Good morning. My name is Adam, and I will be your conference operator today. At this time, I would like to welcome everyone to the Kinross Gold Corporation Second Quarter 2020 Results Conference Call and Webcast. All participants are in a listen-only mode to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. At this time, I’d like to turn the call over to Mr. Tom Elliott, Senior Vice President, Investor Relations, and Corporate Development. Mr. Elliott, you may begin your conference.

Thank you. Good morning. With us today, we have Paul Rollinson, President and CEO and Kinross’ senior leadership team, Andrea Freeborough, Paul Tomory, and Geoff Gold. 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 results and performance being different from estimates contained in our forward-looking information, please refer to page 2 of this presentation, our news releases dated July 29, 2020, the MD&A for the period ended June 30, 2020, 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 thank you all for joining us today. First and foremost, I would like to acknowledge and thank all of our hard working employees who have helped us deliver strong results while managing through their own unique challenges during this pandemic. The safety of our employees and their families in the communities that we operate continues to be our first priority. I also want to say that our thoughts are with all of those who’ve been affected by the pandemic. Kinross delivered strong results in Q2. And we are pleased with the significant growth in margins, earnings and free cash flow. This morning, you will hear how our Company is technically strong with an excellent operational track record, is managing the impacts from COVID, is delivering very strong free cash flow with peer-leading yield, and has numerous projects to continue adding mine life and a number of exciting exploration opportunities. Before that, I will comment briefly on the quarter and a few key developments. Andrea will provide a financial review, and Paul Tomory will summarize our operating performance. We will also give an update on how we are managing through the pandemic. All the Company’s operations performed well during the quarter. Once again, though, our three largest mines Paracatu, Kupol and Tasiast accounted for over 60% of total production and delivered the lowest costs in the portfolio. More than 50% of our production currently comes from the Americas, the U.S. and Brazil, with the balance from Russia and West Africa. Over 80% of our production comes from five key assets in five separate regions. With our recent acquisition in Russia, and taking into account our track record of exploration success, we expect that these assets and regions will have mine lives of at least 10 years. We also…

Thanks, Paul. I’ll begin with a few financial highlights from the quarter, review capital expenditures and end with a summary of the balance sheet. During Q2, we produced approximately 572,000 attributable gold equivalent ounces and sold 584,000 at an average cost of sales of $725 per ounce, and an all-in sustaining cost of $984 per ounce. We are particularly pleased with the cost performance, which came at the middle of our original guidance range, despite COVID-19-related inefficiencies and challenges. Our margins increased 53% to $987 per ounce, outpacing the 31% increase in our average realized gold price of $1,712 per ounce. We sold approximately 12,000 ounces more than we produced, including about 15,000 ounces that were unsold at the end of Q1, partly offset by a missed shipment at Chirano due to a transportation delay relating to bad weather. These ounces were sold in July. Our adjusted EPS of $0.15 and adjusted operating cash flow per share of $0.33 were both up significantly compared with the second quarter of last year. Adjusted operating cash flow increased to $417 million from $288 million last year. And as Paul mentioned earlier, free cash flow for the quarter was approximately $220 million, which is twice the level we achieved in the first quarter. We expect free cash flow to remain strong for the rest of the year. Turning to income tax. We recorded an expense of $103 million during the quarter, compared to $47 million in the second quarter last year, with the increase due to higher taxable income driven by higher realized gold prices and higher margin. Capital expenditures during the quarter were $214 million, which was slightly higher than $191 million spent in Q1. However, Q2 CapEx was lower than planned due to COVID-related challenges. As an example, capitalized stripping for…

Thanks very much, Andrea. First, I’ll spend a few minutes on some of the key COVID-related topics. And then, I’ll give a brief summary of our operations are doing. I’ll also be discussing some very encouraging exploration highlights and comment on areas where we continue to target meaningful mine life extensions. And then, I’ll elaborate on capital expenditures. Broadly speaking, our portfolio of operations managed very well through COVID-19. We acted early with our task force and took several important measures, which allowed us to minimize the impact to our business. To-date, we have not experienced any material negative impacts and remain on track to achieve our operating and project development targets. That said, we’ve experienced some minor impacts on which I will elaborate as I discuss each asset. As Paul indicated, our three big mines continued the strong performance and accounted for over 60% of second quarter production with a combined cost of sales just below $600 per ounce. Paracatu was once again our largest producer and continues to deliver strong consistent results. Production increased by approximately 15,000 ounces over last quarter, recoveries remained lower than last year but are in line with our expectations and what’s presented in the technical report. They’re expected to improve as we move into higher grade ore in late ‘20 and early ‘21. Strong throughput and favorable currency exchange rates during the quarter resulted in low unit costs, albeit slightly higher than the year-ago quarter due to lower production. Turning to Russia, Kupol and Dvoinoye delivered another excellent quarter and continued to generate robust cash flow. Good throughput, grades and recoveries drove an increase in production by approximately 3,000 to 10,000 ounces relative to last year and last quarter, respectively. Cash costs of just over $600 per ounce improved from Q1, but increased…

Thanks, Paul. I want to reiterate our gratitude to our employees, suppliers, communities and host governments that all continue to work together to keep everybody safe and productive. As a result of this hard work, all of our assets remain in operation and our projects continue to advance. Notwithstanding COVID, our business is very well positioned. Our commodity prices and currencies are favorable. We continue to extend our long-term track record of strong and consistent performance across all of our geographies. We have an attractive portfolio of operations, projects and exploration opportunities. And we continue growing our free cash flow and further strengthening our investment-grade balance sheet. With all this, we are set to continue driving meaningful value-creation and share price appreciation over the coming quarters and years. With that operator, can we now please open up the call to questions?

Yes, sir. [Operator Instructions] And your first question comes from the line of Ralph Profiti with Eight Capital.

Good morning. Thanks everyone for taking my questions. Firstly, Paul, on Tasiast 24k. Can you maybe disclose how much of a workforce is needed, say at a minimum, to stay on schedule, when it comes to construction, and maybe sort of where are you now, and how does that workforce need to build up over time?

There’s many aspects to it. So, within the project, there are different scope elements. So, one very large elements of scope is the power plant. And that probably requires the single largest number of people. We’ve delayed that project deliberately. It’s not critical path, it’s not required to get us at 21k. And so, we pushed that out a couple months, primarily to save space in the camp. In general, we’re not particularly worried about being able to ramp up the number of people. There are relatively small scopes of work. The bigger use of space in the camp is in the mining fleet. And that’s where we’ve seen the delay in the stripping as a result of having fewer people in mine. I’ll remind you that the 24k project is a series of pretty small scopes of work thickener, ILR, water, upgrades. So, we were able to manage those sequentially.

Okay. Thanks for that. If maybe I can switch gears and maybe asking a question on the Chulbatkan section that you provided. It does show sort of this higher grade near-surface. And I’m just wondering when it comes to drilling, are you more concentrated sort of along strike as a strategy, and are you finding continuity in that higher grade near-surface elements of how this orebody is coming together?

So, we remain very happy with what’s going on at Chulbatkan. The first half of the year was focused on just -- the continued program, as I said. We did about 35,000 meters. The focus to date has been just that infill program and establishing better confidence in our initial hypothesis. The high-grade portions, we are excited by that whole, but we haven’t spent a lot of time in the first half doing testing on that. That will be part of our program in the second half. So, I don’t want to comment too much right now on further high-grades, until we are able to get into our second half program.

Yes. It’s really just infilling…

Yes, exactly. We’ve really been focused on infilling and getting a better set of data for the resource model that is being built right now. We are excited by the high grades, but we’re going to be getting into that in the second quarter to see if there’s continuity and more of it.

And the reason that’s in the third quarter is we wanted to get the structural geology part.

Correct. Yes.

So, we could have the best chance of success and efficient spending the dollars.

Yes, understood. Thanks for the clarity.

And your next question comes from the line of Greg Barnes with TD Securities.

Yes. Thank you. Thanks to Paul Tomory again. On the 2021 production levels at Tasiast, so you said, they will be done modestly from what was in the technical report. I was just wondering what modest is.

About 40,000 to 60,000 ounces at our current view. We’re still refining the mine plan. There’s a couple of variables that have yet to settle. One is that how quickly can we ramp the mining rate back up. So, the mining rate now is increasing. So, every week, we mine more than the previous week. However, COVID-related impacts remain and it is primarily quarantine related, the number of people we have in the camp there. The COVID situation at Tasiast is continually improving. So, the uncertainty is really how quickly can we ramp back up to planned rates? But, at our first blush, like I said, 40,000 to 60,000 ounces, less than the TR. [Ph] And that’s primarily -- that’s almost exclusively grade driven.

And switching back to Paul Rollinson. Paul, your comments at the end of your opening statement about -- I missed it a little bit, but something to do with you have internal opportunities that you can bring I think forward or potentially monetize I think is what you’re driving at?

Well, I think, I just -- again, I think, this quarter in particular versus other years, we’re pretty excited on the exploration side. We’ve got a lot of new staff. We’ve had some great drilling in the first half of the year. Paul touched on the success at Chirano. We’re very excited about Curlew. There is that aspect to it. The other side of it that I kind of alluded to, as you know, we do our budgeting and our reserves at 1,200. And there is flex obviously in the revenue line where if a project were to green light with your $1,200 hurdle, you’re going to see a lot of optionality or NPV expansion at higher commodity prices without incurring incremental capital. And what I was trying to say was, should commodity prices go back down, we still have positive cash flow, positive IRR. But, we’re going to get the benefit of higher commodity prices by building at $1,200 threshold.

And just finally, Paul, on dividend. I know you’re being cautious around COVID-19 and it’s unclear what the impact will look like over the next 6 to 12 months. But, you’re generating a lot of free cash flow. I know, you’ve got an attractive pipeline. But clearly, that’s something I think that investors would like to see returned.

Yes. Okay, absolutely, and we get it. I think, Greg, we were getting questions on return of capital in January, February, based on what the expectation of the year’s cash flow -- the year ahead cash flow would be. The COVID kind of put everything in the backseat. What we said on our previous call was, it feels to us a little bit incongruent to be reinstating or initiating a dividend when we’ve just drawn $750 million under our revolver to put cash on our balance sheet, just for business uncertainty. I think, the point we’re trying to make here today is we’re not out of the woods yet, but the signaling by paying back that first tranche of 250 of the 750 I think should be taken as a positive signal. We are being impacted by COVID. We are managing through it, but we can’t say for certain that we’re out of it, we’re through it. I’m optimistic though as we continue here, we will work through it. And as I would have said in maybe in January, it’s really not a question of if, it’s a question of when. We are probably a bit on the conservative side, but we are getting stronger, financially every month, every quarter. And my hope -- there’s no guarantees in life, my hope is as we continue to get stronger and we move into the fall, and we work through all of this, we’re going to be well-positioned for that return of capital discussion.

And your next question comes from the line of Josh Wolfson with RBC Capital Markets.

Noting the commentary in the release and on the conference call related to the Kupol exploration results, you gave some sort of commentary about how -- or the magnitude of potential upside at Chirano, is there any sort of quantity could tell us to what that expiration upside could be for Kupol?

I mean, I think what Paul said, which I think is really exciting for us, last year was one of the best years ever, in terms of reserve replacement at Kupol. And I think the point he was making this year, and I’ll let him expand is, we’ve actually been delayed in our spending at Kupol this year. And so, we’re behind where we would be. But notwithstanding that, we’ve had the best year ever. So, we’re feeling really, really good about how things are going from an exploration point of view at Kupol. And not to put Paul on the spot, but I do think he didn’t make the comment about at this stage we’re feeling comfortable about, again, extending mine life.

Josh, as you can appreciate, it’s difficult to put quantums out there. But rather -- how would I say this? The 2025 mine life extension, we’re feeling really good about, we got to do some i dot and t crossing on that in next few months. And you’ll see the reserve update at the end of the year. But we’re feeling pretty good about that 2025. And as you’ve watched Kupol for many years now, we have a very strong record of continuing to add reserves and replace that which we produced. I don’t think, it’s going to end in 2025. We have a lot of targets, we continue to drill, we continue to spend a lot of money, the returns are good. And so, I’m not going to put a quantum out there, but we’re feeling very encouraged by what we’re seeing at Kupol. Let me just talk a little bit about what is happening there. The big wide zones at good high grades are largely depleted, but we’re getting some very encouraging -- the really the heart of this exploration success is finding these narrower veins with very high grades, in some cases 20, 30 grams. Now, the widths are one meter, so you got to dilute those. And originally, our worry was that the grades wouldn’t be high enough and the width is to narrow to support the scale of the Kupol operation. But fortunately, with this very-successful ongoing transition to narrower vein mining, we think we’re going to be able to maintain the diluted grade in that eight to nine range and to continue to extend mine life. So, really what -- the big encouraging thing is that we’re getting good grades in those veins, really high grades, they’re narrow, and we were able to successfully mine them. So, we’re feeling really good about what we’re seeing at Kupol. And to give you a perspective, a couple of years ago, we had almost no narrow veins in active mining. Our plan right now over the next three, four years is to transition to three quarters of our production come from narrow veins. And it’s a phased transition over three, four years. We’re switching the equipment over where our workforce is getting used to the narrower vein. So, it’s not a nice -- it’s not an overnight transition, it’s something phased in over three, four years. So, we’re, what I’ll say is we’re feeling really good about Kupol.

Got it, okay. And then, continuing the conversation on the return of capital commentary, noting where gold prices are today and forecast free cash flow being very high, but also looking at this portfolio of projects and wanting to maintain some conservatism. What’s the right approach or right numbers are again, specifics, if that’s possible, that would make that number of sort of relevant but still not too aggressive?

Yes. Look, I think -- I don’t -- the way we come at it, the way we think about the allocation of capital, really, and we said this, again, maybe back in January, we sort of triangulate around a few considerations. One is obviously the gold price. The other is our balance sheet. And the third would be just the capital opportunities in our business. And check on the gold price, check on the balance sheet. And for us, quite frankly, just to digress slightly, we feel really good. I mean, we as you know, have come through a period of significant reinvestment in our business over the last three years. And when we did put out our guidance, originally back in mid-February, we tried to give a look through to ‘21, ‘22, at least as it relates to capital, investing back in the business. And what we were projecting is, as we’re coming out of that reinvestment period of $900 million plus or minus capital, going down into sort of the $800 million and going forward. And so, we were advertising back in February, growing cash flow as a result of less capital and expanded margins. All of that is -- remains true, and we feel stronger about it than ever. It’s just we can’t predict. As I’ve said, we have been impacted, a lot of it Paul Tomory has spoken about with respect to COVID. We are managing through it. And it just seems prudent to us to just give it a couple more months here to see how we go. So, I think, from what is it, if you’re asking me what is the right sort of dividend if -- as and when we get there? Look, we’ll look at what’s out there. We benchmark off of our peers and our comps. And what I’ve also said is, for us, I think, the signal would be keep an eye on -- there’s a sequence to me that makes a lot of sense here. And as I said, we just made an initial 250 out of the 750 with payment on the revolver. I think, the signal I’d be looking for is when we do repay the balance of that revolver, that’s going to signal our comfort about the COVID risk going forward. Then, I suspect the minute we do repay that revolver, we’ll get an immediate question on a guidance reset, and the return on capital. And I’d like to believe, if everything holds together, that’s the conversation we’ll be having in the fall.

Okay. And maybe just to sort of clarify, you mentioned sort of benchmarking it. One approach, I guess, is looking at yields perhaps for peers. But, I guess, I would note that most of the peer group, I guess, is trying to determine their payout levels based on significantly lower gold prices, which presumably would affect what your levels would be as well? Is that how you would look at things too? Are you more comfortable, I guess, using higher payouts, maybe based on the current environment?

Yes. Look, Josh, I think, we’re inherently conservative. I mean, I think, maybe we’re too conservative. We’re going to be the same when we think about this. We’re going to be reasonable and we’re going to be appropriate. We still budget at 1,200. We still do our reserves at 1,200. And we will contemplate when we do get into that situation, as you well appreciate, you don’t want to be adjusting or turning a dividend on, turning it off. We want to find the right level that’s sustainable for the long term. And, we’ll adjust carefully as we go forward.

Great. Thank you.

Thanks. [Operator Instructions] And your next question comes from the line with Carey MacRury with Canaccord Genuity.

Good morning, everyone. Just maybe another question for Paul Tomory on Fort Knox. Your cash costs there have been averaging $1,200 an ounce. I know there was a pit wall slide a few years back or a year back or so. I’m just wondering, with Gilmore set for completion in Q4, just how we should think about Fort Knox going into 2021 from a production and cost stand point?

Yes. And you quite correctly pointed out Fort Knox had a bit of a rough go over the last few quarters. But, we’re coming out of it. The asset is doing very well right now. We expect production to start ramping up here quarter-by-quarter to fall in line with what’s in the technical report. Yes. That’s it. It’s -- we’re feeling a lot better about performance of Fort Knox.

So, if I recall the report, I think cash costs were somewhere around maybe like $800 to $900 an ounce, is that still what you’re expecting?

Yes. It depends on the year of course. It’ll be correlated to production. The higher the production, the lower the cash cost. But, in aggregate, over the life of mine, that’s correct.

Okay, great. And then, maybe just some as Phase X at Round Mountain, do you have resource ounces in that phase or is this a new…

No. So that -- yes, there’s a big chunk of MI&I [ph] at Round Mountain, a lot of that is in Phase X. And you’ll recall when we did Phase W, we planned and designed all of the infrastructure, the situation of the truck shots, the crusher relocations and all that. We designed it to accommodate what we were calling at that time, W2, and we just rebranded that X. So, this would be the next major pushback for which most of the capital, other than the stripping, has already been spent. It’s just a little bit deeper. But, what’s really significant in this last quarter is that we’re starting to find mineralization in the upper portions of X. And that -- the reason we’re really encouraged about that is of course that would reduce the strip ratio and potentially bring a $1,200 pit shell into state. We’re not quite there yet, but it’s moving in that direction. So, a lot of the inventory we have currently in MI&I is an X. While I’m on this topic of Round Mountain, there’s another phase, they’re called S, slightly smaller that we’re also working on. So, there’s a couple of potential mine life extensions that we’re working on at Round. And for the most part, those ounces are in our resource inventory.

Just wondering like the quantum of ounces, are we talking like millions of ounces…?

It’s in our resource there -- I mean, that X pushback with S, we’re hoping to get about 1 million ounces there, 1 million to 1.5 million ounces. But, it’s still very conceptual, it’s early days, and I don’t want to get ahead of myself on it. But that’s conceptually what we’re looking at.

Okay. That’s fair. And then, maybe just back on Chulbatkan, given the exploration you’re doing there this year, should we be expecting a resource update next year, or is that too soon to think about that?

We intend to update the resource model this year. And so, there will be a resource update with our year end.

And your next question comes from the line of Tanya Jakusconek with Scotia Capital.

Sorry. I just wanted to come back to this capital allocation, Paul, so that I understand it correctly. And maybe another way to ask you is, what minimum cash are you going to be comfortable holding on the balance sheet to run your business, so that we can kind of benchmark that to looking at excess cash flow going to dividend payments and running your business? Thanks.

Yes, sure. I mean, this cash and there is total debt and just balance sheet metrics, if you will. I think, from a running the business point-of-view, we get that question from time-to-time. And I would say, generally, our answer’s been sort of for the day-to-day running of our business, we want sort of minimum 350 to 500 of cash on the balance sheet. What we’re really talking about here, though, is just uncertainty. And that is why we pulled our guidance. It’s just uncertainty. And yes, we feel better today at the end of July than we did in mid-March, having worked through this thus far. And certainly, as you know, with this kind of spot environment, as I alluded to in my opening remarks, if you extrapolate the spot environment to year-end. If I were sort of doing a back of the envelope, I project our net debt EBITDA is probably down in the -- I’ll call it say, 0.3 kind of range from 1.7 today. So, everything’s headed in the right direction. For us, it’s really just making sure -- as Paul alluded to -- and then, maybe I’ll let him speak a little bit more specifically to Tasiast. What we’re finding is, as we’re testing employees, most of them are asymptomatic, and they get on the bus to go to the site, and we find out they’re positive, and we have to quarantine. And so, it’s those kinds of headwinds. And what we’ve been concerned about for example is just share headcount in, for example, the mill. And until we can kind of comfortably say we’re through all of that, we’re not going to -- and again, I would say, we’re not -- it’s a situation where the mill hasn’t been impacted yet. But, we need to know that we’re likely not going to be impacted before our uncertainty levels comes down. We’ve been very fortunate in Brazil so far where Brazil as a country has been making a lot of headlines on how they’ve been dealing with COVID. We’ve been well ahead of it with our protocols. But having said that, in the State of Minas Gerais and in the City of Paracatu, we are seeing some upticks in COVID cases. So, that’s our point here. It’s really not so much about the cash and the balance sheet. I think, we’re in great shape today. We’re getting stronger. It’s really just about the uncertainty of business impact before we get there.

So, whatever, the gold price is a gold price, and you’ll generate that amount of cash flow, as long as you see a workable environment going forward, say post COVID, and you kind of run your business with a minimum of that $350 million to $500 million on cash on the balance sheet. You have your sustaining capital, your development capital. I think you have one debt repayment in September of next year. But, anything above and beyond would be open to returning to shareholders. Would that be fair?

That’s right. I think, as I said earlier, we triangulate around the free considerations of gold price, balance sheet and internal capital opportunities. And, I think all three of those were if not for COVID are probably green light.

Okay. And maybe just a question for Paul T. I’m just interested in a going forward basis. I’m just trying to understand what sort of costs are now sticking with this COVID impact for the business?

Well, actually, I’ll just let that to Andrea. We’ve got some pretty specific numbers on that.

Yes. You would have seen in our disclosures that we did classify some costs in our operating costs.

Yes, I did.

The biggest bucket being in Russia and at Tasiast. And, obviously, those are our two, those are both camp based sites. In Russia, it’s more -- more specifically sort of direct compensation related costs to pay people more that were at site for extended periods of time, probably saw that peak in Q2. So, we’ll have some of that going forward but not to the same extent. And then, at Tasiast, Tasiast in total was about $10 million of that other operating, 6 of that was related to the strike and 4 related to COVID. And in both of those buckets are what we refer to as abnormal -- more abnormal costs, so just as a result of production not being at normal levels.

I’m sorry. I was just wondering more going forward that there’s going to be that additional transportation, there’s the testing, there is the additional PP&E. These are costs that we’re going to have to take on now for the business going forward until we get a vaccination. So, what should we think of those ongoing costs to be and where are you going to allocate them, in your cost structure or other?

Okay. So, I’ll talk about what we expect and Andrea will talk about the accounting. So, by far the biggest components of those costs are the camp costs and the associated overtime payments. Basically, as we bring people onto site two weeks early, they sit around in camp and you pay them. So, you’re consuming space in the camp and you’re paying people over time. So, that’s the by far the largest component of that cost. That is an ongoing situation at Kupol and Dvoinoye -- at Kupol, Dvoinoye and Tasiast and to a much lesser extent at Chirano. I don’t see that going away anytime soon. It may decline a little bit at Tasiast, but I don’t see going away at Kupol. We put everybody into quarantine going at Kupol, so we can keep the site completely clean. So, I would expect that that continues through this quarter and into the fourth quarter. At Tasiast, it’ll go down. As the COVID situation for us at Tasiast has crested, we’re on a down slope I would expect there it to go down a little bit. But, I see these costs hanging around in the next couple of quarters. And as for accounting, Andrea?

Yes. I mean, you’ll -- as you would have seen any other operating costs, there’s not really anything overly significant out of any of the other site. And there are items that what you and Paul referred to. So, we’d expect those to continue. But again, the two significant areas are really Tasiast in Russia as Paul said too.

So not significant at other sites, basically.

Okay. Thanks.

Thank you.

[Operator Instructions] And it looks like we have no further questions at this time.

We have no further questions at this time.

Okay. Thank you. Thank you, operator. Thanks everyone for joining the call today. And we look forward to catching up in the coming weeks and months. Thanks, everyone.

And this concludes today’s conference call. Thank you for your participation. You may now disconnect.