Kinross Gold Corp Q2 FY2023 Earnings Call

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 second quarter 2023 results conference call and webcast. All lines have been placed on mute to prevent any background noise. After the speakers’ 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 Lichtenheldt, Vice President, Investor Relations, you may begin your conference.

Thank you and good morning. With us today, we have Paul Rollinson, President and CEO, and from the Kinross senior leadership team, Andrea Freeborough, Claude Schimper, Ned Jalil, and Geoff Gold. For a complete discussion of the risks and uncertainties which may lead to actual results differing from estimates contained in our forward-looking information, please refer to Page 2 of this presentation, our news release dated August 2, 2023, the MD&A for the period ended June 30, 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 full year guidance. Tasiast, Paracatu and La Coipa delivered excellent results, representing approximately 70% of our production in the quarter with an AISC of approximately $1,000 per ounce driving strong free cash flow. At Paracatu and La Coipa, good performance was driven by strong grades and recoveries. At Tasiast, 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 towards 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 start-up of Manh Choh and favorable mine sequencing in Nevada. At Manh Choh, 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 X OR. 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 onsite and the focus has been on 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 Wabauskang 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. Year 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 2023, 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 Tasiast 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 Paracatu and ramp-up at Tasiast and La Coipa. 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 Tasiast, Paracatu and La Coipa. 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 Tasiast, Paracatu and La Coipa 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 $0.14 and adjusted operating cash flow per share was $0.37, 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 remains 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 repaid $200 million on the revolving credit facility, as well as $20 million on our Tasiast 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 at 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 2024 senior notes on a comparable interest rate. Following first half results, we remain on track to meet our full 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 are reaffirming our full year guidance for production in the range of 2.1 million ounces, cost of sales of $970 per ounce, and AISC 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. Tasiast delivered another robust quarter with production of 158,000 ounces at an impressive cost of sales of $652 an ounce, improving over the prior quarter on higher throughput and improving recoveries. Remaining tie-ins were completed in June and commissioning continues in the plant. 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 has also reached as high as 28,000 tons per day on several occasions, thus demonstrating the operations’ ability to achieve the expanded throughput. Our focus is now on sustaining this higher throughput which we expect to achieve by the end of the year. At the Tasiast 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 completion by the end of the year. At La Coipa, production is tracking well against our full year plan. Continued outperformance on greater recovery is driving production while plant optimization continues through the second half of the year. La Coipa 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 Coipa, we remain on track to meet our full year production guidance in the range of 240,000 ounces. At Paracatu, 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. Paracatu 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 costs improved across our operations in Q2 and we are on track with our full year guidance. As discussed earlier, costs at 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 grades. We saw strong performance from the mill and have benefited 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 Manh Choh project and we are on track to begin processing high grade ore from Manh Choh 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 leaching 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 Manh Choh and Curlew project before finishing with an update on Great Bear. While Round Mountain is currently in a period of elevated costs, I wanted to take a minute to update you on why we remain excited about the future of Round Mountain. Following the period of investment in the near phases, Round Mountain has the potential to be a significant producer through the 2030s with higher margin 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 open pit Phase W2, which is expected to maintain our current production levels through 2024 and provide a new unleached 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 on lower strip driving improved economics compared with our prior view. At Phase X, construction of underground exploration declines is progressing well with 350 meters developed thus far. The decline is on track to facilitate the start of definition drilling early next year with production from Phase X envisioned to begin in 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 70 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 at Gold Hill, we look forward to ultimately bringing this high grade satellite deposit into our broader plans at Round Mountain. Moving to Manh Choh, project activities remain on schedule and on budget, and we are 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 Manh Choh 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 and margin project into production next year. At Curlew 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 an aim to build on the resource through proximal growth. Notably, yesterday’s release includes the best data sets from Curlew in the past 10 years with Hole 1148 intersecting 41 grams per ton over two 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 introducing directional drilling has been enhanced. This method decreases the amount of drilling required to reach these targets, improving productivity and cost per meter drilled while also allowing for more efficient and precise targeting. With improved focus on resource expansion, recent results are encouraging as we continue to confirm high grade mineralization at depth with Hole VR805, which intersects at 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 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 plant have commenced. Three engineering firms with significant experience in Ontario have been engaged to support our strong in-house owners team. Engineering and field 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 Ned. Before concluding, I want to acknowledge and thank Ned for his significant contribution to Kinross 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.

Your first question comes from the line of Josh Wolfson from RBC Capital Markets. Your line is open.

Yes, thanks very much. With the disclosure of the Great Bear underground resource upside, I’m just wondering, and I know 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 year-end resources. Pretty exciting. Fundamentally, the design, as we’ve described it earlier, is open pit with an underground mine and starting with tonnage coming mainly from the open pit, a little bit from the underground, and transitioning to a full 100% underground mine to take us through decades as the resource grows. What’s exciting for us lately is that we’re actually seeing the grade increases. It’s very exciting and I look forward to our releases in the coming quarters.

Thanks, and on the outlook for Tasiast, 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 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 re-think sequencing that with some of the performance we’ve seen this year?

Josh, it’s Claude here. We observed that the grade in the second quarter improved. The Tasiast mining is slightly ahead of plan, which allowed us to increase our stockpile a bit. This improvement enabled us to plan more effectively and balance our grade expectations. We expect the grade to remain strong in Q3 but to decline in Q4. As we move into 2024, we will return to the mine plan, and we anticipate a further reduction.

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 buyback, 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, and just curious on how you’re thinking about maybe a targeted leverage ratio.

Sure. It’s Andrea here, Fahad. 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 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 half related to debt reduction and half higher EBITDA. Our priority going forward, as Paul and I both said in our remarks, is to first of all 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 loan, 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, yes, we would like to continue to reduce, and below 1 would be great. Depending on the gold price, if we were at or above $2,000 gold, we’d expect to get there sort of towards the end of the year, so we’ll see where we get to with gold price as we go through the year here.

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

I think it’s useful to mention that S&P assigned us a negative outlook based on their strict criteria. They estimate a 30% likelihood of a downgrade if gold prices remain low, using a long-term price of $1,400. We disagree with this negative outlook, and in a scenario of falling gold prices, we have measures we can implement to safeguard our balance sheet and maintain our rating. However, their rating stands as is, and I believe that the debt repayment actions we’re currently undertaking will help reverse that outlook, assuming other factors remain constant. Typically, they review ratings every few quarters, so I anticipate that we might see a reassessment sometime next year, either after the year ends or following the first quarter.

Okay, that's very clear. Now shifting focus to Paracatu, it appears the grades are looking quite good, and it seems they will improve even more in Q3 as we delve deeper into the pit. When you mention higher grades in the second half, are you referring to something similar to what was achieved in Q4 of last year, around 0.5 grams per ton? Is that in the right ballpark? I’m just trying to understand how to model Paracatu for the second half.

I think the 0.5 would be a little bit high. As you know, the average for the first was 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 Paracatu drops down quite a bit in its life of mine plan and then picking up the following year as we do the additional stripping in 2024, pick-up again in 2025.

Hi, so I’ve got a lot of fine tuned modeling questions, but first I just want 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. On Paracatu, just a follow-up, next year’s strip, you said it’s slightly higher, or is it like a one-turn or is it materially higher than it is this year?

For Paracatu, 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 other phases within the pit, and that’s why the ounce production for Paracatu next year comes off quite a bit relative to this year.

Anita, this is Ned. Maybe I can help you with your model. As you know, Paracatu has multiple regions - there’s the north region, which is lower grade, almost no strip, and the south side, which is the deeper part, higher grade and higher strip. What Claude is alluding to is that in ’24, we’re going to be mining more in the north area of the pit as we strip Phases 13b and 15, so the grade in 2024 will be slightly lower but all in, we’re north of 500,000 ounces at Paracatu, so that’s in play. Then potentially in 2025, we get back to similar, maybe a little bit lighter than this year, but above 550,000 ounces. I hope that helps.

Your next question comes from the line of Carey MacRury from Canaccord Genuity. Your line is open.

Good morning everyone. Just a question on the Tasiast ramp-up, the plant did just over 18,000 tons a day, the project’s complete and I know you’re ramping it up, but how was throughput in July and is there any guidance you can give on what we should expect for Q3?

We had the throughput in July well under control. We previously mentioned a planned shutdown for early June, which we postponed slightly into the transition of June and July. This resulted in some non-productive days as we worked on piping. However, once we resumed operations, we achieved record tonnages in a day. Our current focus is on properly commissioning the back end of the plant to avoid overloading the system and to ensure we are well-positioned for a strong finish to the year.

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

Well, we mentioned in the first quarter that we expected to average between 20,000 and 21,000 tons. We are now anticipating closer to 21,000 for the entire year, so things are looking quite strong.

Your next question comes from the line of Tanya Jakusconek from Scotiabank. Your line is open.

Good morning everyone. Thank you for taking my questions. I have two. First is on the reserve and resources, and second is on the cost. Can you remind me about the underground resource at Great Bear? When you reported it, I believe it was around 1.3 million underground. Was that between the 500 meter level? I’m looking at your cross-section on Page 23 and trying to understand if the resources you’ll report at the end of 2023 for Great Bear will be between the 500 meter level and the 1,000 meter level.

Hi Tanya, good morning. We got your name right this time, right? Yes, thanks for your questions. That’s a great question. I’m just looking at the numbers here. What we reported for the underground 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. Like I mentioned in the presentation, our focus now is from 500 meters below what we’ve announced down to 1 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. Be watching for that number that will come by year end.

Yes, we have identified it through drilling and are aware of its presence, but we have not yet prepared a technical report on it.

I would say, Paul, there is no technical report, but based on our knowledge and vision, as well as my experience and what I observe from the drilling, it looks like there is potentially an increase of approximately 500,000 in the underground resource, and we are targeting continuous growth into year end.

Okay, that’s helpful. Maybe just 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?

Yes, 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 we bring it in and we look at what potentially could be, but the other two assets, Great Bear and Curlew, we are looking at an increase in resource, yes.

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

Exactly, yes.

Maybe that’s a year-end 2024. Maybe if I could ask about 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 4 internally in Kinross, we bring that into inferred and then we drill the inferred and bring that into indicated and into measured. That is ongoing at all our assets, right. Our focus mainly when it comes to resource is growing Great Bear, as you know, then after that is growing Curlew, and with the underground decline at Round Mountain, we really want to drill from depth. As you know, we’re already progressed, we’re underground now but it will take us a little bit of time to get there and set up at the right angles to drill Phase X from the underground. That will bring in more resources. Then, we continue to drill, as an example, in Fort Knox and bringing some of the resources into reserves at Fort Knox and other operating sites that we have.

Okay, so I should take that as it’s a bit too early for you to comment on whether reserve replacement is occurring?

Yes.

We are experiencing some relief in specific areas, but overall, we’re seeing offsets in other aspects. Typically, we don’t anticipate any changes to what we included in our guidance, which projected a 5% increase overall. We have observed some year-over-year increases in maintenance and labor costs. We do not expect labor costs to decline even if inflation decreases or reverses. Additionally, power costs in Nevada are higher than in the past, so we are not witnessing a net decrease due to inflation reversing; rather, it seems to be balancing out with various factors at play.

Yes, I’ll add that cyanide, as an example, is off its peak pricing and there’s better competition in the market in that area. We do see steel being better at some of the consumables for the plant, but the offset one is ammonia, and it’s really a function of the conflict in Ukraine that’s causing us supply chain issues with our explosives contractors, and that’s raising price there, so there’s puts and takes. The power in Nevada, as Andrea mentioned, the price is set 12 months and so we’re really paying in June 2023 for the power price of June 2022, when it was at its peak, so as we go, more of those things, we do expect some relief but we are watching it very closely and we think our 5% target was a good one to maintain the line.

Yes, thanks Claude, I appreciate that, because you know, in general we’ve found that most companies between three to six months of inventory and contracts and others, so should we get through these, as you mentioned on the power which was priced on June 2022, once we get through that, hopefully we will see some relief in costs in 2024 as we get through, i.e. just power, and/or maybe other inventories at site that are booked at higher prices. I was just wondering, is it safe to look at, when Paul mentioned costs declining into 2024, is that just due to operational grade and other, or can we see some relief in inflationary pressures?

We certainly expect to see some, and you’re absolutely correct - as some of our inventory that we have on site 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 of the items that we’re bringing in to supply 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 impacts. We expect costs to come down in the U.S. in 2024 as Manh Choh comes in Alaska, and then also in Nevada, as I noted earlier.

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

We typically hedge somewhere in the 50% to 60% of currencies and WTI within a year. We do add hedges periodically when we see opportunities in the market, and then to lower amounts 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 hedge 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 a small amount of hedges out in 2025. We sort of roll that forward as we go through, when we see opportunities.

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

Thank you, 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.