Kinross Gold Corp Q2 FY2024 Earnings Call

Thank you for standing by. My name is Joel and I'll be your conference operator today. At this time, I would like to welcome everyone to the Second Quarter 2024 Results Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. I would now like to turn the conference over to Chris Lichtenheldt, Vice President of Investor Relations. You may begin.

Thank you and good morning. With us today, we have Paul Rollinson, CEO; and from the Kinross Senior Leadership Team Andrea Freeborough, Claude Schimper, William Dunford and Geoff Gold. For a complete discussion of the risks and uncertainties which may lead to actual results differing from estimates contained in our forward-looking information, please refer to Page 2 of this presentation, our news release dated July 31, 2024, the MD&A for the period ended June 30, 2024 and our most recently filed AIF, all of which are available on our website. I will now turn the call over to Paul.

Thanks, Chris and thank you all for joining us. This morning I will discuss our Q2 margins and cash flow, provide high-level updates on our operations and projects, update you on our sustainability initiatives and reaffirm our outlook. I will then hand the call over to Andrea, Claude and Will to provide more detail. Following a strong start to the year in Q1, we delivered another strong quarter in Q2, establishing an excellent first half of positioning us well to meet our full year guidance. In Q2, our operating margins grew by over 20% compared to the prior quarter, once again outpacing the relative increase in the gold price over the same period. As a result, free cash flow more than doubled in the second quarter to $346 million, the first half total of just under $0.5 billion. Turning now to operations. Our production in the second quarter was on plan delivering 535,000 ounces at a cost of sales of just over $1,000 per ounce. Our two largest assets; Tasiast and Paracatu, both performed well with production costs improving over the prior quarter. Tasiast had an excellent quarter and was once again the highest margin mine in our portfolio driving significant free cash flow. Paracatu continues its consistent contribution with strong throughput and recoveries helping drive a steady quarter of production and cash flow. On the quarter production remains on track for the full year and we continue to use strong grades and recoveries to optimize throughput in order to address some maintenance opportunities. In our US operations, production was on plan with notably stronger performance from Fort Knox. Turning now to our development activities in the second quarter. At Round Mountain, the Phase X open pit and the Phase X underground development work continues to advance well. Stripping at Phase S and the expansion of the heap leach pad are progressing on schedule to support initial open pit production next year. At Phase X, the development of the exploration decline is progressing on plan. As outlined in our press release, we are excited that the extension drilling at Phase X intersected mineralization with stronger grades and widths outside of the primary exploration target. These results demonstrate the potential for expansion of the primary resource target and are expected to support high productivity throughout mining. Moving to Alaska; consistent with our guidance I was recently at Fort Knox to celebrate the first cold pour at Manh Choh. This important milestone represents the hard work and dedication of our project team and partners to bring this hybrid mine into production, both on budget and on schedule. Mining operations at Manh Choh are performing as planned and the Fort Knox mill modifications are on track for final commissioning in Q3. As a result, we look forward to delivering several years of strong production at attractive costs from the combined operations in Alaska. At Great Bear, we continue to make strong progress in the second quarter. The ongoing exploration drilling campaign continues to focus on targeted extensions, the resource at depth and in Q2 we drilled the deepest hole on the property to date. This hole intersected attractive grades and widths at a vertical depth of nearly 1.6 kilometers down plunge of the main LP zone. This intercept is outside of our current resource and demonstrates significant potential for further resource growth. Drilling at Great Bear also returned attractive results for depth extensions in both zones, indicating strong upside potential to supplement the main LP zone from the satellites. It's important to note that this recent deep drilling will not be reflected in the upcoming PEA because the PEA is a point-in-time estimate and will only include drilling up to April. PEA will provide visibility on the open pit and a window into the initial production scale across the margins for the underground. Given the depth of the mineralization, the long-term potential of the resource will need to be drilled off from underground as we progress development ahead of mining. However, this deep drilling to date shows the continuation of high grade mineralization beyond the current resource in the PEA, indicating the potential for significant resource growth over time. We look forward to outlining more project details when we release the PEA in September. For the AEX, the start of surface construction is targeted for later this year. Regarding permitting for the main project, the Federal impact assessment is underway. Baseline studies, permitting, and engineering for both the AEX and main project are all progressing well. In summary, we are very pleased with how things are progressing at Great Bear. Before I make a few comments on sustainability, we would be remiss to not address the recent incidents that have occurred around heap leach facilities within the mining industry. Will is going to discuss why we are confident in the quality of our heaps in more detail later on this call. Turning now to sustainability. Last night we published our fourth annual climate report which provides our latest comprehensive climate-related disclosures. The report also outlines our progress towards our climate-related goals and provides details on our climate change strategy, including our plan to reduce greenhouse gas emission intensity. In 2023, we implemented 15 energy efficiency projects across our sites with combined greenhouse gas reductions of more than 29 kilotons of CO2. As a result, our percentage of renewable energy increased to 23% of total energy consumed last year. Looking forward, we are on track to achieve our targeted 30% reduction in Scope 1 and Scope 2 emission intensity by 2030. In summary, we continue to be very proud of our work in the area of sustainability and I encourage everyone to read our recent climate report to learn more. Turning now to our outlook. Year-to-date we have produced over 1 million ounces at a cost of sales in line with our guidance. Looking ahead, we remain on track to achieve our production and cost guidance for the full year. Our continued focus on costs is driving strong margins and significant free cash flow. With that, I will now turn the call over to Andrea.

Thanks Paul. This morning I'll review our financial highlights from the quarter, provide an overview of our balance sheet and comments on our guidance and outlook. Our second quarter performance with strong production and cash flow exceeding the prior quarter. We produced 535,000 ounces, with gold sales of 521,000 ounces. Cost of sales was $1,029 per ounce and with an average realized gold price of $2,342 per ounce; we delivered strong margins of over $1,300 per ounce. All in sustaining costs was $1,387 throughout. First half cost of sales of $1,006 per ounce is in line with our full year cost guidance range of $1,020 per ounce. First-hand, all in sustaining cost of $1,348 per ounce is also in line with our full year guidance range of $1,360 per ounce. In Q2, our adjusted earnings were $0.14 per share and adjusted operating cash flow was $478 million, both improving over the prior quarter. We generated $346 million of attributable free cash flow in the quarter or $237 million excluding working capital changes. Turning to the balance sheet. Our financial position continues to improve in the second quarter and remained strong. After repaying $200 million of debt against the term loan in Q2, we ended the quarter with $480 million. We currently have approximately $2.1 billion of total liquidity. Over the past 12 months, we've reduced our net debt by approximately $450 million and our net debt to EBITDA from 1.3 times last year to just under 0.8 times of Q2. Looking forward, we plan to continue allocating excess free cash generated against the remaining $800 million due on the term loan in 2025. Turning to our guidance. Following Q2, we remain solidly on track to meet our guidance to produce 2.1 million ounces at a cost of sales of $1,020 per ounce and all-in sustaining costs of $1,360 per ounce. Capital expenditures are on track for our full year guidance of $1.05 billion split roughly evenly between sustaining and non-sustaining capital. I'll now turn the call over to Claude.

Thank you Andrea. In 2023 we launched our global Safety Excellence Program. And I'm pleased to say that we have now shared this program with over 60% of the workforce, including both employees and business partners. We are proud of the program's impact today and look forward to continuing to share it with the rest of the organization. This quarter we remain focused on continuing to implement our human and organizational performance program and our operational learning teams. This program is improving our team collaboration and operationalizing our core value of putting people first. Results today are very positive and it will continue to be our focus through the remainder of 2024. Moving on to operations; we saw continued strong performance in Q2 with our mines delivering as planned in the quarter and the first half of the year. At Tasiast, production of 162,000 ounces was higher quarter-over-quarter. The cost of sales of $656 per ounce improved over the prior quarter. Tasiast was once again the lowest cost asset within the portfolio, driving significant free cash flow. Following a strong first half, Tasiast remains on track to meet its full year production guidance of 610,000 ounces. At Paracatu, a reduction of 130,000 ounces and a cost of sales of $1,039 per ounce were unplanned and also improved over the prior quarter. The mine continues to see steady performance on throughput, grades, and recoveries in line with the mine plan. Mine sequencing continues to transition through the lower grade portions of the pit as planned before moving back into the higher grades by year-end into 2025. Paracatu remains on track to meet its 2024 production guidance of 510,000 ounces. At La Coipa, Q2 production of 66,000 ounces was lower compared to the prior quarter, while cost of sales was higher mainly due to maintenance costs and timing of sales. Production at La Coipa remains on track for the full year target of 250,000 ounces as strong performance on grades and recoveries offset lower throughput. We continue to perform reliability and optimization work on the plant. As part of this work the team is actively managing throughput levels to enhance the reliability of the plant while the plant optimization continues. Moving to our US operations, production was higher quarter-over-quarter, benefiting from improved contributions from Fort Knox, while Round Mountain and Bold Mountain were lower as planned due to mine sequencing. Beginning with Fort Knox, production of 70,000 ounces was significantly higher compared to the prior quarter. Throughout the quarter, increased performance, grades, and recoveries all improved. Cost of sales of $1,345 per ounce was lower over the prior quarter, primarily due to iron production. At Manh Choh, mining continues on schedule and all transportation has ramped up to planned volumes. Processing at Manh Choh began in early July and is striking to plan. The full commissioning on the mill modifications is expected to be completed in Q3. At Bold Mountain, production of 46,000 ounces was slightly lower than the prior quarter as planned. Cost of sales of $1,271 per ounce was higher quarter-over-quarter. At Round Mountain, production of 62,000 ounces was lower compared to the prior quarter due to lower throughput and grades as planned. The cost of sales of $1,564 per ounce was higher quarter-over-quarter due to the lower production. In Phase S, mining activity continues to progress as planned. Meanwhile, the heap leach pad expansion is progressing on schedule. Earthworks and procurements are all complete and the initial production from Phase S remains on track to begin in the second half of next year. With that, I'll now pass the call over to William.

Thanks, Claude. I'll start off by providing a brief overview of our operating heap leach facilities before moving on to an update on our projects. We are currently operating heap leach facilities across three types in the U.S. As Paul mentioned, we are confident in the quality and safety of our heap leach facilities for a few reasons. First off, our facilities are primarily run-of-mine heap leach pads, which means they have larger rocks and crushed heap leach pads, significantly reducing the risk of liquefaction and increasing the structural stability of the pads. The only heap leach we have with crushing is Round Mountain, where we are only crushing a portion of the ore we are placing on the pads. So overall, we still have larger rock sizing and a fully crushed pad. Second, regarding topography. Both Round and Bold Mountain are built on relatively level ground rather than hillsides or valley fills, increasing their stability. Fort Knox is our only valley-fill heap leach operation. Again, the two pads there are 100% run-of-mine ore. Finally, it is worth noting that the design of the valley pads at Fort Knox are constructed, engineered, operated, and monitored as dams based on state regulation in Alaska, which ensures strong governance on construction and stability. So overall, we are confident in the quality of our heap leach facilities, and as always, we will maintain safety and environmental impact as our top priorities. Moving to updates at Round Mountain. At Phase X underground, the development of the exploration decline continues to progress well, with over 2.2 kilometers developed so far. Exploration drilling has also progressed well as we have started infill drilling as the primary Phase X target and continued opportunity drilling outside of the target to extend the mineralization. We have received multiple strong assay results on intercepts outside of the Phase X target. Of particular note, an impressive intercept of approximately 30 grams per tonne over 32 meters above the lower portion of our primary exploration targets is significant. There is also a link to a video in our press release that can give you a better sense of the location of these intercepts. We are pleased to see these results and confirmation of the potential to extend the mineralization that we are targeting for underground mining. We will continue our exploration program at Phase X through the remainder of this year and into next as we advance technical studies in parallel. Moving to Curlew Basin, exploration continued to advance in the second quarter. Results from the underground drill program continue to confirm thicker zones of high-grade mineralization near the Stealth Zone, where a recent assay returned approximately 14 grams per tonne over 19 years. Drilling from both surface and underground also continued on the Roadrunner vein zone, with the recent hole returning 12.5 grams per tonne over 2.4 meters. We are encouraged by these higher-grade results, which indicate potential to expand the resource and improve overall resource quality. At Great Bear, drilling continues to focus on demonstrating that high-grade mineralization continues well beyond our current resource. As Paul mentioned, in Q2, we drilled the deepest hole on the property to date. This hole returned 3.8 meters at a grade of 9.5 grams per tonne at nearly 1.6 kilometers vertical depth, demonstrating the impressive continuity of this system that will ultimately need to be drilled out from underground. Drilling in the second quarter also showed good grades and widths at depths well beyond our current resource at the Discovery, Yaro and Oro zones. Similar to Yuma, these zones continue to show potential for significant resource upside and growth at depth. Lastly, drilling at Hinge and Limb this quarter has returned promising results for depth extensions at both zones. At Hinge, we had multiple strong intercepts at around 850 meters, including 9.3 grams per tonne over 3.1 meters and 22.7 grams per tonne over 3.1 meters. We are excited to see confirmation of depth extensions to mineralization across the board at Great Bear, continuing to support our original thesis of a long-life, high-grade mining complex. Moving to a few other updates at Great Bear. Through the AEX decline, detailed engineering, execution planning, and procurement continue to progress well. We are targeting a start of early works later this year, and start of the underground decline in mid-2025. For the Main Project, in Q2, we continue to advance technical studies, field work, and comprehensive baseline studies. Beyond the strong exploration results, we are encouraged to see the in-depth technical work continuing to show positive results across the board, including simple metallurgy, high recovery, and competent geotechnical conditions. Work on the initial project PEA is well advanced and we look forward to releasing these results from the study in early September. I will now turn the call back to Paul.

Thanks, Will. Following a strong first half, our business remains in great shape and on track to deliver our full year commitments. There is much to look forward to for the remainder of the year and beyond. We remain excited about our future. We have a strong production profile, we are generating significant cash flow, we have an investment-grade balance sheet that is continuing to strengthen, we have an attractive dividend. Looking forward, we have an exciting pipeline of both exploration and development opportunities, and we are very proud of our commitment to responsible mining that continues to make us a leader in sustainability. With that, operator, I'd like to open the line for questions.

Your first question comes from the line of Joshua Wolfson of RBC Capital Markets.

First question is on the production guide. I think there was commentary earlier this year about first half being softer, given that production has been so strong. Is it reasonable to expect the step up still in the second half on some of the prior guided items?

Claude here. So we remain focused. We've had a very solid first half of the year but we've got some mine sequencing setups going and making sure that we need to continue to go to our guidance. So relative to the mine sequencing, both the Tasiast and Paracatu, we expect to be right on guidance for the year.

Okay. So you wouldn't expect an improvement for those specific assets in the back half?

No, we are sticking to our plan which involved putting in extra effort in the first quarter for those two major projects. For the rest of the portfolio, we have some ups and downs that keep us aligned with our guidance.

The second question is about the upcoming PEA for Great Bear. There has been some impressive exploration reported after the cut-off date in April for the study. Is there any possibility of a resource update, even if it might not be included in the economics? It would be interesting to see what the exploration upside has been so far.

Yes. We will plan to update the resource at the time that we put out the PEA just to make sure it's kind of the two pieces of the picture tied together with latest information. We've closed off the drilling for that as of April but that's where we'll be.

Yes. There is always a lag. However, as we approach the market with an update, we will provide whatever additional information we can at that time.

And then last question is just on the cash flow side of things, a little bit of some moving parts this quarter and also the first quarter. Working capital inflows were very strong which helps free cash flow but cash taxes also have been tracking at least in the first half fairly high versus annual guide. Any sort of commentary you could provide on whether we'll see cash taxes maybe decline in the back half or working capital outflows are reversed, at least in the second half?

Sure. Josh, it's Andrea. The working capital varies throughout the year. In the first quarter, we experienced a net working capital outflow, while in the second quarter, we had an inflow. This is just a matter of timing. By the end of the second quarter, our payables were higher, and those expenses were settled in July. There's nothing particularly noteworthy regarding that. Regarding taxes, we made an installment payment of $25 million in Mauritania, which is probably the only item that deviates from our initial plan for the year. Other than that, we expect our taxes to align with our guidance throughout the year, considering the sensitivity to gold prices.

Your next question comes from the line of Lawson Winder of Bank of America Securities.

Just a couple for me. Where I actually wouldn't mind starting is just on your thoughts around the year-end reserve and resource update for the assets other than Great Bear? Is there any thought internally to potentially increasing the gold price assumption? And if so, which assets would have the greatest sensitivity to that? And then secondly, since now given a full half of drilling, which assets are looking well placed to potentially replace reserves?

I'll begin, and others can join in later. It's a good question. We're all considering the current spot prices alongside our reserve resource price assumptions and thinking about our plans for this fall. We will make decisions later in the season as we approach our budget cycle in November and December. For now, I can say that things are stable. Our main focus is on maintaining margins and cash flow. Our mills are operating at full capacity, and we are stockpiling lower-grade material. With the higher gold prices, our margins and cash flow are positively affected. Regarding the reserve resource, there may be opportunities, but our priority remains on maintaining those margins and cash flow. Each asset has its uniqueness; Bald Mountain, for example, has the largest resource in our portfolio with about 4 million ounces, so we will give that particular attention as we move further into the fall.

If I could pivot a little bit and ask on M&A. And I'll preface it with the statement that I understand. Kinross is in a pretty good position in terms of projects in the portfolio, especially in the near term and long-term with Great Bear. But I mean what is Kinross's thinking in terms of potentially being opportunistic in M&A? And also with the context that the Kinross Gold valuation has improved over the last year and the cash position is improving?

Sure, Lawson, I think you’re spot on. We’re in excellent shape with our organic portfolio and have numerous opportunities to capitalize on. We plan to advance our studies and economics further, which is encouraging. Our balance sheet is strong, and we’re not feeling pressured to make any moves in that area. When considering mergers and acquisitions, it’s about identifying where we can find and create value. We possess strong technical expertise that can help us turn operations around and improve them. Additionally, our robust balance sheet allows us to contribute capital where needed. We’re not under any pressure, but if an opportunity arises that aligns with our goal of creating shareholder value, we would definitely consider it.

Regarding Nevada, there have been challenges in recent years with attracting skilled labor and rising labor costs. During the Q1 call, you mentioned that there have been positive changes in employee turnover and wage pressures. Is that still the case? What updates do you have one quarter later?

So, Claude here and I think the commentary is fair. We are seeing still a positive trend on our turnover rates and the morale and things like that. And as we move forward with the teams in Nevada, we're performing very, very well. So we're going in the right direction. It is still a tight labor market but we feel very comfortable about what it is that we're doing.

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

Congrats on the good quarter. To start with, Tasiast looks like it's doing very well to its nameplate. Just wondering now with operations kind of running around the nameplate, are there any initial thoughts that nameplate capacity could potentially be beaten a bit? And if so, is the mine set up where it could actually leverage that? Or is the constraint really more on the mine order? Could you actually utilize excess capacity if it exists?

Yes, Mike. It's Claude again. Our primary focus at Tasiast has shifted from a project phase to operating as a mine for the past six months. We want to stabilize operations for a while to ensure we meet expectations. However, we are always exploring ways to enhance recovery and increase throughput. I believe the mine is not limited in capacity, as we have some stockpiles available. Our main priority is to achieve the reliability we expect from this operation and sustain performance. Then we will pursue incremental improvements or consider expansions at the site in the near to medium term.

It seems that we might see an increase in ounces or tonnes at Phase X, especially considering the drill results highlighted in the recent quarterly results, which are significantly higher than the resource grade. What are your thoughts on this? Are you planning to implement a substantial grade capping on some of those very high-grade findings, or could a resource update actually lead to an improvement in Grade 2 given the strong results from the drill program?

Yes, we are very pleased with the results we are observing, which exceed the target grade based on historic drilling. Round Mountain has a strong track record of positive reconciliation and visibility of gold. When we establish a resource for the underground, there will be some capping and controls in place. Currently, we do not have a specific resource for that underground target, but we expect to develop it next year. As is typical with these types of deposits, there will be some level of capping. We are just beginning the drilling process, focusing on the main bulk target while considering the overall grade for high-productivity mining. This is our vision for this asset.

So with respect to the results realized to date versus what you've kind of verbally communicated as a ballpark target for grade, are you feeling very comfortable, comfortable, really comfortable versus kind of delivering to those expectations you've given in the past?

We need to put in the effort and come up with a better conclusion once we have an actual resource. We recognize that these grades give us more confidence in our activities there and the long-term margin potential. There are two aspects to consider. It's not solely the grade that makes us happy with the results; it's also the fact that these results come from outside the main target area. These drill results are encouraging indicators for both aspects. However, until we conduct more drilling, we cannot provide an updated perspective on the entire system.

One last question on it. Some of the intercepts also are showing very good widths. Is that proving in line with expectations internally? Or are you finding some of the really wide intercepts actually proving more positive.

This is primarily a bulk target. What we are envisioning, and what we've communicated in the past, involves large stopes and wide stopes, characteristic of that type of mining. Therefore, we anticipate it to significantly exceed what we've shared recently in some of our historic drilling.

Well, for that high productivity mining that we're contemplating.

And maybe it's too early but how are you feeling about the quality of the rock there? Do you feel that there will be any kind of geotechnical challenges? Or do you find the rock is expected to be extremely competent for underground mining?

Yes. Given the history of underground mining in Nevada, we certainly went into this cautiously with a pretty wide tool set in terms of how we prepared ourselves to handle geotechnical conditions. We do have some faults that we were well aware of in advance, that we planned for as we progress the decline. But really, we've been extremely pleased with the progress of the operational team on-site and what they've done from a geotech perspective. And that's increased our confidence in our ability to operate in this ground. It's not extremely competent ground but it's also not extremely poor ground that we've seen in some other assets in Nevada in the past. So we're comfortable with where we're operating at and the controls we have in place.

And then just an overall arching kind of question. Obviously, you're getting really great exploration results at all these assets: Curlew, Great Bear, Round Mountain, Phase X. Is there any thought, like could you put more drills to work? Or is it just, as you need these additional drill bays in the underground to kind of get things going? Like I understand at Great Bear, it makes a lot more sense to drill from underground than from surface, given the depths you’re hitting. That makes sense to test it but to really infill it, cost-efficiency from underground makes a lot of sense. But is there thoughts towards increasing budgets?

Yes, go ahead.

I'd say at Great Bear specifically, the idea of this deep drilling was to provide information for the PEA to give you a snapshot in time view of what the potential of the underground is. This is deep and expansive drilling. So as you clearly understand, it is more efficient to be drilling at 1.5 kilometers from underground to the actual infill drilling. But of course, when we're encouraged by results, not just at Great Bear, but at other places like Phase X, when you get good results, it does sometimes open up the opportunity to do more follow-up drilling. So we continuously review that process. If we're going to increase those projects, we'll certainly let you know. But right now, we think we've done what we wanted to with Great Bear in terms of illustrating and providing a strong view on that kind of core of the deposit, so that we'll be able to give a PEA with an understanding on costs and margins.

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

Just looking to 2025, given it's less than six months away, the capital guidance of $850 million, I know that doesn't include improved projects but I'm assuming that includes the underground work at Great Bear. But I guess what I'm asking is, are there other projects that we should be expecting that could be approved and pump up the 2025 CapEx number?

Sure. I'll start and Paul can provide some specifics afterward. We typically provide guidance for CapEx for years two and three based on what's approved and usually finalized. We expect CapEx for 2025 to be in the same range as this year and last year, around $1 billion.

So Phase X is an example of a project where we're still doing the work. So that doesn't yet have beyond the kind of exploration work that we're doing; there's not an approved budget for next year. So those are the things that will extend it. Curlew is somewhere else where it's possible we'll be starting to spend some money and we're looking at some short extensions of Bald Mountain that could affect that number.

And what are the projects that would be driving that?

Yes, our strategy in Chile focuses on the resources we have near our infrastructure at La Coipa. Maintaining production is primarily a matter of obtaining permits, which we are currently working on. We plan to transition from La Coipa to Lobo by the end of the decade. If we receive the necessary permits, we will continue mining the oxide. We are also beginning to increase our environmental baseline studies to prepare for integrating Lobo after Great Bear around that time. Overall, this outlines our current approach. Our main strategy is centered on the synergy of our water management. We have permanent pumping water wells that have been operational for many years at La Coipa, which are closer to Lobo. Our plan is to utilize these wells to support the transition from La Coipa to Lobo by the end of the decade.

I have a question related to Maricunga. I know there were regulatory issues there a few years ago, but there are still six million ounces available. Are you considering a potential restart at some point, or will that be on hold for a while?

Well, I think, again, there's option value there. You're right. It's drilled out resource. Again, water is always a question. That is a different water source than our basin. But yes, there's no plans right now as it relates to Maricunga but it is a drilled out resource that we'll continue to think about.

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

I just wanted to ask firstly on Paracatu. So the grades picked up in this quarter and I was just wondering how that evolves over the rest of the year?

As we explore different areas of the pit in Paracatu, we've indicated that this year is slightly below last year overall. However, as we transition from one area of the pit to another toward the end of the year, we will return to the higher-grade section. It's important to note that when we mention higher grade at Paracatu, the difference is marginal. For next year, our guidance is set higher and comparable to last year, while this year reflects a decline. We remain committed to our guidance of 510,000 ounces.

Regarding the debt repayment, I understand that you paid a substantial amount of debt this quarter and plan to pay the $1 billion as it comes due in the spring. Assuming gold prices remain stable, what would be your capital allocation strategy after that debt is settled?

Yes. What I'd say is our gold prices where they are now, I don't expect that we'll get through the whole term loan this year. So we'll carry some forward into probably the first half of next year. The maturity is March 2025. But typically, we've got some more chunky annual cash payments coming out of Q1. So there may be a little bit left as we get into this. We may be just getting out of it this time next year. And I think that's when we'll stop and think about what's about our priorities and our capital allocation.

And is it fair to say that about $500 million is the amount that you would like in cash on hand? I'm just looking at historically what you've held?

It's really a matter of timing. We had nearly $500 million at the end of June. As I mentioned earlier, our payables increased slightly at the quarter's end, which caused the cash to decrease in July. Our typical minimum cash balance ranges from $300 million to $350 million, although it can be higher depending on how we manage cash across our operations.

I have a final question to address some details that haven't been covered by analysts. As we approach 2027 and 2028, leading up to Great Bear starting production in mid-2029, I believe some assets may be nearing the end of their mine life, such as Bald Mountain. There may also be a slight decline at La Coipa and Tasiast in 2027, as they are still in a low-grade phase. Could you discuss which assets might be extended to cover that decline? You mentioned seeing a sustained 2 million ounces until the end of the decade, so I would like to know which assets could potentially contribute to smoothing that projection in analysts' forecasts.

Yes, it's Paul here. We're particularly focusing on 2027 with the launch of Phase X alongside Phase S, Curlew. As I mentioned earlier, we're continuing mining at La Coipa, where the current model suggests we would stop in 2027. However, our plan is to keep mining through the permitting of known resources until the end of the decade. These three are especially important. Additionally, there are other factors we will be considering as well.

And where does Bald Mountain end up?

Yes, Bald Mountain is a more complex situation. As I mentioned earlier, we have about 4 million ounces of resources there. Our focus has been on lower capital quick payback opportunities, and while we see some of those, there are also larger capital opportunities on the Bald property. This is mainly about the internal competition for capital returns based on gold pricing; the gold is already there. We're evaluating the economics and considering when to initiate these larger capital projects, which would have longer return periods.

And we have just received a Juniper permit which is a significant kind of optionality expansion at Bald Mountain. So we're well permitted and everything is basically internal decision-making on capital allocation.

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

First of all, congratulations on a good quarter and thank you for the heap leach information. We don't need any more issues in this sector, so it's unfortunate to see these things happen. On the operational front, I wanted to ask about the higher grades at Paracatu in the fourth quarter. It seems like Manh Choh in the fourth quarter should perform better. I'm curious if there will be any maintenance shutdowns in Q3 or Q4 that I should consider for the quarterly estimate.

Yes. So for Tasiast, we're getting to the point where we have to do big liner changes. So that's happening in Q3. And we do have run-of-mine work happening at La Coipa as well in terms of shutdowns. Those two will have an impact. As far as Paracatu is concerned, a lot of those are going into early next year.

So if I look at that, should I be thinking that these two last quarters should be relatively similar, if I were to adjust for these maintenance in Q3?

Yes. I mean it may have become apparent that we're really trying to flatten out the waves in the quarters over the last couple of years. We're focusing on making it more sort of repetitious versus these highs and lows.

Your next question comes from the line of Ralph Profiti of Eight Capital.

Just quickly, please. Andrea, on Mauritania elections, no mining related issues but just wondering when the next budget is presented, are you expecting any sort of fiscal related matters regarding sort of tax policy that may impact Kinross and Tasiast either positively or negatively?

I'll take that, Ralph. Yes, as you saw, President Ghazouani has just been re-elected with a strong majority, which we are very pleased about. We have a strong relationship with his administration, and he has demonstrated a pro-business stance. The country prides itself on the stability it provides in the region. Therefore, we do not anticipate any significant changes. Additionally, we have a stability agreement in place that clarifies our fiscal regime, which we renegotiated a few years ago. In summary, we are not expecting any changes. With the elections occurring, it is somewhat of a political period right now, and there may be a cabinet reshuffle. Personally, I am planning to visit in early September to meet with President Ghazouani and possibly any new ministers, but overall, the situation remains stable and positive.

Could I get an update on Great Bear and the AEX permit? I'm curious if you can compare it to previous timelines. We're still some time away from the underground decline projected for mid-2025, but I'm wondering how we are tracking and if you could provide a more definitive timeline for when the permitting might be completed?

Yes, sure. I'll start, and then Geoff can join in. You're right. The permitting strategy is actually divided into two parts. One involves provincial permits that will support the AEX and the exploration decline, and we've been actively working on that. I'll let Geoff share our expectations regarding the timing. The second part is to build the mine. As you might remember, if you're exceeding 5,000 tonnes per day in the mill, you require a Federal review. So we have a parallel permit strategy for the Main Project, which is currently lagging behind the exploration. We're making good progress on this front as well, and I'll let Geoff address the timing of the main permit and what efforts we are undertaking in that area.

Sure. Thanks, Paul. What I'll do is I'll just quickly divide an update between the provincial permitting process, AEX, as Paul just described, and the Main Project. Turning to AEX, our team has completed a tremendous amount of work with the Ontario authorities and our First Nations partners, Wabauskang and Lac Seul, who provided express letters of support to the authorities for AEX permits. We're expecting our AEX permits in the near term with a view to commencing our early works in H2 2024. With respect to the Main Projects and as previously disclosed, we remain engaged with IAAC on the Impact Assessment process. As we've made the market aware, we previously filed our detailed project description. We're waiting on IAAC to provide the tailored impact study guidelines which we're also expecting in the near term. And as you'll appreciate, that will underpin the Impact Assessment report. So on both fronts, I would say we're in good shape and we're making great progress.

And we have a follow-up question from Tanya Jakusconek.

I have two questions. Perhaps three to start. Now I have two. Just wanted to come back to Andrea, just on the balance sheet again. I think in the previous conference call, we talked about $300 million reduction this year. You've done $200 million. Should I be thinking another $100 million? Or with this stronger free cash flow generation, could we see more occurring in 2024? And then I think you said another $500 million or thereabout repayment in 2025 sort of by the first half?

Yes, Tanya. I think looking back at $300 million was when we were talking about $2,000 gold. So our sensitivity is for every $100 in gold price, an additional $200 million in cash flow, that's an annual number. We've obviously seen higher gold prices. So that $300 million what we've seen recently is more in the $700 million range is what we'd expect for this year. So as I said earlier, we will have some left next year but a lot lower than we had talked about as we started the year.

Okay. So probably more than debt repayment of the year asset?

Again, I think your gold price $2,300, we project $700 million of repayment.

Okay. My last question is about Great Bear. On the previous conference call, we discussed a scenario of 10,000 tonnes per day, equating to around 5 million ounces, which would give us an annual production of 500,000 ounces. We expect to receive an updated resource in early September. How should we approach the capital and operating costs? The capital figures of $1 billion and $1.2 billion, along with the all-in sustaining cost of about $800 an ounce, seem outdated. Should we anticipate an adjustment for inflation in the range of 10% to 15% for these figures? I want to ensure we are adequately prepared for the upcoming release.

Sure, that's a valid point. While inflation has decreased, it remains a factor. Regarding our initial capital estimates of $1 billion to $1.2 billion, I believe $1.2 billion is a more accurate figure given the current environment compared to two years ago. We'll provide detailed updates on sustaining costs in about a month. We're still refining those numbers, but we've consistently aimed for an all-in sustaining cost of less than $1,000, and we're optimistic about where we're headed. It's important to keep in mind that we are discussing the situation as of mid-2024, with construction not expected to commence for a couple more years. The $1.2 billion figure, along with inflation adjustments, is likely to hold true, but the inflation impact should be minimal and not significantly alter our initial projections. This project is straightforward and represents a manageable capital investment for us, which we anticipate being well covered by our current cash flow. I'm just trying to set realistic expectations that we are still on track with our plans.

Yes, I appreciate that. It's important to recognize that we have observed some inflation. Some of the figures we saw in resource sales from about three or four years ago, or even longer, will factor into this. We understand that this will be reflected in our 2024 numbers. Additionally, by the time we move forward a couple of years, those numbers will have changed. Thank you for the additional context.

That concludes our Q&A session. I will now turn the conference back over to Paul for closing remarks.

Operator and thank you, everyone, for joining us this morning. We look forward to catching up in person in the coming weeks. Thank you.

This concludes today's conference call. You may now disconnect.