Kinross Gold Corporation (KGC) Q1 2019 Earnings Report, Transcript and Summary

Good morning. My name is Michelle and I will be your conference operator today. At this time, I would like to welcome everyone to the Kinross Gold Corporation Q1 2019 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] At this time, I would 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; Andrea Freeborough, Chief Financial 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 May 07, 2019, the MD&A for the period ended March 31, 2019 and our most recently filed AIF, all of which are available on our website. I'll now turn the call over to Paul.

Thanks, Tom and thank you all for joining us today. With strong production and excellent cost performance across our portfolio during the first quarter, we are on track to meet our 2019 guidance targets for production, costs and capital expenditures. Paul will have more details on our operations and projects. But I'd like to highlight our three largest operations, which together produced almost 380,000 ounces, representing over 60% of our Q1 production at an average cost of sales of approximately $635 per ounce. First, Paracatu produced approximately 147,000 ounces at a cost of sales below $650 per ounce, marking a second consecutive quarter of record production and the fourth quarter in a row that Paracatu has lowered its costs. Paracatu’s performance is the culmination of a number of steps we've taken to optimize this large long life mine and we are very pleased with the results that we are seeing. Second, the combined Kupol and Dvoinoye operation continued its long track record of consistent high performance, with production of approximately 130,000 ounces at a cost of sales below $600 per ounce. And third, Tasiast has continued to outperform, delivering record quarterly production of over 100,000 ounces at the lowest cost of sales it has achieved since Q1 2011 at $662 per ounce. With six months of operating the phase 1 expansion under our belt, throughput continues to average well above expectations and we are making great progress in realizing the potential Tasiast has to be a substantial low cost producer. As we think about Tasiast’s future, we are continuing to evaluate lower capital alternatives to optimize additional increases in throughput. You'll recall, our original capital estimate for phase 2 was $600 million to expand the throughput -- to expand throughput to 30,000 tons per day. We announced in February that we were evaluating an opportunity to achieve generally the same throughput as phase 2, but with lower capital. And now, the outperformance of the mill has caused us to positively rethink the potential again. This is leading us to focus on an opportunity to increase throughput, above 20,000 tons per day to capital efficient debottleneck and continuous improvement. We expect this could achieve substantial capital savings and enhanced economics. We’re continuing to advance this work and we are targeting to complete our evaluation in the second half of the year. We're also targeting completion of the Tasiast project financing for the second half of 2019, which is proceeding well. Andrea will have more details on this in a few moments. I’ll now turn to our development projects where we are making good progress. Over the past two years, we have been leveraging our financial strength to reinvest in our business by steadily progressing our pipeline of opportunities from technical study and approval to permitting and execution to where we are today, the completion and commissioning. Our two projects in Nevada are progressing well and are nearing completion. We began commissioning the processing circuit at Bald Mountain as planned in the first quarter and started commissioning of the process circuit at Phase W ahead of schedule. We've posted a short video on our website that highlights the progress we're making at Phase W and I would encourage you to take a look. Fort Knox Gilmore in Alaska is the next project in the execution pipeline, with stripping anticipated to begin in the third quarter. Procurement and contracting activities are also well advanced and key contractors are now mobilizing to site. We're also making progress on advancing the next set of opportunities to add to our pipeline, specifically our projects in Chile. We completed the Lobo-Marte scoping study in the first quarter, the results of which Paul will share with you in a few moments, highlight the potential for Lobo-Marte to come into production following the end of La Coipa’s mine life. With the encouraging scoping results, we are now advancing Lobo to a pre-feasibility study. So to wrap up, our mines generated strong results in the first quarter, positioning us well for the rest of the year. We are on track to meet our 2019 guidance and we are making good progress in advancing our development pipeline. Finally, I'd like to welcome Andrea to her first quarterly call in her new role as Chief Financial Officer. She has been -- she's been key in developing and implementing our financial strategy and we are pleased to welcome her to our senior leadership team. I'll now turn the call over to Andrea for a review of our financial results.

Thanks, Paul. Kinross has a strong culture of financial discipline and as the incoming CFO, my priority will be to maintain our strong liquidity position and disciplined capital management. I'd like to begin with a few financial highlights from the quarter. Our global portfolio produced approximately 606,000 ounces, with solid average cost of sales of $682 per ounce, and an all-in sustaining cost of $925 per ounce. Our operations generated approximately $230 million in adjusted operating cash flow compared to $364 million during the same period last year, which is largely related to the lower realize gold prices. During the quarter, we realized an average price of $1304 per ounce compared to $1330 per ounce in the same period last year. Prevailing gold prices and other key commodity and currency rates have performed favorably to our budget assumptions for the year. Our adjusted net earnings were $83 million for the quarter or $0.07 per share, compared with $125 million or $0.10 per share for the first quarter of 2018. Net earnings were $65 million or $0.05 per share, compared with earnings of $106 million or $0.09 per share in Q1 2018. The change was primarily a result of decreased operating earnings, again largely due to lower gold prices, which were partially offset by a decrease in income tax expense in Q1 2019. There are three other items I'd like to point out from the quarter, which influenced our financial results. Capital expenditures of $265 million, which included approximately 165 million of growth capital in our projects. The second and final payment of $30 million related to our purchase of the remaining 50% of the La Coipa phase 7 mining concessions, which we completed last year, and an interest payment of approximately $48 million, which is the first of our semi-annual payments on our senior notes. Turning to our outlook for the year, we are on track to deliver on our 2019 guidance for all metrics as outlined on the slide. DD&A for the first quarter was approximately $270 per ounce, below our guidance of $330, largely due to production mix, which has positioned us well for our 2019 guidance. We continued to advance the $300 million of project financing that we're targeting for Tasiast, with participation from the International Finance Corporation, Export Development Canada and two commercial banks. During the first quarter, due diligence activities and discussions regarding commercial terms continued to progress. Supplemental work as part of their due diligence process is advancing and we're targeting completion of the project financing in the second half of the year. Turning to our balance sheet, we continue to maintain a strong liquidity position with 1.8 billion of liquidity and no debt maturities until 2021. We have the financial flexibility to invest in our capital priorities, as we complete our current cycle installment project. I’ll now turn the call over to Paul Tomory for a review of our operations and development projects.

Thanks, Andrea. I'll be walking you through some of the key highlights of our global portfolio, touching on both operating performance and project updates. I'll start with Tasiast, which as Paul noted, continue to benefit from the excellent performance of the phase 1 expansion and the data on this slide really shows it all. Throughput averaged over 15,000 tons per day in the quarter and also through April. Outside of a planned shut down for site realign and inspection. The culmination of excellent mill throughput, improving grade, better recoveries resulted in a second consecutive quarter of record production. We're also making progress on the cost side, as cost of sales per ounce decreased by 20% compared to the fourth quarter, largely as a result of lower contractor expenses and maintenance supplies. And we are ramping up our continuous improvement initiatives at the site targeting areas such as operational improvements in mining, milling and maintenance, our overall approach to maintenance strategy and a review of all existing contracts. Through these efforts, we're targeting meaningful operational costs improvements. As Paul mentioned, the strong performance of phase 1 is leading us to rethink positively what the most capital efficient next step for Tasiast will be. One of the possible outcomes we're exploring is an incremental step above 20,000 tons per day, through debottlenecking continuous improvement, which we expect to result in significant capital savings versus the 30K plan. One of the main drivers for our thinking is that the grinding circuit has been able to consistently maintain a very fine grind with acceptable energy consumption. This final grind has allowed us to maintain very high recovery levels with shorter leach times. This option has a potential to achieve attractive cost metrics with substantially lower capital expenditures and enhanced economic returns. And we're targeting the second half of this year to complete our evaluation of this alternative. Moving on to Paracatu, which started the year off strongly and achieved record production and a 15% reduction in cost of sales per ounce, compared to Q4. The factors driving the cost and performance improvements that we've been realizing for Paracatu for the past few quarters include, first, the results of the asset optimization work we initiated last year, which has significantly improved our ability to predict grade recovery, ore hardness and throughput, and has made it possible for us to react to changing ore characteristics in real time, resulting in greater efficiency in the mill and also improved recovery. Second, our continuous improvement efforts have resulted in increased mine and mill efficiencies and lower operating costs. And thirdly, we made enhancements to mine infrastructure, including the rainfall mitigation initiatives as well as investments in renewable energy, which are helping to reduce power costs. Overall, we're very pleased with Paracatu’s performance and expect 2019 to be a strong year for the operation. Turning out to our mines in Nevada, the Round Mountain performed in line with our expectations during the quarter, although the production was lower quarter over quarter. This was largely related to mining harder ore and fewer heap leach ounces produced. In the first quarter, Round Mountain’s cost of sales per ounce were 12% lower compared to the fourth quarter, largely as a result of a decrease in operating waste mine, as mining activities were principally focused on capital stripping in support of the Phase W project where we are making excellent progress. We've encountered Phase W ore ahead of schedule and started stacking it on the completed heap leach bed. And as Paul mentioned, we've advanced commissioning of the process circuit in the end of March ahead of schedule. Initial solution is being applied to the heap leach in advance of full completion of the vertical CIC plant, which is now 80% complete. The Vantage project of Bald Mountain is also well advanced with the heap leach pad approximately 90% complete. We're stacking ore on the pad and applying solution ahead of full completion of the vertical CIC plant, which is approximately 70% complete. This site experienced unusually severe winter weather during the quarter, which challenged both Bald’s operational performance, as well as the scheduling costs on the Vantage project. The final cost of the project is now expected to be approximately $130 million, which also resulted from higher than anticipated construction contract rates and issues in the supply of the fabricated components. Commissioning of the processor could begin as planned at the end the first quarter, and we expect activities to ramp up through the balance of the year. Moving on to Fort Knox in Alaska, we indicated in our guidance that we anticipated production will be lower in Q1 and Fort Knox’s results were in line with that expectations. Key factors impacting Fort Knox are the impacts of the wall failure, which have been more challenging than originally anticipated. And Fort Knox has received a historic amount of precipitation over the past two years, particularly in the second half of last year. This has created further challenges with respect to geotechnical instability and our ability to manage groundwater levels beside. And finally, as we stack up the flanks of the value of the existing Walter Creek heap leach, recovery timing has been impacted. The results of these combined factors is that we now anticipate that certain ounces will come into the mine plant later than originally expected. We're building the new Barnes Creek heap leach pad as part of the Gilmore project, which will help mitigate some of these issues as we will be stalking closer to the liner starting in the late part of 2020. We continue to assess the impact of these challenges and are working to mitigate them as we can with a focus on optimizing our strategies for cash flow. One strategy we are implementing is running the mill at reduced rates in order to preserve the remaining tailings capacity for the best grade and material. The Gilmore project is not expected to be impacted by these factors, and is proceeding on budget and on schedule with startup of stripping planned for the third quarter. In terms of 2019 performance, we expect to see production increase from Q1 levels over the balance of the year. Turning now to our Chile projects, we completed the Lobo-Marte scoping study in the first quarter as planned. The study contemplates the heap leach operation using SART technology with operations starting at the end of La Coipa’s mine life. SART is a proven technology that we have previously used at Maricunga with positive results. It's still early days where the study contemplates a mine life of over 10 years, with total production of 4.1 million ounces at an average grade of 1.2 grams per ton. Our scoping level capital estimate is $750 million plus or minus 20% and we anticipate a three year construction timeline for the project once permitted and approved. On the back of these encouraging results, we are advancing Lobo-Marte to PFS and permitting efforts are now underway. Recall that we are considering Lobo-Marte in conjunction with the La Coipa restart project and a feasibility study for La Coipa is progressing well and we are on track to complete it in the third quarter. To wrap up on our operations and projects, our priorities continue to be maintaining our excellent safety record, delivering strong consistent operating results, managing our costs and delivering our projects on time and on budget. And with that, I'll turn it back to Paul.

Thanks, Paul. In closing, I want to thank our employees worldwide for their dedication and hard work and our shareholders for their continued support. Overall, I'm pleased with where we are as a company. Our portfolio of eight mines is off to a strong start to the year and particularly with respect to costs. We remain in a strong financial position and we're making great progress on our development projects. With that operator, can we please open up the call for questions?

[Operator Instructions] Your first question comes from Andrew Kaip from BMO.

Thanks and congratulations on a solid quarter. Andrea, I've got a question for you, just the breakout or can you give us some visibility on the other operating costs during the quarter?

Sure, we had other operating costs. One of the big buckets that we've also adjusted out of our adjusted earnings is abnormal costs at Fort Knox. And that's just consistent with what we've been doing over the past few quarters. One of the other larger, the other more significant items would just be related to care and maintenance costs during the quarter. And then there's a number of other smaller items.

So with respect to your guidance of 100 million, how are you -- what component was in Q1 and how are you tracking on that guidance?

We're maintaining the guidance that we set in February. It's difficult to guide on other operating costs for some of the items, but at the moment, we're maintaining that guidance.

Okay. I guess the reason I ask is, it's not -- you're not providing visibility on the financial statement anymore and it looks like costs during the quarter were, I would say, lower than what was expected. So, I guess the question is, are you tracking at the low end of your cost guidance or how can you -- the question is, what can we expect in subsequent quarters with respect to costs?

On cost of sales, the costs for Q1 are lower than our guidance range, but we're maintaining that guidance that we set in February. It really has to do with production mix and where we expect things to go for the rest of the year.

Alright. Thanks very much. And then Paul, just on the Tasiast and the opportunities that you're exploring, can you give us a bit of understanding of what modifications are required or what additions to the Tasiast mill would be required to move processing rates higher?

I think you mean Tomory as opposed to Rollinson, but –

Either one.

Either one, you want to learn with that.

So Andrew, as we mentioned, this segment was outperforming. And it's outperforming primarily because we're getting a really fine grind at acceptable energy levels. And what we're looking at is how can we continue to harness the outperformances of that mill and it's things like investing in incremental power and water, it's really around the supporting infrastructure. So for example, right now, we are really running every generator at site to the maximum to get these throughput levels and small incremental investments in power, but also water supply. And some elements of the downstream end of the plant could lead us to throughput levels of 20,000 or slightly higher. So, these are relatively modest investments.

You're not looking at meeting to expand your leaching circuit or are we looking at any additional?

Yeah, we might add one or two leach tanks. But one of the other positive surprises at Tasiast has been higher than anticipated recovery, despite lower residence times in the leach tanks. So as we get the high throughput, obviously, we're limited in leach tank capacity, but we are still getting not only acceptable, but outperforming recovery levels. And in any case, you're right, as we go to 20,000 plus, we would have that leaching capacity, but not maybe as much as we had initially anticipated.

Your next question comes from Mike Parkin from National Bank.

Bit of follow up from Andrew’s questions there in Tasiast, kind of phase 1.5. You're saying you're kind of going to be in a more decent position to kind of know what you need in the fall. When can we actually see, like given that it sounds like it's fairly low capital intensity, it probably has pretty good return. So assuming it goes forward, when could you potentially have some things coming into place and allowing you to push up the higher throughput rates?

Thanks, Mike. It is I guess a Hollywood problem. It is evolving as we operate. And we're learning as we operate. But it's a positive trend. So, we do keep the study going. But it's going in the right direction, and you've hit the nail on the head. And we talk about 12,000, 15,000, 20,000, 30,000. I tend to think about it in terms of cutoff grade. But the point is, we are getting better than anticipated. And as Paul Tomory indicated, it's really understanding where those bottlenecks are in the system. And I think we'll be in a good position, we've said second half to really nail down our thinking on this.

And I think one of the things you're getting at is, what would the timing of that ramp up look like, should we have a go ahead there. It wouldn't be like phase 2, where it really relied on the installation of a large new ball mill, some of the throughput increments as we work towards 20 or higher, they would come in sequentially. So for example, if we were to install additional booster pump capacity on our water supply line, we might be able to get to 16, 17. And then power comes online, 17, 18. So it's incremental steps, not all of which are required at the same time. So during a project period, there would be incremental ramp up during the duration of the construction.

And is there any potential payments, if you fully cancel the phase 2? Or has that kind of all been settled, when you put a halt on that about a year ago?

So as we previously discussed, we spent about 100 million on phase 2 and most of that is equipment. For example, the power plant is by far the largest component of that. That power plant could either be sold, if we didn't need it, or put in place for these incremental options we're looking at. In terms of large installation contracts, we essentially have no liabilities on those contracts. So most of the money spent is in the form of physical assets which we hold.

Okay. And in terms of your mining equipment fleet, can you remind us like where that fits? Do you have like overcapacity with it or would you -- would that be another division you tapped investment?

No, we wouldn't need any more trucks. We’re running just short of 793 trucks. And they're good up to the mining rate of around 120 million tons a year. So any option that we would consider going forward, we have sufficient mining capacity.

And then just one question, you mentioned on Fort Knox, the impact of the wall failure being a bit more challenging. Can you just give us a bit more detail on that?

Yeah, so we're on track to meet our guidance in the America’s own production. And that includes of course Fort Knox. And as I mentioned in the prepared remarks, the Gilmore business case is in good shape, but we have had a challenging couple of quarters here at Fort Knox and it's -- several things have added up. And it's just meant that sequencing the mine, stacking on the leach pads has been more -- has led to a number of challenges in the last couple of quarters that we're just working through. The impact will be some deferral of advances into 2020 and then some further deferral from 2020 in to 2021. But as we look to this year, we are operating two plants, so we are essentially on budget even though it was a low production quarter, but we expect to ramp back up to levels historic with -- commensurate with 2018 quarterly performance and the remaining three quarters of this year.

Okay. And then just flipping back to Tasiast, with the shutdown that you guys had in the first quarter, did everything kind of look to be wearing as expected or better than expected, could you give any comments on just how the new plant has been performing from a maintenance and wear position?

Yeah. That segment was my favorite thing in Kinross. I mean, it's really a high performing piece of equipment and the inspection went really well. The first realign went really well. And as we said several times today, it's really exceeding our expectations on performance and there's nothing on unusual. I mean, of course, there's a -- in any ramp up, there's always break this or blow that motor here and there, but it's all been pretty routine stuff. And overall, this thing is truly outperforming.

Your next question comes from Stephen Walker from RBC Capital Markets.

Couple of questions. Paul Tomory, just back to Fort Knox, if you could. When do you anticipate getting access to the higher grade material that has been covered by the pit slump? As you say, broadly speaking, North America is on track for guidance, but at Fort Knox in particular, I'm curious to know when you'd be able to put that higher grade material through the plant at Fort Knox.

So a couple of points there. So the Q1 was a very low production quarter. And that’s primarily as a result of not having a lot of high grade material. We're going to get right back into the high grade almost immediately in Q2. And so Q2 production will be significantly higher than Q1. Now that said, as we've talked about before, we have limited tailings capacity at Fort Knox. And so we will be running the mill on a campaign basis, saving it only for the highest grade material. And that will show up in pockets over the coming couple of years. But we expect there to be a reset upward in production for Q2 as well as Q3 and q4.

Perfect. And then Paul Rollinson, you highlighted that there will be an election, presidential election in Mauritania here in June, early July. I guess there's going to be a point at some point in July, August, September, when you can sit down with the government again and begin discussions. Can you give us a little more color on kind of some of the political uncertainties or certainties around the election? And when you can expect to sit down with the government again?

Sure. Well, I can tell you right now, the election is set for June 22. If it followed typical processes, you'd expect to see an inauguration in, I think, August 5, somewhere in early August. There is a transition period. After the inauguration, the President tends to take a few weeks to appoint a new cabinet. So again, realistically speaking, I would say we probably don't get through that new cabinet appointment until later in August is kind of what we're thinking. I'd also say things are proceeding in an orderly fashion. It's -- and of course, at the mine, as we've indicated, we're firing on all cylinders and nothing politically as in any way impacting us at the site. So it's business as usual.

Your next question comes from Steven Butler from GMP Securities.

Paul Tomory, a question for you on Tasiast. The grade was a pretty robust 2.37 grams per ton in the first quarter? Are you still seeing some good grades as we get in -- have done through April? Or is this a reasonably good grade to carry for balance to the year or was it a bit of the peak or not?

Yeah. Grades are good. They've been good and April's been better than March. But I caution that Tasiast will have grades that are up and down, depending on where we are in the ore body. But we’re happy with the grade right now. And I expect the rest of this year to have pretty robust grades. And like I said, April was better than March.

And then just with respect to Chile, guys, if you do complete feasibility study for phase 7 La Coipa, and then of course with ongoing studies on Lobo-Marte, how will the permitting process work for you as you've gone kind of a bit quiet in Chile, if you will, how will the permits be approached or needed for, let's say, La Coipa phase 7?

Yeah, look, the La Coipa permits are in place. That’s the most important. And as we've indicated on many previous calls, we've been, I don't want to say fitting, but we've had a fairly attractive pre-feas on La Coipa for some time now. In fact, I've said a number of times, the only thing we were totally thrilled about was the mine life. I think the epiphany or the breakthrough here in our thinking is this whole concept of linear, get La Coipa back up and running and then transition from like La Coipa into Lobo. And when you think about that, the restart, the mining out of La Coipa, that gives us lots of lead time to get in front of the permitting for Lobo, which would be sequential to La Coipa. So that's how we're thinking about it.

Your next question comes from Anita Soni from CIBC.

My question is, with regards to the permits you have at Tasiast, are they able to encompass debottlenecking exercise that you're thinking about and envisioning to go into 20K ton per day? Or is there anything incremental that you would need?

We have all the permits that we need for Tasiast.

Okay, even additional power and water supply?

Yeah, so at Tasiast, we are permitted up to 30K. And what we're contemplating here and debottlenecking falls within the envelope of the broader 30K permit.

Okay. And then so -- just remind me, what are we waiting for in terms of the phase 2 expense?

Well, in terms of the phase 2, I guess, it's not so much that we're waiting for anything on the phase 2. I think we have a pretty good understanding of what's required, what's happening is we're getting better results in the commissioning and operation of phase 1. And, that is leading us to some alternatives that we think could potentially be a lot more attractive. Just again, it's pretty simple. If we can get the similar kind of economic parameters with lower capital, that's going to be a huge value creator. So we're pretty excited about the new thinking and the new analysis. So, that's where we're going to be focusing as evolving and trying to create more value towards and we will finish that work by the second half of the year.

And then what’s outstanding from the government is the exploration permit, as I understand the exploration license for Tasiast, is that an issue?

That's on our list of -- again, as we said on a previous call, on the previous quarter, we do have some issues to resolve. We do think we will resolve them. We described them, as I would say, typical industry type issues, refunds and taxes and duties and that sort of thing. Obviously, none of these issues have in any way impacted the success of the ongoing project. And we said we don't expect to get a lot of engagement on these issues until we get through the election. And, we'll plan to revisit that when we get the new cabinet installed. It is, though just for clarity, it's the conversion of exploration to exploitation, and we'll get back talking with the government, as I said, I think late summer, early fall.

Your next question comes from Mike Jalonen from Bank of America.

A question for Paul Tomory. Paul, just looking at the Chile projects, couple of questions. What kind of recovery rates you’re looking at Lobo-Marte, because it was operating before in the early 90s and they were well below 50%. And I guess what kind of production rate, the scoping study envisions and going back to La Coipa, like when do you think that would start, how long would it operate for and I guess when we get to Lobo-Marte, just wondering what, we're talking like a 10 year period sort of thing, just the timeline.

Right. So here's a rough, Paul mentioned this earlier, finish the feasibility on La Coipa in the back half of this year. If we have a positive decision there, we probably have two years of construction stripping. Then, we'd have, give or take, four, five, six years of production during which we add around, call it, 300,000 ounces from La Coipa, all that will be in the feasibility study when we finish it. During that time period, we would continue to permit and then construct Lobo-Marte. And our current plan would envisage a ramp into Lobo-Marte production directly after La Coipa ceases production. So we're really talking about seven, eight years to production at Lobo-Marte. And the reason for that is we are planning to leverage synergies between the two, both capital infrastructure, human resources, et cetera.

I heard 300,000 ounces, is that annual La Coipa production or is that cumulative?

200 is probably a better answer for La Coipa. I think, we haven't really come out and said where we're going to get to on Lobo, we might be able to do a little better at Lobo than at La Coipa. Just be clear on that.

So La Coipa was 200,000 ounces a year.

Yeah.

Okay, thanks. Paul Tomory, what kind of recovery rate at Lobo-Marte, if maybe, if you can give production maybe, kind of what you're looking at targeting there.

So, this was a scoping study, purpose of scoping study is proof of concept to see if we go to a PFS and we are going to PFS. We're happy with the results, 4.1 million recovered. We're targeting recoveries in the 60% to 70% range. And you're quite right. I mean, there were issues a long time ago when Lobo-Marte was run. But our understanding of the ore body, our understanding of the process circuit required to deal with that ore has improved significantly as I mentioned in my remarks. It will be a crush leach with start to recover both copper and cyanide. And we're quite confident in the technology given that we've used it successfully at Maricunga. But I mean, you have the numbers there, 4.1 million recovered over 10 years, do the math on that, we're targeting 300,000 to 400,000 ounces a year in the scoping study. But the PFS will detail all this in more detail. And we're going to be completing that over the next year.

Okay, well, thanks. I was at Lobo-Marte at 95. So I look forward to the next trip. Thanks.

Your next question comes from Greg Barnes from TD Securities.

So Paul Rollinson, all these issues we've talked about for a long time now in Mauritania, will they hold up, you progressing to the phased expansion?

Yeah, that's a good question, Greg. I mean, again, it's a dynamic sort of system. And as we've indicated previously, there's a few moving parts here. One being the project financing, and, that's a good story, it is moving in the right direction. And that's a positive contributor, not condition contributor to our thinking. Our understanding of the asset’s capabilities is also trending in a positive way. And -- not only because of the performance, but certainly, spending 600 million of capital, which was the concept a few years ago versus where we think we might get to on a CI approach is also a positive contributor to decision making. And then the last sort of moving part dynamic is, yes, the government, the discussions, the issues we've been talking about. And again, I would just say, clearly, none of those issues have in any way impacted the site or the project or our ability to overachieve. So, we will do our work, we will finish our work, we will make a decision. But I would say, you can deduct that things are trending positively.

On the technical side, do you think that trending positively on the government relations side as well?

Yeah, I do. We get permits, we've had everything we've needed to get to where we are. Again, we had a highly successful completion of phase 1, a seamless transfer from projects to ops, we broke a record in the third quarter, fourth quarter, and we're ramping up again here with the site of the New Year. So there's nothing in that issues list that's in any way impacted our ability to achieve what we've done. There are things we want to resolve, I want to be clear, we want to get, but they're not -- there's been no escalation, there's been no suggestion of reopening the mining convention. These are issues that we characterized on the last call as sort of normal bump and grind, operating type issues. And, I feel we’ll get the new government bedded down. We'll sit down and I expect we’ll resolve them.

So to Paul Tomory now at Paracatu, I’ve kind of overlooked that, but there's been a very substantial step up in production over the last several quarters. Is that sustainable?

Yeah, that's a good question. And it is no doubt that Paracatu has outperformed over the last couple of quarters. And I'll reiterate a couple of things as to what led to that and then I'll answer your question. We have a better understanding of the ore body, we carried out this asset optimization project, which was essentially an FS level study on the ore body and how best to react to it in the plant. So, there has been a structural step up in our ability to manage that mine. And so what that means is that we do expect performance, on average, to be improved versus the last couple of years. However, Paracatu does have variability in the ore, and we will have good quarters, and we will have quarters that aren't as good. The other major thing that has happened to Paracatu is, we've done a major reset on the cost structure. And we’re just coming out of a year-long program, which was intensely focused on productivity improvement and cost reduction. And combined with the impact of the lower energy costs from the acquired power plants, we are in almost in a reset position on Paracatu performance. Now, will every quarter going forward be as good as the last couple? Likely not. But we definitely have taken a step up in average performance of the mine. And I have to say, we couldn't be happier with where we're at, at Paracatu.

So with that Paul, it sounds like you've made some substantial changes. And I don't remember when the last technical study came out on Paracatu, is that one that we should expect to see soon?

Yes, I know, you all want one and we are -- why are we waiting on it. Part of this asset optimization project is, we want to make sure that the changes we made to the resource model, the way we do grade control, the way we look at the ore body are proven out in actual operations. So we're in that ground trucing, testing process right now. And that should come to an end in the next several months. When that is complete, we will assess the need for new technical report. But if there was one coming, it would probably be less than a year from now, towards the end of this year, early next year. But I know that the one we have there is older and it may be time for a refresh.

Your next question comes from Tanya Jakusconek from Scotiabank.

A lot of my questions have been answered. But just a couple of them on the technical side for either Paul. Just on the guidance that you had initially provided, it was for a weaker Q1, and then better operationally in -- going forward. With Round Mountain, Bald and Paracatu and Tasiast all doing quite well and in Q1, how does the rest of the year shape up?

So the first quarter, really the major theme is our performance at Tasiast and Paracatu. So we had a great quarter with those two assets. And how does it -- it is Q1.

Let's not lose sight of that. We've had a good solid start. We are maintaining our guidance.

And there are ups and downs. So at the end of Q1, like Paul said, we're reiterating our guidance. And if we see need to change that, we’ll do so at subsequent quarters.

Okay. So besides the Fort Knox, which we know is going to be performing better in Q2 and then Q3 and Q4, would we assume that the rest of the assets continue their performance? There's no great deviation that we should take into account or shut down for maintenance?

Yes, I mean, we're operating well. I'd say that the Tasiast and Paracatu, as we've referred to earlier on this call, can we maintain that level of performance through the subsequent quarters? That remains to be seen. We're optimistic about it. But I wouldn't necessarily build in Tasiast and Paracatu Q1 performance into the rest of the year. And the plus minus 5% that we put on our guidance for production and also on the cost side reflects opportunities we see in the portfolio as well as some of the risks and some of the risks we have for example, when do we get a handle on everything at Fort Knox, it’s going to take some time. At Bald Mountain, we've had a challenging weather in the winter. That will have some impact in subsequent quarters. So there's good things and there's risks as well and our guidance takes that into account.

We also built into our guidance, Tanya, we are in a year at Tasiast, where we've got a CLA that needs to be resolved. We've had a good first discussion, but that CLA expires in October and we have built in -- that into our guidance as well.

Okay. Maybe now that I have you, Paul just on Tasiast, you mentioned that everything's going well with the government, you're performing quite well. With the exception of Tasiast, so is that the only permit that has not been granted to you as you keep asking for permits as you operate? And if so, what is it about that deposit that they have an issue with?

Yeah, it's -- look again, it's -- yes, I guess would be the quick answer to the direct question. It is the only thing we haven't resolved from a license permit point of view. Again, it's not exactly sure. I mean, it's not untypical for these things to take a while, like longer than anticipated. I guess the key point for us, though, is it's not material to the overall Tasiast economics. But clearly, it is on trend, and it is something we want and it would be additive. And we believe we've done the right work to support that conversion and we’ll continue to press our case when we get the new government. Again, it's not substantively material, but it is additive. And we think we've done all the right work to convert the expiration permit to exploitation. So we'll continue to press on that.

Okay, well as long as everything else there is, you're getting permits for the, ask for them as you operate, that's great news. And maybe just continuing on Mauritania, we did see the revision to the tax code. I guess, there was an approval by parliament on April 17. And when are we expecting to get some more clarity on that?

Tanya, it’s Andrea. We don't know much more than that. The code was passed, but it's not yet promulgated. And we don't and there hasn't been a copy published. So we're waiting for it to be published for us to be able to review it and determine what the impact on it might be. But I would remind you that we also have the mining convention that protects us on that with respect to tax and I realize that.

Your next question comes from Carey MacRury from Canaccord.

Hi, just another question on Paracatu. A couple of years back, there was a big step down in reserves there. And I'm just wondering, with the -- given how far costs have come down, is there an opportunity to bring some of those ounces back? And is that something that you're thinking about?

So for now, we prefer to just capture the cash flow and the margin. The incremental reserve at Paracatu, if there were to be more, is in the form of another push back at the end of the mine life. That's many years from now, depending on how we perform in the next couple of years, we will reassess what it is another push back there, but for now, we're capturing margin and cash flow.

Okay, and can you just remind us as well as how the water situation is tracking at Paracatu this year.

So rainfall levels are acceptable and well within what we're set up for with our recently implemented mitigation measures. So we don't expect any curtailment as a result of the lack of rainfall this year.

Your next question comes from John Bridges from JP Morgan.

Just wondered with respect to the strong performance at Tasiast and Paracatu, to what extent is this rock strength related? We know that as you get deeper, the rock gets stronger and your mill rate is going to be slipping. So, was there a rock straits influenced in this quarter? And what should we expect, in terms of increasing rock strength over the next couple of years? What should we put in our models?

So if you're asking whether we had softer rock that contributed to higher throughput, that's not the case. We're into the heart of the grand rate at Tasiast, which is representative of the rest of the mine life. The segment is able to get to a grind size that we require. In fact, as I said earlier, we’re exceeding on it. So, we don't expect issues with rock hardness going forward at Tasiast. In the case of Paracatu, there are multiple ore types, different zones within the ore body and there will be periods of higher hardness and lower hardness going forward, which will impact throughput. And that's what I was saying earlier, I wouldn't go benchmarking every quarter in the future on the throughput we just achieved in Q1, because it will depend on ore hardness. And as I said, there will be periods where it’s up and periods where it’s down.

So, but the original last technical report outlook for a decline in throughput overtime is still in place.

For Paracatu, yes. But as I said earlier, we’re going to be assessing the need for a new technical report. And if we do want, it will reflect our better understanding of it. As I said earlier, one of the things that we're benefiting from at Paracatu is the asset optimization project and it better allows us to understand the ore coming out of the mine, which allows us to do things like blending to ensure we have optimal throughput rate. So we're better able to react to changing ore characteristics and not just on hardness, but on things like clay content and any number of other characteristics of the ore coming out. So bottom line is, we're better able to react to changing ore characteristics.

John, it's Tom here, the old technical report had plant one shutting down effectively, we ran out of the softer oxide ore and for some time, we've been blending both ore types in both plants. So that step down in the old technical report is not the expectation going forward.

So perhaps, we do need a new technical report. Just a follow-on on [indiscernible], can you just remind us what the water situation is up there?

Well, so we do have water rights at La Coipa, they are established. And that is one example of synergies between the two La Coipa and Lobo-Marte.

So concept there being, we have, again, this is early days, we've got lots of lead time. But one concept is, we take water from La Coipa and we pipe it along the corridor from La Coipa over to Marte.

And fun fact, La Coipa wells are closer to Lobo-Marte than they are to La Coipa.

And your next question will come from Andrew Kaip from BMO. Andrew, your line is open. Are you on mute? I have no further questions in queue. I turn the call back over to the presenters for closing remarks.

Thank you, operator, and thanks, everyone for the questions. We look forward to catching up with you in person in the coming weeks and months. Thanks, everyone.

Thank you everyone. This will conclude today's conference call. You may now disconnect.