Kinross Gold Corporation (K) Earnings Call Transcript & Summary

Thank you for standing by. My name is Carla, and I will be your conference operator today. At this time, I would like to welcome everyone to the Kinross Gold Third Quarter 2026 Results Conference Call. [Operator Instructions] Thank you. I would now like to turn the call over to David Shaver, Executive Vice President. Please go ahead.

Thank you, and good morning. In the room with us today on the call, we have Paul Rollinson, CEO; and from the Kinross senior leadership team; Andrea Freeborough; Bernard Wessels, Will Dunford and Jeff 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 3 of this presentation. Our news release dated October 28, 2026, the MD&A for the period ended September 30, 2026, 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 discuss our third quarter results provide high-level updates from across our portfolio, comment on our sustainability achievements and confirm our outlook. I will then hand the call over to the team to provide further details. Before we begin discussing the quarter and keeping with our first priorities, I would like to address a very important matter with regards to safety. We are deeply saddened by the tragic loss of 2 employees of business partners of our Bald Mountain operations in Nevada. We extend our sincere condolences to their families, friends and colleagues. The safety of every individual at our sites is our highest priority and we are committed to learning from these incidents and reinforcing our safety controls across our operations. Turning now to our results. Following a strong H1, our portfolio delivered on our updated commitments for the third quarter. Both Tasiast and Paracatu, are 2 top-tier low-cost assets were key contributors and together accounted for more than half of our production at attractive operating costs. In La Coipa and Round Mountain, the 2 smaller assets behind the near-term guidance update delivered in line with our updated expectations. In terms of cost, we continue to hold the line on total operating costs and delivered strong operating margins. All this translated to free cash flow of over $1.8 billion through the first 9 months, and we ended the quarter with significant financial strength, including $2.6 billion in cash. This enabled us to increase our shareholder returns from 40% to 50% of our free cash flow -- and we have now returned over $950 million to our shareholders year-to-date. I am pleased to report that over the last 6 quarters, we have now repurchased approximately 5% of our outstanding shares. Turning now to our growth projects. Our project pipeline is advancing as we continue to make strong progress across our mine life extensions and growth opportunities. In the U.S. the team continues to progress our 3 high-quality projects, Phase X, Redbird and Curlew. At Great Bear, both the advanced exploration and the main projects are advancing well. In terms of AEX, we continue to make strong progress advancing the north and south exploration deep [indiscernible] doing well, and we remain on track the first production in late 2029. In terms of permitting, we continue to work closely with the authorities and are significantly advanced on the federal and provincial permitting process. And in parallel, we are actively engaging with the local communities and indigenous partners through regular community meetings ongoing collaboration transparent communication, which Jeff will comment on later. Moving across to growth in Chile. Last quarter, we provided an updated view of Lobo-Marte, highlighting its strong production profile, low cost structure and attractive economics. And in Q3, we continued to advance permitting, detailed engineering and execution planning towards targeted first production in the early 2030s. Turning now to a few remarks on sustainability. In Q3, we continued to make meaningful impact across our regions. The highlights include: our work with Trout Unlimited on the Cripple Creek restoration project in Alaska, which focused on restoring waterways and fish habitat impacted by non-Kinross historic mining. We also supported recovery efforts following the Trout well fire in Alaska, including emergency systems for families whose homes were rendered uninhabitable. And in Chile, we were proud to receive the Mining foundation of Chile's Award for commitment to territories and education. We're recognizing our support for education training and opportunities in the United camera region. Turning now to our outlook. The broader portfolio continues to perform well. Operations at La Coipa and Round Mountain have stabilized, and we are firmly on track to deliver our updated production guidance of 1.84 million to 1.86 million ounces. Looking ahead, we remain focused on the following: safe operational execution, cost management through productivity initiatives, delivering our great enhancement strategy, maintaining our strong financial position, disciplined capital allocation and advancement of our high-quality resource base and project pipeline. With that, I'll now turn the call over to Andrea.

Thanks, Paul. I will review our financial highlights from the quarter, provide an overview of our balance sheet and return of capital and comment on our outlook. We delivered Q3 as per our updated plan with production and costs in line and a significant amount of capital returned to shareholders through our dividend and increased share buyback plan. We produced 425,000 ounces and sold 410,000 ounces with the difference a function of timing of ounces sold. Cost of sales was $1,485 per ounce and all-in sustaining cost was $1,947 per ounce. Through the first 9 months, our production cost of sales was $1,396 per ounce our all-in sustaining cost was $1,827 per ounce, both tracking well towards our updated full year guidance. Q3 margins were strong at approximately $2,750 per ounce. Our adjusted earnings were $0.50 per share in the quarter our adjusted operating cash flow was $831 million in the quarter and over $3 billion through the first 9 months. Attributable adjusted free cash flow was $391 million when excluding the impact of working capital outflow. Working capital outflows primarily reflected an increase in short-term stockpile balances at Man show along with lower payables and higher prepaid, all of which are a function of timing. Free cash flow was also impacted by the timing of assets sold given the bank holiday on September 30. The unsold ounce at the end of the quarter were sold in early October. Turning now to our balance sheet and return of capital. We ended the quarter with $2.6 billion in cash and $1.9 million in net cash. During the quarter, S&P upgraded our credit rating to BBB flat with a stable outlook, consistent with our ratings at both Moody's and Fitch. With respect to our return of capital, in September, we increased our commitment from 40% to 50% of our full year free cash flow through both dividends and share repurchases. We believe our shares continue to represent a strong return on invested capital, considering our even more attractive valuation and free cash flow yield. In Q3, we accelerated our buyback program and repurchased a total of 8.6 million shares for $230 million. We also continue to pay our quarterly dividend of approximately $50 million. Combined, our total return on capital in the first 9 months represented approximately 46% of our attributable free cash flow, an increase from 37% in the first half of the year. Subsequent to quarter end, we repurchased an additional $100 million in shares, and we remain on track to achieve our 50% commitment by the end of this year. Since resuming our share buybacks in April 2025, we've repurchased over $1.4 billion in shares, representing approximately 5% of our outstanding share count. Including our dividend, we have returned over $950 million to date in 2026 and over $1.7 billion since the start of 2025. These results reflect the strength of our cash flow generation and our ongoing commitment to delivering meaningful returns to shareholders while continuing to invest in our business and further strengthening our balance sheet. Turning now to our garden. We remain on track to deliver our updated production, cost of sales and all-in sustaining cost guidance. Production is expected to be between 430,000 and 450,000 ounces in the fourth quarter to deliver 1.84 million to 1.86 million ounces for the year. And we're on track to be our updated cost of sales guidance of $1,420 to $1,460 per ounce and all-in sustaining cost guidance of $1,850 to $1,900 per ounce. We are also on track with our original capital guidance range of $1.5 billion, plus or minus 5%. Looking ahead to 2027, as [indiscernible] our September update we also expect production in the range of 1.84 million to 1.86 million ounces. In terms of 2027 capital, as previously noted, our $1.5 billion guidance range remains subject to inflation and incremental project additions to support production in the 2030. We're actively evaluating incremental investment opportunities to unlock value from our significant resource inventory. This includes the Fortnox Phase 11 extension and other targeted opportunities across the portfolio to add AMCs and extend mine life. Will is going to discuss these later in the call. Our annual budgeting process is underway, and we will provide detailed 2027 production cost and capital guidance with our year-end results. Looking forward to 2028, our great enhancement strategy is expected to drive higher production relative to 2027 and provide an organic offset to inflation with the addition of higher grade ounces from Phase X, Curlew and Tasiast. With that, I'll now turn the call over to Bernard.

Thank you, Andrea. I'd like to begin by acknowledging the tragic loss of 2 business partners alone Mountain operation in Abada. We are deeply saddened by these incidents, and our thoughts remain with their families, friends and colleagues. As Paul melted, safety of everyone at our sites is our highest priority. Following these incidents, we held company-wide safety standouts to reflect, reinforce and share learnings across the business. Going forward, we will maintain our relentless focus on vitality prevention and reinforce our risk management programs. We continue to be committed to visible leadership, disciplined execution and the active management of everyone algae. Turning now to our operations. Starting with Period. The mine continued to perform extremely well, but increasing all tonnes mined and strongest throughput driving significant free cash flow. -- reduction of 146,000 ounces at a cost of sales of $1,282 per ounce was on plan. Paracatu remains on track to meet its guidance of 600,000 ounces and the target cost of sales of 4 payouts. Earlier, our low-risk cost operation has delivered another excellent quarter of strong throughput and mining performance. production of 120,000 ounces at a cost of sales of $1,072 per ounce was on plan. remains on track to meet its guidance of 505,000 ounces at a target cost of sales of $1,050 per ounce. At La Coipa, we produced 29 -- 29,000 ounces at a cost of sales of $2,194 per ounce. As highlighted in September update, the quote was 1 of the 2 assets impacting our near-term production in 2026 and 2027. Production was lower quarter-over-quarter, primarily due to unpresented wetter with the restricted taxes to the ordered to maintain our targeted moped. This reduced mining rates and ultimately impacted both throughputs. Simultaneously, we encountered higher-than-expected corporate rates, the portions of the sulfide , which added planning complexity. Prices have since recovered from the weather disruptions in both mining and middle activities are stabilized. to diminished the higher copper grades and improved recoveries, we are rebuilding all stockpiles, while strengthening our ore control to maintain the right team through the more. As part of continuous improvement program, we increased oxygen and lead nitrate usage and our advancing optimization. These actions have started to deliver results as mold stabilizing. And more importantly, the impact is on the near term as the quarter provides transition to Lora which remains the key long-term value driver for us in Chile. Turning to our U.S. operations. Combined, the U.S. sites delivered production of 129,000 ounces at a cost of sales of $996 per ounce. At Fortnox, reduction was 72,000 ounces at the cost of sales of $1,938 per ounce, reduction reflected more maintenance activities and planned lower grades during the quarter, partially offset by improved recoveries. At Bald Mountain, production was 29,000 ounces at a cost of sales of $1,616 6 per ounce, reduction reflected higher tons placed on the heap each pad, partially offset by lower grade due to plant mine space. And I'm pleased to report that we bought our first gold from Redbird 1 in early October, which combined with Redbird 2 to extend [indiscernible] into early 2020s. At Round Mountain, as planned, we started to see higher gold grades and incremental improvement in recoveries, resulting in higher production quarter-over-quarter, reduction of 27,000 ounces was higher and cost of sales, $3,557 per ounce [indiscernible]. Despite higher production, it was below our original expectation and Round Mountain was the second of the 2 smaller assets impacting our near-term production profile. This was a result of lower than planned low grades, recoveries slower mining rates driven by increased selective mining. Operations have started to stabilize as we continue to implement initiatives to improve performance around downturn. And we are noticing improvement in mill reconciliation of recovery, a 60% recovery in the third quarter compared to 44% recovery in the prior quarter. Before I hand over to Will, I'd like to touch on a few other assets. In terms of where regs, we are closely monitoring the potential impacts of Al Nino and preparing for different related conditions across our South American assets. In Chile, our focus is on managing increased snowfall and maintain safe site access. While in Paracatu, we are preparing for both heavy rainfall and potential drive-up conditions. Our teams have detailed plans in place to support safe and reliable operations. With regards to productivity improvements, we continue to see strong results from our continuous improvement programs, focused on productivity and cost discipline. Building on that work, we have launched our critical success factors initiative, which focused each operation and a few priorities that matter most to deliver items plan. Clear ownership, major [indiscernible] targets and disciplined execution. With that, I will now pass the call over to Will.

Thanks, Bernard. Turning to the rest of our resource with more than 27 million ounces of M&I and an additional 17 million ounces of inferred, we continue to have a strong resource inventory for future development across our portfolio. Building on that depth, our technical teams are advancing studies for several mine life extension opportunities. Similar to what we saw with the 3 U.S. growth projects announced earlier this year, these internal projects provide significant optionality to invest further capital in our business at our existing assets, strengthen our production profile extend my lives in the 2030s and create value for our shareholders. We are focused on completing the robust technical work on these projects to support our capital allocation decisions. And we'll continue to assess margins, risk and returns as we make investment decisions. Turning now to our 3 U.S. growth projects. These projects represent an important next phase for our portfolio, adding higher grade, lower cost production significantly extending mine lives and adding value to shareholders by reinvesting in our existing operating footprint and resource base. We are pleased to report that execution is progressing well across all 3 projects with development, engineering and construction activities advanced significantly over the last quarter. Starting with our [indiscernible] in Washington, we are making significant progress across both the mill refurbishment and tailings dewatering plant construction. At the tailings dewatering plant, work outside the building on tanks and the thickener is very completion ahead of winter and work inside the building is progressing well on installation of structural steel and mechanical equipment. The mill refurbishment contractor ramped up work substantially this quarter, demolition work progressing well and installation of the new CIL tanks underway. Work at the mine is also progressing well with underground development ahead of schedule, initial reading of the main ventilation rate now complete and construction of a new dry and admin facility largely complete. Overall, these activities are on track, first production at [indiscernible] in 2028. Moving to Redbird at Bald Mountain. We saw first production from Redbird 1 earlier this month and pre-stripping and construction activities for Redbird 2 are progressing well. Engineering and procurement for the SAR plant has also progressed well with detailed engineering now 30% completed and early procurement of long lead items underway. Additionally, permitting for the Redbird 2 satellite pits was computed this quarter, putting us on track to begin [indiscernible] with those tents in 2027 as planned. And at the Phase X project at Round Mountain, we are approximately 8% ahead of schedule on underground development over 9,600 meters completed to date, further derisking our [indiscernible] first production in 2028. In parallel, engineering, procurement and early works for both surface and underground infrastructure continue to progress on plan, and we continue to ramp up operations readiness positioning the team for a smooth transition into operations as we move towards initial production. Infill drilling has also progressed for the early stoping horizons of paybacks and we have seen positive results in getting higher tons and ounces contained in our first stopes and what was modeled in our resource. This is driven by improved continuity of mineralization as we drill in tighter spacing allowing us to take a multi-year stop and more ounces than planned. You can see here some impressive intercepts, including 80 meters at 10 grams per tonne, which show potential to increase both the grade and tons delivered from this stope versus the resource model, which showed around 40,000 tonnes of 4 grams per tonne on this particular [indiscernible]. While still early, these results are encouraging, adding confidence to the [indiscernible] mining inventory and supporting the planned production ramp up. We also continued extensional drilling in Q2 and intersected an impressive zone of mineralization of 11.7 grams per tonne over 27 meters above the 300 meters down map of our initial resource phase. Aligned with our thesis for this deposit, this drilling continues to show potential for mineralization continue down debt, extending the resource base and mine life. Here, you can see some highlights on a few of the additional potential investment opportunities for our next phase of projects from within our resource base. First, at Fort Knox were continuing to event work on the next potential open pit layback Phase 11. This layback of the existing pet contains approximately 2 million ounces and has the potential to meaningfully extend our long-standing tenure in Alaska. We view this as a lower-risk project, given that the majority of capital would be for routine work for our Fort Knox team, including way stripping and heap leach pad expansions. Study work is progressing well, and we are expecting to release a project update in H1 2027 and [indiscernible] prestripping as early as next year. [indiscernible] studies are continuing to progress on both the open pit and underground extensions at West Branch, where the high-grade core of the deposit continues at depth. We are also continuing to explore and study satellite and optionality to bring additional ounces into the profile from opportunities such as [indiscernible] was added last year. At Bald Mountain, we continue to unlock the resource base across our liners lab. Our current focus is on the top area where the larger top open pit pushback and smaller to condo satellite at [indiscernible]. These opportunities could potentially further extend mine life beyond Redbird in the 2030s. Lastly, at Lobo-Marte. We are pleased with the permitting progress to date, which is on track after our EIA was accepted for a review of Chile's environmental authority in early Q2 2026. We are starting to progress detailed engineering and are in the process of project execution planning to target first production in the early 2030s. Lobo-Marte is a strategic focus for us alongside greater and a key piece of our great enhancement strategy, given the strong potential production profile and margins driven by the high grade and low strip ratio of [indiscernible]. [indiscernible] is another area that we have significant optionality both in our resource base and in our exploration projects. The first phase of the optionality is the oxide extensions that sit in our resource and are currently in permitting and under step. These are laybacks of existing pets and they have the potential to start contributing in 2028 after we complete mining in the current pit TNI and Phase 7 in 2027. Bernard spoke about some higher-than-expected copper grades that we saw slighter this quarter. Although this negatively affected near-term production, these high-grade sulfides at the bottom of the existing oxide pits represents our second phase optionality. On that front, we are undertaking exploration to find an inventory and a PFS to explore potential for a flotation plant to add on to the existing circuit process high-grade sulfides, this is early stage with potential for the mid-30s post oxide tensions. The third phase of optionality at La Coipa is the potential for a large copper porphyry deposit deeper on the property that is feeding the large number of surface deposits that we have mined historically. This is longer-term optionality and would be a different scale of operations at La Coipa and is only in the early exploration stage right now, but deep you're letting underway to try to find a [indiscernible]. Turning now to Great Bear, we continue to advance the program in parallel with permitting, detailed engineering and procurement of the main project. Surface construction is now substantially complete with all the infrastructure in place to support underground development. Both declines are advancing well with over 500 meters completed to date on a combined basis. For the main project, manufacturing is underway on several long lead equipment factors, including the mill motors, transformers and power plant generation. We've also awarded the construction contract for the administration and taxes. Detailed engineering is progressing well and is now over 55% in fleet. We expect to substantially complete detailed engineering in the first half of next year, and I'll provide a CapEx update on the back of stat. We do expect capital to be higher than the PEA as it will reflect approximately 3 years of inflation competitive contractor and skilled labor market and still changes and enhancements we made as we move through detailed engineering. However, given the high grade, significant production scale and low paid cost of grade bar, we expect a high return and a quick payback on the capital. We are focused on building a robust, reliable top-tier mine given the quality of the resource base and the multipi-decade production potential. We are excited to now be progressing underground with AEX, seeing the future of Great Bear taking shape. I will now hand it over to Geoff for an update on permitting at Great Bear.

Thanks, Will. As Paul noted, a permanent time line for the main project continues to remain on track. We continue to work closely with the authorities and are significantly advanced on main project federal and provincial permitting which I will speak a little further about. Federally, we are progressing the impact assessment process and have formally responded to the information requests received to date. As previously noted, A final decision on our impact statement as required by the late spring of 2027 in order to facilitate the early works and construction permits needed from the federal and provincial authorities to commence construction of the mine during the summer of 2027. We Provincially, the integrated 1 project, 1 process, also known as 1P1P, permitting continues to proceed in accordance with our overall project tenant time line. We have submitted most of our key early works permitting applications and expect to receive our final indigenous consultation plan shortly, another milestone under the provincial permitting process. We believe that [indiscernible] and impact benefits agreement, also known as an IBA with LAX and Wabasca or stations will benefit the overall permitting process and it is important to maintaining our project permitting time line. In that regard, we continue to make good progress on our IBA agreement. As previously disclosed, we signed the memorandum understanding detailing the key financial arrangements and First Nations accommodations for the IBA and we are currently in the process of advancing the nonfinancial aspects of the agreement, including the results of our First Nations independent impact assessment work. Lastly, and as previously noted, we have already signed a collective benefits agreement with the Northwestern Ontario at community. So overall, we have made meaningful progress with our indigenous communities. And with that, I will now turn the call over to Paul for closing remarks.

Thanks, Jeff. To conclude, Q3 demonstrated the resilience of our portfolio and we remain on track for our 2026 updated guidance. Looking forward, we are excited about our future. We have a resilient production base with a clear path to higher grade production starting in 2028. We have a competitive relative cost position. 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. In closing, when we look at the strength of our portfolio, our strong free cash flow generation, and our financial position against our valuation today, we believe our shares offer an even more exceptional investment opportunity. And with that, operator, I'd like to open up the line for questions.

[Operator Instructions] Your first question is from the line of Matt Murphy with BMO Capital Markets.

Thanks for all the updates, and good to hear that projects are going well. First question, just on the trajectory for CapEx. Is it fair to say you'll be sort of at the upper end of CapEx guide this year just based on the pace so far? And is there anything you can say about the pace in 2027, I know you've got the $1.5 billion, but still the subject to inflation and project advancement. Any thoughts around is the 440 rate? Like should we be continuing to run with that as sort of a quarterly cadence? Or could it be higher?

Matt, it's Andrea. I'll take that to start anyway. For this year, for Q4, probably a bit of an increase in Q4 on both sustaining and growth on sustaining, I think first half will end up being a second half will end up being about equal to first half, and it's kind of been a bit up and down through the quarters. And on the growth side, we have seen that ramp up a bit through the year just as the growth projects are ramping up. So that probably takes us somewhere in the midpoint to upper end of the guidance by the time we close out this year, but still within that guidance range. As we look to next year, we have the $1.5 billion range again out there, but we've always said that subject to inflation and ongoing project approvals. So we're just in the budget process now, and we'll see where we come out on that. But some examples of things we're looking at that are still in the assessment process or Fort Knox Phase 11. If we do approve that, we'll start spending on that next year. And then there's some other potential incremental opportunities that we continue to look at that are really to address production in the 2030s.

Okay. Thanks. I look forward to post budgeting update. And anything you can share on working capital, a bit of a drag in Q3. Does that reverse in Q4?

Call it, temporary. I think some of it likely reverses in Q4. We'll probably have a -- probably swing the other way in Q4 is kind of typical for us. One of the big pieces in Q3 was short-term stockpile. So that was at an show and some of that will come out in Q4, but you might see that kind of continuing just because we stop mining before we stop processing. So we've mined through the end of next year, and there will be some stockpiles throughout that time period, so you continue processing beyond that? But things like the payables and prepaid, those will reverse as we go through Q4. And then I guess, last, you have a bit of additional finished goods just at the end of the quarter, and that was the sales lag behind production, and that all got sold in early October.

Your next question is from the line of Fahad Tariq with Jefferies.

On Round Mountain, it looked like it was quite a bit better than the second quarter, mill grades were 0.73 grams per tonne. Recovery was 60%. I think the throughput was a 5-quarter high. I'm just trying to reconcile that with the September update. And I guess the answer is it's lower relative to the mine plan. So maybe if you could just touch on what the expected I guess, operating metrics were according to the original mine plan, that would be helpful.

Thank you, Bernard speaking here. Certainly, we have seen the improvements as we've mentioned in our press release, we're starting to see improvements both on the grades that we're seeing from Phase II coming through as well as some of the recoveries through our improvement initiatives. I think, ultimately, we saw quarter-on-quarter improvements as indicated here. But we still need to get back to around 80% on recovery, and we're well on our target on achieving that. So as I've said recently, we're definitely seeing the updated improvements coming through and certainly the grade recovery probably closer to 80% in the second part of the year.

Okay. Great. And then just switching gears to Great Bear on the AEX. Can you talk a little bit about any risk to the, I guess, any First Nations pushback or permitting there? And if that does have any impact on the main project.

Yes, sure. I'll take that one. Just context is important here. I would say that we really kind of got separate permitting processes, one for AEX and one for the main project. AEX has -- is not critical to the main project. And I would also say that AEX is not under 1P/1P, which the main project is, and that's we making a huge difference to us in terms of what we're kind of seeing. And what I would say on overall timing main project permitting still remains on time at this state based on our project schedule, which we've shared with both the provincial and federal authorities. And then on the AEX side, I would say, as you know, those permits have been appealed by [indiscernible] First Nation. They're seeking a lead to appeal, but we wouldn't expect to see a decision on that until later next year, potentially in the first half. And in the meantime, it's been full steam ahead. We've been able to significantly complete our AEX activity, and we're certainly not anticipating any delays at this point to our main project. Permitting given their two separate processes, and we would expect the provincial authorities to assess those main project permits under their own merits. And I would also say that in that regard, we worked very closely with the authorities to ensure that we're addressing the concerns of [indiscernible] in those -- in those permits. And last but not least, and there's sort of been a lot of media about Grasse, but I would say that the bigger voice here is our traditional territory rights owners, [indiscernible] on whose territory our project is located. They've been very supportive of AEX and further in support of our project overall. And we made significant progress on our IBA agreement negotiations. And we see that -- and once we're -- we've sort of completed those negotiations as being a big catalyst to facilitate the remaining permits that we require on the project. And on the IBA, as we've disclosed previously, we've sort of landed on the key financial metrics and compensatory elements for nations. And now we're sort of just focused on some of the softer issues are the nonfinancial provisions. So we're making excellent progress there. And we would expect to get that agreement signed before we received the final IAC permit and again, see that as a potential facilitator for the remainder of the permitting of the project.

Great. Very clear.

Your next question is from the line of Daniel Major with UBS.

Can you hear me, okay?

Yes.

Great. I guess, first one, thinking about the trajectory of unit costs into 2027, you got essentially flat production and certainly external variables, energy, et cetera, like there will be a consistent cost pressure. Would it be fair to assume that those unit costs are moving higher in the, say, $50 to $100 an ounce sort of range based on current external variables.

I'll take that one. It's Andrea. So we typically provide costs kind of 1 year out, it's pretty difficult to make the call in particular on inflation longer than that. I think maybe important to note, structurally, production is similar in 2027 to 2026 fit there's a bit more production coming from the U.S. and some offsets elsewhere, but I don't think that will have a significant impact on overall cost in '27 versus '26. We're just in the budget process right now, but expect inflation to probably be similar to where it was this year, which was about a 5% factor that we had on our cost. With the one caveat that we're continuing to watch where diesel prices go, oil price as well as the crack spreads. So we're we don't think that currently has a big impact on this year, but we're continuing to look at it as we go through the budget process.

Yes. And I would just pile on there. Just completely support everything Andrea has just said, but we do also look through the windshield a little bit. One of the things we're working on are executing as what we call our grade enhancement strategy. So as we look through '27 into '28, '29, that's when the grade enhancement strategy starts to kick in. So we expect we'll start to get the benefit of the the underground grades at Phase X, the benefit of Curlew, where we've got higher grades underground. And of course, our mine plan has us approaching the bottom of the pit at Tasiast where we get back into the high grades. So to Andrea's point, operationally, 27 was a lot like 26%. We'll keep going with efficiencies and everything we can do to manage that inflation. But looking through the windshield, we should have an organic offsite.

Maybe I'll just add to you back to 2027. We do also have hedges in place against the oil cost component of the diesel price in 2027. So we're about 50% hedged for '27.

Okay. So okay. So you're 50% hedged and at what sort of level relative to this year's trending diesel cost?

In the low $60 a barrel to $65 a barrel.

Okay. That's very helpful. Second one, maybe just touching on Matt's questions on CapEx. You guided $260 million, I think, in Great Bear this year. What should we be expecting for a run rate of CapEx into next year, assuming the FID comes through in line with your expected time lines. And a similar question on Lobo-Marte, is that going to be incurring kind of pre-approval spend in '27?

Yes. If you look back at what we disclosed at the PA time, it's got a bit of a profile there. So obviously, 27 upon receipt of our federal permits we go into significant construction. So we do expect that it ramps up meaningfully. It was in the $500 million range in that original PEA. Obviously, that's a few years data now in terms of the value date for some of those quotes. So we expect that will be higher when we work in inflation, but next year starts to be a meaningful spend here at Great Bear well with permitting.

Got it. Okay. So the $500 million is from a time line standpoint, still valid and then we should imply an inflation factor on to that. Is that the right way of thinking about it?

Yes, that's what we're thinking right now. And then Lobo-Marte is into full construction next year. That's more still early spend -- so we're still doing our bloodstream work, but that's not in the same scale next year really will get into full construction later in '28 into '29. So it's a little bit staggered behind Great Bear.

Okay. And then the final one, yes, the lift in free cash flow payout to -- in terms of cash returns, think is supportive, but you're still accruing 50% of the free cash flow on the balance sheet if you stick to that policy. We've seen some decline in asset values in the sector broadly, what are you seeing on the M&A landscape? Is there any irons in the fire that look more attractive as equity values in the sector are coming down?

Look, again, our standard sort of response on that is we're keeping awareness of what's out there. We feel we're in a pretty good position with our organic internal optionality. We've got over 40 million ounces of resource. And you recall last year, one of the things we did is we brought our U.S. a number of our U.S. brownfield projects out of that resource category through further drilling, further study and we basically move things out of resource into reserve. So we've got a lot of depth in the portfolio to keep advancing internally. But yes, we do keep an awareness and an eye on what's out there. And again, we've got a fabulous balance sheet. We've got very strong cash flow. We've got a great internal resource optionality. So we don't feel under pressure. So we do look, particularly if there's a process where something is going on, we'll take a look at it. But if you look in the rearview mirror, we've been pretty disciplined in terms of when we decide to move forward with M&A, and that will continue. We're in a good position where we don't need to do anything, but we can look and if we saw value creation opportunities, we'd look a little closer.

Your next question is from Carey MacRury with Canaccord Genuity.