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Good morning. My name is Michelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Kinross Gold Corporation Q1 2019 Financial Results Conference Call and Webcast. [Operator Instructions] At this time, I would 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, and good morning. With us today we have Paul Rollinson, Chief Executive Officer; Andrea Freeborough, Chief Financial Officer; and Paul Tomory, Chief Technical 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 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 7, 2019, the MD&A for the period ended March 31, 2019, 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. With strong production and excellent cost performance across our portfolio during the first quarter, we are on track to meet our 2019 guidance targets for production, cost and capital expenditures. Paul will have more details on our operations and projects, but I'd like to highlight our 3 largest operations, which together produced almost 380,000 ounces, representing over 60% of our Q1 production at an average cost of sales of approximately $635 per ounce. First, Paracatu produced approximately 147,000 ounces at a cost of sales below $650 per ounce, marking a second consecutive quarter of record production and the fourth quarter in a row that Paracatu has lowered its cost. Paracatu's performance is the culmination of a number of steps we've taken to optimize this large long-life mine, and we are very pleased with the results that we are seeing. Second, the combined Kupol-Dvoinoye operation continued its long track record of consistent high performance with production of approximately 130,000 ounces and a cost of sales below $600 per ounce. And third, Tasiast has continued to outperform, delivering record quarterly production of over 100,000 ounces at the lowest cost of sales it has achieved since Q1 2011 at $662 per ounce. With 6 months of operating the Phase 1 expansion under our belt, throughput continues to average well above expectations, and we are making great progress in realizing the potential Tasiast has to be a substantial low-cost producer. As we think about Tasiast's future, we are continuing to evaluate lower capital alternatives to optimize additional increases in throughput. You'll recall our original capital estimate for Phase 2 was $600 million to expand throughput to 30,000 tonnes per day. We announced in February that we were evaluating an opportunity to achieve generally the same throughput as Phase 2 but with lower capital. And now the outperformance of the mill has caused us to positively rethink the potential again. This is leading us to focus on an opportunity to increase throughput above 20,000 tonnes per day through capital-efficient debottlenecking and continuous improvement. We expect this could achieve substantial capital savings and enhanced economics. We're continuing to advance this work, and we are targeting to complete our evaluation in the second half of the year. We're also targeting completion of the Tasiast project financing for the second half of 2019, which is proceeding well. Andrea will have more details on this in a few moments. I'll now turn to our development projects, where we are making good progress. Over the past 2 years, we have been leveraging our financial strength to reinvest in our business by steadily progressing our pipeline of opportunities, from technical study and approval to permitting and execution, to where we are today in completion and commissioning. Our 2 Nevada -- our 2 projects in Nevada are progressing well and are nearing completion. We began commissioning the processing circuit at Bald Mountain as planned in the first quarter and started commissioning of the process circuit at Phase W ahead of schedule. We've posted a short video on our website that highlights the progress we are making at Phase W, and I would encourage you to take a look. Fort Knox Gilmore in Alaska is the next project in the execution pipeline, with stripping anticipated to begin in the third quarter. Procurement and contracting activities are also well advanced, and key contractors are now mobilizing to site. We're also making progress on advancing the next set of opportunities to add to our pipeline, specifically our projects in Chile. We completed the Lobo-Marte scoping study in the first quarter. The results, which Paul will share with you in a few moments, highlight the potential for Lobo-Marte to come into production following the end of La Coipa's mine life. With the encouraging scoping results, we are now advancing Lobo to a pre-feasibility study. So to wrap up, our mines generated strong results in the first quarter, positioning us well for the rest of the year. We are on track to meet our 2019 guidance, and we are making good progress in advancing our development pipeline. And finally, I'd like to welcome Andrea to her first quarterly call in her new role as Chief Financial Officer. She has been key in developing and implementing our financial strategy, and we are pleased to welcome her to our senior leadership team. I'll now turn the call over to Andrea for a review of our financial results.
Thanks, Paul. Kinross has a strong culture of financial discipline, and as the incoming CFO, my priority will be to maintain our strong liquidity position and disciplined capital management. I'd like to begin with a few financial highlights from the quarter. Our global portfolio produced approximately 606,000 ounces with solid average cost of sales of $682 per ounce and an all-in sustaining cost of $925 per ounce. Our operations generated approximately $230 million in adjusted operating cash flow compared to $364 million during the same period last year, which is largely related to the lower realized gold prices. During the quarter, we realized an average price of $1,304 per ounce compared to $1,330 per ounce in the same period last year. Prevailing gold prices and other key commodity and currency rates have performed favorably to our budget assumptions for the year. Our adjusted net earnings were $83 million for the quarter or $0.07 per share compared to $125 million or $0.10 per share for the first quarter of 2018. Net earnings were $65 million or $0.05 per share compared with earnings of $106 million or $0.09 per share in Q1 2018. The change was primarily a result of decreased operating earnings, again largely due to lower gold prices, which were partially offset by a decrease in income tax expense in Q1 2019. There are 3 other items I'd like to point out from the quarter which influenced our financial results: capital expenditures of $265 million, which included approximately $165 million of growth capital at our projects; the second and final payment of $30 million related to our purchase of the remaining 50% of the La Coipa Phase 7 mining concessions, which we completed last year; and an interest payment of approximately $48 million, which is the first of our semiannual payments on our senior notes. Turning to our outlook for the year. We are on track to deliver on our 2019 guidance for all metrics as outlined on the slide. DD&A for the first quarter was approximately $270 per ounce, below our guidance of $330, largely due to production mix, which has positioned us well for our 2019 guidance. We continued to advance the $300 million of project financing that we're targeting for Tasiast, with participation from the International Finance Corporation, Export Development Canada and 2 commercial banks. During the first quarter, due diligence activities and discussions regarding commercial terms continued to progress. Supplemental work as part of the due diligence process is advancing, and we're targeting completion of the project financing in the second half of the year. Turning to our balance sheet. We continue to maintain a strong liquidity position. With $1.8 billion of liquidity and no debt maturities until 2021, we have the financial flexibility to invest in our capital priorities as we complete our current cycle of development projects. I'll now turn the call over to Paul Tomory for a review of our operations and development projects.
Thanks, Andrea. I'll be walking you through some of the key highlights of our global portfolio, touching on both operating performance and project updates. I'll start with Tasiast, which as Paul noted, continue to benefit from the excellent performance of the Phase 1 expansion, and the data on the slide really shows it all. Throughput averaged over 15,000 tonnes per day in the quarter and also through April, outside of a planned shutdown for site relining and inspection. The combination of excellent mill throughput, improving grade, better recoveries resulted in a second consecutive quarter of record production. We're also making progress on the cost side as cost of sales per ounce decreased by 20% compared to the fourth quarter, largely as a result of lower contractor expenses and maintenance supplies. And we are ramping up our continuous improvement initiatives at the site, targeting areas such as operational improvements in mining, milling and maintenance, our overall approach to maintenance strategy and a review of all existing contracts. Through these efforts, we are targeting meaningful operational cost improvements. As Paul mentioned, the strong performance of Phase 1 is leading us to rethink positively what the most capital-efficient next step for Tasiast will be. One of the possible outcomes we're exploring is an incremental step above 20,000 tonnes per day through debottlenecking and continuous improvement, which we expect to result in significant capital savings versus the 30,000 plan. One of the main drivers for our thinking is that the grinding circuit has been able to consistently maintain a very fine grind with acceptable energy consumption. This fine grind has allowed us to maintain very high recovery levels with shorter leach times. This option has a potential to achieve attractive cost metrics with substantially lower capital expenditures and enhanced economic returns, and we're targeting the second half of this year to complete our evaluation of this alternative. Moving on to Paracatu, we started the year off strongly and achieved record production and a 15% reduction in cost of sales per ounce compared to Q4. Factors driving the cost and performance improvements that we've been realizing at Paracatu for the past few quarters include: first, the results of the asset optimization work we initiated last year, which has significantly improved our ability to predict grade, recovery or hardness in throughput and has made it possible for us to react to changing ore characteristics in real time, resulting in greater efficiency in the mill and also improved recovery. Second, our continuous improvement efforts have resulted in increased mine and mill efficiencies and lower operating costs. And thirdly, we made enhancements to mine infrastructure, including rainfall mitigation initiatives as well as investments in renewable energy, which are helping to reduce power costs. Overall, we're very pleased with Paracatu's performance and expect 2019 to be a strong year for the operation. Turning now to our mines in Nevada. Round Mountain performed in line with our expectations during the quarter, although production was lower quarter-over-quarter. This was largely related to mining harder ore and fewer heap leach ounces produced. In the first quarter, Round Mountain's cost of sales per ounce were 12% lower compared to the fourth quarter, largely as a result of a decrease in operating waste mined as mining activities were principally focused on capital stripping in support of the Phase W project, where we are making excellent progress. We've encountered Phase W ore ahead of schedule and started stacking on the completed heap leach pad. And as Paul mentioned, we began commissioning of the process circuit in the end of March, ahead of schedule. Initial solution is being applied to the heap leach in advance of full completion of the vertical CIC plant, which is now 80% complete. The Vantage project at Bald Mountain is also well advanced with the heap leach at approximately 90% complete. We're stacking ore on the pad and applying solution ahead of full completion of the vertical CIC plant, which is approximately 70% complete. The site experienced unusually severe winter weather during the quarter, which challenged both Bald's operational performance as well as the schedule and cost of the Vantage project. The final cost of the project is now expected to be approximately $130 million, which also resulted from higher-than-anticipated construction contract rates and issues in the supply of fabricated components. Commissioning of the processor could begin as planned at the end of the first quarter, and we expect activities to ramp up through the balance of the year. Moving on to Fort Knox in Alaska. We indicated in our guidance that we anticipated production will be lower in Q1, and Fort Knox' results were in line with that expectations. Key factors impacting Fort Knox are the impacts of the wall failure, which have been more challenging than originally anticipated. And Fort Knox has received a historic amount of precipitation over the past few years, particularly in the second half of last year. This has created further challenges with respect to geotechnical instability and our ability to manage groundwater levels at the site. And finally, as we stack up the flanks of the value of the existing Walter Creek heap leach, recovery timing has been impacted. The results of these combined factors is that we now anticipate that certain ounces will come into the mine plan later than originally expected. We're building the new Barnes Creek heap leach pad as part of the Gilmore project, which will help mitigate some of these issues as we will be stacking closer to the liner starting in the late part of 2020. We continue to assess the impacts of these challenges and are working to mitigate them as we can with a focus on optimizing strategies for cash flow. One strategy we are implementing is grinding the mill at reduced rates in order to preserve the remaining tailings capacity for the best grade material. The Gilmore project is not expected to be impacted by these factors and is proceeding on budget and on schedule, with start-up of stripping plant for the third quarter. In terms of 2019 performance, we expect to see production increase from Q1 levels over the balance of the year. Turning now to our Chile projects. We completed the Lobo-Marte scoping study in the first quarter as planned. The study contemplates a heap leach operation using SART technology with operation starting at the end of La Coipa's mine life. SART is a proven technology that we have previously used at Maricunga with positive results. It's still early days, but the study contemplates a mine life of over 10 years with total production of 4.1 million ounces at an average grade of 1.2 grams per tonne. Our scoping level capital estimated $750 million, plus or minus 20%, and we anticipate a 3-year construction time line for the project once permitted and approved. On the back of these encouraging results, we are advancing Lobo-Marte to PFS, and permitting efforts are now underway. Recall that we are considering Lobo-Marte in conjunction with the La Coipa restart project. And the feasibility study for La Coipa is progressing well, and we are on track to complete it in the third quarter. To wrap up on our operations and projects, our priorities continue to be maintaining our excellent safety record, delivering strong consistent operating results, managing our costs and delivering our projects on time and on budget. And with that, I'll turn it back to Paul.
Thanks, Paul. In closing, I want to thank our employees worldwide for their dedication and hard work and our shareholders for their continued support. Overall, I'm pleased with where we are as a company. Our portfolio of 8 mines is off to a strong start to the year and particularly with respect to costs. We remain on a strong financial position, and we are making great progress on our development projects. With that, operator, can we please open up the call to questions?
[Operator Instructions] Your first question comes from Andrew Kaip from BMO.
Congratulations on a solid quarter. Andrea, I've got a question for you. Just break out -- or can you give us some visibility on the other operating costs during the quarter?
Sure. We had other operating costs. One of the big buckets that we've also adjusted out of our adjusted earnings is abnormal costs at Fort Knox, and that's just consistent with what we've been doing over the past few quarters. One of the other larger -- the other more significant items will just be related to care and maintenance costs during the quarter. And then there's a number of other smaller items.
Okay. So with respect to your guidance of $100 million, how are you -- what component was in Q1? And how are you tracking on that guidance?
We're maintaining the guidance that we set in February. It's difficult to guide on other operating costs for some of the items, but at the moment, we're maintaining that guidance.
Okay. I guess the reason I ask is it's not -- you're not providing visibility on the financial statement anymore. And it looks like costs during the quarter were, I would say, lower than what was expected. So can we -- I guess the question is are you tracking at the low end of your cost guidance? Or how can you -- the question is what can we expect in subsequent quarters with respect to costs?
On cost of sales, they are -- the costs for Q1 are lower than our guidance range, but we're maintaining that guidance that we set in February. It really has to do with production mix and where we expect things to go for the rest of the year.
All right. And then, Paul, just on the Tasiast and the opportunities that you're exploring, can you give us a bit of understanding of what modifications are required? Or what additions to the Tasiast mill would be required to move processing rates higher?
Well, I think you mean Tomory as opposed to Rollinson, but...
Well, either one of you two, I guess.
Either one. You want to run with that, Paul?
Yes. So Andrew, as we mentioned, this segment was outperforming, and it's outperforming primarily because we're getting a really fine grind at acceptable energy levels. And what we're looking at is how can we continue to harness the outperformance of that mill. And it's things like investing in incremental power and water, it's really around the supporting infrastructure. So for example, right now, we are really running every generator at site to the maximum to get these throughput levels. And small incremental investments in power but also water supply and some elements of the downstream end of the plant could lead us to throughput levels of 20,000 or slightly higher. So these are relatively modest investments.
You're not looking at needing to expand your leaching circuit? Or are we looking at any additional...
Yes. We might add 1 or 2 leach tanks. But one of the other positive surprises at Tasiast has been higher-than-anticipated recovery despite lower residence times in the leach tanks. So as we get the high throughput, obviously, we're limited in leach tank capacity, but we are still getting accept -- not only acceptable but outperforming recovery levels. And in any case, you're right, as we go to 20,000-plus, we would have that leaching capacity, but not maybe as much as we had initially anticipated.
Your next question comes from Mike Parkin from National Bank.
A bit of follow-up from Andrew's question there on Tasiast kind of Phase 1.5. You're saying that you're kind of going to be in a more decent position to kind of know what you need in the fall. When could we actually see -- like given that it sounds like it's fairly low capital intensity, it probably has pretty good returns. So assuming it goes forward, when could you potentially have some things coming into place and allowing you to push up the higher throughput rates?
Okay. Thanks, Mike. And it is, I guess, a Hollywood problem. It is evolving as we operate, and we're learning as we operate. But it's a positive trend. So we do keep the study going, but it's going in the right direction. And you've hit the nail on the head. And we talk about 12,000, 15,000, 20,000, 30,000. I tend to think about it in terms of cutoff grade. But the point is we are getting better than anticipated. And as Paul Tomory indicated, it's really understanding where those bottlenecks are in the system. And I think we'll be in a good position, we've said, second half to really nail down our thinking on this.
And I think one of the things you're getting at is what would be the timing of that ramp up look like should we have a go-ahead there. It wouldn't be like Phase 2, where it really relied on the installation of a large new ball mill. Some of the throughput increments as we work towards 20 or higher would -- they would come in sequentially. So for example, if we were to install additional booster pump capacity on our water supply line, we might be able to get to 16, 17; and then power comes online, 17, 18. So it's incremental steps, not all of which are required at the same time. So during a project period, there would be incremental ramp-up during the duration of the construction.
Okay. Perfect. And then is there any potential payments if you fully cancel the Phase 2? Or is that kind of all been settled when you put a halt on that about a year ago?
So we -- as we previously disclosed, we spent about $100 million on Phase 2, and most of that is equipment. For example, the power plant is by far the largest component of that. That power plant could either be sold if we didn't need it or put in place for these incremental options we're looking at. In terms of large installation contracts, we essentially have no liabilities on those contracts. So most of the money spent is in the form of physical assets, which we hold.
Okay. And in terms of your mining equipment fleet, can you remind us where that sits? Do you have like overcapacity with it? Or would you -- would that be another division you'd have to invest in?
No, we wouldn't need any more trucks. We were running just short of 50 -- 793 trucks, and they're good up to a mining rate of around 120 million tonnes a year. So any option that we would consider going forward, we have sufficient mining capacity.
Okay. That's great. And then just one question. You mentioned on Fort Knox the impact of the wall failure being a bit more challenging. Can you give us a bit more detail on that?
Yes. So we're on track to meet our guidance in the Americas on production, and that includes, of course, Fort Knox. And as I mentioned in the prepared remarks, the Gilmore business case is in good shape. But we have had a challenging couple of quarters here at Fort Knox. And it's -- several things have added up, and it just meant that sequencing the mine, stacking on the leach pads has been more -- has led to a number of challenges in the last couple of quarters that we're just working through. The impact will be some deferral of ounces into 2020 and then some further deferral from 2020 into 2021. But as we look to this year, we are operating to plan. So we are essentially on budget, even though it was a low production quarter. But we expect to ramp back up to levels historic with -- commensurate with 2018 quarterly performance in the remaining 3 quarters of this year.
Okay. And then just flipping back to Tasiast. With the shutdown that you guys had in the first quarter, did everything kind of look to be wearing as expected or better than expected? Could you give any comments on just how the new plant's been performing from a maintenance and wear position?
Yes. That segment was my favorite thing in Kinross. I mean it's a really high-performing piece of equipment, and the inspection went really well. The first reline went really well. And as we've said several times today, it's really exceeding our expectations on performance. And there's nothing unusual -- I mean, of course, there's -- in any ramp-up, there's always "break this" or "blow that" motor here and there, but it's all been pretty routine stuff. And overall, this thing is truly outperforming.
Your next question comes from Stephen Walker from RBC Capital Markets.
Couple of questions, Paul Tomory. Just back to Fort Knox, if you could. When do you anticipate getting access to the higher-grade material that has been covered by the pit slump? As you say, broadly speaking, North America is on track for guidance, but at Fort Knox, in particular, I'm curious to know when you'd be able to put that higher-grade material through the plant at Fort Knox.
So a couple of points there. So Q1 was a very low production quarter, and that was primarily as a result of not having a lot of high-grade material. We're going to get right back into the high grade almost immediately in Q2, and so Q2 production will be significantly higher than Q1. Now that said, as we've talked about before, we have limited tailings capacity at Fort Knox, and so we will be running the mill on a campaign basis, saving it only for the highest-grade material. And that will show up in pockets over the coming couple of years. But we expect there to be a reset upward in production for Q2 as well as Q3 and Q4.
Perfect. And then, Paul Rollinson, you highlighted that there will be an election -- a presidential election in Mauritania here in June, early July. I guess there's going be a point at some point in July, August, September when you can sit down with the government again and begin discussions. Can you give us a little more color on kind of some of the political uncertainties or certainties around the election and when you can expect to sit down with the government again?
Sure. Well, I can tell you right now the election is set for June 22. If it followed typical processes, we'd expect to see an inauguration in, I think, August 5, somewhere in early August. There is a transition period. After the inauguration, the president tends to take a few weeks to appoint a new cabinet. So again, realistically speaking, I would say we probably don't get through that new cabinet appointment until later in August, is kind of what we're thinking. I'd also say, things are proceeding in an orderly fashion. It's -- and of course, at the mine, as we've indicated, we're firing on all cylinders, and nothing politically is in any way impacting us at the site. So it's business as usual.
Your next question comes from Steven Butler from GMP Securities.
Paul Tomory, a question for you on Tasiast. The grade was a pretty robust 2.37 grams per tonne in the first quarter. Do -- are you still seeing some good grades as we get in -- have done through April? Or is this reasonably good grade to carry for balance of the year? Or is it a bit of a peak or not?
Yes. Grades are good. They've been good, and April has been better than March. But I caution that Tasiast will have grades that are up and down depending on where we are in the orebody. But we're happy with the grade right now, and I expect the rest of this year to have pretty robust grades. And like I said, April is better than March.
Okay, Paul. And then just with respect to Chile, guys, if you do complete feasibility study for Phase 7 La Coipa and then of course, with ongoing studies on Lobo-Marte, how will the permitting process work for you? As you've gone kind of a bit quiet in Chile, if you will, how will the permits be approached or needed for, let's say, La Coipa Phase 7?
Yes. Look, the La Coipa permits are in place. That's the most important. And as we've indicated on many previous calls, we've been -- I don't want to say fitting but we've had a fairly attractive pre-feas on La Coipa for some time now. In fact, I've said a number of times the only thing we were totally thrilled about was the mine life. I think the epiphany or the breakthrough here in our thinking is this whole concept of linear, get La Coipa back up and running and then transition from La Coipa into Lobo. And when you think about that, the restart, the mining out of La Coipa, that gives us lots of lead time to get in front of the permitting for Lobo, which would be sequential to La Coipa. So that's how we're thinking about it.
Your next question comes from Anita Soni from CIBC.
My question is with regards to the permits that you have at Tasiast. Are they able to encompass the debottlenecking exercise that you're thinking about and envisioning to go into 20,000 tonnes per day? Or is there anything incremental that you would need?
Yes. We have all the permits that we need for Tasiast.
Okay. Even additional power and water supply?
Yes. So Tasiast, we are permitted up to 30,000. And what we're contemplating here in debottlenecking falls within the envelope of the broader 30,000 permit.
Okay. And then -- so just remind me what are we waiting for in terms of the Phase 2 then?
Well, in terms of Phase 2, I guess it's not so much that we're waiting for anything on the Phase 2. I think we have a pretty good understanding of what's required. What's happening is we're getting better results in the commissioning and operation of Phase 1, and that is leading us to some alternatives that we think could potentially be a lot more attractive. Just again, it's pretty simple. If we can get to similar kind of economic parameters with lower capital, that's going to be a huge value creator. So we're pretty excited about the new thinking and the new analysis. So that's where we're going to be focusing. It's evolving and trying to create more value towards -- and we'll finish that work by the second half of the year.
And then what's outstanding from the government is the exploration permit, as I understand, or the exploration license for Tasiast Sud. Is that an issue for you?
That's on our list of -- again, as we said on the previous call on the previous quarter, we do have some issues to resolve. We do think we will resolve them. We describe them as, I would say, typical industry-type issues, that refunds and taxes and duties and that sort of thing. Obviously, none of these issues have in any way impacted the success of the ongoing project. And we said we don't expect to get a lot of engagement on these issues until we get through the election, and we'll plan to revisit that when we get the new cabinet installed. It is -- so just for clarity, it's the conversion of exploration to exploitation. And we will get back talking with the government, as I said, I think late summer, early fall.
Your next question comes from Mike Jalonen from Bank of America.
I had a question for Paul Tomory. So Paul, just looking at the Chile projects, couple of questions. What kind of recovery rates are you looking at Lobo-Marte? Because it was operating before in the early '90s and they were well below 50%. And I guess what kind of production rate the scoping study envisions? And going back to La Coipa, like when do you think that would start? How long would it operate for? And I guess when will we get to like Lobo-Marte? Just wondering what -- are we talking like a 10-year period sort of thing? Just the time line.
Right. So here's a rough -- Paul mentioned this earlier. Finish the feasibility on La Coipa in the back half of this year. If we have a positive decision there, we probably have 2 years of construction and stripping. Then we'd have, give or take, 4, 5, 6 years of production, during which...
At about 300,000...
Yes, at around, call it, 300,000 ounces from La Coipa. All of that will be in the feasibility study when we finish it. During that time period, we would continue to permit and then construct Lobo-Marte. And our current plan would envisage a ramp into Lobo-Marte production directly after La Coipa ceases production. So we're really talking about 7, 8 years to production at Lobo-Marte. And the reason for that is we are planning to leverage synergies between the 2, both capital, infrastructure, human resources, et cetera.
I heard 300,000 ounces. Is that annual La Coipa production? Or is that cumulative?
Yes, it's -- no, that -- it's...
It's probably -- yes. Sorry, 200,000 is probably a better answer for La Coipa, I think. We haven't really come out and said where we're going to get to on Lobo. We might be able to do a little better at Lobo than at La Coipa, just to be clear on that, Mike.
So La Coipa is 200,000 ounces a year?
Yes.
Okay. Paul Tomory, what kind of recovery rate at Lobo-Marte? If maybe -- if you can't give production, maybe kind of what you're looking there -- targeting there.
So the -- this is a scoping study. The purpose of scoping study is proof of concept to see if we go to a PFS, and we are going to PFS. We're happy with the results, 4.1 million recovered. We're targeting recoveries in the 60% to 70% range. And you're quite right. I mean there were issues a long time ago when Lobo-Marte was run. But our understanding of the orebody, our understanding of the process circuit required to deal with that ore has improved significantly. As I mentioned in my remarks, it will be a crush leach with SART to recover both copper and cyanide. And we're quite confident in the technology given that we've used this successfully at Maricunga. But -- I mean you got the numbers there, 4.1 million recovery over 10 years. Do the math on that. We're targeting 300,000 to 400,000 ounces a year in the scoping study. But the PFS will detail all of this in more detail, and we're going to be completing that over the next year.
Okay. I was at Lobo-Marte in '95. So I look forward to the next trip.
Your next question comes from Greg Barnes from TD Securities.
So Paul Rollinson, all these issues you've -- we've talked about for a long time now in Mauritania, will they hold up as you're progressing through the phased expansion at Tasiast?
Yes. That's a good question, Greg. I mean, again, it's a dynamic sort of system. And as we've indicated previously, there's a few moving parts here, one being the project financing, and that's a good story. It is moving in the right direction, and that's a positive contributor -- contributor not condition, contributor to our thinking. Our understanding of the asset's capabilities is also trending in a positive way and not only because of the performance, but certainly spending $600 million of capital, which was the concept a few years ago, versus where we think we might get to on a CI approach is also a positive contributor to decision-making. And then the last sort of moving part dynamic is yes, the government, the discussions, the issues we've been talking about. And again, I would just say, clearly, none of those issues have in any way impacted the site or the project or our ability to overachieve. So I -- we will do our work, we'll finish our work, we'll make a decision. But I would say you can deduct that things are trending positively.
On a technical side, do you think that's trending positively on the government relation side as well?
Yes, I do. We got permits, we've had everything we've needed to get to where we are. Again, we had a highly successful completion of Phase 1, a seamless transfer from projects to ops. We broke a record in the third quarter, fourth quarter, and we're ramping up again here with the sight of a new year. So there's nothing in that issues list that's in any way impacted our ability to achieve what we've done. There are things we want to resolve. I want to be clear. We want to get -- but they're not -- there's been no escalation. There's been no suggestion of reopening the mining convention. These are issues that we characterized on the last call as sort of normal bump and grind, operating-type issues. And I feel we'll get the new government bedded down. We'll sit down and I expect we'll resolve them.
Okay. Great. To Paul Tomory now at Paracatu, kind of overlooked that, but there's been a pretty substantial step-up in production over the last several quarters. Is that sustainable?
Yes. That's a good question. And there's no doubt that Paracatu has outperformed over the last couple of quarters. And I'll reiterate a couple of things as to what led to that, and then I'll answer your question. We have a better understanding of the orebody. We carried out this asset optimization project, which was essentially an FS-level study on the orebody and how best to react to it in the plant. So there has been a structural step-up in our ability to manage that mine. And so what that means is that we do expect performance on average to be improved versus the last couple of years. However, Paracatu does have variability in the ore, and we will have good quarters, and we will have quarters that aren't as good. The other major thing that has happened at Paracatu is we've done a major reset on the cost structure, and we're just coming out of a year-long program which was intensely focused on productivity improvement, cost reduction and combined with the impact of a lower energy cost from the acquired power plants. We are in a -- almost in a reset position on Paracatu performance. Now will every quarter going forward be as good as the last couple? Likely not. But we definitely have taken the step-up in average performance of the mine. And I have to say we couldn't be happier with where we're at, at Paracatu.
So with that, Paul, it sounds like you made some substantial changes there. And I don't remember when the last technical study came out on Paracatu. Is there one that we should see soon?
Yes. I know you all want one. And we are -- the real -- why are we waiting on it? Part of this asset optimization project is we want to make sure that the changes we made to the resource model, the way we do grade control, the way we look at the orebody are proven out in actual operations. So we're in that ground truth-ing testing process right now. And that should come to an end in the next several months. When that is complete, we will assess the need for a new technical report. But if there was one coming, it would probably be less than a year from now, towards the end of this year or early next year. But I know that the one we have there is older, and it may be time for a refresh.
Your next question comes from Tanya Jakusconek from Scotiabank.
A lot of my questions have been answered, but just a couple on the technical side for either Paul. Just on the guidance that you had initially provided, it was for a weaker Q1 and then better operationally in going forward. With Round Mountain, Bald and Paracatu and Tasiast all doing quite well in Q1, how does the rest of the year shape up?
So the first quarter, really the major theme is outperformance of Tasiast and Paracatu. So we had a great quarter with those 2 assets. And how does it...
But it is Q1.
It is Q1.
Let's not miss sight of that. We've had a good solid start. We are maintaining our guidance.
And there are ups and downs. So at the end of Q1, like Paul said, we are -- we're reiterating our guidance. And if we see need to change that, we'll do so at subsequent quarters.
Okay. So besides the Fort Knox, which we know is going to be performing better in Q2 and then Q3 and Q4, would we assume that the rest of the assets continue their performance, there's no grade deviation that we should take into account or shut down for maintenance?
There's -- yes. I mean we're operating well. I'd say that the -- Tasiast and Paracatu, as we've referred to earlier in this call, can we maintain that level of performance through the subsequent quarters? That remains to be seen. We're optimistic about it. But I wouldn't necessarily build in Tasiast and Paracatu Q1 performance into the rest of the year. And the plus/minus 5% that we put on our guidance for production and also on the cost side reflects opportunities we see in the portfolio as well as some of the risks. And some of the risks we have, for example, when do we get a handle on everything at Fort Knox, that's going to take some time. At Bald Mountain, we've had a challenging weather in the winter that will have some impact in subsequent quarters. So there's good things and there's risks as well, and our guidance takes that into account.
We also built into our guidance, Tanya, we are in a year at Tasiast where we've got a CLA that needs to be resolved. We've had a good first discussion. But that CLA expires in October, and we have built in that into our guidance as well.
Okay. Maybe now that I have you, Paul, just on Tasiast, you mentioned that everything is going well with the government, you're performing quite well. With the exception of Tasiast Sud, is that the only permit that has not been granted to you as you keep asking for permits as you operate? And if so, what is it about that deposit that they have an issue with?
Yes. It's -- look, again, it's -- yes, I guess, would be the quick answer to the direct question. It is the only thing we haven't resolved from a license, permit point of view. Again, it's not exactly sure. I mean it's not untypical for these things to take a while, like longer than anticipated. I guess the key point for us though is it's not material to the overall Tasiast economics. But clearly, it is on trend and it is something we want and it would be additive. And we believe we've done the right work to support that conversion, and we'll continue to press our case when we get the new government. Again, it's not substantively material but it is additive. And we think we've done all the right work to convert the exploration permit to exploitation, so we'll continue to press on that.
Okay. Well, as long as everything else there is -- you're getting permits for as you ask for them as you operate, that's great news. And maybe just continuing on Mauritania. We did see the revision to the tax code. I guess there was an approval by parliament on April 17. And when are we expecting to get some more clarity on that? When are you expecting...
Tanya, it's Andrea. We don't know much more than that. The code was passed, but it's not yet promulgated. And we don't -- and there hasn't been a copy published. So we'll -- we're waiting for it to be published for us to be able to review it and determine what the impact on us might be. But I would remind you that we also have the mining convention that protects us on -- with respect to tax.
Your next question comes from Carey MacRury from Canaccord.
Just another question on Paracatu. A couple of years back, there was a big step down in reserves there. And I'm just wondering what the -- given how far costs have come down, is there an opportunity to bring some of those ounces back? And is that something that you're thinking about?
So for now, we prefer to just capture the cash flow and the margin. The incremental reserve at Paracatu, if there were to be more, is in the form of another pushback at the end of the mine life. That's many years from now. Depending on how we perform in the next couple of years, we will reassess whether there's another pushback there. But for now, we're capturing margin and cash flow.
Okay. And can you just remind us as well as how the water situation is tracking at Paracatu this year?
So rainfall levels are acceptable and well within what we're set up for with our recently implemented mitigation measures. So we don't expect any curtailment as a result of the lack of rainfall this year.
Your next question comes from John Bridges from JPMorgan.
Just wanted -- with respect to the strong performance at Tasiast and Paracatu, to what extent is this rock strength-related? We know that as you get deeper, the rock is stronger and your mill rate is going to be slipping. So was there a rock strength influence in this quarter? And what should we expect in terms of increasing rock strength over the next couple of years? What should we put in our models?
So if you're asking whether we had softer rock that contributed to higher throughput, that's not the case. We're into the heart of the grand diorite at Tasiast, which is representative of rest of the mine life. The SAG mill is able to get to a grind size that we require. And in fact, as I said earlier, we're exceeding on it. So we don't expect issues with rock hardness going forward at Tasiast. In the case of Paracatu, there are multiple ore types, different zones within the orebody. And there will be periods of higher hardness and lower hardness going forward, which will impact throughput. And that's what I was saying earlier. I wouldn't go benchmarking every quarter in the future on the throughput we just achieved in Q1 because it will depend on ore hardness. And as I said, there will be periods where it's up and periods where it's down.
So with coming -- so -- but the original last technical report outlook for decline in throughput over time is still in place?
For Paracatu, yes. But as I said earlier, we're going to be assessing the need for a new technical report. And if we do one, it will reflect our better understanding of it. As I said earlier, one of the things that we're benefiting from at Paracatu is this asset optimization project, and it better allows us to understand the ore coming out of the mine, which allows us to do things like blending to ensure we have optimal throughput rates. So we're better able to react to changing ore characteristics and not just on hardness but on things like clay content and any number of other characteristics of the ore coming out. So bottom line is we're better able to react to changing ore characteristics.
But -- John, it's Tom here. The old technical report had plant 1 shutting down effectively when we run out of a softer oxide ore. And for some time, we've been blending both ore types in both plants, so that step down in the old technical report is not the expectation going forward.
Yes. That's a good point.
So perhaps we do need a new technical report.
For you, yes.
Just to follow on, on Marte, Lobo. Can you just remind us what the water situation is out there?
Well -- so we do have water rights at La Coipa. They're established. And that is one example of synergies between the 2, La Coipa and Lobo-Marte.
Yes. The concept there being we have -- again, this is early days. We've got lots of lead time. But one concept is we take water from La Coipa and we pipe it along the corridor from La Coipa over to Marte.
Fun fact, the La Coipa wells are closer to Lobo-Marte than they are to La Coipa.
Yes.
And your next question will come from Andrew Kaip from BMO.I have no further questions in queue. I'd turn the call back over to the presenters for closing remarks.
Thank you, operator. And thanks, everyone, for the questions. We look forward to catching up with you in person in the coming weeks and months. Thanks, everyone. Bye.
Thank you, everyone. This will conclude today's conference call. You may now disconnect.