Kinross Gold Corporation (KGC) Q3 2024 Earnings Report, Transcript and Summary

Thank you for standing by and welcome to the Kinross Gold Third Quarter 2024 Results Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the call over to David Shaver, Vice President of Kinross Gold. You may begin.

Thank you, and good morning. With us today, we have Paul Rollinson, CEO; and from the Kinross senior leadership team, Andrea Freeborough, Claude Schimper, Will Dunford and Geoff Gold. For a complete discussion of the risks and uncertainties, which may lead to actual results differing from estimates contained in our forward-looking information, please refer to Page 2 of this presentation, our news release dated November 5, 2024, the MD&A for the period ended September 30, 2024 and our most recently filed AIF, all of which are available on our website. I will now turn the call over to Paul.

Thanks, David and thank you all for joining us. This morning, I will provide an overview of what was another strong quarter for us, discuss high level updates on our operations and projects and confirm our outlook. I’ll then hand the call over to Andrea Claude and Will to provide more detail. Q3 was another excellent quarter for us, building on our strong performance in the first half of the year. Our portfolio of mines continues to perform very well. As of Q3, we have produced just over three quarters of our full year production with cost tracking in line with our guidance range. Our ability to hold costs in this rising gold price environment continues to benefit our margins In Q3, we grew our operating margins by 14% over the prior quarter, compared to a 6% increase in the gold price. As a result, we generated record quarterly free cash flow of $415 million, an increase of approximately 20%, compared to the prior quarter. For the first nine months, free cash flow was over $900 million. We have continued to allocate excess free cash towards debt repayment and have now repaid $650 million out of the $1 billion term loan. Looking ahead, we are at strong position to make further repayments to the term loan before year end. With respect to operations, our production in the third quarter was strong, delivering 564,000 ounces at a cost of sales of under $1,000 per ounce. Our two largest assets Tasiast and Paracatu both performed well with production increasing at both sites over the prior quarter. Tasiast has had another excellent quarter, delivering exceptional free cash flow from high margin production. Paracatu also has a standout quarter with higher production and cash flow over the prior quarter. At La Coipa, we remain on track to deliver our production guidance, at our US operations, production was on plan and higher over the prior quarter as initial production from higher grade Manh Choh commenced in early July. Moving to updates on our project activities. We continued to make good progress across the portfolio in the third quarter, including the addition of two senior executives who bring notable large-scale project construction experience in Ontario and Chile. These additions come at an important time as we focus on our project development priorities at Great Bear and Lobo-Marte At Lobo-Marte, we see an excellent long-term potential for another long-life, low-cost asset with meaningful production, At Round Mountain, we continue to advance Phase X with drilling demonstrating exciting grades and widths which Will is going to speak to you later. With respect to Great Bear, we continue to make excellent progress. As discussed during our PEA Presentation in September, we have illustrated the top-tier potential of this asset. The PEA outlined significant annual production of approximately 500,000 ounces, and robust cash flow with an impressive all-in sustaining cost of approximately $800 per ounce. The study outlined strong base case economics and a current spot prices, the project generates an impressive NPV and IRR, with a modest initial project capital requirement. As we indicated, the PEA represents only a point in time estimate. But we continue to see geologic potential to support a multi-decade mine life. For the Great Bear AEX program, permitting and detailed engineering continue to advance. We recently reached an important AEX permitting milestone with the submission of our final closure plan to the Ontario Ministry of Mines. We expect approval of the closure planned shortly allowing for commencement of early works construction. Regarding permitting for the main project, we continue to work with the Impact Assessment Agency of Canada, on the Impact Statement, which we plan to file next year. In addition to the projects, I just touched on, our team also continues to advance our study work and other opportunities. And we look forward to providing more updates on this work in 2025. Moving to our outlook. With strong year-to-date performance, we are well-positioned to meet our full year production and cost guidance. Our continued focus on operational performance, strong grades at multiple assets and rigorous cost discipline are driving record margins and free cash flow. In addition, we are also advancing exploration to further support the future of our business. With that, I will turn the call over to Andrea.

Thanks, Paul. This morning, I will discuss our financial highlights from the quarter, provide an overview of our balance sheet and comment on our guidance. Our third quarter performance was strong with production costs and cash flow, all improving over the prior quarter. We produced 564,000 assets with sales of 551,000 ounces and remain on track for full year production of 2.1 million ounces. Cost of sales was $980 per ounce, improving from $1,029 per ounce in the prior quarter. With an average realized gold price of $2,477 per ounce, we delivered strong margins of approximately, $1,500 per ounce. Margins improved from approximately $1,300 per ounce in the prior quarter, and as Paul noted, this improvement outpaced the increase in the average realized gold price. All-in sustaining cost was $1,350 per ounce and was lower over the prior quarter, primarily on higher gold sales. For the first nine months, cost of sales was $997 per ounce and we are on track for our guidance of $1,020 per ounce for the year. In Q3, our adjusted earnings were $0.24 per share and adjusted operating cash flow was $625 million, both improving over the prior quarter. Capital expenditures were $276 million in the third quarter and $772 million in the first nine months. In Q3, we generated $415 million of attributable free cash flow or $350 million, excluding positive working capital changes. Year-to-date, we have generated an impressive free cash flow of $906 million. Turning to the balance sheet, our financial position continued to strengthen in the third quarter. After repaying $200 million against the term loan in Q2, we repaid an additional $350 million in the third quarter and then made another $100 million payment last week. In total, we have repaid $650 million this year, leaving $350 million outstanding. Looking forward, as Paul mentioned, we expect to continue to make payments against the balance for the end of the year. Over the last 18 months, we've reduced our net debt by approximately $1 billion dollars and our net debt to EBITDA from 1.7 times to 0.5 times as of the end of Q3. With respect to guidance, we remain firmly on track for all of our key metrics. I'll now turn the call over to Claude to discuss our operations.

Thank you, Andrea. Starting with our most important value, safety, I’m pleased to say that our Global Safety Excellence Program, which was launched in 2023 has now been completed by over 70% of the workforce including both employees, and business partners. Under the spirit of continuous improvement in building on our successful track record, this quarter, we finalized our health and safety brand called Safe Ground, which represents the importance of Kinross places not only on physical safety, but also psychological safety and respectful workplaces by reinforcing the importance of creating a culture in which everybody feels they are in safe ground to speak up. Moving on to our operating performance. As Paul indicated, our operations performed well in Q3, Tasiast delivered production of 152,000 ounces at a cost of sales of $688 per ounce, in line with the prior quarter. Production benefit from stable mill performance with throughput increasing to a new record. Tasiast was once again our lowest cost asset, driving significant free cash flow. With slightly lower grade, and maintenance planned in the fourth quarter Tasiast remains on track to meet its full year production guidance of 610,000 ounces at a cost of sales of $670 per ounce. At Paracatu production of 146,000 ounces at a cost of sales of $1,006 per ounce improved over the prior quarter, driven by stronger grades and recoveries. As planned, the mine sequencing has started to transition into the higher grade portions of the pit, which is expected to support higher production next year. Paracatu remains on track to meet its 2024 production guidance of 510,000 ounces at a cost of sales of $1,080 per ounce. At La Coipa, Q3 production was 51,000 ounces at a cost of sales of $1,074 per ounce. Throughput at La Coipa has being managed while no off the mine basin initiatives are being implemented. Production remains on track for a full year target of 250,000 ounces. Moving to our US operations, production of 205,000 ounces was driven by a strong contribution from our operations at Alaska. Our US sites to remain on track to achieve full year guidance range of 730,000 ounces, at a cost of sales of $1,350 per ounce. In Alaska, production of 120,000 ounces was higher compared to the prior quarter, a record mill grade and recovery as production commenced from the higher grade Manh Choh during the quarter. Construction and commissioning of the Fort Knox mill modifications were completed in Q3 with the project now fully transferred the operations team and is performing as planned. Cost of sales of $973 per ounce was lower over the prior quarter, primarily due to the higher production from Manh Choh. At Bald Mountain, we produced 43,000 ounces at a cost of sales of $1,326 per ounce. At Round Mountain production of 42,000 ounces was lower over the prior quarter, due to fewer ounces stacked and recovered from the heap leach pad as per our planned mining sequence. Cost of sales of $1,540 per ounce was in line with the prior quarter. I’d say this, mining remains on track and construction of the heap leach pad expansion was completed on schedule in Q3. Phase S production is expected to begin in the second half next year. With that, I'll now pass the call the call over to William to discuss our project.

Thanks, Claude. Moving to updates on our projects. At Round Mountain Phase X development of the exploration decline continues to progress well with over 2.7 kilometers developed thus far. Exploration drilling has also progressed well. And in Q3, we started in-fill drilling of primary Phase X targets which is shown in purple on this slide. The infill drilling has shown exciting results as it’s highlighted by the red stars on the slide with multiple high-grade intercepts at strong widths including DX-0071, which intersected approximately 37 meters at 10.7 grams per tonne. Opportunity drilling this year outside of the primary exploration target has also shown strong grades and widths indicating potential to expand mineralization at Phase X Of particular note, DX-0052 intercepted an impressive 30 grams per tonne over 32 meters and 11.5 grams per tonne over 23 meters outside of the original exploration target. We are pleased with these results, which continue to support our offices of potential for higher margin mining from a bulk underground of paybacks. Moving to Curlew Basin, exploration drilling this year has continued to expand mineralization in the lower areas of our resource, where we see good margin potential on the back of strong grades and widths. As you can see on the slide, a recent hole at Stealth Zone returned approximately 14 grams per tonne over 10 meters, well outside of our existing resource. We are encouraged with the results on both the exploration and mine plan optimization which are\ highlighting areas with good mining widths and strong grades. As Paul mentioned, we recently welcomed a new senior executive tour team in Chile to oversee the progression of global market and we are currently advancing baseline studies. As a reminder, we published a feasibility study on Lobo in 2021, which highlighted a high quality development project located in close proximity to the La Coipa mine. Lobo-Marte has significant potential for high margin production, driven by the strong heap leach grade of 1.3 grams per tonne and a low strip ratio of 2 to 1. The asset had significant scale with the highlighting. 4.7 million ounces of production over a 16 year mine life with average annual production of approximately 300,000 ounces. Strategically, Lobo has the potential to be a key low cost contributor to our production profile in the 2030s. Lastly, with respect to Great Bear, as Paul noted earlier, we released a PEA in Q3, which showed robust economics, impressive margins and a quick payback, as you can see highlighted on this slide. In addition to the impressive geology and economics of the project, our significant technical work today has also demonstrated a clean and straightforward project across the board including, clean metallurgy with higher recoveries over of 95%, a straightforward 10,000 tonnes per day milling circuit, confident geotechnical conditions, a robust tailings management strategy and significant production flexibility from combined open pit and underground operations. It's important to note that these strong PEA results are just the beginning of the value story at Great Bear. This is a point in time estimate showing only a window into the underground potential, based on the drilling we have been able to do from surface prior to April of this year. As you can see on the slide, we also already have multiple intercepts well below the PEA resource, and strong grades and widths, demonstrating continuity of the system at depth and the significant potential for further expansion of the resource. Given we have already drilled out of PEA inventory providing a robust 12 year mine life and demonstrated continuation of mineralization beyond that, we will be ramping up deep drilling from surface at LP this year and shift our focus progressing the advanced exploration decline, which will provide a platform for infill drilling from underground. This provides more efficient drilling from surface at deep depths. In parallel to developing AEX, we are also excited to be shifting our exploration focus to regional targets on the 120 square kilometre land package, looking for both open pit and underground opportunities. As you can see on the slide, there is an 18 kilometer trend at Great Bear, which assumes limited drilling to-date as we have largely been focused on drilling off the resource at LP on approximately 4 kilometers of that trend. We look forward to sharing those results with you through 2025. I will now turn it back to Paul for closing remarks.

Thanks, Will. Following a strong third quarter, and first nine months, our business is positioned for a strong end to the year. Looking forward, we are excited about our future. We have a strong fraction profile. We're generating significant free cash flow. We have an investment-grade balance sheet that is continuing to strengthen. We have an attractive dividend. We have an exciting pipeline of both exploration and development opportunities, and we are very proud of our commitment to responsible mining that continues to make us a leader in sustainability. With that operator, I'd like to open up the line for questions.

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

Hi, thanks very much. Just wanted to ask on Manh Choh, very strong results this quarter. It looks like both the contribution from throughput and grade, is there any visibility how into the sustainability of some of these results, I guess, maybe more so on the throughput side which probably has more likelihood of being sustained?

Hey, morning Josh. Yeah, we reassess sort of stable production from there as we – in the mill of 382,000 ounce a quarter from Manh Choh. So we are at a stable rate and building the grade that we put in I mean, feasibility of it. We will manage it through the year. So, we expect it to be consistent with what we’ve been able to do so far.

Okay. Maybe just more specifically, 380,000 tonnes this quarter is pretty high above steady state. Is there are there some characteristics that the ore that would prevent that from happening going forward? Or is that a reasonable forecast going forward?

Balancing it with the transportation, so roughly 200,000 per quarter from Manh Choh but also in the Fort Knox production the three balances, the hardness of the ore is depicted to be stable over the coming years.

Got it. Okay. Thank you. And then a question, maybe on the CapEx side. If there is any visibility we have at this point into future numbers. I know there is a number of projects the company is looking at evaluating going forward in terms of extending asset duration. How should we think about CapEx in upcoming years? The number this year being $1,050 plus accounting for inflation and maybe what the discretionary spending would be at global prices? Thank you.

Sure Josh. So, yeah, we said our CapEx this year in ‘24 is $1.05 billion. Looking forward I’d first start by saying that we are still just in our budget process now. So we're looking at this now but expect that it'll be not significantly above where we were this year, which just maybe adjusting for some inflation, sort of what we're seeing as we look at it today.

Great, thank you. And if I can tuck in one more question, just on the capital allocation side, I mean, I’ll say fantastic results in terms of cash generation this year, what I would think is comfortably above $1 billion. The debt repayment schedule looks like it will be resolved within the six months of the term loans do. I guess the easy part of the capital allocation seems to be done in terms of the debt repayment that was identified earlier this year, how do you think about allocating that free cash flow going forward in the context of call it reasonably stable CapEx and debt no longer being out high about a priority? Thanks.

Sure Josh. I’ll take that one. Look, our philosophy has really changed. We've been consistent in our philosophy on capital allocation. As we've said, it's, means of the business. Our business, we keep it well maintained. We keep it well maintained because that reduces risk after the needs of the business obviously the balance sheet and as you fully agree, we're making a good headway on the taking out that term loan and I expect it'll dependent upon the gold price, early in the New Year. And then, it comes down as you look forward, it's really a question of internal growth versus returning capital. But I would say I guess, sadly, this morning as I look at what's happening with the gold prices, it's a good reminder that we don't want to get too far ahead of ourselves. It'll be gold price dependent and we'll, no doubt get that question as we take out the term loan and get into the New Year. But it's – it’ll be somewhat gold price-dependent.

Great. Thank you very much.

Thanks.

Your next question comes from the line of Anita Soni from CIBC World Markets. Your line is open. Anita, your line is open.

Hey, sorry I put my cellphone muted. Sorry about that. First question is, well firstly congratulations on the solid quarter, particularly on the cost control. I was wondering on the US operations, as we look like on Bald Mountain you stacked a lot and it seems like that's in the inventory. Like how do we think about the production volumes next year and into 2026, I'm assuming I was tempted to add some ounces in 2026 from residual leach, but I'm not sure how that that works out in the next two years. Could you just give some clarity on Bald Mountain?

Yeah, yeah, we, obviously at Bald Mountain we expect fairly stable production next year. And then based on what's in the current inventory and, the current sketch that will start to taper off after next year. But obviously we are looking at different optionality around additional pits and laybacks at Bald Mountain that it continue that production profile out so longer.

Okay, so you stop mining at the end of 2025 and then some residual leach in 2026 still? Is that's still on plan?

Yeah, just based on the current pit size without approving any new projects.

Okay. Secondly, Round Mountain, how does that, I mean, the volumes trended down a little bit this quarter. Does it still dip into the first half of next year before it picks up? I thought I read that you had construction new leach pad and I'm just wondering when that starts to come on stream.

Yeah, I think next year, our plan has always been, that that we will have lower production next year because we're guiding to the bottom of Phase W right now and we are in a process of stripping base out. So we do – we have beta construction that heap leach pad which is because we're putting ounces on fresh liner. But we do expect a lower production profile next year before starting to ramp up again with Phase S in ’26 and ’27.

Okay, so to wrap it up, just my question is driving towards going from 2.1 million ounces to 2 million ounces next year. The major driver, I guess would be Round Mountain with some offsets from a Fort Knox Manh Choh?

Yeah.

Okay.

Yeah. There's quite a bit of…

Higher – high production circuit at Manh Choh. Yeah and in Tasiast has a lower year next year, which that's in the year we’ve been talking about that.

Yeah. Okay. All right. Thank you very much. That's it for my questions.

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

Hi guys. Congrats on the solid quarter. On Round, the underground – that keeps you seem to keep hitting the high grade pretty consistently and looking at Slide 18 with where you are putting in the infrastructure. A lot of it seems like it's right on the doorstep of that decline. Is that basically on design? And you'll be able to access some of those higher grade zones? It looks like early and just give us a refresh like you’ve obviously got quite a bit of development in there. Are we still looking at first production in 2027 in that tracking forward by the front-end, the back of 2027 or into 2028? Any kind of color you can provide in terms of how that’s shaping up in terms of first access of ore?

Yeah, first off, I think you interpreted, right in terms of where that drilling that's why we're calling it the opportunity drilling. We're really drilling it as we progress the decline towards the main exploration targets from the open pit. So it is right there that additional mineralization that we run into. So that does make it very easy to access and get into. We still are looking 2027 as the primary stage for it start of fulsome operations at Round Mountain. But obviously, we may love to do some test stopes things like that, as part of our due diligence as we progress the project and – to do that given that opportunity drilling is very precise to decline. And the decline itself is actually quite close to primary target as well. So we are kind of right there in terms of transitioning to production.

Okay. Is any of the development going right through ore or are you it is kind of hard to tell from Slide 18, but is it…

We have across the ore in our developments you can – I think last quarter we highlighted some holes where we have them from and to and you could see a narrative that from was zero, meaning that same rate at the phase of the decline. So we have crossed a couple of different ore bodies there, and mineralization don’t.

Excellent. And just to remind us, what are you kind of thinking of in terms of average grade coming from the underground excluding the impacts of the high rate infill?

Yeah, the original target there was kind of a 3 to 4 gram bulk target. Really as we had talked about at the beginning there it was all about the geometry and the significant width that we see there. It was highlighted that in a few slides in the past. Obviously, some of the intersections we’ve been having are higher grade in that. So that’s a positive indicator, but you can see on the slide that we really just started to drill off the main target. It’s bringing to progress our work further before we have a more advanced definitive view of the grade of the overall deposit.

Okay. And will all this get back to against in the feeded resource or the year end reserve resource update?

Not, not this year. Again, if you look just the highlights on the slide, we clearly haven’t drilled off that entire deposit. And there is some of that material that’s already in our open pit resource. So before we do a conversion, we want to get widespread drilling across the deposit. We will do a proper conversion, we will do that next year.

Okay. All right. Thanks

It’s a great question. I was just going to say on the grade question, obviously in that 3 to 4 gram, we believe that that was the right zone with positive economics. But clearly, based on the grades we’re getting, it seems to be trending to maybe something better than that. But we're just – we just haven't finished the work.

Look forward to the update. Thanks guys.

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

Hi, good morning, everyone. Maybe a question for Claude on La Coipa. Can you just talk a little bit about the optimization initiatives that you are referring to there?

Yeah, Carey. Good morning. Obviously as we restarted this project at the pretty old model it needs a lot of care and maintenance. We were being very selective on what we do to make sure that it runs efficiently. As you would have noticed in the last couple of quarters, we've been putting a lot of effort into that. And at the same time, we blending the ore and maintaining our focus on reaching the objective for the year as we indicated and we still targeting the 250,000 ounce production.

Are there issues on the crushing side of the circuit or grinding or any color on sort of what you are trying outlines for?

No, as I said, it's you know it's a pretty old model. It just stands for eight years. So this, and it's an altitude with the different humidity level. So, as we go through it, we've been able to identify some sort of structural pieces. We would slowly would be through those and across the board and mountain we’ve had some - we had some challenges initially on crushing that’s been resolved. Milling is not a problem. And we are now focused on filtration.

The way I think about it Carey is, we're just really kind of moving little bottlenecks. We address the efficiency of one area and we get that optimized and then we'll move down the line and look at the next, place where we could get reliability consistency. That's how I would think about it.

Okay. And then, maybe a question on Bald Mountain seems that got a lot of resources there. Not a lot of reserves. Can you get that – project and we are just trying to give us a little bit color on what the objective of that could look like?

Yeah, I'll start, others can jump in. I mean, as you know, we've always said with Bald, we have a quite a large resource of 4 million ounces. And we've also said that, it's really been in a mid of a situation, that's a bit more on the line. Everything internally has to compete for capital and some of those opportunities at Bald you really want to have a confidence in a higher gold price. The other characteristic of Bald though which is unlike, the rest of our mines has instead of having one big pit, where you're doing a massive layback, we have a whole bunch of little pits. So, again in the context of where we find ourselves in the gold price, we will be looking at some kind of quick, quicker payback of satellite opportunities.

Okay. Thank you.

[Operator Instructions] Your next question comes from the line of Tanya Jakusconek from Scotia Bank. Your line is open.

Great. Good morning, everyone. Thank you for taking my questions and congrats on a good quarter. Great Bear, so maybe over to Geoff. Can you just walk us through exactly what we're waiting for on this permit? And then, once we get this permit, assuming it soon what can be done over the winter? I'm just trying to [Indiscernible] on a timing here for this decline start next year. Thank you.

Sure, Tanya. Thanks for the question. I'll probably divide that up with Will we get into the actual activity that we will be doing in the winter. But with respect to a permitting of Great Bear, you are specifically asking about AEX. But I won’t get into the Federal IX process. But on the AEX front, there's a number of permits that we’re waiting on and we're expecting very shortly. You would have gathered from our press release that's the first most important permit, for which we require, for any and all construction activity is the closure plan. And we're obviously pleased to have been invited by the Ministry of Mines to submit that for approval, which we have done, along with our financial assurance. And we expect to get that final approval very shortly. So that’s the first kind of key permit. Other permits also include, and that we're waiting on a permit to take water from Ministry of Energy Conservation and Parks. We are also expecting that in the near term. And furthermore, we're expecting a tree clearing permit from the Ministry of Natural Resources and Forestry, and that permit should come immediately after the approval of our closure plan. And then as we look sort of more into 2025 and more advanced AEX activities, we're also expecting and waiting on some additional permits from the Ministry of Environment Conservation of Forests in respect of certain wildlife. But again, it's not a question of if on these permits but when and expecting all of them in relatively short order. And I would say that, the last point I would make is that, with respect to the AEX and while we are waiting on these, they did not impact our overall main project timeline either.

Activities?

Yeah, on the activities, generally, I’ll just maybe turn that over to Will to talk about what we are going to do in the winter program.

Sure, yeah. I mean, and we can do the majority of our activities in the winter obviously to get underground at AEX the main scope of activity is that building a portal pattern of locks cut. So we can do excavation and we can do to fill for that facility over the winter and we can also work on some of the ancillary facilities that we’ve put in place, maintenance shots and inflation plan et cetera. So the majority of the work can be progressed over the winter. We're also going to continue to do a geotechnical work for the wider projects. We will continue to do some RC drilling and obviously as we alluded to on the call, exploration drilling. So the winter is not pulling us down in regards to kind of that.

Okay. That's good to hear. Just cold up there. Maybe just then moving on to just the costing side, I don't know if you want take this question. But just wanted to get a handle and thank you Andrea for the CapEx for 2025. Just on the costing side, would it be safe to assume that, you do have the 5% lower production map outlook for next year? So that's going to impact your cost and then we have the higher gold price that obviously also impacts your costs on the upside from a royalties paid. And then we have inflation. Maybe we can just kind of understand what is the inflation right now that you're seeing in your labor? Are you in that 5% for both your employees and contractors? I'm just trying to understand how might cost should look next year over 2024?

Yeah, Tanya, I guess I'll first - I'll start by saying again that we are still in our budgeting process. So, but I can certainly make some observations. So, you're right on the factors that you highlighted that will impact cost next year. The one other area I would note and then I also come back to the inflation question is just the production mix. So with half years being in just a lower production year based on mine plan sequencing, being our lowest cost asset that that will have a bit of an impact on overall cost as well. And then, in terms of labor inflation, specifically, yeah, I would say it’s around the 5% or 6% increases is what we're expecting just for labor cost, that would be labor and contractors together. And then, aside from labor cost, inflation would be lower than that. So, averaging out somewhere in the 3% give or take for overall inflation on average.

Okay. And so, if I looked about that and I'll obviously the $100 move it's about 4 bucks on your cost structure for royalties and so forth. So, if I was to look at this within - as I look at your 10 I think you $1,050 this year on your cost side – no, $1,020, I think it was $1,020, would it be safe to assume that somewhere in the 5% to 10% range would be reasonable over 2024?

Yeah, as I said, we're just in our budget process, but maybe towards the higher end of that 5% to 10% is kind of what we're thinking. But again, we'll come out with more guidance - more specificity in February.

Yeah, I mean, again, it it'll be a combination of a few factors. There's obviously the numerator, denominator. We are going to be down a little bit. And there is the inflation. And then there's the grade effect of where is the production coming from next year versus this year. And you got sort of throw that into the half and that will suggest that cost will be up a little bit. But we haven't finished the work.

Yeah, and maybe apologize to continue on that, I just want to talk about your reserves and cut-off grades. Obviously, that's another impact, right? And so I just want to make sure - just trying to get your understanding on what you're thinking about pricing next year and cut-off rates, as well, putting…?

Yeah, again, we're still doing the work. That's something we generally will put the pen in after we get through the budget process. But, look, I would say, first of all, on the cut-off grades, we get that question a lot given the gold price environment we're in. We're certainly not planning to do anything with our cut-off grades. Our mills are full. And so we'll just continue to stockpile low-grade material. That's still no changes on cut-off grades. As it relates to commodity price options, my expectation is that within the industry, you'll see some upward movement from reserve and reserves prices where they were last year. We're still thinking about that. We're not actually - that impacted, but I think it's more of a movement towards the reality we're in. But I expect across the board, probably there will be a higher reserve and resource prices going forward.

Okay. Look forward to getting more of that next year. Thank you so much for taking my questions.

Thank you, Tanya.

And that concludes our question and answer period. I will now turn the call back over to Paul for some final closing remarks.

Thank you, operator and thanks everyone for joining us this morning. We look forward to catching up with you all in person in the coming weeks. Thanks for dialing in.

This concludes today's conference call. Thank you for your participation. You may now disconnect