed to declining? I know you had thought our economy, your loss gardens of the sustaining levels to sort of sustain production long-term. And so, you tack on inflation and we're still on a pretty healthy gold price environment. I'm just wondering directionally how we should think about it.

I think we've touched on it a bit, Matthew. We are optimistic about both inflation and new project investments. In the past, we've used some general guidelines. For example, if you consider Anita, we often suggest thinking about $300 an ounce. However, if you factor in inflation, you might adjust that to around $330 an ounce. Overall, we are seeing a positive trend.

Yes. Okay. Thank you.

Your next question comes from the line of Anita Soni with CIBC World Markets.

Hi. I would like to follow up on the other expense line item. I'm trying to understand what might be included in that for next year. Will there be any additional compounds there, or is that already settled?

I mean it's difficult to predict just by the nature of other operating costs. But yes, I mean, obviously we had some bigger ticket items that were specific to this year. So, I don't really expect any more of those 2 items going forward.

And COVID costs, which were part of it historically are coming down.

Yeah, I mean, COVID costs for the quarter was about $5 million, and they have been trending down from last year throughout this year. As far as we're seen, we expect them to continue to go down, but well something we will continue to watch as well.

Okay. Thank you.

And at this time, there are no further questions. Are there any closing remarks?

No. Thank you all for joining us today. We look forward to catching up with you in the coming weeks and months. Thanks, everyone. Thank you, Operator.

You're welcome. This concludes today's conference. You may now disconnect.