Kinross Gold Corporation (K) Earnings Call Transcript & Summary

Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Great Bear project update. [Operator Instructions] I would now like to turn the conference over to Victoria Barrington, Senior Director of Communications. Please go ahead.

Thank you, operator. Good morning, everyone, and thanks for joining us today. Please be advised that this presentation contains forward-looking information about expected future events and outcomes related to the Great Bear project. 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 today refer to Page 2 of this presentation, the cautionary statement in our Great Bear news release dated today, February 13, 2023, and the risk factors in our most recently filed AIF, all of which are available on our website, www.kinross.com. Joining us on the call today are Paul Rollinson, President and CEO; Ned Jalil, Chief Technical Officer; Nicos Pfeiffer, VP of Geology; Graham Long, VP of Greenfields Exploration. And with that, I'll now turn the call over to Paul.

Thanks, Victoria. Before we get started, I'd like to respectfully acknowledge the indigenous lands of Wabauskang and Lac Seul on whose traditional territories, the project is located. Thank you all for joining us today. I'll provide a few opening remarks about today's exciting milestone and then turn it over to our technical team. I would also like to point out that today, along with the press release, we have filed a voluntary technical report focused on geology and metallurgy. We closed the acquisition of Great Bear on February 24 of last year. And at that time, we had high confidence that this property would become a world-class mine. In the 1 year we have owned the property, we have made excellent progress on drilling out this world-class deposit and releasing a substantial initial resource. Today, we are even more excited and confident about the project than we were at the time we closed the acquisition. The drilling results have continued to prove out our thesis that the project could host a multi-decade high-grade open pit and underground mining complex. On our Q3 earnings call, I highlighted one specific hole that I thought was particularly exciting as it demonstrated the mineralization we were encountering at depth. That whole inter-sector mineralization at a vertical depth of 700 meters. We now have a drill intersection at a vertical depth of approximately 1.3 kilometers. With that, I'll now turn the call over to Ned and his team.

Thanks, Paul. Our focus in 2022 was drilling out the first 500 meters of the LP zone in order to confirm our thesis of a high-grade open pit and underground mine. We drilled over 225 kilometers, which when you combine with drilling completed by Great Bear Resources brings the total drilling on the project to more than 560 kilometers. The results are spectacular. Within 12 months, we have declared a 5 million ounce resource, 2.7 million ounces of indicated and 2.3 million ounces of inferred. This validates our view that the LP zone can host a long-life, high-grade open pit and underground mine. In addition to the diamond drilling, we drilled 35 kilometers of grade control. This is a practice that is common just before production. Nevertheless, we decided to bring this forward because this drilling is at a tighter spacing and provides a larger sample size, which increases our confidence in the resource model. The grade control drilling has confirmed our expectation that the abundant visible gold will potentially generate a positive reconciliation. We also have developed a lithology model and a structural model, which has informed the estimation domains and led to a deeper understanding of the mineral resource. This work has given us the confidence to release a voluntary technical report with a focus on geology and metallurgy. We've done more work than is typical at this stage. Furthermore, to confirm our hypothesis at depth, we drilled 1 kilometer plus deep holes, which intersected mineralization. I would like to share with you that last week, one of our deepest tolls had visible gold at a depth of 1,280 meters below surface. We're very pleased with the robust resource estimate. I would like to point out that this resource includes 140,000 ounces from Hinge and Limb. The resource was run at 1,700 gold price, which is what we are using for resources this year. But it's important to point out that we have selected a $1,400 pit shell. We ran pit shell optimization and underground stope shape optimization. The open pit resource cutoff is 0.5 gram per tonne, while the underground cutoff is 2.3 grams per tonne. This high-grade underground and open pit resource is only based on the top 500 meters of the LP. Furthermore, the mineralization comes to surface, directly below the overburden, making it easy for us to access the high-grade material at the start of the pit. This open pit has the potential to be one of Canada's highest-grade open pits, which again continues to support our view that the LP zone is expected to host a long-life, high-grade open pit and underground mine. As we presented earlier, the resource was developed using a 1,700 gold price, which translates to a 0.5 gram per tonne cutoff grade for the open pit material and 2.3 gram per tonne cutoff grade for the underground. What is even more exciting for us is that most of the resource is high-grade material. We have this high-grade core. If we raise the cutoff grade for the open pit from 0.5 grams per tonne to 0.9 grams per tonne, we get 3 million ounces at an average grade of 3.5 grams per tonne. Also, if we raise the cutoff grade for the underground from 2.3 gram per tonne to 3.5 grams per tonne, we get 1.1 million ounces at an average grade of 6 grams per ton. This resource, the high-grade resource of 4 million ounces will potentially be the source of mill feed for the first 8 years of the project life at an average grade of 4.2 grams per tonne. We have not completed the studies yet, but assuming a potential 10,000 tonne per day mill with a feed grade of 4.2 grams per tonne and a recovery of 95%, one can see how this will potentially generate between 450,000 ounces to 500,000 ounces per year. Now thinking about the future, as Nicos and Graham will show, the deposit is open at depth. As we go underground with the exploration decline and continue to grow the resource, we see the first 10 years of the open pit and underground complex transitioning to a large, high tonnage underground mine going forward. To visually demonstrate to you what I just covered, please look at these figures. On the left-hand side, you can see the block model with material above 0.9 grams per tonne in red and the low-grade material in blue. On the right-hand side, you see the high-grade material only, the 0.9 gram per tonne and above. See how the high-grade core hangs very well together and how the low-grade material occurs around it. This low-grade material will potentially be able to segregate and stockpile. Now let's talk about the resiliency of the pit to changes in gold price. As I mentioned earlier, this resource was based on a 1,700 gold price. Nevertheless, we have conservatively selected the 1,400 pit shell. If you look at the figure on the right, at a higher cutoff grade of 0.9 gram per tonne, even higher than a potential reserve cutoff grade, most of the resource remain intact and yields 3 million ounces at an average grade of 3.5 grams per tonne. Our intention is to continue expanding the high-grade underground over time, which, combined with the high-grade open pit will provide the blended feed to the mill. Now I pass it over to Nicos.

Thank you, Ned. At the LP zone, we see a robust underground resource that complements the open pit. The deposit is characterized by wide mineralization and stacked lenses with exceptionally competent rock. With an average stope width of 6 meters and parallel panels, we envision high productivity, low development intensity mining. We see the initial resource as just the beginning at this project. We have drilled a series of holes below the resource and see mineralization extending to depth in high-grade northwest plunging shoots. Holes like BR-579, which was drilled last quarter and intersected 25 meters of 15.5 grams highlight the tremendous potential of these shoots sitting immediately below the LP resource. These initial drill holes have extended mineralization to depth of more than 1 kilometer vertically and will continue to be followed up throughout 2023 and 2024. You can see here a view of our resource constrained by a pit optimization and [ MSO stope shapes ] as well as the design for an exploration decline we intend to begin developing next year. The decline will facilitate more efficient exploration of the depth extensions of our deposits and enable continued resource growth at LP, Hinge and Limb. While this decline is advancing, we will continue to conduct deep exploration, resource development and regional exploration from surface. I'll now pass the call over to Graham.

Thank you, Nicos. Our extensive 2022 drill program has demonstrated that our geological and structural analogy to the Hemlo Gold deposit is reasonably accurate. With the strong deformation corridor hosting mineralization continuing along strike and developing high-grade shoots that extended depth. Mineralization starts its surface for all of the zones. When comparing the 2 deposits, our drilling has shown that the LP zone is more robust from surface down to 500 meters and at the broad and high-grade mineralization we are seeing at depth potentially with coalesce as seen at Hemlo and many other mines of orogenic nature. The land package has potentially significant prospectivity with roughly 20% of the 91 square kilometer property having been explored to date. Our 2023 drill program is intended to grow the inferred resource category to depths up to 1 kilometer while simultaneously carrying out condemnation and exploration programs as we look to place future infrastructure and head for the next ore body. Key exploration target areas will be the strike extent of the LP zone, and then as deep drilling will have us position drill collars further to the Northeast, we will be testing the stratigraphy for potential parallel zones. Unlike the LP zone area, the portion of the property hosting the Hinge and Limb deposits are underlying predominantly by the [indiscernible] and interflow sentiments similar to the units hosting the Red Lake Gold Mines. Detailed airborne magnetic geophysics shows us that there are numerous targets that resemble the Hinge and Limb structures that remain to be tested.

Thanks, Graham. The network also shows favorable results. The initial test work indicates a recovery of approximately 95% with no indications of deleterious elements. Furthermore, with abundant visible gold found in the LP zone as well as the Hinge and Limb, our expectations are for high recoveries. Within that, another positive is that we expect 40% to 50% of the recovery be by gravity. Our overall schedule for Great Bear is driven and subject to the permitting process. Our estimated time lines are in line with comparable Canadian projects. Environmental baseline activities are progressing well, and we plan to begin preparing the impact statement later this year. We are continuing to target start-up production in 2029 with the potential for 2028 in the event the permits are received quickly. With that, I will hand it back to Paul.

Thanks, Doug. We are extremely pleased with the initial resource estimate and believe the best is still to come. We are targeting releasing the first details regarding mine plans and economics with the upcoming study results in 2024. In closing, let me say we are committed to developing this project through a genuine partnership with the Wabauskang and Lac Seul First Nations and with full respect for their values and traditions. Thank you all for joining us today. Operator, we would now like to open up the line for questions.

[Operator Instructions] Our first question will come from the line of Anita Soni with CIBC World Markets.

Can you hear me.

Yes, we can hear you, Anita.

Okay. I just have a few questions, and I'll pass it off. So firstly, in terms of a little confused on the presentation between the elevated cutoff grade and the baseline. So the baseline is done at $1,700 gold, right? And then the elevated cutoff grade that was done at -- I think Chris was telling you around $900 per ounce. Can you just explain to me the material that falls off because that used a very high gold -- sorry, very low gold price there. Why is it included in the resource estimate. Why wouldn't you just not bother going after that material? Because it seems like it's 0.6 gram per tonne material in the open pit, and it's only 300,000 ounces. It doesn't seem like it's worth bothering [indiscernible].

Thanks, Anita. As you know, we -- as I mentioned on the call, for this year, we are using $1,700 for declaration of the resource. And as the standard practice in the industry is that you report everything above the cutoff grade that the $1,700 gold translates to. As such, the material that's in the low grade bin has to be reported. That being said, I wouldn't discount completely the material. The material is part of the open pit. We're going to go through it anyways. We're going to mine it, whether we mind it as waste, low grade. It doesn't really matter. We're going to mine that material. So the proposal or the vision for this would be to stockpile that material as low grade and whether it's 0.6 or 0.7, that material could supplement mill feed in the future of the deposits, say, in the next 10 years of the project as a supplement to the, for example, high-grade underground feed that would come from an underground-only mine at that point.

Okay. Second question, as I look at the resources that have been delivered in the open pit, and there's a gray area in some of the -- sorry, the brown area on the sum -- in the slide. Is that what you indicated resource shell is going to look like and the mineralization that's at the bottom. That's what's going to be mined out eventually? And if so, could you just kind of give us an indication if the strip ratios are still coming in at 6 to 8:1 as you had previously indicated, I think, in June.

Do you want to take that, Nicos?

Sure. it. Yes. So what you see the brown area there, that's our LG shell. So that's our actual resource pit shell. And then the material sitting directly below that, those are resource stope shapes. So those are actually MSO stope shapes that we run to constrain the underground resource. With respect to the strip ratio, I can pass that over to Ned.

Yes. Did we answer your first question, Anita, I guess just to confirm.

Yes, I was waiting for the strip after.

Okay. Okay. Yes. So the strip ratio for the overall resource is approximately 7% as the number within the range you mentioned. But as you know, as we start doing mine planning work in the next phase of studies, we will optimize this in the sense that the starter pit and the first couple of pushbacks will have a significantly lower strip ratio. But the overall strip ratio for the resource, for that pit shape that you see is the you've asked about.

Okay. Second to last question, the dilution that I should be considering when I move these resources to reserves in my model in the open pit is like a 5% to 10% level fare and in the underground a 20% level fare? Is that?

So with the -- this is Nicos again. With the open pit, we reblock the model, so we actually have a 10x 5x10 block model informing that resource. So there is some amount of dilution already considered in those underlying numbers. And then with the underground, there's a minimum stope with of 2.5 meters. So we forced our stopes to be at least 2.5 meters wide, which is incorporating some dilution. So I would guide you to go lower on your dilution figures.

Okay. So I think you mentioned stope with a 6 -- you said 2.5% minimum, but it was 6 by something that I noted that you guys.

Yes. The average stope width is 6 meters, and we have stopes above 20 meters. So we're thinking about a pretty high productivity underground set up here. We've got multiple panels running parallel to each other. So imagine what that will do from development intensity and just tonnes generated from the underground.

And the last question... I think you threw out the 4.2 gram per tonne material at 10 [indiscernible] tonne per day, that's how you get to the 450 to 500 . Can you sort of give us an idea of how many years of pit at what grade do you envision? And then how many years have underground at what grade do you envision?

Anita, at this point, this -- we haven't completed our studies. We're actually just kicking off the study work. So we don't have the details between an open pit and an underground split that one would put in an economic model. That being said, back of the envelope calculation, you look at the 3 million ounces in the pit, right? And you look at the 1 million ounces in the underground as high grade. We have access to both materials at the potential start of a mine because we're driving this advanced exploration decline early in the project. As such, we have access to high-grade material from underground and a high-grade material from the pit. Now to bring to your attention, this average grade for the 3 million ounces that you see in the presentation, we have the potential, as we start the detailed my planning work as part of the next coming phases of studies to elevate even that average grade higher in the early years. But as a back of the envelope calculation, we provided you with a chart so you can model the first 8, 10 years of the mine life.

Okay. And I lied, one last question. And this is more of a corporate question. You're using 17 for your resources. Is it fair to say that the rest of the assets will be done at 17 this year?

Yes.

Okay. And similarly, the reserves were, I would guess 14 then?

Yes, we're jumping the gun a little bit. We'll talk a little bit more about that later in the.

I know I'm getting questions why are you seeing 17 for you versus the 16 last year.

Your next question will come from the line of Greg Barnes with TD Securities.

Just on the -- your evolution of your thinking around how you developed this. I know last year, we were talking to 15,000 tonnes a day, biasing towards the higher end of that blending grade, stockpiling. It seems like you've moved away from that lower tonnage, higher grades. Is that where you're thinking has gone, yes?

Yes. I think as one go through the drilling, which is the first phase of a project and starts with the initial resource, which we're doing right here, you go through multiple phases of back-of-envelope calculations. What we see today with this high-grade resource, we don't see the need to go for a larger mill. Again, we have not completed our studies yet. As such, we will go through that in the next phases of defining what is the optimum pit size, what is the underground? Where does it start? And what is -- and we zoom in and lock in the mill size. But with what we know today, a 10,000 tonne per day mill with the grades we're feeding is very attractive for this deposit.

I think the other thing, Ned, though, which is we have the advantage here of really the time to really design this in a way that we have the flexibility. Our sort of cardinal rule here is never to build a mill that we'll be struggling to fill because ultimately, this will be a longer life underground. And so we're trying to optimize the economics in the early years with the open pit, which makes you want to have a bigger mill, but we're mindful of the longer-term underground and not having an oversized mill. We've seen that many times where people struggle to keep the mill full, and it really hurts you on the economics. So we're balancing the 2.

Yes. Okay. That makes sense. And I think, again, when we talked about this last summer, there was a fairly significant percentage of stockpiling going on of this lower grade material for later in the mine life and then you blend it through. It sounds like that's still part of the plan, but perhaps less so.

Well, I think, I mean, Ned, I would say, that Nicos, based on what we're talking about today, preliminary, you've probably got a minimum of 10 years of stockpile that we'd be able to work with as we transition underground, minimum. So we've got lots of comfort as we think about the future and the transition from the open pit to the underground, both with the stockpile and just how we build that mill and our flexibility on if we wanted to even potentially derating it at some point in the future if we wanted to go from 10 to 8 or something like that. So I think we've got 2 levers to pull there.

Your next question comes from the line of Jackie Przybylowski with BMO Capital Markets.

I think most of my questions have been answered, but maybe I'll just ask if you could just take a step back and maybe from a high level, talk about how you see this property over time. I know you've sort of alluded to it. You've got the starter pit, you've got an open pit and then a longer life underground. But can you maybe walk through how the different deposits maybe fit into that overall plan, at least as far as you're thinking right now, [ Nicos ]?