Kinross Gold Corporation (K) Earnings Call Transcript & Summary

I so move.

I second the motion.

The motion has been moved and seconded. If you have not already done so, you may now vote your shares on the advisory resolution with respect to executive compensation. [Voting]

I now declare the voting closed on all items of business. The scrutineers have completed their preliminary count of the votes cast and have received the results, and I declare that all the motions have passed. A report on all matters voted on at the meeting will be filed on SEDAR. This concludes the formal business of the meeting. Before handing it over to Paul Rollinson for the CEO remarks, I would like to note that Kinross is celebrating a significant milestone this year as it celebrates its 30th anniversary. The mining sector is characterized by cyclical patterns and Kinross has successfully navigated many cycles with the ongoing support of its shareholders. This support has enabled Kinross to build a strong foundation based on our core purpose, generating value for our shareholders and ensuring a sustainable future for the company. On behalf of the Board, thank you for your continued support and engagement and to the senior management and our global team, thank you for all your hard work towards delivering safely on our shared goals. I would now like to turn the meeting over to Paul, who will provide an overview of the company.

Thank you, Catherine, and thank you to everyone for taking the time to join us for our virtual Annual General Meeting. Before I get started, let me call your attention to our cautionary statement on forward-looking information. As a reminder, shareholders may submit questions through the messaging icon on the screen and we will address them at the end of my remarks. I'd like to begin by introducing members of our senior leadership team, all of whom are on the call, they are Andrea Freeborough, Executive Vice President and Chief Financial Officer; Kathleen Grandy, Senior Vice President, Human Resources; Claude Schimper, Executive Vice President and Chief Operating Officer; Ned Jalil, Senior Vice President and Chief Technical Officer; and Geoff Gold, Executive Vice President, Corporate Development, External Relations and Chief Legal Officer. Today, I will discuss the changes in our portfolio over the last year, highlights from our operational and financial performance, both in 2022 and Q1 2023, our current capital returns framework and our ongoing commitment to ESG and our climate change strategy. In 2022, our team navigated a variety of complex challenges, including significant geopolitical events, inflation and some new project ramp-up issues. I'm very proud of how our team managed these challenges and believe our business is well positioned moving forward. Last year, we successfully exited Russia and divested our mine in Ghana. Offsetting this, we added a world-class development project in Canada with the acquisition of Great Bear. The result is that our portfolio is now repositioned and largely centered in the Americas. I will discuss the exciting Great Bear project in more detail shortly. Our company is also on a strong operational and financial position. And looking out, we expect to produce approximately 2 million ounces in each of the next 3 years. Our diverse portfolio is in excellent shape and is backed by 2 Tier 1 assets, Paracatu and Tasiast, a world-class development project in Canada, Great Bear, a growing business in Chile and the fact that 70% of our production now comes from the Americas. In 2022, our 2 cornerstone assets, Tasiast and Paracatu, continued to deliver stable, low-cost production and together accounted for over 50% of our gold production. These 2 mines are again expected to deliver over 1 million ounces this year, and are expected to remain key contributors to our production profile for many years to come. In February of last year, our La Coipa mine in Chile, reported its first gold bar after we restarted operations. La Coipa represents a growing contributor within our portfolio. Our culture at Kinross is highly focused on generating value while mining responsibly. Specifically, we remain focused on operational project and exploration excellence, maintaining balance sheet strength and generating returns for our shareholders and prioritizing ESG, which I will discuss shortly. With respect to operational priorities, as always, we continue to focus on safely meeting our production targets while striving to achieve high-margin production. We will also focus on advancing our development projects and executing our company-wide exploration strategy as we look to maintain a robust pipeline of organic growth opportunities. Our portfolio of development projects continues to underpin our future growth strategy. At Great Bear, we made excellent progress following the acquisition early last year by exceeding our drilling targets and completing approximately 225,000 meters of diamond drilling. Our initial resource announced in February delivered approximately 5 million of indicated and inferred ounces, all largely coming from the first 500 meters of depth. This is just the starting point for this high-quality deposit which we believe has all the characteristics needed to establish a large, long-life mining complex. Ongoing drilling has been encouraging with recent results confirming gold mineralization with large widths and high grades below the initial resource, including at depths of more than 1 kilometer continuing to confirm our thesis and showcasing the tremendous potential that lies ahead. At Tasiast, we are progressing well on the 24,000 expansion project. We successfully completed a planned shutdown in February, and we remain on schedule to reach throughput of 24,000 tons per day by the middle of this year. We expect to achieve this throughput level on a sustained basis by the end of this year, and we remain on track to achieve our full year production target of 610,000 ounces. In addition to the 24,000 expansion, we have also begun procurement and construction activities at the Tasiast solar plant, which remains on schedule for completion in the second half of this year. In Alaska, Manh Choh is advancing well, following the completion of a feasibility study last year. Currently, construction activities remain on schedule and on budget with the early works program progressing as planned. The initial production at the project is expected in late 2024. Our exploration strategy is also an important component of our future growth and 2022 marked a successful year for our exploration team. In 2022, a total of 336 kilometers of drilling was completed across all exploration projects, including the 225 kilometers at Great Bear. Highlights of the 2022 brownfield exploration program included promising results at the company's North American assets, Round Mountain, Curlew Basin, Bald Mountain and Fort Knox. The 2022 programs focused on expanding key targets, positioning us to further test higher-grade zones this year. In 2022, greenfields exploration programs focused on targets in Canada, Nevada and Finland, with approximately 49 kilometers of drilling completed on all projects. We anticipate spending $150 million for our company-wide exploration program this year, slightly more than we spent last year. We have budgeted $50 million for exploration at Great Bear alone to follow up on last year's exploration success. This year, we will explore additional targets at the [ LP ] zone, along striking at depth, with the goal of further delineating the deposit at depth. We also plan to explore the broader land package. Exploration at Round Mountain will focus on Phase X and Gold Hill opportunities. And at Curlew Basin, we plan to continue building on our resource. As we reflect on 2022, which represented a year of extraordinary headwinds, including geopolitical events, substantial cost inflation and somewhat stagnant gold price, I am proud of how our team responded proactively, and we're able to successfully improve operational performance in the latter part of the year. To sum up our performance in the last year, Kinross delivered production of nearly 2 million ounces with robust margins of $856 per ounce, we generated $1 billion in operating cash flow and almost $240 million in free cash flow finishing the year with a cash balance of $418 million and a total liquidity of $1.8 billion, and we also returned more than $450 million in capital to shareholders through dividends and our share buyback program. Turning now to our first quarter results, which we announced yesterday, we produced approximately 466,000 ounces at a cash cost of sales of $987 per ounce, in line with our plans. Notably, in Q1, Tasiast delivered another strong quarter of production, achieving 2 record production months in January and March. Production at Paracatu, La Coipa and our U.S. operations were all as expected. We remain on track to achieve our 2.1 million ounce production guidance for this year. Our cash and liquidity position remains strong at the end of the quarter with $471 million of cash and $1.7 billion of liquidity. With respect to our balance sheet, we have an investment-grade rating from all 3 agencies, and we continue to have very strong liquidity. In the current economic environment, our business is generating strong cash flow, and we expect to delever our balance sheet as we progress through the year. With respect to capital returns, as I indicated, we returned $455 million to shareholders through our regular dividend and our share buyback program last year. We repurchased $300 million in shares in 2022 completing our buyback commitment and meeting our objective of buying back the shares we issued in the Great Bear transaction. This year, we plan to continue paying our quarterly dividend of $0.03 per share, and our share buyback program also remains in place. Last year, we invested over $750 million into our business through sustaining and growth capital expenditures. This year, we expect total capital spend to be approximately $1 billion. Looking beyond this year, we will continue to optimize our CapEx program so that it supports the needs of our targeted long-term production profile of approximately 2 million ounces per annum. ESG is ingrained in all facets of our business and is embedded in our culture and our core values. I'm pleased to say that in 2022, Kinross once again continue to rank well among our peers in major ESG rankings and ratings. We also updated our ESG strategy focusing on the following 3 core pillars: workforce and community, natural capital and climate change and energy. In addition, we strengthened our ESG governance structure, including quarterly reporting by our ESG Executive Committee to our Board of Directors. Yesterday, we released our sustainability and ESG report, which is now in its 15th year. The report provides a comprehensive update on the progress we made in 2022 and what we aim to achieve in 2023 and beyond. Some highlights from the report include in 2022, we generated nearly $3 billion in economic benefits to host countries through taxes, wages, procurement and community support. We sustained high levels of local employment with 99% of our workforce and 87% of our management from within host countries. We advanced diversity, equity and inclusion targets, achieving the highest percentage of female participation in Kinross' workforce in the last 5 years. We ranked as the highest mining company surveyed in the Global Mail's Annual Corporate Governance Review. And we received the Alaska Miners Association's Environmental Stewardship Award for best management practices in environmental protection as part of the abandoned mine initiative. In early 2022, we also introduced our climate change strategy, which outlines a comprehensive greenhouse gas reduction plan on our path to a net 0 greenhouse gas emissions by 2050. We have set an interim target to achieve a 30% reduction of Scope 1 and Scope 2 greenhouse gas emissions intensity per gold ounce produced by 2030. As I mentioned earlier, we are currently developing a 34-megawatt solar plant at Tasiast, which will save 530,000 tons in greenhouse gas emissions over the life of the mine. We also signed a power purchase agreement for 100% renewable power at La Coipa. Climate change is a key consideration in our overall business strategy including building in emissions forecast directly into mine and project models. At Kinross, we are dedicated to supporting the local communities where we operate. In 2022, we donated $10 million in monetary and in-kind community investments in host countries. In Alaska, Kinross made a $1 million donation to Troth Yeddhas indigenous study center at the University of Alaska. In Chile, we are partnering with the local indigenous Colla community in the Atacama region on a variety of legacy projects. In that regard, we'd like to share a short video that provides details on the various projects and initiatives with the people of the Colla community. [Presentation]

In conclusion, I'd like to thank our employees and everyone who joined us today for this presentation and for your continued support. After navigating through a challenging year in 2022, I believe we are well positioned as we look forward. The outlook of our business is supported by a sizable reserve and resource base, a substantial production profile capable of delivering 2 million ounces per annum, a repositioned portfolio with 70% of our production expected to come from the Americas, exciting development projects and exploration opportunities, including the world-class Great Bear project, a strong balance sheet with strong free cash flow and a commitment to responsible mining that has made us a leader in ESG performance within the industry. With that, we'll now open it up for questions from our shareholders.

There are no questions at this time.

Thanks, Victoria. In that regard then, I would just say thanks to everyone for joining today. This concludes the Annual General Meeting. We look forward to meeting with you in the future. Thank you.