Kinross Gold Corporation (K) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Kinross Gold Second Quarter 2026 Results Conference Call and Webcast. [Operator Instructions] Thank you. I'd now like to turn the call over to David Shaver, Executive Vice President. You may begin.

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; Claude Schimper; Will Dunford; Geoff Gold; and Bernard Wessels, our incoming Chief Operating Officer. 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 July 29, 2026; the MD&A for the period ending June 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 second quarter results, provide high-level updates from across our portfolio, comment on sustainability achievements and confirm our outlook. I will then hand the call back over to the team to provide further details. Before we begin discussing the quarter, I would like to highlight some changes to our senior leadership team. I'm pleased to announce the appointment of Bernard Wessels as Chief Operating Officer, succeeding Claude Schimper, who will be retiring later this year. Claude has been an integral part of Kinross for more than 16 years, including the past 5 years on our senior leadership team and 4 years as COO. During his tenure, he has led our operations with a steadfast commitment to safety, operational excellence and continuous improvement, helping to deliver meaningful and lasting benefits across the business. To ensure a seamless transition, Claude will remain with the company for a period of time, working closely with Bernard. On behalf of the Board and the entire Kinross team, I would like to thank Claude for his outstanding leadership and many contributions to the company and wish him all the best in his retirement. Bernard brings more than 25 years of mining experience, having held increasing senior operational and leadership roles at Sibanye-Stillwater, Harmony Gold, Anglo American Platinum JV, and most recently, Newmont. We are excited to welcome Bernard to Kinross and look forward to leveraging his extensive operational leadership. Turning now to our second quarter results. Following a strong Q1, we delivered a strong Q2, establishing an excellent first half and positioning us well to achieve our full year guidance. We continue to hold the line on costs and delivered strong operating margins. As a result, we delivered free cash flow of over $725 million in Q2 and over $1.5 billion in the first half of this year. Our business is in excellent shape, and our pipeline of growth projects, including Great Bear and Lobo-Marte, continue to advance well. Our financial position and cash flow outlook remains excellent. And in Q2, we continue to return additional capital to our shareholders through both buybacks and our quarterly dividend, in keeping with our target to return 40% of our free cash flow. In terms of operations, Q2 was another strong quarter, with production of 492,000 ounces. Both Tasiast and Paracatu were key contributors and together accounted for more than half of our production, driving significant free cash flow. With regards to our projects, we continue to make strong progress across the portfolio. In the U.S., the team continues to advance our 3 new high-quality projects at Phase X, Redbird and Curlew. At Great Bear, both the advanced exploration and the main project are progressing well. In terms of AEX, with the remaining permits in place, we recently completed the first blast of the exploration decline. And with respect to the main project, both detailed engineering and permitting are advancing well. We continue to work with the authorities as they progress their review of the impact statement. We also continue to engage with local stakeholders and indigenous partners through regular community meetings, ongoing collaboration and transparent communication. Moving across to Chile. As a reminder, we submitted the Lobo-Marte environmental impact assessment in March, marking an all-important milestone and formally launching the permitting process. Subsequently, in May, we welcomed the newly elected President of Chile, President Kast, to our local offices in Copiapo. During his visit, he acknowledged Kinross's long-standing commitment to the Atacama region and declared his support for our development plans in the region, including our world-class project, Lobo-Marte. We appreciate President Kast's support for the responsible operation and the development of our assets in the region. And last night, we announced an update on Lobo-Marte, an excellent high-quality asset in our portfolio with a strong production profile, low cost structure and excellent economics. Will is going to elaborate on this later in the call. Turning now to sustainability. We published our annual sustainability report in the second quarter. This report provides a comprehensive update on our achievements and plans going forward. A key highlight for me was in Mauritania. In June, we delivered humanitarian support to remote farming communities facing food insecurity due to drought and rising transportation costs. Turning now to our outlook. Following a strong first half, we remain on track to meet our full year production, cost and capital guidance. As we highlighted last quarter, we continue to benefit from an attractive relative cost position, supported by our disciplined approach to managing cost pressures through input cost hedging, productivity initiatives and our grade enhancement strategy. Looking ahead, we remain focused on continued operational execution, cost management and capital allocation and continued advancement of our high-quality resource base. Our focus is to continue to generate strong margins, robust free cash flow and long-term value for all our shareholders. With that, I will now turn the call over to Andrea.

Thanks, Paul. This morning, I'll review our financial highlights from the second quarter, provide an overview of our balance sheet and return of capital and comment on our outlook. As Paul noted, Q2 was another strong quarter for us. We produced 492,000 gold equivalent ounces as planned. Q2 cost of sales of $1,336 per ounce and all-in sustaining costs of $1,821 per ounce were also on plan. Margins were robust at over $3,100 per ounce. Our adjusted earnings were $0.71 per share, and our adjusted operating cash flow was again over $1.1 billion. Attributable free cash flow was $727 million after $406 million in capital expenditures and $327 million in tax payments. Turning now to our balance sheet. In the second quarter, we continued to strengthen our financial position, adding over $470 million in cash after returning $275 million to shareholders. We ended the quarter with new records of $2.7 billion in cash and $1.9 billion in net cash. With respect to our return of capital, as a reminder, we're targeting a 40% return of free cash flow through a combination of dividends and share buybacks. Our shares continue to remain a strong return on invested capital, considering our attractive valuation and free cash flow yield. In Q2, we repurchased a total of 7.9 million shares for $230 million and continued to pay our quarterly dividend of approximately $50 million. Combined, our total return of capital in the first half represented approximately 37% of our attributable free cash flow, and we remain on track to achieve our 2026 target of 40%. Subsequent to quarter end, we repurchased an additional $40 million of shares. I'm also pleased to report that since resuming our share buybacks in Q2 2025, we've repurchased over $1.1 billion in shares, representing approximately 4% of our outstanding share count. And including our quarterly dividends, we have returned approximately $615 million to date in 2026 and approximately $1.4 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 further strengthening our balance sheet. Turning now to our guidance. Following a strong first half, we remain solidly on track to deliver approximately 2 million ounces and a cost of sales of $1,360 per ounce and an all-in sustaining cost of $1,730 per ounce. And we're also on track with our capital guidance in the range of $1.5 billion. On production, we'd expect the third quarter to be in line with the first 2 quarters as we continue to transition to Phase X at Round Mountain, and we expect the fourth quarter to be higher. In terms of our operating costs, as we look to the second half of the year, we expect costs to be modestly higher, reflecting a greater contribution from our U.S. operations. For the full year, we'd expect to be in line with our cost guidance. As Paul noted earlier, through our disciplined cost management, we're starting from a competitive cost position relative to our peers. We remain focused on managing costs in order to maintain strong margins and free cash flow generation. In the near to medium term, our fuel hedging program continues to provide meaningful protection against higher oil prices, with significant hedges in place through both 2026 and 2027. I would also reiterate that the fuel cost sensitivities we outlined with our first quarter results remain unchanged and the impact on our overall cost structure remains manageable and within our guidance ranges. As a reminder, our guidance was based on $70 oil. For every $10 per barrel change in oil price, we expect an impact of approximately $10 per ounce, with a potential additional $4 per ounce from secondary impacts such as freight and other consumables as oil markets continue to be volatile. Provided context, if the recent oil prices persist through the remainder of the year, the impact on all-in sustaining costs would be less than 2%. On the supply side, we continue to receive regular deliveries of fuel and other key consumables, and we've not experienced any supply disruptions across our operations. Looking forward, our grade enhancement strategy is expected to provide organic offsets to inflationary pressures and contribute a stronger cost profile over time. For example, both Phase X and Curlew are expected to begin contributing higher-grade ounces to our production profile starting in 2028. And our 2 world-class development projects, Great Bear and Lobo-Marte, are expected to be contributing a total of approximately 850,000 ounces per year of high-grade, low-cost ounces to our future production profile. With that, I'll now turn the call over to Claude.

Thank you, Andrea. I'd like to start with our safety culture. This quarter, we continued to invest in protecting our people through proactive training initiatives which promote our Safeground brand. Our critical risk management program continues to mature across our operations, with leaders engaging effectively with the workforce and verifying critical controls for high-risk tasks. Turning now to our operations. Starting with Paracatu, the mine had an outstanding quarter, with strong production driving significant free cash flow. Production of 158,000 ounces and a cost of sales of $1,108 per ounce were in line with the prior quarter. Paracatu remains on track to meet its guidance of 600,000 ounces at a target cost of sales of $1,240 per ounce. Tasiast had another strong quarter. Production of 133,000 ounces increased over the prior quarter due to higher throughput with a cost of sales of $990 per ounce, in line with the prior quarter. Tasiast 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 59,000 ounces at a cost of sales of $1,395 per ounce. Production increased over the prior quarter due to planned higher grades and throughput. Cost of sales decreased over the prior quarter due to higher production. Before I move on, I'd like to acknowledge the recent severe winter storm in Northern Chile. Our thoughts are with the local communities and our employees who were affected by this event. While we experienced some impact, La Coipa remains on track to achieve its annual guidance of 210,000 ounces at a target cost of sales of $1,320 per ounce. Moving to our U.S. operations. Production was lower quarter-over-quarter as we ramp up all mining at Round Mountain Phase S in the second half of the year. Combined, the U.S. sites delivered production of 142,000 ounces with cost of sales of $1,871 per ounce. At Fort Knox, production of 95,000 ounces was in line with the prior quarter. Cost of sales of $1,596 per ounce was lower compared to the prior quarter due to the timing of ounces processed through the mill. At Bald Mountain, production of 27,000 ounces was in line with the prior quarter. Cost of sales of $1,770 per ounce was lower due to the ramp-up of capital stripping at Redbird in Q2 and higher ounces placed on the heap leach pads. At Round Mountain, we are currently in a stage of higher waste mining and lower-grade, lower-volume ore supply as we are stripping Phase S. Higher-grade, higher recovery ore is expected from Phase S in the second half of the year. Turning to a spotlight on our overall performance. At Kinross, we have a strong culture of continuous improvement and innovation embedded throughout the business, with each site having a dedicated team in place to evaluate, implement and sustain increased efficiencies and cost management practices. I would like to list a few highlights of these projects to demonstrate how they help offset inflationary and cost pressures. Starting with Paracatu, the recovery improvement projects which have been in the works for the last couple of years are now delivering tangible results. We have made enhancements to the CIL circuit, implemented new gravity concentrators, improved process controls and carbon management practices as well as targeted improvements in the Acacia reactor performance, all of which are contributing to higher recoveries and improved operating performance. At Tasiast, we are focused on mining and mill throughput improvements and our solar power. On the mining front, we are focused on loading productivities, targeted training and commissioning of larger equipment. In parallel, we've improved the effective utilization of our rolling fleet through an improved roster balance, shift change management and dispatch optimization. These increases together have contributed to a record month in May, with Tasiast delivering the highest tonnes mined and moved in its history. At the mill, the team's attention is focused on continued improvement in reliability. And some examples include implementing procedures which have reduced the time to change out a [ rip belt ] by 50%, redesigning the SAG panels with lighter weight and adding [ oxygenation ] to make recoveries more consistent. In terms of power, the solar facility continues to provide approximately 23% of site power requirements, resulting in lower energy consumption and reducing impacts of the recent elevated oil prices. At Bald Mountain, the shovel optimization program has delivered improvements in loading efficiency, helping lower mining costs while improving equipment productivity. We have also introduced the Relief Operator Program, which has contributed approximately 2.1 million productive tonnes during break coverage since the beginning of the year. At both Round Mountain and Fort Knox, we have optimized haul routes and truck dispatching practices, reducing unnecessary engine hours and fuel consumption. These efforts have resulted in fuel savings of approximately 6.4 million liters while reducing haul cycle times at Fort Knox by approximately 7 minutes. At all of our sites, we are embracing the use of artificial intelligence and machine learning to improve our predictive maintenance, optimize schedules and mine planning and fire response management. Overall, our continuous improvement and innovation initiatives continue to generate measurable benefits across the portfolio, supporting safety, productivity gains, enhancing efficiency and helping offset inflationary cost pressures. Before I hand the call over to William, I'd like to say what an incredibly rewarding journey it has been with Kinross. It has been both a privilege and an honor to work alongside such a talented and dedicated team. As I transition my responsibilities over to Bernard, I do so with great confidence. And his extensive operational experience, combined with the strength of our team, positions Kinross well for continued success. Thank you to everyone with whom I've had the opportunity to work alongside over the years. And Bernard, welcome to Kinross. With that, I will now pass the call over to William.

Thanks, Claude. It's been a pleasure working alongside you. Bernard, welcome to Kinross. I look forward to working closely together as we continue to advance our operating and growth initiatives across the portfolio. Turning to our resource base and project pipeline. Our portfolio remains underpinned by a substantial gold resource inventory of more than 27 million ounces of M&I and an additional 17 million ounces of inferred. In addition to our near-term growth projects, our technical services teams continue to advance a number of medium-term attractive mine life extension opportunities from across this resource base, including Phase 11 at Fort Knox, Top Pit at Bald Mountain, resource pit extensions at Paracatu, open pit and underground extensions at Tasiast and the La Coipa bauxite extensions in Chile. These projects have the potential to further strengthen our production profile, extend mine lives and create value for shareholders well into the next decade. The 3 high-quality projects in the U.S. that we announced earlier this year are excellent examples of how we are leveraging our extensive resource base to create long-term value. I'm pleased to report that our teams are making strong progress across all 3 projects and continue to advance them on plan. At Phase X at Round Mountain, underground development is progressing slightly ahead of schedule with over 8,400 meters completed to date, derisking our path to first production in 2028. Engineering work for both surface and underground infrastructure is advancing well, including the start of detailed engineering for our paste backfill plant. Procurement is also advancing well, with packages awarded for many critical items such as the mobile equipment, ventilation fans and the CRF plant. We've also had a strong focus on operations readiness, with 21 Kinross miners gaining experience working in underground with our contractor and onboarding of a highly experienced underground mine manager. At Bald Mountain, mining at Redbird is advancing well, benefiting from the increases in efficiency, and we expect Redbird production to continue ramping up through the rest of this year. Construction of heap leach pad extensions to support Redbird advanced significantly over the first half of the year, benefiting from a milder winter, with earthworks for the first leach pad extension now complete and lining well underway. Engineering for the SART plant and other process infrastructure has also advanced, and long lead procurement is underway for some of the key infrastructure. Turning to our Curlew project in Washington. We made significant progress on the tailings dewatering plant in Q2, with the building now complete and installation of mechanical equipment commencing. Mill refurbishment activities are starting to ramp up with the contractor onboarded and starting initial demolition. Underground mine development and infrastructure are also advancing well, with the raised collar construction completed for the main ventilation and escape raises and underground development ahead of schedule. We are pleased with the progress across this portfolio of opportunities, and we'll continue to provide updates as the projects advance towards production. Turning now to Lobo-Marte, our next high-margin cornerstone development project beyond Great Bear. We completed a high-level refresh of our feasibility study economics to account for inflation since 2021 and further enhancements of the execution strategy. For context, the historically operated project is located in Northern Chile in the Atacama region, approximately 50 kilometers from both of our assets, La Coipa and Maricunga. The project's key attributes include its forecasted long mine life, high heap leach grade and low strip ratio, positioning Lobo-Marte at the lower end of the industry cost curve and reinforcing its potential to become a significant contributor to long-term shareholder value. In terms of production, based only on the initial mine plan and current reserve, Lobo-Marte is expected to produce approximately 4.6 million ounces over an initial 15-year operating life. Annual production is expected to average approximately 350,000 ounces a year during steady-state operations, providing a meaningful and long-duration source of low-cost production for our portfolio. These attributes and the substantial production scale deliver excellent returns on the $1.8 billion initial capital with an all-in sustaining cost of $1,000 per ounce, and NPV of $4.3 billion, an IRR of 26% and a payback period of approximately 2 years, all set at a gold price of $4,100 per ounce. And the project remains resilient at lower gold prices. With a high grade, low strip ratio and low cost structure, Lobo-Marte is expected to play an important role in our grade enhancement strategy alongside Great Bear with potential to become a cornerstone asset, adding higher-margin production and strong free cash flow in the 2030s and into the 2040s. The project is also an excellent strategic fit for Kinross, extending our mine life in Chile, where we have a 20-plus year history of production and strong government support for responsible mine development through large-scale open pit mining and heap leach processing, areas where we have extensive experience, both in Chile and in the U.S. The layout and scale of the 2 open pit mines at Lobo-Marte is one key driver of that low-cost structure and high margin. The size of the pits and the broad mineralization allow for use of a large-scale fleet planned to deliver mining rates of up to 50 million tonnes per annum in the current mine plan. Forecasted mining costs over the life of mine of $3.25 per tonne also benefits from the construction of conveyors to transport ore from the open pits to the crushing facilities, driving down material movement operating costs. Most importantly, on the mining side, the overall cost structure and all-in sustaining costs are expected to benefit significantly from the low strip ratio of 2:1, driven by the broad nature of the mineralization on these porphyry deposits. [ Plan ] and the current economics from the 2021 FS contemplates the sequential development of the 2 open pits, beginning with Marte, which has been mined previously, reducing the strip ratio and initial CapEx. As we progress the project, we will continue to study the optionality around the sequencing of the 2 open pits. Moving to processing. The project is designed around a nominal throughput rate of approximately 35,000 tonnes per day, with ore processed through a conventional 3-stage crushing circuit prior to heap leaching. The amenability of the ore to heap leaching with a strong forecasted heap leach recovery of 69% is also central to the strong margin and low expected cost of production at Lobo-Marte, as heap leach processing at an estimated $12.30 per tonne would be significantly cheaper than a conventional mill and CIL circuit. The 1.3 gram per tonne average grade of the reserve at Lobo is significantly higher than most heap leaches operating today and is the largest contributor to the strong margins, economics and returns of this project with an estimated all-in sustaining cost of $1,000 an ounce. It is this grade that enables Lobo to potentially produce 300,000 to 400,000 ounces per year from a relatively straightforward 35,000 tonne per day 3-stage crush and heap leach facility. Moving to capital and site infrastructure. The refresh of the 2021 FS indicates initial project capital of approximately $1.8 billion, largely driven by processing facilities and site infrastructure, including approximately $1.1 billion of direct capital and $700 million for indirect and contingency. Key infrastructure required to support the project beyond the processing facilities includes a 75-kilometer access road, 60-kilometer power line and a 40-kilometer water pipeline, which is expected to bring water in from our existing operating wells that are currently supplying water to La Coipa. We also included significant investment in the capital estimate to ensure best-in-class environmental controls and initiatives, including options such as covering all of our conveyors to minimize dust and using regenerative braking on the conveyors to save energy. This high-level refresh was provided to account for inflation since 2021 and to reflect the current execution strategy, which has advanced over the prior years to improve constructability and reduce development and execution risk. We are progressing to detailed engineering, and we will provide a fulsome capital update once detailed engineering is substantially complete. Given the manageable estimated initial capital of $1.8 billion, [ plan ] funded from operating cash flow, in line with our disciplined capital allocation strategy. The combination of the low mining cost, low processing cost, high heap leach grade and the resource size are what make this project a central focus in our grade enhancement strategy. Importantly, the impressive economics in this update reflect only a starting point for Lobo-Marte. The project has significant upside potential beyond the current mine plan and captures just a portion of the broader mineral endowment identified across the property. The current open pit mine designs in this update remain unchanged from the 2021 feasibility study and include only the reserve from 2021, which was done at a $1,200 gold price. The 2021 mine plan was maintained as the base case for the EIA submission as baseline studies have advanced on this plan, helping to facilitate an earlier submission of the EIA, and the plan already provides production well into the 2040s. However, significant potential remains at higher prices to further unlock value at Lobo-Marte through mine life extensions from the 2.8 million ounces of indicated resource and approximately 700,000 ounces of inferred. As you can see on the slide, this inventory has the potential to be captured through a further layback of each pit, which could meaningfully extend mine life. You can also see the mineralization remains open at depth, continuing beyond the resource pits, and is ultimately limited only by a lack of drilling at depth. And beyond this optionality at the Lobo and Marte pits, we also see potential on our broader land package to identify additional open pit deposits through exploration, which could further enhance the mine life and production profile. This is a highly prospective land package which sits on the prolific Maricunga trend, with 2 porphyry deposits and a substantial resource inventory already identified. We know these types of deposits occur in clusters along structural corridors, and we will focus exploration on finding additional deposits once we bring Lobo-Marte into operation. To conclude on the Lobo-Marte economic update, we are excited by the quality of this project and the potential to bring it online to further our grade enhancement strategy in the early 30s, driving high-grade, low-cost heap leach production in Chile well into the 2040s with significant value creation potential for our shareholders. With that, I will now hand it over to Geoff for an update on permitting at Lobo-Marte and Great Bear.

Thanks, Will. In terms of permitting at Lobo-Marte, the project's environmental impact assessment was accepted by Chile's Environmental Assessment Service in April 2026, marking an important milestone for Lobo-Marte and the team. Permitting remains a critical path, and we have taken a rigorous approach to integrating environmental and community considerations into the project design and capital estimate from the outset. This includes leveraging the best available technologies and measures intended to protect water resources, reduce dust generation and optimize infrastructure placement to reduce the project footprint. We continue to work closely with the Chilean regulatory authorities to advance the permitting process with a view to targeting first gold production in the early 2030s. Turning now to advanced exploration at Great Bear. As previously noted, we received all remaining AEX permits and construction is progressing well, which William will speak to later. Turning to the main project. We continue to advance permitting with both federal and provincial authorities. Federally, and following the submission of the third and final phase of the impact statement to the Impact Assessment Agency of Canada, who we call IAC, in April, we moved into the information request phase of the impact assessment process. IAC is in the process of collecting and consolidating all third-party input comments on our impact statement, which we will respond to on a timely basis. We will continue to work with IAC to advance the impact assessment process so that the final impact statement report issued by IAC aligns with our targeted main project time line. As a reminder, receiving the final impact assessment report from IAC that is ultimately approved by the Federal Minister of Environment and Climate Change is the critical first step to obtaining the additional federal and provincial permits we require to construct and operate the Great Bear mine. As previously disclosed, we require this final impact assessment approval, and certain provincial early works and construction permits in the spring of 2027 will allow us to take advantage of the summer construction season to maintain targeted first gold production in late 2029. Provincially, we continue to work with the Ontario authorities to advance the permitting process for the main project under the One Project, One Process, what is called 1P1P, which is overseen by the Ministry of Energy and Mines. We are pleased that the ministry deemed the final 1P1P project definition complete in early May and subsequently issued the integrated authorization and permitting plan for the main project. Submission of individual Ontario permit applications have proceeded in accordance with this plan. Next steps include finalizing the integrated indigenous consultation plan also submitted under 1P1P. Briefly turning to the indigenous community front, we continue to progress the negotiation of impact benefits agreements. We are pleased to report that we recently signed a community benefits agreement with the Northwestern Ontario Metis community that captures the key economic elements, including financial accommodations. In relation to Lac Seul and Wabauskang First Nations, on whose traditional territory the project resides, negotiations on the impact and benefits agreement continue to advance off the back of the memorandum of understanding we signed at the end of last year. With that, I will now turn it back to Will for a technical project update on Great Bear.

Thanks, Geoff. At Great Bear, work on the AEX program and the main project is progressing well. Following the receipt of the final AEX permits in April, AEX surface construction is 93% complete, and we recently completed the first blast of the exploration decline. As a reminder, the decline will provide drilling access for exploration and extension of the underground resource as well as delineation work. In terms of the main project, we continue to make meaningful progress on procurement, contracts awarded, requests for proposal issued and selection of open pit mining fleet nearing completion. And in terms of detailed engineering, we are well advanced, with approximately 50% complete. Upon completion of detailed engineering, we will provide an update on the initial capital in the first half of 2027, which will include impacts from inflation since the 2024 PEA and the impacts of any scope changes and enhancements we make as we move through detailed engineering. As we progress detailed engineering, we are working to ensure we are building a robust, reliable world-class operation given the multi-decade high-margin production potential we see at this asset. Turning now to exploration. We are continuing with our 2026 55-kilometer planned drill program. In Q2, drilling continued at the Strider Zone, a recently identified zone of mineralization 2.4 kilometers along strike from the southeast edge of the LP resource, and we will provide further drill results later this year. With that, I will now turn it back to Paul for closing remarks.

Thanks, Will. After a strong first half, we are well positioned to meet our targets in 2026. We have a strong set of upcoming milestones this year, which include: continued strong operational performance and cash flow generation; ongoing return of capital through our dividend and share repurchases; further strengthening of our balance sheet; advancing our projects pipeline; and continued exploration and studies of our resource inventory intended to bring in new projects to extend mine lives. Looking forward, we are excited about our future. We have a strong production profile, we have an attractive relative cost position, and we are holding the line on costs. We are generating significant free cash flow. We have an excellent balance sheet. We have an attractive return of capital. We have an exciting pipeline of both exploration and development opportunities. We are growing our net asset value and our per share metrics, and we are very proud of our commitment to responsible mining that continues to make us a leader in sustainability. In closing, we believe that our shares offer attractive relative value across a number of metrics. And with that, operator, I'd like to open up the line for questions.

[Operator Instructions] Your first question comes from the line of Fahad Tariq from Jefferies.

On Lobo-Marte, can you just talk about maybe next steps and how we should be thinking about a potential pit redesign at prevailing gold prices, when the CapEx spend would come in, how it would compare to the timing of Great Bear? Just trying to think through next steps over the next few years.

Yes. I think as we mentioned, we've just submitted the EIA. So that's the key critical path and the key next step. So we're focused on that, and that's 2 to 3 years roughly for that process. And then after that, we go into construction. So construction is really end of the decade. So the peak in spend there will kind of be behind the peak in spend at Great Bear. And in terms of the redesign, as you can see in what we've released, there is significant potential not only in M&I, but also cutoff grades, that type of thing. But it's really something given that we already have a 15-year mine life established that's quite high quality that we're going to focus on once we get into operations.

Okay. Great. And then maybe just switching gears to overall just cost environment. Kinross has obviously done a really good job containing costs. Just -- are there any areas where you are seeing cost pressures? It doesn't sound like diesel is necessarily a big impact so far, but are you seeing anything on the consumable side? Or even any upcoming like labor negotiations we should be aware of that could result in some inflation?

Sure. It's Andrea, I'll take that. I guess just as a reminder, we did include a 5% inflation factor in our guidance for the year. So we're still feeling pretty good about that. That was prior to higher oil prices. But as you noted, the impact of those has been relatively muted, and we expect it to continue to not have a significant impact. It's sort of below 2% is the all-in expected impact if we continue with higher fuel prices. In terms of other areas of inflation, as I said, this is all within our -- within what we contemplated in our guidance. But just to give you some specific examples, we're seeing higher power costs in Alaska. And then on the labor side, Nevada is always kind of a tight labor market. Not really more significant than we've seen recently, just sort of ongoing labor in Nevada. That's really the focus and sort of where we've been -- what we've been seeing sort of on the ground. But again, we're expecting to be well within our guidance rates near the midpoint for the year as we sit here today.

Your next question comes from the line of Josh Wolfson from RBC Capital Markets.

Just back to Lobo-Marte. I understand, obviously, it's an inflationary environment there. But is there any additional insights to maybe what drove inflation beyond just kind of industry trends?

Yes. I think, obviously, the change from the 2021 FS was primarily inflation. So that really -- we were around [ 1.1 ] in 2021. That took us to over [ 1.5 ]. The extra kind of [ 250 ] beyond inflation, part of it is in 2021, obviously, a different gold price environment. We were planning to reuse some equipment from Maricunga. Now with the gold price environment, we want to make sure we keep that around for Maricunga, and we thought it makes sense given the mine life to buy new equipment. So that's around $100 million of the additional increase beyond that just to make it a higher quality life of mine plan. And then there was also some advancement of the execution strategy as the team has really gotten into the details and gotten into the planning stage, the indirect costs are the other component that take us up to the $1.8 billion. We've also moved the contingency from about 14% up to 19%, just given we're quite far away from when we had the detailed estimates in 2021.

Okay. And then just on Great Bear and some of the AEX disclosures. When you think about the main permit, is there any way to minimize some of the uncertainty there and just what sort of maybe what the risk profile could be?

Yes. I mean, we're looking at -- I'll let Geoff speak to it, but the question was around minimizing uncertainty around the main project. Our position, Josh, is we've got these 2 parallel tracks. AEX, obviously, to get us underground to make for more efficient, cost-effective drilling extensions at depth. And then the main project. I'll let Geoff speak to it, but the main project is really launched, if you will, under this 1P1P. And I have to say things are going really well from the government side of things under the 1P1P. They're certainly hitting deadlines and moving things through the system. So pretty straightforward. Geoff, on the main project?

Yes. I guess -- and Josh, I think you're already aware of this. But again, we've never characterized AEX as being sort of critical path. And they are -- as Paul has alluded to, there are 2 different processes. AEX is strictly a provincial process, whereas the main project is both federal and provincial. And we're making excellent progress on both the federal and provincial fronts. And yes, in terms of efficiencies, we're already seeing the benefits of 1P1P provincially. And we're a long way down the path with the federal agency that kind of looks after the key permit that we require in the late spring of 2029, which is the final impact statement approval report. And we've been working closely with both the federal and provincial authorities. They're well aware of our time lines. And at this juncture -- and again, I'll remind you, we're targeting first production at the end of 2029. And certainly, at this juncture, what we're seeing with some of the stuff on the AEX side of the fence is not interfering with that time line.

Your next question comes from the line of Anita Soni from CIBC World Markets.

And firstly, congratulations, Claude, on your retirement. Your tenure was certainly exemplary in terms of operating track record. Best of luck in your retirement. And then I think my questions on Lobo-Marte were mostly asked just on the timing. I just wanted to get an idea about on Round Mountain, how we could see the back half of the year evolve. I think if we look back to some -- when you were -- there was an update, I think, a couple of years ago about the Phase X. And I thought production was going to be somewhat in the like 150,000 to 200,000 ounces per year range this year, and it's kind of tracking a little bit behind. So are we looking for really strong grades in the back half of the year? Or was that kind of production profile shifted from -- understandably from like 2 years ago from that chart?

Yes, I think for Round Mountain, the 150 forward has always been the target. We're obviously ramping up to that as we now are stripping into Phase S and getting into the ore in the second half of this year. When we add Phase X later, it will contribute as well and take it up to closer to the 200 range. So the 150 was always an average with a ramp-up period. So we do see increased production in the back end of this year as we now enter the Phase S ore and also getting into high-grade ore feed. So during the first part of this year, we were doing a lot of production came from heaps and historical mining. So now we're moving to the ore in the back half of this year. So I do think we're targeting 120, 130 range for this year, and then it will build up into next year and the years following.

Okay. And then -- and sorry, just in terms of the types of grades that we could see from Phase S, is that kind of in the mid-1 grams? Is that what we should be seeing?

Yes. I think the average grade, I think we released it a couple of years ago, it was a little lower than 1 gram on average, I believe. But I think we have quite a bit of -- we're getting into 0.7 later in the phase, deeper down, we get into the 1 gram stuff.

Okay. Yes. So I was just talking specifically about the deeper stuff rather than the stuff that goes to the heap leach, which is consistently sort of...

[indiscernible].

Your next question comes from the line of Daniel Major from UBS.