Kinross Gold Corp (KGC) 2016 Q1 法說會逐字稿

Thank you for standing by. This is the Chorus Call conference operator. Welcome to the Kinross Gold Corporation first-quarter 2016 financial results conference call.

(Operator Instructions)

The conference is being recorded.

(Operator Instructions)

At this time, I would like to turn the conference over to Mr. Tom Elliott, Vice President (sic -- see press release, "Senior Vice-President, Investor Relations"), Investor Relations. Please go ahead, Mr. Elliott.

Thank you and good morning. With us today we have Paul Rollinson, Chief Executive Officer; Tony Giardini, Chief Financial Officer; and Warwick Morley-Jepson, Chief Operating Officer.

Before we begin, I'd like to bring to your attention the fact that we will be making forward-looking statements during this presentation. For a complete discussion of the risks, uncertainties and assumptions which may lead to actual financial results and performance being different from estimates contained in our forward-looking information, please refer to page 2 of this presentation; our news release dated May 10, 2016; the MD&A for the period ended March 31, 2016; and our most recently filed AIF, all of which are available on our website. I'll now turn the call over to Paul.

Thanks, Tom, and good morning, everyone, and thanks for joining us today. As you can see from our Q1 results, we're off to a strong start in 2016. Production is up year-over-year as a result of our continued focus on operational excellence and the recent bald and Round Mountain acquisition.

Our all-in sustaining costs continue to trend downward and we generated solid free cash flow of approximately $75 million at an average gold price significantly lower than today's spot price. As a result, we are once again on track to meet our 2016 guidance for production, all-in sustaining cost, and production cost of sales. At the same time, our balance sheet remains strong as we look to capitalize on some very exciting organic growth opportunities.

I'll get to those opportunities in a moment, but first I would like to touch on a few operational highlights in the quarter. Paracatu, Maricunga, and Kupol-Dvoinoye all reached near record lows in their production cost of sales per ounce, with levels not seen since Q3 2011 in the case of both Brazil and Russia. While all three sites benefited from weaker foreign exchange rates against the US dollar, we also saw strong operational performance, with Kupol-Dvoinoye producing 192,000 ounces in the quarter, which is a 4% increase year-over-year.

Fort Knox also posted a strong Q1, due to milder winter conditions, which allowed for increased mining and better heat performance. Round Mountain, which is now 100% owned by Kinross, benefited from higher grades, strong heat performance, and better mill recoveries. I'm pleased to say that the Kettle River Buckhorn mine, which was originally set to close in October, will likely continue mining until the end of the year, as the team has found some incremental profitable ounces.

I'd now like to turn to Tasiast. While we have made the decision to proceed with Phase One of the expansion, we are continuing to focus on interim operational improvements with a view to improving existing mill throughput. As we mentioned last quarter, engineering upgrades to the tertiary crushing circuit, the conveyor system, and milling and screening processes increased average mill throughput from approximately 6,800 to 7,500 tons per day.

I'm pleased to say that trend continued in Q1, with throughput averaging above 8,000 tons per day. The enhanced mill performance, in turn, helped to offset lower grades this quarter and the planned lower production from the dump leach. With these recent operational improvements, we are strongly positioned to take the site to the next level as we begin preliminary construction of Phase One, which is expected to increase mill throughput to 12,000 tons per day.

Since announcing our decision to proceed with Phase One on March 30, I'm pleased to report that engineering and procurement is progressing well and is now approximately 55% complete. Major construction activity is scheduled to begin in August, with completion of commissioning and ramp-up to full production by the end of Q1 2018.

As I have mentioned, Phase One requires a relatively modest capital investment for what is expected to be a substantial improvement to Tasiast's production profile and cost structure. It is expected to nearly double annual production to approximately 400,000 ounces, while significantly reducing production cost of sales to an estimated $535 per ounce. At current spot rates, the project's IRR is even more attractive, at about 25%.

Phase Two, which is expected to expand mill throughput to 30,000 tons per day, will transform what is expected to be an excellent operation post-Phase One into a world-class mine. According to the pre-feasibility study completed in March, annual production is expected to nearly double again to an estimated 780,000 ounces and a production cost of sales that will decline to approximately $460 per ounce.

The operations team is currently focused on executing Phase One and work will begin later this year on the Phase Two feasibility study. We look forward to sharing those results with you when they're available.

I'd like now to turn to another exciting organic growth initiative, which is Bald Mountain. We've just completed our first quarter as operators of the mine and I can tell you we are even more excited by Bald Mountain's upside potential now than when we agreed to acquire the asset.

Now that we've had some time on the ground, there will be some adjustments in the short-term regarding working capital and Q1 production, which Tony and Warwick will elaborate on. But as they say, these are expected to be short-term considerations. Our confidence in converting a substantial amount of Bald's 4 million ounces of mineral resources to mineral reserves has increased as we continue infill drilling.

This conversion is expected to support increased annual production and enhance the longevity of the operation. We currently have two drill rigs on site and have drilled 9,000 meters, mostly in the Saga, Top, and Redbird pits in the north area. With permitting for exploration and mining expected by mid-year, we plan to increase the number of rigs and expand drilling to the Vantage, Luxe, Saddle, and Gator pits in the south area.

There is no shortage of targets, and as we become increasingly familiar with the land package, we see the potential to expand production from the current pit in the north to include additional pit locations on the property. Obviously, these organic opportunities with both Bald and Tasiast require capital investment and they also requires us to set strategic priorities within our portfolio.

The mine plan at Maricunga has brought us to a natural decision point, with laybacks required if we are to advance into new sections of the ore body. Given our focus on disciplined capital allocation and our desire to preserve balance sheet strength, choices need to be made regarding our investment priorities, which is why we're contemplating a temporary suspension of mining activities at our Maricunga operation as of October this year.

The exact timing of a suspension could be impacted by the ongoing regulatory action by Chile's environmental authorities, which Warwick will address later in his remarks. While the time may not be right for additional capital expenditure, Maricunga remains an attractive property with over 1 million ounces of 2P and an estimated measured and indicated resource of approximately 4.3 million ounces.

We have demonstrated that we have been willing to make tough decisions when necessary. By focusing on the fundamentals of operational excellence and financial discipline, we have consistently and steadily delivered, quarter after quarter, and year after year, and Q1 is no exception.

We are on track to meet our guidance with strong production and declining all-in sustaining costs. We generated solid free cash flow in the quarter and our balance sheet remains strong.

With that, I'll now turn the call over to Tony.

Thank you, Paul. We generated solid free cash flow of $75 million in the quarter as a result of our strong production and a continuing decline in our all-in sustaining cost to $963 per ounce. Our Q1 all-in sustaining cost includes withholding and consumption taxes that are not expected to reoccur during the remainder of the year. Had we adjusted out this amount, Q1 all-in sustaining costs would have been lower by approximately $30 per ounce.

A number of factors contributed to the generation of free cash flow, including an increase in production resulting from our recent Bald and Round Mountain acquisition, a continued focus on cost reduction through CI initiatives and streamlined procurement, and favorable oil prices and foreign currency exchange rates. Foreign exchange and lower oil prices resulted in a benefit of approximately $23 per ounce to our cost of sales versus our budget, with currency benefits coming from the Russian ruble, the Chilean peso, and the Brazilian real. Despite a decline in the average realized gold price year-over-year and a lag between gold production and sales for the quarter, our revenue remained essentially flat, while adjusted net earnings declined slightly on a per share basis to $0.00 for the quarter.

The balance sheet remains strong with $750 million in cash and cash equivalents and $2.3 billion in total liquidity. During the quarter, the Company completed an equity offering, issuing 96 million common shares for gross proceeds of $288 million. Of that, $175 million was used to repay what we drew down from our revolving credit facility following the $610 million all cash acquisition of Bald and Round Mountain which closed January 11.

Going forward, we have two significant capital requirements this year: $250 million in senior notes due in September, which is our only debt maturity between now and 2019, and $160 million in additional capital expenditure for Phase One of the Tasiast expansion, which increased our CapEx guidance for the year to $755 million.

We expect to pay for the senior notes and the Phase One CapEx from existing liquidity. Based on a $1,200 gold price, we expect to meet these capital requirements and finish 2016 with cash and cash equivalents of approximately $700 million on the balance sheet, which is slightly below where we are today.

Before turning the call over to Warwick, there are two items that I want to highlight. First, there has been a lot of interest around hedging strategies, given the gold price and fluctuations we have seen. Over the past three years, we have, in fact, moved to reduce our hedges in order to benefit from the weaker currency and oil prices.

Many of our hedges rolled off in 2015 and we are now fully benefiting from a weaker Russian currency, while 26% of our exposure to the Brazilian real is currently hedged at favorable rates relative to spot prices. With the go-ahead decision on Tasiast Phase One, however, we decided in early April to hedge 50% of our fuel oil requirements for the project at $46 a barrel from now until April 2019.

We felt that this was prudent, given the volatility in the energy market and in order to protect our returns for the project. We will continue to look for opportunities to hedge the project's oil requirement at attractive prices.

The second item I want to mention also came after the end of quarter and relates to the working capital adjustment primarily associated with the Bald Mountain acquisition. As you may have seen, there was a notable gap between our expectation for gold production and gold sales at Bald Mountain for the quarter.

This was due to lower than anticipated inventory levels. Kinross received a working capital adjustment from Barrick of $22 million in cash in early May, of which a large portion is related to inventory at Bald. This payment will be reflected in our second-quarter results.

With that, I'll now turn the call over to Warwick for highlights of our operating results.

Thank you, Tony. As Paul mentioned, Q1 was a strong quarter operationally. This performance was underpinned, as always, by our constant focus on our of safety standards and the safety of all our employees and contractors.

Starting with the Americas, we had a strong showing from Fort Knox, Round Mountain, Maricunga, and Kettle River Buckhorn. The Paracatu, the Santo Antonio tailing reprocessing initiative is firmly on track, producing approximately 13,000 ounces in the quarter. As you may recall, the team developed a new approach the recovering -- the tailings, which significantly reduced water consumption, given the low levels of rainfall in the region.

Instead of hydro mining and pumping the tailing to Plant 1, we are physically mining the tailings and hauling them to Plant 2, where incidentally, recoveries are better. Significant rainfall still remains a concern for Paracatu. The rainy season just ended as of April and the region has received somewhat less rain than historically being the average.

We have instituted a number of conservation measures, as we noted in Q4, and are currently focused on accessing additional water sources, which we expect to update you on in July. Given current water levels, however, I want to underscore that we still expect to meet regional production guidance for the year.

Turning now to Maricunga, I would like to provide an update regarding the ongoing regulatory process with Chile's environmental authority, the SMA. On May 2, the regulator imposed a 15-day order curtailing the amount of water Maricunga pumps from its wells. In response, on May 3, Maricunga suspended mining and crushing activities for the duration of the 15-day order.

This temporary suspension is not expected to impact regional production or cost guidance. As we notified the market on March 18, the SMA is seeking the permanent closure of Maricunga's water pumping wells. We believe the curtailment order and the original March 18 resolution are technically and legally flawed and are appealing both.

Both not only contravened our permitting requirements, but are based on contested scientific study and pose serious environmental, health, and safety consequences. It is early days in the appeal process so we are not in a position to speculate on the outcome at this time.

Moving to Bald Mountain, now that the integration process is largely complete and we have a clearer picture on the ground, we are making some short-term adjustments to our production forecast for 2016. In Q1, we had a lower than anticipated production due to a number of factors: the inventory shortfall, which Tony mentioned earlier; a deviation from the mine plan in the weeks before the acquisition closed, resulting in a lag in mine plan sequencing and more well stripping than anticipated; and severe winter weather in northern Nevada, which made safe access to the pit more challenging.

The team has risen to the challenge and has been moving waste material at an impressive rate. We therefore expect to see improved performance in the second half of the year. In this regard, I would emphasize that we have always seen 2016 as an integration year for Bald Mountain and we expect 2017 to be much better, with substantial increased production and lower costs, as the current stripping campaign will be behind us and we will be into the heart of the current ore body.

Turning now to West Africa, Tasiast had a strong quarter. Continuous improvement initiatives, which are focused on blasting techniques to improve fragmentation of the ore, as well as adjustments to the crushing and grinding circuits, have all contributed to a significant improvement in throughput.

While the heap is performing well, overall production is down due to lower [mill] grades. We expect mill grades to recover to approximately 2.5 grams per tonne by the end of the year.

Moving to Chirano, we have seen a decrease in mine production and grade as we transition from Akwaaba mine to Paboase. The Paboase mine is a lower-grade deposit than Akwaaba was in its best years, and as we transition into the ore body, we have encountered some challenges opening up new mining areas. We have made adjustments to our mining techniques, and while we expect this transition period to continue in Q2, we anticipate improved performance in Q3.

Moving to the Russian region, Kupol and Dvoinoye continued to outperform. Tonnes of ore mined increased 6% year-on-year. Our mill grades reached nearly 14 grams per tonne, the highest level since Q2 of 2011. At the same time, production cost of sales reached favorable levels not seen since Q3 2011 due to a combination of increased production, higher grades, and the benefit from the weaker Russian ruble.

Given the world-class quality of our Russian operations, we are pleased with the progress being made on two projects to potentially extend the mine life of both Kupol and Dvoinoye. At the Moroshka project, which is located approximately 4 kilometers from Kupol, the construction of an ore haulage road to the site is currently underway.

Moroshka added 180,000 gold ounces to Kupol's mineral reserves in 2015 and mining is expected to begin at the Moroshka deposit in 2018, with ore processed at Kupol mill. At the September Northeast target near Dvoinoye, a 15-kilometer haulage road has been completed and a camp facility has been established.

A high-grade, near-surface M&I mineral resource estimate of some 68,000 ounces at an average grade of 32 grams per tonne has been defined at the target and is expected to enter production in late 2017. Exploration continues at both Kupol and Dvoinoye, and we are focused on opportunities to continue to extend the life of these two assets.

In summary, our balanced portfolio continues to deliver good operational performance across all our regions and we remain on target to meet our guidance for the production and costs for the year. I will now hand back to Paul.

Thanks, Warwick. Our track record has been consistent in focusing on the things that matter: operational excellence, balance sheet strength, and disciplined growth. Over the past few years, the gold price has trended steadily down and the gold industry, as a result, has experienced significant change.

Throughout this period, we have maintained our focus. We have continued to hit our operational targets quarter after quarter and year after year, and we have refused to jeopardize our balance sheet strength. That focus, I'm pleased to say, has positioned us very well. We are on track to achieve record production this year.

We are generating solid free cash flow from our operations. Our balance sheet remains strong and we have organic growth projects in every one of our three operating regions: Tasiast in West Africa, Bald Mountain in the US, and Moroshka and September Northeast in Russia.

Kinross has a clear path forward and solid momentum at a time when the gold price seems to have turned a corner and I'm very excited about our future.

With that, operator, I'd now like to open up the call for some questions. Thank you.

(Operator Instructions)

Our first question is from the line of Chris Terry with Deutsche Bank. Please go ahead with your question.

Good morning, guys. Couple of questions from me. Just starting on Maricunga, and I appreciate that it's still uncertain at this stage how it may play out there, but can you just give us some indication around what the CapEx savings might be, just so that we fairly think about the MPV implications of reducing production there?

Sure. Again, we haven't made a decision. We're contemplating. And again, just for context, Chris, there's, as I said in my words earlier, there is a significant amount of gold at Maricunga and we've got a great team there that's done a good job of bringing the cost down from where they were historically, but it is still one of our higher-cost assets.

The challenge that we're thinking about is the capital return on doing that layback to continue to access that ore. Because for us, we've said for many years, it's not about production for the sake of production. We've had this mantra of quality over quantity. We do have to make a good return.

But maybe, Warwick, you can elaborate more specifically on the capital.

Thank you, Paul. This is a project we've taken for every one of our increases or continuations of production at Maricunga, have been on the basis of phases. We're currently coming to the end of a phase where we had spent the capital and promoted that program during 2015.

Going into 2016, if we had to continue, it would be in the order of $26 million for those laybacks. As Paul has suggested, it's not necessarily about the capital but rather associated margin.

Okay. Thanks for the color. So $26 million would then allow you the access to the full reserves? Is that the way I read that? Or is that just what it would have been in 2016 alone for capital?

That would have been for the next phase, which would have given us access to a further cutback and access to the ore reserve, but certainly not the full reserve that we currently have on our reserve statements.

Okay. Thanks for that. And then just on the balance sheet and thinking about the requirements for Tasiast Phase One, and also the note due in September of this year, you talked about where the cash balance might end at 2016. What is the minimum -- now that you have Round and Bald Mountain -- what is the minimum cash requirement you need, just from a working capital standpoint, just so we can think about whether you have to dip at all into the revolving facility?

Yes, Chris, it's Tony. We basically like to look at about $250 million of liquidity, and I use the term liquidity, and that could obviously consider that credit facility, but as I indicated in my comments, when we look at our year-end cash position after repaying the notes due of $250 million, and paying for the current year's portion of Tasiast capital of $160 million, we could foresee being around $700 million, if the gold price holds at $1,200. And in fact, just with current gold price levels, $100 change in the gold price on an annualized basis is worth about $220 million of cash on an after-tax basis to us. So when we look at that $250 million and we look at $700 million possibly if gold stays around $1,200, feel we're in a very strong position from a straight cash flow perspective, but as I pointed out, our liquidity total is more like $2.3 billion including the credit facility.

Great. Thanks for that. Then just a last one on Bald and Round Mountain, obviously where you're targeting quite a bit of exploration. What would be the timing that we should think about where there could be a decent change maybe in the reserves and resources? Is it next year or could it be before that?

It will be -- we're drilling now, and as I indicated, we hope to do more drilling once we get some permits in that we're pursuing in mid-year. It will come in, in pieces through the year. As you know, we are going to host an analyst site visit in June.

We're really excited to get you guys all down there, get the maps out, and you'll have a good amount of time on site. That's where we really hope to get you guys up to speed and have you see what we see. Anything to add there, Warwick?

We certainly have done a lot of drilling in a short period of time, in fact, some 9,000 meters in the first few months of this year. Those have been confirming the expectations that we had. Certainly, we are not disappointed in any way.

We want to show you and bring you all those results during that visit at the end of June. So there will be a conversion. I don't want to speculate those numbers right now, but certainly, we're looking good.

And again, the drilling will continue throughout the course of the year, but typically in our Company, we do not update our reserves within the year. We usually do it on an annual basis with our annual reserve resource update, which will all happen next February. But you'll see the results of the drilling and that's really the point is, that I would make, is what we're pleased about is the results of the drilling seem to be proving out our thesis of what we expected.

Okay. Thanks. Thanks, guys. Appreciate it.

Our next question is coming from the line of David Haughton with CIBC. Please go ahead with your question.

Good morning, Paul, Tony, and Warwick. Thank you for the update. Perhaps to Warwick, if you could outline to us how you could see Moroshka and September feeding ore into the Kupol mill -- the kind of tonnes you expect out of Moroshka, for instance, and if it's open pit, underground potential, et cetera?

Okay, David. We are very excited that we can continue to extend the mine life at both Kupol and Dvoinoye. Any deposit that we find within that area, we would establish a strategic plan which ensures that the timing of the mining of those deposits fall within the context of the mill capacity we have at Kupol, which as you know is 4,500 tonnes per day.

If I could just reflect on September Northeast, it is a deposit, albeit small, very high-grade, 15 kilometers away from Dvoinoye. In essence, it's the top of a mountain, so it's an open pit, and we would mine that over a couple of months and truck it down to Kupol at a time where we're starting to see the grades diminish at Dvoinoye. As you know, that happens during the course of 2017, into 2018.

As far as Moroshka's concerned, that being a lot closer to Kupol, some 4 kilometers, as I mentioned earlier. That is an underground operation. 180,000 ounces, we would believe to extract from there. It's about 250 to 300 meters below surface. We would put in a decline, as is typically the case at Kupol itself, and we would mine that during the period 2018, 2019.

Excellent, and the mining rate you'd expect from each of those?

The mining rate at September, as I said, it's a small tonnage, high grade and so we would keep that in the order of about 500 to 800 tonnes per day. As far as September -- as far as Moroshka's concerned, that would be in the order, very similar, 800 to 1,000 tonnes per day, supplementing tonnages that would normally come from Kupol.

Okay. I presume that in the case of Moroshka, which is already in reserves, as you'd mentioned, for Kupol, that there's upside potential with additional drilling, you'd be able to add something there as well.

Yes, we have drilled the area quite significantly in the immediate area of Moroshka, and it is, in fact, closed in all directions. However, the area around it, and really we're talking about the ground between Moroshka and Kupol itself, is very prospective. We certainly do come across positive results in our drilling.

We are doing a lot of drilling in that area. It's a case of getting it to hang together and that's been and continues to be a challenge for all exploration targets, and we're still excited about the area. Nothing that we could put together in a reserve or resource right now, but certainly we'll talk about it more at the end of the year.

It's fairly typical of an epithermal system where you can have veins or ore clustered around the same area, and it's just a matter of [jagging] them with your drilling?

Exactly, David.

Last question if I may, Paul. Switching over to Ghana, if I may. Akwaaba, how much is left there?

David, I assume that you're directing that at me. I'll take that. Akwaaba really is coming to end of its mine life. In fact, we've extended its life by the development of a further sublevel during quarter 4 of 2015 and we continued to pursue those ounces. We're talking in the order of 15,000 to 20,000 ounce, as it was at the beginning of this year.

We did strike some challenging ground during the course of this last quarter, of which we had to retract our operations because of that. We've since seen a lot more settlement and we'll get back down there during the course of this year. There is in the order of 5,000 to 10,000 ounces still down there.

Excellent. Thank you for that, Warwick.

Our next question comes from the line of Anita Soni with Credit Suisse. Please proceed with your question.

Good morning, guys. First question is with regards to Chirano. I was just wondering what the split on underground and open pit tonnes was this quarter and how that plays out on the underground with Pabaose and Akwaaba?

Anita, I'll just give you the answer there. We are building up tonnes, let me first say, at the Pabaose operation. As you would have seen that during the course of this last quarter, we were down on tonnes and grade, but we also are being supplemented by surface sources. The split of underground to open pit tonnes, I would say, is in the order of about 80% -- 70% to 30%, favoring underground, with some supplement for the open -- the surface coming from the stockpiles.

Okay. And then could you provide us potentially with the average grade of Pabaose underground deposit?

The average grade is in the order of 4 grams per tonne.

Okay. Moving on to Tasiast, the dump leach, how many tonnes do you plan to put on the dump leach this year?

Let me firstly explain to you that we have a budget, obviously, which was in the order of about 800,000 tonnes for the year. That's really mining open pit oxide material that we had found during the course of the second half of 2015. As you know, the majority of our open pit material in the past has come from Piment, and I did confirm the end of the Piment operations during 2015.

But in 2016, we are always scouting out for open pit oxide material, and we in fact, came as cross a [lance] in the [West Browns footland]. That's why you'd see during the course of this last quarter and you'll see a little bit of that into quarter 2, more oxide material, which is outside of what we were expecting. So those numbers would increase by about 50% on the number that I just gave you.

Okay. And then Kupol, I'm just wondering why there is a variance this quarter between what was mined versus milled. That's not typically the pattern there. Just your mill was a little bit lighter versus the mining rate?

Let me just give some thought to that question.

492,000 mined and then 416,000 milled. Just wondering if that's going to reverse out for the rest of the year?

The milled tonnages are influenced by the rates in which we feed both Kupol and Dvoinoye material. The Dvoinoye material being a lot harder than the Kupol material, so there is a blending process there, and it depends on how many days we would mill one versus the other. As far as mining rates are concerned, we typically try and pick up our mining rates during the first quarter of the year, because of dealing with the winter road that starts to deteriorate as we go into summer.

So we increase the mining rates when we can to develop stockpiles and move the material over to Kupol as soon as possible prior to the winter melt. It will balance out during the course of the year. We don't see any changes. Our restrictions really are the number of tonnes we can put through the mill.

Then the last question is with Fort Knox. I'm just looking back through the mining rates in the mill processed end, the mining rate is -- the processed -- what's processed through the mill and processed through the heap leach exceeds what the mining rate is. I'm wondering, in your reserves are you just looking at a specific facet? Is the heap leach not in reserves, heap leach tonnes?

What would lead you to that question, Anita?

You're basically -- what's being processed is basically 25 million tonnes per annum, and what's being mined is somewhere in the range of 19 million to 16 million over the past years. I'm just wondering why there's an excess of what's beings processed between what's been mined and what's being actually processed via the mill and via the heap leach?

I would I say, Anita, that the mine over the years has developed a number of stockpiles, which initially, depending our price of mining, processing, as well as gold price, have been retained. As things change, we do supplement some of our -- we do find that we can put these deposits onto our pads and derive, obviously, returns that are favorable.

All right. So that leads me back to the same question, which are those stockpiles embedded within your reserves?

Yes, they are. Yes, they are.

All right. Thank you.

Thanks.

Thank you. Our next question is from the line of Steve Parsons with National Bank Financial. Please proceed with your question.

Good morning. Thanks for taking my call. Just with respect to the organic growth projects noted in your remarks, Paul, couldn't help but notice that La Coipa was not mentioned. Wondering if you could just talk to how you're thinking efforts and timing has changed with respect to La Coipa, given the events surrounding Maricunga and the SMA's claims? And maybe if you could comment whether or not La Coipa is drawing from the same water basin as Maricunga and maybe whether the same is true for Lobo-Marte? Thanks.

In general, the quick answer would be nothing's changed for us at La Coipa. To us, La Coipa is a good news story. It's, again, one of those situations where, as we're contemplating now with Maricunga, we weren't happy with the cost structure, we weren't happy with the margin, and we decided to suspend.

Obviously, then we went out, drilled satellite deposits, we got higher grades, and now we have a very attractive PFS. The only thing we'd like to see more of is a bit longer life, with a current mine life of about five years. So we are going through the environmental permitting process to look to restart.

At the same time, though, we're continuing to drill and try to add to the resource. As to the water, I would not -- what I would say is both -- all three deposits are in what they call Region 3. Region 3 does have the same regulator but it is a different water source at La Coipa than at Maricunga, same regulator.

Perfect. That's helpful. Thanks.

Thank you.

Thank you. There are no more questions at this time.

Okay. Thank you, operator, and thank you everyone for joining us today on the call. Thanks. Bye-bye.

This concludes today's conference call. You may now disconnect your lines. Thank you for participating and have a pleasant day.