Kinross Gold Corporation (KGC) Q2 2018 Earnings Report, Transcript and Summary

Good morning. My name is Denise, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Kinross Gold Corporation Q2 2018 Financial Results Conference Call and Webcast. All participants are in a listen-only mode to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. At this time, I'd like to turn the call over to Mr. Tom Elliott, Senior Vice President, Investor Relations and Corporate Development. Mr. Elliott, you may begin your conference.

Thank you and good morning. With us today, we have Paul Rollinson, Chief Executive Officer; Tony Giardini, Chief Financial Officer; Lauren Roberts, Chief Operating Officer; and Paul Tomory, Chief Technical Officer. Before we begin, I'd like to bring to your attention the fact that 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 financial 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 August 1, 2018, the MD&A for the period ended June 30, 2018, and our most recently filed AIF, all of which are available on our website. I'll now turn the call over to Paul.

Good morning, everyone, and thank you for joining us today. Our portfolio of mines performed well in the second quarter. We generated solid cash flow and maintained our strong balance sheet and we also continued to advance our development projects. We saw strong showings at most of our operations in the second quarter. Highlights would include Paracatu, which achieved its highest throughput in four years; Chirano, which performed well in the first half with improved cost of sales; and our Russia and Nevada mines continued to produce good results; particularly, Bald Mountain, which achieved its lowest cost of sales, since Kinross became the operator. However, we are also working through some temporary challenges at our Fort Knox and Tasiast mines, which impacted production and costs at those operations. Notwithstanding that, the second quarter was in line with expectations, and our overall performance in the first half of the year has been strong, as well, we continue to be on track to meet our 2018 guidance. I'd now like to provide an update on Mauritania and our Tasiast expansion project. First, I'm pleased to report that the construction of Phase One is complete and we are in the final stages of commissioning. For me, the picture is worth a thousand words. And the video we posted last night really provides a great visual on where the project is. It also includes some footage of the first ore going through the mill and I'd encourage you all to take a look. Second, we remain engaged with the government to understand and address their position on our activities in Mauritania and related benefits for the country. I think it's very important to note however, it has continued to be business as usual at the mine in the Phase One project. In other words, notwithstanding the government's request for discussions, the mine continues to operate as it has for the past eight years. In addition to political risk insurance that we've already arranged with MIGA, a division of the World Bank, we've also made progress on the project financing for Phase One. Tony will have more details for you, but I want to highlight, we have continued to see strong interest from organizations like the IFC and EDC. We see the project financing as a good opportunity to bring in these additional multilateral partners. However, until we have greater clarity on what the Government of Mauritania is seeking, we have decided to pause spending on the Phase Two project. This is very much in line with our commitment to capital discipline. In parallel, we have started analyzing alternative scenarios, to incrementally expand throughput above 12,000 tonnes per day. Completing the analysis of these alternatives and a decision on next steps for Phase Two, are subject to our ongoing engagement with the government. I'll now turn over to our other development projects, where we also continue to make good progress. In June, we approved the Gilmore project at Fort Knox, adding another U.S. project to our development pipeline. Gilmore is a low-risk, low-cost brownfield expansion, that is expected to extend mine life to 2030 at one of our top performing mines. Also, both projects in Nevada are progressing well. We expect to begin mining in the four quarter at the Moroshka satellite deposit in Russia. And we've initiated studies at La Coipa and Lobo Marte, to evaluate the potential for a return to production in Chile. As we look forward, we are confident that we have the financial and technical strength to invest in our future and our teams are highly focused on the delivery of our development pipeline. With that, I'll now turn the call over Tony.

Thank you, Paul. I'd like to begin with a review of financial results. We produced 602,000 gold equivalent ounces in the second quarter, at a production cost of sales of $767 per ounce. Our operations generated approximately $232 million of adjusted operating cash flow, roughly in line with the same period last year. Adjusted net earnings were $0.03 per share, which is roughly in line with the $0.04 per share last year. Capital expenditures were $247 million for the quarter and $494 million for the first half of the year. While we have paused Phase Two, we are maintaining our 2018 capital guidance of $1.1 billion plus or minus 5%. This is due to the incremental cost associated with the Gilmore project which we approved in July; the project studies for La Coipa and Lobo Marte in Chile; and spending on Tasiast Phase Two, which was underway earlier in the year, and now, also includes costs associated with preserving optionality following the decision to pause the project. In addition to our financial results, I'd like to highlight two other items of interest during the quarter, namely the Tasiast project financing and extensions to our credit facilities. First, we have continued to advance the project financing for Tasiast, where we are targeting to raise approximately $300 million. During the second quarter, we signed a mandate letter with the International Financial Corporation, a division of the World Bank, confirming their interest in participating in the financing, subject to further due diligence. We're also finalizing a mandate letter with Export Development Canada, which is subject to due diligence. In addition, we have received expressions of interest from commercial banks. While no decisions have been made on the final makeup of a lending group, we are pleased with the level of interest we've seen in the financing. Lenders are finalizing engagement of their legal counsel and technical consultants. And we expect a due diligence site visit to take place later this year. Second, we extended the maturity dates for our revolving credit facility, as well as our letter of credit guarantee facility. In July, we extended the maturity date of a $1.5 billion revolving credit facility by one year to August 2023. The bank group remains very supportive of the company and there were no changes made to the lending syndicate. Also in July, the $300 million letter of credit guarantee facility with EDC was extended by 2 years to 2020. This facility is used for reclamation bonding [ph] obligations at some of our U.S. operations. Turning now to our financial position, our balance sheet remains strong. We have approximately $920 million of cash, a total of $2.5 billion in liquidity, no debt maturities prior to 2021, a trailing net debt to EBITDA ratio of approximately 0.7 and strong cash flow generation from our portfolio of mines. It is worth noting that subsequent to the end of the quarter we closed the acquisition of 2 power-plants in Brazil for $254 million. Given the strength of our balance sheet, we've funded the transaction with cash while we continue to consider a future debt financing for the acquisition. To sum up, we're in a strong financial position. Our focus on disciplined capital management and the strength of our liquidity position will continue to be priorities. Now, I'll turn the call over to Lauren for a review of operations.

Thank you, Tony. During the second quarter, our mines in Nevada, Brazil, Russia and Ghana all performed well, with overall production and cost in line with our expectations, despite some temporary headwinds at Tasiast and Fort Knox. Our performance was underpinned as always by our constant focus on the safety of all of our employees and contractors. Starting with Fort Knox. In mid-July, I was pleased to host the mine tour, which was well attended by both analysts and investors. It was a great opportunity to showcase the excellent operating team we have there as well as the future potential we see with the Gilmore project. As we mentioned last quarter, we experienced a minor pit wall failure in the first quarter. As those of you who attended the site visit will attest, it was relatively minor. It is however, poorly located and it is restricting access to higher-grade material. As a result, production decreased and cost of sales were higher quarter-over-quarter. As we discussed on the mine tour, we expect production in 2018 to be approximately 30,000 ounces lower than the estimate in the technical report published in June. We do not anticipate any impact next year and we would expect to recover those ounces in 2020. At Round Mountain, production was in line with the first quarter as fewer tonnes of ore placed on the heap leach pad, as partially offset by higher mill production due to an increase in mill grade and recoveries. Cost of sales per ounce sold was higher quarter-over-quarter, primarily due to mining of ounces recovered from the pad - timing of ounces recovered from the pad as well as higher fuel costs. At Bald Mountain, production decreased compared with the previous quarter mainly due to timing of ounces recovered from the heap leach pad. I'm very pleased with the performance of Bald Mountain since came in to our portfolio. For example, cost in the second quarter were record low, and Bald Mountain was recently named the safest surface mine in the state by the Nevada Mining Association. These are achievements our team has extremely proud of, and our strong indicators of well-run operation. At Paracatu, mill throughput was strong in the quarter reflecting increased efficiencies in the mill and mining in more consistent zone at the orebody. However, production decreased slightly compared to the first quarter, primarily due to timing of ounces process through the mill. Cost of sales per ounce sold was lower compared to the first quarter, mainly due to an increase in operating waste mined. Paracatu has experienced significantly improved rainfall compared to last year, combined with the benefits of our mitigation efforts we expect to be well positioned for the remainder of the year. At Maricunga, gold production was ahead of plan due to better performance from rinsing of the heaps. Turning to West Africa, production at Chirano was largely in line with first quarter due to better mill performance despite slightly lower grades. Performance also benefitted from more reliable power supply from the grid. With new leadership, the mine has made a lot of progress in the last year and it's become a steady performer with improved costs, which were down 12% from where they were a year-ago. At Tasiast, the Phase One project was handed over to operations, which is highly focused on completing the commissioning. The mine however experienced few operating challenges in the second quarter, which impacted production and cost of sales. This was mainly a result of a slower than planned ramp-up in the mining rate delayed access to higher-grade material and downtime at the mill related to tie-ins for the Phase One project. For the balance of the year, we will be focused on ramping up mill throughput and accessing the higher-grade ore that is about to be release by the current phase of stripping. I'm proud to report that in early June, the mine site completed one year without loss time injury, which totaled almost 10 million work hours, testament to the excellent quality of our teams, which have been operating mine, while executing the large construction project. Moving to our Russia region, Kupol and Dvoinoye continued to be consistent performers. Our production was largely in line with Q1, cost of sales was higher quarter-over-quarter, mainly due to higher maintenance costs, partially offset by favorable foreign exchange movements. Development of the Russian satellite deposits continues to progress well. The twin declines at Moroshka proceeding on schedule and production is expected to commence on the fourth quarter. At the Dvoinoye Zone 1 deposit, portal construction is complete, and mine and surface infrastructure development are progressing as planned. Production at Zone 1 is expected to commence in mid-2019. In summary, we are moving in the right direction at all of our operations. Our overall performance for the first half of the year has been strong and we continue to be on track to meet our company-wide guidance for the year. I'll now turn the call over to Paul Tomory for review of our projects and exploration highlights.

Thank, Lauren. As Paul mentioned earlier, we've got a great deal on the go right now on our projects, which includes completing the commissioning of the SAG mill at Tasiast; executing on the construction of our three projects in the U.S.; initiating project studies in Chile; and last but not least, work on our priority exploration are on our targets. Over the past three months, we've made significant progress on all of these projects. Let me start by providing an update on the Tasiast Phase One expansion. I'm very pleased to say that construction is now complete. We have fully commissioned the CIL plant to conveyor the crusher, pebble crusher, and all ancillary systems, and the SAG mill is now in its final stages of commissioning, and that is proceeding well. During this past week, we are all very excited when we reached an important milestone, running the first batch of ore through the SAG mill. And other major milestone, we achieved in this past week is when we officially handed the project over to the operations team. We look forward to final ramp-up of throughput, which has already peaked at 12,000 [on a couple of days] [ph] in the past month. Turning now to our Nevada project. The Phase W expansion at Round Mountain is progressing well and on budget. Detailed engineering is essentially complete and earthworks to the new infrastructure areas are approximately 90% complete. The new dewatering pond is complete and we've made good progress on the new heap leach. Initial construction activities for the vertical CIC plant have begun and the remaining major construction and procurement contracts are progressing nicely. Work has been largely focused on pre-stripping, which is proceeding very well, and we continue to expect to reach initial Phase W ore in the middle part of 2019. At Bald Mountain, we've also making - been making very good progress on the Vantage Complex project. Engineering is also almost complete and construction is well underway. All major equipment and construction packages have been awarded. Project is on schedule, with commissioning of the new heap leach and processing facilities expected to commence in the first quarter of 2019. At Fort Knox Gilmore project in Alaska, we've initiated early works on new heap leach and permitting is complete. We expect initial production from Gilmore in early part of 2020. We continue to explore the prospectivity and upside potential of the Fort Knox area, as the orebody remains open to the west, south and east, as we demonstrated at the analyst visit. Drilling at the East Wall extension is ongoing and has yielded encouraging results from the first few holes. We've also started generative work in and around the Fort Knox property and we are reviewing the Gil Sourdough target to evaluate potential synergies with the ongoing operations at Fort Knox. In addition to the project and execution, we are also continuing to look at additional future development opportunities in the portfolio, particularly the return to potential production in Chile. With permitting and advancing well at La Coipa, we've initiated feasibility study that will contemplate refurbishments of the existing mill and the processing of high-grade material from the Phase 7 deposit. We expect to complete the study in the second half of 2019. In parallel to that, we've also initiated scoping study for the Lobo Marte project, which is located about 80 kilometers from La Coipa. This study will assess the potential for a production start at Lobo Marte at the end of La Coipa's mine life, and we expect to complete the study in the first half of 2019. The two studies will also look at the potential for synergies, resource sharing between the two projects. I'd like to conclude by providing brief update on two of our exploration priorities. First, at Bald Mountain, drilling has mainly been focused on the North area of the property. We were analyzing results from the drilling completed in the first half of the year and continuing the program with the goal of potential mineral resource addition and mineral reserve conversions at year-end from the Top, Redbird and Winrock deposits. Exploration drilling in the JV zone and in the South area of the property is ongoing, and we've seen some encouraging results from some of the targets. Second priority, as we highlight is Kupol, where we've continued to explore the main Kupol vein and mineralization to the north and south along the trend. Initial results for potential mineral resource additions to extend mine life have been promising. Drilling at the North Extension continues to confirm mineralization and vein widths similar to those intercepted in 2017. And at 650 Zone in the Southeast drilling is indicating potential mineralization at depth beneath the current resource. Drilling in the second half will continue to probe depth extensions and hanging wall structures parallel to the main Kupol vein. In summary, we are making good progress on all our projects, and we look forward to updating on a number of important milestones later in the year. With that, I'll turn it back to Paul.

Thank you, Paul. Well, just to wrap up, before we open up the line for questions, our portfolio of 8 operating mines has delivered solid results in the first half of the year and we are on track to meet guidance. Our balance sheet is strong, and we continue to advance our development portfolio. With that operator, I'd like to open up the call for questions.

[Operator Instructions] Your first question comes from Stephen Walker with RBC Capital Markets. Your line is open.

Thank you, operator. Good morning, everybody. Just wanted to ask - there is a new Mauritanian tax legislation that's being proposed. And I guess my question is - and you made reference to discussions with the government officials. Is this an escalation - or are the taxes within this proposal in and above what has been previously discussed with Kinross and what are the proposals within it that could have an impact that may not have been previously discussed?

Yes, Stephen, it's Paul. Just on the one point, and I think it's really important here, your question about escalation. There's absolutely been no escalation. It's business as usual. In fact, we put out a press release on the last quarter, indicating the government wanted to have a conversation. In our meeting subsequent to that, they very much want to deescalate what resulted from us putting out a press release. But Tony maybe will speak more specifically to that point.

Sure, and I think the first point I want to make, Stephen, is that these changes, first of all they're just proposed changes at this point. But they will apply to all taxpayers. It's not focused on the mining industry or Kinross specifically. So, a couple of points that I just like to make, so after a preliminary review of the full document, we've reached some initial conclusions that are still subject to a more detailed review. The draft is a result of the longstanding need to refresh the 1982 tax code. So if you think about that, that's over 35-years-old. It has been prepared with assistance from a French tax administration and it's been financed by the EU. At this point, there are no significant changes or effect on proposed changes to the Tasiast income tax, withholding tax at that position. However, we're relying in part on the stabilization clauses within our mining conventions. There may be some impact on payroll amendment taxes. And we're not clear on when the implementation date would occur if this is actually passed through the Mauritanian government. But it would likely not apply until 2019. There is going to be some additional compliance requirements that we'll need to address. And those will be the primary focus of what we're looking at. There are also may be some positive effects such as VAT and income tax, withholding tax offsets. So that's in a broad sense where things are at. It's all preliminary. It has been approved at this point. But we're focused obviously on getting a better understanding. And I'd just point out, that is not related to ongoing conversations and…

And, in fact, they're seeking our input as well.

Right and they're seeking our input as well, so happy to answer your question…

Input in - sorry, input into the proposed structure to the Tasiast agreement or input into the proposed tax legislation?

They've held. They've already held a briefing session for taxpayers in Mauritania and have requested further input in terms of written comments. So we're in the process of preparing those comments for submission later this month.

But, again, this is not a Kinross specific, mining specific. It's a general tax for the entire country initiative.

Income tax versus royalty structure or other production taxes?

It's not even necessarily geared to money taxes, Stephen.

Okay. Thank you. And if I can change the subject, just maybe for Paul Tomory, at La Coipa and Lobo Marte, how should we think about Lobo Marte? Is there going to be concentrate that's produced and potentially sent up to La Coipa? I know there is copper component to Lobo Marte and there were previously considerations for a SART plant. I mean, can you give us some high-level sort of thinking on kind of what that project could look like?

Right, so, high level, the concept is a potential return to production first at La Coipa. And then during the La Coipa production period, we would advance permitting and further study and ultimately construction at Lobo Marte. So we're looking at these projects in series rather than in parallel. So Lobo Marte obviously has a much lead time. In terms of specifically answering your question, as you know, Lobo Marte is a large resource. We currently have it primarily [measured and investigated] [ph]. And we are doing a scoping study, so we're taking it right back to the beginning to assess the impact that new technologies have had in the intervening year, since we last looked at it. Take into account our experience at Maricunga, you mentioned the SART plant. We've made very good use of the SART plant at Maricunga. Same thing with a lot of the best practices in heap-leaching we put in place at Round Mountain, Bald Mountain, and Maricunga, Fort Knox. So it's a scoping study. We're starting from the ground up. But your points are valid, SART, crush, leach are all going to be part of what we assess. And I'd say at this point, it's too early to say what it will be, what the throughput rates will be, what the mining rates will be. But we will know that at the end of the scoping study. And as I mentioned in the script earlier, we are also looking exclusively at synergies between the 2 projects; can we share certain resources like water, fleet, other capital equipment, camp. And you mentioned potentially the trucking of high-grade concentrate from Lobo Marte, La Coipa. I think that that's unlikely, but we'll look at that as well. So in a nutshell, these are projects we're looking at in series. And we're looking at the opportunities to synergistically deploy capital between the two.

And then just one follow-up question, if I may, Paul. The issues with metallurgy was again the copper more so than the leachability of the residual ore or the - excuse me, the ore that is there, the oxide ore. Did you see any issues with the leachability of the oxide ore or the mixed ore that as within the resource number that you have?

Yeah, so we are going to be doing pretty comprehensive metallurgical test were to relook at the challenges that we've encountered previously. But again, as we pointed out, our experience with the SART plant and with heap leaching in general will be brought to bear in these studies. But you're quite right, there is a higher copper content and so it's a question of cyanide recovery and the production of a salable copper product. And like I say, it's a scoping study, so we're really beginning from the ground up.

Okay. Thanks for that, Paul. That's all my questions.

Your next question comes from David Haughton with CIBC. Your line is open.

Good morning, Paul and team, thank you for the update. Just having a look at Bald Mountain, pretty strong throughput rights there, mining rights and stacking rights. I was wondering, what we should be thinking about rights of stacking going forward. And I guess, the other question to that is quite to see catch-up just especially for Q2 production versus sales?

Hi, David. It's Lauren. How are you today?

Great. Thanks, Lauren.

Good. Yeah, David, so the stacking at Bald as you know is a function of which series of pits we're mining at which point in time, and where they are in their individual strip cycle. So it will ebb and flow over time, how much ore we stack versus how much waste we're stripping, and how much recoverable metal is reporting to the process. We are anticipating another really good year above, should we solidly in line with the guidance on the previous analyst visit. And answer to your second question about catch-up. You'll also recall that our carbon in the gold production occurs offsite for us at gold strike. So there's always a little bit of a lack in terms of the processing and it shows up more prominently at the end of the quarter.

Yeah, I just - it's just a matter of the timing of shipments really is to whether it falls into one quarter and another?

Correct. And then also gold strikes demand in terms of carbon processing for their own purposes. So we have an agreed their arrangement on how much of raw material was processed, there is always a little bit of flex in terms of how things happen at the end of a quarter, but it will come right back.

And a similar question at Paracatu. We've got milling levels, like which we didn't think we get back to for quite some time, so looking at 20,000 tonnes a day sort of thing. I'm wondering, what we should be considering going forward for that operation?

So Paracatu, as you recall as two large plants. There is the original plant one through which we are processing a healthy stream of tails as well as ore from the mine. And plant two and which we are processing predominantly pit run material. So the improvement that you're seeing in throughput is really a result of a couple of things, we've been heavily analyzing that asset over the last year or so. And it leads us to some very good outcomes in terms of our understanding of the metallurgy and the work index curve and how to operate that plant. In parallel with the technical studies, the operations team has been extremely focused on improving efficiency at the operation. Combination of those two things that we are seeing record high plant efficiencies is actually world class availability on an utilization of SAG mill. And we're performing above our work index curve. So the combination of those things resulting and really very stellar throughput. And I quite proud of the team in the work has been done there to achieve those outcomes.

Okay. So that's pretty encouraging looking forward within.

Yes, I think so.

Last question for Tony. Going for project financing on a project that you've already spent the money on and now looking and with respect to fund externally, it seems a little bit ask about. And I was just wondering what the strategy is there, and whether it's partly to get some heavyweights on the lending books that can help you in negotiation with the government. Or whether you're positioning for additional funding for Phase Two win this clarity in that country?

Well, I think the history on project finance actually goes back quite away. As you may recall, when we're looking at 38,000 tonne per day expansion a couple of years back, we had initiated project financing process we're looking to rise $600 million. When we broke the project into two, we made the contact decision, we wanted to complete the 12K before we initiated the project financing process, and the reason is quite simple. One of the challenges associated with getting project financing, as you see agreeing completion test that you need to negotiate with multilateral. So there is a lot of time and effort build in terms of doing that. So the thought process was, let's get the 12K completed up and running. So when the technical concerns do their review, we are not arguing about the completion test, and that puts us in a position where the negotiation of the terms associated with project financing has much more easily reached. In terms of whether we have contemplated, that financing would assess this part of Phase Two. Clearly, we review that, if we raise the money once we completed Phase One and the project financing was recourse to Phase One. We have that money available to us for Phase Two. That doesn't preclude us though from if we decide to pass them super period of time. Are they using that money for some of the other potential initiatives that we are looking at or effectively repatriate in that money, and using that in terms of our other business were paying down other debt. And having that debt recourse to the project. In terms of bringing in multinationals - multilaterals, our view is always that we wanted to have other partners at the table with this, and the IFC has been pursuing us for a long period of time in terms of engage with the project. And so, it's not something that has just come about or what thought in the context of our ongoing discussion with the government, and something that we thought about for the long period of time. But we wanted to make sure that it fits in terms of timing and processing. We are hopeful that, not just IFC but EDC will be able to participate. And there are other multilaterals that could come into the project financing. So well it seems a bit unorthodox. Thought process is actually to diminish the amount of time that we spend on the completion test to make it more efficient in terms of moving forward. And to make sure that when we're having discussions with multilaterals is focused on the real important considerations of the project moving forward.

Yes, I just would add that, the other thing to keep in mind, as well, David. This is something that we think good for us, but also good for the country. The Government of Mauritania wants to see this happen, because it really becomes an IFC World Bank stamp of approval. This country is get for lending. There is an alignment of interest, because completing as well signal to others the project financing is available.

The last thing, I'd point out is that the Government of Mauritania, in fact the Finance Minister has met with the IFC and has indicated that they welcome their participation in the project and they see them as an important part of the financing plan moving forward, and they're encouraged in terms of having IFC involved and that occurred recently. So we are hopeful that subject to due diligence we'll be able to get something in place on the project financing.

All right, great. So anything that diminishes the perceived geopolitical risk of that country is obviously going to benefit to you going forward. Thank you. I'll leave it there.

Thank you.

[Operator Instructions] Your next question comes from Greg Barnes with TD Securities. Your line is open.

Thank you. I have a question for Paul Tomory. Can you give us some kind of idea of the alternatives you're looking at to increase the 12,000 tonne per day capacity at Tasiast Phase One?

Yeah, so what we're basically looking at in some ways is analogous to what we do with Phase One, Phase Two, is looking for where the next bottleneck is. So on our path to 13,000 tonne a day throughput, we look at the flow sheet and look at where the natural bottlenecks are. And there is a couple of them that show up. So I'll give you an example. In the 30K, we would have been running the SAG mill followed by the installation of a new ball mill. So one of the things we can do here as an interim throughput scenario is look at what can the SAG mill do without any ball milling. And that's one of the natural bottlenecks. So the SAG mill without any ball milling behind it could do 20,000 tonnes a day. And then, that project would be in the - the scope of that would be de-bottlenecking pumping and piping, as well as the addition of some tanks and upgrades to some of the infrastructure, water and power. So basically, in a nutshell, we're looking at a range of potential throughput scenarios that follow natural bottlenecks. And there are a number, I mean, it isn't just that one number. There are a number of bottleneck points. But in a nutshell, that's how we're looking at breaking Phase Two up into potentially a couple of stages.

I see. But anything you do on that would have to wait until you got some kind of an agreement with the government to [have this one solved] [ph]?

Yeah, that's right, Greg. I mean, it's what we typically would do around here. While we're trying to sort out - understand better what the government is looking for, we're not sitting on our hands. We're looking at the operational execution of alternative scenarios. In a sort of a lower or slower capital spend until we get some clarification.

But just listening to everything you said today, it sounds fairly constructive, as it's not really higher taxes and royalties. And they're just looking to revise the code for everybody. Have you got any sense of what is it the government is looking for from you?

Well, yeah, look, we don't - this is moving slower than we would like, I'll be frank. And but again, I can't - it is a priority for us. But I can't presume or speak for the government as to what priority they assign. They've got a country to run and they've had a very busy agenda in the last several months. And for me, context is important here. We're literally one quarter into getting us this letter. And I think for me it's almost as important as what happened and what hasn't happened. And as we said, what hasn't happened, is any kind of escalation or the mine is running just like it did the week before we got the letter and as it has been for the last 8 years, so business as usual. And we've talked about what has happened with the continued interest and pursuit of the IFC, EDC, those - and even some commercial banks have approached us. We completed the Phase One without any sort of issues. And you will note and you may have seen this. They have been busy attracting - there has been a big push on foreign investment in the oil and gas sector. There has been a few deals announced on offshore gas with big oil. So in our view, this is a country that's very much open, trying to attract foreign investment. And we can speculate, but we're hopeful we're going to have a reasonable discussion there. There should be no suggestion, for example, of reopening the convention, which is our legal agreement on our fiscal term. So we're keen to get this resolved. But we also need to be patient as well. And again, frankly speaking, as we operate mines around the world and we deal with governments on all kinds of different issues, it's pretty typical things don't move as quickly with governments anywhere as fast as we corporates would like to deal with things. So it's business as usual, and again, we - for all those sort of macro context points, we expect to have a reasonable discussion with them.

Thanks, Paul.

Yeah.

There are no further questions queued up at this time. I turn the call back over to the presenters.

Okay. Well, thanks, everyone. I know we're standing in front of a Canadian long weekend. So thanks for dialing in and we look forward to catching up with you in the coming weeks. And thanks, everyone, for dialing in.

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