Kinross Gold - Q1 2022
May 11, 2022
Transcript
Speaker 0
Good day and thank you for standing by. Welcome to the Kinross Gold First Quarter 2022 Results Conference Call and Webcast. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer I would now like to hand the conference over to your first speaker, Mr. Chris Lichtenholff.
Thank you, and please go ahead.
Speaker 1
Thank you and good morning. With us today, we have Paul Rollinson, President and CEO and from the Kinross senior leadership team, Andrea Freebrough, Paul Tomory and Jeff Gold. Before we begin, I would also like to state that we will be making forward looking statements during this presentation. 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 May 10, 2022, the MD and A for the period ended March 31, 2022 and our most recently filed AIF, all of which are available on our website.
I will now turn the call over to Paul.
Speaker 2
Thanks, Chris, and thank you all for joining us today. This morning, I'm going to provide a brief overview of our Q1 results and our updated guidance. Then I will provide an update on our key areas of focus, including Our balance sheet and capital allocation plans, our operations and exploration, and then comment briefly on M and A. After that, I will turn the call over to Andrea and Paul, who will provide additional detail on our quarter and our outlook. With respect to our Q1 results, our assets performed largely as planned and are set to ramp up throughout the year.
It was a low production quarter as expected due to seasonality and our mine planning schedule, We remain on track to deliver stronger performance as the year progresses. Two key operating milestones were achieved during the quarter. First, Tasiast delivered record production And exited the quarter with throughput of approximately 21,000 tons per day and is on track with its target of 24 ks by mid next year. And secondly, La Coipa poured its 1st dore bar in February and is on target to ramp up production in the back half of the year. With respect to guidance, in our news release last night, we updated our outlook to reflect the pending divestitures of our Russian operations and Toronto.
We have effectively restated our original production targets, excluding Russia and Toronto for all of 2022 and future years, with all other operations remaining on track with our original 3 year guidance. Regarding costs, we updated our original guidance to exclude Russia and Toronto, But to also reflect the higher gold and oil prices we are currently experiencing. This meant that instead of lowering operating costs, We left the guidance at $8.30 per ounce to reflect these higher prices. At this point, we are not making further provisions in our guidance, but we are monitoring the macro environment closely And we'll adjust later in the year if appropriate. Andrea will comment more on this shortly.
I now want to address our focus on the business moving forward given the 2 major catalysts that have impacted us, namely The pending divestitures of our Russian assets in Toronto and the continuing inflationary pressures We see across our business. With respect to our balance sheet, we are in a strong financial position With an investment grade balance sheet, which we expect to continue to strengthening over the coming years. With respect to our capital allocation strategy, our objectives have not fundamentally changed. We will continue to reinvest in our business, maintain the strength of our balance sheet and return capital to our shareholders. In the current gold price environment, we expect to continue with our baseline dividend And share buyback plans returning approximately $300,000,000 per year to shareholders.
However, given the current environment, we will be closely monitoring the gold price And the impacts of inflation on our margins as we go forward. Turning to our operations, The combination of the pending divestitures with the acquisition of Great Bear has reshaped the geographic mix of our portfolio. We now have 70% of our production coming from the Americas. 2 Tier 1 assets Paracatu and Tasiast, accounting for approximately half of our production A return to low cost operations in Chile with potential for further growth and a world class development project in Canada. In the current environment, we are very focused on continuous improvement and cost management, Maintaining our reserves and growth through exploration.
Starting with continuous improvement, We are maintaining our strong focus in this area to help manage ongoing cost inflation. For example, We are executing a plan to enhance synergies in Nevada between Bald Mountain and Round Mountain. We are making investments in grade control to minimize dilation. We have developed alternate Supplier strategies with a focus on total cost of ownership over the lifecycle and we have been advancing certain vendor payments To lock in preferential pricing where possible. With respect to maintaining our reserves, we are analyzing our reserve pricing in the context of today's environment.
We recognize that ongoing inflation puts upward pressure on cost structures And in turn, the gold price required to support the economics of new projects. We are not considering dropping cutoff grades or otherwise compromising the quality of ounces we mine in light of higher gold prices. Rather, we are evaluating how to realign the reserve price assumptions on both gold price and input costs to more accurately reflect today's inflationary environment. We are not changing our reserve pricing yet, But it is something we continue to analyze. Finally, with respect to exploration, We are excited about our prospects and have increased our budget to its highest level in recent years.
With respect to our brownfields Exploration program. We have several exciting projects, including curlew and potential underground extensions at a number of our existing mines that we plan to advance over the coming quarters. Great Bear in particular will be an exciting A significant area for continued investment to demonstrate the asset's world class value over time. I am excited about the potential of our exploration programs and I expect over time our investments in this area will surface value in our pipeline of projects and ultimately layered growth and profitability on top of our baseline production. Next, I want to provide a brief comment on the M and A question we've been getting.
We are happy with our balance sheet, our current operating profile and pipeline of opportunities And don't feel any pressure to replace the production from Russia or Toronto. It's been a challenging first quarter With our pending exit from Russia and Ghana. With that, 70% of our production now comes from the Americas. And all things being equal, we'd like to see this rebalanced portfolio contribute positively to our share price. Before handing off to Andrea, I will briefly discuss ESG.
Last night, we released our 20 We continue to rank well among our peers in major ESG rankings and ratings And more importantly, remain focused on doing what's right on the ground. For example, last year, We generated approximately $3,500,000,000 in economic benefits in our host countries. We recycled 80% of the water used at our sites and we approved an investment in solar at Tasiast, A strong step towards our goal of reducing greenhouse gas intensity. We are proud of our achievements and our consistent performance in all aspects of ESG. I will now turn the call over to Andrea.
Speaker 3
Thanks, Paul. I'll begin with financial highlights from the quarter, then provide an overview of our balance And financial metrics I'll be discussing today exclude our Russian operations, which have been classified as discontinued operations. With respect to Toronto, we're targeting to close the transaction in the second quarter, and our results will include the Toronto operations until that time. As Paul mentioned, our Q1 production was anticipated to be the lowest of the year, and we expect improvements as we progress through the year, With the second half in particular being stronger than the first half. Starting with production.
Our first quarter production of 410,000 ounces was lower than Q1 last year, primarily due to lower production from our U. S. Operations, partially offset by record production at Tasiast. Production cost of sales of $1,000 per ounce and all in sustaining cost of $12.45 per ounce were higher than last year due to lower production and inflationary cost pressures. 1st quarter free cash flow was a net outflow of $1,000,000 However, this includes $156,000,000 of working capital outflow.
Adjusting for this, our free cash flow would have been $155,000,000 Our first quarter CapEx was $106,000,000 with a lower spend compared to last year driven by lower capital stripping and timing. Lower first quarter CapEx is typical for us, and we expect higher spending throughout the rest of the year. Last As noted in our news release last night, we recorded a noncash impairment charge of $670,000,000 related to the planned divestiture of our Russian operations. The accounting fair value was determined based on $80,000,000 of consideration to be received with the deferred payment subject to an elevated discount rate given the current political climate in Russia. Moving to our balance sheet.
In addition to commenting on our financial position at the end of Q1, I'll also expand on our capital allocation strategy. Our cash and liquidity position remained strong at the end of the quarter with approximately $450,000,000 of cash and $1,700,000,000 of liquidity. During the quarter, we drew $1,100,000,000 from our revolver in connection with the closing of the Great Bear transaction and subsequently repaid $1,000,000,000 with proceeds from the new term loan. As such, our net debt increased from $1,100,000,000 at the end of Q4 to $2,300,000,000 And our trailing 12 month net debt to EBITDA ratio increased from just under 0.8x at the end of Q4 to approximately 1.8x, excluding Russia, which is still very manageable. We expect our leverage ratio to return to around 1 or Along with Tasiast entering its best years, we remain well positioned to generate significant free cash flow over the coming years.
When considering plans for allocating this We look at a range of scenarios depending on gold price and inflation to balance our priorities. As Paul mentioned, we remain committed to our baseline return program. Beyond that, we plan to prioritize reducing debt given the inflationary environment. At current gold prices, we plan to allocate about $1,000,000,000 to debt repayment over the next 2 years, and we expect our net debt to EBITDA to continue to decrease going forward. Turning to our revised guidance.
Note that all figures I reference are within our typical range Starting with production, we expect to produce 2,150,000 ounces in 2022, 2.3 in 2020 $3,000,000 and $2,100,000 in 2024, which is consistent with our original guidance when excluding Russia and Toronto. Looking at cost guidance, given we were revisiting these metrics, we updated our assumptions for gold and oil price to be more reflective of the prevailing environment. Specifically, we are now assuming $1,801 per ounce gold and $100 per barrel oil prices rather than $15.70 previously. With respect to CapEx, we have rightsized our CapEx profile and now plan to spend $850,000,000 in 2022 and expect CapEx to remain in the range of $750,000,000 over the following 2 years before factoring in Additional inflation beyond this year and potential additional growth projects. Moving on to inflation.
We continue to see inflation through the first quarter and in some instances, above and beyond what we factored into our budget and guidance. As a reminder, we reflected a 7 guidance of $140,000,000 includes approximately $60,000,000 related to Great Bear and excludes Before I hand off to Paul Tomory, I'd like to reiterate that although our production profile has gotten Our recently announced divestitures do not have a significant impact on our expected free cash flow over the coming year. Free cash flow generated at Kupol was expected to be reinvested into the construction of Yudinsk. And with Toronto's smaller scale, its Contribution to the consolidated profile was modest. With that, I'll now turn the call over to Paul.
Speaker 4
Thanks, Andrea. This morning, I'll provide some key updates on our operations and projects and share some highlights from our Great Bear project. I'll start with Tasiast. It delivered a strong Q1 with a new production record of 134,000 ounces. Head grades were strong this quarter and we're encouraged by the improvements in mining rates throughout the quarter The ramp up to 21,000 tons per day went well in the quarter With several days reaching this threshold, as is typical with ramp ups, there were down days during the quarter associated with tie ins and troubleshooting, But the outlook on Tasiast remains strong and the site is on track for a record year with over 600,000 ounces of production.
The second phase of the project ramp up to 24,000 tons a day also remains on track for the middle of 2023. Engineering is planned to be complete in Q2 and construction of the 3rd leach tank is now 70% complete. Looking across the rest of the portfolio, our operations are tracking well against our plan and our projects continue to advance. As Andrea mentioned, our production profile this year is weighted to the second half, in particular La Coipa, Tasiast and Paracatu and to a lesser extent the other sites also. Starting with La Coipa, we achieved a significant milestone and poured our first gold bar during the quarter.
The project was delivered on schedule under budget, which is a significant achievement given the challenging environment the team worked through during the pandemic. We remain on track to ramp up production over the first half of this year and reach full production levels by the middle of the year. At Paracatu, we saw a lighter quarter of production as anticipated with the processing of lower grade stockpile material while mining activities focused on advancing stripping. Production is expected to increase throughout the year as grades improve and we expect Pericato to deliver another strong year. Turning to Round Mountain.
Given the complexity of the Wall issued Phase W, I'd like to provide a brief summary of what has happened and what we've learned so far. As is often the case with open pit mines where mineralization extends at depth, there's a point at which we need to decide whether to continue with the next open pit pushback or transition to an underground. When our early warning systems detected a geotechnical issue at Phase W last year, it caused us to pause mining and assess this trade off sooner than we otherwise would have. Based on what we've learned so far through our optimization study, we know that our wall angles at Phase W need to be shallower than originally envisioned And over an area more extensive than initially thought, which brings with it the need for substantial additional stripping. The amount of additional stripping need is capital intensive.
So we are in the process of exploring the potential to mine portions of Phase W from underground. The geotechnical work we have done combined with the exciting exploration success we have had at Phase X is enhancing the opportunity to move underground sooner with less capital and better returns in the open pit. Moving underground Sooner Ramana would result in lower annual production levels in 'twenty four and 'twenty five versus the original plan. However, moving underground serves to lower CapEx needs and ultimately extend the mine life. Our optimization study is progressing well and has outlined optimal mine sequencing over the next few years, while also incorporating Phase S into the plan.
We will be prepared to discuss our detailed plans going forward once we complete the study in the second half of the year. But for now, we know we'll now in the first couple of phases of Phase W followed by Phase S as open pit pushbacks. Before turning the call back over to Paul, I will provide a brief update on our exploration program and our Great Bear project. Starting with Great Bear, we continue to receive positive drill and assay results that confirm gold mineralization, which is open along strike in-depth. The results reaffirm our thesis that this asset has the potential to be a high grade open pit mine with further potential to transition to a large underground operation.
We have an extensive exploration program planned for this year with over 200,000 meters of drilling with the goal of declaring an initial resource with year end results along with an infill program to support the PFS, which is scheduled to start next year. With respect to the timeline of the project, continue to look forward to potentially compressive schedule and bring initial production earlier than our current estimate of 2029. We're also analyzing an advanced exploration program, which would potentially allow us to establish an underground decline as early as 2024. This program would allow for underground drilling for more efficient exploration of deeper areas of the LP fault zone along with the nearby Hinge and Limb gold zones as well as for bulk sampling. We began baseline environmental studies and local socioeconomic studies required for the permitting process this quarter.
Other exploration highlights from the portfolio include encouraging drill results at Round Mountain and at our At Round Mountain, we encountered several high grade holes at Gold Hill that confirmed the dam dip extension of the Alexandria vein, Commence later this year. At curlew, we continue to see positive exploration results with recent drilling discovering previously unidentified veins, including an extension of the Galaxy vein, which was discovered last year. While it's still early and more work is needed on both exploration and permitting, We remain encouraged by the grades, width and depth we're seeing that have the potential to support another mine in the Americas. In summary, With that, I'll turn the call back over to Paul.
Speaker 2
Thanks, Paul. Over the past several months, our company has gone through some significant changes. However, some things that haven't changed include a strong 3 year production profile, a portfolio that supports strong production through the decade, a continued focus on margins, A strong balance sheet and capital returns through dividends and share repurchases. What has changed is that our portfolio has been reshaped by our planned exits from Russia and Ghana And our business is now more Americas focused and our growth projects have reached significant milestones with Tasiast Hitting its throughput targets and La Coipa ramping up to full production. In our view, Our updated portfolio warrants a better valuation and we look forward to seeing this materialize as we continue to execute on our plans.
With that operator, I'd like to open up the line for Q and A.
Speaker 0
Thank you. We have our first
Speaker 5
My question, I guess, the first one is with regards to grades at Tasiast in the back half of the year. I had Pulled up the old technical report and averaging grades around 2.7 for the next for 20222023. Given the 2.5%, like should we be still gearing towards that 2.7% overall for the course of the year?
Speaker 4
Yes. We'll be tracking higher towards 3 actually for the full year. In other words, we're going to be hitting higher than 2.5 grades going into the second half.
Speaker 5
Sorry, you're going to be hitting higher than 2.5 or 2.7?
Speaker 4
Higher than 2.5 and higher than 3 in pieces over the course of the year. We still intend to average just shy of 3 for the year, for full year 2021.
Speaker 5
Okay. Full year 2022, you mean, right?
Speaker 4
Yes, sorry, yes, full year 'twenty two, yes.
Speaker 5
Okay. And then similarly at Paracatu, I mean, I guess, we've been looking for higher grades for a year now. And I know you've been saying that it's nothing major, but just what kind of grade should we be gearing towards for the second half of the year at Paracatu.
Speaker 4
So the reason the grades have been lower over the last couple of quarters is because we've had the fleet focused on stripping And we've been putting lower rate stockpile through the mill. As we get into Q2, Q3, Q4, we're going to trend higher closer to 0.4 in Q2 and then above 0.4 for the second half, finishing the year nearing 0.5. So we are on track with grade at Paracatu and what you've been seeing for the last couple of quarters is simply mine sequencing and stockpile milling.
Speaker 5
Okay. And then I will ask one more question on Round Mountain and then maybe to others to ask some questions. So thanks for giving us some clarity on what's going on there. I was a little bit lost as to where that stood. But in just in terms of you sort of gave us an idea of what 2024 and 2025 could potentially look like.
And then you said that you're currently Open pit sorry, assuming open pit extraction for Phase S and Sorry, in Phase W right now. But what does 2022, 2023 look like? Are we should we be modeling Around the current run rates that you have this quarter or is there some kind of an improvement that we will see over the course of the year?
Speaker 4
Yes. Thanks for the Raman question, Anita. We knew that this is going to be a topic of focus. What we've as you know, We had the wall movement early last year. And then early this year, we determined that the clay layer that is causing the geotech issues is more extensive.
And so we've had to Look at how we sequence the plan and one of the bits of news here are that we've pulled Phase S forward. So what we're going to do starting immediately is we're going to Feed direct ore from the first two phases of W and that's what we're going to focus on over the next several months. And then we're going to start stripping Phase S Later this year, so that the sequence in the near term will be W1, W2, then Phase S. And what we're targeting is production approaching 2.40, 2.50 for this year, same again next year And then closer to 300 after that. So what we've established here is that we're in an open pit mine, the next couple of phases of W and then Phase S.
And then the second half of our optimization study, which we're working on in the balance of this year, will determine whether the 3rd and 4th phases of W and then X, What their configuration is open pit versus underground. But to answer the question, we are going to ramp up quarterly production around the Q1 Was lower than initially thought because of underdosing of cyanide in the heap. So it was a heap issue, not necessarily a mining issue. And we expect to finish the year, like I said, In that $240,000,000 range and same again next year and then starting to ramp up in 'twenty four.
Speaker 5
And then so if we I was stripping out the capital from Russia and from Toronto and kind of Came in a little under what you're saying for $750,000,000 So if there's somewhat of a shortfall, is that the should it be Sort of allocated to stripping it at Round Mountain, is that where we would expect to see if there was a differential?
Speaker 4
Yes, Andrea will start.
Speaker 3
I think the $750,000,000 for 'twenty three and 'twenty four were really sort of directional. And This is Jocelyn from where we had previously said about $1,000,000,000 was the biggest chunk is taking out the $650,000,000 or so CapEx For you, Jen, that was in the Okay. So it's really more of a directional number than too precise.
Speaker 4
And at Round Mountain, we are limited by the fleet. So we have a constant stripping rate. And so the total tons moved around We'll be basically the same every year, but the CapEx this year will likely be lower.
Speaker 5
If I could ask, what is that mining rate overall?
Speaker 4
We target about 100,000,000 The year.
Speaker 5
Tons per annum, okay, between waste and ore. Okay, all right. Thanks. I'll get back in the queue for other questions. Thanks.
Speaker 0
Our next question comes from the line of Mike Parkin from National Bank Financial. Your line is open. Please go ahead.
Speaker 6
Thanks guys. Can you just give Any color in terms of you kind of noted already, Tasiast is running, it's kind of around the 21,000 tonnes per day To exit the quarter, I thought it's good, but what about La Coipa? How can you give any color there in terms of what you're seeing in April or May to date?
Speaker 4
On throughputs, it's been spotty. We're still in the very early stages of the commissioning there and we've had the typical tie in and downtimes. Our production, as you've seen, has been very small there. But as we got into May, we started to see more reliable throughput Pushing 7, 8, 9, 10000 tons a day. And our plan has always been to ramp up to a steady state for the second half, really targeting late June, early July.
So it has definitely been spotty up and down, but that was expected due to the commissioning ramp up schedule, We will get into that steady state in the second half.
Speaker 6
But nothing that has you alarmed like kind of largely everything as expected,
Speaker 4
Yes. Both Tasiast and La Coipa have had tie ins and downtimes and Pumps breaking and power bumps, but entirely consistent with what we had modeled and expected for commissioning ramp ups.
Speaker 6
Okay. With respect to Paracatu, there's obviously some challenges with water in regions of Brazil. I don't I think From what I recall, you guys are generally okay, but there's kind of some regional factors that affect your power rate. Can you just Give us an update on where things stand there?
Speaker 4
Yes. This year's rainy season was a record. And if anything, Our problem was the opposite of having to manage excess water. Water balance at the site is doing fine. The power plants are also doing fine.
And the how much we can take off take from our power plants is higher than it was last year. And certainly, Having owned those power plants through the drought has greatly benefited our unit prices. But bottom line is that both operationally at site and the power plants, It's smooth sailing right now due to water.
Speaker 6
Okay. That's great. And then just with Kettle River and Curle Loop, Can you just give us a bit of color like what the goal is there? It's obviously an asset that doesn't come up in conversation very often. The results are Pretty interesting.
Where do you guys
Speaker 7
what are you
Speaker 6
guys kind of thinking of for that project?
Speaker 4
What you've seen in our tone, we're starting to talk about it a little bit more. We're really excited about what we're seeing there. The intercepts are Very encouraging. We're getting things like 6 meters at 5 grams, 3 meters at 6 grams. And the overall thinking there is To use the fact that we have the Kettle River Mill, the Kettle River infrastructure, curlew basin project is quite close.
It would be A shorter trucking than what we were doing from Buckhorn. And what we're targeting here is getting to about 1,000,000 ounces. We're not there yet, but we have line of sight on that. And at 1,000,000 ounces, we're looking at a pretty attractive project. And what we start to do in the background here is Parallel to the exploration program, which is that we're very excited about, we're looking at the permitting aspects of reopening the Kettle River Mill And we're looking at potential project economics and that would be something similar to what we did at La Coit by refurbishing the mill, investing in the infrastructure.
But because we've got the decline already in place at curlew, we're in effect already mining there. And now that we're down at the depth, we would like to be Much of the focus over the next couple of quarters will be drilling from underground. So it is exciting. We're targeting 1,000,000 ounces. We're adding them in our models as we go.
We're not at that $1,000,000 yet, but we're quite excited about the prospects.
Speaker 6
So with that decline kind of in place, we could actually potentially see a greater volume of drill holes getting reported as we move through The year?
Speaker 4
That's the intent, yes. And as we had done some drilling from surface over the years there What the underground drilling is allowing us to do is obviously a much more granular targeted program and we are discovering veins That we did not know were there. So we're proving up a hypothesis that the mineralization continues at depth and down dip and it's It's been really positive.
Speaker 6
Okay, great. Super. Thanks very much guys. That's it for me.
Speaker 0
Our next question comes from the line of Greg Barnes from TD Securities. Your line is open. Please go ahead.
Speaker 8
Thank you. Paul Rollinson, Perhaps some of the overhang on your stock is still some concern about your ability to close on the sale of the Russian assets. Do you see any particular risks around that or the counterparty being able to pay in dollars?
Speaker 2
Sure. Thanks, Greg. Look, maybe I'll give a little bit of a background segue and then maybe transition over to Jeff, We're on the day to day. Look, as you know, I mean, we're in uncharted territory here. It's a very fluid situation.
Our strategy really has been to in the first instance Focus on the priority of our health and safety of our people and our environmental standards and Well, the position we've taken with the government is we're trying to effect a transition To a responsible operator with industrial logic, someone that's an underground miner in the region where we operate, We've pursued a process as laid out by the government. And so in terms of looking after our people, looking after the environment, finding a responsible buyer and following the process, we feel We've really done everything we can. But again, I would say we're in uncharted territory. Jeff, do you want to maybe I'll give a sense of where we're at.
Speaker 9
Sure. Yes. Yes, Greg, look, as Paul said, unprecedented circumstances. And so we don't Want to speculate on the outcome or timing of the Russian government approval, as there is some uncertainty around that, but we've done everything we can. We've We've obviously advanced our closing process and our ancillary agreements.
And effectively, the approvals that the parties require, there's effectively a Sign off for the Ministry of Industry and Trade that's required. And then there was a newly constituted sub commission that was set up to approve foreign company transactions and that is something as required. And in addition, there's a federal Anti monopolies, service approval required, which is sort of tantamount to antitrust in the Western So we're doing everything we can. We're supporting the buyer with larger applications and we're waiting. And if and when those approvals show up and we're in a position to close, we'll update the market at that time.
Speaker 8
Okay. That's helpful. Give us some color around that situation. Paul, you also mentioned you're considering Your reserve pricing, you use $1200 per ounce now. And I know this is overly simplistic, but if you use 8% inflation, I guess you have $1300 an ounce.
What Kind of ballpark numbers are you thinking about in terms of what gold price you might use going forward or how you would get there?
Speaker 2
Well, you're bang on like you've hit the nail on the head. It's strictly that. When you look at our Spend whether it's operating or capital, when you start to run through kind of inflation numbers that we're seeing, It's mathematical. And so we haven't done anything yet. We still got our mine plan set up, Our reserves at 1200.
But to as I indicated in the commentary, our strategy is not around, I would say the sins of the past where people drop cut off grades to try to paint a growth story, Our thinking is really about and I use the word carefully maintaining our reserves By looking at higher gold prices to take into account that cost of inflation effect, The kind of prices we're talking about, Paul, I mean, I think, essentially there.
Speaker 4
Yes. So with the 8%, you're right, I guess, you did $13,000,000 But that 8% is Hedge impacted, in other words, we have the cushion from hedges on oil in the near term. As we look at $100 per barrel longer term, The number is probably higher than 8%. And as we go through the Q1 here heading into May, inflation is trending higher than we had Been anticipating, so what we're modeling right now is $13.50 to $1400 as sensitivities right now.
Speaker 2
With $100 oil.
Speaker 4
With $100 oil, exactly. And what we're going to do is with subsequent quarters, we're going to elaborate on that thinking a little bit more, but we are running Our internal plans at 13,501,400 to see the impacts. If we were to move higher, We would accompany that move higher with an instruction to our sites not to increase pit size or Change cutoff grades. So in other words, we would look to maintain pit geometries because in some situations, a higher reserve That's not what we're trying to do here. We're just trying to maintain the reserve, recognize the inflationary environment.
Speaker 2
And then the whole other side of the inflation that we have to think about What will happen with currencies in particular Brazilian real. So I guess we're just putting a notice out there, Greg, that inflation is here. As you know, we were pretty transparent when we 7% into our guidance at the beginning of the year. We're just watching it very closely and trying to have you guys understand what our thinking is.
Speaker 8
That's great color. Thanks very much. It gives a lot of context.
Speaker 0
Our next question comes from the line of Carey MacRury from Canaccord. Your line is open. Please go ahead.
Speaker 7
Hey, good morning, everyone. Just maybe back on the La Coipa, can you talk about What you've assumed for guidance there in terms of production? And is that going to be all commercial production? Or is there some sort of non commercial production associated
Speaker 4
We almost all the production will be production ounces and we're assuming around 200,000 ounces for the year. And clearly, like I said in my prepared remarks, La Coipa is very heavily back weighted here.
Speaker 7
So probably like what 80%, 90% of that would be in H2?
Speaker 4
Yes, that's about right. Yes.
Speaker 7
Okay. And then you mentioned the impact of the fuel hedges on Costs, is there any way you can quantify like the $830,000,000 cost assumption for this year if you were unhedged? Is there a sense of what that number would be?
Speaker 3
Well, I guess I'll start by just saying we're about About 50% of our exposures are hedged at an average price just below $50 That's helpful.
Speaker 7
Okay. And then maybe one last one for Paul Tomory. Just on the Great Bear, you're doing great control,
Speaker 8
John, there. Any surprises you're seeing on the great control, John?
Speaker 7
In You're seeing under great control, John?
Speaker 4
In terms of the mineralization, no, we're seeing everything we're hoping for. We've done about 12 kilometers out of a planned $35,000 program and it's really to delineate and have a better understanding of how we construct the But also to set up for operational practices, but no surprises.
Speaker 8
Great. Thank you.
Speaker 0
We have another question from the line of Anya Soni from CIBC World Markets. Your line is open. Please go ahead.
Speaker 5
Hi. So I guess I also wanted to ask about Fort Knox and What's going on with the Gill satellite pits and Gilmore and where that sort of stands, like where we are in the mining sequence there? If you could just refresh my memory on those assets.
Speaker 4
So the Gill satellite is up and running. We We're using a contract miner there with a smaller fleet and we're trucking the mill ore Over to the main Fort Knox Mill and it's progressing well. It's a year 1, so all going well there. In the case of Gilmore, that's now part of the fundamental mine plan. We no longer differentiate between Gilmore and non Gilmore.
And just to give you a rough sense, Gil will make up about 50% of the mill by the end of this year, Having slightly higher grade than the principal for NOX pit.
Speaker 5
Yes. I assumed I thought that it was going to start up this quarter and I was just So is that the like the I think the proportion was kind of like 1852 tons, not to get too specific, versus the $13,000,000 from the Gilmore proper. So that's going to ramp up to fifty-fifty, is that what you're saying?
Speaker 4
In terms of total tons, we'll have to get back to you on the total ton split.
Speaker 5
But the
Speaker 4
total the gill tons are relatively low. As I said, it's higher grade, smaller fleet. The principal tons movement is in the main 4th NOx pit with the 7 90 fleet.
Speaker 5
Okay. And then the second question I had was around CapEx. Obviously, with the CapEx Expense this quarter was fairly low. Can we just can you just give us an idea of like Where and how like that will evolve in the ramp up over the course of the year?
Speaker 3
I'll start. Typically, we have a relatively slow start to the year on CapEx. So Q1 is usually our lowest CapEx We have maintained our guidance for the year ex Russia and Toronto. One of the reasons our CapEx was lower in Q1 was just less stripping less capital stripping costs and we do expect that to ramp up through the year.
Speaker 4
And a couple of specifics. La Coipa, we will end with a pretty significant under run on CapEx. We'll be probably 20,000,000 Under budget there.
Speaker 2
Which is in a good way.
Speaker 4
In a good way, exactly. Yes,
Speaker 5
exactly.
Speaker 4
And We have a solar power plant. We're developing at Tasiast and that is has been deferred a little bit. So the capital that we were Q1 didn't show up and it's been deferred a little.
Speaker 5
Okay. And then I think the last question that I have was Just with respect to the guidance overall, just so I understand, the 2,150,000 ounces of GEO That you have now completely excludes any contribution from Toronto, right, which probably would have been I mean, you delivered like $30,000 or so This quarter, so you've stripped that out when you take the 2.15?
Speaker 3
That's right. We've basically guided For continuing operations that we expect to be there going forward. So it's for all of 2022 January 1, but obviously, we produced almost 100,000 ounces in Russia that's within discontinued operations. And as you said, about 30,000 ounces From Toronto in Q1, and there will be some in the early part of Q2 as well until we close.
Speaker 5
And then similarly, any spend that you had, like Russia was already excluded, but any Toronto spend and Toronto up to the 31st is We shouldn't be including that in our 850 number for the year?
Speaker 3
That's right.
Speaker 5
In cap. Okay. All right. Okay. Thank you very much.
Speaker 0
Our next question comes from the line of Tanya Jakusconek from Scotia. Your line is open. Please go ahead.
Speaker 10
Great. Good morning, everyone, and thank you for taking my questions. A lot have been answered, but I just want to circle back. Just wanted to finish Maybe Andrea, just on the capital allocation or Paul, you mentioned the $300,000,000 On $150,000,000 from dividends and $150,000,000 on share buyback, what where do you stand on the Great Bear Resource Shares that were issued for that transaction, it had been mentioned previously that you were going to look at buying those back. Have those been now pushed out?
Priority has been the $1,000,000,000 debt reduction. Where do we stand on that?
Speaker 2
Yes, it's a good question, Tanya. Thank you. Obviously, that's something we do want to address. We still want to address. We're also trying to be Mindful of the environment we're in today.
We're looking pretty closely at the gold price and how it holds in On the revenue line and the inflation we're seeing is not going away. It's growing and I mean that in a year over year context. So we are absolutely committed to the $300,000,000 We would like To take out those shares issued for Great Bear, but at the same time, we want to be transparent that As we think about that, we're thinking about this from a margin perspective as well.
Speaker 10
Okay. So we'll prioritize then the $1,000,000,000 debt repayment over the next few years over this buyback Well,
Speaker 2
the idea is obviously we'd like to do both, but in a contracting margin environment, we'll always go seek the balance sheet 1st.
Speaker 10
No, for sure. And maybe just on just finishing off on guidance, You have a lot of ramp ups in the second half, Fort Knox, Ball, the Coipa. You've got Tasiast impacted 2 quarter over quarter improvements. So I'm just trying to get an idea on a overall portfolio basis as we go through the year. Are we looking at Progressively quarter over quarter improvements or are we looking at a portfolio where you've got 45, 55 first half, second And then quarter over quarter improvement over that 40x55, maybe some guidance there would be helpful.
Speaker 4
It varies by asset. So for example, at Fort Knox, we anticipate getting back to about 80 for each of the remaining three quarters, Whereas at Paracatu, it's a slower ramp up. We did 108 and then we're targeting probably 120 in the second quarter And then heading up above $160,000,000 $170,000,000 for the last two quarters. So Paracatu is definitely back end weighted, as I answered the earlier question, ramping up The grade, so what we're looking at really here is a medium ramp up in Q2, something over $500,000 And then getting into the $650,000,000 range for each of Q3 and Q4. I've given you some color on some of the assets there.
And of course, Tasiast, With every month that goes by, we get into better and better grades. So Tasiast is also quite back end weighted.
Speaker 10
Thank you for that.
Speaker 4
We don't love to be so back end weighted, but it's just the nature of the portfolio and where each asset is Right now, so they are all back and weighted on grade and throughput and ramp ups and heap leach timing.
Speaker 10
Okay. Thank you for that. And now that I have you on, maybe you mentioned about fast tracking Dixie and trying to get that in earlier than 2029. Would the decline there help you in terms of having some underground production earlier? And is there excess Is that the milling toll milling capacity in the area as we get your mill in place to bring it on earlier?
Or how should I be thinking of where you can gain time to get this in earlier than 2029.
Speaker 4
So as we look at potential schedule compression, the critical paths do run through permitting And some other regulatory processes, for example, electrical system tie ins. So the focus will be on Continue to evolve our understanding, engage with all key stakeholders on the permitting timeline. The underground decline doesn't necessarily advance The project, what it does allow us to do is do much better targeted underground drilling for better definition of the hinge and limb underground targets, but also the LP underground target. The decline will be situated in between the 2. We would drill as we go.
And the principal goal there is not necessarily schedule acceleration, but rather Resource growth earlier and better definition on underground targets for engineering purposes.
Speaker 10
Okay. And how should I think maybe my last question, how should I be thinking about your pipeline as we go forward? Obviously, peak Gold coming in the earliest, then you would have Dixie and if we can come in earlier than 2029, that's great. And then Lobo Marte Coming in, in 2030, would that be a reasonable assumption of how I should think of your pipeline? Just to see that 2,000,000 ounce over the rest of the decade.
I'm trying to understand how all of that pans out?
Speaker 4
Yes. So you got the sequencing correct. Muncho at peak It's going well at Fort Knox. We're on track there for 2024 production. The one in the middle that you missed is the extending La Coipa.
So we've got the first extension at La Coipa with the JV with Codelco. We're now working on another phase extension with Codelco in that Peren deposit Called Paren IV, we've got Paren II. Don't ask me why we go from 2 to 4. And Lobo Marte, as we said before, If we can extend La Coipa, we would push out Lobo Marte because La Coipa is built, permitted. So to the extent that we add mine life We will push out Lobo Marte.
And the other one, as I was talking to earlier with Mike, curlew is starting to show up on the list here as well as something that Come into production if we can get to that minimum viable project, some of it has come in, in the back half of the decade here.
Speaker 10
Okay. So that could come in even before Lobo Marte if you're extending mine life at La Coita?
Speaker 4
Definitely. Yes, definitely, we will want to do that. The other thing in the very far background is Maricunga. We've got a big We've initiated a very early stage study on what things might look like in a sustained higher gold price environment In Chile, as you know, we have a huge resource there and we're starting to do some preliminary level studies on a reopening plan there, but it's very early days there.
Speaker 0
There are no further questions at this time. I would like to turn the call back over to Paul Robinson.
Speaker 2
Thank you, operator, and thanks everyone for