Kinross Gold Corporation (KGC) Q4 2025 Earnings Report, Transcript and Summary

Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to Kinross Gold Fourth Quarter and Year-End 2025 Results Conference Call and webcast. [Operator Instructions] I would now like to turn the call over to David Shaver, Senior Vice President. Please go ahead.

Thank you, and good morning. With us today, we have Paul Rollinson, CEO; and from the Kinross senior leadership team; Andrea Fiber, Rod Shimer, Will Dunford and Jeff Cold. 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 3 of this presentation. Our news release dated February 18, 2026, the MD&A for the period ended December 31, 2025, 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 our fourth quarter and full year results, highlight our operations and projects and discuss our outlook for the business going forward and review our achievements in sustainability. I will then hand the call over to the team to provide more detail. Looking back, 2025 was another strong year for our business, underpinned by consistent operational and financial performance. We produced just over 2 million ounces and achieved our cost guidance, demonstrating a rigorous focus on cost control. As a result, our margins increased by 66% compared to a 43% increase in the gold price. This margin expansion resulted in a record free cash flow generation for our business with $769 million generated in Q4 and $2.5 billion for the full year. This free cash flow strengthened our balance sheet, and allowed us to return significant capital in 2025. In addition to returning approximately $1.5 billion of capital to debt and equity holders -- we also ended the year with approximately $1 billion of net cash. With respect to operations, Tasiast and Paracatu continue to anchor the portfolio in 2025. Together, they accounted for approximately 1.1 million ounces for the full year or more than half of our production at strong margins. At Paracatu, full year production of over 600,000 ounces exceeded the midpoint of guidance with production exceeding 500,000 ounces for the eighth consecutive year. At Tasiast, full year production also exceeded the midpoint of guidance and the mine was once again our highest margin operation in the portfolio. At La Coipa, we delivered on full year production guidance and saw a strong performance in the fourth quarter. In the U.S., our assets delivered another solid year of operations with full year guidance achieved. Turning now to our projects. In 2025, we continue to make excellent progress across our attractive pipeline. In mid-January, we announced that we are proceeding with the construction of 3 high-quality organic growth projects which will extend mine life and benefit the long-term cost of our U.S. portfolio. Each of these projects demonstrate compelling economics at a range of gold prices and represent a strong case to invest capital to grow the overall value of the business. We also saw notable progress across our broader resource base with resource additions at several assets enhancing our strong resource optionality and long-term production outlook. We also continue to advance our 2 world-class development projects, great Bear and Lobo Marte. At great Bear, surface construction for the AEX is well advanced, and we look forward to starting construction of the exploration decline later this year. I'm very pleased to report that we were just designated under the Ontario 1P process, which Jeff will elaborate more on. For the main project, detailed engineering and permitting continues to advance as we work with the Ontario and federal authorities, including the Impact Assessment Agency of Canada. The third and final phase of the impact statement submission remains on schedule to be filed at the end of this quarter. At Lobo-Marte, we are progressing baseline studies and plan to submit an EIA by Q2, and we look forward to providing a project update later this year. With respect to our outlook, we are reaffirming our stable multiyear production profile. Production of 2 million ounces for '26 and '27 remains consistent with our previous guidance and we are introducing a new year of production of 2 million ounces for 2028. At which time, our new higher-grade U.S. projects are expected to come online coinciding with higher-grade mining at Tasiast. Together, we expect this will provide an organic offset to cost inflation through great enhancement within the mine plan. Looking further ahead, we expect production to remain around the 2 million-ounce level through the end of the decade, supported by the higher grade mining at Tasiast, the U.S. projects, open pit extensions at La Coipa and the startup of great Bear. As with everyone in the industry, costs are expected to increase compared to 2025, primarily on higher royalties and inflation. However, I want to stress that we are holding the line on what we can control through continued cost discipline. With respect to future capital allocation plans, we will continue to remain disciplined to ensure that we are investing in our operations to maintain a reliable low-risk business, growing net asset value through continued pipeline development and strengthening our balance sheet while also returning meaningful capital to shareholders. The outlook for our business remains very robust, and Andrew will speak more on our plans to return capital to shareholders later. Turning to sustainability. In 2025, we continue to advance several priorities across this important area. In Q2, we will publish our annual sustainability report which will provide a detailed review on our sustainability performance and initiatives throughout 2025. Some highlights from the past year include, under the heading of Environment, we completed an energy efficiency program, delivering an estimated 1.5% reduction in greenhouse gas emissions through the implementation of more than 30 projects across our sites. Under the heading of Social, in Mauritania, we donated medical supplies through our long-standing partnership with Project Cure and Moritaneous Ministry of Health. To date, the program has supported more than 70 health clinics. And under the heading of Governance, we were once again named the top scoring mining company in the Global Mail's Annual Corporate Governance ranking including maintaining placement in the top 15% of companies overall. With that, I will now turn the call over to Andrea.

Thanks, Paul. This morning, I will review our financial highlights from the quarter and full year, provide an overview of our balance sheet and our capital allocation plans and discuss our outlook and guidance. We finished the year producing just over 2 million ounces, in line with guidance, with 484,000 ounces produced in the fourth quarter. Cost of sales of $1,289 per ounce and all-in sustaining costs of $1,825 per ounce in the fourth quarter were higher compared to the prior quarter as expected due to higher gold prices and lower planned production related to mine sequencing. Full year cost of sales of $1,135 per ounce and full year all-in sustaining cost of $1,571 per ounce were in line with guidance despite the impact from higher royalties. Margins were strong at $2,847 per ounce sold in Q4 and $2,283 per ounce for the full year. Our adjusted earnings were $0.67 per share in Q4 and $1.84 per share for the full year. Adjusted operating cash flow was a record $1.1 billion in Q4 and a record $3.6 billion for the full year. Attributable CapEx was $362 million in Q4 and $1.18 billion for the full year, in line with our full year guidance. Attributable free cash flow was a record $769 million in Q4 and a record $2.5 billion for the full year. Turning to the balance sheet. We continue to strengthen our financial position with significant cash flow generation in 2025, $700 million of debt repayment and significant growth in our cash position. In Q1, we repaid the remaining $200 million on the term loan we used to fund the acquisition of great Bear and after redeeming our $500 million 2027 senior notes in December, we ended the year with $1.7 billion in cash, approximately $3.5 billion of total liquidity and net cash of approximately $1 billion. We now have no near-term debt maturities with $500 million due in 2033 and $250 million due in 2041. In December, we received a credit rating upgrade from Moody's Investor Services, upgrading our rating to Baa2 or Baa3. Also in December, we renewed our $1.5 billion revolving credit facility restoring the 5-year term. Turning to our guidance and outlook. We're forecasting production in the range of 2 million ounces for 2026 remaining consistent with previous guidance. Production is expected to be relatively evenly split across the year at approximately 490,000 to 510,000 ounces each quarter. With respect to cost this year, we are guiding $1,360 per ounce for cost of sales and $1,730 per ounce for all-in sustaining costs at a gold price of $4,500 per ounce. The expected increase of 10% for all-in sustaining costs compared to 2025 is driven by 3 factors. First, higher royalty costs due to higher gold prices, resulting in an approximate impact of 4% or $55 per ounce. Second, overall cost inflation of approximately 5% or $75 per ounce and the remaining 1% is primarily related to mine plan sequencing across the portfolio. With the increase in costs largely related to noncontrollable factors, our comp guidance continues to demonstrate our effective cost management strategy. Our capital expenditure guidance of $1.5 billion for 2026 reflects annual inflation and planned higher capital investment as we reinvest more in our business to extend my life and increase production in the late 2020 and 2030. Approximately $1.05 billion of our total CapEx is expected to be nonsustaining with the remaining $450 million expected to be sustaining capital. Looking ahead, our production guidance of 2 million ounces remains unchanged for 2027. And we have now added another year 2028 to our stable 2 million-ounce profile. Capital expenditures for 2027 and 2028 are expected to be approximately in line with 2026 subject to ongoing inflation and potential other project opportunities for the 2030s that are currently under study. As Paul noted, we will maintain our disciplined capital allocation strategy which includes reinvesting in our business, where we have chosen to increase capital expenditures by $350 million this year, continuing to strengthen our investment-grade balance sheet, and returning meaningful capital to shareholders. This year, we are targeting to return approximately 40% of our free cash flow back to shareholders through both dividends and share repurchases. Our shares remain a strong return on invested capital, considering our attractive valuation and free cash flow yield. With respect to dividends, we are further increasing our dividend by $0.02 per share annually or 14%, following a 17% increase we announced in Q4 for a total increase of 33%. Also, as a reminder, as typical for us, we expect Q1 to be a higher cash outlook quarter due to annual tax payments in Brazil and Mauritania and semiannual interest payments on the remaining senior notes. We expect to start executing our share buyback program next week. I'll now turn the call over to Claude to discuss our operations.

Thank you, Andrea. I'd like to start with our safety culture. In the fourth quarter, our risk management practices continue to be strengthened across all the assets, ensuring that our highest risk activities are consistently and effectively controlled in the field. Building on our safety excellence programs, we continue to enhance capability at the front line by investing in our field supervisors, equipping them with practical tools targeted training and visible leadership expectations to improve the quality of our critical control verifications. In December, we signed a 5-year collective labor agreement at Tasiast and a 2-year CLA at Makita, reflecting our ongoing partnership with our employees and ensuring stability for both the local workforce and our businesses in Mauritania and Chile. Our culture of operational excellence, which is backed by dedicated site teams continues to drive strong performance from our operations. Beginning with Pac -- the mine delivered another strong year of production, exceeding 600,000 ounces, resulting in significant cash flow. Full year production of 601,000 ounces exceeded the midpoint of guidance. Cost of sales of $978 per ounce was below the midpoint of guidance. Production of 155,000 ounces in the fourth quarter increased over the prior quarter due to timing of ounces processed through the mill partially offsetting lower planned throughput. Paracatu is expected to produce 600,000 ounces at a cost of sales of $1,240 per ounce in 2026. Tasiast delivered another strong year of operations with full year production of 503,000 ounces at a cost of sales of $884 per ounce, both meeting guidance. This was once again our lowest cost operation in 2025, delivering a robust cash flow. In the fourth quarter, the site delivered 126,000 ounces at a cost of sales of $1,002 per ounce. Production was higher over the prior quarter due to higher grades and strongest throughput. Production is expected to be slightly higher in 2026 and 2027 compared to the technical report due to ongoing mine plan optimization. The site is expected to maintain production at around 500,000 ounce level until we are back into higher grades in 2028. In 2026, this is expected to deliver 505,000 ounces with a target cost of sales of $1,050 per ounce and is expected to be our lowest cost operation once again this year. The Copa delivered a strong final quarter with production of 67,000 ounces, improving over the prior quarter on higher mill throughput. Full year production of 232,000 ounces was in line with guidance. In 2026, mining at La Copa will continue to take place at the 2 open pits, Phase 7 and Pure and blend ore feed into the process plant. Equip is anticipated to produce 210,000 ounces at a cost of sales of $1,320 per ounce in 2026. Our U.S. assets collectively delivered full year production of 676,000 ounces, and across the sales of $1,426 per ounce, in line with guidance. Production of 136,000 ounces in the final quarter was on plan. In Alaska, fourth quarter production of 65,000 ounces was lower compared to the prior quarter cost of sales of $1,673 per ounce was higher as a result of planned mine sequencing, including lower contributions from Mancha. At Borg Mountain, we produced 38,000 ounces at a cost of sales of $1,492 per ounce, and production was lower over the prior quarter, while costs were higher due to planned mining of lower-grade areas at the Galaxy and Royal pits. At Round Mountain, production of 32,000 ounces was lower compared to the prior quarter as Phase S continue to transition into initial ore while processing from lower grade stockpiles, resulting in a higher cost per ounce sold. With that, I'll now pass the call over to William to discuss our resource update and projects.

Thanks, Vlad. I will start by providing an update on our year-end reserve and resource. For this year, we have updated our reserve price to $2,000 per ounce and our resource price to $2,500 per ounce. The intention was to be more reflective of the recent gold price environment while still maintaining discipline and a focus on strong margins. Starting with reserves, I'm pleased to report that we added approximately 1.2 million ounces of reserve before depletion. At Period 2, we saw a 700,000 ounce addition, largely offsetting depletion through mine design optimization and successful near-mine exploration. At Balloon, we added 200,000 ounces before depletions, primarily through conversion of resources to reserves and the 5 satellite pets that were approved as part of the RED VERI project. At Tasiast, we added 200,000 ounces before the patient with additions, both at West Branch and the existing pit design and at the fenix satellite pit. At Round Mountain, the transition to underground placed just over 1 million ounces of lower margin, lower grade open pit reserves with approximately 1.2 million ounces of higher grade, higher-margin underground reserves, fully offsetting our depletion. We are pleased to continue to see this type of progress in our reserve base, extending mine life as we advance exploration, optimizations and project studies across the portfolio. We have also grown our resource base by 1.6 million assets of M&I and 3.4 million ounces of deferred. These resource additions were spread across our portfolio and were reflective of both exploration success and the impact of higher gold prices as we continue to hold the line on costs, increasing the size of potential future open pit laybacks at some assets. Just as we are holding the line on costs, we are also holding the line on our cutoff grades to ensure we maintain the margin and quality of our resource and only saw a small resource addition from additional mill feed at the end of mine life at the higher gold price. We are pleased to see these strong additions to enhance our long-term resource optionality. You can see on this slide a summary of that significant resource optionality which now includes 27 million ounces of M&I and approximately 17 million ounces of inferred. These resources, which include a number of projects across our operating and development sites form the pipeline of potential opportunities that we are progressing to support our production profile through the end of the decade and into the 2030. Our January announcement of progression to construction across 3 high-return projects in the U.S. is a great example, demonstrating the depth and quality of the significant resource base and how we are progressing these projects into our business plan. Pax at Round Mountain is a low-cost bulk tonnage underground opportunity that it extends operations through 2038 with average annual production of approximately 140,000 ounces. Hurley is a high-grade underground opportunity that leverages existing infrastructure at the Cal River mill and at a historic Kulu mine bring online an additional high-margin line produces up to 100,000 ounces per year. And the Redbird 2 project is a highly efficient extension of mining at Bald Mountain, providing the next anchor pits alongside 5 satellite pits that combines to deliver 640,000 ounces. We have progressed the construction across these 3 projects on the back of strong margins with an average ASIC of $1,660 per ounce, quick paybacks of less than 2 years, combined NPV of $4.3 billion a combined IRR of 59% at $4,500 a poll. Together, they are expected to add over 3 million ounces of production just based on the initial resource and mine plan inventory we have drilled to date. We are excited to be moving ahead with 3 high-quality projects as we continue to execute our portfolio and grade enhancement strategy. Beyond our initial life of mines at Paydex and Carlo, which go out to 2038 both projects have significant potential for mine life extension down dip to further enhance our return on asset value. At PhaseOX, we have recently completed drilling 220 meters down depth which has demonstrated that mineralization continues with similar strong with the grade, providing further confirmation of our hypothesis that this system extends significantly down debt. This mineralization provides potential for both mine life extensions and for mining rate increase through opening of more mining horizons, potentially increasing the production rates. At Curlew, Stealth and Roadrunner exploration development completed last year has provided drilling access to target wide, high-grade resource extensions in these areas to augment our production profile in the mid-30s and drilling is now underway. As you can see on the slide, we have seen strong intercepts outside of the current resource and mine plan inventory in both of these zones, good widths and grades that have potential to extend the mine life and enhance the margins of the asset. Exploration will continue to be a priority for these 2 sites, and we look forward to providing further drilling updates through 2026. With these 3 projects now progressing to construction expected to come online in 2028. Our focus is now shifting to adding value-accretive production in the 2030s. This slide shows a summary of some of the longer-term projects in that extensive resource base that are our next focus to progress. I'll come back to an update on -- great Bear, which is next in line shortly. Moving across to Chile, a global Marta project team continues to advance technical work as well as baseline studies to support our upcoming EIA submission and we look forward to providing a project update later this year. At Tasiast, we continue to see positive results down dip at West branch and are setting both open pit and underground optionality there for mine life extensions in the '30. At the same time, we are continuing to progress exploration on satellite opportunities similar to FNIC, which we added to the production profile last year and where we saw further reserve growth this year. At Maricunga, this year, we will be progressing technical and baseline studies and refreshing the mine plan to refine our view given the incentive resource base. Beyond these projects, we are continuing to progress exploration and studies for open pit layback opportunities that you can see in our resource base across our portfolio with a strong focus on Part Borok and liquidates. Now moving to -- great Bear. Both the AEX program and Matproject are progressing well, with the main project on schedule for first production later in 2029, subject to permitting. Starting with updates on AEX, we made strong progress on site construction. Service construction for AEX is 80% complete. As Paul noted, we look forward to construction of the exploration decline later this year pending receipt of provincial permits, which Jeff will comment on shortly. With respect to the main project, which remains on track detailed engineering and technical work continues to advance well, with detailed engineering now approximately 35% in fleet. Initial major equipment procurement for process plan and surface infrastructure is already underway with contract awards in progress. Manufacturing and selected long lead items is anticipated to commence later this year. With respect to exploration at Graybar, in 2025, our efforts shifted to focus on regional exploration on the 120 square kilometer land package. Depot drilling completed up to 1.8 kilometers along strike of the main LP cell, returned encouraging results, indicating high-grade mineralization beyond the current resource base. Drilling on the broader land package outside of the main LP trend, also returned encouraging results. We will progress additional drilling to follow up on these results long trend and on the broader land package this year. I'll now hand it over to Geoff to discuss the promoting progress at Great Bear.

Thanks, Will. Permitting of the AEX program and the main project continue to advance as we work hand-in-hand with the Ontario and federal authorities. Focusing on AEX, we continue to work with the Ontario Ministry of Environment Conservation and parks to finalize the 2 remaining AEX permits. We anticipate receiving these permits and to commence construction of the decline by Q2 of this year. Turning to the main project, which remains on schedule work has commenced on both federal and provincial permits. Federally, we continue to work with the Impact Assessment Agency of Canada, IAC, to advance the project impact statement. The first 2 of 3 phase submissions for the project's impact statement were filed on time in September and December, respectively. The third and final phase is scheduled to be submitted at the end of Q1 of this year as previously noted. As a reminder, finalizing the impact statement and receiving the final impact assessment report from IAC is the critical first step to obtaining the other federal and provincial permits we require to construct and operate to great Bear mine. Work has also commenced another main project federal permits with technical documents submitted to Fisheries and Oceans Canada and Environment and Climate Change Canada during the quarter. Provincially, we were pleased that the main project was recently designated for the 1 project, 1 process permitting framework by the Ontario Minister of Energy and Mines Stephen Laser. This helpful initiative aims to better coordinate, integrate and streamline Ontario mining project authorizations, permitting and indigenous community consultation, which we support. We expect this more coordinated framework will facilitate the Ontario component of -- great Bear permitting and targeted first gold production later in 2029. Respecting indigenous communities, we continue to advance the negotiation of benefits agreements in a constructive and positive manner. I will now turn it back to Will to discuss our exploration portfolio.

Thanks, Jeff. Beyond the significant portfolio of projects under study, permitting and construction that already sit in our resource base, we are also actively progressing brownfield and greenfield exploration across the portfolio with a total $185 million budget in 2026. We had a strong year of brownfields exploration, driving both the significant reserve additions we spoke about earlier and identification of additional resource potential across a number of projects, a few of which I will now highlight. First, at Tasiast, we have continued to see positive results at West branch. With 2025 deep drilling demonstrating that mineralization continues at least 1.8 kilometers down plunge of our existing underground resource. Next, in Alaska, the team spent 2025 building on our knowledge of the Gill satellite deposit at Fort Knox. alongside opportunity drilling near the Fort Knox pit to enhance the optionality of our next playback. Results at GIL were encouraging with a few highlight intercepts shown on the slide, strong grades and we, including a 15.2 gram per tonne intercell over more than 4 meters. Gill is a satellite opportunity with potential to augment production for future phases of the forward NOx main pet. And the last highlight a FaldMountain effort to continue to explore our large land package at the site, and we're successful in bringing in the 200,000-ounce reserve add I mentioned earlier, primarily through satellite pit extensions. We have also seen strong results outside of those satellite pits that were added to reserves as part of the Redbet project. One highlight was the drilling of the Rat satellite pit, saw intercepts with significant grades and widths including 10 grams per tonne over 16 meters. RAB is 1 of more than 40 historic mining areas on the property and will be a focus to EXPLORE and study for potential to complement our next anticipated anchor pit at Bald Mountain, the top pet. You can find more details on the strong results from our 2025 brownfields program and our plans for 2026 in our press release. Moving to our greenfield program. We completed approximately 40 kilometers of drilling across targets in Canada, in the U.S. and Finland. In Canada, exploration was primarily focused in Manitoba, New Brunswick and Ontario. At Snow Lake in Manitoba, we saw exciting new results both from our first drill program on a McCarty property, including an intercept of 4 meters at 34 grams per tonne and from grab sampling on the SLG property which returned to a number of results of strong gold grades. These properties further complement the high-grade advance system we have outlined at Laguna North, providing critical mass for further exploration work in the area. In New Brunswick work consisted of mapping and drilling in the Williamsbu JV property, where Gold rich course veins were identified at the Lincoln. At Red Lake North in Ontario, Field work also identified several high-grade parts and rock grab samples returned numerous strong grades with the highest assay returning to 65 grams per ton. In Nevada, we completed 2 drill holes at PWC JV project to test for lower placed Carlin-type host drops. Program returned 149-meter mineralized INTERCEPT confirming the presence of Carlin type disseminated gold, work this year will focus on following up on this exciting result. We continue to be encouraged by our success identifying earlier-stage brownfields and greenfield opportunities to progress into our resource base and project pipeline and plan to build on this success in 2026. I will now turn it back to Paul for closing remarks.

Thanks, Will. After delivering on our commitments in 2025, we are well positioned for a strong 2026. Our business is in great shape, both operationally and financially, with a number of upcoming catalysts for the year ahead, including ongoing return of capital through our dividend and share repurchases, continued strengthening of our balance sheet, supported by strong operational performance and cash flow generation, advancing our project pipeline, including the U.S. projects discussed in January, as well as -- great Bear and Lobo Marte, which we intend to provide a project update later on this year and continued exploration intended to bring in new projects and mine life extensions. Looking forward, we are excited about our future. We have a strong production profile. We are generating significant free cash flow. We have an excellent balance sheet. We have an attractive return of capital -- 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 Fahad Tarik with Jefferies.

On -- great Bear, the 1 project, 1 process designation. I believe Kinross is the first major mining company to receive that. Can you maybe talk about the relationship with the provincial government and whether this could help get great bear into the major projects office designation at the federal level?

Yes, sure. It's Geoff. I'll take that question. Look, let me start by saying that we were pleased by the Interior Minister of Energy and Mines decision to designate the great Bear project for inclusion in the 1P1P process. And we believe this designation represents an important milestone. I was -- I'm going to talk about both processes. But at the 1P1P level, the main benefit of the designation is a more streamlined and integrated approach for the provincial component of main project permitting. And it gives us a single point of contact at the Ontario Ministry of Energy and Mines to coordinate all required provincial authorizations permitting and First Nations consultation. And so as a result, we expect that will help facilitate the provincial piece of main project permitting and targeted first gold production in late 2029. And we've worked hand-in-hand through this process with the Ministry of Mines and other provincial permitting agencies, and we're pleased with the relationship. It's a strong relationship as we continue to work together to develop the project. On your federal piece of the question, I can tell you that we've been in touch with the federal Major Projects office. And they, along with other federal agencies are aware of the -- great Bear project and its potential significant economic and sustainable benefits for not only Ontario, but Canada and in digitus communities. And it's absolutely possible to obtain designations under both the 1P 1P permitting framework that I talked about previously and the federal national project of interest framework -- but we've elected at this juncture to not apply for that federal designation. We believe that with the benefit of the 1P1P designation that we currently have, along with the fact at the end of Q1. So we believe we are well positioned for our targeted first gold production in late 2029.

Great. I appreciate the detailed response. That's very clear. And then maybe just switching gears to 2026 cost guidance. Can you just break out the impact of the royalties, the higher royalties because of the higher gold price and underlying cost inflation?

Sure, I can take that. It's Andrea. I'll start with talking about all-in sustaining costs. So our total owned sustaining cost guidance is up about 10% over 2025. And most of that is related to those 2 items. So inflation and higher royalties on gold price. So of the 10% increase, 5% is inflation and 4% is royalties from using the $4,500 gold price versus where we were for 2025. And then there's about a 1% increase that's left, and that's just really puts and takes across the portfolio on mine plan sequencing. When we look at cash costs, there's a bigger increase, so the increase looks like 20% year-over-year. So half of that 20% is the inflation in royalties and the other half is sequencing as well. There's a bit of a different impact there. It's kind of accounting characterization of our stripping costs. We started to see this soon start in kind of second half of last year where stripping costs move from being characterized as sustaining capital at some of our assets into operating costs. So we see the increase in cash costs, but the offset of that is in sustaining capital. So that's why there's no impact or very small impact on the all-in sustaining cost guidance. I'd say overall, we're moving at the same time. it's just a characterization of cost shows up differently.

Your next question comes from the line of Daniel Lager with UBS.

7 First question, just on the capital allocation and cash returns going forward. I mean I think it's great that you're anchoring a capital return to free cash flow going forward. But I suppose 2 parts to the question. Is there a preference? Or can you comment on the split between ongoing buybacks and potential special dividends to get to the 40% of free cash capital return? And then 40% of free cash flow with $1 billion net cash position implies you're going to continue to build net cash? What are you going to use that for? And is there a maximum limit above which you'd pay it all out to shareholders?

Why don't I start on -- and Andrea can jump in. To the first part of the question, we have a baseline dividend, which is meant to be there forever. And the bulk of the return of capital really comes in the form of buyback. We like the buyback. We think a lot of our investors prefer the buyback. And one of the things we like about back is it does come with that benefit of reducing our share count and therefore improving our per share metric. We reduced our share count last year, and our intention is to do that again this year. So in terms of the preference between dividend and buyback, we'll do both. But the greater volume or total of cash will be returned through the form of the buyback. Looking forward, I think our focus is to get the appropriate return of capital. And that's why, as you acknowledge, we focused on the percentage of free cash flow, that is the focal point. We do realize that in the context of current prices that will be more cash flow and therefore, more returns than we had last year. So we are increasing. But at the same time, we're reinvesting in our business. We do expect in the context of spot that our balance sheet will continue to strengthen. But I guess the point there is we also have to look at the other side of it with these higher gold prices, as we've already seen, we expect higher royalties, higher taxes. We just demonstrated with the announcement on the U.S. projects, we've got lots of optionality in our pipeline. And we'll take a sort of a steady as she goes with the balance sheet while reinvesting in our business with the appropriate return of capital expecting that we may have higher taxes, royalties and opportunities to reinvest in our business.

Okay. And then well, I guess, maybe a follow-on to that in terms of the inorganic options. Are you kind of optically looking at many opportunities at this point?

I would say we get the question reasonably frequently. We do have -- we have a very strong internal technical team. We do look at opportunities, particularly if there's a process but I would say we're hard markers. We're not under any pressure. When you look at our reserve resource really more of our resource optionality. We've got a lot of depth in our organic portfolio. We've given good visibility on our guidance for 3 years and beyond. So we don't feel under any pressure -- and what that means is if we saw the right thing and we felt it created value, we'd have a look at it. But we certainly don't feel under any pressure and we're quite happy with the organic profile as it looks today. As I said, we'll -- our objective really with the free cash flow is to continue to grow our per share metrics.

Great. And then last 1 for me. First, I guess you slowly changed the way of the accounting for the tax payables. But just on that, in terms of the Q1, now we're past the year-end, what we should be expecting in terms of the cash outflow. I know you've obviously given the guidance of cash tax for the full year. And then with respect to the run rate of capital returns, free cash flow will be lower in Q1 because of the tax payments, would you -- should we read that you'll slow the buyback? Or will you just look to distribute that at a similar rate through the year?

Yes. We're -- as I noted in my remarks, we haven't started the buyback yet just because of more significant cash outflows in Q1, largely related to tax, and I'll come back to that. But we are planning to get on the back next week. So on the whole Q1 may be lower than the rest of the year. But given we're targeting the 40% of free cash flow for total return on capital, it will be a bit of a we'll have to calibrate it as we go throughout the year, and then we'll report back each quarter. Like last year, we do expect to be in the market systematically sort of daily throughout the year, repurchasing our shares. So -- in terms of the tax payments, in Q1, we expect to be paying over $400 million, and that's largely related to 2025. And then -- we gave the guidance for the full year, but I think $500 million of that is related to 2025. Probably closer...

$60 million so $400 million in the first -- in the first quarter $400 million in the first quarter and then the remainder of the 1.25 billion -- so 125 million over the year.

Okay. Forth sort of the lowest payment, Q1, the highest than Q2. So more weighted to the first half and Q1 being the highest.

Your next question comes from the line of Carrie Macquarie with Canaccord Genuity.

Congrats on the strong year. Just going back to the 40% target. That's just to clarify, that's for 2026, and that's a number that you'll revisit, I guess, in 2027.

That's right.

Okay. And then just in terms of the 2 million ounces, is there a quarterly progression we should be expecting are pretty flat quarter-to-quarter like last year?

Pretty flat quarter-to-quarter.

Kay, as Andrea noted, to give a comment. We'd like to range sort of consistency, but obviously, at 2 million by 4, that's 500, but you have ups and downs. So we think anything $485 million to $515 million or $490 million to $510 million, that's kind of the average.

Your next question comes from the line of Tanya Jakusconek with Scotiabank.

Good morning, everyone. Hello, can you hear me?

You cut out, -- can just you can hear you that

Yes. Okay. Perfect. Great. Some have been asked, but I just wanted to follow back on just the contract renewals. Are there any other ones that are coming up for renewal this year for your labor contracts that we should be aware of?

Yes, Tanya, there is. We're busy -- we're currently busy working through the Brazil Paracatu contract negotiations are pretty standard. We do them almost annually or 18 months, a slightly different to the other side.

Late a bit more legislative as well. So it's just a bit more of a process and that's why it's taken on into this year. But for the rest of the sites, as our U.S. sites, we don't have them, and then it's just assaritania. -- we completed. So we're.

And I should be thinking about labor, the inflation and wage inflation in that 4% to 5%, would that be fair?

Yes, it's really relative to the country. Our inflation in Mauritania is like 10%. Brazil, it's about 8%. So relative to each country. And then overall, for us as a portfolio, it's in the 4% to 5% range.

Okay. So it's not out of one. Okay. My second question is on -- great Bear and thank you for the information on the permitting side. Hopefully, we get that permit in Q2. That would be good to see. But I read that you're going to give us an update later in the year on great Bear. What exactly are we getting in terms of an update? Is it a new technical study? Maybe just some clarity on what's coming.

Yes, just for kind of -- that may have come out a little bit on the script. The update we're going to provide is on global Marta. And we were talking about -- great Bear and logo at the same time. I don't know that there's a specific update that we're planning. It's just continued milestones in the case of great Bear getting those 2 remaining permits, starting to decline following the third and final impact assessment filing. So there's not a specific deliverable that I think we're thinking about with great Bear, in the case of logo, we will be filing the EIA, and we plan to give a project update on economics.

That makes more sense because I was just like what's coming on Graberthat needs an update. But okay, at -- and then my final question is the slide that we talked about -- you talked about on some mine life extensions and Paracatu was there. And I'm just wondering, many years ago, there was a potential to do a layback that would add quite a bit of ounces on Paracatu. Is that what you're still thinking about?

Yes, you can see that I mean, there's a variety of layback optionality, both in reserve and resource at Perica, -- you can see that we put about 700,000 ounces into the reserve this year as it converts that's material that is now in our strategic business plan, and that's a further redesign of layback. So that full reserve is now approved in part of our business case. So it's an easy way to think about the direct business case is the laybacks that sit in the reserve. And then there's also a significant multimillion ounce resource that we're looking at for the next stage of optionality there.

Okay.

I will turn the call back over to Paul Rollinson for 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.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.