Good day, and thank you for standing by. Welcome to the Kinross Second Quarter 2022 Results Conference Call and Webcast. All lines have been placed on mute to prevent background noise. [Operator Instructions] During today's call, there will be a question-and-answer session. [Operator Instructions] I will now turn the conference over to Chris Lichtenheldt, Vice President of Investor Relations. Please go ahead.

Thank you, and good morning. With us today, we have Paul Rollinson, President and CEO; and from the Kinross senior leadership team, Andrew Frere, Paul Tomory 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 27, 2022, the MD&A for the period ended June 30, 2022, and our most recently filed AIF, all of which are available on our website. I will now turn the call over to Paul.

Thanks, Chris, and thank you all for joining us. Today, I'm going to briefly review our second quarter performance, comment on our expectations for the second half of 2022 and update you on key developments across our portfolio. Then I will provide some comments on the state of our business and the compelling value opportunity our shares currently offer. After that, I will turn the call over to Andrea and Paul, who will provide more detail on our financial performance and on our operations. Beginning with our results. As a company that has met guidance nine out of the last 10 years, I am not happy with our operational results in the first half of this year. Given the challenges we have encountered, we are now targeting production at the low end of our guidance range. In order to meet the low end of guidance, we will need to produce nearly 400,000 ounces more in the second half than we did in the first. We see the increase in production coming from the following four areas. One, the movement to higher grades at Paracatu. Two, seasonally enhanced recovery from our U.S. heap leach operations with particularly strong performance expected from Bald Mountain. Three, maintaining the 21,000 tonne per day throughput at Tasiast that we have already achieved and four, working through supply chain challenges at the La Coipa mill. I want to give you my commitment that we will be highly focused on the delivery of these objectives. On costs, with the slower ramp-up at the Coipa resulting in lower production overall, combined with inflation, we expect to be above our guidance for cost of sales in ASIC. Andrea will elaborate on this in a few moments. We remain confident in our expectation our cost per ounce will drop in…

Thank you, Paul. I'll cover financial highlights from the quarter and provide an overview of our balance sheet and then touch on our capital allocation. First, I'd like to point out that all the financial metrics I’ll comment on today exclude our former Russian asset and Chirano. As Paul noted, our second quarter production of 454,000 ounces was stronger than the first quarter, driven primarily by increases of Paracatu and our U.S. operations. Our Q2 cost of sales was $1,027 per ounce, which increased relative to the first quarter, largely due to increased comp at Round Mountain and higher fuel costs at Tasiast. We expect cost of sales to decrease in the second half, which I’ll come back to. All-in sustaining costs of $1,341 per ounce were higher than Q1 due to the increase in cost of sales and higher sustaining capital. As we indicated in our press release yesterday, our costs are tracking above our previous guidance range, and we're now expecting full year cost of sales to be approximately $900 per ounce and are all-in sustaining cost to be approximately $1,240 per ounce. due mainly to lower production from La Coipa and inflation. On inflation, we previously incorporated a 7% increase in our operating cost for the year. We now expect the impact to be around 10% to 12% for the full year, and we factor that into our revised guidance. For CapEx, our initial assumption of 10% to 15% inflation still to hold. Our examination of $900 per ounce incorporates lower cost of sales in the second half at approximately $830 per ounce. We're confident in this reduction, which comes from the ramp-up in production across the portfolio and the benefit from increased lower cost ounces at Tasiast and La Coipa in particular. Our second quarter adjusted…

Thanks, Andrea. This morning, I'll provide key updates on our operations, share highlights from our decision to proceed with Manh Choh, as well as details on our ongoing growth projects and share some news from exploration. Across the portfolio, Q2 improved compared with Q1, but it was not without challenges, as Paul mentioned. Looking forward, we remain on track to ramp production up in the second half of the year, driven by planned higher grades and throughput levels across the portfolio. I'll provide a few examples of this, starting with Tasiast. Tasiast delivered a good second quarter with $129,000 ounce produced, head grades remain strong in Q2, and we're encouraged by the ongoing throughput ramp-up regularly achieving more than 21,000 tonnes per day. The outlook on Tasiast remains strong, and the site remains on track for a record year with over 600,000 ounces of production. We're expecting a production increase of at least 30% from Tasiast in the second half of the year, largely driven by sustained throughput of 21,000 tonnes a day and increasing grades coming out of West Branch 4, where we are mining now. In July, for example, the mill grade average just below 3 grams per tonne. The second phase of the project ramped up to 24,000 tonnes a day also remains on track for completion in the middle of 2023, with engineering substantially complete and procurement well underway. Construction of the solar power plant at Tasiast is advancing with detailed engineering ongoing with procurement underway with initial site activities expected to start later this year. At Paracatu, production for the quarter was 129,000 ounces, up roughly 20% compared with the first quarter. We expect to see higher grades in Paracatu through the remainder of the year, as mining enters into a higher grade ore in…

Thanks, Paul. Despite operating challenges in the first half, our operations continue to advance towards our plans, and we are confident in our outlook for a strong second half. Our company continues to generate meaningful free cash flow, and we think the value our shares offer has never been better. We have an improved geopolitical footprint, a robust production pipeline with exciting projects and exploration to come, a significant free cash flow profile, a strong balance sheet and an attractive return of capital program. With that, operator, I'd like to open up the line for questions.

Thank you. [Operator Instructions] Your first question comes from the line of Fahad Tariq of Credit Suisse. Please go ahead.

Hi, good morning. Thanks for taking my two questions. First on La Coipa, you mentioned mitigation is ongoing. Can you just give some more details on whether the spare parts that are needed have been procured, what else is needed to from a supply chain perspective to get the mill kind of where you want it to be?

Yes. Thanks, Fahad. The nature of the issues as we are commissioning the second line in the filter plant. We had some seals and bearings sale on a number of the pumps. We've placed orders for both new components and new pumps, and we have been steadily sourcing them. We don't have them all I'd say right now, but we've been steadily having new pumps and components arrive at site, and we expect to have everything we need to fully ramp up throughput in the next couple of months.

Okay. Great. And just switching gears to Manh Choh. Obviously, with the investment decision and the positive feasibility study results. Why is this still excluded from 2024 production guidance?

We typically do our multiyear guidance at the beginning of the year. So it's simply a mechanical step on when we update guidance.

Okay. So it's not a function of like expecting lower production in or beginning the second half of 2024, okay?

No, no. No, we just haven't updated our multiyear guidance.

Understood. That's it for me. Thank you.

Thanks.

Your next question comes from the line of Anita Soni of CIBC World Markets. Please go ahead.

Hi, good morning, Paul, Paul. And thanks for taking my question.. The first one is just related to – is regarding CapEx. So if I'm correct, you've spent about $250 million in the first half of the year, but you reiterated your guidance for $850. Does that mean that - and correct me if the $250 million is wrong, but does that mean that we'll have a heavy CapEx spend in the second half of the year and you'll catch up? Or should we be gearing more towards minus and on the cost minus 5% of the capital?

Anita, it's Andrea. Yeah, I mean, we maintained our 850 guidance. But you're right, that's a range, plus or minus 5%. We were low in the first half, but we do expect CapEx to ramp up in the second half for a few reasons. Capital stripping, we expect to increase, in particular at Tasiast and La Coipa, and then we'll have some additional CapEx that for now at Paracatu, and then spending at Manh Choh the higher spending of the 24K project. Those are kind of the three things that factor into higher CapEx second half.

Okay. And then on costs. I appreciate that you don't give guidance out for the coming years, but until February. But I'm just trying to understand, given the $900 per ounce you've guided to this year, and I know that you're guiding to like lower cost in the back half of the year. But should we - should we be using a lower cost in the back half of the year as the run rate for next year? Or should we be thinking that inflationary pressures may offset the volume increase that you have planned for next year?

It's a bit of a tough one to call, Anita. It really is around and from an operational perspective, we're comfortable with the second half with a sort of a numerator denominator production grade effect. But the more difficult part to call as you're alluding to, is the inflation. And again, as we said at the beginning of the year, we guided inflation in February at 7%. We said we'd give an update at midyear and here we are essentially updating now to 12. So trying to predict how that's going to play out next year at this point. Hopefully, it abates, but that's going to be the wild card.

Okay, thank you. That’s it for my questions.

[Operator Instructions] Your next question comes from the line of Carey MacRury of Canaccord Genuity. Please go ahead.

Hi, good morning, everyone. Maybe first on La Coipa. I know originally, the plan was to do 200,000 ounces. I'm just wondering what that ramp up looks like now through Q3, Q4 into Q – sorry into 2023?

Yeah. So because of these delays in the ramp up, we're now running through 8,000, 9,000 tons, had a few days at 10, and we want to ramp up to 13,000 tons by the fourth quarter. If you make that adjustment into allowances, as I said in the prepared. we are moving La Coipa production from 200 to 225.

I would just add to that, again, just for context, Carey. I mean, this is obviously frustrating. We're not happy with it. The mine continues to operate. It's - this is not a highly technical issue. It's - it is a ramp-up. It's pretty straightforward. It's really just about getting those spares, those parts. For equipment, that's pretty straightforward. So we know what the issue is. We're on top of it. We've just got to source the material and get a job back in.

And we've got in all - 2023.

Yeah. 2023 will be as per plan. As Paul said, this is just a matter of ramping up the throughput. And we've got the order, we got the stockpile there at 1.2 grams waiting to be fed.

Okay. And then maybe just switching to around Mountain, just on the cost there. I mean, obviously, a big jump in costs despite a jump in production. Just wondering if you can add a bit of color on what happened there this quarter?

There are several drivers there. One is just inflation. Our Nevada sites are particularly impacted by cyanide and lime ph cost increases, particularly on cyanide. It's also a function of a greater proportion of heat ounces versus mail ounces and also timing of where we are in stacking versus recovery. But even in the bigger picture, a way to look at it is, it's more than anything a function of the lower production number. And as we said on previous calls, our intent is to ramp around Mountain back up to that 300,000 ounce a year figure, which will get cost structure back in line. So big picture, it's really about production scale. But in this particular quarter, it was impacted by a number of those specific issues that I just mentioned.

To cost you to go down to like , like 1,000 an ounce something like that?

Well, we're going to have to finish our optimization work. But as we ramp up to 300,000 ounces, which we intend to do in 2024, the costs will trend back down or both. That will be the - those are the last bids that we're doing on this optimization study of the cost profile, but the cost will come down as production goes up.

And maybe just one last question on Tasiast. I noticed the recoveries were 89, which is just quite step down for the last few quarters. Just wondering what happened there?

Yeah. As we got into the high-grade material, we encountered some high sulfide puritite [ph] and that pulled the recovery down, but we've been able to address that through better oxygenation and blending the puritites with the non- puritite material to get it back up. And over the last few weeks, we've got that back in line. So it's really to do with some puritite that we encountered.

Okay. Thank you.

Your next question comes from the line of Mike Parkin with National Bank. Please go ahead.

Hi, guys. Just one for me. With an NCIB outstanding and you're still generating and expected to generate stronger free cash flows. Is there a thought towards a bit of a balance now in terms of still focusing on the balance sheet in terms of debt repayment, but given where the share price is, maybe putting some capital to work towards repurchase of shares?

Yes. Mike, that's exactly the plan. So we are maintaining both the dividends and the buyback on top of the dividend. And obviously, at the same time, we're paying down debt. So we're doing all of the above. I think we're taking a bit of a cautious approach as we think about where we are in the macro sense, where is the commodity price going? Where is inflation going? We'll see how that takes us. And certainly, any margin expansion through higher gold prices, we'll think about how we might ramp up either the buyback or accelerate the debt repayment, but we're comfortable doing all three as we sit here today.

Okay. Thanks, guys.

Your next question comes from the line of Tanya Jakusconek of Scotiabank. Please go ahead.

Good morning, everyone. Thank you for taking my questions. Paul Tomory, I just want to circle back to just a bigger picture theme, which is obviously instrumentation ship [ph] getting these pumps in and spare parts. And just wondering how you are looking at your inventories at site. Are we looking at adding additional inventories for site given some of these supply issues that say La Coipa and following that, as we Tasiast and we're expanding throughput from '21 to '23 by mid next year, do we have everything we need for that one on site?

So there's a couple of questions in there, and I'll hit a few anecdotes on this. So as we all know, global supply chains are stretched, and the availability of certain parts has really been impacted particularly on lead times. We have, over the past 6, 8 months campaign on critical spares, and we've ramped up inventory levels where possible, where the vendors had the capacity to do that. So yes, we have been squireling away critical parts and components where possible. and building up our warehouse levels. In the specific case of La Coipa, just to give an anecdote, we're seeing certain components with 40 to 45 week lead times, on things that previous to the pandemic and previously supply chain challenges that would have been readily available. And it's difficult, in some cases, to predict specifically where some of these components will really be impacted. And there's always a - there's always a trade-off between - I don't want to say irresponsibly ramping up warehouse just buying everything that you can.

We manage inventory as carefully as far…

Yes. We manage the inventory as much as we can while ramping up critical spares, where we think we can anticipate failures, but it's a difficult one to get right all the time. And in certain situations, no amount of begging and pleading with suppliers to get you more equipment or components. Sometimes the supply chain are what they are, and we have to source alternative supply. So that's what we're doing here at Tasiast, as we are buying pumps from perhaps not of the quality that we would normally buy put in place a substandard component or a substandard piece of equipment and then wait the long lead time for the better piece of equipment. So yes, we are managing, we are buying a replacement components proactively where we can, but it's not something we can do perfectly everywhere.

I am just going to jump in and add and maybe tee you up a bit more. I mean, again, just for context, why are we here right now where we are. Obviously, we tested all this equipment, we ran test on these pumps as part of our ramp-up to restart the La Coipa and the pumps all works fine. But what we're finding is with a constant load with the ramp-up of the operation, the constant load on this equipment, this is where we've seen the failures. So it wouldn't have been routine for us to have this amount spare parts given the positive testing we got. But what we've found as we've continued to push the throughput, that's where we've seen some of the failures and that's why we're scrambling a bit to get these parts.

And a quick reminder, this is a plant that was down for 10 years, and there are over 80 pumps in the filtration plant there. And again, like I said, it's not something you can replace every single one and have in warehouse.

And again, for context, 80 pumps, we're probably talking 8 or 10 that are problems or 10% of the - the total. So that's - we know what it is. We're focused on it, and we're chasing it down.

Given the experience that you're seeing there and now knowing what is taking some of these supply chain issues or take a long time to get the parts, are you seeing anything that you're concerned about for the Tasiast expansion? Anything that - La Coipa - south, but maybe something else in the supply chain that you're now definitely focused on to make sure you have the Tasiast?

Well, it is a hard lesson learned, and we are reviewing all of our sustaining capital projects and major projects for exactly similar weak spots, where are there components or key pieces of equipment where we should have a capital spare on hand. So yes, we are - from a hard lesson learned, we are reviewing critical components across the rest of the portfolio.

And anything in the critical component for Tasiast like from my understanding, it's just the expansion of the mill. I think if - I remember correctly, we had a majority thing we needed on site.

Yes. Tasiast – yeah, so the 24k project is more a construction sequencing asset of activities. tie-ins. The biggest element there are the Segisor [ph] screen retrofit, and we have all the components for that.

Okay. I just have two other questions, if I could, and I wanted to circle back to Andrea and maybe Paul as well. I'm just trying to understand your capital allocation. Again, I understand you're going to keep your share buyback $150 million, your dividend of $150 million, you want to reduce your debt at the same time and I think I had from my collection. I think you want to do another is it $300 million or $400 million on top of what you have recently done for the second half of the year. Is that correct? As I'm thinking about it…

Yeah. Tanya, I think - I mean, part of this depends on gold price in the second half. So we gave a range in terms of what we expect to add to the debt repayment. So just to clarify, in the second quarter, we repaid $120 million. That was $100 million on the revolver and $20 million on the Tasiast loan. In July, we've repaid another $100 million on the revolver. So we've got $100 million left outstanding on the revolver. As we sit here today, and we expect to repay $200 million to $300 million in the second half. So that would be taking out the rest of the revolver and then addressing other debt. And so for the year, that's a total of $400 million to $500 million. And again, that range just depends on where we are on gold price.

Yes. I'm just trying to get an understanding from you. Is there a sort of net debt-to-EBITDA level that you're looking at before you feel comfortable that you have your debt where you want it to be and your share buyback becomes [indiscernible] I know I think you're targeting as indicated your net debt to EBITDA under one by year-end. So I'm just wondering if that’s still possible just I have chance to do the number. And then my second question is what level do you feel comfortable with your net to EBITDA to move from debt to share buyback?

Yes. I mean I think I did previously say we expect that ratio to be at or slightly below one, just given production now being at the low end of our guidance range. We'll probably end the year slightly above one. That's by no means uncomfortable for us. I think the message there is just we are working to strengthen the balance sheet. We're comfortable where we are, but we do see it getting stronger by the end of this year and then continuing into next year as well.

And then I guess we've always thought of the buyback is that flex in the equation. And again, we're going to take our key there really from a margin perspective, as we continue to approach that debt metric if we get some benefit in the commodity, then that's where we'll have the flexibility to amp up on the buyback.

So as [indiscernible] net debt to EBITDA again for that one time, then we could see you be more active in your share buyback is sort of what I understood.

If the tone is right in the commodity.

Thanks for that. And if I could just squeeze in one more – more Paul Tomory. It's just back to the inflationary pressures. And I appreciate you we've gone from up to 12% for 2022. I'm just trying to look at your key components of your cost structure? I'm trying to understand where you yourself are seeing more inflation, I think from a memory, I think $0.40 of your cost structure is labor? Maybe just to touch the math because component - are you seeing continued labor inflation? Or is it mainly in the consumables and fuel that we're seeing for everybody else. I'm just trying to get the components and just trying to see if anything has peaked for you or has anything peaked for you in terms of what you're seeing in the consumables?

So the one area where we are seeing a peaking of course, is in the oil prices with things flattening out of 100. In other key commodities, we continue to see increases in prices, but perhaps at a flatter rate of increase. The most impacted things are like cyanide and lime, ammonia explosives, things that are essentially tied to the petrochemical chain. In the case of labor, we are seeing pressure in the United States and then to a lesser extent in Brazil and Chile. So if you're asking - we are seeing inflation across the board. We are seeing signs of some attenuation as I said, in the fuel. And the rates of increase in some of the other key commodities aren't as severe as they were. So if that's a good news story, maybe there is something there that the worst of the rate increases - increasing the rate behind us.

And when you say labor pressure in the U.S. used to be in that 3% to 5% that I should be thinking about what you're seeing?

It's a little bit more than that. It's probably the 5% to 8% on labor in the U.S. And it's really driven by very high turnover rates. And the only way to keep those - keep those jobs - operators and trucks and people in the mills and in maintenance is by hiring and typically, you have to pay a more competitive wage.

Okay. Thank you. I appreciate it for a lot of time. So I’ll pass it on to somebody else.

And this concludes the question-and-answer session. I will turn the call back to Paul.

Thank you, operator, and thanks, 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 your lines.+